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Encore Capital Group Announces Fourth Quarter and Full-Year 2024 Financial Results

1. ECPG reported record portfolio purchases of $1.35 billion in 2024. 2. Collections increased 16% in 2024, totaling $2.16 billion. 3. Cabot's restructuring caused a net loss of $139 million for ECPG. 4. U.S. portfolio purchases grew by 23%, driven by high demand. 5. Expectations for 2025 anticipate 11% growth in global collections.

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Why Bullish?

Despite losses, strong growth in portfolio purchases and collections indicates positive momentum. Historical instances of growth in collections have correlated with stock price increases.

How important is it?

The article highlights significant financial results and future growth objectives, influencing investor confidence.

Why Long Term?

Sustained growth and strategic restructuring are expected to yield benefits over time.

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CABOBCIVRCAP
Favorable U.S. market for portfolio supply continuesGlobal portfolio purchases in 2024 up 26% to record $1.35 billionGlobal collections in 2024 up 16% to $2.16 billionActions taken to resolve Cabot issues resulted in a loss for the quarter and the year SAN DIEGO, Feb. 26, 2025 (GLOBE NEWSWIRE) -- Encore Capital Group, Inc. (NASDAQ: ECPG), an international specialty finance company, today reported consolidated financial results for the fourth quarter and full year ended December 31, 2024. “2024 was a year of significant growth for Encore,” said Ashish Masih, Encore’s President and Chief Executive Officer. “Our global portfolio purchases increased by 26% to an all-time high for us and global collections increased by 16% compared to 2023. Higher portfolio purchasing in recent years is a key driver of our growth in collections and ultimately cash generation growth of 20% for the year.” “In the U.S. in 2024, continued growth in bank lending, coupled with rising delinquencies and charge-offs, led to record supply for non-performing loan portfolios and a continuation of the favorable purchasing environment in the U.S. market. As a result, our largest business, MCM, increased U.S. portfolio purchases in 2024 by 23% to a record $1 billion. In addition, anchored by stable consumer payment behavior throughout the year, MCM collections increased by 20% compared to 2023.” “For our Cabot business in the U.K. and Europe, 2024 was a year of progress, but also significant restructuring to resolve certain persistent issues and enable future success. Cabot portfolio purchases increased by 36% compared to 2023, driven by exceptional Q4 purchases of $200 million that included large spot-market portfolio purchases at attractive returns. For the year, Cabot collections increased by 8% compared to 2023. Despite these successes, Cabot’s business environment continued to be highly competitive and impacted by macroeconomic factors such as subdued lending growth and low charge-offs. In 2024, we took certain restructuring actions including the exit from two underperforming markets, beginning with the Spanish secured non-performing loan (NPL) market in Q3 followed by the Italian NPL market in Q4. We also made adjustments to Cabot’s estimated remaining collections (ERC), particularly in the fourth quarter. These actions resulted in a $101 million goodwill charge in Q4.” “We believe our reported financial results in 2024, and in particular our net loss of $139 million, or ($5.83) per share, are not indicative of the operational performance of our business due to certain non-cash charges, the largest of which were the goodwill impairment related to our Cabot business and the adjustments to Cabot’s ERC in Q4, which reduced earnings for the quarter and the year. We believe these Cabot ERC adjustments, in addition to other actions taken during the year, place Cabot on a more solid footing. We expect Cabot’s future performance to align closely with its rebased ERC.” “Looking ahead, guided by our three pillar strategy, we remain committed to our long-standing financial objectives and our capital allocation priorities. We anticipate our global portfolio purchases in 2025 to exceed the $1.35 billion of purchases we made in 2024. We expect global collections in 2025 to increase by 11% to $2.4 billion. As a result of our continued growth in cash generation and its impact on our improving leverage, we plan to resume share repurchases in 2025. 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 Full Year of 2024:   Year Ended December 31,(in thousands, except percentages and earnings per share) 2024   2023  ChangeCollections$2,162,478  $1,862,567  16%Revenues$1,316,361  $1,222,680  8%Portfolio purchases(1)$1,352,035  $1,073,812  26%Estimated Remaining Collections (ERC)$8,501,370  $8,191,913  4%Operating expenses$1,159,031  $1,206,145  (4)%GAAP net loss$(139,244) $(206,492) NMGAAP loss per share$(5.83) $(8.72) NM __________________ (1)Includes U.S. purchases of $998.9 million and $814.6 million, and Europe purchases of $353.2 million and $259.3 million in 2024 and 2023, respectively.   Financial Highlights for the Fourth Quarter of 2024:   Three Months Ended December 31,(in thousands, except percentages and earnings per share) 2024   2023  ChangeCollections$554,595  $458,350  21%Revenues$265,619  $277,387  (4)%Portfolio purchases(1)$495,144  $292,497  69%Operating expenses$399,809  $494,580  (19)%GAAP net loss$(225,307) $(270,762) NMGAAP loss per share$(9.42) $(11.40) NM __________________ (1)Includes U.S. purchases of $295.3 million and $208.5 million, and Europe purchases of $199.8 million and $84.0 million in Q4 2024 and Q4 2023, respectively.   Key Impacts from Cabot Actions and other items for the Fourth Quarter of 2024:   Three Months EndedDecember 31,(in thousands, except earnings per share impact) 2024  EPS Impact(1)Cabot changes in expected future recoveries$(129,128) $(5.40)Goodwill impairment$(100,600) $(4.21)Cabot IT-related asset impairment$(18,544) $(0.78)Loss on extinguishment of debt$(7,832) $(0.28)Cabot restructuring charges$(6,087) $(0.25)Total$(262,191) $(10.92) __________________ (1)Basic share count was used to calculate EPS impacts.   Conference Call and Webcast The Company will host a conference call and slide presentation today, February 26, 2025, at 2:00 p.m. Pacific time / 5:00 p.m. Eastern time to discuss fourth quarter and full year 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, when added to collections applied to principal balance, 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 an alternative to, or more meaningful than, net income as an indicator 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. The Company has attached to this news release a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures. 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 StatementsThe 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 portfolio purchase volumes, collections and cash generation), performance, business plans or prospects as well as statements regarding future supply, consumer behavior, or macroeconomic environment. 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 Form 10-K, as it may be amended from time to time. The Company disclaims any intent or obligation to update these forward-looking statements. Contact:Bruce ThomasEncore Capital Group, Inc.Vice President, Global Investor Relationsbruce.thomas@encorecapital.com SOURCE: Encore Capital Group, Inc. FINANCIAL TABLES FOLLOW     ENCORE CAPITAL GROUP, INC.Consolidated Statements of Financial Condition(In Thousands, Except Par Value Amounts)     December 31,2024 December 31,2023Assets   Cash and cash equivalents$199,865  $158,364 Investment in receivable portfolios, net 3,776,369   3,468,432 Property and equipment, net 80,597   103,959 Other assets 225,090   293,256 Goodwill 507,808   606,475 Total assets$4,789,729  $4,630,486 Liabilities and Equity   Liabilities:   Accounts payable and accrued liabilities$233,545  $189,928 Borrowings 3,672,762   3,318,031 Other liabilities 116,091   185,989 Total liabilities 4,022,398   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 shares and 23,545 shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively 237   235 Additional paid-in capital 19,297   11,052 Accumulated earnings 909,927   1,049,171 Accumulated other comprehensive loss (162,130)  (123,920)Total stockholders’ equity 767,331   936,538 Total liabilities and stockholders’ equity$4,789,729  $4,630,486          The following table presents certain assets and liabilities of consolidated variable interest entities (“VIEs”) included in the 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.      December 31,2024 December 31,2023Assets   Cash and cash equivalents$23,875 $24,472Investment in receivable portfolios, net 895,704  717,556Other assets 3,699  19,358Liabilities   Accounts payable and accrued liabilities 2,946  1,854Borrowings 599,830  494,925Other liabilities 887  2,452                 ENCORE CAPITAL GROUP, INC.Consolidated Statements of Operations(In Thousands, Except Per Share Amounts)     (Unaudited)Three Months EndedDecember 31, Year EndedDecember 31,  2024   2023   2024   2023 Revenues       Revenue from receivable portfolios$336,666  $304,892  $1,302,567  $1,204,437 Changes in recoveries (95,760)  (52,476)  (89,740)  (82,530)Total debt purchasing revenue 240,906   252,416   1,212,827   1,121,907 Servicing revenue 20,525   19,650   84,783   83,136 Other revenues 4,188   5,321   18,751   17,637 Total revenues 265,619   277,387   1,316,361   1,222,680 Operating expenses       Salaries and employee benefits 104,616   96,760   422,910   391,532 Cost of legal collections 68,989   56,727   259,298   224,252 General and administrative expenses 52,019   36,809   163,847   144,862 Other operating expenses 37,786   29,315   130,802   111,179 Collection agency commissions 8,288   9,074   30,596   35,657 Depreciation and amortization 8,967   8,969   32,434   41,737 Goodwill impairment 100,600   238,200   100,600   238,200 Impairment of assets 18,544   18,726   18,544   18,726 Total operating expenses 399,809   494,580   1,159,031   1,206,145 (Loss) income from operations (134,190)  (217,193)  157,330   16,535 Other expense       Interest expense (68,498)  (54,501)  (252,545)  (201,877)Loss on extinguishment of debt (7,832)  —   (7,832)  — Other income (expense) 541   (2)  6,832   5,078 Total other expense (75,789)  (54,503)  (253,545)  (196,799)(Loss) income before income taxes (209,979)  (271,696)  (96,215)  (180,264)(Provision) benefit for income taxes (15,328)  934   (43,029)  (26,228)Net loss$(225,307) $(270,762) $(139,244) $(206,492)        Loss per share:       Basic$(9.42) $(11.40) $(5.83) $(8.72)Diluted$(9.42) $(11.40) $(5.83) $(8.72)        Weighted average shares outstanding:       Basic 23,916   23,741   23,873   23,670 Diluted 23,916   23,741   23,873   23,670                                    ENCORE CAPITAL GROUP, INC.Consolidated Statements of Cash Flows(In Thousands)   Year Ended December 31,  2024   2023   2022 Operating activities:     Net (loss) income$(139,244) $(206,492) $194,564 Adjustments to reconcile net (loss) income to net cash provided by operating activities:     Depreciation and amortization 32,434   41,737   46,419 Other non-cash interest expense, net 16,325   17,160   15,875 Stock-based compensation expense 14,012   13,854   15,402 Deferred income taxes (22,280)  (55,916)  46,410 Goodwill impairment 100,600   238,200   — Impairment of assets 18,544   18,726   4,075 Changes in recoveries 89,740   82,530   (93,145)Other, net 17,880   (2,259)  18,798 Changes in operating assets and liabilities     Other assets (28,245)  15,894   (6,722)Accounts payable, accrued liabilities and other liabilities 56,402   (10,443)  (30,995)Net cash provided by operating activities 156,168   152,991   210,681 Investing activities:     Purchases of receivable portfolios, net of put-backs (1,336,442)  (1,060,206)  (790,569)Collections applied to investment in receivable portfolios, net 859,911   658,130   709,176 Purchases of real estate owned (212)  (26,901)  (39,340)Purchases of property and equipment (29,007)  (24,807)  (37,224)Proceeds from sale of real estate owned 56,396   52,636   27,722 Other, net 8,924   (793)  — Net cash used in investing activities (440,430)  (401,941)  (130,235)Financing activities:     Payment of loan and debt refinancing costs (21,418)  (13,707)  (1,659)Proceeds from credit facilities 2,031,470   1,196,046   779,513 Repayment of credit facilities (1,868,111)  (989,627)  (515,703)Proceeds from senior secured notes 1,000,000   104,188   — Repayment of senior secured notes (789,106)  (39,080)  (39,080)Proceeds from issuance of convertible senior notes —   230,000   — Repayment of convertible senior notes —   (212,480)  (221,153)Payments to settle derivative instruments (40,038)  —   — Repurchase and retirement of common stock —   —   (87,006)Other, net 4,977   (7,040)  (22,357)Net cash provided by (used in) financing activities 317,774   268,300   (107,445)Net increase (decrease) in cash and cash equivalents 33,512   19,350   (26,999)Effect of exchange rate changes on cash and cash equivalents 7,989   (4,898)  (18,734)Cash and cash equivalents, beginning of period 158,364   143,912   189,645 Cash and cash equivalents, end of period$199,865  $158,364  $143,912       Supplemental disclosures of cash flow information:     Cash paid for interest$210,580  $163,815  $131,391 Cash paid for income taxes, net of refunds 67,091   68,522   71,276 Supplemental schedule of non-cash investing and financing activities:     Investment in receivable portfolios transferred to real estate owned$5,966  $7,957  $1,903                              ENCORE CAPITAL GROUP, INC.Supplemental Financial InformationReconciliation of Non-GAAP Metrics    Adjusted EBITDA      (in thousands, unaudited)Three Months EndedDecember 31, Year EndedDecember 31, 2024   2023   2024   2023 GAAP net loss, as reported$(225,307) $(270,762) $(139,244) $(206,492)Adjustments:       Interest expense 68,498   54,501   252,545   201,877 Loss on extinguishment of debt 7,832   —   7,832   — Interest income (1,971)  (1,364)  (7,008)  (4,746)Provision (benefit) for income taxes 15,328   (934)  43,029   26,228 Depreciation and amortization 8,967   8,969   32,434   41,737 Net loss (gain) on derivative instruments(1) —   342   (267)  (3,170)Stock-based compensation expense 2,281   2,837   14,012   13,854 Acquisition, integration and restructuring related expenses(2) 6,087   827   10,451   7,401 Goodwill Impairment(3) 100,600   238,200   100,600   238,200 Impairment of assets(3) 18,544   18,726   18,544   18,726 Adjusted EBITDA$859  $51,342  $332,928  $333,615 Collections applied to principal balance(4)$337,464  $213,769  $1,004,230  $776,280  ________________________ (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)During the years ended December 31, 2024, and 2023, we recorded a non-cash goodwill impairment charge of $100.6 million and $238.2 million, respectively. We recorded a non-cash impairment of long-lived assets of $18.5 million and a non-cash impairment of intangible assets of $18.7 million during the years ended December 31, 2024, and 2023, respectively. We believe these non-cash impairment charges are not indicative of ongoing operations, therefore adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results. Refer to “Note 15: Goodwill and Identifiable Intangible Assets” and “Note 5: Composition of Certain Financial Statement Items” to our consolidated financial statements for further details.(4)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 exit activities. A reconciliation of “collections applied to investment in receivable portfolios, net” to “collections applied to principal balance” is available in the Form 10-K for the period ending December 31, 2024.

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