Encore Capital Group, Inc. (NASDAQ: ECPG), an international
specialty finance company, today reported consolidated financial
results for the fourth quarter and full year ended
December 31, 2022.
“2022 marked another year of strong financial and operational
performance for Encore as we delivered earnings per share that were
second only to our extraordinary result from a year ago,” said
Ashish Masih, Encore’s President and Chief Executive Officer. “The
exceptional collections environment of 2021 in the U.S. gave way to
more typical consumer behavior as the year progressed, which had
the dual effect of reducing collections and increasing the supply
of charged off receivables in the market.”
“After roughly two and a half years of reduced market supply,
increased lending by banks and rising delinquencies have led to the
beginning of a transition in the U.S. credit cycle in which
opportunities to deploy capital at strong returns are also steadily
rising. As a result, our largest business, MCM, increased U.S.
portfolio purchasing in 2022 by 36%, which helped increase Encore’s
global portfolio purchasing by 20% for the year.”
“In Europe, we have maintained our purchasing discipline in the
face of portfolio pricing that we believe does not yet reflect
recent higher funding costs. As a result, and because we are seeing
double-digit inflation in parts of Europe, we are taking actions to
control the cost base in our Cabot business. Consistent with our
capital allocation priorities we will continue to focus our
investments in markets with the highest risk adjusted returns.”
“In the fourth quarter, a number of accounting items negatively
impacted our results including small percentage reductions to our
ERC forecast and certain one-time tax items. Despite these impacts,
we delivered strong results for the full year.”
“Looking ahead, our priorities in 2023 remain consistent with
the fundamental objectives that have driven our financial
performance and created shareholder value over the past several
years. We remain anchored by our three pillar strategy and focused
on our balance sheet objectives and capital allocation priorities.
Against a backdrop of growing market supply in the U.S., we expect
MCM’s portfolio purchases in Q1 2023 to be at least $200 million
dollars at attractive returns, more than double Q1 2022 purchases.
The purchasing pipeline for 2023 appears equally robust. Encore is
well positioned to capitalize on these opportunities that are
emerging as portfolio supply rises,” continued Masih.
Available capacity under Encore’s global senior facility was
$478 million at the end of 2022. In addition, Encore ended the year
with $126 million of non-client cash on the balance sheet.
Financial Highlights for the Full Year of
2022:
|
Year Ended December 31, |
(in
thousands, except percentages and earnings per share) |
|
2022 |
|
|
|
2021 |
|
|
Change |
Collections |
$ |
1,911,537 |
|
|
$ |
2,307,359 |
|
|
(17 |
)% |
Revenues |
$ |
1,398,347 |
|
|
$ |
1,614,499 |
|
|
(13 |
)% |
Portfolio purchases(1) |
$ |
800,507 |
|
|
$ |
664,529 |
|
|
20 |
% |
Estimated Remaining Collections (ERC) |
$ |
7,555,003 |
|
|
$ |
7,749,954 |
|
|
(3 |
)% |
Operating expenses |
$ |
936,173 |
|
|
$ |
981,227 |
|
|
(5 |
)% |
Effective tax rate |
|
37.4 |
% |
|
|
19.5 |
% |
|
+1790bps |
|
GAAP net
income attributable to Encore |
$ |
194,564 |
|
|
$ |
350,782 |
|
|
(45 |
)% |
GAAP
earnings per share |
$ |
7.46 |
|
|
$ |
11.26 |
|
|
(34 |
)% |
|
|
|
|
|
|
|
|
|
|
|
__________________(1) Includes U.S. purchases of $556.0 million
and $408.7 million, and Europe purchases of $244.5 million and
$255.8 million in 2022 and 2021, respectively.
Financial Highlights for the Fourth Quarter of
2022:
|
Three Months Ended December 31, |
(in
thousands, except percentages and earnings per share) |
|
2022 |
|
|
|
2021 |
|
|
Change |
Collections |
$ |
436,156 |
|
|
$ |
521,781 |
|
|
(16 |
)% |
Revenues |
$ |
233,996 |
|
|
$ |
357,303 |
|
|
(35 |
)% |
Portfolio purchases(1) |
$ |
225,343 |
|
|
$ |
183,435 |
|
|
23 |
% |
Operating expenses |
$ |
236,301 |
|
|
$ |
233,279 |
|
|
1 |
% |
Effective tax rate |
|
(59.3 |
)% |
|
|
10.6 |
% |
|
N/A |
|
GAAP net
(loss) income |
$ |
(73,118 |
) |
|
$ |
76,083 |
|
|
(196 |
)% |
GAAP
(loss) income per share |
$ |
(3.11 |
) |
|
$ |
2.53 |
|
|
(223 |
)% |
|
|
|
|
|
|
|
|
|
|
|
__________________(1) Includes U.S. purchases of $168.9 million
and $124.5 million, and Europe purchases of $56.4 million and $58.9
million in Q4 2022 and Q4 2021, respectively.
Conference Call and Webcast
The Company will host a conference call and slide presentation
today, February 22, 2023, at 2:00 p.m. Pacific time / 5:00
p.m. Eastern time to discuss fourth quarter and full year
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 an alternative to, or more meaningful than, net income
as an indicator 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. The Company has attached to this news release a
reconciliation of these non-GAAP financial measures to their most
directly comparable GAAP financial measures.
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, 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
Securities and Exchange Commission, including the most recent
reports on Form 10-K, 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.Consolidated Statements of Financial
Condition(In Thousands, Except Par Value Amounts)
|
December 31,2022 |
|
December 31,2021 |
Assets |
|
|
|
Cash and cash equivalents |
$ |
143,912 |
|
|
$ |
189,645 |
|
Investment in receivable portfolios, net |
|
3,088,261 |
|
|
|
3,065,553 |
|
Property
and equipment, net |
|
113,900 |
|
|
|
119,857 |
|
Other
assets |
|
341,073 |
|
|
|
335,275 |
|
Goodwill |
|
821,214 |
|
|
|
897,795 |
|
Total assets |
$ |
4,508,360 |
|
|
$ |
4,608,125 |
|
Liabilities and Equity |
|
|
|
Liabilities: |
|
|
|
Accounts payable and accrued liabilities |
$ |
198,217 |
|
|
$ |
229,586 |
|
Borrowings |
|
2,898,821 |
|
|
|
2,997,331 |
|
Other liabilities |
|
231,695 |
|
|
|
195,947 |
|
Total liabilities |
|
3,328,733 |
|
|
|
3,422,864 |
|
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, 23,323
shares and 24,541 shares issued and outstanding as of December 31,
2022 and December 31, 2021, respectively |
|
233 |
|
|
|
245 |
|
Additional paid-in capital |
|
— |
|
|
|
— |
|
Accumulated earnings |
|
1,278,210 |
|
|
|
1,238,564 |
|
Accumulated other comprehensive loss |
|
(98,816 |
) |
|
|
(53,548 |
) |
Total stockholders’ equity |
|
1,179,627 |
|
|
|
1,185,261 |
|
Total liabilities and stockholders’ equity |
$ |
4,508,360 |
|
|
$ |
4,608,125 |
|
|
|
|
|
|
|
|
|
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.
|
December 31,2022 |
|
December 31,2021 |
Assets |
|
|
|
Cash and cash equivalents |
$ |
1,344 |
|
|
$ |
1,927 |
|
Investment in receivable
portfolios, net |
|
431,350 |
|
|
|
498,507 |
|
Other assets |
|
3,627 |
|
|
|
3,452 |
|
Liabilities |
|
|
|
Accounts payable and accrued
liabilities |
|
150 |
|
|
|
105 |
|
Borrowings |
|
423,522 |
|
|
|
473,443 |
|
Other liabilities |
|
105 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
ENCORE CAPITAL GROUP,
INC.Consolidated Statements of
Operations(In Thousands, Except Per Share Amounts)
|
(Unaudited)Three Months Ended December
31, |
|
Year Ended December 31, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Revenues |
|
|
|
|
|
|
|
Revenue from receivable portfolios |
$ |
294,755 |
|
|
$ |
305,337 |
|
|
$ |
1,202,361 |
|
|
$ |
1,287,730 |
|
Changes in recoveries |
|
(86,148 |
) |
|
|
22,508 |
|
|
|
93,145 |
|
|
|
199,136 |
|
Total debt purchasing revenue |
|
208,607 |
|
|
|
327,845 |
|
|
|
1,295,506 |
|
|
|
1,486,866 |
|
Servicing revenue |
|
22,996 |
|
|
|
26,877 |
|
|
|
94,922 |
|
|
|
120,778 |
|
Other revenues |
|
2,393 |
|
|
|
2,581 |
|
|
|
7,919 |
|
|
|
6,855 |
|
Total revenues |
|
233,996 |
|
|
|
357,303 |
|
|
|
1,398,347 |
|
|
|
1,614,499 |
|
Operating expenses |
|
|
|
|
|
|
|
Salaries and employee benefits |
|
90,058 |
|
|
|
96,286 |
|
|
|
375,135 |
|
|
|
385,178 |
|
Cost of legal collections |
|
54,188 |
|
|
|
56,068 |
|
|
|
217,944 |
|
|
|
254,280 |
|
General and administrative expenses |
|
40,023 |
|
|
|
34,905 |
|
|
|
145,798 |
|
|
|
137,695 |
|
Other operating expenses |
|
28,516 |
|
|
|
25,043 |
|
|
|
111,234 |
|
|
|
106,938 |
|
Collection agency commissions |
|
8,156 |
|
|
|
8,592 |
|
|
|
35,568 |
|
|
|
47,057 |
|
Depreciation and amortization |
|
15,360 |
|
|
|
12,385 |
|
|
|
50,494 |
|
|
|
50,079 |
|
Total operating expenses |
|
236,301 |
|
|
|
233,279 |
|
|
|
936,173 |
|
|
|
981,227 |
|
(Loss)
income from operations |
|
(2,305 |
) |
|
|
124,024 |
|
|
|
462,174 |
|
|
|
633,272 |
|
Other
expense |
|
|
|
|
|
|
|
Interest expense |
|
(42,313 |
) |
|
|
(38,088 |
) |
|
|
(153,308 |
) |
|
|
(169,647 |
) |
Loss on extinguishment of debt |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9,300 |
) |
Other (expense) income |
|
(1,269 |
) |
|
|
(791 |
) |
|
|
2,123 |
|
|
|
(17,784 |
) |
Total other expense |
|
(43,582 |
) |
|
|
(38,879 |
) |
|
|
(151,185 |
) |
|
|
(196,731 |
) |
(Loss)
income before income taxes |
|
(45,887 |
) |
|
|
85,145 |
|
|
|
310,989 |
|
|
|
436,541 |
|
Provision for income taxes |
|
(27,231 |
) |
|
|
(9,062 |
) |
|
|
(116,425 |
) |
|
|
(85,340 |
) |
Net
(loss) income |
|
(73,118 |
) |
|
|
76,083 |
|
|
|
194,564 |
|
|
|
351,201 |
|
Net income attributable to noncontrolling interest |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(419 |
) |
Net
(loss) income attributable to Encore Capital Group, Inc.
stockholders |
$ |
(73,118 |
) |
|
$ |
76,083 |
|
|
$ |
194,564 |
|
|
$ |
350,782 |
|
|
|
|
|
|
|
|
|
(Loss) income per share attributable to Encore Capital
Group, Inc.: |
|
|
|
|
|
|
|
Basic |
$ |
(3.11 |
) |
|
$ |
2.72 |
|
|
$ |
8.06 |
|
|
$ |
11.64 |
|
Diluted |
$ |
(3.11 |
) |
|
$ |
2.53 |
|
|
$ |
7.46 |
|
|
$ |
11.26 |
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
23,544 |
|
|
|
27,950 |
|
|
|
24,142 |
|
|
|
30,129 |
|
Diluted |
|
23,544 |
|
|
|
30,040 |
|
|
|
26,092 |
|
|
|
31,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENCORE CAPITAL GROUP,
INC.Consolidated Statements of Cash
Flows(In Thousands)
|
Year Ended December 31, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2020 |
|
Operating activities: |
|
|
|
|
|
Net
income |
$ |
194,564 |
|
|
$ |
351,201 |
|
|
$ |
212,524 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
Depreciation and amortization |
|
50,494 |
|
|
|
50,079 |
|
|
|
42,780 |
|
Expense related to financing |
|
— |
|
|
|
9,300 |
|
|
|
51,117 |
|
Other non-cash interest expense, net |
|
15,875 |
|
|
|
17,785 |
|
|
|
23,639 |
|
Stock-based compensation expense |
|
15,402 |
|
|
|
18,330 |
|
|
|
16,560 |
|
Deferred income taxes |
|
46,410 |
|
|
|
35,371 |
|
|
|
8,549 |
|
Changes in recoveries |
|
(93,145 |
) |
|
|
(199,136 |
) |
|
|
(7,246 |
) |
Other, net |
|
18,798 |
|
|
|
17,130 |
|
|
|
16,260 |
|
Changes
in operating assets and liabilities |
|
|
|
|
|
Other assets |
|
(6,722 |
) |
|
|
38,941 |
|
|
|
(33,663 |
) |
Accounts payable, accrued liabilities and other liabilities |
|
(30,995 |
) |
|
|
(35,948 |
) |
|
|
(17,656 |
) |
Net cash provided by operating activities |
|
210,681 |
|
|
|
303,053 |
|
|
|
312,864 |
|
Investing activities: |
|
|
|
|
|
Purchases of receivable portfolios, net of put-backs |
|
(790,569 |
) |
|
|
(657,280 |
) |
|
|
(644,048 |
) |
Collections applied to investment in receivable portfolios,
net |
|
709,176 |
|
|
|
1,019,629 |
|
|
|
737,131 |
|
Purchases of assets held for sale |
|
(39,340 |
) |
|
|
(17,090 |
) |
|
|
(1,502 |
) |
Purchases of property and equipment |
|
(37,224 |
) |
|
|
(33,372 |
) |
|
|
(34,600 |
) |
Other, net |
|
27,722 |
|
|
|
28,009 |
|
|
|
25,845 |
|
Net cash (used in) provided by investing activities |
|
(130,235 |
) |
|
|
339,896 |
|
|
|
82,826 |
|
Financing activities: |
|
|
|
|
|
Payment of loan and debt refinancing costs |
|
(1,659 |
) |
|
|
(11,963 |
) |
|
|
(82,455 |
) |
Proceeds from credit facilities |
|
779,513 |
|
|
|
821,931 |
|
|
|
1,820,634 |
|
Repayment of credit facilities |
|
(515,703 |
) |
|
|
(896,418 |
) |
|
|
(2,290,822 |
) |
Proceeds from senior secured notes |
|
— |
|
|
|
353,747 |
|
|
|
1,313,385 |
|
Repayment of senior secured notes |
|
(39,080 |
) |
|
|
(359,175 |
) |
|
|
(1,033,765 |
) |
Repayment of convertible senior notes |
|
(221,153 |
) |
|
|
(161,000 |
) |
|
|
(89,355 |
) |
Repurchase and retirement of common stock |
|
(87,006 |
) |
|
|
(390,606 |
) |
|
|
— |
|
Other, net |
|
(22,357 |
) |
|
|
(12,208 |
) |
|
|
(40,822 |
) |
Net cash used in financing activities |
|
(107,445 |
) |
|
|
(655,692 |
) |
|
|
(403,200 |
) |
Net
decrease in cash and cash equivalents |
|
(26,999 |
) |
|
|
(12,743 |
) |
|
|
(7,510 |
) |
Effect
of exchange rate changes on cash and cash equivalents |
|
(18,734 |
) |
|
|
13,204 |
|
|
|
4,359 |
|
Cash and
cash equivalents, beginning of period |
|
189,645 |
|
|
|
189,184 |
|
|
|
192,335 |
|
Cash and
cash equivalents, end of period |
$ |
143,912 |
|
|
$ |
189,645 |
|
|
$ |
189,184 |
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
Cash paid for interest |
$ |
131,391 |
|
|
$ |
132,400 |
|
|
$ |
169,553 |
|
Cash paid for income taxes, net of refunds |
|
71,276 |
|
|
|
42,039 |
|
|
|
88,816 |
|
Supplemental schedule of non-cash investing and financing
activities: |
|
|
|
|
|
Investment in receivable portfolios transferred to real estate
owned |
$ |
1,903 |
|
|
$ |
768 |
|
|
$ |
2,214 |
|
Property and equipment acquired through finance leases |
|
3,273 |
|
|
|
2,664 |
|
|
|
3,276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
ENCORE CAPITAL GROUP,
INC.Supplemental Financial InformationReconciliation of
Non-GAAP Metrics
Adjusted EBITDA
|
Three Months Ended December 31, |
|
Year Ended December 31, |
(in thousands, unaudited) |
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
GAAP net
(loss) income, as reported |
$ |
(73,118 |
) |
|
$ |
76,083 |
|
|
$ |
194,564 |
|
|
$ |
351,201 |
|
Adjustments: |
|
|
|
|
|
|
|
Interest expense |
|
42,313 |
|
|
|
38,088 |
|
|
|
153,308 |
|
|
|
169,647 |
|
Loss on extinguishment of debt |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9,300 |
|
Interest income |
|
— |
|
|
|
(568 |
) |
|
|
(1,774 |
) |
|
|
(1,738 |
) |
Provision for income taxes |
|
27,231 |
|
|
|
9,062 |
|
|
|
116,425 |
|
|
|
85,340 |
|
Depreciation and amortization |
|
15,360 |
|
|
|
12,385 |
|
|
|
50,494 |
|
|
|
50,079 |
|
Stock-based compensation expense |
|
3,171 |
|
|
|
5,427 |
|
|
|
15,402 |
|
|
|
18,330 |
|
Acquisition, integration and restructuring related expenses(1) |
|
34 |
|
|
|
2,609 |
|
|
|
1,213 |
|
|
|
20,559 |
|
Adjusted
EBITDA |
$ |
14,991 |
|
|
$ |
143,086 |
|
|
$ |
529,632 |
|
|
$ |
702,718 |
|
Collections applied to principal balance(2) |
$ |
232,420 |
|
|
$ |
201,322 |
|
|
$ |
635,262 |
|
|
$ |
843,087 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
________________________
(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.
(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-K for the period
ending December 31, 2022.
Encore Capital (NASDAQ:ECPG)
Historical Stock Chart
From Mar 2024 to Apr 2024
Encore Capital (NASDAQ:ECPG)
Historical Stock Chart
From Apr 2023 to Apr 2024