Encore Capital Group(ECPG) - 2025 Q2 - Quarterly Results

Executive Summary & Business Update Encore Capital Group reports strong Q2 2025 performance, segment results, updated full-year guidance, and share repurchases Second Quarter 2025 Performance Overview Encore Capital Group reported strong financial performance in Q2 2025, with significant year-over-year increases in portfolio purchases, collections, and earnings per share, reflecting broad strength across its operations - Encore delivered strong performance in Q2 2025, reflected in financial metrics across the board[2] Q2 2025 Key Performance Indicators (YoY Growth) | Metric | Q2 2025 Value | YoY Change | | :-------------------------- | :-------------- | :--------- | | Global Portfolio Purchases | $367 million | +32% | | Global Collections | $655 million | +20% | | Earnings Per Share (EPS) | $2.49 | +86% | | Estimated Remaining Collections (ERC) | $9.4 billion | +12% | Segment Performance The MCM business in the U.S. achieved record portfolio purchases and collections, driven by favorable market conditions and strong execution. The Cabot business in Europe delivered solid results with increased collections Q2 2025 Segment Performance (YoY Growth) | Segment | Metric | Q2 2025 Value | YoY Change | | :---------------- | :---------------------- | :-------------- | :--------- | | MCM (U.S.) | Portfolio Purchases | $317 million | +34% | | | Collections | $490 million | +24% | | Cabot (Europe)| Portfolio Purchases | $50 million | In line | | | Collections | $164 million | +10% | - MCM U.S. capitalized on favorable supply environment, achieving record purchases at attractive returns and record collections due to superior execution[2] Full-Year 2025 Guidance Update Following a strong first half of 2025, Encore raised its full-year global collections guidance to approximately $2.5 billion, representing 15.5% year-over-year growth. Global portfolio purchasing guidance remains unchanged, expected to exceed 2024 levels Full-Year 2025 Guidance Update | Metric | Previous Guidance | Updated Guidance | YoY Growth | | :-------------------------- | :---------------- | :--------------- | :--------- | | Global Collections | $2.4 billion | ~$2.5 billion | +15.5% | | Global Portfolio Purchasing | Exceed $1.35B (2024) | Unchanged | - | - The higher collections guidance is an increase over the prior expectation of 11% growth to $2.4 billion[2] Share Repurchase Program Encore repurchased $15 million of its common stock during the second quarter of 2025, bringing the total repurchases for the first half of the year to $25 million Share Repurchases | Period | Amount Repurchased | | :---------------- | :----------------- | | Q2 2025 | $15 million | | First Half 2025 | $25 million | Financial Highlights for the Second Quarter of 2025 This section presents Encore Capital Group's key financial metrics for Q2 2025, highlighting significant year-over-year growth in purchases, collections, and net income Key Financial Metrics The company's financial highlights for the second quarter of 2025 demonstrate robust growth across key metrics, including a 32% increase in portfolio purchases, a 20% rise in collections, and an 82% surge in net income compared to the prior year Financial Highlights for the Three Months Ended June 30, 2025 (in thousands, except percentages and earnings per share) | (in thousands, except percentages and earnings per share) | 2025 | 2024 | Change | | :------------------------------------------------------ | :---------- | :---------- | :----- | | Portfolio purchases | $367,099 | $278,692 | 32% | | Average receivable portfolios | $4,068,656 | $3,557,355 | 14% | | Estimated Remaining Collections (ERC) | $9,362,400 | $8,396,696 | 12% | | Collections | $654,985 | $546,728 | 20% | | Revenues | $442,122 | $355,285 | 24% | | Operating expenses | $291,389 | $253,446 | 15% | | Net income | $58,721 | $32,181 | 82% | | Earnings per share | $2.49 | $1.34 | 86% | - U.S. purchases were $317.3 million in Q2 2025, up from $236.8 million in Q2 2024. Europe purchases were $49.8 million in Q2 2025, up from $41.9 million in Q2 2024[5] Company Information & Disclosures This section provides essential company information, including conference call details, non-GAAP measure definitions, company profile, forward-looking statements, and contact information Conference Call and Webcast Encore Capital Group will host a conference call and slide presentation on August 6, 2025, to discuss its second-quarter results, with live webcast and replay options available via its investor relations website - A conference call and slide presentation will be held on August 6, 2025, at 2:00 p.m. Pacific / 5:00 p.m. Eastern time[7] - The live webcast can be accessed on the Investor Relations page of Encore's website at encorecapital.com, with a replay available shortly after the call[7][8] Non-GAAP Financial Measures This section clarifies the use of non-GAAP financial measures, specifically Adjusted EBITDA, which management uses to evaluate operations and indicate cash generation. It emphasizes that these measures are not GAAP compliant and should not be considered alternatives to GAAP metrics - Adjusted EBITDA is a non-GAAP financial measure used by management to evaluate operations and indicate the Company's ability to generate cash collections in excess of operating expenses[10] - Adjusted EBITDA is not prepared in accordance with GAAP and should not be considered an alternative to net income and net income per share[10] About Encore Capital Group, Inc. Encore Capital Group is an international specialty finance company focused on debt recovery solutions and related services. It purchases consumer receivables globally and is committed to helping consumers achieve financial recovery, operating with a Consumer Bill of Rights - Encore Capital Group is an international specialty finance company providing debt recovery solutions and related services for consumers[11] - The company purchases portfolios of consumer receivables from major banks, credit unions, and utility providers globally[11] - Encore operates with a Consumer Bill of Rights, demonstrating its commitment to helping consumers restore financial health[12] Forward-Looking Statements This section serves as a cautionary statement regarding forward-looking information, indicating that such statements involve risks and uncertainties that could cause actual results to differ materially from projections. The company claims safe harbor protection and disclaims any obligation to update these statements - Statements in the press release that are not historical facts, including those with words like 'will,' 'expects,' 'anticipates,' are 'forward-looking statements' under the Private Securities Litigation Reform Act of 1995[13] - Such statements involve risks, uncertainties, and other factors that may cause actual results to differ materially from those expressed or implied[13] - The Company disclaims any intent or obligation to update these forward-looking statements[13] Contact Information Contact details for investor relations are provided for inquiries regarding Encore Capital Group - For investor relations inquiries, contact Bruce Thomas, Vice President, Global Investor Relations, at bruce.thomas@encorecapital.com[14] Condensed Consolidated Financial Statements This section presents Encore Capital Group's condensed consolidated financial statements, including statements of financial condition, income, and cash flows for Q2 2025 Condensed Consolidated Statements of Financial Condition The condensed consolidated statements of financial condition show Encore's financial position as of June 30, 2025, compared to December 31, 2024, indicating an increase in total assets, primarily driven by growth in receivable portfolios and goodwill, alongside a corresponding rise in total liabilities Condensed Consolidated Statements of Financial Condition (In Thousands) | | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Assets | | | | Cash and cash equivalents | $172,896 | $199,865 | | Receivable portfolios, net | $4,184,780 | $3,776,369 | | Goodwill | $542,912 | $507,808 | | Total assets | $5,191,386 | $4,789,729 | | Liabilities and Equity | | | | Borrowings | $3,965,465 | $3,672,762 | | Total liabilities | $4,295,415 | $4,022,398 | | Total stockholders' equity | $895,971 | $767,331 | | Total liabilities and stockholders' equity | $5,191,386 | $4,789,729 | - Receivable portfolios, net, increased by over $400 million from December 31, 2024, to June 30, 2025[17] Condensed Consolidated Statements of Income The condensed consolidated statements of income highlight strong revenue growth and a significant increase in net income for both the three and six months ended June 30, 2025, compared to the prior year. Total revenues for Q2 2025 rose by 24%, and net income surged by 82% Condensed Consolidated Statements of Income (In Thousands, Except Per Share Amounts) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $442,122 | $355,285 | $834,897 | $683,671 | | Total operating expenses | $291,389 | $253,446 | $554,821 | $498,241 | | Income from operations | $150,733 | $101,839 | $280,076 | $185,430 | | Net income | $58,721 | $32,181 | $105,517 | $55,420 | | Diluted Earnings per share | $2.49 | $1.34 | $4.41 | $2.28 | - Changes in recoveries significantly contributed to total debt purchasing revenue, increasing from $5,754 thousand in Q2 2024 to $55,599 thousand in Q2 2025[20] Condensed Consolidated Statements of Cash Flows The condensed consolidated statements of cash flows for the six months ended June 30, 2025, show a net decrease in cash and cash equivalents, primarily due to increased purchases of receivable portfolios in investing activities, despite positive cash flow from operating and financing activities Condensed Consolidated Statements of Cash Flows (Unaudited, In Thousands) | | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $54,807 | $86,697 | | Net cash used in investing activities | $(169,652) | $(131,886) | | Net cash provided by financing activities | $87,230 | $139,492 | | Net (decrease) increase in cash and cash equivalents | $(27,615) | $94,303 | | Cash and cash equivalents, end of period | $172,896 | $250,621 | - Purchases of receivable portfolios, net of put-backs, increased to $725,391 thousand in H1 2025 from $566,960 thousand in H1 2024[22] - Cash paid for interest significantly increased to $133,830 thousand in H1 2025 from $80,945 thousand in H1 2024[22] Supplemental Financial Information This section provides supplemental financial information, including a reconciliation of non-GAAP metrics like Adjusted EBITDA Reconciliation of Non-GAAP Metrics (Adjusted EBITDA) This section provides a reconciliation of GAAP net income to Adjusted EBITDA, a non-GAAP measure, for the three and six months ended June 30, 2025 and 2024. Adjusted EBITDA increased significantly year-over-year, reflecting operational performance excluding certain non-recurring or non-cash items Reconciliation of Adjusted EBITDA (in thousands, unaudited) | (in thousands, unaudited) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | GAAP net income, as reported | $58,721 | $32,181 | $105,517 | $55,420 | | Interest expense | $73,943 | $61,376 | $144,473 | $117,141 | | Provision for income taxes | $19,295 | $10,329 | $32,959 | $17,582 | | Depreciation and amortization | $7,311 | $7,461 | $14,655 | $15,309 | | Stock-based compensation expense | $5,283 | $4,637 | $8,707 | $7,994 | | Acquisition, integration and restructuring related expenses | $1,042 | $1,883 | $1,290 | $4,202 | | Adjusted EBITDA | $164,233 | $116,029 | $304,693 | $214,247 | | Collections applied to principal balance | $244,677 | $228,923 | $488,977 | $443,474 | - Adjusted EBITDA for the three months ended June 30, 2025, increased by approximately 41.5% compared to the same period in 2024[23] - Adjustments for non-indicative ongoing operations include net gain on derivative instruments and acquisition, integration, and restructuring related expenses[23][24]