PRA Group's fourth-quarter financial results reported Thursday showed drops in both revenue and income and mixed news for cash collections.
Adjusted total revenue fell nearly 6%, to $236.7 million, which was slightly less than the consensus forecast among investors. Net income dropped 13%, to $41 million, resulting in earnings of $0.86 per share, which was $0.17 per share less than investors had expected. Investors were reportedly bracing for falling numbers but the Norfolk, Va.-based debt buyer wasn’t able to meet reduced expectations.
The pace of PRA Group’s expenditures on finance receivables slowed in the quarter. Out of $225.9 million in spending, approximately $141 million went to the Americas, while Europe's purchases amounted to more than $84 million. Both figures were lower than year-ago levels.
PRA Group’s CEO Steve Fredrickson nevertheless kept an optimistic tone. He believes that once the supply of receivables in the U.S. begins to increase, the company will be in a good spot to pick up market share.
"One thing remains evident for our future long-term results: the industry consolidation in the U.S. Core market remains a critical positive for us," he said.
The company is apparently waiting for conditions in the U.S. economy to turn. Moves such as a recent acquisition of bankrupt-account processor Recovery Management Systems Corporation should help PRA Group be more competitive when delinquencies and bankruptcy activity rise. Meanwhile, PRA Group might struggle to make the most of its U.S. presence despite international success. Growth in Europe and South America, however, should be able to sustain the company while it waits for an improved U.S. market.
"With our industry-low leverage, we will be ready and able to purchase portfolios that are within our return profile both now and when volume inevitably picks up,” Fredrickson said. Cash collection source figures were mixed, with core business collections climbing by $23 million, but insolvency-related collections falling $28 million. The European business produced solid growth of 18%, but in the Americas, cash collections fell 7%. Moreover, European growth would have been even higher at 27% in constant-currency terms, but the strong dollar held back gains in dollar terms.