Portfolio Recovery Earns $45 million in 2008 on Big Rise in Fee Revenue

Debt buyer and collector Portfolio Recovery Associates (Nasdaq: PRAA) reported last week net income of more than $45 million for the full year 2008 on a 57 percent increase in the revenue it received from its fee-for-service business.

Norfolk, Va.-based PRA announced results for the fourth quarter and full year 2008 after the stock market closed on Thursday. For the year, the accounts receivable management company reported earnings of $45.4 million, down slightly from the $48.2 million in earnings reported for 2007. Similarly, earnings in the fourth quarter dropped slightly to $10.6 million in 2008 from $10.7 million in the final quarter of 2007.

But cash collections were up 22 percent in the fourth quarter to $79.2 million. Call center and other collections increased 16 percent, outsourced legal collections decreased 12 percent, internal legal collections grew 84 percent and purchased bankruptcy collections were up 133 percent when compared with the year-earlier period.

Total revenues for the year were up 19.3 percent to $263.3 million. Revenue was $67 million in the fourth quarter, up 17 percent from the same period a year ago.

PRA’s fee-for-service businesses generated record revenue of $18.9 million in the fourth quarter of 2008, up 79 percent from Q4 2007. The fee-for-service businesses – which include government collection and revenue enhancement services and asset location services -- accounted for a record 28.2 percent of the company's overall revenue in the fourth quarter of 2008, up from 18.5 percent in Q4 2007. For the full year, the fee businesses generated revenue of $56.8 million, up 57.6 percent from 2007.

"In the face of a credit crunch and an economy falling into recession, Portfolio Recovery Associates held its ground -- and more -- in 2008,” said Steven Fredrickson, Chairman, President and CEO.  “The company's continued diversification into fee-based businesses, including the acquisitions of MuniServices and Broussard Partners' assets during the year, helped mitigate the effects of a slowing economy on owned-portfolio collections. While allowance charges did impact our bottom-line results, business remained solid and cash flows were strong, allowing us to spend a record $280 million on portfolio purchases for the full year and position the company for long-term growth.”

Portfolio Recovery reported that it acquired $4.59 billion of face value debt for $280.3 million for the full year. The company purchased $1.3 billion of face-value debt during the fourth quarter of 2008 for $61.5 million. This debt was acquired in 77 portfolios from 20 different sellers.  

Investors responded positively to PRA’s earnings announcement, sending the company’s stock price up more than 15 percent in trading Friday. Although the firm reported slightly lower net income, it matched analysts’ estimates for earnings in the fourth quarter and full year.