Debt collection giant PRA Group on Monday reported growth in revenue, net income and cash collections for the second quarter ended June 30. Revenue increased by 20% to $237.2 million and net income jumped an even stronger 37% to $51.4 million.
Investors, however, expected to see an estimated 26% revenue growth and earnings, at $1.06 per share, were nearly a dime less than the consensus forecast from those tracking the companys stock. In last years second quarter, PRA Group took a large hit as a result of its $880 million acquisition of Aktiv Kapital. Earnings growth, adjusting for that charge, took a 20 percentage point hit with net income growing just 17% and earnings per share up 22%.
Cash collections for the second quarter increased 22% to $389.6 million, although the figure is actually down $10 million from the first quarter. Principal amortization of finance receivables in Q2 was $169.6 million or 43.5% of cash collections, compared with 42.8% in the year-ago quarter.
Principal amortization included a net allowance charge of $4.9 million recorded against certain pools of finance receivables, compared with a net allowance reversal of $2.3 million recorded in Q2 2014. The cash collections total included collections from the following finance receivables sources: Americas-Core; Americas-Insolvency; Europe-Core; and Europe-Insolvency.
The Americas business makes up the large majority of PRA Group's overall revenue. It saw sequential declines in Q2 in both the core collections and insolvency divisions. European results have been a big growth driver in the past year, but revenue from that core segment fell 10% from Q1.
But PRA Group, based in Norfolk, Va., continues to invest in new receivables and the company also committed to a further purchase of $200 million in receivables that will be funded in the current quarter.
"The quarter continued many of the trends we have seen over the last 12 months, including better-than-expected collections in our U.S. call centers," said Steve Fredrickson, PRA's CEO. "In early August we purchased a majority position in RCB Investimentos, Brazil's leading NPL master servicing platform. RCB is currently servicing the small investment we made in Brazil in the first quarter. We are very excited to continue diversifying geographically and work with Alexandre Nobre and Renato Toledo to further develop RCB."
PRA Group's acquisition of Oslo, Norway-based Aktiv Kapital included an agreement to assume approximately $435 million of the firm's corporate debt, resulting in an acquisition of estimated total enterprise value of $1.3 billion. The deal, one of the largest in accounts receivable management history, was announced in February 2014 and closed in the third quarter last year. On Monday, PRA Group named Kevin Stevenson as the firm's new president. Stevenson previously was PRA Group's executive vice president, chief financial and administrative officer, treasurer and assistant secretary.
Stevenson will assume the additional responsibility of the operations in the Americas, with both the Core and Insolvency groups reporting to him. He will continue in his role as chief financial and administrative officer until a new chief financial officer is hired. Stevenson then will continue as chief administrative officer, with the new chief financial officer reporting to him.