Image: PRA Group.

Some industries are countercyclical in nature, and debt-collection specialist PRA Group (PRAA -4.05%) can attest to the nature of the personal debt market as an example. Even as economic conditions improve, PRA Group has found it difficult to find assets against which to collect, and that has put pressure on its financial results.

Coming into its fourth-quarter financial report on Thursday, PRA Group investors were bracing for falling revenue, but the company wasn't even able to match reduced expectations for the quarter. Let's take a closer at exactly what PRA Group's results looked like, and what could bring better times in the future.

PRA Group sees revenue, income fall
PRA Group's fourth-quarter results were just the latest in a series of disappointing results for the company. Adjusted total revenue fell almost 6%, to $236.7 million, which was slightly less than the consensus forecast among investors. On the bottom line, net income dropped 13%, to $41 million, and that resulted in earnings of $0.86 per share, which was $0.17 per share less than investors had expected.

A closer look at PRA Group's numbers shows a continuing onslaught against the debt collector from several fronts. 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.

PRA Group kept spending money on finance receivables during the quarter, but the pace of those purchases slowed. Out of $225.9 million in spending, about $141 million went to the Americas, while Europe's purchases amounted to more than $84 million. Both figures were lower than year-ago levels, but the pullback in Europe, in particular, was considerable.

CEO Steve Fredrickson was still willing to point to benefits for PRA Group. "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," Fredrickson said. The CEO believes that, as soon as supply of receivables in the U.S. starts to increase, PRA Group will be in a good position to pick up market share.

Will PRA Group recover soon?
PRA Group thinks that the key to its future is its capacity to take advantage of future opportunities when they arise. As Fredrickson sees it, "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." Meanwhile, rapid growth in Europe and South America should be able to sustain PRA Group while it waits for a better U.S. market to materialize.

Stock repurchase activity also jumped during the quarter. PRA Group reported that it bought back 2.07 million shares during the quarter, paying an average of $38.60 per share. That amounts to about $80 million, which is well above the $7.7 million that it spent during the third quarter. Nevertheless, based on its recent share price, PRA Group's efforts haven't led to sustained support for the stock.

Based on its comments, PRA Group appears to be waiting for conditions in the U.S. economy to turn. Moves like the acquisition of bankrupt-account processor Recovery Management Systems Corporation should help PRA Group be more competitive when delinquencies and bankruptcy activity rise. Until then, though, PRA Group might struggle to make the most of its U.S. presence despite its international success.