Encore Capital Group Announces First Quarter 2010 Results
SAN DIEGO, April 27, 2010 /PRNewswire via COMTEX/ --Encore Capital Group, Inc. (Nasdaq: ECPG), a leading distressed consumer debt management company, today reported consolidated financial results for the first quarter ended March 31, 2010.
For the first quarter of 2010:
- Gross collections were $141.3 million, a 23% increase over the $115.2 million in the same period of the prior year.
- Investment in receivable portfolios was $81.6 million, to purchase $2.1 billion in face value of debt, compared to $55.9 million, to purchase $1.3 billion in face value of debt in the same period of the prior year. Available capacity under the revolving credit facility, subject to borrowing base and applicable debt covenants, was $54.5 million as of March 31, 2010. Total debt, consisting of the revolving credit facility, convertible senior notes and capital lease obligations, was $318.0 million as of March 31, 2010, an increase from $303.1 million as of December 31, 2009.
- Revenue from receivable portfolios was $82.9 million, a 15% increase over the $72.3 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, was 64%, compared to 67% in the same period of the prior year.
- Revenue from bankruptcy servicing was $4.4 million, a 6% increase over the $4.1 million in the same period of the prior year.
- Total operating expenses were $65.6 million, a 9% increase over the $60.2 million in the same period of the prior year. Operating expense (excluding stock-based compensation expense and bankruptcy servicing operating expenses) per dollar collected decreased to 42.9% compared to 48.3% in the same period of the prior year.
- Adjusted EBITDA, defined as net income before interest, taxes, depreciation and amortization, stock-based compensation expense and portfolio amortization, was $82.6 million, a 29% increase over the $63.8 million in the same period of the prior year.
- Total interest expense was $4.5 million, compared to $4.3 million in the same period of the prior year.
- Net income was $10.9 million or $0.44 per fully diluted share, compared to net income of $9.0 million or $0.38 per fully diluted share in the same period of the prior year.
- Tangible book value per share, computed by dividing total stockholders' equity less goodwill and identifiable intangible assets by the number of diluted shares outstanding, was $9.73 as of March 31, 2010, a 5% increase over $9.23 as of December 31, 2009.
Additional Financial Information:
Certain events affected the comparability of 2010 versus 2009 quarterly results, as outlined below. For a more detailed comparison of 2010 versus 2009 results, refer to Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010.
- In the first quarter of 2010, the Company recorded net portfolio allowances of $7.9 million, compared to $5.4 million in the same period of the prior year.
- In the first quarter of 2010, the Company expensed $8.5 million in upfront court costs, compared to $13.3 million in the same period of the prior year.
- In the first quarter of 2009, the Company repurchased $25.6 million principal amount of its outstanding convertible senior notes, for a total price of $19.8 million, plus accrued interest. These repurchases resulted in a gain of $3.1 million or $0.08 per fully diluted share.
Conference Call and Webcast
The Company will hold a conference call today at 1:30 P.M. Pacific time / 4:30 P.M. Eastern time to discuss first quarter results. Members of the public are invited to listen to the live conference call via the Internet.
To hear the presentation, log on at the Investor Relations page of the Company's website at www.encorecapitalgroup.com.For those who cannot listen to the live broadcast, a replay of the conference call will be available shortly after the call at the same location.
Non-GAAP Financial Measures
The Company has included information concerning Adjusted EBITDA because management utilizes this information, which is materially similar to a financial measure contained in covenants used in the Company's credit agreement, in the evaluation of its operations and believes that this measure is a useful indicator of the Company's ability to generate cash collections in excess of operating expenses through the liquidation of its receivable portfolios. The Company has included information concerning total operating expenses excluding stock-based compensation expense and bankruptcy servicing operating expenses in order to facilitate a comparison of approximate cash costs to cash collections for the debt purchasing business in the periods presented. The Company has included information concerning tangible book value per share because management believes that this metric is a meaningful measure that reflects the equity deployed in the business. These non-GAAP financial measures should not be considered as alternatives to, or more meaningful than, net income and total operating expenses as indicators of Encore Capital Group's operating performance and total stockholders' equity as an indicator of Encore Capital Group's financial condition. Adjusted EBITDA, operating expenses excluding stock-based compensation expense and bankruptcy servicing operating expenses, and tangible book value per share have not been prepared in accordance with generally accepted accounting principles (GAAP). These non-GAAP financial measures, as presented by Encore Capital Group, may not be comparable to similarly titled measures reported by other companies. The Company has included a reconciliation of Adjusted EBITDA to reported earnings under GAAP, a reconciliation of operating expenses excluding stock-based compensation expense and bankruptcy servicing operating expenses to the GAAP measure total operating expenses, and a reconciliation of tangible book value per share to the GAAP measure total stockholders' equity in the attached financial tables.
About Encore Capital Group, Inc.
Encore Capital Group, Inc. is a systems-driven purchaser and manager of charged-off consumer receivables portfolios. More information on the company can be found at www.encorecapitalgroup.com.
Contact:
Encore Capital Group, Inc.
Paul Grinberg (858) 309-6904
paul.grinberg@encorecapitalgroup.com
or
Ren Zamora (858) 560-3598
ren.zamora@encorecapitalgroup.com
FINANCIAL TABLES FOLLOW
ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Financial Condition
(In Thousands, Except Par Value Amounts)
(Unaudited)
March 31, December 31,
2010 2009
---- ----
Assets
Cash and cash equivalents $7,575 $8,388
Accounts receivable, net 2,523 3,134
Investment in receivable portfolios, net 549,660 526,877
Deferred court costs 25,603 25,957
Property and equipment, net 9,922 9,427
Other assets 10,194 4,252
Goodwill 15,985 15,985
Identifiable intangible assets, net 1,041 1,139
----- -----
Total assets $622,503 $595,159
======== ========
Liabilities and stockholders' equity
Liabilities:
Accounts payable and accrued liabilities $18,253 $21,815
Income taxes payable 5,188 2,681
Deferred tax liabilities, net 17,097 16,980
Deferred revenue 5,464 5,481
Debt 318,014 303,075
Other liabilities 1,321 2,036
----- -----
Total liabilities 365,337 352,068
------- -------
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock, $.01 par
value, 5,000 shares authorized, no shares
issued and outstanding - -
Common stock, $.01 par value, 50,000
shares authorized, 23,458 shares and
23,359 shares issued and outstanding as
of March 31, 2010 and December 31, 2009,
respectively 235 234
Additional paid-in capital 106,831 104,261
Accumulated earnings 150,703 139,842
Accumulated other comprehensive loss (603) (1,246)
---- ------
Total stockholders' equity 257,166 243,091
------- -------
Total liabilities and stockholders' equity $622,503 $595,159
======== ========
ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Income
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended
March 31,
---------
2010 2009
---- ----
Revenue
Revenue from receivable portfolios, net $82,907 $72,275
Servicing fees and other related revenue 4,431 4,171
----- -----
Total revenue 87,338 76,446
------ ------
Operating expenses
Salaries and employee benefits (excluding stock-
based compensation expense) 15,485 13,957
Stock-based compensation expense 1,761 1,080
Cost of legal collections 26,433 29,947
Other operating expenses 9,114 5,980
Collection agency commissions 5,296 2,891
General and administrative expenses 6,879 5,697
Depreciation and amortization 673 623
--- ---
Total operating expenses 65,641 60,175
------ ------
Income before other (expense) income and income
taxes 21,697 16,271
------ ------
Other (expense) income
Interest expense (4,538) (4,273)
Gain on repurchase of convertible notes, net - 3,053
Other income (expense) 192 (81)
--- ---
Total other expense (4,346) (1,301)
------ ------
Income before income taxes 17,351 14,970
Provision for income taxes (6,490) (5,973)
------ ------
Net income $10,861 $8,997
======= ======
Weighted average shares outstanding:
Basic 23,494 23,122
Diluted 24,685 23,631
Earnings per share:
Basic $0.46 $0.39
Diluted $0.44 $0.38
ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, In Thousands)
Three Months Ended
March 31,
---------
2010 2009
-- --
Operating activities:
Net income $10,861 $8,997
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 673 623
Amortization of loan costs and debt discount 1,062 1,221
Stock-based compensation expense 1,761 1,080
Gain on repurchase of convertible notes, net - (3,053)
Deferred income tax expense 117 145
Excess tax benefit from stock-based payment
arrangements (458) (21)
Provision for allowances on receivable
portfolios, net 7,881 5,427
Changes in operating assets and liabilities
Other assets (822) (165)
Deferred court costs 354 (2,310)
Prepaid income tax and income taxes payable 2,903 5,441
Deferred revenue (17) 26
Accounts payable, accrued liabilities and
other liabilities (3,787) (523)
------ ----
Net cash provided by operating activities 20,528 16,888
---- ----
Investing activities:
Purchases of receivable portfolios (81,632) (55,913)
Collections applied to investment in
receivable portfolios, net 50,384 37,424
Proceeds from put-backs of receivable
portfolios 584 924
Purchases of property and equipment (208) (469)
---- ----
Net cash used in investing activities (30,872) (18,034)
------- -------
Financing activities:
Payment of loan costs (4,660) -
Proceeds from notes payable and other
borrowings 35,000 32,000
Repayment of notes payable and other
borrowings (22,000) (17,000)
Repurchase of convertible notes - (19,834)
Proceeds from net settlement of certain call
options 524 -
Proceeds from exercise of stock options 395 -
Excess tax benefit from stock-based payment
arrangements 458 21
Repayment of capital lease obligations (186) (121)
---- ----
Net cash provided by financing activities 9,531 (4,934)
--- ------
Net decrease in cash (813) (6,080)
Cash and cash equivalents, beginning of
period 8,388 10,341
----- ------
Cash and cash equivalents, end of period $7,575 $4,261
====== ======
Supplemental disclosures of cash flow
information:
Cash paid for interest $3,516 $3,699
Cash paid for income taxes $3,832 $499
Supplemental schedule of non-cash investing
and financing activities:
Fixed assets acquired through capital lease $862 $-
ENCORE CAPITAL GROUP, INC.
Supplemental Financial Information
Reconciliation of Adjusted EBITDA to GAAP Net Income, Operating
Expenses, Excluding Stock-based Compensation Expense and Bankruptcy
Servicing Operating Expenses to GAAP Total Operating Expenses, and
Tangible Book Value Per Share to GAAP Total Stockholders' Equity
(Unaudited, In Thousands)
Three Months Ended
March 31,
---------
2010 2009
---- ----
GAAP net income, as reported $10,861 $8,997
Interest expense 4,538 4,273
Provision for income taxes 6,490 5,973
Depreciation and amortization 673 623
Amount applied to principal on receivable portfolios 58,265 42,851
Stock-based compensation expense 1,761 1,080
----- -----
Adjusted EBITDA $82,588 $63,797
======= =======
Three Months Ended
March 31,
---------
2010 2009
---- ----
GAAP total operating expenses, as reported $65,641 $60,175
Stock-based compensation expense (1,761) (1,080)
Bankruptcy servicing operating expenses (3,311) (3,386)
------ ------
Operating expenses, excluding stock-based
compensation expense and bankruptcy servicing
operating expenses $60,569 $55,709
======= =======
As of As of
March 31, December 31,
2010 2009
---------- -------------
GAAP total stockholders' equity, as
reported $257,167 $243,091
Goodwill (15,985) (15,985)
Identifiable intangible assets, net (1,041) (1,139)
------ ------
Tangible book value $240,141 $225,967
Diluted shares outstanding 24,685 24,484
------ ------
Tangible book value per share $9.73 $9.23
SOURCE Encore Capital Group, Inc.