Velocity Reports 24% Rise in Net Income

Debt buyer and legal collection firm Velocity Asset Management (AMEX: JVI) reported Friday first quarter net income of $656,716, an increase of 24 percent from $529,808 in the first quarter of 2007. Revenues were $3.8 million in the first quarter of 2008, up nearly 25 percent from $3.0 million in the same period a year ago. Wall, N.J.-based Velocity earned 2 cents a basic and diluted share, compared with 1 cent a year ago.

The company attributed the results to “significant growth in collections” and a reduction in expenses. “Velocity’s solid Q1 results highlight our receivable underwriting discipline and the strength and operating leverage provided by our collections model,” Velocity President and CEO Jack Kleinert said in a statement. “As our asset portfolio continues to season, we anticipate it will generate increasing levels of cash flow, enabling us to achieve organic revenue growth as well as freeing up capital to purchase new charged-off receivables.”

Kleinert said that debt portfolio prices look to be going lower, offsetting any difficulties in collecting debts. 

The company last week delayed its quarterly filing, to allow auditors to reclassify certain company divisions (“Debt Buyer Velocity Asset Management to Delay Quarterly Report,” May 21). The company said it is “in the process of winding down the discontinued operations of its J. Holder and VOM subsidiaries and expects to complete this process by the end of 2008.”

Velocity said this would free up capital for its subsidiary Velocity Investments, which had $487 million in receivables under management at the end of the first quarter, up 38 percent from $353 million a year ago. Velocity Investments reported gross collections of $4.4 million in the quarter, up 21 percent from a year ago.

Velocity also announced that in April it paid about $581,000 for two portfolios of consumer receivables worth about $9.65 million.

Velocity disclosed today in a filing with the U.S. Securities and Exchange Commission its had completed in May a private placement of stock and warrants to purchase stock, receiving net proceeds of $752,152. Velocity sold 945,166 shares, with 800,003 at 90 cents a share and 145,163 at 93 cents a share. It also delivered warrants to purchase a total of 236,293 shares of common stock. The three-year warrants have exercise prices of $1.13 a share and $1.16 per share. Velocity reported the sale had expenses of $70,000 and a commission of about $59,850. Velocity hired Anderson & Strudwick as placement agent.

Early this year Wells Fargo Foothill, Inc. increased its credit facility with Velocity to $22.5 million, and extended its maturity to the end of January 2011.