Encore Posts Strong 2Q Financial Results

Most collection agencies are private companies, and do not have to release their financial statements. So all we outsiders have to go on is anecdotal or empirical information about how companies in the industry are doing. But there are a couple of companies that are publicly traded and one of them released their second quarter financial statements yesterday, which offered the first glimpse into the economic impact that the coronavirus pandemic is having on companies in the accounts receivable management industry.

Net income at Encore Capital Group was $130 million during the second quarter of 2020, compared with $37 million a year ago, and earnings per share were $4.13, up from $1.17 during the same period a year ago. The amount collected by Midland Credit Management, Encore’s U.S. collections unit, was $386 million during the second quarter, up 20% from a year ago and 29% higher than what the company had projected to collect.

The company cited investments in moving more of its communications into digital channels, an embracing of that move by the individuals with whom the company is trying to connect, better productivity from its workforce, and better outreach that is generating more inbound calls as the reasons for the increase in the amount collected.

“In summary, Q2 was an exceptional quarter for Encore in which we delivered record revenues, profits and cash generation,” said Ashish Masih, Encore’s chief executive, during a conference call with analysts yesterday. “Over the past several years, we have made investments in our training, compliance and technology, which have enabled us to safely remain fully operational in each of our markets.”

The company also discussed a planned pullback from the amount of accounts for which it is pursuing a legal collections strategy, instead emphasizing trying to work with individuals to get them to make their payments.

“If you look at our long-term trend in the U.S. business, the shift away from legal towards call center and digital has been very steady over the last few years,” Masih said during the call with analysts. “Every quarter, the mix has been shifting and as part of our strategy. So that’s continuing. Now clearly, we saw in Q2 an unusual kind of disruption to that mix shift and legal slowing down tremendously. We also did really well in call center and digital.”

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