NCO Group Announces First Quarter Results of $0.45 Per Diluted Share

NCO Group Announces First Quarter Results of $0.45 Per Diluted
Share 


HORSHAM, Pa., May 2  /PRNewswire-FirstCall/ -- NCO Group, Inc. ("NCO" or the
"Company") (NASDAQ:NCOG), a leading provider of business process outsourcing
services, announced today that during the first quarter of 2005, it reported
net income of $15.3 million, or $0.45 per diluted share, as compared to net
income of $12.0 million, or $0.43 per diluted share, in the first quarter of
2004.

Revenue in the first quarter of 2005 was $260.3 million, an increase of 29.4%,
or $59.1 million, from revenue of $201.2 million in the first quarter of 2004.

NCO's operations are organized into four market specific divisions that
include: Accounts Receivable Management North America ("ARM North America"),
Customer Relationship Management ("CRM"), Portfolio Management, and Accounts
Receivable Management International ("ARM International").  For the first
quarter of 2005, these divisions accounted for $198.4 million, $47.6 million,
$27.8 million, and $3.1 million of revenue, respectively.  Included in ARM
North America's revenue was $16.5 million of intercompany revenue from
Portfolio Management and included in ARM International's revenue was $73,000 of
intercompany revenue from Portfolio Management.  All intercompany revenue is
eliminated in consolidation.

For the first quarter of 2004, the ARM North America, Portfolio Management and
ARM International divisions accounted for $191.0 million, $21.6 million and
$3.7 million of the revenue, respectively.  Included in ARM North America's
revenue was $15.0 million of intercompany revenue from Portfolio Management and
included in ARM International's revenue was $116,000 of intercompany revenue
from Portfolio Management.  All intercompany revenue is eliminated in
consolidation.  The CRM division was created in the second quarter of 2004 in
connection with the acquisition of RMH Teleservices, Inc. ("RMH") on April 2,
2004 and, accordingly, is not included in the results for the first quarter of
2004.

NCO's payroll and related expenses as a percentage of revenue increased to
49.1% for the first quarter of 2005 as compared to 45.2% for the same period in
the prior year.  The increase in payroll and related expenses as a percentage
of revenue was attributable to the CRM division.  The CRM division has a more
significant amount of payroll and related expenses as compared to the ARM
business.  Excluding the CRM division, payroll and related expenses decreased
as a percentage of revenue from the same period in the prior year due to
continued diligence in monitoring staffing levels while maintaining
productivity through the use of new technologies.

NCO's selling, general and administrative expenses as a percentage of revenue
decreased to 35.7% for the first quarter of 2005 as compared to 38.1% for the
same period in the prior year.  The decrease was primarily attributable to the
difference in CRM's expense structure discussed above. Excluding the CRM
division, selling, general and administrative expenses increased as a
percentage of revenue from the same period in the prior year due to the
continuing increase in the use of outside attorneys and other third party
service providers.

NCO also announced that it continues to expect earnings per share to be
approximately $1.70 to $1.80 per diluted share for 2005.

Commenting on the quarter, Michael J. Barrist, Chairman and Chief Executive
Officer, stated, "As we entered 2005, we continued to execute strategic
initiatives launched in 2004 that were designed to expand our overall growth
opportunities.  These initiatives were key to allowing each of our business
units either to meet or exceed their operational goals during the first
quarter.  More important than our near-term accomplishments are several key new
client opportunities that are currently being deployed and are expected to
begin producing revenue during the latter part of 2005."

NCO will host an investor conference call on Tuesday, May 3, 2005, at 10:00
a.m., ET, to address the items discussed in the press release in more detail
and to allow the investment community an opportunity to ask questions.
Interested parties can access the conference call by dialing 888-209-7450
(domestic callers) or 706-643-7734 (international callers) and providing the
pass code 5672149.  A taped replay of the conference call will be made
available for seven days and can be accessed by interested parties by dialing
800-642-1687 (domestic callers) or 706-645-9291 (international callers) and
providing the pass code 5672149.  A transcript of the conference call will also
be available on NCO's website (http://www.ncogroup.com/) and will be furnished
to the SEC in a report on Form 8-K.

NCO Group, Inc. is a leading provider of business process outsourcing services
including accounts receivable management, customer relationship management and
other services.  NCO provides services through 87 offices in the United States,
Canada, the United Kingdom, India, the Philippines, the Caribbean and Panama.

  For further information:

   At NCO Group, Inc.
   Michael J. Barrist,
   Chairman and CEO
   Steven L. Winokur,
   EVP, Finance and CFO
   [phone]
   http://www.ncogroup.com/



Certain statements in this press release, including, without limitation,
statements as to fluctuations in quarterly operating results, statements
concerning projections, statements concerning strategic initiatives, statements
as to the economy and its effects on NCO's business, statements as to the
integration of the acquisition of RMH Teleservices, Inc., statements as to
trends, statements as to NCO's or management's beliefs, expectations or
opinions, and all other statements in this press release, other than historical
facts, are forward-looking statements, as such term is defined in the
Securities Exchange Act of 1934, which are intended to be covered by the safe
harbors created thereby.  Forward-looking statements are subject to risks and
uncertainties, are subject to change at any time and may be affected by various
factors that may cause actual results to differ materially from the expected or
planned results.  In addition to the factors discussed above, certain other
factors, including without limitation, the risk that NCO will not be able to
implement its business strategy as and when planned, risks related to the ERP
implementation, risks related to the final outcome of the environmental
liability, risks related to past and possible future terrorists attacks, risks
related to the economy, the risk that NCO will not be able to improve margins,
risks relating to growth and future acquisitions, risks related to the
integration of the acquisitions of RMH Teleservices, Inc. and the minority
interest of NCO Portfolio Management, Inc., risks related to fluctuations in
quarterly operating results, risks related to the timing of contracts, risks
related to international operations, and other risks detailed from time to time
in NCO's filings with the Securities and Exchange Commission, including the
Annual Report on Form 10-K for the year ended December 31, 2004, can cause
actual results and developments to be materially different from those expressed
or implied by such forward-looking statements. The Company disclaims any intent
or obligation to publicly update or revise any forward-looking statements,
regardless of whether new information becomes available, future developments
occur or otherwise.

                               NCO GROUP, INC.
                      Unaudited Selected Financial Data
                (in thousands, except for per share amounts)

  Statements of Income:
                                               For the Three Months Ended
                                                         March 31,
                                                  2005              2004

  Revenue                                       $260,349          $201,231

  Operating costs and expenses:
      Payroll and related expenses               127,731            91,039
      Selling, general and
       administrative expenses                    93,037            76,645
      Depreciation and amortization
       expense                                    10,758             7,778
                                                 231,526           175,462
  Income from operations                          28,823            25,769

  Other income (expense):
      Interest and investment income                 734               996
      Interest expense                            (5,175)           (5,288)
      Other income                                    93               -
                                                  (4,348)           (4,292)
  Income before income tax expense                24,475            21,477

  Income tax expense                               9,204             8,888

  Income before minority interest                 15,271            12,589

  Minority interest                                   (8)             (606)

  Net income                                     $15,263           $11,983

  Net income per share:
      Basic                                        $0.48             $0.46
      Diluted                                      $0.45             $0.43

  Weighted average shares outstanding:
      Basic                                       32,080            26,125
      Diluted                                     36,173            30,234


  Selected Balance Sheet Information:
                                                  As of            As of
                                                March 31,       December 31,
                                                  2005              2004

  Cash and cash equivalents                      $41,471           $26,334
  Current assets                                 268,795           245,839
  Total assets                                 1,112,704         1,113,889

  Current liabilities                            206,606           175,369
  Long-term debt, net of current
   portion                                       143,348           186,339
  Shareholders' equity                           710,488           695,601


                             NCO GROUP, INC.
                Unaudited Selected Segment Financial Data
                              (in thousands)

                                                For the Three Months
                                                Ended March 31, 2005
                                           ARM North               Portfolio
                                            America       CRM     Management

  Revenue                                  $198,457     $47,616     $27,802

  Operating costs and expenses:
       Payroll and related expenses          90,144      34,341       1,203
       Selling, general and admin.
        expenses                             83,246       7,830      17,571
       Depreciation and amortization
        expense                               6,951       3,461         206
                                            180,341      45,632      18,980

  Income (loss) from operations             $18,116      $1,984      $8,822


                             NCO GROUP, INC.
                Unaudited Selected Segment Financial Data
                              (in thousands)

                                             For the Three Months
                                             Ended March 31, 2005
                                          ARM    Intercompany
                                  International Eliminations(1) Consolidated


  Revenue                                $3,062     $(16,588)    $260,349

  Operating costs and expenses:
       Payroll and related expenses       2,043          -        127,731
       Selling, general and admin.
        expenses                            978      (16,588)      93,037
       Depreciation and amortization
        expense                             140          -         10,758
                                          3,161      (16,588)     231,526

  Income (loss) from operations            $(99)        $-        $28,823


                          For the Three Months Ended March 31, 2004
                  ARM North  Portfolio   ARM    Intercompany
                   America   Management  Intl   Elimination(1) Consolidated

  Revenue          $191,003   $21,602   $3,706   $(15,080)      $201,231

  Operating costs
   and expenses:
     Payroll and
      related
      expenses       88,301       647    2,091        -           91,039
     Selling,
      general
      and admin.
      expenses       74,605    16,091    1,029    (15,080)        76,645
     Depreciation
      and
      amortization
      expense         7,574        81      123        -            7,778
                    170,480    16,819    3,243    (15,080)       175,462

  Income from
   operations       $20,523    $4,783     $463       $-          $25,769

     (1) Represents the elimination of intercompany revenue for accounts
         receivable management services provided by ARM North America and
         ARM International to Portfolio Management.


DATASOURCE: NCO Group, Inc.



CONTACT:  Michael J. Barrist, Chairman and CEO or Steven L. Winokur,

EVP, Finance and CFO, NCO Group, [phone]



Web site:  http://www.ncogroup.com/ 

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