Portfolio Recovery Associates Sees Gains in First Quarter of 2012

Large debt buyer and collection firm Portfolio Recovery Associates (PRA) late Monday reported financial results for the first quarter of 2012 marked by significant increases in cash collections, revenue, and net income, driven in part by the acquisition of UK ARM firm Mackenzie Hall early in the quarter.

Norfolk, Va.-based Portfolio Recovery Associates, Inc. (NASDAQ: PRAA) reported net income of $25.5 million in the first three months of 2012, up 10 percent from the same period in 2011. Per-share earnings totaled $1.47 in Q1 2012, up from $1.34 in Q1 2011.

First quarter revenue was $140.1 million, including Mackenzie Hall revenue of $4.6 million, up 25 percent from the year-earlier quarter.

PRA announced in January the acquisition of Mackenzie Hall, a leading debt buyer and collection agency based in Scotland. Paying $51 million for the firm, PRA noted that the acquisition would be immediately accretive to earnings.

Including collections from Mackenzie Hall, cash collections for PRA were up 31 percent in the first quarter to $218 million.

“Revenue from our fee-for-service businesses slightly improved year-over-year, largely due to the inclusion of Mackenzie Hall. We look forward to the growth and diversification opportunities that Mackenzie Hall provides us,” noted PRA Chairman, President, and CEO Steve Fredrickson.

Purchased bankruptcy collections was the company’s largest collection channel, accounting for $80 million in cash collections, followed closely by call center collections with $79.8 million. The company’s legal collection channel grew 42 percent in the quarter, with internal legal collections accounting for $23.3 million and external legal collections bringing in $34.8 million.

The company noted in its earnings release that “strong future growth in legal collections is expected as a result of an expanded focus on legal collections activities.”

PRA purchased $1.46 billion of face-value finance receivables during the first quarter of 2012 for $111.4 million. The receivables were acquired in 91 defaulted debt portfolios from 16 different sellers.

The company’s fee-for-service businesses generated revenue of $15.9 million in the first quarter of 2012, stable with revenue of $15.8 million reported in the same period a year ago. The inclusion of Mackenzie Hall plus year-over-year growth in fee income generated by PRA Government Services helped to offset a year-over-year decline in fee income from PRA Location Services and Claims Compensation Bureau. Together, the fee-for-service businesses accounted for 11 percent of the company’s overall revenues in the first quarter of 2012.

PRA reported a total employee headcount of 3,014 – including 1,934 collectors – at the end of Q1 2012, up 21.4 percent from Q1 2011 and up 14.1 percent from the fourth quarter of 2011.