• Encore Capital Group Announces Third Quarter 2024 Financial Results

    المصدر: Nasdaq GlobeNewswire / 06 نوفمبر 2024 16:05:00   America/New_York

    • 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, Nov. 06, 2024 (GLOBE NEWSWIRE) -- 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.

    Financial Highlights for the Third Quarter of 2024:

     Three Months Ended September 30,
    (in thousands, except percentages and earnings per share)2024
     2023
     Change
    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.

    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 (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.
    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, net 3,719,260   3,468,432 
    Property and equipment, net 103,550   103,959 
    Other assets 295,422   293,256 
    Goodwill 628,131   606,475 
    Total assets$4,993,716  $4,630,486 
    Liabilities and Equity   
    Liabilities:   
    Accounts payable and accrued liabilities$222,841  $189,928 
    Borrowings 3,550,574   3,318,031 
    Other liabilities 172,196   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 capital 17,016   11,052 
    Accumulated earnings 1,135,234   1,049,171 
    Accumulated other comprehensive loss (104,382)  (123,920)
    Total stockholders’ equity 1,048,105   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, net 818,540   717,556 
    Other assets 5,485   19,358 
    Liabilities   
    Accounts payable and accrued liabilities 2,129   1,854 
    Borrowings 484,105   494,925 
    Other liabilities 2,915   2,452 
            


     
    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,
     2024 2023 2024 2023
    Revenues       
    Revenue from receivable portfolios$328,119  $302,687  $965,901  $899,545 
    Changes in recoveries 12,675   (17,067)  6,020   (30,054)
    Total debt purchasing revenue 340,794   285,620   971,921   869,491 
    Servicing revenue 22,772   19,893   64,258   63,486 
    Other revenues 3,505   4,106   14,563   12,316 
    Total revenues 367,071   309,619   1,050,742   945,293 
    Operating expenses       
    Salaries and employee benefits 107,502   95,067   318,294   294,772 
    Cost of legal collections 67,339   56,274   190,309   167,525 
    General and administrative expenses 38,808   35,559   111,828   108,053 
    Other operating expenses 31,804   27,959   93,016   81,864 
    Collection agency commissions 7,370   8,046   22,308   26,583 
    Depreciation and amortization 8,158   11,196   23,467   32,768 
    Total operating expenses 260,981   234,101   759,222   711,565 
    Income from operations 106,090   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 taxes 40,762   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:       
    Basic 23,912   23,712   23,859   23,644 
    Diluted 24,407   24,382   24,324   24,535 
                    


     
    ENCORE CAPITAL GROUP, INC.
    Condensed Consolidated Statements of Cash Flows
    (Unaudited, In Thousands)
      
     Nine Months Ended September 30,
     2024 2023
    Operating activities:   
    Net income$86,063  $64,270 
    Adjustments to reconcile net income to net cash provided by operating activities:   
    Depreciation and amortization 23,467   32,768 
    Other non-cash interest expense, net 12,379   12,526 
    Stock-based compensation expense 11,731   11,017 
    Deferred income taxes 1,718   952 
    Changes in recoveries (6,020)  30,054 
    Other, net 7,477   (1,958)
    Changes in operating assets and liabilities   
    Other assets (35,277)  (21,820)
    Accounts payable, accrued liabilities and other liabilities 31,086   (11,598)
    Net cash provided by operating activities 132,624   116,211 
    Investing activities:   
    Purchases of receivable portfolios, net of put-backs (844,868)  (772,101)
    Collections applied to investment in receivable portfolios 641,982   504,672 
    Purchases of property and equipment (20,451)  (16,765)
    Other, net 47,632   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 facilities 458,844   630,079 
    Repayment of credit facilities (1,292,578)  (446,724)
    Proceeds from senior secured notes 1,000,000    
    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, net 11,695   (16,890)
    Net cash provided by financing activities 130,487   158,872 
    Net increase in cash and cash equivalents 87,406   4,357 
    Effect of exchange rate changes on cash and cash equivalents 1,583   (3,558)
    Cash and cash equivalents, beginning of period 158,364   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 refunds 61,255   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.
    Supplemental Financial Information
    Reconciliation of Non-GAAP Metrics
     
    Adjusted EBITDA
        
     Three Months Ended
    September 30,
     Nine Months Ended
    September 30,
    (in thousands, unaudited)2024 2023 2024 2023
    GAAP net income, as reported$30,643  $19,339  $86,063  $64,270 
    Adjustments:       
    Interest expense 66,906   50,558   184,047   147,376 
    Interest income (1,909)  (1,315)  (5,037)  (3,382)
    Provision for income taxes 10,119   10,724   27,701   27,162 
    Depreciation and amortization 8,158   11,196   23,467   32,768 
    Stock-based compensation expense 3,737   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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