Encore Capital Group, Inc. (NASDAQ: ECPG), an international
specialty finance company, today reported consolidated financial
results for the first quarter ended March 31, 2024.
“2024 is off to a strong start for Encore as our first quarter
performance aligned well with expectations,” said Ashish Masih,
President and Chief Executive Officer. “Growth in portfolio
purchasing, collections and cash generation in the first quarter
reinforces our belief that 2024 will be the turning point in
Encore’s operational and financial results.”
“In the U.S., the highly favorable purchasing conditions
continue, driven by credit card lending growth and rising charge
off rates. We remain committed to allocating capital to our highest
return opportunities with 80% of our global portfolio purchases in
Q1 concentrated in the U.S., resulting in $237 million deployed by
MCM, establishing a new quarterly record for our U.S.
business.”
“In Europe, the portfolio purchasing market remains very
competitive. Although we continue to see some examples of improved
pricing, we believe European market pricing still does not
consistently reflect the higher cost of capital caused by higher
interest rates. As a result, we continue to exercise discipline and
are constraining Cabot portfolio purchases.”
“Our first quarter global collections of $511 million were up
10% compared to a year ago and were in line with expectations,
continuing to reflect a stable collections environment in our key
markets.”
“Driven by the disciplined execution of our strategy, along with
the continued favorable portfolio purchasing environment in the
U.S., our performance in Q1 keeps us on track to deliver on our
2024 guidance provided in February. This guidance called for
portfolio purchasing this year to exceed our 2023 total and for our
collections to grow approximately 8% to over $2 billion. 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 First
Quarter of
2024:
|
Three Months Ended March 31, |
(in thousands, except percentages
and earnings per share) |
2024 |
|
2023 |
|
Change |
Portfolio purchases(1) |
$ |
295,714 |
|
$ |
276,431 |
|
7 |
% |
Estimated Remaining Collections
(ERC) |
$ |
8,307,294 |
|
$ |
7,789,980 |
|
7 |
% |
Collections |
$ |
510,887 |
|
$ |
462,356 |
|
10 |
% |
Revenues |
$ |
328,386 |
|
$ |
312,630 |
|
5 |
% |
Operating expenses |
$ |
244,795 |
|
$ |
242,492 |
|
1 |
% |
GAAP net income |
$ |
23,239 |
|
$ |
18,626 |
|
25 |
% |
GAAP earnings per share |
$ |
0.95 |
|
$ |
0.75 |
|
27 |
% |
______________________
(1) Includes U.S. purchases of $236.5 million
and $213.5 million, and Europe purchases of $59.2 million and $63.0
million in Q1 2024 and Q1 2023, respectively.
Conference Call and Webcast
Encore will host a conference call and slide presentation today,
May 8, 2024, 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 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.
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 ThomasEncore Capital Group, Inc.Vice President, Global
Investor Relations(858) 309-6442bruce.thomas@encorecapital.com
SOURCE: Encore Capital Group, Inc.
FINANCIAL TABLES FOLLOW
ENCORE CAPITAL GROUP, INC. |
Condensed Consolidated Statements of Financial
Condition |
(In Thousands, Except Par Value Amounts) |
(Unaudited) |
|
|
March 31, 2024 |
|
December 31, 2023 |
Assets |
|
|
|
Cash and cash equivalents |
$ |
172,990 |
|
|
$ |
158,364 |
|
Investment in receivable
portfolios, net |
|
3,531,387 |
|
|
|
3,468,432 |
|
Property and equipment, net |
|
102,776 |
|
|
|
103,959 |
|
Other assets |
|
277,622 |
|
|
|
293,256 |
|
Goodwill |
|
602,400 |
|
|
|
606,475 |
|
Total assets |
$ |
4,687,175 |
|
|
$ |
4,630,486 |
|
Liabilities and Equity |
|
|
|
Liabilities: |
|
|
|
Accounts payable and accrued liabilities |
$ |
180,206 |
|
|
$ |
189,928 |
|
Borrowings |
|
3,364,029 |
|
|
|
3,318,031 |
|
Other liabilities |
|
189,081 |
|
|
|
185,989 |
|
Total liabilities |
|
3,733,316 |
|
|
|
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, 23,687 and
23,545 shares issued and outstanding as of March 31, 2024 and
December 31, 2023, respectively |
|
237 |
|
|
|
235 |
|
Additional paid-in capital |
|
8,648 |
|
|
|
11,052 |
|
Accumulated earnings |
|
1,072,410 |
|
|
|
1,049,171 |
|
Accumulated other comprehensive loss |
|
(127,436 |
) |
|
|
(123,920 |
) |
Total stockholders’ equity |
|
953,859 |
|
|
|
936,538 |
|
Total liabilities and stockholders’ equity |
$ |
4,687,175 |
|
|
$ |
4,630,486 |
|
|
|
|
|
|
|
|
|
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, 2024 |
|
December 31, 2023 |
Assets |
|
|
|
Cash and cash equivalents |
$ |
26,879 |
|
$ |
24,472 |
Investment in receivable
portfolios, net |
|
736,226 |
|
|
717,556 |
Other assets |
|
11,280 |
|
|
19,358 |
Liabilities |
|
|
|
Accounts payable and accrued
liabilities |
|
1,005 |
|
|
1,854 |
Borrowings |
|
492,027 |
|
|
494,925 |
Other liabilities |
|
253 |
|
|
2,452 |
|
|
|
|
|
|
ENCORE
CAPITAL GROUP, INC. |
Condensed
Consolidated Statements of Income |
(In Thousands,
Except Per Share Amounts) |
(Unaudited) |
|
|
Three Months Ended March
31, |
|
2024 |
|
2023 |
Revenues |
|
|
|
Revenue from receivable portfolios |
$ |
315,852 |
|
|
$ |
295,674 |
|
Changes in recoveries |
|
(12,409 |
) |
|
|
(9,501 |
) |
Total debt purchasing revenue |
|
303,443 |
|
|
|
286,173 |
|
Servicing revenue |
|
20,379 |
|
|
|
22,585 |
|
Other revenues |
|
4,564 |
|
|
|
3,872 |
|
Total revenues |
|
328,386 |
|
|
|
312,630 |
|
Operating expenses |
|
|
|
Salaries and employee benefits |
|
104,184 |
|
|
|
103,850 |
|
Cost of legal collections |
|
58,721 |
|
|
|
54,101 |
|
General and administrative expenses |
|
36,241 |
|
|
|
37,965 |
|
Other operating expenses |
|
30,367 |
|
|
|
27,556 |
|
Collection agency commissions |
|
7,434 |
|
|
|
8,150 |
|
Depreciation and amortization |
|
7,848 |
|
|
|
10,870 |
|
Total operating expenses |
|
244,795 |
|
|
|
242,492 |
|
Income from operations |
|
83,591 |
|
|
|
70,138 |
|
Other expense |
|
|
|
Interest expense |
|
(55,765 |
) |
|
|
(46,835 |
) |
Other income, net |
|
2,666 |
|
|
|
1,732 |
|
Total other expense |
|
(53,099 |
) |
|
|
(45,103 |
) |
Income before income taxes |
|
30,492 |
|
|
|
25,035 |
|
Provision for income taxes |
|
(7,253 |
) |
|
|
(6,409 |
) |
Net income |
$ |
23,239 |
|
|
$ |
18,626 |
|
|
|
|
|
Earnings per
share: |
|
|
|
Basic |
$ |
0.98 |
|
|
$ |
0.79 |
|
Diluted |
$ |
0.95 |
|
|
$ |
0.75 |
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
Basic |
|
23,784 |
|
|
|
23,548 |
|
Diluted |
|
24,468 |
|
|
|
24,942 |
|
|
|
|
|
|
|
|
|
ENCORE
CAPITAL GROUP, INC. |
Condensed
Consolidated Statements of Cash Flows |
(Unaudited, In
Thousands) |
|
|
|
Three Months Ended March 31, |
|
2024 |
|
2023 |
Operating
activities: |
|
|
|
Net income |
$ |
23,239 |
|
|
$ |
18,626 |
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
Depreciation and amortization |
|
7,848 |
|
|
|
10,870 |
|
Other non-cash interest expense, net |
|
3,727 |
|
|
|
4,594 |
|
Stock-based compensation expense |
|
3,357 |
|
|
|
4,052 |
|
Deferred income taxes |
|
170 |
|
|
|
1,369 |
|
Changes in recoveries |
|
12,409 |
|
|
|
9,501 |
|
Other, net |
|
717 |
|
|
|
(1,843 |
) |
Changes in operating assets and
liabilities |
|
|
|
Other assets |
|
(6,223 |
) |
|
|
(3,139 |
) |
Accounts payable, accrued liabilities and other liabilities |
|
5,740 |
|
|
|
(8,117 |
) |
Net cash provided by operating activities |
|
50,984 |
|
|
|
35,913 |
|
Investing
activities: |
|
|
|
Purchases of receivable portfolios, net of put-backs |
|
(291,367 |
) |
|
|
(274,625 |
) |
Collections applied to investment in receivable portfolios |
|
195,035 |
|
|
|
166,682 |
|
Purchases of asset held for sale |
|
(212 |
) |
|
|
(22,596 |
) |
Purchases of property and equipment |
|
(6,861 |
) |
|
|
(4,885 |
) |
Other, net |
|
12,523 |
|
|
|
4,709 |
|
Net cash used in investing activities |
|
(90,882 |
) |
|
|
(130,715 |
) |
Financing
activities: |
|
|
|
Payment of loan and debt refinancing costs |
|
(10,202 |
) |
|
|
(5,850 |
) |
Proceeds from credit facilities |
|
248,549 |
|
|
|
229,128 |
|
Repayment of credit facilities |
|
(696,351 |
) |
|
|
(140,043 |
) |
Proceeds from senior secured notes |
|
500,000 |
|
|
|
— |
|
Repayment of senior secured notes |
|
(9,770 |
) |
|
|
(9,770 |
) |
Proceeds from issuance of convertible senior notes |
|
— |
|
|
|
230,000 |
|
Repayment of exchangeable senior notes |
|
— |
|
|
|
(192,457 |
) |
Proceeds from convertible hedge instruments, net |
|
— |
|
|
|
10,050 |
|
Other, net |
|
23,564 |
|
|
|
(10,684 |
) |
Net cash provided by financing activities |
|
55,790 |
|
|
|
110,374 |
|
Net increase in cash and cash
equivalents |
|
15,892 |
|
|
|
15,572 |
|
Effect of exchange rate changes
on cash and cash equivalents |
|
(1,266 |
) |
|
|
(710 |
) |
Cash and cash equivalents,
beginning of period |
|
158,364 |
|
|
|
143,912 |
|
Cash and cash equivalents, end of
period |
$ |
172,990 |
|
|
$ |
158,774 |
|
|
|
|
|
Supplemental disclosure of cash
information: |
|
|
|
Cash paid for interest |
$ |
46,469 |
|
|
$ |
38,072 |
|
Cash paid for taxes, net of refunds |
|
1,542 |
|
|
|
908 |
|
Supplemental schedule of non-cash
investing activities: |
|
|
|
Investment in receivable portfolios transferred to real estate
owned |
$ |
2,045 |
|
|
$ |
1,105 |
|
|
|
|
|
|
|
|
|
ENCORE CAPITAL GROUP, INC. |
Supplemental Financial Information |
Reconciliation of Non-GAAP Metrics |
|
Adjusted
EBITDA |
|
|
Three Months EndedMarch 31, |
(in thousands, unaudited) |
2024 |
|
2023 |
GAAP net income, as reported |
$ |
23,239 |
|
|
$ |
18,626 |
|
Adjustments: |
|
|
|
Interest expense |
|
55,765 |
|
|
|
46,835 |
|
Interest income |
|
(1,368 |
) |
|
|
(944 |
) |
Provision for income taxes |
|
7,253 |
|
|
|
6,409 |
|
Depreciation and amortization |
|
7,848 |
|
|
|
10,870 |
|
Net gain on derivative instruments(1) |
|
(195 |
) |
|
|
— |
|
Stock-based compensation expense |
|
3,357 |
|
|
|
4,052 |
|
Acquisition, integration and restructuring related expenses(2) |
|
2,319 |
|
|
|
5,526 |
|
Adjusted EBITDA |
$ |
98,218 |
|
|
$ |
91,374 |
|
Collections applied to principal
balance(3) |
$ |
214,551 |
|
|
$ |
182,981 |
|
________________________
(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) 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 March 31, 2024.
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