Press release from PR Newswire
Encore Capital Group Announces First Quarter 2010 Results
Tuesday, April 27, 2010
Encore Capital Group Announces First Quarter 2010 Results16:05 EDT Tuesday, April 27, 2010SAN DIEGO, April 27 /PRNewswire-FirstCall/ -- Encore Capital Group, Inc. (Nasdaq: ECPG), a leading distressed consumer debt management company, today reported consolidated financial results for the first quarter ended March 31, 2010.For the first quarter of 2010:Gross collections were $141.3 million, a 23% increase over the $115.2 million in the same period of the prior year.Investment in receivable portfolios was $81.6 million, to purchase $2.1 billion in face value of debt, compared to $55.9 million, to purchase $1.3 billion in face value of debt in the same period of the prior year. �Available capacity under the revolving credit facility, subject to borrowing base and applicable debt covenants, was $54.5 million as of March 31, 2010. �Total debt, consisting of the revolving credit facility, convertible senior notes and capital lease obligations, was $318.0 million as of March 31, 2010, an increase from $303.1 million as of December 31, 2009.Revenue from receivable portfolios was $82.9 million, a 15% increase over the $72.3 million in the same period of the prior year. �Revenue recognized on receivable portfolios, as a percentage of portfolio collections, excluding the effects of net portfolio allowances, was 64%, compared to 67% in the same period of the prior year.Revenue from bankruptcy servicing was $4.4 million, a 6% increase over the $4.1 million in the same period of the prior year.Total operating expenses were $65.6 million, a 9% increase over the $60.2 million in the same period of the prior year. �Operating expense (excluding stock-based compensation expense and bankruptcy servicing operating expenses) per dollar collected decreased to 42.9% compared to 48.3% in the same period of the prior year. Adjusted EBITDA, defined as net income before interest, taxes, depreciation and amortization, stock-based compensation expense and portfolio amortization, was $82.6 million, a 29% increase over the $63.8 million in the same period of the prior year.Total interest expense was $4.5 million, compared to $4.3 million in the same period of the prior year.Net income was $10.9 million or $0.44 per fully diluted share, compared to net income of $9.0 million or $0.38 per fully diluted share in the same period of the prior year.Tangible book value per share, computed by dividing total stockholders' equity less goodwill and identifiable intangible assets by the number of diluted shares outstanding, was $9.73 as of March 31, 2010, a 5% increase over $9.23 as of December 31, 2009.Additional Financial Information: Certain events affected the comparability of 2010 versus 2009 quarterly results, as outlined below. �For a more detailed comparison of 2010 versus 2009 results, refer to Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010.In the first quarter of 2010, the Company recorded net portfolio allowances of $7.9 million, compared to $5.4 million in the same period of the prior year. �In the first quarter of 2010, the Company expensed $8.5 million in upfront court costs, compared to $13.3 million in the same period of the prior year.In the first quarter of 2009, the Company repurchased $25.6 million principal amount of its outstanding convertible senior notes, for a total price of $19.8 million, plus accrued interest. �These repurchases resulted in a gain of $3.1 million or $0.08 per fully diluted share.Conference Call and WebcastThe Company will hold a conference call today at 1:30 P.M. Pacific time / 4:30 P.M. Eastern time to discuss first quarter results. �Members of the public are invited to listen to the live conference call via the Internet. To hear the presentation, log on at the Investor Relations page of the Company's website at www.encorecapitalgroup.com. �For those who cannot listen to the live broadcast, a replay of the conference call will be available shortly after the call at the same location.Non-GAAP Financial MeasuresThe Company has included information concerning Adjusted EBITDA because management utilizes this information, which is materially similar to a financial measure contained in covenants used in the Company's credit agreement, in the evaluation of its operations and believes that this measure is a useful indicator of the Company's ability to generate cash collections in excess of operating expenses through the liquidation of its receivable portfolios. �The Company has included information concerning total operating expenses excluding stock-based compensation expense and bankruptcy servicing operating expenses in order to facilitate a comparison of approximate cash costs to cash collections for the debt purchasing business in the periods presented. �The Company has included information concerning tangible book value per share because management believes that this metric is a meaningful measure that reflects the equity deployed in the business. �These non-GAAP financial measures should not be considered as alternatives to, or more meaningful than, net income and total operating expenses as indicators of Encore Capital Group's operating performance and total stockholders' equity as an indicator of Encore Capital Group's financial condition. �Adjusted EBITDA, operating expenses excluding stock-based compensation expense and bankruptcy servicing operating expenses, and tangible book value per share have not been prepared in accordance with generally accepted accounting principles (GAAP). �These non-GAAP financial measures, as presented by Encore Capital Group, may not be comparable to similarly titled measures reported by other companies. �The Company has included a reconciliation of Adjusted EBITDA to reported earnings under GAAP, a reconciliation of operating expenses excluding stock-based compensation expense and bankruptcy servicing operating expenses to the GAAP measure total operating expenses, and a reconciliation of tangible book value per share to the GAAP measure total stockholders' equity in the attached financial tables.About Encore Capital Group, Inc.Encore Capital Group, Inc. is a systems-driven purchaser and manager of charged-off consumer receivables portfolios. �More information on the company can be found at www.encorecapitalgroup.com.Contact:Encore Capital Group, Inc.Paul Grinberg (858) email@example.comRen Zamora (858) firstname.lastname@example.orgFINANCIAL TABLES FOLLOWENCORE CAPITAL GROUP, INC.Condensed Consolidated Statements of Financial Condition(In Thousands, Except Par Value Amounts)(Unaudited)March�31,2010December�31,2009AssetsCash and cash equivalents$ �7,575$ �8,388Accounts receivable, net2,5233,134Investment in receivable portfolios, net549,660526,877Deferred court costs25,60325,957Property and equipment, net9,9229,427Other assets10,1944,252Goodwill15,98515,985Identifiable intangible assets, net1,0411,139Total assets$ �622,503$ �595,159Liabilities and stockholders' equityLiabilities:Accounts payable and accrued liabilities$ �18,253$ �21,815Income taxes payable5,1882,681Deferred tax liabilities, net17,09716,980Deferred revenue5,4645,481Debt318,014303,075Other liabilities1,3212,036Total liabilities365,337352,068Commitments and contingenciesStockholders' equity:Convertible preferred stock, $.01 par value, 5,000 shares authorized, no shares issued and outstanding??Common stock, $.01 par value, 50,000 shares authorized, 23,458 shares and 23,359 shares issued and outstanding as of March 31, 2010 and December�31, 2009, respectively235234Additional paid-in capital106,831104,261Accumulated earnings150,703139,842Accumulated other comprehensive loss(603)(1,246)Total stockholders' equity257,166243,091Total liabilities and stockholders' equity$ �622,503$ �595,159ENCORE CAPITAL GROUP, INC.Condensed Consolidated Statements of Income(In Thousands, Except Per Share Amounts)(Unaudited)Three Months EndedMarch 31,20102009RevenueRevenue from receivable portfolios, net$ �82,907$ �72,275Servicing fees and other related revenue4,4314,171Total revenue87,33876,446Operating expensesSalaries and employee benefits (excluding stock-based compensation expense)15,48513,957Stock-based compensation expense1,7611,080Cost of legal collections26,43329,947Other operating expenses9,1145,980Collection agency commissions5,2962,891General and administrative expenses6,8795,697Depreciation and amortization673623Total operating expenses65,64160,175Income before other (expense) income and income taxes21,69716,271Other (expense) incomeInterest expense(4,538)(4,273)Gain on repurchase of convertible notes, net?3,053Other income (expense)192(81)Total other expense(4,346)(1,301)Income before income taxes17,35114,970Provision for income taxes(6,490)(5,973)Net income$ �10,861$ �8,997Weighted average shares outstanding:Basic23,49423,122Diluted24,68523,631Earnings per share:Basic$ �0.46$ �0.39Diluted$ �0.44$ �0.38ENCORE CAPITAL GROUP, INC.Condensed Consolidated Statements of Cash Flows(Unaudited, In Thousands)Three Months EndedMarch 31,20102009Operating activities:Net income$ �10,861$ �8,997Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization673623Amortization of loan costs and debt discount1,0621,221Stock-based compensation expense1,7611,080Gain on repurchase of convertible notes, net?(3,053)Deferred income tax expense117145Excess tax benefit from stock-based payment arrangements(458)(21)Provision for allowances on receivable portfolios, net7,8815,427Changes in operating assets and liabilitiesOther assets(822)(165)Deferred court costs354(2,310)Prepaid income tax and income taxes payable2,9035,441Deferred revenue(17)26Accounts payable, accrued liabilities and other liabilities (3,787)(523) � � � � �Net cash provided by operating activities20,52816,888Investing activities:Purchases of receivable portfolios(81,632)(55,913)Collections applied to investment in receivable portfolios, net50,38437,424Proceeds from put-backs of receivable portfolios584924Purchases of property and equipment(208)(469) � � � � Net cash used in investing activities(30,872)(18,034)Financing activities:Payment of loan costs(4,660)?Proceeds from notes payable and other borrowings35,00032,000Repayment of notes payable and other borrowings(22,000)(17,000)Repurchase of convertible notes?(19,834)Proceeds from net settlement of certain call options524?Proceeds from exercise of stock options395?Excess tax benefit from stock-based payment arrangements45821Repayment of capital lease obligations(186)(121) � � � � � � � � �Net cash provided by financing activities9,531(4,934)Net decrease in cash(813)(6,080)Cash and cash equivalents, beginning of period8,38810,341Cash and cash equivalents, end of period$ �7,575$ �4,261Supplemental disclosures of cash flow information:Cash paid for interest$ �3,516$ �3,699Cash paid for income taxes$ �3,832$ �499Supplemental schedule of non-cash investing and financing activities:Fixed assets acquired through capital lease$ �862$ �?ENCORE CAPITAL GROUP, INC.Supplemental Financial InformationReconciliation of Adjusted EBITDA to GAAP Net Income, Operating Expenses, Excluding Stock-based Compensation Expense and Bankruptcy Servicing Operating Expenses to GAAP Total Operating Expenses, and Tangible Book Value Per Share to GAAP Total Stockholders' Equity(Unaudited, In Thousands)Three Months EndedMarch�31,20102009GAAP net income, as reported$ �10,861$ �8,997Interest expense4,5384,273Provision for income taxes6,4905,973Depreciation and amortization673623Amount applied to principal on receivable portfolios58,26542,851Stock-based compensation expense1,7611,080Adjusted EBITDA$82,588$63,797Three Months EndedMarch�31,20102009GAAP total operating expenses, as reported$ �65,641$ �60,175Stock-based compensation expense(1,761)(1,080)Bankruptcy servicing operating expenses(3,311)(3,386)Operating expenses, excluding stock-based compensation expense and bankruptcy servicing operating expenses$60,569$55,709As ofMarch 31, 2010As ofDecember 31, 2009 �GAAP total stockholders' equity, as reported � ��$257,167$243,091 �Goodwill(15,985)(15,985) �Identifiable intangible assets, net(1,041)(1,139) �Tangible book value$240,141$225,967 �Diluted shares outstanding24,68524,484 �Tangible book value per share$9.73$9.23SOURCE Encore Capital Group, Inc.For further information: Paul Grinberg, +1-858-309-6904, email@example.com, or Ren Zamora, +1-858-560-3598, firstname.lastname@example.org, both of Encore Capital Group, Inc.