Encore Reports a 42% Increase in Fully Diluted Earnings Per Share for the Second Quarter of 2005

SAN DIEGO, Aug. 4 /PRNewswire-FirstCall/ -- Encore Capital Group, Inc. (Nasdaq: ECPG), a leading accounts receivable management firm, today reported consolidated financial results for the second quarter ended June 30, 2005.

For the second quarter of 2005:

• Gross collections were $70.4 million, a 23% increase over the $57.4 million in the same period of the prior year



• Total revenues were $53.8 million, a 23% increase over the $43.6 million in the same period of the prior year



• Net income was $8.1 million, a 45% increase over the $5.6 million in the same period of the prior year



• Earnings per fully diluted share were $0.34, a 42% increase over the $0.24 in the same period of the prior year.

"Our second quarter performance represented the highest levels of collections, revenues, and earnings per share in the history of the Company," said Carl C. Gregory, III, Vice Chairman and CEO of Encore Capital Group, Inc. "The development of highly effective alternative collection channels and the use of sophisticated consumer level analytics that determine the most appropriate collection channel for each account are driving strong increases in the productivity of our collection efforts. This is particularly evident in the increased penetration of our more seasoned portfolios."

"Importantly, during the second quarter we also took a major step towards supporting the long term growth and profitability of the Company with our unique portfolio acquisition and forward-flow agreement with Jefferson Capital. We believe this transaction mitigates the problem presented by the increasingly competitive purchase market for portfolios," said Mr. Gregory.

Second Quarter Financial Highlights

Revenue recognized, as a percentage of collections, was 76% in the second quarter of 2005, the same percentage as in the second quarter of 2004. Consistent with recent trends, the percentage of collections recognized as revenue reflects the deeper penetration of portfolios.

Total operating expenses for the second quarter of 2005 were $31.9 million, compared with $25.4 million in the second quarter of 2004, while cost per dollar collected increased slightly from 44% to 45%.

Total interest expense was $8.4 million in the second quarter of 2005, compared to $9.0 million in the second quarter of 2004. Due to the strong collections on older portfolios that require contingent interest payments to the provider of the Company's previous credit facility, the level of contingent interest has remained above initial expectations for 2005. The Company continues to expect a decline in contingent interest in future quarters, with the degree of decline dependent upon the rate of liquidation of the older portfolios.

In addition to the $2.8 billion portfolio purchased from Jefferson Capital, the Company spent $25.3 million to purchase approximately $874.0 million in face value of credit card and automobile deficiency portfolios.

Outlook

Management reaffirms its guidance for 2005 earnings per share of $1.25 to $1.33. This guidance reflects management's estimate of after-tax contingent interest expense being approximately $0.25 per share during the second half of 2005.

Commenting on the outlook for the Company, Brandon Black, President and COO, said, "Our core collection business is performing well and the Jefferson Capital transaction ensures that we will have a steady supply of reasonably priced charge-offs to fuel the continued growth of this business. Furthermore, given our new $200 million credit facility with J.P. Morgan Chase, we have ample access to resources that will allow us to capitalize on a wide range of opportunities that can drive increased shareholder value in the future."

Conference Call and Webcast

The Company will hold a conference call today at 2:00 PM Pacific time / 5:00 P.M. Eastern time to discuss the second quarter results. Members of the public are invited to listen to the live conference call via the Internet.

To hear the presentation, log on at the Investor Relations page of the Company's web site at www.encorecapitalgroup.com. For those who cannot listen to the live broadcast, a replay of the conference call will be available shortly after the call at the same location.

About Encore Capital Group, Inc.

Encore Capital Group, Inc. is a systems-driven purchaser and manager of charged-off consumer receivables portfolios. More information on the company can be found at www.encorecapitalgroup.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 "may," "believes," "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, projections of future contingent interest expense, purchase volumes, revenues, income or loss (including our expectations regarding the current environment for and timing of portfolio purchases and the resulting effect on revenue recognition rates and profitability); plans for future acquisitions, operations, products or services; and financing needs or plans, as well as assumptions relating to those matters. 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 our subsidiaries to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Factors that could affect the Company's results and cause them to materially differ from those contained in the forward-looking statements include: the Company's ability to purchase receivables portfolios on acceptable terms and in sufficient quantities; the Company's ability to acquire and collect on portfolios consisting of new types of receivables; the Company's ability to recover sufficient amounts on or with respect to receivables to fund operations; the Company's ability to successfully execute acquisitions; the Company's continued servicing of receivables in its third party financing transactions; the Company's ability to hire and retain qualified personnel to recover on its receivables efficiently; changes in, or failure to comply with, government regulations; the costs, uncertainties and other effects of legal and administrative proceedings; and risk factors and cautionary statements made in the Company's Annual Report on Form 10-K as of and for the year ended December 31, 2004. Forward-looking statements speak only as of the date the statement was made. They are inherently subject to risks and uncertainties, some of which the Company cannot predict or quantify. Future events and actual results could differ materially from the forward-looking statements. The Company will not undertake and specifically declines any obligation to publicly release the result of any revisions to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, whether as the result of new information, future events or for any other reason. In addition, it is the Company's policy generally not to make any specific projections as to future earnings, and the Company does not endorse any projections regarding future performance that may be made by third parties.

                          ENCORE CAPITAL GROUP, INC.
           Condensed Consolidated Statements of Financial Condition
                   (In Thousands, Except Par Value Amounts)


                                                     June 30,     December 31,
                                                       2005          2004 (A)
                                                    (Unaudited)
     Assets
     Cash and cash equivalents                        $18,949         $9,731
     Investments in marketable securities                  --         40,000
     Restricted cash                                    2,930          3,432
     Investment in receivable portfolios, net         246,070        137,963
     Property and equipment, net of accumulated
      depreciation of $9,789 and $12,097,
      respectively                                      3,483          3,360
     Deferred tax assets, net                           2,470            361
     Forward flow asset                                42,152             --
     Other assets                                       8,850          6,295
     Goodwill                                           5,000             --
           Total assets                              $329,904        $201,14


     Liabilities and Stockholders' Equity
     Liabilities:
       Accounts payable and accrued liabilities        17,540        $17,418
       Accrued contingent interest                     18,042         20,881
       Income tax payable                               1,129             --
       Notes payable and other borrowings             179,907         66,567
       Capital lease obligations                          166            261
          Total liabilities                           216,784        105,127


     Commitments and Contingencies

     Stockholders' equity:
     Preferred stock, $.01 par value, 5,000 shares
      authorized, and no shares issued
      and outstanding                                      --             --
     Common stock, $.01 par value,
      50,000 shares authorized,
      and 22,326 shares and 22,166 shares
      issued and outstanding
      as of June 30, 2005 and
      December 31, 2004, respectively                     224            222
     Additional paid-in capital                        68,407         66,788
     Accumulated earnings                              44,383         28,834
     Accumulated other comprehensive income               106            171
          Total stockholders' equity                  113,120         96,015
           Total liabilities and
            stockholders' equity                     $329,904       $201,142

     (A) Derived from the audited consolidated financial statements as of
         December 31, 2004.



                          ENCORE CAPITAL GROUP, INC.
               Condensed Consolidated Statements of Operations
                   (In Thousands, Except Per Share Amounts)
                                 (Unaudited)


                                     Three Months Ended   Six Months Ended
                                         June 30,              June 30,
                                      2005      2004        2005     2004

     Revenue
      Revenue from receivable
       portfolios                    $53,519  $43,432    $103,939   $85,523
      Servicing fees and other
       related revenue                   239      154         295       450
         Total revenue                53,758   43,586     104,234    85,973
     Operating expenses
      Salaries and employee
       benefits                       12,375   11,852      24,975    23,476
      Cost of legal collections
       8,631    6,701      16,987    12,203
      Other operating expenses         4,150    3,387       8,792     6,809
      Collection agency
       commissions                     3,462      868       5,486     1,540
      General and
       administrative expenses         2,869    2,154       5,027     3,807
      Depreciation and
       amortization                      417      473         928       917
           Total operating
            expenses
                 31,904   25,435      62,195    48,752

     Income before other
      income (expense)
      and income taxes                21,854   18,151      42,039    37,221
     Other income (expense)
       Interest expense               (8,384)  (8,977)    (16,471)  (18,259)
       Other income                      203      166         608       320
     Income before income
      taxes                           13,673    9,340      26,176    19,282
     Provision for income
      taxes                           (5,576)  (3,745)    (10,627)    7,672)
          Net income                  $8,097   $5,595     $15,549   $11,610

     Weighted average shares
      outstanding                     22,286   22,048      22,257    22,035
     Incremental shares from
      assumed conversion
      of stock options                 1,231    1,391       1,309     1,407
     Adjusted weighted average
      shares outstanding              23,517   23,439      23,566    23,442

     Earnings per share
      -- Basic                         $0.36    $0.25       $0.70     $0.53
     Earnings per share
      -- Diluted                       $0.34    $0.24       $0.66     $0.50