<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q

/X/  Quarterly report pursuant to Section 13 or 15(d) of
     the Securities Exchange Act of 1934


     For the quarterly period ended March 31, 1998, or


/ /  Transition report pursuant to Section 13 or 15(d) of
     the Securities Exchange Act of 1934

     For the transition period from      to

--------------------------------------------------------------------------------

                         COMMISSION FILE NUMBER 0-21639
--------------------------------------------------------------------------------

                                 NCO GROUP, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                                  PENNSYLVANIA
--------------------------------------------------------------------------------
         (State or other jurisdiction of incorporation or organization)

             515 Pennsylvania Avenue, Fort Washington, Pennsylvania
--------------------------------------------------------------------------------
                    (Address of principal executive offices)

                                   23-2858652
--------------------------------------------------------------------------------
                      (IRS Employer Identification Number)

                                      19034
--------------------------------------------------------------------------------
                                   (Zip Code)

                                  215-793-9300
--------------------------------------------------------------------------------
               (Registrant's telephone number including area code)

--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
                                     Yes  X  No
                                        ----   ----


         The number of shares outstanding of each of the issuer's classes of
common stock was 13,390,776 shares common stock, no par value, outstanding as 
of April 30, 1998.

                                       -1-

<PAGE>

                                 NCO GROUP, INC.
                                      INDEX

                                                                            PAGE

Part I                  FINANCIAL INFORMATION

 Item 1   CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

          Consolidated Balance Sheets -
           December 31, 1997 and March 31, 1998                             3

          Consolidated Statements of Income -
           Three months ended
           March 31, 1997 and 1998                                          4

          Consolidated Statements of Cash Flows -
           Three months ended  March 31, 1997 and 1998                      5

          Notes to Consolidated Financial Statements                        6

          Pro Forma Selected Financial Data                                 9

          Notes to Pro Forma Selected Financial Data                       10

 Item 2   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS                   11

PART II                                                                    14 

 Item 1.  Legal Proceedings
 Item 2.  Changes in Securities
 Item 3.  Defaults Upon Senior Securities
 Item 4.  Submission of Matters to a Vote of Shareholders
 Item 5.  Other Information
 Item 6.  Exhibits and Reports on 8-K

                                       -2-

<PAGE>
Part 1 - Financial Information
Item 1 - Financial Statements

                                 NCO GROUP, INC.
                           Consolidated Balance Sheets
                                   (Unaudited)
                             (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                                          December 31,         March 31,
                                          ASSETS                                              1997                1998
                                                                                         ------------        ------------

<S>                                                                                     <C>                 <C>   
Current assets:
    Cash and cash equivalents                                                             $ 29,539          $ 16,088
    Accounts receivable, trade, net of allowance for                                                      
         doubtful accounts of $365 and $431, respectively                                   13,442            14,848
    Other current assets                                                                     2,357             1,557
                                                                                         ---------         ---------
         Total current assets                                                               45,338            32,493
                                                                                                          
Funds held in trust for clients                                                                           
                                                                                                          
Property and equipment, net                                                                  7,469             8,245
                                                                                                          
Other assets:                                                                                             
    Intangibles,  net of accumulated amortization                                           45,881            63,130
    Deferred financing costs                                                                   522               849
    Deposits on acquisitions                                                                 1,650                  
    Other assets                                                                               776               991
                                                                                         ---------         ---------
          Total other assets                                                                48,829            64,970
                                                                                         ---------         ---------
Total assets                                                                             $ 101,636         $ 105,708
                                                                                         =========         =========
                                                                                                          
                                                                                                          
                           LIABILITIES AND SHAREHOLDERS' EQUITY                                           
                                                                                                          
Current liabilities:                                                                                      
    Long-term debt, current portion                                                          $ 560           $ 1,060
    Capitalized lease obligations, current portion                                             114               106
    Corporate taxes payable                                                                    286               462
    Accounts payable                                                                         1,913             2,937
    Accrued expenses                                                                         3,074             2,548
    Accrued compensation and related expenses                                                2,844             2,955
    Unearned revenue, net of related costs                                                     107               252
                                                                                         ---------         ---------
         Total current liabilities                                                           8,898            10,320
                                                                                                          
Funds held in trust for clients                                                                           
                                                                                                          
Long-term liabilities:                                                                                    
    Long term debt, net of current portion                                                   1,437               923
    Capitalized lease obligations, net of current portion                                      248               225
    Deferred taxes                                                                           1,691             2,253
    Unearned revenue, net of related costs                                                      28                31
                                                                                                          
Commitments and contingencies                                                                             
                                                                                                          
Shareholders' equity:                                                                                     
    Preferred stock, no par value, 5,000,000 shares authorized,                                           
         no shares issued and outstanding                                                                 
    Common stock,  no par value, 37,500,000 shares authorized,                                            
        13,216,244 and 13,390,651 shares issued and outstanding                                            
        at December  31, 1997 and March 31, 1998, respectively.                             80,249            80,802
    Unexercised warrants                                                                     1,122               875
    Retained earnings                                                                        7,963            10,279
                                                                                         ---------         ---------
          Total shareholders' equity                                                        89,334            91,956
                                                                                         ---------         ---------
Total liabilities and shareholders' equity                                               $ 101,636         $ 105,708
                                                                                         =========         =========
                                                                                                          
</TABLE>

                  The accompanying notes are an integral part
                  of these consolidated financial statements.

                                      -3-


<PAGE>


                                 NCO GROUP, INC.
                        Consolidated Statements of Income
                                   (Unaudited)
                 (Dollars in thousands, except per share data)
<TABLE>
<CAPTION>


                                                                                           For the Three Months Ended
                                                                                                    March 31,
                                                                                         --------------------------------
                                                                                               1997             1998
                                                                                         -------------      -------------
<S>                                                                                       <C>                      <C>         
Revenue                                                                                   $ 18,077             $ 27,609
                                                                                                            
Operating costs and expenses:                                                                               
    Payroll and related expenses                                                             9,046               14,144
    Selling, general and administrative                                                                     
      expenses                                                                               5,932                8,568
    Depreciation and amortization expense                                                      716                1,155
                                                                                         ---------            ---------
         Total operating costs and expenses                                                 15,694               23,867
                                                                                         ---------            ---------
Income from operations                                                                       2,383                3,742
                                                                                                            
Other income (expense):                                                                                     
    Interest and investment income                                                              93                  232
    Interest expense                                                                          (175)                 (79)
                                                                                         ---------            ---------
                                                                                               (82)                 153
                                                                                         ---------            ---------
Income before provision for income taxes                                                     2,301                3,895
                                                                                                            
Income tax expense                                                                             994                1,579
                                                                                         ---------            ---------
                                                                                                            
Net  income                                                                                $ 1,307              $ 2,316
                                                                                         =========            =========
                                                                                                            
Net income per share:                                                                                       
    Basic                                                                                  $  0.12              $  0.17
                                                                                         =========            =========
    Diluted                                                                                $  0.12              $  0.17
                                                                                         =========            =========
                                                                                                            
Weighted average shares outstanding:                                                                        
    Basic                                                                               10,655,636           13,240,098
    Diluted                                                                             11,229,918           13,801,012
                                                                                                      

</TABLE>
                  The accompanying notes are an integral part
                  of these consolidated financial statements.


                                      -4-



<PAGE>


                                 NCO GROUP, INC
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                             (Dollars in thousands)
<TABLE>
<CAPTION>


                                                                                           For the Three Months Ended
                                                                                                    March 31,
                                                                                         ---------------------------------
                                                                                             1997               1998
                                                                                         -------------      -------------
<S>                                                                                       <C>                 <C>
    Cash flows from operating activities:                                                               
      Net income                                                                           $ 1,307            $ 2,316
      Adjustments to reconcile net income                                                                 
        to net cash provided by operating activities:                                                     
          Depreciation                                                                         269                439
          Amortization of intangibles                                                          404                673
          Amortization of deferred financing costs                                              43                 43
          Provision for doubtful accounts                                                       92                 66
          Changes in assets and liabilities, net of acquisitions:                                         
            Accounts receivable, trade                                                      (1,979)               206
            Notes receivable                                                                              
            Other current assets                                                               127                881
            Deferred taxes                                                                      40                560
            Other assets                                                                        50               (153)
            Accounts payable                                                                (1,073)               954
            Corporate taxes payable                                                            822                176
            Accrued expenses                                                                 1,311             (1,249)
            Accrued compensation and related costs                                              17                (13)
            Unearned revenue                                                                   (35)                (3)
                                                                                         ---------          ---------
                 Net cash provided by operating activities                                   1,395              4,896
                                                                                                          
    Cash flows from investing activities:                                                                 
      Purchase of property and equipment                                                      (312)            (1,065)
      Net cash paid for acquisitions                                                       (15,557)           (17,174)
                                                                                         ---------          ---------
                 Net cash used in investing activities                                     (15,869)           (18,239)
                                                                                                          
    Cash flows from financing activities:                                                                 
      Repayment of notes payable                                                              (130)               (43)
      Borrowings under credit agreement                                                      8,350                   
      Payment of fees to acquire new debt                                                      (12)              (371)
    Issuance of common stock, net                                                                -                306
                                                                                         ---------          ---------
                 Net cash provided by financing activities                                   8,208               (108)
                                                                                         ---------          ---------
    Net increase (decrease) in cash and cash equivalents                                    (6,266)           (13,451)
    Cash and cash equivalents at beginning of period                                        12,059             29,539
                                                                                         ---------          ---------
    Cash and cash equivalents at end of period                                             $ 5,793           $ 16,088
                                                                                         =========          =========
                                                                                                          
</TABLE>

                  The accompanying notes are an integral part
                  of these consolidated financial statements.


                                      -5-

<PAGE>
                                 NCO GROUP, INC.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)
                  (Dollars in thousands, except per share data)

 1.      Nature of Operations:

NCO Group, Inc. (the "Company") is a leading provider of accounts receivable
management and other outsourced services. The Company's client base is comprised
of companies located throughout the United States in the financial services,
healthcare, retail and commercial, education, telecommunications, utilities and
government sectors.

 2.      Summary of Significant Accounting Policies:

     Principles of Consolidation:

The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries after elimination of significant intercompany
accounts and transactions.

     Revenue Recognition:

The Company generates revenues from contingency fees and contractual services.
Contingency fee revenue is recognized upon collection of funds on behalf of
clients. Contractual services revenue is deferred and recognized as services are
performed.

     Income Taxes:

The Company accounts for income taxes using Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." This standard requires an
asset and liability approach that takes into account changes in tax rates when
valuing the deferred tax amounts to be reported on the balance sheet.

     Credit Policy:

The Company has two types of arrangements under which it collects its
contingency fee revenue. For certain clients, the Company remits funds collected
on behalf of the client net of the related contingency fees while, for other
clients, the Company remits gross funds collected on behalf of clients and bills
the client separately for its contingency fees. Management carefully monitors
its client relationships in order to minimize its credit risk and generally does
not require collateral. In the event of collection delays from clients,
management may at its discretion change from the gross remittance method to the
net remittance method.

     Goodwill and Acquisition Costs:

Goodwill represents the excess of purchase price over the fair market value of
the net assets of the acquired businesses. Goodwill is amortized on a
straight-line basis over 15 to 25 years. The recoverability of goodwill is
periodically reviewed by the Company. In making such determination with respect
to goodwill, the Company evaluates the operating cash flows of the underlying
business which gave rise to such amount.

     Deferred Financing Costs:

Deferred financing costs relate to debt issuance costs incurred which are
capitalized and amortized over the term of the debt.

     Estimates Utilized in the Preparation of Financial Statements:

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

                                       -6-
<PAGE>
                                 NCO GROUP, INC.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)
                  (Dollars in thousands, except per share data)

     Earnings Per Share:

All earnings per share computations and presentations are in accordance with 
SFAS No. 128, "Earnings per Share."

     Interim Financial Information:

The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions for Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 1998 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1998 or for any other interim period. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K, as amended, filed
with the Securities and Exchange Commission on March 31, 1998.

3.   Acquisitions:

On January 22, 1997 the Company purchased the outstanding stock of Goodyear &
Associates, Inc. ("Goodyear") for $5.4 million comprised of $4.5 million in cash
and a $900 convertible note. The Company recognized goodwill of $4.9 million.

On January 30, 1997 the Company purchased substantially all the assets of
Tele-Research Center, Inc. ("Tele-Research") for $2.2 million in cash, including
contingent consideration paid. The Company recognized goodwill of $1.6 million.

On January 31, 1997 the Company purchased certain assets of the CMS A/R Services
("CMSA/R"), the Collection Division of CMS Energy Corporation, for $5.1 million
in cash. The Company recognized goodwill of $3.2 million.

On February 2, 1997 the Company purchased certain assets and assumed certain
liabilities of the Collections Division of CRW Financial, Inc. ("CRWCD") for
$3.8 million in cash, 518,000 shares of common stock and warrants for 375,000
shares of common stock. The acquisition was valued at approximately $12.8
million. The Company recognized goodwill of $10.2 million.

On October 1, 1997 the Company purchased the outstanding stock of ADVANTAGE
Financial Services, Inc. and related companies ("AFS") for $2.9 million in cash,
46 shares of common stock and $1.0 million in notes payable. The acquisition
was valued at approximately $5.0 million. The Company recognized goodwill of
$5.1 million.

On October 1, 1997 the Company purchased the outstanding stock of Credit
Acceptance Corporation ("CAC") for $1.8 million in cash. The Company recognized
goodwill of $1.8 million.

On December 31, 1997, effective January 1, 1998, the Company purchased certain
assets of American Financial Enterprises, Inc. Collections Division ("AFECD")
for $1.7 million in cash. Cash paid for the acquisition of AFECD is included on
the Consolidated Balance Sheet at December 31, 1997 under the caption "Deposits
on acquisitions." The Company recognized goodwill of $2.1 million.

On February 6, 1998, the Company purchased certain assets of The Response Center
("TRC"), which was an independent division of TeleSpectrum Worldwide, Inc., for
$15.0 million plus an earn-out based on the value of the Company's market
research business at December 31, 1998. The Company recognized goodwill of 
$13.9 million.

In March 1998, the Company entered into an agreement with FCA International 
Ltd. ("FCA") pursuant to which NCO is making a cash tender offer for all of the
outstanding common shares of FCA at $9.60 per share, Canadian (equivalent to
$6.77 in U.S. dollars based upon the exchange rate as of the date of the
agreement). Founded in 1926, FCA is the largest accounts receivable management
company in Canada with signifcant operations in the United States and the United
Kingdom. The purchase price is valued at approximately $67.6 million. The
Company expects to recognize $56.2 million of goodwill.

                                       -7-
<PAGE>


                                 NCO GROUP, INC.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)
                  (Dollars in thousands, except per share data)

The Company has entered into an agreement to acquire all of the outstanding
stock of MedSource, Inc. for approximately $17.9 million in cash and the 
recognizition of certain acquisition related liabilities. MedSource, Inc. based 
in Goodlettsville, Tennessee, provides accounts receivable management services 
principally to the healthcare sector. The Company expects to recognize $36.3 
million of goodwill.

4.   Funds Held in Trust for Clients:


In the course of the Company's regular business activities as an accounts
receivable management company, the Company receives clients' funds arising from
the collection of accounts placed with the Company. These funds are placed in
segregated cash accounts and are generally remitted to clients within 30 days.
Funds held in trust for clients of $8.1 million and $17.4 million at December
31, 1997 and March 31, 1998, respectively, have been shown net of their
offsetting liability for financial statement presentation purposes.

5.    Long-Term Debt:

In March 1998, Mellon Bank, N.A. increased the revolving credit facility to
$75.0 million from $25.0 million and changed the interest rate to a variable
rate ranging from LIBOR plus 0.75% to LIBOR plus 2.0% (LIBOR was 5.69% at March
31, 1998) based on the Company's interest coverage ratios from a fixed interest
rate of 2.5% over LIBOR. There were no outstanding borrowings as of December 31,
1997 or March 31, 1998. The revolving credit line is collateralized by
substantially all the assets of the Company and includes certain financial
covenants such as maintaining minimum working capital and net worth requirements
and includes restrictions on, among other things, capital expenditures and
distributions to shareholders. The bank had received warrants to purchase an
aggregate of 360,887 shares of the Company's Common Stock for establishing the
credit facility initially and for subsequent amendments to increase the
Company's borrowing capacity under such facility. In July 1997, the bank
exercised 225,000 warrants for Common Stock which was sold in the 1997 offering.
The remainder of the warrants were exercised in January 1998.

6.    Earnings Per Share:

Basic earnings per share were computed by dividing the net income for the three
months ended March 31, 1997 and 1998 by the weighted average number of shares
outstanding. Diluted earnings per share were computed by dividing the net
income, adjusted for the effects of interest expense attributable to convertible
debt, for the three months ended March 31, 1997 and 1998 by the weighted average
number of shares outstanding including common equivalent shares. All outstanding
options, warrants and convertible securities have been utilized in calculating
diluted net income per share only when their effect would be dilutive.

The reconciliation of basic to diluted earnings per share ("EPS") consists of
the following for the three months ended March 31, 1997 and 1998 (amounts in
thousands, except per share data):

                                        1997                 1998
                                 Shares      EPS      Shares      EPS
                                --------   --------- ---------  --------

Basic .....................      10,656    $   0.12   13,240    $  0.17
Dilutive effect of warrants          46           -       99          -
Dilutive effect of options          353           -      398          -
Dilutive effect of
convertible notes .........         175           -       64          -
                                --------  --------- ---------  -------
Diluted ...................      11,230    $   0.12   13,801    $  0.17
                                ========  ========= =========  =======

7.    Supplemental Cash Flow Information:

The following are supplemental disclosures of cash flow information for the
three months ended March 31:

                                                    1997           1998       
                                                    ----           ----
Noncash investing and financing activities:
  Fair value of assets acquired ..................  $7,987        $1,972
  Liabilities assumed form acquisitions ..........   3,400           346
  Convertible note payable, issued for acquisition     900           --
  Common stock issued for acquisitions ...........   8,215           --
  Warrants issued for acquisitions ...............     875           --
  Warrants exercised .............................      --           247

8.    Subsequent Events:

On May 4, 1998, the Company filed a Registration Statement for a public offering
of 6,565,000 shares of Common Stock of which 5.8 million shares will be sold
by the Company and 765,000 shares will be sold by management and other selling
shareholders.

9.    Investment Considerations:

In analyzing whether to make, or to continue, an investment in the Company,
investors should consider, among other factors, certain risk factors and other
information contained in the Company's filings with the Securities and Exchange
Commission, including, without limitation, the Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 1998 as amended, and
the Company's Registration Statement on Form S-3 filed with the Securities and
Exchange Commission on May 4, 1998.

A copy of the Annual Report on Form 10-K can be obtained, without charge except
for exhibits, by written request to Steven L. Winokur, Executive Vice President,
Finance/CFO, NCO Group, Inc., 515 Pennsylvania Avenue, Ft. Washington, PA 19034.

                                       -8-

<PAGE>
                                 NCO GROUP, INC.
                        Pro Forma Selected Financial Data
                                   (Unaudited)
                  (Dollars in thousands, except per share data)


<TABLE>
<CAPTION>
                                                                           Three Months Ended March 31, 1998
                                                           ------------------------------------------------------------------
                                                                       Historical
                                                           --------------------------------------------
                                                                                           Pending             Acquisition       
                                                           NCO           TRC (1)       Acquisitions (2)       Adjustments (3)    
                                                           ---           -------       ----------------       ---------------    

<S>                                                       <C>           <C>                <C>                   <C>       
Statement of Income Data:

Revenue .............................................     $ 27,609      $    788           $ 20,002              $   --    
                                                          --------      --------           --------              --------  
                                                                                                                           
Operating costs and expenses:                                                                                              
     Payroll and related expenses ...................       14,144           429             11,778                (1,519) 
     Selling, general and administrative expenses ...        8,568           162              6,779                  (336) 
     Depreciation and amortization expense ..........        1,155             7                904                    28  
                                                          --------      --------           --------              --------  
          Total operating costs and expenses ........       23,867           598             19,461                (1,827) 
                                                          --------      --------           --------              --------    
                                                                                                                           
Income (loss)from operations ........................        3,742           190                541                 1,827  
                                                                                                                           
                                                                                                                           
Other income (expense):                                                                                                    
     Interest and investment income .................          232          --                   89                   (69) 
     Interest expense ...............................          (79)         --                 (704)               (1,264)
                                                          --------      --------           --------              --------  
                                                               153          --                 (615)               (1,333)
                                                          --------      --------           --------              --------    
Income before provision for income taxes ............        3,895           190                (74)                  494
                                                                                                                           
Income tax expense ..................................        1,579          --                  (56)                  673  
                                                          --------      --------           --------              --------    
Net  income (loss) .................................      $  2,316      $    190           $    (18)             $   (179) 
                                                          ========      ========           ========              ========  
                                                                                                                           
Net income per share:                                                                                                      
     Basic...........................................     $   0.17                                                         
                                                          ========                                                         
     Diluted ........................................     $   0.17                                                         
                                                          ========                                                          
                                                                                                                           
Weighted average shares outstanding:
     Basic...........................................   13,240,098                                                     
     Diluted ........................................   13,801,012                                                     
                                                                      
                                                                                        March 31, 1998
                                                                        ---------------------------------------------------
                                                          December 31,                      Pro                Pro Forma 
                                                             1997         Actual          Forma(6)           As Adjusted(7)
                                                          -----------   --------         --------            --------------
Balance Sheet Data:

Cash and cash equivalents ..........................      $ 29,539      $ 16,088           $  9,148              $ 60,707  
Working capital ....................................        36,440        22,173              2,199                56,640  
Total assets .......................................       101,636       105,708            227,420               278,979  
Long-term debt, net of current portion .............         1,437           923             94,715                   923  
Shareholders' equity ...............................        89,334        91,956             91,956               240,284  

</TABLE>

<PAGE>

<TABLE>                                           
<CAPTION>                                         
                                                                      Three Months Ended March 31, 1998
                                                             ------------------------------------------------
                                                        
                                                                               Offering           Pro Forma          
                                                             Pro Forma       Adjustments (4)      As Adjusted        
                                                             ---------       ---------------      -----------        
                                                                                                                     
<S>                                                         <C>                 <C>                <C>               
Statement of Income Data:

Revenue .............................................       $ 48,399            $   --             $ 48,399          
                                                            --------            --------           --------          
                                                                                                                     
Operating costs and expenses:                                                                                        
     Payroll and related expenses ...................         24,832                --               24,832          
     Selling, general and administrative expenses ...         15,173                --               15,173          
     Depreciation and amortization expense ..........          2,094                --                2,094          
                                                            --------            --------           --------          
          Total operating costs and expenses ........         42,099                --               42,099          
                                                            --------            --------           --------          
                                                                                                                     
Income (loss)from operations ........................          6,300                --                6,300          
                                                                                                                     
                                                                                                                     
Other income (expense):                                                                                              
     Interest and investment income .................            252                --                  252          
     Interest expense ...............................         (2,047)              1,945               (102)         
                                                            --------            --------           --------          
                                                              (1,795)              1,945                150          
                                                            --------            --------           --------          
Income before provision for income taxes ............          4,505               1,945              6,450          
                                                                                                                     
Income tax expense ..................................          2,196                 788              2,984          
                                                            --------            --------           --------          
Net  income (loss) .................................        $  2,309            $  1,157           $  3,466          
                                                            ========            ========           ========          
                                                                                                                     
Net income per share:                                                                                                
     Basic...........................................       $   0.17                               $   0.20          
                                                            ========                               ========          
     Diluted ........................................       $   0.17                               $   0.19         
                                                            ========                               ========          
                                                                                                                     
Weighted average shares outstanding:                                                                                 
     Basic...........................................     13,240,098                             17,452,491(5)          
     Diluted ........................................     13,801,012                             18,013,405(5)   
                                                                                                                     
</TABLE>                                                                 
                  The accompanying notes are an integral part
              of these pro forma consolidated financial statements.

                                       -9-
<PAGE>
                                 NCO GROUP, INC.
                   Notes to Pro Forma Selected Financial Data
                                  (Unaudited)

(1)  Gives effect to the acquisition of The Response Center ("TRC") as if it
     occurred on January 1, 1998.

(2)  Gives effect to the acquisition of FCA International Ltd. and Medsource,
     Inc. (collectively, the "Pending Acquistions") as if they occurred on
     January 1, 1998.

(3)  Gives effect to: (i) the elimination of payroll and related expenses
     relating to certain redundant collection and administrative personnel costs
     immediately eliminated at the time of the TRC acquisition and expenses
     identified during the due diligence process which will be eliminated upon
     the closing of the Pending Acquisitions; (ii) the elimination of certain
     rental expenses and related operating costs attributable to facilities
     which were identified during the due diligence process and will be closed
     upon the completion of the Pending Acquisitions; (iii) the increase in
     amortization expense resulting from the TRC acquisition and the Pending
     Acquisitions; (iv) the elimination of depreciation and amortization expense
     related to assets revalued or not acquired; (v) the elimination of interest
     income on funds assumed to be used for the purchase of the TRC acquisition
     and the Pending Acquisitions; (vi) interest expense on borrowings related
     to the Pending Acquisitions; and (vii) the estimated income tax expense,
     after giving consideration to non-deductible goodwill expense.

(4)  Reflects the elimination of interest expense on debt assumed to be repaid
     with a portion of the proceeds from the Company's proposed public offering
     of 6,565,000 shares of Common Stock (the "Offering") of which 5.8 million
     shares will be sold by the Company and 765,000 shares will be sold by
     management and other selling shareholders.

(5)  Gives effect to the issuance of 4.2 million shares of Common Stock at an
     assumed public offering price of $27.00 per share, net of the estimated
     underwriting discounts and offering expenses payable by the Company, which
     would be sufficient to repay acquisition related debt of $75.0 million,
     repay debt of $21.9 million recognized in connection with the Pending
     Acquisitions and additional $10.5 million necessary to fund the Pending
     Acquisitions.

(6)  Gives effect to: (i) the pending acquisition of FCA for approximately $67.6
     million in cash, which was assumed to be borrowed against the Company's
     credit facility, and the recognition of certain acquisition related
     liabilities; and (ii) the pending acquisition of MedSource for
     approximately $17.9 million in cash, of which $7.4 million was assumed to
     be borrowed against the Company's credit facility, and the recognition of
     certain acquisition related liabilities. The Company expects to recognize
     goodwill of $56.2 million and $36.3 million for the FCA and MedSource
     acquisitions, respectively.

(7) Gives effect to the issuance of 5.8 million shares of Common Stock at an
    assumed public offering price of $27.00 per share. The estimated net
    proceeds of $148.3 million from the Offering, net of the estimated
    underwriting discount and offering expenses payable by the Company, will be
    used to repay acquisition related debt of $75.0 million, repay FCA's and
    MedSource's acquired debt of $4.8 million and $17.1 million, respectively,
    with the balance added to working capital. In addition, estimated net 
    proceeds includes the exercise of 61,058 stock options resulting in
    proceeds of $157,920 to the Company.




                                      -10-
<PAGE>


Item 2
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations


         Certain statements included in this Report on Form 10-Q, are
forward-looking statements (as such term is defined in the Securities Exchange
Act of 1934, and the regulations thereunder) including, without limitation,
statements as to the Company's objective to grow through strategic acquisitions
and internal growth, the Company's ability to realize operating efficiencies in
the integration of its acquisitions, trends in the Company's future operating
performance, the classification of the Company's investment portfolio, and
statements as to the Company's or management's beliefs, expectations and
opinions. Forward-looking statements are subject to risks and uncertainties and
may be affected by various factors which may cause actual results to differ
materially from those in the forward-looking statements. In addition to the
factors discussed in this Report, certain risks, uncertainties and other
factors, including, without limitation the risk that the Company will not be
able to realize operating efficiencies in the integration of its acquisitions,
risks associated with growth and future acquisitions, fluctuations in quarterly
operating results, and the other risks detailed from time to time in the
Company's filings with the Securities and Exchange Commission, including the
Company's Annual Report on Form 10-K, filed on March 31, 1998, as amended, can
cause actual results and developments to be materially different from those
expressed or implied by such forward-looking statements.

         A copy of the Annual Report on Form 10-K can be obtained, without
charge except for exhibits, by written request to Steven L. Winokur, Executive
Vice President, Finance/CFO, NCO Group, Inc., 515 Pennsylvania Avenue, Ft.
Washington, PA 19034.

Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997

         Revenue. Revenue increased $9.5 million or 52.7% to $27.6 million for
the three months ended March 31, 1998 from $18.1 million for the comparable
period in 1997. Of this increase, $3.6 million was attributable to the addition
of new clients and growth in business from existing clients. Revenue
attributable to the Goodyear & Associates, Inc. ("Goodyear"), Tele-Research
Center, Inc. ("Tele-Research"), and CMS A/R Services ("CMS A/R") acquisitions
completed in January 1997 represented $908,000 of the increase and $1.2 million
of the increase was attributable to the Collection Division of CRW Financial,
Inc. ("CRWCD") acquisition completed in February 1997. In addition, $2.1 million
of the increase was attributable to the ADVANTAGE Financial Services, Inc.
("AFS") and Credit Acceptance Corporation ("CAC") acquisitions completed in
October 1997 and $1.7 million of the increase was attributable to the Collection
Division of American Financial Enterprises, Inc. ("AFECD") and The Response
Center ("TRC") acquisitions completed in the first quarter of 1998.

         Payroll and related expenses. Payroll and related expenses increased
$5.1 million to $14.1 million for the three months ended March 31, 1998 from
$9.0 million for the comparable period in 1997, and increased as a percentage of
revenue to 51.2% from 50.0%. Payroll and related expenses increased as a
percentage of revenue primarily as a result of the market research division
having a higher payroll cost structure than that of the remainder of the
Company. In addition, there were additional payroll costs attributable to the
start up of a contract with the United States Department of Education (the "DOE
Contract") which required the Company to hire and train a certain number of
collection personnel prior to realizing any revenue under the contract. These
higher costs were partially offset by lower payroll costs in the AFS and CAC
acquisitions and by spreading the cost of management and administrative
personnel over a larger revenue base.

         Selling, general and administrative expenses. Selling, general and
administrative expenses increased $2.7 million to $8.6 million for the three
months ended March 31, 1998 from $5.9 million for the comparable period in 1997,
and decreased as a percentage of revenue to 31.0% from 32.8%. A portion of the
decrease was attributable to the market research division having a lower
selling, general and administrative expense structure than that of the remainder
of the business. In addition, additional operating efficiencies were obtained by
spreading selling, general and administrative expenses over a larger revenue
base.

                                      -11-
<PAGE>

         Depreciation and amortization. Depreciation and amortization increased
to $1.2 million for the three months ended March 31, 1998 from $716,000 for the
comparable period in 1997. Of this increase, $90,000 was attributable to the CAC
and AFS acquisitions, and $120,000 was attributable to the AFECD and TRC
acquisitions. The remaining $274,000 primarily consisted of depreciation
resulting from normal capital expenditures incurred in the ordinary course of
business.


         Other income (expense). Interest and investment income increased
$139,000 to $232,000 for the three months ended March 31, 1998 from $93,000 for
the comparable period in 1997. This increase was primarily attributable to the
investment of funds remaining from the Company's public offering completed in
July 1997 (the "1997 Offering"), as well as an increase in operating funds and
funds held in trust for clients. Interest expense decreased to $78,000 for the
three months ended March 31, 1998 from $175,000 for the comparable period in
1997. During the first quarter of 1997, the Company borrowed $8.4 million on its
revolving credit facility to partially finance the Goodyear, Tele-Research, CMS
A/R and CRWCD acquisitions, and issued a $900,000 convertible note payable in
connection with the Goodyear acquisition in January 1997. The revolving credit
facility was repaid with a portion of the proceeds from the 1997 Offering. In
addition, the $1.0 million convertible note payable issued in connection with
the Management Adjustment Bureau, Inc. ("MAB") acquisition in September 1996 was
converted to Common Stock in connection with the 1997 Offering.

         Income tax expense. Income tax expense increased to $1.6 million, or
40.5% of income before taxes, for the three months ended March 31, 1998 from
$994,000, or 43.2% of income before taxes, for the comparable period in 1997.
Income taxes were computed after giving effect to non-deductible goodwill
expenses resulting from certain of the acquired companies.

         Net income. Net income increased $1.0 million or 77.2% to $2.3 million
for the three months ended March 31, 1998 from $1.3 million for the comparable
period in 1997.

Liquidity and Capital Resources

         In July 1997, the Company completed the 1997 Offering, selling
2,166,000 shares of Common Stock and receiving net proceeds of approximately
$40.4 million.

         The Company's primary sources of cash have historically been cash flows
from operations, bank borrowings and in 1996 and 1997, the net proceeds from the
Company's intial public offering in November 1996 (the "IPO")and the 1997
Offering, respectively. Cash has been used for acquisitions, S Corporation
distributions to shareholders prior to the IPO, purchases of equipment and
working capital to support the Company's growth.

         Cash provided by operating activities was $4.9 million during the three
months ended March 31, 1998, and $1.4 million for the comparable period in 1997.
The increase in cash provided by operations was primarily due to the increase in
net income to $2.3 million for the three months ended March 31, 1998 compared to
$1.3 million for the comparable period in 1997. In addition the increase in cash
provided by operations was also attributable to the decrease in other current
and long term assets by $728,000 for the three months ended March 31, 1998
compared to $177,000 for the comparable period in 1997, and the increase in
non-cash charges, primarily depreciation and amortization, to $1.2 million
during the three months ended March 31, 1998 compared to $716,000 for the
comparable period in 1997.

         Cash used in investing activities was $18.2 million during the three
months ended March 31, 1998 compared to $15.9 million for the comparable period
in 1997. The increase was primarily due to the cash portion of the purchase
price paid for the acquisitions of AFECD and TRC in the first quarter of 1998
versus the cash portion of the purchase price paid for the acquisitions of
Goodyear, Tele-Research, CMS A/R, and CRWCD during the first quarter of 1997. In
addition, during the three months ended March 31, 1998, capital expenditures
were $1.1 million compared to $312,000 for the comparable period in 1997.

         Cash used in financing activities was $108,000 during the three months
ended March 31, 1998 compared to cash provided by financing activities of $8.2
million for the comparable period in 1997. During the first quarter of 1997,
bank borrowings were the Company's primary source of cash from financing
activities and were used for acquisitions. The Company raised net proceeds of
approximately $40.4 million in the 1997 Offering and used a portion of the
proceeds from the IPO and the 1997 Offering to repay $8.4 million of outstanding
indebtedness under its revolving credit facility.

                                      -12-
<PAGE>

         In March 1998, the Company's credit agreement was amended to, among
other things, increase the Company's revolving credit facility with Mellon Bank,
N.A. to provide for borrowings up to $75.0 million at an interest rate ranging
from LIBOR plus 0.75% to LIBOR plus 2.0% (LIBOR was 5.69% at March 31, 1998).
The Company has the right to permanently reduce the revolving credit facility by
up to $25.0 million. There were no outstanding borrowings as of December 31,
1997 or March 31, 1998. The revolving credit line is collateralized by
substantially all the assets of the Company and includes certain financial
covenants such as maintaining minimum working capital and net worth requirements
and includes restrictions on, among other things, capital expenditures and
distributions to shareholders.


         The Company believes that funds generated from operations, together
with existing cash, the net proceeds from the Company's proposed public offering
and available borrowings under its Credit Agreement will be sufficient to
finance its current operations and planned capital expenditure requirements and
internal growth at least through the next twelve months. However, the Company
could require additional debt or equity financing if it were to make any other
significant acquisitions for cash.


Year 2000 System Modifications

         NCO has initiated a program to evaluate and address the impact of the
year 2000 on its information systems in order to insure that its network and
software will manage and manipulate data involving the transition of dates from
1999 to 2000 without functional or data abnormality and without inaccurate
results related to such data. This program includes steps to: (a) identify
software that require date code remediation; (b) establish timelines for
availability of corrective software releases; (c) implement the fix to a test
environment and test the remediated product; (d) integrate the updated software
to NCO's production environment; (e) communicate and work with clients to
implement year 2000 compliant data exchange formats; and (f) provide management
with assurance of a seamless transition to the year 2000. The identification
phase is substantially complete and delivery of the final software updates are
scheduled for the third quarter of 1998. Management expects to complete the
major portion of testing and acceptance procedures in 1998. The Company will
continue to coordinate the year 2000 compliance effort throughout the balance of
1998 and into 1999 to synchronize data exchange formats with clients.

         For the years 1998 and 1999, the Company expects to incur total pre-tax
expenses of approximately $200,000 to $250,000, per year. These costs are
associated with both internal and external staffing resources for the necessary
planning, coordination, remediation, testing, and other expenses to prepare its
systems for the year 2000. However, a portion of these expenses will not be
incremental, but rather represent a redeployment of existing information
technology resources. Management does not expect substantial additional license
fee costs associated directly with year 2000 compliance because the Company's
software vendors are incorporating necessary modifications as part of their
normal system maintenance. The majority of the costs will be incurred through
the modification and testing of electronic data interchange formats with the
Company's clients. The cost of planning and initial remediation incurred through
1997 has not been significant.

Recent Accounting Pronouncements

         Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS
No. 130 establishes standards for the reporting and display of comprehensive
income, requiring its components to be reported in a financial statement that is
displayed with the same prominence as other financial statements. The adoption
of SFAS No. 130 had no impact on the Company's consolidated statements of income
for the three months ended March 31, 1997 and 1998.

         In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." SFAS
No. 131 establishes standards for reporting financial information about
operating segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial reports
issued to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas, and major customer. The Company
is required to disclose this information for the first time it publishes its
1998 annual report. Management is in the process of evaluating the segment
disclosures for purposes of reporting under SFAS No. 131. Management has not
determined what impact the adoption of SFAS. No. 131 will have on the
consolidated results of operations, financial condition or cash flows.


                                      -13-

<PAGE>


                           Part II. Other Information


Item 1.  Legal Proceedings

         The Company is involved in legal proceedings from time to time in the
ordinary course of its business. Management believes that none of these legal
proceedings will have a materially adverse effect on the financial condition or
results of operations of the Company.

Item 2.  Changes in Securities

         In January, 1998, the Company issued a total of 135,887 shares upon
exercise of warrants issued in connection with the revolving credit facility.
These shares were issued pursuant to the exemption from registration provided by
Section 4(2) of the Securities Act of 1933, as amended.

Item 3.  Defaults Upon Senior Securities

         None - not applicable

Item 4.  Submission of Matters to a Vote of Shareholders

         None - not applicable

Item 5.  Other Information

         None - not applicable

Item 6.  Exhibits and Reports on 8-K

    (a)  Exhibits
          3.1 Amendment to the Amended and Restated Articles of Incorporation.
         10.1 Second Amended and Restated Credit Agreement dated March 23, 1998
              with Mellon Bank, N.A., for itself and as Agent 
         10.2 Executive Salary Continuation Plan. (Management compensatory plan,
              content or arrangement)
         27.1 Financial Data Schedule

    (b)  Reports on Form 8-K

         Date of Report    Item Reported
         --------------    -------------
         2/24/98           Item 2 - The Response Center Acquisition 
         2/25/98           Item 2 - The Response Center Acquisition (Amendment) 
           


                                      -14-

<PAGE>



                                   Signatures

Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




Date:    May 1, 1998                  By:  /s/ Michael J. Barrist
                                           ----------------------
                                           Michael J. Barrist
                                           Chairman of the Board, President
                                           and Chief Executive Officer
                                           (principal executive officer)



Date:    May 1, 1998                  By:  /s/ Steven L. Winokur
                                           ---------------------
                                           Steven L. Winokur
                                           Executive Vice President, Finance,
                                           Chief Financial Officer and
                                           Treasurer


                                      -15-