Portfolio Recovery Associates Reports First Quarter 2010 ResultsEPS Totals $0.91 in Quarter as Net Income Grows 47% to Record $14.8 Million; Revenue up 22% to Record $83.4 Million as Cash Collections Rise 33% to $119.2 Million; Portfolio Acquisitions Total $102.6 Million
NORFOLK, VA -- (Marketwire - April 27, 2010) - Portfolio Recovery Associates, Inc. (NASDAQ: PRAA), a company that purchases, collects and manages portfolios of defaulted consumer receivables and provides a broad range of receivables management and payments processing services, today reported record net income of $14.8 million, or $0.91 per diluted share, for the quarter ended March 31, 2010.
The Company's first-quarter 2010 profit represents a 47% increase from net income of $10.1 million, or $0.66 per diluted share, in the same period a year earlier.
Total revenue in the first quarter of 2010 was up 22% from the year-earlier period to a record $83.4 million. Total revenue consists of cash collections reduced by amounts applied to principal on the Company's owned debt portfolios, plus fee income earned from its fee-for-service businesses. During the first quarter of 2010, the Company applied 43.0% of cash collections to reduce the carrying basis of its owned debt portfolios, compared with 42.9% in the first quarter of 2009. The first quarter 2010 amortization rate included a $6.9 million net allowance charge, equivalent to approximately $4.2 million after tax, or 26 cents per diluted share, against certain pools of finance receivables accounts. During the first quarter of 2010, the Company recorded ongoing non-cash equity-based compensation expense of $880,000, equivalent to approximately $536,000 after tax, or 3 cents per diluted share.
"Portfolio Recovery Associates began 2010 with strong financial performances across the board, highlighted by record first-quarter cash collections, cash receipts, revenue, net income and EPS. In addition, the Company took several important steps to build for the future, demonstrating the long-term focus we have always advocated. These efforts include $102.6 million in first-quarter portfolio acquisitions, our March purchase of a controlling interest in Claims Compensation Bureau, or CCB, and a successful offering of common stock in February that raised $72.0 million," said Steven D. Fredrickson, Chairman, President and Chief Executive Officer.
Financial and Operating Highlights
- -- Cash collections rose 33% to a record $119.2 million in the first
quarter of 2010, up from $89.9 million in the year-ago period.
Call center and other collections increased 12%, external legal
collections increased 3%, internal legal collections grew 203%, and
purchased bankruptcy collections gained 88% when compared with the
year-earlier period.
The table below displays our cash collections by source, by quarter for
the past five quarters:
Cash Collection Source ($ in
thousands) Q12010 Q42009 Q32009 Q22009 Q12009
-------- -------- -------- -------- --------
Call Center & Other
Collections $ 56,987 $ 45,365 $ 48,590 $ 50,052 $ 50,914
External Legal Collections 18,276 15,496 15,330 16,527 17,790
Internal Legal Collections 10,713 7,570 6,196 4,263 3,539
Purchased Bankruptcy 33,219 26,855 22,251 19,637 17,628
- -- Productivity, as measured by cash collections per hour paid, the
Company's key measure of collector performance, finished at a record
$182.02 for the first quarter of 2010 vs. $145.44 for all of 2009.
Excluding the impact of trustee remittances from purchased bankrupt
accounts, the comparison is $134.70 for first quarter of 2010,
compared with $113.42 for all of 2009. Excluding trustee remittances
on purchased bankrupt accounts and external legal collections, the
comparison is $106.40 for the first quarter of 2010 and $87.13 for all
of 2009.
- -- Revenue was a record $83.4 million in the first quarter, up 22% when
compared with the same period a year ago. This was driven by record
cash receipts of $134.6 million, up 26.1% from $106.8 million a year
earlier. Cash receipts are comprised of both cash collections and
revenue from the Company's fee-based businesses.
- -- The Company's net allowance charge totaled $6.9 million in the first
quarter. The table below displays net allowance charges incurred by
quarter, by buying period since 2005 as well as purchases of
charged-off consumer debt, net of buybacks:
($ in thousands)
---------------------------------------------------
Allowance Period Purchase Period
1996-
2000 2001 2002 2003 2004 2005
------- ------- ------- ------- ------- --------
Q1 05 $ - $ - $ - $ - $ - $ -
Q2 05 - - - - - -
Q3 05 - - - - - -
Q4 05 - 200 - - - -
Q1 06 - - - - - 175
Q2 06 - 75 - - - 125
Q3 06 - 200 - - - 75
Q4 06 - - - - - 450
Q1 07 - (245) - - - 610
Q2 07 - 70 - 20 - -
Q3 07 - 50 - 150 320 660
Q4 07 - - - 190 150 615
Q1 08 - - - 120 650 910
Q2 08 - (140) - 400 720 -
Q3 08 - (30) - (60) 60 325
Q4 08 - (75) - (325) (140) 1,805
Q1 09 - (105) - (120) 35 1,150
Q2 09 - - - (230) (220) 495
Q3 09 - - - (25) (190) 1,170
Q4 09 - - - (120) - 1,375
Q1 10 - - - - - 2,795
------- ------- ------- ------- ------- --------
Total $ - $ - $ - $ - $ 1,385 $ 12,735
======= ======= ======= ======= ======= ========
Portfolio
Purchases, net $65,772 $33,481 $42,325 $61,448 $59,179 $142,172
======= ======= ======= ======= ======= ========
($ in thousands)
----------------------------------------------
Purchase Period
2009-
2006 2007 2008 2010 Total
-------- -------- -------- -------- ----------
Q1 05 $ - $ - $ - $ - $ -
Q2 05 - - - - $ -
Q3 05 - - - - $ -
Q4 05 - - - - $ 200
Q1 06 - - - - $ 175
Q2 06 - - - - $ 200
Q3 06 - - - - $ 275
Q4 06 - - - - $ 450
Q1 07 - - - - $ 365
Q2 07 - - - - $ 90
Q3 07 - - - - $ 1,180
Q4 07 340 - - - $ 1,295
Q1 08 1,105 - - - $ 2,785
Q2 08 2,330 650 - - $ 3,960
Q3 08 1,135 2,350 - - $ 3,780
Q4 08 2,600 4,380 620 - $ 8,865
Q1 09 910 2,300 2,050 - $ 6,220
Q2 09 765 685 2,425 - $ 3,920
Q3 09 1,965 340 4,750 - $ 8,010
Q4 09 1,220 110 6,900 - $ 9,485
Q1 10 1,175 2,900 - - $ 6,870
-------- -------- -------- -------- ----------
Total $ 13,545 $ 13,715 $ 16,745 $ - $ 58,125
======== ======== ======== ======== ==========
Portfolio
Purchases, net $107,731 $258,341 $275,189 $386,153 $1,431,791
======== ======== ======== ======== ==========
- -- The Company purchased $1.9 billion of face-value debt during the first
quarter of 2010 for $102.6 million. This debt was acquired in 84
portfolios from 8 different sellers.
- -- The Company's fee-for-service businesses generated revenue of
$15.4 million in the first quarter of 2010, down 8.9% from
$16.9 million in the same period a year ago. These businesses
accounted for 18.5% of the Company's overall revenue in the first
quarter of 2010, down from 24.8% in Q1 2009.
- -- The Company's cash balances were $23.0 million as of March 31, 2010.
During the first quarter, the Company made net repayments of
$23.0 million on its line of credit, leaving it with $296.3 million in
outstanding borrowings at quarter's end. Remaining borrowing
availability under the line was $68.7 million at March 31, 2010.
- -- In March, the Company announced it had acquired a controlling interest
in substantially all of the assets of Claims Compensation Bureau,
or CCB, a company that specializes in recovering funds and processing
payments that are due under class action activities.
- -- The Company announced in March that John Fain and John Fuller had been
named to its Board of Directors effective March 1, 2010.
- -- In February, the Company announced it had closed its previously
announced public offering of 1.25 million newly issued shares of
common stock with its underwriters exercising their option to purchase
an additional 187,500 shares.
"The first quarter of 2010 was a strong one for Portfolio Recovery Associates, driven in large part by the efficiency of our collection operations and the investments we have made in the Company's future. Our core measure of productivity, recoveries per hour paid, finished the first quarter at $182.02, which is by far the best collections performance we have ever seen. This strength allowed us to overcome a sizeable allowance charge and an economy still suffering the after-effects of our recent recession. We were, of course, also the beneficiaries of the typical seasonal strength we see in the first quarter as well as a shift in our collection mix to bankrupt accounts," said Kevin P. Stevenson, Chief Financial and Administrative Officer.
Conference Call Information
The Company will hold a conference call with investors tonight, Tuesday, April 27, 2010, at 5:30 p.m. EDT to discuss its first-quarter results. Investors can access the call live by dialing 888-713-4217 for domestic callers or 617-213-4869 for international callers using the pass code 96053534.
In addition, investors may listen to the call via a taped replay, which will be available for seven days, by dialing 888-286-8010 for domestic callers and 617-801-6888 for international callers using the pass code 51431020. The replay will be available approximately two hours after today's conference call ends. Investors may also listen via webcast, both live and archived, at the Company's website, www.portfoliorecovery.com.
About Portfolio Recovery Associates, Inc.
Portfolio Recovery Associates' business revolves around the detection, collection, and processing of both unpaid and normal-course receivables originally owed to credit grantors, governments, retailers and others. The Company's primary business is the purchase, collection and management of portfolios of defaulted consumer receivables. These are the unpaid obligations of individuals to credit originators, which include banks, credit unions, consumer and auto finance companies, and retail merchants. Portfolio Recovery Associates also provides fee-based services, including collateral-location services for credit originators via its IGS subsidiary, revenue administration, audit and debt discovery/recovery services for government entities through both its RDS and MuniServices businesses and class action claims recovery services and related payment processing through its CCB subsidiary.
Statements herein which are not historical, including Portfolio Recovery Associates' or management's intentions, hopes, beliefs, expectations, representations, projections, plans or predictions of the future, including future revenue and earnings growth, statements with respect to future contributions of its subsidiaries to earnings and future portfolio-purchase opportunities, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include references to Portfolio Recovery Associates' presentations and web casts. The forward-looking statements in this press release are based upon management's beliefs, assumptions and expectations of the Company's future operations and economic performance, taking into account currently available information. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties, some of which are not currently known to us. Actual events or results may differ from those expressed or implied in any such forward-looking statements as a result of various factors, including the risk factors and other risks that are described from time to time in the Company's filings with the Securities and Exchange Commission including but not limited to its annual reports on Form 10-K, its quarterly reports on Form 10-Q and its current reports on Form 8-K, filed with the Securities and Exchange Commission and available through the Company's website, which contain a more detailed discussion of the Company's business, including risks and uncertainties that may affect future results. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. Information in this press release may be superseded by more recent information or statements, which may be disclosed in later press releases, subsequent filings with the Securities and Exchange Commission or otherwise. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or to reflect any change in events, conditions or circumstances on which any such forward-looking statements are based, in whole or in part.
Portfolio Recovery Associates, Inc.
Unaudited Consolidated Income Statements
(in thousands, except per share amounts)
Three Three
Months Months
Ended Ended
March 31, March 31,
2010 2009
---------- ----------
Revenues:
Income recognized on finance receivables, net $ 67,951 $ 51,276
Fee income 15,427 16,927
---------- ----------
Total revenues 83,378 68,203
Operating expenses:
Compensation and employee services 29,642 26,663
Legal and agency fees and costs 13,338 12,118
Outside fees and services 2,829 2,111
Communications 5,058 3,472
Rent and occupancy 1,252 1,082
Other operating expenses 2,274 1,988
Depreciation and amortization 2,550 2,275
---------- ----------
Total operating expenses 56,943 49,709
---------- ----------
Income from operations 26,435 18,494
Other income and (expense):
Interest income 36 3
Interest expense (2,180) (1,978)
---------- ----------
Income before income taxes 24,291 16,519
Provision for income taxes 9,486 6,447
---------- ----------
Net income $ 14,805 $ 10,072
========== ==========
Less net income attributable to
Noncontrolling interest (5) -
---------- ----------
Net income attributable to Portfolio
Recovery Associates, Inc. $ 14,800 $ 10,072
========== ==========
Net income per common share attributable to
Portfolio Recovery Associates, Inc.:
Basic $ 0.91 $ 0.66
Diluted $ 0.91 $ 0.66
Weighted average number of shares outstanding:
Basic 16,191 15,334
Diluted 16,203 15,367
Portfolio Recovery Associates, Inc.
Unaudited Consolidated Summary Balance Sheets
(in thousands, except per share amounts)
March 31, December 31,
ASSETS 2010 2009
----------- -----------
Cash and cash equivalents $ 23,006 $ 20,265
Finance receivables, net 742,484 693,462
Accounts receivable, net 8,752 9,169
Income taxes receivable 1,439 4,460
Property and equipment, net 21,925 21,864
Goodwill 49,053 29,299
Intangible assets, net 30,018 10,756
Other assets 5,773 5,158
----------- -----------
Total assets $ 882,450 $ 794,433
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities $ 20,450 $ 20,948
Deferred tax liability 126,234 117,206
Line of credit 296,300 319,300
Long term debt 1,334 1,499
----------- -----------
Total liabilities 444,318 458,953
----------- -----------
Stockholders' equity:
Portfolio Recovery Associates, Inc.
stockholders' equity:
Preferred stock, par value $0.01, authorized
shares, 2,000, issued and outstanding
shares - 0 - -
Common stock, par value $0.01, authorized
shares, 30,000, 17,041 issued and 16,959 outstanding
shares at March 31, 2010, and 15,596 issued and
15,514 outstanding shares at December 31, 2009 170 155
Additional paid-in capital 154,975 82,400
Retained earnings 268,153 253,353
Accumulated other comprehensive loss, net of
taxes (494) (428)
----------- -----------
Total Portfolio Recovery Associates, Inc.'s
stockholders' equity 422,804 335,480
=========== ===========
Noncontrolling Interest 15,328 -
----------- -----------
Total stockholders' equity 438,132 335,480
----------- -----------
Total liabilities and stockholders' equity $ 882,450 $ 794,433
=========== ===========
Portfolio Recovery Associates, Inc.
Unaudited Consolidated Summary Statements of Cash Flows
(in thousands)
Three Three
Months Months
Ended Ended
March 31, March 31,
2010 2009
---------- ----------
Cash flows from operating activities:
Net income $ 14,805 $ 10,072
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of share-based compensation 880 1,998
Depreciation and amortization 2,550 2,275
Deferred tax expense 9,070 6,189
Changes in operating assets and
liabilities:
Other assets (613) (459)
Accounts receivable 417 (339)
Accounts payable and accrued
liabilities (2,606) (3,740)
Income taxes receivable 3,021 298
---------- ----------
Net cash provided by operating activities 27,524 16,294
---------- ----------
Cash flows from investing activities:
Purchases of property and equipment (1,706) (829)
Acquisition of finance receivables, net of
buybacks (100,266) (51,365)
Collections applied to principal on finance
receivables 51,244 38,595
Company acquisitions, net of cash acquired (22,500) -
Contingent payment made for acquisition (100) (100)
---------- ----------
Net cash used in investing activities (73,328) (13,699)
---------- ----------
Cash flows from financing activities:
Proceeds from exercise of options - 84
Income tax benefit/(shortfall) from share-based
compensation 22 (9)
Proceeds from line of credit 70,500 15,000
Principal payments on line of credit (93,500) (17,000)
Proceeds from offering, net of offering costs 71,688 -
Proceeds from long-term debt - 2,036
Principal payments on long-term debt (165) (53)
Principal payments on capital lease obligations - (5)
---------- ----------
Net cash provided by financing activities 48,545 53
---------- ----------
Net increase in cash and cash equivalents 2,741 2,648
Cash and cash equivalents, beginning of period 20,265 13,901
---------- ----------
Cash and cash equivalents, end of period $ 23,006 $ 16,549
========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,151 $ 2,069
Cash paid for income taxes $ 61 $ 1
Noncash investing and financing activities:
Net unrealized change in fair value of derivative
instrument $ (108) $ (451)
Contact:
Investor Relations
757-519-9300 ext. 13010
info@portfoliorecovery.com
