West ARM Unit Reports Drop in Revenue in Quarter

The accounts receivable management unit of West Corporation swung to a profit in the third quarter of 2008, but revenue was down 12.5 percent in the unit and debt purchasing activity has dried up.

West’s ARM business, called West Asset Management (WAM), Wednesday reported operating income of $9.25 million for the three months ended September 30, 2008. Income was down 32 percent from the third quarter of 2007, but was up significantly from the second quarter of this year when WAM reported an operating loss of $9.9 million (“West Posts Loss for ARM Unit on $19.8 million Impairment Charge,” July 24).

Revenues in the debt collection and buying unit slid 12.5 percent in the quarter to $66.9 million. On an investor conference call Wednesday, West Corp. CEO Tom Barker noted that the decline was due to a “reduction in revenue derived from purchased paper.”

Debt portfolio acquisition activity nearly ground to a halt in the third quarter, as WAM reported spending $5 million on purchased portfolios compared to $30.3 million in the year-ago period. Barker blamed the drop off in activity on unattractive portfolio valuations in the market.

But WAM announced in April that it would be reducing its portfolio purchases for the remainder of 2008 in response to the severing of a lending relationship with funder CarVal (“WAM to Reduce Debt Buying in 2008 Over Funding Flap,” April 18). When pressed on the call Wednesday on whether the CarVal flap had anything to do with lower purchasing levels, Barker said that “it doesn’t matter right now as we’re not seeing the valuations on portfolios we’d like to see.”

Company-wide, West Corp. reported net income of $21.7 million in the third quarter, up from $1.9 million in the third quarter of 2007. Revenues were up 12.7 percent to $598.5 million. The gains were primarily attributed to West’s April acquisition of web conferencing service Genesys.