Encore Capital Group Announces Record Third Quarter 2012 Financial Results
Company Release - 11/01/2012 16:05
Earnings Per Share From Continuing Operations Increased 37% to $0.82 per Fully Diluted Share; Quarterly Gross Collections Increased 30% to $246 Million
SAN DIEGO, Nov. 1, 2012 /PRNewswire/ -- Encore Capital Group, Inc. (Nasdaq: ECPG), through its subsidiaries (the "Company"), a leading provider of debt management and recovery solutions for consumers and property owners across a broad range of assets, today reported consolidated financial results for the third quarter ended September 30, 2012.
"For the quarter, we delivered strong financial results, including record earnings, collections and operating cash flow," said Brandon Black, the Company's President and Chief Executive Officer. "We've been very disciplined with the investments we've made and how we've executed our strategies, and this continues to drive our performance across the board."
The Company also discussed the major changes taking place in the industry that are likely to lead to increased consolidation in the years ahead. "We built Encore for the exact business and regulatory environment we're now entering," Black commented. "Only companies with access to low cost capital, a differentiated operating model, an operating cost advantage and a real commitment to respecting consumers will succeed."
Third Quarter of 2012 Highlights Include:
- Gross collections from the portfolio purchasing and recovery business were $246.0 million, a 30% increase over the $189.1 million in the same period of the prior year.
- Investment in receivable portfolios in the portfolio purchasing and recovery business was $47.3 million, to purchase $1.1 billion in face value of debt, compared to $65.7 million, to purchase $2.0 billion in face value of debt in the same period of the prior year.
- Available capacity under the Encore Capital Group revolving credit facility, subject to borrowing base and applicable debt covenants, was $145.5 million as of September 30, 2012. Total debt, consisting of the revolving credit facility, senior secured notes and capital lease obligations, was $615.1 million as of September 30, 2012, compared to $389.0 million as of December 31, 2011.
- Revenue from receivable portfolios in the portfolio purchasing and recovery business, net of allowance adjustments, was $140.7 million, a 21% increase over the $115.8 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 57% from 62% in the same period of the prior year.
- Total operating expenses were $103.6 million, a 22% increase over the $85.2 million in the same period of the prior year. Adjusted operating expense (operating expenses excluding stock-based compensation expense, and tax lien transfer segment operating expenses) per dollar collected decreased to 40.5% compared to 43.8% 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 $150.9 million, a 41% increase over the $106.9 million in the same period of the prior year.
- Total interest expense for the portfolio purchasing and recovery segment increased to $7.0 million, as compared to $5.2 million in the same period of the prior year.
- Income from continuing operations was $21.3 million, or $0.82 per fully diluted share, compared to income from continuing operations of $15.4 million, or $0.60 per fully diluted share in the same period of the prior year.
- Total stockholders' equity per share was $16.64 at the end of the quarter, a 15.0% increase over $14.46 at December 31, 2011.
Conference Call and Webcast
The Company will hold a conference call today at 2:00 p.m. Pacific time / 5:00 p.m. Eastern time to discuss third quarter and full year results.
Members of the public are invited to listen to the event via a listen-only telephone conference call line or the Internet. To access the live telephone conference call, please dial (877) 670-9781 or (408) 940-3818. To access the live webcast via the Internet, log on at the Investors page of the Company's website at www.encorecapital.com.
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 adjusted operating expenses excluding stock-based compensation expense and tax lien transfer segment operating expenses in order to facilitate a comparison of approximate cash costs to cash collections for the debt purchasing business in the periods presented. Adjusted EBITDA and adjusted operating expenses have not been prepared in accordance with generally accepted accounting principles (GAAP). 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 the Company's operating performance. Further, these non-GAAP financial measures, as presented by the Company, 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 and a reconciliation of adjusted operating expenses excluding stock-based compensation expense, and tax lien transfer segment operating expenses to the GAAP measure total operating expenses.
About Encore Capital Group, Inc.
Encore Capital Group is a leading provider of debt management and recovery solutions for consumers and property owners across a broad range of assets. Through its subsidiaries, the Company purchases portfolios of consumer receivables from major banks, credit unions, and utility providers, and partners with individuals as they repay their obligations and work toward financial recovery. Through its Propel Financial Services, LLC subsidiary, the Company assists property owners who are delinquent on their property taxes by structuring affordable monthly payment plans.
Headquartered in San Diego, Encore Capital Group is a publicly traded NASDAQ Global Select company (ticker symbol: ECPG) and a component stock of the Russell 2000, the S&P SmallCap 600, and the Wilshire 4500. More information about the Company can be found at www.encorecapital.com. The Company's website and the information contained therein, is not incorporated into and is not a part of this press release.
Forward Looking Statements
The statements in this press release that are not historical facts, including, most importantly, those statements preceded by, or that include, the words "may," "believe," "projects," "expects," "anticipates" or the negation thereof, or similar expressions, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). These statements may include, but are not limited to, statements regarding our future operating results, performance, business plans or prospects. For all "forward-looking statements," the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act. Such forward-looking statements involve risks, uncertainties and other factors which may cause actual results, performance or achievements of the Company and its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors are discussed in the reports filed by the Company with the Securities and Exchange Commission, including the most recent reports on Forms 10-K, 10-Q and 8-K, each as it may be amended from time to time. The Company disclaims any intent or obligation to update these forward-looking statements.
Contact:
Encore Capital Group, Inc.
Paul Grinberg (858) 309-6904
paul.grinberg@encorecapital.com
Adam Sragovicz (858) 309-9509
adam.sragovicz@encorecapital.com
|
FINANCIAL TABLES FOLLOW
ENCORE CAPITAL GROUP, INC. Condensed Consolidated Statements of Financial Condition (In Thousands, Except Par Value Amounts) (Unaudited)
| ||
|
September
30, |
December 31, | |
|
Assets |
||
|
Cash and cash equivalents |
$ 19,263 |
$ 8,047 |
|
Accounts receivable, net |
2,471 |
3,265 |
|
Investment in receivable portfolios, net |
811,620 |
716,454 |
|
Deferred court costs, net |
37,561 |
38,506 |
|
Property tax payment agreements receivable, net |
135,190 |
— |
|
Interest receivable |
4,180 |
— |
|
Property and equipment, net |
19,771 |
17,796 |
|
Other assets |
23,068 |
11,968 |
|
Goodwill |
55,446 |
15,985 |
|
Identifiable intangible assets, net |
515 |
462 |
|
Total assets |
$ 1,109,085 |
$ 812,483 |
|
Liabilities and stockholders' equity |
||
|
Liabilities: |
||
|
Accounts payable and accrued liabilities |
$ 43,108 |
$ 29,628 |
|
Deferred tax liabilities, net |
17,532 |
15,709 |
|
Debt |
615,131 |
388,950 |
|
Other liabilities |
2,132 |
6,661 |
|
Total liabilities |
677,903 |
440,948 |
|
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, 25,002 shares and 24,520 shares issued and outstanding as of September 30, 2012 and December 31, 2011, respectively |
250 |
245 |
|
Additional paid-in capital |
133,005 |
123,406 |
|
Accumulated earnings |
299,162 |
249,852 |
|
Accumulated other comprehensive loss |
(1,235) |
(1,968) |
|
Total stockholders' equity |
431,182 |
371,535 |
|
Total liabilities and stockholders' equity |
$ 1,109,085 |
$ 812,483 |
|
See accompanying notes to condensed consolidated financial statements |
|
ENCORE CAPITAL
GROUP, INC.
| ||||
|
Three Months Ended September 30, |
Nine Months Ended September 30, | |||
|
2012 |
2011 |
2012 |
2011 | |
|
Revenues |
||||
|
Revenue from receivable portfolios, net |
$ 140,682 |
$ 115,843 |
$ 405,818 |
$ 332,262 |
|
Tax lien transfer |
||||
|
Interest income |
5,585 |
— |
8,567 |
— |
|
Interest expense |
(1,475) |
— |
(2,125) |
— |
|
Net interest income |
4,110 |
— |
6,442 |
— |
|
Total revenues |
144,792 |
115,843 |
412,260 |
332,262 |
|
Operating expenses |
||||
|
Salaries and employee benefits |
25,397 |
20,087 |
72,891 |
57,458 |
|
Cost of legal collections |
43,544 |
40,169 |
123,203 |
117,364 |
|
Other operating expenses |
14,829 |
9,904 |
38,854 |
26,944 |
|
Collection agency commissions |
4,227 |
3,264 |
12,352 |
10,774 |
|
General and administrative expenses |
14,091 |
10,704 |
46,331 |
29,471 |
|
Depreciation and amortization |
1,533 |
1,054 |
4,193 |
2,916 |
|
Total operating expenses |
103,621 |
85,182 |
297,824 |
244,927 |
|
Income from operations |
41,171 |
30,661 |
114,436 |
87,335 |
|
Other (expense) income |
||||
|
Interest expense |
(7,012) |
(5,175) |
(19,024) |
(16,137) |
|
Other income (expense) |
1,036 |
(342) |
1,385 |
(182) |
|
Total other expense |
(5,976) |
(5,517) |
(17,639 ) |
(16,319 ) |
|
Income from continuing operations before income taxes |
35,195 |
25,144 |
96,797 |
71,016 |
|
Provision for income taxes |
(13,887) |
(9,834) |
(38,393) |
(27,658) |
|
Income from continuing operations |
21,308 |
15,310 |
58,404 |
43,358 |
|
Income (loss) from discontinued operations, net of tax |
— |
60 |
(9,094) |
466 |
|
Net income |
$ 21,308 |
$ 15,370 |
$ 49,310 |
$ 43,824 |
|
Weighted average shares outstanding: |
||||
|
Basic |
25,071 |
24,638 |
24,930 |
24,493 |
|
Diluted |
26,047 |
25,604 |
25,920 |
25,636 |
|
Basic earnings (loss) per share from: |
||||
|
Continuing operations |
$ 0.85 |
$ 0.62 |
$ 2.34 |
$ 1.77 |
|
Discontinued operations |
$ 0.00 |
$ 0.00 |
$ (0.36) |
$ 0.02 |
|
Net basic earnings per share |
$ 0.85 |
$ 0.62 |
$ 1.98 |
$ 1.79 |
|
Diluted earnings (loss) per share from: |
||||
|
Continuing operations |
$ 0.82 |
$ 0.60 |
$ 2.25 |
$ 1.69 |
|
Discontinued operations |
$ 0.00 |
$ 0.00 |
$ (0.36) |
$ 0.02 |
|
Net diluted earnings per share |
$ 0.82 |
$ 0.60 |
$ 1.90 |
$ 1.71 |
|
Other comprehensive gain (loss): |
||||
|
Unrealized gain (loss) on derivative instruments |
3,027 |
(2,042 ) |
1,205 |
(2,094 ) |
|
Income tax (provision) benefit related to unrealized gain (loss) on derivative instruments |
(1,186) |
796 |
(472) |
819 |
|
Other comprehensive gain (loss), net of tax |
1,841 |
(1,246) |
733 |
(1,275) |
|
Comprehensive income |
$ 23,149 |
$ 14,124 |
$ 50,043 |
$ 42,549 |
|
See accompanying notes to condensed consolidated financial statements |
|
ENCORE CAPITAL
GROUP, INC. | ||
|
Nine Months Ended September 30, | ||
|
2012 |
2011 | |
|
Operating activities: |
||
|
Net income |
$ 49,310 |
$ 43,824 |
|
Adjustments to reconcile net income to net cash provided by operating activities |
||
|
Depreciation and amortization |
4,193 |
2,916 |
|
Impairment charge for goodwill and identifiable intangible assets |
10,400 |
— |
|
Amortization of loan costs and premium on property tax payment agreements receivable |
2,091 |
1,367 |
|
Stock-based compensation expense |
6,710 |
5,980 |
|
Income tax provision in excess of (less than) income tax payments |
1,823 |
(1,472) |
|
Excess tax benefit from stock-based payment arrangements |
(3,600) |
(4,904) |
|
Loss on sale of discontinued operations |
2,416 |
— |
|
(Reversal) provision for allowances on receivable portfolios, net |
(1,506) |
8,109 |
|
Changes in operating assets and liabilities, net of effects of acquisition |
||
|
Other assets |
(20) |
1,944 |
|
Deferred court costs |
945 |
(3,968) |
|
Prepaid income tax and income taxes payable |
(8,407) |
3,423 |
|
Accounts payable, accrued liabilities and other liabilities |
1,798 |
1,012 |
|
Net cash provided by operating activities |
66,153 |
58,231 |
|
Investing activities: |
||
|
Cash paid for acquisition, net of cash acquired |
(186,731) |
— |
|
Purchases of receivable portfolios |
(408,757) |
(250,107) |
|
Collections applied to investment in receivable portfolios, net |
313,205 |
234,726 |
|
Proceeds from put-backs of receivable portfolios |
1,892 |
2,343 |
|
Originations of property tax payment agreements receivable |
(22,912) |
— |
|
Collections applied to property tax payment agreements receivable, net |
24,967 |
— |
|
Purchases of property and equipment |
(3,665) |
(3,458) |
|
Net cash used in investing activities |
(282,001) |
(16,496) |
|
Financing activities: |
||
|
Payment of loan costs |
(1,832) |
(835) |
|
Proceeds from senior secured notes |
— |
25,000 |
|
Proceeds from revolving credit facilities |
390,399 |
61,000 |
|
Repayment of revolving credit facilities |
(163,048) |
(127,000) |
|
Proceeds from exercise of stock options |
5,181 |
1,287 |
|
Taxes paid related to net share settlement of equity awards |
(2,287) |
(3,476) |
|
Excess tax benefit from stock-based payment arrangements |
3,600 |
4,904 |
|
Repayment of capital lease obligations |
(4,949) |
(2,848) |
|
Net cash provided by (used in) financing activities |
227,064 |
(41,968) |
|
Net increase (decrease) in cash and cash equivalents |
11,216 |
(233) |
|
Cash and cash equivalents, beginning of period |
8,047 |
10,905 |
|
Cash and cash equivalents, end of period |
$ 19,263 |
$ 10,672 |
|
Supplemental disclosures of cash flow information: |
||
|
Cash paid for interest |
$ 18,634 |
$ 14,591 |
|
Cash paid for income taxes |
36,840 |
24,860 |
|
Supplemental schedule of non-cash investing and financing activities: |
||
|
Fixed assets acquired through capital lease |
2,817 |
2,434 |
|
See accompanying notes to condensed consolidated financial statements |
| ENCORE CAPITAL GROUP, INC. Supplemental Financial Information Reconciliation of Adjusted EBITDA to GAAP Net Income and Adjusted Operating Expenses Excluding Stock-based Compensation Expense and Tax Lien Transfer Segment Operating Expenses to GAAP Total Operating Expenses (In Thousands) (Unaudited)
| ||
|
Three Months
Ended | ||
|
2012 |
2011 | |
|
GAAP net income, as reported |
$ 21,308 |
$ 15,310 |
|
Loss (income) from discontinued operations, net of tax |
- |
(60) |
|
Interest expense |
7,012 |
5,175 |
|
Provision for income taxes |
13,887 |
9,834 |
|
Depreciation and amortization |
1,533 |
1,054 |
|
Amount applied to principal on receivable portfolios |
105,283 |
73,187 |
|
Stock-based compensation expense |
1,905 |
2,405 |
|
Adjusted EBITDA |
$150,928 |
$106,905 |
|
Three Months
Ended | ||
|
2012 |
2011 | |
|
GAAP total operating expenses, as reported |
$ 103,621 |
$ 85,182 |
|
Stock-based compensation expense |
(1,905) |
(2,405) |
|
Tax lien transfer segment operating expenses |
(2,055) |
— |
|
Adjusted operating expenses excluding stock-based compensation expense, and tax lien transfer segment operating expenses |
$99,661 |
$82,777 |
|
As of Sep 30, 2012 |
As of Dec 31, 2011 | |
|
GAAP stockholders' equity, as reported |
$ 431,182 |
$ 371,535 |
|
Diluted shares outstanding |
25,920 |
25,690 |
|
Stockholders' equity per share |
$16.64 |
$14.46 |
SOURCE Encore Capital Group, Inc.