ecpg-20230503
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
______________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
May 3, 2023
Date of report (Date of earliest event reported)
______________________
ENCORE CAPITAL GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
000-26489
48-1090909
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)
350 Camino de la Reina, Suite 100
San Diego, California 92108
(Address of principal executive offices)(Zip Code)
(877) 445-4581
(Registrant’s telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report.)
_____________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 Par Value Per ShareECPGThe NASDAQ Stock Market LLC
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐




Item 2.02.    Results of Operations and Financial Condition.
On May 3, 2023, Encore Capital Group, Inc. (“Encore”) issued a press release announcing its financial results for the quarter ended March 31, 2023. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.
The information in Item 2.02 of this Current Report on Form 8-K, including the information contained in Exhibit 99.1, is being furnished to the Securities and Exchange Commission pursuant to Item 2.02, and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by a specific reference in such filing.
Item 9.01.    Financial Statements and Exhibits.
Exhibit Number
Description
Press release dated May 3, 2023
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)





SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ENCORE CAPITAL GROUP, INC.

Date:
May 3, 2023
/s/ Jonathan C. Clark
Jonathan C. Clark
Executive Vice President, Chief Financial Officer and Treasurer





EXHIBIT INDEX
Exhibit NumberDescription
Press release dated May 3, 2023
104Cover Page Interactive Data File (embedded within the Inline XBRL document)




Document
https://cdn.kscope.io/9564d58e071737519a4c69c97114951e-ecpglogoa.jpg
Exhibit 99.1


Encore Capital Group Announces First Quarter 2023 Financial Results

Global collections of $462 million
Portfolio purchases of $276 million up 63%, including a quarterly record $213 million in the U.S.
Portfolio supply growth accelerating in U.S. market
GAAP EPS of $0.75 impacted by $0.19 per share charge related to headcount reductions in Europe

SAN DIEGO, May 3, 2023 -- Encore Capital Group, Inc. (NASDAQ: ECPG), an international specialty finance company, today reported consolidated financial results for the first quarter ended March 31, 2023.
“Encore’s performance in the first quarter reflected normalized consumer behavior in each of our key markets,” said Ashish Masih, President and Chief Executive Officer. “As such, collections have returned to pre-pandemic levels for our MCM business in the U.S. and have stabilized for our Cabot business in Europe. At the same time, as anticipated, the growth of portfolio supply in the U.S. is accelerating with lending and charge-off rates steadily growing. As a result, MCM portfolio purchases in the U.S. in the first quarter were a record $213 million, more than double the amount we purchased in Q1 a year ago.”
“In Europe, in the face of near double-digit inflation, and consistent with our message from a quarter ago, we took actions in the first quarter to manage our cost base, including headcount reductions in support functions, that resulted in a $6 million pre-tax charge.”
“As a result of the disciplined execution of our strategy, Encore is well-positioned with the operational capability and balance sheet to capitalize on the growing portfolio purchasing opportunities in the market. Looking forward, we expect portfolio purchases in the U.S. in the second quarter to be at a similar level to those in Q1. We're also as committed as ever to the critical role we play in the consumer credit ecosystem and to help consumers regain their financial freedom, especially in this rising charge-off rate environment," said Masih.

Financial Highlights for the First Quarter of 2023:
Three Months Ended March 31,
(in thousands, except percentages and earnings per share)20232022Change
Collections
$462,356 $519,414 (11)%
Revenues
$312,630 $499,682 (37)%
Portfolio purchases(1)
$276,431 $169,505 63%
Estimated Remaining Collections (ERC)
$7,789,980 $7,799,940 0%
Operating expenses
$242,492 $234,668 3%
GAAP net income
$18,626 $175,749 (89)%
GAAP earnings per share
$0.75 $6.40 (88)%
______________________
(1)Includes U.S. purchases of $213.5 million and $94.3 million, and Europe purchases of $63.0 million and $75.2 million in Q1 2023 and Q1 2022, respectively.




Encore Capital Group, Inc.
Page 2


Conference Call and Webcast
Encore will host a conference call and slide presentation today, May 3, 2023, at 2:00 p.m. Pacific / 5:00 p.m. Eastern time, to present and discuss first 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.



Encore Capital Group, Inc.
Page 3


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, 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.


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.
Page 4


ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Financial Condition
(In Thousands, Except Par Value Amounts)
(Unaudited)
March 31,
2023
December 31,
2022
Assets
Cash and cash equivalents$158,774 $143,912 
Investment in receivable portfolios, net3,214,792 3,088,261 
Property and equipment, net110,184 113,900 
Other assets368,041 341,073 
Goodwill834,174 821,214 
Total assets
$4,685,965 $4,508,360 
Liabilities and Equity
Liabilities:
Accounts payable and accrued liabilities$179,971 $198,217 
Borrowings3,081,786 2,898,821 
Other liabilities240,052 231,695 
Total liabilities
3,501,809 3,328,733 
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, 23,482 and 23,323 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively
235 233 
Additional paid-in capital— — 
Accumulated earnings1,274,289 1,278,210 
Accumulated other comprehensive loss(90,368)(98,816)
Total stockholders’ equity1,184,156 1,179,627 
Total liabilities and stockholders’ equity$4,685,965 $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.
March 31,
2023
December 31,
2022
Assets
Cash and cash equivalents$1,642 $1,344 
Investment in receivable portfolios, net459,974 431,350 
Other assets3,813 3,627 
Liabilities
Accounts payable and accrued liabilities496 150 
Borrowings431,919 423,522 
Other liabilities105 105 


Encore Capital Group, Inc.
Page 5


ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Income
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended
March 31,
20232022
Revenues
Revenue from receivable portfolios$295,674 $304,105 
Changes in recoveries(9,501)167,223 
Total debt purchasing revenue286,173 471,328 
Servicing revenue22,585 26,146 
Other revenues3,872 2,208 
Total revenues312,630 499,682 
Operating expenses
Salaries and employee benefits103,850 96,956 
Cost of legal collections54,101 55,717 
General and administrative expenses37,965 33,534 
Other operating expenses27,556 27,027 
Collection agency commissions8,150 9,605 
Depreciation and amortization10,870 11,829 
Total operating expenses242,492 234,668 
Income from operations70,138 265,014 
Other expense
Interest expense(46,835)(34,633)
Other income, net1,732 392 
Total other expense(45,103)(34,241)
Income before income taxes25,035 230,773 
Provision for income taxes(6,409)(55,024)
Net income $18,626 $175,749 
Earnings per share:
Basic$0.79 $7.11 
Diluted$0.75 $6.40 
Weighted average shares outstanding:
Basic23,548 24,722 
Diluted24,942 27,482 


Encore Capital Group, Inc.
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ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, In Thousands)
Three Months Ended March 31,
20232022
Operating activities:
Net income$18,626 $175,749 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization10,870 11,829 
Other non-cash interest expense, net4,594 4,196 
Stock-based compensation expense4,052 3,921 
Deferred income taxes1,369 2,806 
Changes in recoveries9,501 (167,223)
Other, net(1,843)4,787 
Changes in operating assets and liabilities
Other assets(3,139)27,299 
Accounts payable, accrued liabilities and other liabilities(8,117)(8,834)
Net cash provided by operating activities35,913 54,530 
Investing activities:
Purchases of receivable portfolios, net of put-backs(274,625)(166,298)
Collections applied to investment in receivable portfolios166,682 215,309 
Purchases of asset held for sale(22,596)(12,388)
Purchases of property and equipment(4,885)(7,079)
Other, net4,709 7,684 
Net cash (used in) provided by investing activities(130,715)37,228 
Financing activities:
Payment of loan and debt refinancing costs(5,850)(1,455)
Proceeds from credit facilities229,128 328,273 
Repayment of credit facilities(140,043)(180,614)
Repayment of senior secured notes(9,770)(9,770)
Proceeds from issuance of convertible senior notes230,000 — 
Repayment of convertible and exchangeable senior notes(192,457)(221,152)
Proceeds from convertible hedge instruments, net10,050 — 
Repurchase and retirement of common stock— (25,692)
Other, net(10,684)(7,606)
Net cash provided by (used in) financing activities110,374 (118,016)
Net increase (decrease) in cash and cash equivalents15,572 (26,258)
Effect of exchange rate changes on cash and cash equivalents(710)(3,170)
Cash and cash equivalents, beginning of period143,912 189,645 
Cash and cash equivalents, end of period$158,774 $160,217 
Supplemental disclosure of cash information:
Cash paid for interest$38,072 $31,771 
Cash paid for taxes, net of refunds$908 $949 


Encore Capital Group, Inc.
Page 7


ENCORE CAPITAL GROUP, INC.
Supplemental Financial Information
Reconciliation of Non-GAAP Metrics
Adjusted EBITDA
Three Months Ended
March 31,
(in thousands, unaudited)20232022
GAAP net income, as reported$18,626 $175,749 
Adjustments:
Interest expense46,835 34,633 
Interest income(944)(437)
Provision for income taxes6,409 55,024 
Depreciation and amortization10,870 11,829 
Stock-based compensation expense4,052 3,921 
Acquisition, integration and restructuring related expenses(1)
5,526 679 
Adjusted EBITDA$91,374 $281,398 
Collections applied to principal balance(2)
$182,981 $53,567 
________________________
(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 months ended March 31, 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 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-Q for the period ending March 31, 2023.