Debt Buyers Report Gains in the First Quarter

Two major publicly traded debt purchasers this week reported financial results for the first quarter. Asset Acceptance had a solid quarter with nice gains in income, while Encore Capital Group posted large increases across the board.

San Diego-based Encore Capital Group, Inc. (Nasdaq: ECPG) reported net income of $13.7 million ($0.54 per fully diluted share) in the quarter ended March 31, 2011, up 26 percent from net income in the same period a year ago. Adjusted EBITDA was $116.4 million, a 41 percent increase over the first quarter of 2010.

Encore’s total revenue jumped 26 percent to $110.3 million on gross collections of $191.1 million, a 35 percent increase from Q1 2010.

Asset Acceptance Capital Corp. (Nasdaq: AACC), headquartered in Warren, Mich., meanwhile reported net income of $1.1 million (0.04 per fully diluted share) for the first quarter of 2011, more than double the $400,000 it reported in the first quarter last year. Adjusted EBITDA was $47.2 million, a 10.9 percent increase from Q1 2010.

Total revenues for Asset Acceptance declined 2.3 percent in the first quarter to $50.4 million. Cash collections increased 2.3 percent to $91.3 million.

Both companies reported sharp increases in debt buying activity in the first quarter. Encore said it invested $90.7 million to purchase $2.9 billion in face value of debt in the quarter, up 11 percent from last year. Asset Acceptance spent $46.4 million to purchase charged-off consumer debt portfolios with a face value of $1.2 billion, a 57 percent increase over Q1 2010 purchasing activity.

Encore’s total headcount at the end of the first quarter stood at 2,049, a 25 percent increase from the headcount at the end of the first quarter 2010. Employment at the company’s Indian location grew 30 percent while its American payroll grew 17 percent. Asset Acceptance said that its total account representative headcount, including supervisors, declined 34 percent to 694 in the quarter when compared to the first quarter last year, while the number of account representatives at a third party off-shore location grew 58 percent over the same time to 250.

Encore announced separately that it will host its fifth annual investor day on Thursday, June 9, 2011, in New York City, following the conclusion of business at its annual meeting of stockholders.