Debt buyer Encore Capital Group Inc. on Thursday announced financial results of the first quarter ended March 31, including a 17% jump in gross collections from the portfolio purchasing and recovery business - to $270.2 million compared with $231 million in the year-ago period.
In March, Encore Capital announced it is acquiring debt buyer Asset Acceptance Capital Corp. in a deal valued at $200 million.
"We have positioned our operations for the integration of Asset Acceptance, and are confident in the value that this acquisition will deliver for shareholders," says Brandon Black, Encore's CEO. "Upon closing in June, we will have almost $3 billion in estimated remaining collections. In addition to the $59 million we deployed in the first quarter on purchases, after closing, we will have the benefit of managing the $27 million that Asset Acceptance deployed in the first quarter."
Some highlights of the report:
• Investment in receivable portfolios in the portfolio purchasing and recovery business was $58.8 million, to purchase $1.6 billion in face value of debt, compared to $130.5 million, to purchase $2.9 billion in face value of debt in the same period of the prior year.
• Revenue from receivable portfolios in the portfolio purchasing and recovery business, net of allowance adjustments, was $140.7 million, an 11% increase over the $126.4 million in the same period of the prior year. Revenue recognized on receivable portfolios, as a percentage of portfolio collections, excluding the effects of net portfolio allowances, decreased to approximately 52% from 55% in the same period of the prior year.
• Total operating expenses were $105.9 million, including $3.0 million for Propel, a 16% increase over the $91.4 million in the same period of the prior year. Cost per dollar collected for the portfolio purchasing and recovery business decreased to 36.5% compared to 38.4% in the same period of the prior year.
• Net income increased to $19.4 million from $11.4 million in the same period last year.
• Earnings per share from continuing operations, excluding non-cash interest and issuance cost amortization, and acquisition related expenses incurred during the quarter, net of tax, was $0.86, a 23% increase over $0.70 in the same period of the prior year.
• Adjusted EBITDA, defined as net income before interest, taxes, depreciation and amortization, stock-based compensation expense, portfolio amortization, and acquisition related expenses, was $174.5 million, a 21% increase over the $143.9 million in the same period of the prior year.
• Total interest expense for the portfolio purchasing and recovery business was $6.9 million, compared to $5.5 million in the same period of the prior year. Included in this is incremental, non-cash interest expense incurred by the Company as a result of the convertible note offering in late 2013. Cash interest expense was $5.5 million and $5.0 million for the three months ended March 31, 2013 and 2012, respectively.
Encore also announced the expansion of its existing credit facility, led by SunTrust Robinson Humphrey and Bank of America, by $217.5 million to $812.5 million, with an additional $162.5 million available to draw under its accordion, bringing the total facility to $975 million.
"The expansion to our facility will provide us with the access to capital necessary to continue our growth strategy. We appreciate the confidence that our lenders have shown by increasing their commitments, as well as the entrance of a number of new lenders to our facility. With the additional commitments, on a pro forma basis at March 31, 2013, we had over $475 million of availability under our facility," said Paul Grinberg, Encore's chief financial officer.