Asta Funding, Inc. :ASFI-US: Earnings Analysis: Q2, 2017 By the Numbers : June 16, 2017

Asta Funding, Inc. reports financial results for the quarter ended March 31, 2017.

We analyze the earnings along side the following peers of Asta Funding, Inc. – SLM Corp, Encore Capital Group, Inc., QC Holdings, Inc., CIT Group Inc., J.G. Wentworth Company Class A and PRA Group Inc (SLM-US, ECPG-US, QCCO-US, CIT-US, JGWE-US and PRAA-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 8.92 million, Net Earnings of USD -5.57 million.
  • Gross margins widened from 98.65% to 99.38% compared to the same period last year, operating (EBITDA) margins now -87.91% from -31.39%.
  • Year-on-year change in operating cash flow of 9.65% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2017-03-31 2016-12-31 2016-09-30 2016-06-30 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 8.92 10.12 13.34 17.6 9.31
Revenue Growth (%YOY) -4.21 -6.39 35.84 96.02 3.76
Earnings (mil) -5.57 -1.66 4.69 3.2 -1.83
Earnings Growth (%YOY) -204.15 -191.75 311.32 1885.09 -289.15
Net Margin (%) -62.44 -16.38 35.16 18.16 -19.66
EPS -0.57 -0.14 0.39 0.26 -0.15
Return on Equity (%) -14.98 -3.68 10.46 7.31 -4.19
Return on Assets (%) -9.5 -2.58 7.48 5.28 -3.09

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Market Share Versus Profits

Revenues History
Earnings History

ASFI-US‘s change in revenue this period compared to the same period last year of -4.21% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that ASFI-US is holding onto its market share. Also, for comparison purposes, revenues changed by -11.84% and earnings by -236.09% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings declined year-on-year largely because of the increases in operating costs. Its operating margins (EBITDA margins) went from -31.39% to -87.91%. This decline in earnings would have been worse except for the fact that the company showed improvement in gross margins, from 98.65% to 99.38%. For comparison, gross margins were 98.66% and EBITDA margins -16.00% in the immediate last period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

ASFI-US‘s change in operating cash flow of 9.65% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from -32.75% to -88.53% and (2) one-time items that contributed to a decrease in pretax margins from -34.08% to -105.35%

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Asta Funding, Inc. is a consumer receivable asset management company, which specializes in the purchase, management and liquidation of performing and non-performing consumer receivables. It operates through following segments: Consumer Receivables, Personal injury claims, Structured settlements, and GAR Disability Advocates. The Consumer receivables segment is engaged in the business of purchasing, managing for its own account and servicing distressed consumer receivables, including charged off receivables, semi-performing receivables and performing receivables primarily in the international sector. The Personal injury claims segment purchases interests in personal injury claims from claimants who are a party to personal injury litigation. The Structured settlements segment purchases periodic structured settlements and annuity policies from individuals in exchange for a lump sum payment. The GAR Disability Advocates segment is a social security benefit and disability advocacy group, which obtains and represents individuals in their claims for social security disability and supplemental security income benefits from the Social Security Administration. The company was founded by Arthur Stern on July 7, 1994 and is headquartered in Englewood Cliffs, NJ.

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