Encore Capital Group Announces Second Quarter 2023 Financial Results

  • Global collections of $477 million
  • Portfolio purchases of $274 million up 59%, including $213 million in the U.S.
  • Portfolio supply growth continues in U.S. market
  • GAAP EPS of $1.08  

SAN DIEGO, Aug. 02, 2023 (GLOBE NEWSWIRE) -- Encore Capital Group, Inc. (NASDAQ: ECPG), an international specialty finance company, today reported consolidated financial results for the second quarter ended June 30, 2023.

“Encore’s second quarter performance reflected normalized consumer behavior and a stable collections environment in each of our key markets,” said Ashish Masih, President and Chief Executive Officer. “With lending and charge-off rates steadily rising in the U.S., the growth of portfolio supply and improvements in portfolio pricing continue. Consequently, MCM portfolio purchases in the U.S. in the second quarter matched our Q1 total of $213 million.”

“In Europe, portfolio purchasing remains very competitive with pricing still not fully reflecting the higher cost of capital caused by higher interest rates. Against this backdrop, we continue to constrain Cabot portfolio purchasing and believe this disciplined approach to portfolio purchasing best positions us for success when Cabot’s markets become more constructive.”

“As a result of the continued, disciplined execution of our strategy, Encore remains well-positioned with the operational capability and balance sheet required to capitalize on the growing portfolio purchasing opportunities in the U.S. market. Looking forward, with higher portfolio purchases and strengthening returns in the U.S., we expect the steady growth in ERC and earnings to continue. We also remain committed to the critical role we play in the consumer credit ecosystem and to helping consumers restore their financial health," said Masih.

Financial Highlights for the Second Quarter of 2023:

 Three Months Ended June 30,
(in thousands, except percentages and earnings per share) 2023  2022 Change
Portfolio purchases(1)$274,325 $173,007 59%
Estimated Remaining Collections (ERC)$7,979,353 $7,559,820 6%
Collections$476,522 $497,711 (4)%
Revenues$323,044 $356,917 (9)%
Operating expenses$234,972 $237,969 (1)%
GAAP net income$26,305 $60,439 (56)%
GAAP earnings per share$1.08 $2.29 (53)%


(1)   Includes U.S. purchases of $213.4 million and $116.2 million, and Europe purchases of $61.0 million and $56.8 million in Q2 2023 and Q2 2022, respectively.

Conference Call and Webcast

Encore will host a conference call and slide presentation today, August 2, 2023, at 2:00 p.m. Pacific / 5:00 p.m. Eastern time, to present and discuss second 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 www.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.

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.

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, performance, supply and pricing, liquidity, ability to access capital markets, 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.


Bruce Thomas
Encore Capital Group, Inc.
Vice President, Global Investor Relations
(858) 309-6442

SOURCE: Encore Capital Group, Inc.

Condensed Consolidated Statements of Financial Condition
(In Thousands, Except Par Value Amounts)
 June 30,
 December 31,
Cash and cash equivalents$184,871  $143,912 
Investment in receivable portfolios, net 3,330,986   3,088,261 
Property and equipment, net 107,218   113,900 
Other assets 401,299   341,073 
Goodwill 852,196   821,214 
Total assets$4,876,570  $4,508,360 
Liabilities and Equity   
Accounts payable and accrued liabilities$203,050  $198,217 
Borrowings 3,203,425   2,898,821 
Other liabilities 236,260   231,695 
Total liabilities 3,642,735   3,328,733 
Commitments and Contingencies   
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, 23,485 and 23,323 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively 235   233 
Additional paid-in capital 3,906    
Accumulated earnings 1,300,594   1,278,210 
Accumulated other comprehensive loss (70,900)  (98,816)
Total stockholders’ equity 1,233,835   1,179,627 
Total liabilities and stockholders’ equity$4,876,570  $4,508,360 

The following table presents certain assets and liabilities of consolidated variable interest entities (“VIEs”) included in the condensed consolidated statements of financial condition above. Most assets in the table below include those assets that can only be used to settle obligations of consolidated VIEs. The liabilities exclude amounts where creditors or beneficial interest holders have recourse to the general credit of the Company.

 June 30,
 December 31,
Cash and cash equivalents$2,537 $1,344
Investment in receivable portfolios, net 470,666  431,350
Other assets 3,151  3,627
Accounts payable and accrued liabilities 99  150
Borrowings 448,424  423,522
Other liabilities 129  105

Condensed Consolidated Statements of Income
(In Thousands, Except Per Share Amounts)
 Three Months Ended
June 30,
 Six Months Ended
June 30,
  2023   2022   2023   2022 
Revenue from receivable portfolios$301,184  $306,282  $596,858  $610,387 
Changes in recoveries (3,486)  25,150   (12,987)  192,373 
Total debt purchasing revenue 297,698   331,432   583,871   802,760 
Servicing revenue 21,008   23,788   43,593   49,934 
Other revenues 4,338   1,697   8,210   3,905 
Total revenues 323,044   356,917   635,674   856,599 
Operating expenses       
Salaries and employee benefits 95,855   98,880   199,705   195,836 
Cost of legal collections 57,150   55,148   111,251   110,865 
General and administrative expenses 34,529   34,967   72,494   68,501 
Other operating expenses 26,349   27,405   53,905   54,432 
Collection agency commissions 10,387   9,923   18,537   19,528 
Depreciation and amortization 10,702   11,646   21,572   23,475 
Total operating expenses 234,972   237,969   477,464   472,637 
Income from operations 88,072   118,948   158,210   383,962 
Other expense       
Interest expense (49,983)  (37,054)  (96,818)  (71,687)
Other (expense) income, net (1,755)  1,795   (23)  2,187 
Total other expense (51,738)  (35,259)  (96,841)  (69,500)
Income before income taxes 36,334   83,689   61,369   314,462 
Provision for income taxes (10,029)  (23,250)  (16,438)  (78,274)
Net income$26,305  $60,439  $44,931  $236,188 
Earnings per share:       
Basic$1.11  $2.48  $1.90  $9.63 
Diluted$1.08  $2.29  $1.83  $8.77 
Weighted average shares outstanding:       
Basic 23,670   24,359   23,610   24,539 
Diluted 24,280   26,411   24,611   26,945 

Condensed Consolidated Statements of Cash Flows
(Unaudited, In Thousands)
 Six Months Ended June 30,
  2023   2022 
Operating activities:   
Net income$44,931  $236,188 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization 21,572   23,475 
Other non-cash interest expense, net 8,660   8,149 
Stock-based compensation expense 7,925   9,040 
Deferred income taxes 2,785   3,699 
Changes in recoveries 12,987   (192,373)
Other, net 985   9,267 
Changes in operating assets and liabilities   
Other assets (35,730)  39,037 
Accounts payable, accrued liabilities and other liabilities (1,492)  (37,952)
Net cash provided by operating activities 62,623   98,530 
Investing activities:   
Purchases of receivable portfolios, net of put-backs (544,721)  (337,932)
Collections applied to investment in receivable portfolios 342,020   406,738 
Purchases of asset held for sale (24,645)  (35,178)
Purchases of property and equipment (9,503)  (11,937)
Other, net 22,603   13,416 
Net cash (used in) provided by investing activities (214,246)  35,107 
Financing activities:   
Payment of loan and debt refinancing costs (8,151)  (1,659)
Proceeds from credit facilities 444,805   446,853 
Repayment of credit facilities (259,843)  (298,743)
Repayment of senior secured notes (19,540)  (19,540)
Proceeds from issuance of convertible senior notes 230,000    
Repayment of convertible and exchangeable senior notes (192,457)  (221,153)
Proceeds from convertible hedge instruments, net 10,050    
Repurchase and retirement of common stock    (50,835)
Other, net (14,238)  (10,523)
Net cash provided by (used in) financing activities 190,626   (155,600)
Net increase (decrease) in cash and cash equivalents 39,003   (21,963)
Effect of exchange rate changes on cash and cash equivalents 1,956   (13,387)
Cash and cash equivalents, beginning of period 143,912   189,645 
Cash and cash equivalents, end of period$184,871  $154,295 
Supplemental disclosure of cash information:   
Cash paid for interest$79,167  $64,366 
Cash paid for taxes, net of refunds$36,822  $44,671 

Supplemental Financial Information
Reconciliation of Non-GAAP Metrics
Adjusted EBITDA
 Three Months Ended
June 30,
 Six Months Ended
June 30,
(in thousands, unaudited) 2023   2022   2023   2022 
GAAP net income, as reported$26,305  $60,439  $44,931  $236,188 
Interest expense 49,983   37,054   96,818   71,687 
Interest income (1,123)  (588)  (2,067)  (1,025)
Provision for income taxes 10,029   23,250   16,438   78,274 
Depreciation and amortization 10,702   11,646   21,572   23,475 
Stock-based compensation expense 3,873   5,119   7,925   9,040 
Acquisition, integration and restructuring related expenses(1) 454   487   5,980   1,166 
Adjusted EBITDA$100,223  $137,407  $191,597  $418,805 
Collections applied to principal balance(2)$190,658  $170,112  $373,639  $223,679 


(1)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. For the three and six months ended   June 30, 2023 amount represents costs related to headcount reductions in Europe. The remainder of the costs relating to the headcount reductions in Europe are included in stock-based compensation expense.
(2)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 June 30, 2023.

Primary Logo

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.