NCO Group Lowers Losses in Q2 as Revenues Decline

Accounts receivable management and business process outsourcing giant NCO Group late Monday announced results for the second quarter of 2009 marked by a significantly narrower quarterly loss, increased EBITDA, and a decline in revenues.

Horsham, Pa.-based NCO said that its net loss in the second quarter fell to $5.2 million from $14.8 million in the year-ago quarter. The Q2 2009 results included an impairment charge on purchased receivables of $1.3 million compared to impairments of $24.9 million in Q2 2008. EBITDA -- earnings before interest, taxes, depreciation and amortization -- increased more than 53 percent to $48.9 million.

Revenues for the ARM and BPO firm were lower in the second quarter of 2009. NCO reported total revenues of $387.6 million in Q2 2009, compared to $405 million in the second quarter of 2008.

In a press release, NCO explained that it is organized into three operating divisions: Accounts Receivable Management (ARM), Customer Relationship Management (CRM) and Portfolio Management (“PM”). During the second quarter of 2009, both the ARM and CRM divisions operated below their respective revenue objectives but slightly above their respective profitability targets. The revenue shortfall in ARM was primarily the result of lower than expected collections as a result of the ongoing difficult economic climate, as well as reductions in volume and average balances from clients. The revenue shortfall in CRM was primarily as a result of lower than expected volume from existing clients. The ARM and CRM divisions were both positively impacted by net gains from foreign exchange contracts during the quarter. During the quarter, PM operated below its revenue target and slightly above its profitability target. PM’s revenue shortfall was primarily a result of lower than expected collection results and fewer than expected purchases during the quarter.

“Although NCO met its overall profitability target, the second quarter presented many challenges as we began to experience volume reductions from clients as a result of declines in credit card activity and continued weakness in general consumer spending patterns,” said Michael J. Barrist, Chairman and CEO, in the press release. “This was offset by continued expense reductions and the benefit from foreign currency gains. As we move into the back half of the year, we will continue to focus on positioning NCO to be prepared to capitalize on potential opportunities from future improvements in consumer activity.”