WAM Reports Big Numbers in 2007, But Cautions on 2008

Call center operator and ARM provider West Corporation late Wednesday reported earnings for the fourth quarter and full year of 2007, marked by a nearly 30 percent increase in revenues in the quarter from its accounts receivable management unit, West Asset Management (WAM), and a 20 percent increase for the year. But management cautioned that the ARM unit will be strained in 2008.

Omaha, Neb.-based West reported corporate-wide revenues of $2.1 billion for the year, the first time the company has cracked the $2 billion barrier, CEO Thomas B. Barker reported in press release. The revenue total showed an increase of $243.5 million from 2006, with $164.2 million attributable to acquired entities, including Omnium Worldwide in the ARM unit (“West Corporation to Acquire ARM Giant Omnium Worldwide,” April 19, 2007).

For the fourth quarter of 2007, the ARM unit reported revenue of $72.2 million, a 29.2 percent increase over revenues in Q4 2006. David Pleiss, West’s vice president of investor relations, told insideARM that $17.7 million of fourth quarter revenue was directly attributable to acquired Omnium operations.

In a conference call discussing results Thursday morning, West’s Chief Financial Officer Paul Medlik said that WAM spent $31.3 million on debt portfolio purchases in the fourth quarter of 2007, down significantly from the $41.2 million it spent in Q4 2006. The unit reported $2.2 million in revenue from the sale of debt portfolios in the fourth quarter.

Medlik noted that the unit recorded its first-ever impairment charge — $2.5 million — on a healthcare debt portfolio purchased in the fourth quarter with partners. “It was our first foray into healthcare,” said Medlik. “The other parties involved also experienced similar issues and we have adjusted our pricing in [the healthcare] market.”

The ARM unit took an additional $1 million charge in the quarter relating to the closing of three collection call centers. Pleiss told insideARM that the call centers were in Norcross and Cartersville, Ga. and Medford, Ore.

For the full year, WAM brought in $283.4 million in revenue, up nearly 21 percent from $234.5 million in 2006.

In a discussion of expectations for 2008, Barker said that the economic environment would put pressure on the ARM unit. “We must be very patient and disciplined, as always, in 2008,” said Barker. He expects less competition among debt buyers in 2008 as portfolio prices move down “reflecting reduced liquidity expectations in a difficult collections environment.”