West Reports Increase in Revenue for Collection Unit

Call center and ARM giant West Corporation Wednesday reported a jump in revenue and income in the third quarter from its debt purchasing and collection unit West Asset Management (WAM).

For the third quarter of 2007, West reported revenues of $76.5 million from its WAM unit, up nearly 29 percent from the third quarter of 2006 and up nearly 4 percent from the $73.7 million reported in the second quarter of this year. Operating income for the ARM unit was $13.6 million in the third quarter, roughly unchanged from $13.7 million in the second quarter, but up more than 28 percent from the operating income reported in the third quarter of 2006.

For the first nine months of 2007, WAM generated revenues of $211.2 million, up more than 18 percent from the same period in 2006.

In a conference call this morning, West’s Chief Financial Officer Paul Medlik said that WAM spent $30.3 million in debt portfolio purchases for the quarter, compared to $38.2 million spent in the third quarter of 2006.

Much of the increase in revenue is attributable to the acquisition of collection agency Omnium Worldwide earlier this year (“West Corporation to Acquire ARM Giant Omnium Worldwide,” 4/19), according to David Pleiss, West’s vice president of investor relations. Pleiss told insideARM.com that the acquisition closed on May 1 this year and revenues from Omnium were added to WAM for part of the second quarter and all of the third quarter.

Pleiss said during the conference call that West continues to blend in Omnium’s operations. “The Omnium integration is working under an 18 month plan, and so far it is going very well, beyond our expectations,” said Pleiss.

Omaha, Neb.-based West primarily provides call center and CRM services worldwide. The WAM division has been developing into a major player in the ARM industry through organic growth and strategic acquisitions.

Corporate-wide, West reported revenues of $531.1 million in the third quarter, a 12 percent increase from the same period a year ago, and net income of $1.9 million. The net income represents a drop of more than 95 percent from the third quarter of 2006, primarily attributable to a nearly 600 percent increase in interest expense, a rise that went unexplained in West’s release today.

As the Omnium acquisition is fully integrated into WAM’s operations, the ARM unit is accounting for a larger percentage of West’s operating income. Although net income was down sharply in the quarter, West reported operating income of $85.6 million. Of that total, $13.6 million – or nearly 16 percent – was attributed to the WAM unit. In the third quarter of 2006, WAM accounted for less than 13 percent of West’s total operating income.

West was acquired by a private equity investor group led by Thomas H. Lee Partners, L.P. and Quadrangle Group LLC and taken private in a deal that closed in October 2006.