Asset Acceptance Earns $4.6 million in Q1, Above Analyst Estimates

Debt purchaser and collector Asset Acceptance Capital Corp. (Nasdaq: AACC) reported Thursday net income of $4.6 million for the first quarter of 2009, a decline of 32 percent from the same period a year ago, but above analysts’ expectations.

The Warren, Mich. accounts receivable management firm said that it earned $4.6 million in the first quarter of 2009, or $0.15 per share, compared to $6.8 million — $0.22 per share – in the first quarter of 2008. Wall Street analysts had estimated that Asset Acceptance would earn $0.14 per share in the quarter.

The company’s shares gained more than 18 percent in trading Thursday on news that it had beat estimates. Shares were also up in early trading Friday.

In the first quarter of 2009, Asset Acceptance said that revenues slipped 11 percent to $57 million. The company took a $3.4 million net impairment charge on purchased debt compared to a charge of $400,000 in the first quarter last year. Cash collections in the quarter fell 6 percent to $94.1 million.

Traditional call center collections dropped to $41 million in Q1 2009 from $47.5 million in the first quarter 2008. The legal collections channel increased slightly to $38.7 million from $38.2 million while Other collections (collection agency forwarding, bankruptcy and probate) were relatively flat at $14.4 million.

"The collections environment continued to be difficult this quarter, but we saw some easing during March,” said CEO Rion Needs in a press release. “We knew we would face strong headwinds as we entered 2009, and against this backdrop we achieved what we set out to do this quarter.”

On a conference call to discuss results, Asset Acceptance’s management team said that the improvements in March appear to have carried over into April. They noted that the benefit the company sees from tax refund season typically extends into May.

Asset Acceptance noted that it reduced costs in the first quarter. Operating expenses dropped 6.2 percent when compared to expenses in the prior year period. The company was also able to pay down $19.5 million in debt in the quarter as it controlled its level of portfolio purchasing.

In the quarter, the company invested $22.1 million to purchase 31 charged-off consumer debt portfolios with a face value of $747.8 million, compared to the $542.8 million in face value debt it bought in Q1 2008.

Mark Redman, SVP and CFO, said, “We carefully controlled our levels of purchasing in the first quarter and expect to do so again in the second quarter in order to free up capital to purchase at what we expect will be more advantageous pricing in the second half of 2009 and early 2010.”

Asset Acceptance noted that it averaged 955 full-time equivalent collectors in the first quarter, up from the 901 in Q1 2008, but down from the 1,003 it averaged in the fourth quarter of 2008.