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Recently filed earnings reports for 2008 have revealed winners and losers among the industry's largest debt buyers. While none of the companies lost money last year, the brutal financial climate impacted their net incomes – some more severely than others.
Asta Funding Inc. was among the debt buyers hardest hit. The Englewood Cliffs, N.J.-based debt buyer reported net income of $8.8 million for the fiscal year ended Sept. 30, 2008, down 83.1% from $52.3 million a year ago. Asta reported 2008 total revenue of $115.5 million, an 18% decrease from $140.8 million in the previous year.
Asset Acceptance Capital Corp. (AACC) reported net income of $15.7 million for 2008, a 23% decrease from $20.4 million in 2007. Total revenues for the Warren, Mich.-based company declined 5.6% to $234.2 million, compared with $248 million in 2007.
"From the second half of 2008 to present, we have seen a significant decrease in the liquidation rates due to the housing bust, contraction in credit markets, increased unemployment and deteriorating consumer confidence about the future," Rion B. Needs, president and CEO at AACC, said during a February conference call with analysts. "Our [projections suggest] that with these economic pressures, we can expect to see continued deterioration in liquidation rates ... through 2010."
Portfolio Recovery Associates Inc. (PRA) and Encore Capital Group Inc. appeared to have fared better in 2008. PRA reported net income of $45.4 million in 2008, a 5.8% decrease from $48.2 million the year before. Total revenue in 2008 was $263.3 million, a 19.3% increase from $220.7 million in 2007.
"For PRA 2008 was a year of building, diversification and continuous improvement in our collection operations," Steven D. Fredrickson, president and CEO at the Norfolk, Va.-based debt buyer told analysts earlier this year.
"In a period of great turmoil, concluding with the Wall Street meltdown and the economy slipping into a serious recession, Portfolio Recovery Associates held its ground and more. Revenue continued to grow nicely and cash collections were strong," Fredickson said.
Encore reported total revenue of $255.9 million for the year, up slightly from $254 million in 2007. Net income totaled $18.8 million, up 25.3% from $15 million.
The San Diego-based buyer of delinquent credit card debt reported gross collections for 2008 of $398.6 million, a 12.2% increase from $355.2 million in 2007. For the fourth quarter ended Dec. 31, Encore's gross collections were $94.4 million, up 10.5% from $85.4 million during the same period in 2007. Encore invested $63.8 million during the fourth quarter to purchase a face value of $1.7 billion in debt.
PRA paid $61.5 million to acquire 77 portfolios from 20 different sellers during the fourth quarter. The face value of the purchased accounts totaled $1.3 billion. Approximately 92% of the debt in terms of dollars invested was a combination of Visa, MasterCard and private-label credit card asset classes. The remainder came from pools of auto, medical, utility and installment-loan accounts. Cash collections for the quarter rose 21.7%, to $79.2 million from $65.1 million.
AACC spent $32.2 million to purchase charged-off consumer debt portfolios with a face value of $636.5 million during the fourth quarter. The company spent $60.7 million to purchase consumer debt with a face value of $1.5 billion during the same period in 2007.
"In 2008, our portfolio purchases were $155.2 million, representing face value of $3.8 billion, compared with purchases of $169.5 million representing face value of $5.2 billion in 2007. The reduction in our level of purchases is consistent with our desire to be more selective in light of the current market," said Needs at AACC.
The debt buyer reported cash collections of $83.3 million in the fourth quarter, a 6.7% decrease compared with $89.1 million a year ago. For the full-year period, cash collections declined 0.4% to $369.6 million, compared with $371.2 million in 2007.
Asta spent $49.9 million for $1.5 billion in charged-off consumer receivables during 2008. In 2007, Asta purchased $10.9 billion of face value charged-off consumer receivables at a cost of $440.9 million. Net cash collections were approximately $208 million in 2008, compared with $281.8 million in the previous year. CCR
