Encore Capital Group Announces Fourth Quarter and Full-Year 2023 Financial Results
- U.S. market for portfolio supply continues strong growth
- Global portfolio purchases in 2023 up 34% to
$1,074 million with a record$815 million in theU.S. - Encore expects portfolio purchases and collections to grow in 2024
“For the debt buying industry as a whole, 2023 was a year characterized by continued rapid growth of portfolio supply in the
“Continued increases in lending by banks coupled with rising delinquencies and charge-offs led to an exceptional purchasing environment in the U.S. market with record supply for non-performing loan portfolios in 2023. As a result, our largest business, MCM, increased
“For our Cabot business in the
“Our reported financial results in 2023, and in particular our net loss of
“Looking ahead, our priorities in 2024 remain unchanged. We are guided by our three pillar strategy and focused on our balance sheet objectives and capital allocation priorities. Anchored by a robust pipeline of supply in the
Available capacity under Encore’s global senior facility was
Financial Highlights for the Full Year of 2023:
Year Ended |
|||||||||
(in thousands, except percentages and earnings per share) | 2023 | 2022 | Change | ||||||
Collections | $ | 1,862,567 | $ | 1,911,537 | (3 | )% | |||
Revenues | $ | 1,222,680 | $ | 1,398,347 | (13 | )% | |||
Portfolio purchases(1) | $ | 1,073,812 | $ | 800,507 | 34 | % | |||
Estimated Remaining Collections (ERC) | $ | 8,191,913 | $ | 7,555,003 | 8 | % | |||
Operating expenses | $ | 1,206,145 | $ | 936,173 | 29 | % | |||
GAAP net (loss) income | $ | (206,492 | ) | $ | 194,564 | (206 | )% | ||
GAAP (loss) income per share | $ | (8.72 | ) | $ | 7.46 | (217 | )% |
__________________
(1) Includes
Key Impacts for the Full Year of 2023:
Year Ended |
|||||||
(in thousands, except earnings per share impact) | 2023 | EPS Impact(1) | |||||
$ | (238,200 | ) | $ | (10.06 | ) | ||
Impairment of intangible assets | $ | (18,726 | ) | $ | (0.79 | ) | |
Charges related to Cabot headcount reduction in Q1 2023(2) | $ | (6,077 | ) | $ | (0.26 | ) | |
Recoveries below forecast | $ | (33,405 | ) | $ | (1.17 | ) | |
Changes in expected future recoveries | $ | (49,125 | ) | $ | (1.74 | ) | |
Total impacts | $ | (345,533 | ) | $ | (14.02 | ) |
__________________
(1) Basic share count was used to calculate EPS impacts.
(2) Impact of
Financial Highlights for the Fourth Quarter of 2023:
Three Months Ended |
||||||||||
(in thousands, except percentages and earnings per share) | 2023 | 2022 | Change | |||||||
Collections | $ | 458,350 | $ | 436,156 | 5 | % | ||||
Revenues | $ | 277,387 | $ | 233,996 | 19 | % | ||||
Portfolio purchases(1) | $ | 292,497 | $ | 225,343 | 30 | % | ||||
Operating expenses | $ | 494,580 | $ | 236,301 | 109 | % | ||||
GAAP net loss | $ | (270,762 | ) | $ | (73,118 | ) | 270 | % | ||
GAAP loss per share | $ | (11.40 | ) | $ | (3.11 | ) | 267 | % |
__________________
(1) Includes
Key Impacts for the Fourth Quarter of 2023:
Three Months Ended |
|||||||
(in thousands, except earnings per share impact) | 2023 |
EPS Impact(1) | |||||
$ | (238,200 | ) | $ | (10.03 | ) | ||
Impairment of intangible assets | $ | (18,726 | ) | $ | (0.79 | ) | |
Recoveries below forecast | $ | (13,296 | ) | $ | (0.47 | ) | |
Changes in expected future recoveries | $ | (39,180 | ) | $ | (1.36 | ) | |
Total impacts | $ | (309,402 | ) | $ | (12.65 | ) |
__________________
(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,
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
About
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
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, 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
Contact:
Vice President, Global Investor Relations
(858) 309-6442
bruce.thomas@encorecapital.com
SOURCE:
FINANCIAL TABLES FOLLOW | |||||||
Consolidated Statements of Financial Condition | |||||||
(In Thousands, Except Par Value Amounts) | |||||||
2023 |
2022 |
||||||
Assets | |||||||
Cash and cash equivalents | $ | 158,364 | $ | 143,912 | |||
Investment in receivable portfolios, net | 3,468,432 | 3,088,261 | |||||
Property and equipment, net | 103,959 | 113,900 | |||||
Other assets | 293,256 | 341,073 | |||||
606,475 | 821,214 | ||||||
Total assets | $ | 4,630,486 | $ | 4,508,360 | |||
Liabilities and Equity | |||||||
Liabilities: | |||||||
Accounts payable and accrued liabilities | $ | 189,928 | $ | 198,217 | |||
Borrowings | 3,318,031 | 2,898,821 | |||||
Other liabilities | 185,989 | 231,695 | |||||
Total liabilities | 3,693,948 | 3,328,733 | |||||
Commitments and contingencies | |||||||
Equity: | |||||||
Convertible preferred stock, |
— | — | |||||
Common stock, |
235 | 233 | |||||
Additional paid-in capital | 11,052 | — | |||||
Accumulated earnings | 1,049,171 | 1,278,210 | |||||
Accumulated other comprehensive loss | (123,920 | ) | (98,816 | ) | |||
Total stockholders’ equity | 936,538 | 1,179,627 | |||||
Total liabilities and stockholders’ equity | $ | 4,630,486 | $ | 4,508,360 | |||
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.
2023 |
2022 |
||||
Assets | |||||
Cash and cash equivalents | $ | 24,472 | $ | 1,344 | |
Investment in receivable portfolios, net | 717,556 | 431,350 | |||
Other assets | 19,358 | 3,627 | |||
Liabilities | |||||
Accounts payable and accrued liabilities | 1,854 | 150 | |||
Borrowings | 494,925 | 423,522 | |||
Other liabilities | 2,452 | 105 | |||
Consolidated Statements of Operations | |||||||||||||||
(In Thousands, Except Per Share Amounts) | |||||||||||||||
(Unaudited) Three Months Ended |
Year Ended |
||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
Revenues | |||||||||||||||
Revenue from receivable portfolios | $ | 304,892 | $ | 294,755 | $ | 1,204,437 | $ | 1,202,361 | |||||||
Changes in recoveries | (52,476 | ) | (86,148 | ) | (82,530 | ) | 93,145 | ||||||||
Total debt purchasing revenue | 252,416 | 208,607 | 1,121,907 | 1,295,506 | |||||||||||
Servicing revenue | 19,650 | 22,996 | 83,136 | 94,922 | |||||||||||
Other revenues | 5,321 | 2,393 | 17,637 | 7,919 | |||||||||||
Total revenues | 277,387 | 233,996 | 1,222,680 | 1,398,347 | |||||||||||
Operating expenses | |||||||||||||||
Salaries and employee benefits | 96,760 | 90,058 | 391,532 | 375,135 | |||||||||||
Cost of legal collections | 56,727 | 54,188 | 224,252 | 217,944 | |||||||||||
General and administrative expenses | 36,809 | 40,023 | 144,862 | 145,798 | |||||||||||
Other operating expenses | 29,315 | 28,516 | 111,179 | 111,234 | |||||||||||
Collection agency commissions | 9,074 | 8,156 | 35,657 | 35,568 | |||||||||||
Depreciation and amortization | 8,969 | 11,285 | 41,737 | 46,419 | |||||||||||
238,200 | — | 238,200 | — | ||||||||||||
Impairment of intangible assets | 18,726 | 4,075 | 18,726 | 4,075 | |||||||||||
Total operating expenses | 494,580 | 236,301 | 1,206,145 | 936,173 | |||||||||||
(Loss) income from operations | (217,193 | ) | (2,305 | ) | 16,535 | 462,174 | |||||||||
Other expense | |||||||||||||||
Interest expense | (54,501 | ) | (42,313 | ) | (201,877 | ) | (153,308 | ) | |||||||
Other (expense) income | (2 | ) | (1,269 | ) | 5,078 | 2,123 | |||||||||
Total other expense | (54,503 | ) | (43,582 | ) | (196,799 | ) | (151,185 | ) | |||||||
(Loss) income before income taxes | (271,696 | ) | (45,887 | ) | (180,264 | ) | 310,989 | ||||||||
Benefit (provision) for income taxes | 934 | (27,231 | ) | (26,228 | ) | (116,425 | ) | ||||||||
Net (loss) income | $ | (270,762 | ) | $ | (73,118 | ) | $ | (206,492 | ) | $ | 194,564 | ||||
(Loss) income per share: | |||||||||||||||
Basic | $ | (11.40 | ) | $ | (3.11 | ) | $ | (8.72 | ) | $ | 8.06 | ||||
Diluted | $ | (11.40 | ) | $ | (3.11 | ) | $ | (8.72 | ) | $ | 7.46 | ||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 23,741 | 23,544 | 23,670 | 24,142 | |||||||||||
Diluted | 23,741 | 23,544 | 23,670 | 26,092 | |||||||||||
Consolidated Statements of Cash Flows | |||||||||||
(In Thousands) | |||||||||||
Year Ended |
|||||||||||
2023 | 2022 | 2021 | |||||||||
Operating activities: | |||||||||||
Net (loss) income | $ | (206,492 | ) | $ | 194,564 | $ | 351,201 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 41,737 | 46,419 | 50,079 | ||||||||
Other non-cash interest expense, net | 17,160 | 15,875 | 17,785 | ||||||||
Stock-based compensation expense | 13,854 | 15,402 | 18,330 | ||||||||
Deferred income taxes | (55,916 | ) | 46,410 | 35,371 | |||||||
238,200 | — | — | |||||||||
Impairment of intangible assets | 18,726 | 4,075 | — | ||||||||
Changes in recoveries | 82,530 | (93,145 | ) | (199,136 | ) | ||||||
Other, net | (2,259 | ) | 18,798 | 26,430 | |||||||
Changes in operating assets and liabilities | |||||||||||
Other assets | 15,894 | (6,722 | ) | 38,941 | |||||||
Accounts payable, accrued liabilities and other liabilities | (10,443 | ) | (30,995 | ) | (35,948 | ) | |||||
Net cash provided by operating activities | 152,991 | 210,681 | 303,053 | ||||||||
Investing activities: | |||||||||||
Purchases of receivable portfolios, net of put-backs | (1,060,206 | ) | (790,569 | ) | (657,280 | ) | |||||
Collections applied to investment in receivable portfolios, net | 658,130 | 709,176 | 1,019,629 | ||||||||
Purchases of real estate owned | (26,901 | ) | (39,340 | ) | (17,090 | ) | |||||
Purchases of property and equipment | (24,807 | ) | (37,224 | ) | (33,372 | ) | |||||
Proceeds from sale of real estate owned | 52,636 | 27,722 | 31,159 | ||||||||
Other, net | (793 | ) | — | (3,150 | ) | ||||||
Net cash (used in) provided by investing activities | (401,941 | ) | (130,235 | ) | 339,896 | ||||||
Financing activities: | |||||||||||
Payment of loan and debt refinancing costs | (13,707 | ) | (1,659 | ) | (11,963 | ) | |||||
Proceeds from credit facilities | 1,196,046 | 779,513 | 821,931 | ||||||||
Repayment of credit facilities | (989,627 | ) | (515,703 | ) | (896,418 | ) | |||||
Proceeds from senior secured notes | 104,188 | — | 353,747 | ||||||||
Repayment of senior secured notes | (39,080 | ) | (39,080 | ) | (359,175 | ) | |||||
Proceeds from issuance of convertible senior notes | 230,000 | — | — | ||||||||
Repayment of convertible senior notes | (212,480 | ) | (221,153 | ) | (161,000 | ) | |||||
Repurchase and retirement of common stock | — | (87,006 | ) | (390,606 | ) | ||||||
Other, net | (7,040 | ) | (22,357 | ) | (12,208 | ) | |||||
Net cash provided by (used in) financing activities | 268,300 | (107,445 | ) | (655,692 | ) | ||||||
Net increase (decrease) in cash and cash equivalents | 19,350 | (26,999 | ) | (12,743 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | (4,898 | ) | (18,734 | ) | 13,204 | ||||||
Cash and cash equivalents, beginning of period | 143,912 | 189,645 | 189,184 | ||||||||
Cash and cash equivalents, end of period | $ | 158,364 | $ | 143,912 | $ | 189,645 | |||||
Supplemental disclosures of cash flow information: | |||||||||||
Cash paid for interest | $ | 163,815 | $ | 131,391 | $ | 132,400 | |||||
Cash paid for income taxes, net of refunds | 68,522 | 71,276 | 42,039 | ||||||||
Supplemental schedule of non-cash investing and financing activities: | |||||||||||
Investment in receivable portfolios transferred to real estate owned | $ | 7,957 | $ | 1,903 | $ | 768 | |||||
Property and equipment acquired through finance leases | 234 | 3,273 | 2,664 | ||||||||
Supplemental Financial Information | |||||||||||||||
Reconciliation of Non-GAAP Metrics | |||||||||||||||
Adjusted EBITDA | |||||||||||||||
(in thousands, unaudited) |
Three Months Ended |
Year Ended |
|||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
GAAP net (loss) income, as reported | $ | (270,762 | ) | $ | (73,118 | ) | $ | (206,492 | ) | $ | 194,564 | ||||
Adjustments: | |||||||||||||||
Interest expense | 54,501 | 42,313 | 201,877 | 153,308 | |||||||||||
Interest income | (1,364 | ) | — | (4,746 | ) | (1,774 | ) | ||||||||
(Benefit) provision for income taxes | (934 | ) | 27,231 | 26,228 | 116,425 | ||||||||||
Depreciation and amortization | 8,969 | 11,285 | 41,737 | 46,419 | |||||||||||
Net loss (gain) on derivative instruments(1) | 342 | — | (3,170 | ) | — | ||||||||||
Stock-based compensation expense | 2,837 | 3,171 | 13,854 | 15,402 | |||||||||||
Acquisition, integration and restructuring related expenses(2) | 827 | 34 | 7,401 | 1,213 | |||||||||||
Goodwill Impairment(3) | 238,200 | — | 238,200 | — | |||||||||||
Impairment for Intangibles(3) | 18,726 | 4,075 | 18,726 | 4,075 | |||||||||||
Adjusted EBITDA | $ | 51,342 | $ | 14,991 | $ | 333,615 | $ | 529,632 | |||||||
Collections applied to principal balance(4) | $ | 213,769 | $ | 232,420 | $ | 776,280 | $ | 635,262 |
________________________
(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 fourth quarter of 2023, we recorded a non-cash goodwill impairment charge of
(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 related 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
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Source: Encore Capital Group, Inc.