Average Collection Agency Earnings Decline in 2013

Net profit and earnings before interest, taxes, depreciation, and amortization (EBITDA) at U.S. debt collection agencies declined in 2013 after recovering from the depths of the recession, according to a new report published today by insideARM.com.

Data included in insideARM’s Collection Agency Financial Benchmark Report: Summer 2014 is drawn from official filings based on the NAICS classification code for debt collectors and is aggregated from 2,446 collection agencies, across eight size categories with revenues ranging from under $500,000 to $50-$100 million. The report is produced in cooperation with BizMiner.

In 2013, the average EBITDA (as a percentage of total revenue) for all collection agencies was 7.5 percent, down from 8.67 percent in 2012 and nine percent in 2011. During the depths of the recession in 2009, the same measure was 1.43 percent.

Results varied by company size, with small collection agencies scoring higher EBITDA rates. Still, all eight size categories saw declines in EBITDA in 2013, as shown in the graph below:

Data Source: BizMiner. Company sizes categories move from largest to smallest left to right (and darker green to light green). The specific sizes, expressed as annual revenue, are: $50-100 million, $25-50 million, $10-25 million, $5-10 million, $2.5-5 million, $1-2.5 million, $500k-$1 million, and under $500k.

After Tax Net Profit saw a similar decline compared to the previous year.

In 2013, the average net profit across all company sizes was 5.04 percent of revenue, down from 5.88 percent in 2012 and 6.14 percent in 2011. Among company sizes, the collection agencies with the least revenue (below $500k) saw the highest net profit at 9.3 percent, while companies with revenues of $25-50 million had the lowest profits at just under three percent.

Lower earnings were driven by slight declines in revenue and an increase in certain operating expenses such as taxes and general and administrative costs. The latter category may reflect the increased expenses due to compliance requirements recently imposed on the ARM industry.

To see the full results, including company size breakdowns of all metrics and far more data, get the Collection Agency Financial Benchmark Report: Summer 2014 today. The full, 56-page report contains useful data on specific expense types, compensation ratios, balance sheet metrics, fixed asset net worth, and much, much more.