Workflow
Encore Capital Group(ECPG) - 2025 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1— Condensed Consolidated Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for Q1 2025 reflect significant growth in net income and total revenues, driven by increased debt purchasing and portfolio expansion Condensed Consolidated Statements of Financial Condition Total assets reached $4.97 billion, driven by increased receivable portfolios, while liabilities grew to $4.15 billion due to higher borrowings Condensed Consolidated Statements of Financial Condition (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $4,969,586 | $4,789,729 | | Receivable portfolios, net | $3,952,531 | $3,776,369 | | Goodwill | $519,410 | $507,808 | | Total Liabilities | $4,150,525 | $4,022,398 | | Borrowings | $3,790,698 | $3,672,762 | | Total Stockholders' Equity | $819,061 | $767,331 | Condensed Consolidated Statements of Income Total revenues increased to $392.8 million, leading to a more than doubling of net income to $46.8 million for Q1 2025 Three Months Ended March 31, (in thousands, except per share amounts) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Total Revenues | $392,775 | $328,386 | | Total debt purchasing revenue | $366,682 | $303,443 | | Income from operations | $129,343 | $83,591 | | Net income | $46,796 | $23,239 | | Diluted EPS | $1.93 | $0.95 | Condensed Consolidated Statements of Cash Flows Operating activities generated $45.3 million, while investing activities used $100.3 million, resulting in a net decrease in cash and equivalents Cash Flow Summary for Three Months Ended March 31, (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $45,283 | $50,984 | | Net cash used in investing activities | ($100,278) | ($90,882) | | Net cash provided by financing activities | $40,337 | $55,790 | | Net (decrease) increase in cash | ($14,658) | $15,892 | | Cash and cash equivalents, end of period | $187,117 | $172,990 | - Purchases of receivable portfolios were a primary use of cash, totaling $362.7 million in Q1 2025, an increase from $291.4 million in Q1 202420 Notes to Condensed Consolidated Financial Statements Detailed notes cover accounting policies, business operations, share repurchases, receivable portfolios, borrowings, and confirm no new material legal proceedings - The company operates as an international specialty finance company, purchasing and managing portfolios of defaulted consumer receivables through its main subsidiaries, MCM in the U.S. and Cabot in Europe2223 - During Q1 2025, the company repurchased 289,425 shares of common stock for approximately $10.0 million under its share repurchase program34 Change in Receivable Portfolios, Net (in thousands) | Description | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Beginning Balance | $3,776,369 | $3,468,432 | | Portfolio Purchases | $367,851 | $295,714 | | Collections Applied | ($259,589) | ($195,035) | | Changes in Recoveries | $21,464 | ($12,409) | | Ending Balance | $3,952,531 | $3,531,387 | Consolidated Borrowings (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Global senior secured revolving credit facility | $916,409 | $865,365 | | Senior secured notes | $1,880,143 | $1,846,047 | | Convertible senior notes | $330,000 | $330,000 | | Other | $397,502 | $384,041 | | Total (before debt costs) | $3,824,851 | $3,710,018 | - As of March 31, 2025, the company had forward flow purchase agreements for nonperforming loans with an estimated minimum aggregate purchase price of approximately $534.9 million106 Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations Management highlights strong Q1 2025 performance driven by robust U.S. portfolio purchasing, increased collections, and revenue growth, while maintaining sufficient liquidity Purchases and Collections Portfolio purchases rose to $367.9 million, primarily from U.S. market strength, driving an 18.4% increase in gross collections to $604.8 million - In the U.S., market supply for defaulted consumer receivables remains at a record level, with issuers predominantly selling fresh portfolios, leading to favorable pricing conditions for Encore131 Purchases of Receivable Portfolios by Location (in thousands) | Location | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | MCM (United States) | $316,366 | $236,509 | | Cabot (Europe) | $51,485 | $59,205 | | Total | $367,851 | $295,714 | Total Collections by Geographic Area (in thousands) | Location | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | MCM (United States) | $454,025 | $369,478 | | Cabot (Europe) | $149,976 | $140,697 | | Total | $604,807 | $510,887 | Results of Operations Total revenues surged 19.6% to $392.8 million, driven by debt purchasing and positive recovery changes, while operating income grew 54.7% Revenue Breakdown (in thousands) | Revenue Component | Q1 2025 | Q1 2024 | $ Change | | :--- | :--- | :--- | :--- | | Portfolio revenue | $345,218 | $315,852 | $29,366 | | Changes in recoveries | $21,464 | ($12,409) | $33,873 | | Total debt purchasing revenue | $366,682 | $303,443 | $63,239 | | Servicing revenue | $22,547 | $20,379 | $2,168 | | Total revenues | $392,775 | $328,386 | $64,389 | - Collections over-performed forecasts by approximately $27.0 million in Q1 2025, contributing significantly to the positive 'Changes in recoveries' revenue line item149 Operating Expenses (in thousands) | Expense Component | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $105,932 | $104,184 | 1.7% | | Cost of legal collections | $68,013 | $58,721 | 15.8% | | General and administrative | $41,018 | $36,241 | 13.2% | | Total operating expenses | $263,432 | $244,795 | 7.6% | - Interest expense increased by $14.8 million (26.5%) YoY, driven by a higher average debt balance (contributing $6.7 million) and rising interest rates (contributing $8.6 million)166169 Liquidity and Capital Resources The company maintains strong liquidity with $378.6 million available under its Global Senior Facility and repurchased $10.0 million in common stock during Q1 2025 - The company is in material compliance with all debt covenants and had $378.6 million of available capacity under its Global Senior Facility as of March 31, 2025196 - Under its $300 million share repurchase program, the company bought back 289,425 shares for approximately $10.0 million in Q1 2025. As of March 31, 2025, $81.9 million remained authorized for future repurchases197 Item 3 – Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk exposure, including foreign currency and interest rates, were reported as of March 31, 2025 - There were no material changes in the company's foreign currency or interest rate risk profiles during the first quarter of 2025204205 Item 4 – Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The CEO and CFO have concluded that the company's disclosure controls and procedures are effective as of the end of the reporting period209 - No material changes were made to the internal control over financial reporting during the quarter ended March 31, 2025210 PART II – OTHER INFORMATION Item 1 – Legal Proceedings No material developments or new legal proceedings were reported during the quarter, as detailed in the financial statements - There were no material developments in legal proceedings during the three months ended March 31, 2025102213 Item 1A – Risk Factors No material changes to the company's previously disclosed risk factors were reported for the quarter - No material changes to the company's risk factors were reported for the quarter215 Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 289,425 shares for $10.0 million in Q1 2025, with $81.9 million remaining under its share repurchase program Issuer Repurchases of Equity Securities (Q1 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | | Jan 2025 | 0 | N/A | $91,926,255 | | Feb 2025 | 7,636 | $36.41 | $91,648,258 | | Mar 2025 | 281,789 | $34.51 | $81,922,587 | | Total | 289,425 | $34.56 | $81,922,587 |