Encore Capital Group reported a net loss of $10.4 million for the first quarter of 2020, compared with profits of $49 million for the same period a year ago, and revised its collection forecast downward for the rest of the year because of the expected impact of the COVID-19 pandemic on the financial situations of individuals worldwide.
The drop in profits for the first quarter was largely attributable to a charge of $109 million that the company took in adjusting its collection forecast for the remainder of 2020, Ashish Masih said during a conference call yesterday with analysts to discuss the company’s financial performance.
Collections in the United States through Encore’s Midland Credit Management were up 14% in the first quarter, to $375 million, compared with the same period a year ago.
As the coronavirus pandemic will likely lead to an increased supply of charged-off assets, Encore is preparing for a spike in the amount of receivables available to be purchased, and the company’s markets in both the United States and United Kingdom are “poised for substantial growth,” Masih said.
Given the timing of the pandemic striking the United States – just as the first quarter was ending, Masih provided a mid-quarter update for the second quarter, saying that collections were 15% higher than the company’s revised projections had estimated.
Masih also fielded questions about the state of the company’s legal collections operation, given that many courts across the country have been closed because of the pandemic.
The “U.S. is a very large country with varying levels of court systems and with what are open, and it’s not a zero or one,” Masih said. “There’s different stages in the legal process that happen. Some states are operating and cities are operating at different levels of kind of open – opening and what functionalities. And we are watching it very carefully and taking it into account as we project our collections. And our best guess is there is going to be a delay, not a permanent loss only perhaps about a 10% loss of the collections that we just mentioned is going to be permanent, and you could attribute that to some to legal, some to call center, but eventually we hope to recoup about 90% of collections over time.”
