Encore Capital Reports Higher Collection, Revenue and Earnings

Encore Capital Group (Nasdaq: ECPG) announced Thursday higher gross collections, revenue and earnings for the first quarter of 2008. The company noted, however, that certain changes to collection forecasts of portfolios positively impacted the comparison of results from the first quarter of 2008 and Q1 2007.

The San Diego-based bad debt buyer and collection agency reported net income of $7.5 million, or $0.32 per share, for the first quarter of 2008, an increase of nearly 32 percent from the first quarter of 2007.

Total revenue in the first quarter was $67.6 million, an increase of 3.3 percent from the first quarter last year. Gross collections in the quarter were up 15 percent to $104.4 million.

In the quarter, Encore recorded a net impairment provision of $5.3 million, compared to an impairment reversal of $200,000 in the same period of 2007.

Encore noted that effective January 1, 2008, it increased its collection forecasts from 72 months to 84 months. For the quarter ended March 31, 2008, the impact of the change resulted in an increase in revenue of $100,000, a reduction in the net impairment provision of $3.1 million, an increase in net income of $1.9 million and an increase in earnings per share of $0.08.

Investors responded very positively to the announcement, sending Encore’s shares up more than 30 percent in early trading Thursday.

The company also said in an SEC filing that it invested $47.9 million in portfolios with face values of $1.2 billion in the first quarter, up 5.5 percent from the total portfolio investment in the first quarter of 2007. Of the $47.9 million spent buying debt, $45.3 million was for credit card accounts.

Encore experienced growth in all of its debt collection and liquidation channels in the first quarter except for portfolio resales. Legal collections, Encore’s largest channel, increased 14 percent to $45.3 million; the collection site channel grew 27.3 percent to $43.3 million; and outsourcing to third party collection agencies increased 24.5 percent to $11 million. The portfolio sales channel decreased 42.5 percent in the quarter to $4.2 million.