0001084961false00010849612024-11-062024-11-06

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
______________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
November 6, 2024
Date of report (Date of earliest event reported)
______________________
ENCORE CAPITAL GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
000-26489
48-1090909
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)
350 Camino de la Reina, Suite 100
San Diego, California 92108
(Address of principal executive offices)(Zip Code)
(877) 445-4581
(Registrant’s telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report.)
_____________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 Par Value Per ShareECPGThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company  ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐



Item 2.02.    Results of Operations and Financial Condition.
On November 6, 2024, Encore Capital Group, Inc. (“Encore”) issued a press release announcing its financial results for the quarter ended September 30, 2024. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.
The information in Item 2.02 of this Current Report on Form 8-K, including the information contained in Exhibit 99.1, is being furnished to the Securities and Exchange Commission pursuant to Item 2.02, and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by a specific reference in such filing.

Item 9.01.    Financial Statements and Exhibits.
Exhibit Number
Description
Press release dated November 6, 2024
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)




SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ENCORE CAPITAL GROUP, INC.

Date:
November 6, 2024
/s/ Jonathan C. Clark
Jonathan C. Clark
Executive Vice President, Chief Financial Officer and Treasurer




EXHIBIT INDEX
Exhibit NumberDescription
Press release dated November 6, 2024
104Cover Page Interactive Data File (embedded within the Inline XBRL document)




ecpglogoa.jpg
Exhibit 99.1


Encore Capital Group Announces Third Quarter 2024 Financial Results

•Highly favorable purchasing conditions continue in U.S. market
•Global portfolio purchases up 23% to $282 million
•Global collections up 18% to $550 million
•GAAP EPS of $1.26

SAN DIEGO, November 6, 2024 -- Encore Capital Group, Inc. (NASDAQ: ECPG), an international specialty finance company, today reported consolidated financial results for the third quarter ended September 30, 2024.
“Encore’s strong third quarter performance was largely driven by our MCM (Midland Credit Management) business in the U.S.,” said Ashish Masih, President and Chief Executive Officer. “U.S. market supply continues to grow to record levels, driven by the highest U.S. charge off rate in more than 10 years coupled with growth in lending. Amid these favorable market conditions, MCM continues to deliver on this robust opportunity with portfolio purchases of $230 million, up 28% compared to the year ago quarter, while collections in the quarter were at their highest level since 2021.”
“For our Cabot business in the U.K. and Europe, the portfolio purchasing market remains competitive. We are maintaining discipline and our selective approach to purchasing portfolios in the region as we continue to see slow improvement in portfolio pricing, although pricing still does not yet consistently reflect the higher cost of capital. This approach has led to better purchase price multiples compared to a year ago.”
In the third quarter, the company exited the secured NPL market in Spain, which was a small, niche portion of Cabot’s business. The sale of these assets resulted in a pre-tax loss of $8 million, or ($0.27) per share.
“Due to our continued strong operational and investment execution, we are again raising our 2024 guidance which we originally established in February and revised upward in August. We now anticipate our global portfolio purchasing this year will exceed $1,250 million and we expect our year-over-year collections growth to be approximately 15% to over $2,125 million. As always, we remain committed to the critical role we play in the consumer credit ecosystem and to helping consumers restore their financial health,” said Masih.


Encore Capital Group, Inc.
Page 2


Financial Highlights for the Third Quarter of 2024:
Three Months Ended September 30,
(in thousands, except percentages and earnings per share)20242023Change
Portfolio purchases(1)
$282,485 $230,559 23%
Estimated Remaining Collections (ERC)
$8,648,886 $7,877,621 10%
Collections
$550,268 $465,339 18%
Revenues
$367,071 $309,619 19%
Operating expenses
$260,981 $234,101 11%
GAAP net income
$30,643 $19,339 58%
GAAP earnings per share
$1.26 $0.79 59%
______________________
(1)Includes U.S. purchases of $230.2 million and $179.3 million, and Europe purchases of $52.3 million and $51.3 million in Q3 2024 and Q3 2023, respectively.


Conference Call and Webcast
Encore will host a conference call and slide presentation today, November 6, 2024, at 2:00 p.m. Pacific / 5:00 p.m. Eastern time, to present and discuss third quarter results.
Members of the public are invited to access the live webcast via the Internet by logging in on the Investor Relations page of Encore's website at encorecapital.com. To access the live conference call by telephone, please pre-register using this link. Registrants will receive confirmation with dial-in details.

For those who cannot listen to the live broadcast, a replay of the webcast will be available on the Company's website shortly after the call concludes.

Encore Capital Group, Inc.
Page 3


Non-GAAP Financial Measures
This news release includes certain financial measures that exclude the impact of certain items and therefore have not been calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company has included information concerning adjusted EBITDA because management utilizes this information in the evaluation of its operations and believes that this measure is a useful indicator of the Company’s ability to generate cash collections in excess of operating expenses through the liquidation of its receivable portfolios. Adjusted EBITDA has not been prepared in accordance with GAAP and should not be considered as an alternative to, or more meaningful than, net income and net income per share as indicators of the Company’s operating performance. Further, this non-GAAP financial measure, as presented by the Company, may not be comparable to similarly titled measures reported by other companies. A reconciliation of Adjusted EBITDA to its most directly comparable GAAP financial measure is below.

About Encore Capital Group, Inc.

Encore Capital Group is an international specialty finance company that provides debt recovery solutions and other related services for consumers across a broad range of financial assets. Through its subsidiaries around the globe, Encore purchases portfolios of consumer receivables from major banks, credit unions, and utility providers.
Encore partners with individuals as they repay their debt obligations, helping them on the road to financial recovery and ultimately improving their economic well-being. Encore is the first and only company of its kind to operate with a Consumer Bill of Rights that provides industry-leading commitments to consumers. Headquartered in San Diego, Encore is a publicly traded NASDAQ Global Select company (ticker symbol: ECPG) and a component stock of the Russell 2000, the S&P Small Cap 600 and the Wilshire 4500. More information about the company can be found at http://www.encorecapital.com.

Encore Capital Group, Inc.
Page 4


Forward Looking Statements
The statements in this press release that are not historical facts, including, most importantly, those statements preceded by, or that include, the words “will,” “may,” “believe,” “projects,” “expects,” “anticipates” or the negation thereof, or similar expressions, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). These statements may include, but are not limited to, statements regarding our future operating results (including purchases and collections), performance, supply and pricing, liquidity, business plans or prospects. For all “forward-looking statements,” the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act. Such forward-looking statements involve risks, uncertainties and other factors which may cause actual results, performance or achievements of the Company and its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors are discussed in the reports filed by the Company with the Securities and Exchange Commission, including the most recent reports on Forms 10-K and 10-Q, each as it may be amended from time to time. The Company disclaims any intent or obligation to update these forward-looking statements.


Contact:
Bruce Thomas
Encore Capital Group, Inc.
Vice President, Global Investor Relations
(858) 309-6442
bruce.thomas@encorecapital.com

SOURCE: Encore Capital Group, Inc.



FINANCIAL TABLES FOLLOW


Encore Capital Group, Inc.
Page 5


ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Financial Condition
(In Thousands, Except Par Value Amounts)
(Unaudited)
September 30,
2024		December 31,
2023
Assets
Cash and cash equivalents$247,353 $158,364 
Investment in receivable portfolios, net3,719,260 3,468,432 
Property and equipment, net103,550 103,959 
Other assets295,422 293,256 
Goodwill628,131 606,475 
Total assets
$4,993,716 $4,630,486 
Liabilities and Equity
Liabilities:
Accounts payable and accrued liabilities$222,841 $189,928 
Borrowings3,550,574 3,318,031 
Other liabilities172,196 185,989 
Total liabilities
3,945,611 3,693,948 
Commitments and Contingencies
Equity:
Convertible preferred stock, $0.01 par value, 5,000 shares authorized, no shares issued and outstanding
— — 
Common stock, $0.01 par value, 75,000 shares authorized, 23,691 and 23,545 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively
237 235 
Additional paid-in capital17,016 11,052 
Accumulated earnings1,135,234 1,049,171 
Accumulated other comprehensive loss(104,382)(123,920)
Total stockholders’ equity1,048,105 936,538 
Total liabilities and stockholders’ equity$4,993,716 $4,630,486 

The following table presents certain assets and liabilities of consolidated variable interest entities (“VIEs”) included in the condensed consolidated statements of financial condition above. The liabilities in the table below can only be settled from assets in the respective VIEs. Creditors of the VIEs do not have recourse to the general credit of the Company.
September 30,
2024		December 31,
2023
Assets
Cash and cash equivalents$28,740 $24,472 
Investment in receivable portfolios, net818,540 717,556 
Other assets5,485 19,358 
Liabilities
Accounts payable and accrued liabilities2,129 1,854 
Borrowings484,105 494,925 
Other liabilities2,915 2,452 

Encore Capital Group, Inc.
Page 6


ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Income
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Revenues
Revenue from receivable portfolios$328,119 $302,687 $965,901 $899,545 
Changes in recoveries12,675 (17,067)6,020 (30,054)
Total debt purchasing revenue340,794 285,620 971,921 869,491 
Servicing revenue22,772 19,893 64,258 63,486 
Other revenues3,505 4,106 14,563 12,316 
Total revenues367,071 309,619 1,050,742 945,293 
Operating expenses
Salaries and employee benefits107,502 95,067 318,294 294,772 
Cost of legal collections67,339 56,274 190,309 167,525 
General and administrative expenses38,808 35,559 111,828 108,053 
Other operating expenses31,804 27,959 93,016 81,864 
Collection agency commissions7,370 8,046 22,308 26,583 
Depreciation and amortization8,158 11,196 23,467 32,768 
Total operating expenses260,981 234,101 759,222 711,565 
Income from operations106,090 75,518 291,520 233,728 
Other expense
Interest expense(66,906)(50,558)(184,047)(147,376)
Other income
1,578 5,103 6,291 5,080 
Total other expense(65,328)(45,455)(177,756)(142,296)
Income before income taxes40,762 30,063 113,764 91,432 
Provision for income taxes(10,119)(10,724)(27,701)(27,162)
Net income $30,643 $19,339 $86,063 $64,270 
Earnings per share:
Basic$1.28 $0.82 $3.61 $2.72 
Diluted$1.26 $0.79 $3.54 $2.62 
Weighted average shares outstanding:
Basic23,912 23,712 23,859 23,644 
Diluted24,407 24,382 24,324 24,535 

Encore Capital Group, Inc.
Page 7


ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, In Thousands)
Nine Months Ended September 30,
20242023
Operating activities:
Net income$86,063 $64,270 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization23,467 32,768 
Other non-cash interest expense, net12,379 12,526 
Stock-based compensation expense11,731 11,017 
Deferred income taxes1,718 952 
Changes in recoveries(6,020)30,054 
Other, net7,477 (1,958)
Changes in operating assets and liabilities
Other assets(35,277)(21,820)
Accounts payable, accrued liabilities and other liabilities31,086 (11,598)
Net cash provided by operating activities132,624 116,211 
Investing activities:
Purchases of receivable portfolios, net of put-backs(844,868)(772,101)
Collections applied to investment in receivable portfolios641,982 504,672 
Purchases of property and equipment(20,451)(16,765)
Other, net47,632 13,468 
Net cash used in investing activities(175,705)(270,726)
Financing activities:
Payment of loan and debt refinancing costs(18,164)(8,224)
Proceeds from credit facilities458,844 630,079 
Repayment of credit facilities(1,292,578)(446,724)
Proceeds from senior secured notes1,000,000 — 
Repayment of senior secured notes(29,310)(29,310)
Proceeds from issuance of convertible senior notes— 230,000 
Repayment of exchangeable senior notes
— (212,480)
Proceeds from convertible hedge instruments, net— 12,421 
Other, net11,695 (16,890)
Net cash provided by financing activities130,487 158,872 
Net increase in cash and cash equivalents87,406 4,357 
Effect of exchange rate changes on cash and cash equivalents1,583 (3,558)
Cash and cash equivalents, beginning of period158,364 143,912 
Cash and cash equivalents, end of period$247,353 $144,711 
Supplemental disclosure of cash information:
Cash paid for interest$138,951 $120,113 
Cash paid for taxes, net of refunds61,255 50,605 
Supplemental schedule of non-cash investing activities:
Investment in receivable portfolios transferred to real estate owned$4,617 $9,558 

Encore Capital Group, Inc.
Page 8


ENCORE CAPITAL GROUP, INC.
Supplemental Financial Information
Reconciliation of Non-GAAP Metrics
Adjusted EBITDA
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands, unaudited)2024202320242023
GAAP net income, as reported$30,643 $19,339 $86,063 $64,270 
Adjustments:
Interest expense66,906 50,558 184,047 147,376 
Interest income(1,909)(1,315)(5,037)(3,382)
Provision for income taxes10,119 10,724 27,701 27,162 
Depreciation and amortization8,158 11,196 23,467 32,768 
Stock-based compensation expense3,737 3,092 11,731 11,017 
Net loss (gain) on derivative instruments(1)
7 (3,512)(267)(3,512)
Acquisition, integration and restructuring related expenses(2)
162 594 4,364 6,574 
Adjusted EBITDA$117,823 $90,676 $332,069 $282,273 
Collections applied to principal balance(3)
$223,292 $188,872 $666,766 $562,511 
________________________

(1)Amount represents gain or loss recognized on derivative instruments that are not designated as hedging instruments or gain or loss recognized on derivative instruments upon dedesignation of hedge relationships. We adjust for this amount because we believe the gain or loss on derivative contracts is not indicative of ongoing operations.
(2)Amount represents acquisition, integration and restructuring related expenses. We adjust for this amount because we believe these expenses are not indicative of ongoing operations; therefore, adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results.
(3)Amount represents (a) gross collections from receivable portfolios less (b) debt purchasing revenue, plus (c) proceeds applied to basis from sales of real estate owned (“REO”) assets and other receivable portfolios. A reconciliation of “collections applied to investment in receivable portfolios, net” to “collections applied to principal balance” is available in the Form 10-Q for the period ending September 30, 2024.


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