NCO and Portfolio Recovery Report Higher Earnings, But NCO Warns

By: Patrick Lunsford – CollectionIndustry.com

Late yesterday, Portfolio Recovery Associates (NasdaqNM: PRAA) and NCO Group (NasdaqNM: NCOG) released earnings statements that reflect positively on the collection industry.

In its fourth quarter and 2003 annual earnings release, Portfolio Recovery Associates reported across-the-board gains for both the quarter and year. The company had net income of $5.4 million in Q4 of 2003, a 63% increase from Q4 of 2002. For the year, the Norfolk, VA-based firm saw its earnings rise to $20.7 million compared to earnings of $11.4 million in 2002. Total revenue in 2003 came in at $84.9 million compared to $55.8 million in 2002. Chief Financial Officer Kevin P. Stevenson commented, ?Operationally and financially, Portfolio Recovery Associates has never been stronger, with more-than-ample resources to continue expanding our business in a controlled and disciplined manner.? To read the entire press release, please click here.

NCO Group had an equally satisfying earnings report for the fourth quarter of 2003, but warned on earnings in 2004 and set new guidance for this year. The Horsham, PA-based collection giant reported net income of $10.3 million in Q4 2003 compared to $6.8 million in the same quarter of 2002. Revenues in the quarter stood at $187.6 million, with 2002?s total sitting at $172.2 million. For the year, NCO Group had net income of $42.4 million on revenues of $753.8 million compared to yearly totals in 2002 of $42.1 million earned on revenues of $703.4 million. However, the company cautions that earnings for 2004 will not approach consensus market expectations.

Due to collection shortfalls on certain portfolios in the 4th quarter of 2003 would mean lower-than-expected performance in 2004. Additionally, the company expects implementation of SAP to take a toll on earnings. The company set new guidance for 2004 at $1.56 to $1.64 per share compared to analysts? estimates of around $1.80. Company CEO Michael Barrist commented, “2004 is a very important year for NCO as we begin the process of transitioning from the leading brand in Accounts Receivable Outsourcing to a provider of Business Process Outsourcing Services. We believe that the pending RMH and NCPM transactions, in conjunction with deployment of our SAP initiative, will allow NCO to be able to take advantage of an improving economy and will position us as a global leader in Business Process Outsourcing Services with one of the largest service platforms in our marketplace.” To read the entire press release, please click here.

NCO Portfolio Management saw its net income for 2003 fall slightly from 2002. The company reported net income for 2003 of $6.6 million compared to $8.8 million in 2002. The collection shortfalls cited in NCO Group?s earnings were the cause of the lowered earnings. To read the entire release, please click here.