Strong Performance Reported by Agencies in First Quarter

First quarter results are in and many collection agencies reported to us they achieved record performance.

Quarterly fees, for the most part, got off to rough start in January but picked up substantially in February and again in March. Placement volumes were high going into 2010 which also added to the positive results. Profits were also up for most agencies we talked to about first quarter performance, compared to both Q4 performance and on a year-over-year basis. It will be interesting to see if the large publicly traded ARM companies report similar results for Q1; they are due to release earnings for the quarter this week.

Executives cited two major reasons for the record performance they achieved in Q1. First, of course, is the lift that most agencies realize from tax refunds during Q1. As I blogged earlier, tax benefits started later this year in large part due to this past winter’s record snow accumulation in many parts of the country including DC, causing the Federal Government to close down and processing of refunds to slow. However, tax refunds did positively impact recovery efforts in Q1 which is typical of most first quarters in the ARM industry.

The second reason that many executives indicated to us was the impact of operational changes that they were forced to make in the wake of the worst recession this industry has ever seen. Cutbacks were necessary for many agencies to combat the drop in revenues and profitability realized when recoveries plummeted, in some cases as much as 60 percent. Efficiencies were not realized immediately but the longer term impact has been positive for agencies that were able to weather the economic storm.

The question of course is whether the positive results realized by most agencies in Q1 are sustainable. Early Q2 indications are positive as owners are telling us that performance remains strong. I often stated that the collection industry is a barometer of economic performance overall. Collectors are in direct contact with countless consumers each and every day. Are Q1 results indicative of sustained economic improvements overall? We will continue to evaluate Q1 performance and track results for the rest of 2010. Let us know how your agency fared in Q1 and what you think is in store for the rest of the year. Credit grantors and debt buyers; let us know how your agency vendors are liquidating on your accounts.

InsideARM is opening its quarterly Credit & Debt Collection Industry Confidence Survey today for those who wish to participate. The survey covers performance in the first quarter. To my knowledge, it’s the only survey out there that specifically addresses the performance and expectations of ARM companies. Take a couple of minutes and tell them how you did in the first quarter at http://www.surveymonkey.com/s/66HLQ3D.

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