ecpg-20230802
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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
August 2, 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 August 2, 2023, Encore Capital Group, Inc. (“Encore”) issued a press release announcing its financial results for the quarter ended June 30, 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 August 2, 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:
August 2, 2023
/s/ Jonathan C. Clark
Jonathan C. Clark
Executive Vice President, Chief Financial Officer and Treasurer





EXHIBIT INDEX
Exhibit NumberDescription
Press release dated August 2, 2023
104Cover Page Interactive Data File (embedded within the Inline XBRL document)




Document
https://cdn.kscope.io/65b79b546424eb7fae3ff363e012cc84-ecpglogoa.jpg
Exhibit 99.1


Encore Capital Group Announces Second Quarter 2023 Financial Results

Global collections of $477 million
Portfolio purchases of $274 million up 59%, including $213 million in the U.S.
Portfolio supply growth continues in U.S. market
GAAP EPS of $1.08

SAN DIEGO, August 2, 2023 -- Encore Capital Group, Inc. (NASDAQ: ECPG), an international specialty finance company, today reported consolidated financial results for the second quarter ended June 30, 2023.
“Encore’s second quarter performance reflected normalized consumer behavior and a stable collections environment in each of our key markets,” said Ashish Masih, President and Chief Executive Officer. “With lending and charge-off rates steadily rising in the U.S., the growth of portfolio supply and improvements in portfolio pricing continue. Consequently, MCM portfolio purchases in the U.S. in the second quarter matched our Q1 total of $213 million.”
“In Europe, portfolio purchasing remains very competitive with pricing still not fully reflecting the higher cost of capital caused by higher interest rates. Against this backdrop, we continue to constrain Cabot portfolio purchasing and believe this disciplined approach to portfolio purchasing best positions us for success when Cabot’s markets become more constructive.”
“As a result of the continued, disciplined execution of our strategy, Encore remains well-positioned with the operational capability and balance sheet required to capitalize on the growing portfolio purchasing opportunities in the U.S. market. Looking forward, with higher portfolio purchases and strengthening returns in the U.S., we expect the steady growth in ERC and earnings to continue. 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 Second Quarter of 2023:
Three Months Ended June 30,
(in thousands, except percentages and earnings per share)20232022Change
Portfolio purchases(1)
$274,325 $173,007 59%
Estimated Remaining Collections (ERC)
$7,979,353 $7,559,820 6%
Collections
$476,522 $497,711 (4)%
Revenues
$323,044 $356,917 (9)%
Operating expenses
$234,972 $237,969 (1)%
GAAP net income
$26,305 $60,439 (56)%
GAAP earnings per share
$1.08 $2.29 (53)%
______________________
(1)Includes U.S. purchases of $213.4 million and $116.2 million, and Europe purchases of $61.0 million and $56.8 million in Q2 2023 and Q2 2022, respectively.




Encore Capital Group, Inc.
Page 2


Conference Call and Webcast
Encore will host a conference call and slide presentation today, August 2, 2023, at 2:00 p.m. Pacific / 5:00 p.m. Eastern time, to present and discuss second 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, supply and pricing, 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)
June 30,
2023
December 31,
2022
Assets
Cash and cash equivalents$184,871 $143,912 
Investment in receivable portfolios, net3,330,986 3,088,261 
Property and equipment, net107,218 113,900 
Other assets401,299 341,073 
Goodwill852,196 821,214 
Total assets
$4,876,570 $4,508,360 
Liabilities and Equity
Liabilities:
Accounts payable and accrued liabilities$203,050 $198,217 
Borrowings3,203,425 2,898,821 
Other liabilities236,260 231,695 
Total liabilities
3,642,735 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, 23,485 and 23,323 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively
235 233 
Additional paid-in capital3,906 — 
Accumulated earnings1,300,594 1,278,210 
Accumulated other comprehensive loss(70,900)(98,816)
Total stockholders’ equity1,233,835 1,179,627 
Total liabilities and stockholders’ equity$4,876,570 $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.
June 30,
2023
December 31,
2022
Assets
Cash and cash equivalents$2,537 $1,344 
Investment in receivable portfolios, net470,666 431,350 
Other assets3,151 3,627 
Liabilities
Accounts payable and accrued liabilities99 150 
Borrowings448,424 423,522 
Other liabilities129 105 


Encore Capital Group, Inc.
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ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Income
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2023202220232022
Revenues
Revenue from receivable portfolios$301,184 $306,282 $596,858 $610,387 
Changes in recoveries(3,486)25,150 (12,987)192,373 
Total debt purchasing revenue297,698 331,432 583,871 802,760 
Servicing revenue21,008 23,788 43,593 49,934 
Other revenues4,338 1,697 8,210 3,905 
Total revenues323,044 356,917 635,674 856,599 
Operating expenses
Salaries and employee benefits95,855 98,880 199,705 195,836 
Cost of legal collections57,150 55,148 111,251 110,865 
General and administrative expenses34,529 34,967 72,494 68,501 
Other operating expenses26,349 27,405 53,905 54,432 
Collection agency commissions10,387 9,923 18,537 19,528 
Depreciation and amortization10,702 11,646 21,572 23,475 
Total operating expenses234,972 237,969 477,464 472,637 
Income from operations88,072 118,948 158,210 383,962 
Other expense
Interest expense(49,983)(37,054)(96,818)(71,687)
Other (expense) income, net(1,755)1,795 (23)2,187 
Total other expense(51,738)(35,259)(96,841)(69,500)
Income before income taxes36,334 83,689 61,369 314,462 
Provision for income taxes(10,029)(23,250)(16,438)(78,274)
Net income $26,305 $60,439 $44,931 $236,188 
Earnings per share:
Basic$1.11 $2.48 $1.90 $9.63 
Diluted$1.08 $2.29 $1.83 $8.77 
Weighted average shares outstanding:
Basic23,670 24,359 23,610 24,539 
Diluted24,280 26,411 24,611 26,945 


Encore Capital Group, Inc.
Page 6


ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, In Thousands)
Six Months Ended June 30,
20232022
Operating activities:
Net income$44,931 $236,188 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization21,572 23,475 
Other non-cash interest expense, net8,660 8,149 
Stock-based compensation expense7,925 9,040 
Deferred income taxes2,785 3,699 
Changes in recoveries12,987 (192,373)
Other, net985 9,267 
Changes in operating assets and liabilities
Other assets(35,730)39,037 
Accounts payable, accrued liabilities and other liabilities(1,492)(37,952)
Net cash provided by operating activities62,623 98,530 
Investing activities:
Purchases of receivable portfolios, net of put-backs(544,721)(337,932)
Collections applied to investment in receivable portfolios342,020 406,738 
Purchases of asset held for sale(24,645)(35,178)
Purchases of property and equipment(9,503)(11,937)
Other, net22,603 13,416 
Net cash (used in) provided by investing activities(214,246)35,107 
Financing activities:
Payment of loan and debt refinancing costs(8,151)(1,659)
Proceeds from credit facilities444,805 446,853 
Repayment of credit facilities(259,843)(298,743)
Repayment of senior secured notes(19,540)(19,540)
Proceeds from issuance of convertible senior notes230,000 — 
Repayment of convertible and exchangeable senior notes(192,457)(221,153)
Proceeds from convertible hedge instruments, net10,050 — 
Repurchase and retirement of common stock— (50,835)
Other, net(14,238)(10,523)
Net cash provided by (used in) financing activities190,626 (155,600)
Net increase (decrease) in cash and cash equivalents39,003 (21,963)
Effect of exchange rate changes on cash and cash equivalents1,956 (13,387)
Cash and cash equivalents, beginning of period143,912 189,645 
Cash and cash equivalents, end of period$184,871 $154,295 
Supplemental disclosure of cash information:
Cash paid for interest$79,167 $64,366 
Cash paid for taxes, net of refunds$36,822 $44,671 


Encore Capital Group, Inc.
Page 7


ENCORE CAPITAL GROUP, INC.
Supplemental Financial Information
Reconciliation of Non-GAAP Metrics
Adjusted EBITDA
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands, unaudited)2023202220232022
GAAP net income, as reported$26,305 $60,439 $44,931 $236,188 
Adjustments:
Interest expense49,983 37,054 96,818 71,687 
Interest income(1,123)(588)(2,067)(1,025)
Provision for income taxes10,029 23,250 16,438 78,274 
Depreciation and amortization10,702 11,646 21,572 23,475 
Stock-based compensation expense3,873 5,119 7,925 9,040 
Acquisition, integration and restructuring related expenses(1)
454 487 5,980 1,166 
Adjusted EBITDA$100,223 $137,407 $191,597 $418,805 
Collections applied to principal balance(2)
$190,658 $170,112 $373,639 $223,679 
________________________
(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 and six months ended June 30, 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 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 June 30, 2023.