NCO Group Announces Second Quarter Results of $0.42 Per Diluted Share

NCO Group Announces Second Quarter Results of $0.42 Per Diluted
Share 


HORSHAM, Pa., July 28  /PRNewswire-FirstCall/ -- NCO Group, Inc. ("NCO" or the
"Company") (NASDAQ:NCOG), a leading provider of business process outsourcing
services, announced today that during the second quarter of 2005, it reported
net income of $14.1 million, or $0.42 per diluted share, as compared to net
income of $14.4 million, or $0.43 per diluted share, in the second quarter of
2004.

Revenue in the second quarter of 2005 was $247.2 million, a decrease of 3.2%,
or $8.1 million, from revenue of $255.3 million in the second 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 second
quarter of 2005, these divisions accounted for $192.5 million, $43.8 million,
$27.8 million, and $3.3 million of revenue, respectively. Included in ARM North
America's revenue was $20.1 million of intercompany revenue from Portfolio
Management and included in ARM International's revenue was $79,000 of
intercompany revenue from Portfolio Management. All intercompany revenue is
eliminated in consolidation.

For the second quarter of 2004, the ARM North America, CRM, Portfolio
Management and ARM International divisions accounted for $185.0 million, $59.4
million, $24.1 million and $3.5 million of the revenue, respectively. Included
in ARM North America's revenue was $16.6 million of intercompany revenue from
Portfolio Management and included in ARM International's revenue was $97,000 of
intercompany revenue from Portfolio Management. All intercompany revenue is
eliminated in consolidation.

The decrease in revenue was primarily attributable to the previously discussed
loss of a telecommunications client within the Company's CRM division. While
the implementation of newly committed client contracts is progressing on
schedule, the revenue from such opportunities has not yet had a meaningful
impact on the Company.

NCO's payroll and related expenses as a percentage of revenue decreased to
49.6% for the second quarter of 2005 as compared to 52.0% for the same period
in the prior year. The decrease in payroll and related expenses as a percentage
of revenue was attributable to continued diligence in monitoring staffing levels
against revenue, as well as the use of labor in Barbados and the Philippines.

NCO's selling, general and administrative expenses as a percentage of revenue
increased to 36.9% for the second quarter of 2005 as compared to 32.8% for the
same period in the prior year. This increase was primarily due to the
additional use of outside attorneys and other third party service providers
including the use of the Company's business partner in India.

Commenting on the quarter, Michael J. Barrist, Chairman and Chief Executive
Officer, stated, "The second quarter is difficult to compare to the prior year
because of several unique situations imbedded in the results of the current
quarter. During the quarter our CRM division continued both the planned exit of
a large telecom client and the implementation of several new client
opportunities. While our ARM North America division grew its revenue, clients
continued to impact our margins by adding many administrative and security
burdens and as well as exerting pricing pressure. This was partially offset by
the extremely strong operating results within our Portfolio Management
division, which included a new process of identifying and selling accounts that
have a very low probability of collection. As a result of this process we
recognized a gain during the quarter of approximately $5.3 million. However,
due to the nature of these sales, the gain was included in other income since
it was not considered to be a component of operating income. We are encouraged
by our success in positioning our portfolio business for the remainder of this
year and beyond with closed deals, as well as deals that are still in the
pipeline and have a high probability of closing."

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

NCO will host an investor conference call on Friday, July 29, 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 7916050. 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 7916050. 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.
   Investor Relations
   [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 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, including the acquisition of Risk Management
Alternatives, 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   For the Six Months Ended
                                 June 30,                 June 30,
                            2005         2004         2005         2004

  Revenue               $247,185     $255,255     $507,534     $456,486

  Operating costs
   and expenses:
    Payroll and related
     expenses            122,524      132,823      250,255      223,862

   Selling, general and
    admin. expenses       91,313       83,752      184,350      160,397
   Depreciation and
    amortization expense  10,920       11,147       21,678       18,925
                         224,757      227,722      456,283      403,184

  Income from operations  22,428       27,533       51,251       53,302

  Other income (expense):
   Interest and investment
    income                   726          599        1,460        1,595
   Interest expense       (4,867)      (5,256)     (10,042)     (10,544)
   Other income            4,663          621        4,756          621
                             522       (4,036)      (3,826)      (8,328)

  Income before income
   taxes                  22,950       23,497       47,425       44,974

  Income tax expense       8,814        9,078       18,018       17,966

  Income before minority
   interest               14,136       14,419       29,407       27,008

  Minority interest           (1)           -           (9)        (606)

  Net income             $14,135      $14,419      $29,398      $26,402

  Net income per share:
    Basic                  $0.44        $0.46        $0.92        $0.92
    Diluted                $0.42        $0.43        $0.86        $0.86

  Weighted average shares
   outstanding:
    Basic                 32,101       31,502       32,090       28,814
    Diluted               36,099       35,723       36,136       32,979


  Selected Balance Sheet Information:
                                                     As of          As of
                                                   June 30,   December 31,
                                                      2005           2004

  Cash and cash equivalents                        $20,601        $26,334
  Current assets                                   244,055        245,839
  Total assets                                   1,084,104      1,113,889
  Current liabilities                              132,594        175,369
  Long-term debt, net of current portion           167,257        186,339
   Shareholders' equity                            723,316        695,601



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

                             For the Three Months Ended June 30, 2005

                                          ARM North              Portfolio
                                            America       CRM    Management

  Revenue                                  $192,496    $43,787    $27,759

  Operating costs and expenses:
       Payroll and related expenses          86,707     32,489      1,211
       Selling, general and admin.
        expenses                             81,220      8,263     21,038
       Depreciation and amortization
        expense                               6,959      3,601        207
                                            174,886     44,353     22,456

  Income (loss) from operations             $17,610      $(566)    $5,303


                                   ARM        Intercompany
                              International   Eliminations(1)   Consolidated

  Revenue                         $3,308         $(20,165)        $247,185

  Operating costs and expenses:
       Payroll and related
        expenses                   2,117                -          122,524
       Selling, general and admin.
        expenses                     957          (20,165)          91,313
       Depreciation and
        amortization expense         153                -           10,920
                                   3,227          (20,165)         224,757

  Income (loss) from operations      $81               $-          $22,428


                               For the Three Months Ended June 30, 2004

                                          ARM North              Portfolio
                                            America       CRM    Management

  Revenue                                  $184,962    $59,445    $24,132

  Operating costs and expenses:
       Payroll and related expenses          87,849     42,476        485
       Selling, general and admin.
        expenses                             72,339     10,147     17,012
       Depreciation and amortization
        expense                               7,693      3,254         81
                                            167,881     55,877     17,578

  Income from operations                    $17,081     $3,568     $6,554


                                    ARM         Intercompany
                               International    Eliminations(1) Consolidated

  Revenue                          $3,459         $(16,743)       $255,255

  Operating costs and expenses:
       Payroll and related
        expenses                    2,013                -         132,823
       Selling, general and admin.
        expenses                      997          (16,743)         83,752
       Depreciation and amortization
        expense                       119                -          11,147
                                    3,129          (16,743)        227,722

  Income from operations             $330               $-         $27,533

   (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:  Investor Relations, [phone]



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

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