Debt buyer Encore Capital Group Inc. reported Wednesday large increases in revenue and cash collections but a decline in net income for the first quarter ended March 31.
Gross collections for the San Diego-based firm reached $231 million, a 21% increase from the year-ago period. Total revenue increased 18% to $130.2 million.
The company reported net income of $11.4 million, down 17% from the year-ago quarter. But the company noted that excluding non-cash impairment charges of $10.3 million, earnings per fully diluted share would have been 28% higher than last year.
Brandon Black, Encore's president and CEO, said: "Our cost-to-collect continued to improve, declining to a record 38.4 cents per dollar collected. This cost advantage, combined with our analytical discipline and strong capital position, enabled us to deploy more than $130 million on portfolio purchases in the first quarter and positioned us to invest over $200 million in the second quarter, of which, more than $100 million is expected to come from the purchase of nine portfolios from one seller."
Revenue from receivable portfolios, net was $126.4 million, a 20% increase over the $105.3 million in the year-ago period. Revenue recognized on receivable portfolios, as a percentage of portfolio collections, excluding the effects of net portfolio allowances, was 54.9%, compared to 58% a year ago.
The company also announced it acquired Propel Financial Services LLC, a tax lien acquisition company, and sold its bankruptcy servicing subsidiary, Ascension Capital Group. Uncertainty over a client’s contract renewal with Ascension led to Encore’s decision to sell the unit,
To facilitate the deals, Encore expanded its credit facility, led by SunTrust Robinson Humphrey, to $555 million, with a $100 million accordion feature, and an increase in the availability of capital under a revised borrowing base calculation. In addition, the company established a new $160 million facility, led by Texas Capital Bank, to provide the funding for the Propel acquisition and its capital requirements.
"Propel has an excellent track record of deploying capital at attractive returns and provides a valuable and affordable service for consumers, consistent with Encore's core competencies," said Brandon Black, Encore's president and CEO. "The acquisition of Propel will capitalize on Encore's expertise in consumer-level analytics and operational capabilities, will leverage the company's deep experience assisting financially stressed consumers, and will put Encore in position to build a significant tax lien acquisition business."