Encore Capital Sees Earnings Dip in Second Quarter

by Patrick Lunsford CollectionIndustry.com

Debt purchaser/collector Encore Capital Group (Nasdaq: ECPG) Thursday reported lower earnings for the second quarter of 2006 on higher expenses. The company also signaled increased purchasing activity in alternative asset classes in the earnings statement.

Encore reported net income of $7.5 million, or 32 cents per share, on total revenues of $65.9 million. The net income figure came in 7% lower than the $8.1 million total in the second quarter of 2005. Although net income was lower, revenue and collections were up. Gross collections were $79.2 million, a 12% increase over the $70.4 million in the same period of the prior year. Revenues from the debt purchasing business were $59.7 million, an 11% increase over the $53.8 million in the same period of the prior year.

The drop in income was blamed on higher expenses, the most significant increase being legal collections costs. Legal collections expenses grew from $8.6 million in Q2 2005 to $12.9 million in the second quarter of this year.

Although Encore saw its income fall, the company exceeded analysts’ expectations for the quarter. Analysts polled by Thomson Financial anticipated earnings of 25 cents per share on revenues of $62.3 million.

Commenting specifically on portfolio acquisitions, Encore CEO Brandon Black said in the release, "Pricing remained elevated for new portfolios and we remained disciplined in our purchasing. During the second quarter, we invested $21 million to purchase $594 million in face value of debt. We found good value in alternative asset classes, as more than 50% of our purchases during the second quarter were non-credit card purchases."