Encore Capital Group, Inc. (NASDAQ:ECPG) Q2 2024 Earnings Conference Call August 7, 2024 5:00 PM ET Company Participants Bruce Thomas – Vice President, Global Investor Relations Ashish Masih – President and Chief Executive Officer Jonathan Clark – Executive Vice President and Chief Financial Officer Ryan Bell – President, Midland Credit Management Conference Call Participants Mark Hughes – Truist Securities Zach Oster – Citizens JMP Robert Dodd – Raymond James Operator Good afternoon everyone, and thank you ...

| --- | --- | |----------------|-------| | | | | August 7, 2024 | | Legal Disclaimers The statements in this presentation 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 inclu ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ___________________________________________________________________________________ FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2024 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________to__________. COMMISSION FILE NUMBER: 000-26489 ...

Exhibit 99.1 Encore Capital Group Announces Second Quarter 2024 Financial Results • Highly favorable purchasing conditions continue in U.S. market • Global portfolio purchases of $279 million including record $237 million in the U.S. • Global collections of $547 million up 15% compared to Q2 2023 • GAAP EPS of $1.34 SAN DIEGO, August 7, 2024 -- Encore Capital Group, Inc. (NASDAQ: ECPG), an international specialty finance company, today reported consolidated financial results for the second quarter ended Jun ...

Core Viewpoint - Encore Capital Group, Inc. will release its financial results for Q2 2024 on August 7, 2024, after market close, followed by a conference call to discuss the results [1] Company Overview - Encore Capital Group is an international specialty finance company that provides debt recovery solutions and related services for consumers across various financial assets [3] - The company purchases portfolios of consumer receivables from major banks, credit unions, and utility providers through its global subsidiaries [3] - Encore operates with a Consumer Bill of Rights, offering industry-leading commitments to consumers, and is headquartered in San Diego [6] - The company is publicly traded on NASDAQ under the ticker symbol ECPG and is part of the Russell 2000, S&P Small Cap 600, and Wilshire 4500 indices [6] Conference Call Details - The conference call will take place on August 7, 2024, at 2:00 p.m. Pacific / 5:00 p.m. Eastern time, featuring key executives including the President and CEO, CFO, and Vice President of Global Investor Relations [1] - Members of the public can access the live webcast via the Investor Relations page on Encore's website [2] - A replay of the webcast will be available shortly after the call concludes for those unable to listen live [5]

After several months of gangbuster growth in the employment arena, the Federal Reserve finally got some "good" bad news – and that sets the stage for certain stocks to buy. In April, the economy added 175,000 jobs, much lower than the 240,000 expected by analysts. Further, the latest print represented a substantial drop from March's result of 315,000 jobs added. As well, the unemployment rate ticked up to 3.9%. Expectations called for the rate to hold steady at 3.8%. On one hand, this dynamic means that the ...

Encore Capital Group’s (ECPG) shares gained 11.2% since it reported first-quarter 2024 results on May 8, 2024. The strong first-quarter earnings benefited from improving portfolio supply in the United States and rising collections. Continued growth in lending, coupled with higher delinquencies and charge-offs, supported the company’s record supply of non-performing loans in the quarter. However, slow growth in the U.K. and European markets partially offset the results.ECPG reported first-quarter 2024 adjust ...

Financial Data and Key Metrics Changes - In Q1 2024, GAAP net income was $23 million, and GAAP EPS was $0.95, representing increases of 25% and 27% respectively compared to Q1 2023 [21] - Q1 collections reached $511 million, exceeding forecasts by approximately $1 million, with a 10% increase year-over-year [20][41] - The company's leverage ratio decreased slightly to 2.8x from 2.9x at the end of 2023, indicating strong cash generation despite higher portfolio purchases [22] Business Line Data and Key Metrics Changes - Encore's global portfolio purchases increased by 7% in Q1 to $296 million, with record U.S. deployments of $237 million in the MCM business [9][29] - MCM collections were $369 million, up 12% compared to Q1 2023, while Cabot's collections were $141 million, up 6% [38][39] - The efficiency ratio improved to 52% on a trailing 12-month basis, reflecting a strong performance in collections relative to expenses [91] Market Data and Key Metrics Changes - U.S. revolving credit has been steadily rising, with credit card charge-off rates at a 10-year high, creating favorable purchasing conditions [6][16] - In contrast, the U.K. market has seen slower growth, with credit card outstandings not returning to pre-pandemic levels and low charge-off rates [8] Company Strategy and Development Direction - The company focuses on markets with the highest risk-adjusted returns, primarily allocating capital to the U.S. market due to its attractive pricing and returns [5][17] - The strategy includes a disciplined approach to portfolio purchasing, with expectations for 2024 to exceed 2023 total purchases and collections to grow approximately 8% [30][110] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong start to 2024, with expectations for continued growth in portfolio purchasing and collections [30][117] - The company highlighted the importance of its global funding structure in maintaining competitive funding costs amid elevated interest rates [23][45] Other Important Information - The company's estimated ERC at the end of Q1 was $8.3 billion, up 7% year-over-year, indicating strong future cash flow potential [20] - The company plans to redeem its 2026 sterling senior secured notes at par in November 2024, following the issuance of $500 million of 2029 senior secured notes [44] Q&A Session Summary Question: How much would that raise your cost of funds in general? - Management indicated that the additional interest expense would be approximately $10 million to $15 million for the balance of the year due to bond refinancing [61][62] Question: Can you remind me if there's been a quarter where you've over-collected but impaired forecast revisions? - Management explained that over-collections can occur alongside negative forecast revisions, indicating a pull-forward effect rather than a long-term improvement [68] Question: What is the current weighted average cost of debt? - The current weighted average cost of debt is slightly below 6.5%, with expectations for an increase in interest expense due to refinancing [45][61] Question: What is the efficiency ratio for the quarter? - The efficiency ratio was reported at 52%, with expectations for continued improvement as collections grow [91][92] Question: What is the guidance for 2024 purchasing and collections? - The company expects purchasing in 2024 to exceed 2023 levels, with collections projected to grow by approximately 8% [30][110]

Encore Capital Group (ECPG) came out with quarterly earnings of $0.95 per share, beating the Zacks Consensus Estimate of $0.94 per share. This compares to earnings of $0.94 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 1.06%. A quarter ago, it was expected that this provider of debt-management and recovery services would post earnings of $1.22 per share when it actually produced earnings of $1.25, delivering a surprise of 2. ...

PART I – FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the first quarter [Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201%E2%80%94%20Condensed%20Consolidated%20Financial%20Statements%20%28Unaudited%29) Presents unaudited condensed consolidated financial statements, including statements of financial condition, income, and cash flows, with detailed notes [Condensed Consolidated Statements of Financial Condition](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Condition) Total assets increased to **$4.69 billion**, driven by receivable portfolios, with liabilities and equity also rising Condensed Consolidated Statements of Financial Condition (in thousands) | | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Total assets** | **$4,687,175** | **$4,630,486** | | Cash and cash equivalents | $172,990 | $158,364 | | Investment in receivable portfolios, net | $3,531,387 | $3,468,432 | | **Total liabilities** | **$3,733,316** | **$3,693,948** | | Borrowings | $3,364,029 | $3,318,031 | | **Total stockholders' equity** | **$953,859** | **$936,538** | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Total revenues rose to **$328.4 million**, driving net income to **$23.2 million** or **$0.95 EPS** for Q1 2024 Condensed Consolidated Statements of Income (in thousands, except per share amounts) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | **Total revenues** | **$328,386** | **$312,630** | | Total debt purchasing revenue | $303,443 | $286,173 | | Income from operations | $83,591 | $70,138 | | Interest expense | $(55,765) | $(46,835) | | **Net income** | **$23,239** | **$18,626** | | **Diluted EPS** | **$0.95** | **$0.75** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow increased to **$51.0 million**, with financing activities providing **$55.8 million** from new notes Summary of Cash Flows (in thousands) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $50,984 | $35,913 | | Net cash used in investing activities | $(90,882) | $(130,715) | | Net cash provided by financing activities | $55,790 | $110,374 | | **Net increase in cash and cash equivalents** | **$15,892** | **$15,572** | [Note 5: Investment in Receivable Portfolios, Net](index=13&type=section&id=Note%205%3A%20Investment%20in%20Receivable%20Portfolios%2C%20Net) Net investment in receivable portfolios increased to **$3.53 billion**, driven by new purchases despite negative changes in recoveries Changes in Investment in Receivable Portfolios, Net (in thousands) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Balance, beginning of period | $3,468,432 | $3,088,261 | | Negative allowance for expected recoveries - current period purchases | $295,714 | $276,431 | | Collections applied to investment in receivable portfolios, net | $(195,035) | $(166,682) | | Changes in recoveries | $(12,409) | $(9,501) | | **Balance, end of period** | **$3,531,387** | **$3,214,792** | - For Q1 2024, 'Changes in recoveries' included a **$0.9 million** over-performance against forecast, but was offset by a **$13.3 million** negative revision in the present value of expected future recoveries[65](index=65&type=chunk)[67](index=67&type=chunk) [Note 7: Borrowings](index=16&type=section&id=Note%207%3A%20Borrowings) Total borrowings increased to **$3.36 billion**, with new senior secured notes issued to repay credit facilities Consolidated Borrowings (in thousands) | | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Global senior secured revolving credit facility | $367,739 | $816,880 | | Senior secured notes | $2,128,357 | $1,654,989 | | Convertible senior notes | $330,000 | $330,000 | | **Total Borrowings (net)** | **$3,364,029** | **$3,318,031** | - In March 2024, Encore issued **$500.0 million** in **9.250% Senior Secured Notes** due 2029. Proceeds were used to repay **$493.0 million** under the Global Senior Facility[76](index=76&type=chunk) - As of March 31, 2024, available capacity under the Global Senior Facility was approximately **$827.3 million**[72](index=72&type=chunk) [Note 11: Commitments and Contingencies](index=20&type=section&id=Note%2011%3A%20Commitments%20and%20Contingencies) No new material legal proceedings were reported, with **$598.9 million** in forward flow purchase commitments - As of March 31, 2024, the company had forward flow purchase agreements with an estimated minimum aggregate purchase price of approximately **$598.9 million**[107](index=107&type=chunk) - No material reserves for legal matters were recorded as of March 31, 2024, as no losses were deemed both probable and reasonably estimable[105](index=105&type=chunk) [Note 12: Segment and Geographic Information](index=21&type=section&id=Note%2012%3A%20Segment%20and%20Geographic%20Information) The company operates as a single segment, with Q1 2024 total revenues of **$328.4 million** from the U.S. and Europe Total Revenues by Geographic Area (in thousands) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | United States | $219,136 | $200,218 | | Europe | $108,531 | $112,223 | | Other geographies | $719 | $189 | | **Total** | **$328,386** | **$312,630** | - The company determined its operating segments meet aggregation criteria, resulting in one reportable segment: portfolio purchasing and recovery[108](index=108&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202%20%E2%80%93%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a **5.0%** revenue increase, higher U.S. capital deployment, and significant debt refinancing activities [Purchases and Collections](index=25&type=section&id=Purchases%20and%20Collections) Portfolio purchases increased to **$295.7 million**, driven by U.S. deployment, with total gross collections up **10.5%** Purchases of Receivable Portfolios by Geographic Location (in thousands) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | MCM (United States) | $236,509 | $213,452 | | Cabot (Europe) | $59,205 | $62,979 | | **Total** | **$295,714** | **$276,431** | Total Collections by Channel and Geographic Area (in thousands) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | **MCM (United States)** | **$369,478** | **$328,670** | | Call center and digital | $235,091 | $191,105 | | Legal collections | $128,903 | $137,511 | | **Cabot (Europe)** | **$140,697** | **$132,788** | | **Total Collections** | **$510,887** | **$462,356** | - In the U.S., increased lending and rising delinquency rates have led to an increase in supply of predominantly fresh portfolios at favorable pricing levels[133](index=133&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Total revenues increased **5.0%** to **$328.4 million**, but higher interest expense impacted net income of **$23.2 million** Revenue Components (in thousands) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Revenue from receivable portfolios | $315,852 | $295,674 | | Changes in recoveries | $(12,409) | $(9,501) | | **Debt purchasing revenue** | **$303,443** | **$286,173** | | Servicing revenue | $20,379 | $22,585 | | **Total revenues** | **$328,386** | **$312,630** | Operating Expenses (in thousands) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Salaries and employee benefits | $104,184 | $103,850 | | Cost of legal collections | $58,721 | $54,101 | | General and administrative expenses | $36,241 | $37,965 | | **Total operating expenses** | **$244,795** | **$242,492** | - Interest expense increased by **$8.9 million** (**19.1%**) YoY, driven by a higher average debt balance (**$6.3 million** effect) and rising interest rates (**$2.1 million** effect)[169](index=169&type=chunk)[172](index=172&type=chunk) Adjusted EBITDA Reconciliation (in thousands) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | GAAP net income, as reported | $23,239 | $18,626 | | Interest expense | $55,765 | $46,835 | | Provision for income taxes | $7,253 | $6,409 | | Depreciation and amortization | $7,848 | $10,870 | | Stock-based compensation expense | $3,357 | $4,052 | | Other adjustments | $2,124 | $5,526 | | **Adjusted EBITDA** | **$98,218** | **$91,374** | [Supplemental Performance Data](index=36&type=section&id=Supplemental%20Performance%20Data) The total portfolio has a cumulative collections to purchase price multiple of **1.9x**, with **$8.2 billion** in ERC Purchase Price Multiple by Geography (as of March 31, 2024) | Geography | Purchase Price (in thousands) | Total Estimated Gross Collections (in thousands) | Purchase Price Multiple | | :--- | :--- | :--- | :--- | | United States | $9,184,179 | $23,874,527 | 2.6x | | Europe | $4,022,533 | $9,401,655 | 2.3x | | **Total** | **$13,546,995** | **$33,866,233** | **2.5x** | Estimated Remaining Gross Collections (ERC) (in thousands) | | 84-Month ERC | 120-Month ERC | 180-Month ERC | | :--- | :--- | :--- | :--- | | Portfolio ERC | $6,829,240 | $7,578,068 | $8,195,339 | | REO ERC | $111,330 | $111,955 | $111,955 | | **Total ERC** | **$6,940,570** | **$7,690,023** | **$8,307,294** | [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$173.0 million** cash and **$827.3 million** available credit, and refinanced debt - Primary sources of capital are cash collections, bank borrowings, and debt/equity offerings. Primary cash requirements include portfolio purchases, operating expenses, and debt service[202](index=202&type=chunk) - In March 2024, the company issued **$500.0 million** in **9.250% Senior Secured Notes** due 2029[203](index=203&type=chunk) - As of March 31, 2024, **$91.9 million** remained under the share repurchase program. No repurchases were made in Q1 2024[204](index=204&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203%20%E2%80%93%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to foreign currency exchange rate or interest rate risk were reported since year-end 2023 - There had not been a material change in any of the foreign currency risk information or interest rate risk information disclosed in the 2023 Annual Report on Form 10-K[212](index=212&type=chunk)[213](index=213&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204%20%E2%80%93%20Controls%20and%20Procedures) Disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective at the reasonable assurance level as of the end of the reporting period[217](index=217&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[218](index=218&type=chunk) PART II – OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, other disclosures, and exhibits [Legal Proceedings](index=44&type=section&id=Item%201%20%E2%80%93%20Legal%20Proceedings) Information on legal proceedings is referenced in Note 11, indicating no new material developments this quarter - Information regarding legal proceedings is located in Note 11 of the financial statements[221](index=221&type=chunk) [Risk Factors](index=44&type=section&id=Item%201A%20%E2%80%93%20Risk%20Factors) No material changes to the risk factors previously disclosed in the 2023 Annual Report on Form 10-K - There is no material change in the information reported under 'Part I-Item 1A-Risk Factors' in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023[223](index=223&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202%20-%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities were reported during the period - None[225](index=225&type=chunk) [Other Information](index=44&type=section&id=Item%205%20%E2%80%93%20Other%20Information) A Rule 10b5-1 trading plan was adopted by a Senior Vice President to sell up to 2,025 shares - On March 18, 2024, Andrew Asch, Senior Vice President and General Counsel, adopted a Rule 10b5-1(c) trading plan to sell up to **2,025 shares** of company common stock[227](index=227&type=chunk) [Exhibits](index=45&type=section&id=Item%206%20%E2%80%93%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including officer certifications and debt indentures - Exhibits filed include officer certifications (**31.1, 31.2, 32.1**) and the indenture for the **2029 Notes** (**4.1**)[230](index=230&type=chunk)