Encore Capital Reports Broad Gains in Second Quarter

Bad debt buyer Encore Capital Group said Monday that it posted net income of $7.3 million in the second quarter of 2008 compared to a loss in the same quarter of 2007. Revenue, cash collections and debt purchasing activity all increased in the quarter.

San Diego-based Encore (Nasdaq: ECPG) said that net income for the second quarter amounted to $0.31 per share compared to a loss of $0.04 per share a year ago.

Revenues in the second quarter of 2008 were up 4.2 percent to $70 million as cash collections increased 9 percent to $102.1 million. Collections increased across three of the company’s four main collection channels, with portfolio sales being the only decliner.

Collections through the company’s Legal channel increased 10.8 percent to $49.2 million. Encore’s collection sites accounted for $38.9 million in cash collections, up 19.7 percent from the second quarter of 2007. The company received $10 million in cash from its outsourced collection agency channel, an increase of 30 percent. Cash collections from the sale of portfolios declined to $3.6 million from $8 million in the second quarter last year.

Encore noted in an SEC filing that effective January 1, 2008, it increased its collection forecasts from 72 months to 84 months. While the change impacted results for the first quarter of 2008, the company said that the change had no material impact on second quarter results.

Encore said that its investments in receivable portfolios in the second quarter were $52.5 million to purchase $1.8 billion in face value of debt, compared to $41.1 million, to purchase $1.3 billion in face value of debt in the same period of the prior year. Encore said that it purchased about 676,000 accounts in the quarter. The company noted that it spent $40.2 million buying credit card portfolios and $12.3 million to purchase “other” portfolios of debt.

Revenues from the company’s bankruptcy servicing unit increased 15.6 percent to $3.7 million. The percentage of total revenues coming from the servicing unit also increased in the second quarter to 5.3 percent from 4.8 percent in the second quarter of 2007.