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

PART I – FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and notes for Q2 2025 and FY 2024 Item 1—Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements and notes for Q2 2025 and FY 2024 Condensed Consolidated Statements of Financial Condition This statement provides a snapshot of the company's assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | | Total Assets | $5,191,386 | $4,789,729 | | Receivable portfolios, net | $4,184,780 | $3,776,369 | | Total Liabilities | $4,295,415 | $4,022,398 | | Borrowings | $3,965,465 | $3,672,762 | | Total Stockholders' Equity | $895,971 | $767,331 | - Most assets of consolidated variable interest entities (VIEs) can only be used to settle obligations of those VIEs, and liabilities exclude amounts where creditors have recourse to the Company's general credit[9] Condensed Consolidated Statements of Income This statement details the company's revenues, operating income, net income, and earnings per share for the three and six months ended June 30, 2025 and 2024 | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Total Revenues | $442,122 | $355,285 | $834,897 | $683,671 | | Income from operations | $150,733 | $101,839 | $280,076 | $185,430 | | Net Income | $58,721 | $32,181 | $105,517 | $55,420 | | Basic EPS | $2.50 | $1.35 | $4.45 | $2.33 | | Diluted EPS | $2.49 | $1.34 | $4.41 | $2.28 | Condensed Consolidated Statements of Comprehensive Income This statement presents net income and other comprehensive income components, including unrealized gains/losses on derivatives and foreign currency translation | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------------------ | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Net income | $58,721 | $32,181 | $105,517 | $55,420 | | Unrealized (loss) gain on derivative instruments, net of tax | $(2,853) | $(1,819) | $(3,729) | $971 | | Unrealized gain (loss) on foreign currency translation, net of tax | $30,914 | $(703) | $46,378 | $(7,009) | | Comprehensive income | $86,782 | $29,659 | $148,166 | $49,382 | Condensed Consolidated Statements of Equity This statement outlines changes in total stockholders' equity, accumulated earnings, and other comprehensive loss, including share repurchases | Metric | December 31, 2024 (in thousands) | June 30, 2025 (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | | Total Stockholders' Equity | $767,331 | $895,971 | | Accumulated Earnings | $909,927 | $1,015,221 | | Accumulated Other Comprehensive Loss | $(162,130) | $(119,481) | | Common Stock Shares Outstanding | 23,691 | 23,095 | - The company repurchased 418,499 shares of common stock for approximately $15.0 million during the three months ended June 30, 2025, and 707,924 shares for approximately $25.0 million during the six months ended June 30, 2025[18] Condensed Consolidated Statements of Cash Flows This statement summarizes cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | | 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 | | Purchases of receivable portfolios, net of put-backs | $(725,391) | $(566,960) | | Collections applied to receivable portfolios | $553,400 | $419,833 | | Cash and cash equivalents, end of period | $172,896 | $250,621 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1: Ownership, Description of Business, and Summary of Significant Accounting Policies This note describes the company's business, primary operations, and recent accounting pronouncements affecting financial reporting - Encore Capital Group, Inc. is an international specialty finance company providing debt recovery solutions and related services, primarily purchasing defaulted consumer receivables[25] - The company's primary operations are through Midland Credit Management, Inc. (MCM) in the U.S. and Cabot Credit Management Limited (CCM) in Europe and the UK[26] - Recent accounting pronouncements include ASU 2023-09 (Income Tax Disclosures, effective after Dec 15, 2024), ASU 2024-03/2025-01 (Expense Disaggregation Disclosures, effective after Dec 15, 2026), and ASU 2024-04 (Induced Conversions of Convertible Debt, effective after Dec 15, 2025)[33][34][35] Note 2: Earnings Per Share This note details the calculation of basic and diluted earnings per share and information on share repurchases | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $58,721 | $32,181 | $105,517 | $55,420 | | Basic earnings per share | $2.50 | $1.35 | $4.45 | $2.33 | | Diluted earnings per share | $2.49 | $1.34 | $4.41 | $2.28 | | Weighted-average basic shares outstanding | 23,507 | 23,883 | 23,692 | 23,834 | | Weighted-average dilutive shares outstanding | 23,578 | 24,097 | 23,926 | 24,282 | - The company repurchased 418,499 shares for approximately $15.0 million during the three months ended June 30, 2025, and 707,924 shares for approximately $25.0 million during the six months ended June 30, 2025, under its $300.0 million share repurchase program[38] Note 3: Fair Value Measurements This note provides fair value measurements for financial instruments, including derivatives and receivable portfolios, and their valuation methodologies | Financial Instrument | Fair Value Level | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------- | :--------------- | :----------------------------- | :----------------------------- | | Interest rate cap contracts | Level 2 | $503 | $252 | | Interest rate swap agreements | Level 2 | $(22,659) | $(18,360) | | Financial Instrument | Fair Value Level | Carrying Amount (June 30, 2025) | Estimated Fair Value (June 30, 2025) | | :------------------- | :--------------- | :------------------------------ | :----------------------------------- | | Receivable portfolios, net | Level 3 | $4,184,780 | $4,469,118 | - The fair value of receivable portfolios is measured by discounting estimated future cash flows using proprietary forecasting models, with key inputs including estimated future gross cash flow, average cost to collect, and discount rate[48] Note 4: Derivatives and Hedging Instruments This note explains the company's use of interest rate swaps and cross-currency swaps to manage interest rate and foreign currency risks | Derivative Instrument | Balance Sheet Location | Fair Value (June 30, 2025, in thousands) | Fair Value (December 31, 2024, in thousands) | | :-------------------- | :--------------------- | :--------------------------------------- | :--------------------------------------- | | Interest rate cap contracts | Other assets | $503 | $252 | | Interest rate swap agreements | Other liabilities | $(22,659) | $(18,360) | - The company uses interest rate swap agreements and interest rate cap contracts as cash flow hedges to reduce exposure to fluctuations in interest rates on variable interest rate debt[55] - Cross-currency swap agreements are used as fair value hedges to manage foreign currency exchange risk by converting fixed-rate Euro and GBP borrowings to fixed-rate USD debt[56] Note 5: Receivable Portfolios, Net This note details the balance of receivable portfolios, net, and the impact of collections and changes in expected recoveries | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :----------------------------- | | Receivable portfolios, net (Balance, end of period) | $4,184,780 | $3,776,369 | | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Negative allowance for expected recoveries - portfolio purchases | $367,099 | $278,692 | $734,950 | $574,406 | | Collections applied to receivable portfolios, net | $(293,811) | $(224,798) | $(553,400) | $(419,833) | | Changes in recoveries | $55,599 | $5,754 | $77,063 | $(6,655) | - Collections over-performed forecasted collections by approximately $52.3 million and $79.2 million for the three and six months ended June 30, 2025, respectively[66] Note 6: Other Assets This note provides a breakdown of other asset categories, including operating lease right-of-use assets and real estate owned | Other Asset Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------- | :----------------------------- | :----------------------------- | | Operating lease right-of-use assets | $61,054 | $58,089 | | Prepaid expenses | $34,874 | $35,564 | | Real estate owned | $30,122 | $38,075 | | Total Other Assets | $206,743 | $225,090 | Note 7: Borrowings This note outlines the company's various borrowing instruments, including credit facilities and senior notes, and recent amendments | Borrowing Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :----------------------------- | | Global senior secured revolving credit facility | $999,678 | $865,365 | | Senior secured notes | $1,950,022 | $1,846,047 | | Convertible senior notes | $330,000 | $330,000 | | Cabot securitisation senior facility | $350,141 | $319,137 | | U.S. facility | $300,000 | $283,500 | | Total Borrowings (net) | $3,965,465 | $3,672,762 | - The Global Senior Facility was upsized by $190.0 million to $1.485 billion and its termination date extended from September 2028 to September 2029 (except for a $69.5 million tranche)[71] - The U.S. Facility was amended on July 3, 2025, to extend its maturity date from October 2027 to October 2028 and increase the committed amount from $300.0 million to $450.0 million[91] Note 8: Variable Interest Entities This note explains the company's consolidation of Variable Interest Entities (VIEs) for which it is the primary beneficiary - The company consolidates Variable Interest Entities (VIEs) for which it is the primary beneficiary, having both the power to direct activities and the obligation to absorb losses or right to receive benefits[94] - VIEs include certain securitized financing vehicles and other immaterial special purpose entities created to purchase receivable portfolios in specific geographies[95] Note 9: Accumulated Other Comprehensive Loss This note details the components of accumulated other comprehensive loss, including derivatives and currency translation adjustments | Component | Balance at December 31, 2024 (in thousands) | Balance at June 30, 2025 (in thousands) | | :----------------------------- | :------------------------------------------ | :-------------------------------------- | | Derivatives | $(16,368) | $(20,097) | | Currency Translation Adjustments | $(145,762) | $(99,384) | | Total Accumulated Other Comprehensive Loss | $(162,130) | $(119,481) | - For the six months ended June 30, 2025, other comprehensive income before reclassification included $(7.1) million from derivatives and $46.2 million from currency translation adjustments[98] Note 10: Income Taxes This note presents the provision for income taxes, effective tax rates, and factors influencing tax rate differences | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Provision for income taxes | $19,295 | $10,329 | $32,959 | $17,582 | | Effective tax rate | 24.7% | 24.3% | 23.8% | 24.1% | - The effective tax rate differences from the federal statutory rate were primarily due to state income taxes and other foreign adjustments for 2025, and state income taxes for 2024[99] - The company has estimated and recorded an immaterial impact from the OECD's Pillar Two global minimum tax framework, and the recently signed One Big Beautiful Bill Act (OBBBA) is expected to have an immaterial impact for future periods[103][105] Note 11: Commitments and Contingencies This note discusses legal actions, regulatory investigations, and forward flow purchase agreements for nonperforming loans - The company is routinely subject to legal actions and regulatory investigations related to debt collection practices (e.g., FDCPA, FCRA, TCPA)[106] - As of June 30, 2025, there were no material developments in previously disclosed legal proceedings, nor any new material legal proceedings, and no material reserves for legal matters[107][108] - The company had forward flow purchase agreements for nonperforming loans with an estimated minimum aggregate purchase price of approximately $411.1 million as of June 30, 2025[110] Note 12: Segment and Geographic Information This note provides revenue and operating income by the company's single reportable segment and geographic areas - The company operates as one reportable segment: debt purchasing and recovery, based on aggregation criteria[112] | Metric | Three Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | | :----------------------------- | :------------------------------------ | :---------------------------------- | | Debt purchasing and recovery segment - Total revenues | $442,122 | $834,897 | | Debt purchasing and recovery segment - Operating income | $167,815 | $311,081 | | Geographic Area | Three Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | | :-------------- | :------------------------------------ | :---------------------------------- | | United States | $312,590 | $582,176 | | Europe | $128,138 | $249,599 | | Other geographies | $1,394 | $3,122 | | Total Revenues | $442,122 | $834,897 | Note 13: Goodwill This note details the balance of goodwill, the effect of foreign currency translation, and impairment testing information | Metric | December 31, 2024 (in thousands) | June 30, 2025 (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | | Balance of Goodwill | $507,808 | $542,912 | | Effect of foreign currency translation | N/A | $35,104 | - The company's goodwill is tested for impairment annually, and no interim assessment was required for the three and six months ended June 30, 2025[123][124] - Accumulated goodwill impairment loss was $338.8 million as of June 30, 2025, attributable to the Cabot reporting unit[125] Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses the company's financial condition, operations, and liquidity, analyzing Q2 2025 revenues, expenses, and cash flows Our Business This section describes Encore's core business as an international specialty finance company focused on debt recovery solutions - Encore is an international specialty finance company providing debt recovery solutions and related services, primarily purchasing portfolios of defaulted consumer receivables[128] - The company operates through three business units: MCM (United States), Cabot (Europe), and LAAP (Latin America and Asia-Pacific)[129] - The long-term growth strategy focuses on continuing to invest in core portfolio purchasing and recovery in the United States and United Kingdom, and strengthening and developing business in France and Spain[132] Government Regulation This section outlines the federal, state, municipal, and foreign regulations governing the company's debt collection and purchasing activities - U.S. operations (MCM) are subject to federal, state, and municipal statutes, rules, and regulations, including the Fair Debt Collection Practices Act (FDCPA), Fair Credit Reporting Act (FCRA), and Telephone Consumer Protection Act (TCPA)[133][134] - European operations (Cabot) are affected by foreign statutes, rules, and regulations regarding debt collection and debt purchase activities, which are subject to modification[135] Portfolio Purchasing and Recovery This section details the types of defaulted consumer receivables purchased and the proprietary models used for valuation and collections - In the United States, the company primarily purchases charged-off credit card debt portfolios, with a small percentage comprising Chapter 13 and Chapter 7 bankruptcy proceedings[136] - Proprietary statistical and behavioral models are employed across U.S. operations for accurate portfolio valuation and to maximize future collections[137] - In Europe, purchased defaulted debt portfolios primarily consist of credit card and consumer loan accounts, valued using a proprietary pricing model[138] Purchases and Collections This section analyzes market conditions, capital deployments, and gross collections from purchased receivables by geographic location Portfolio Pricing, Supply and Demand This section discusses the supply, demand, and pricing dynamics for defaulted consumer receivables in the U.S. and European markets - In the U.S., supply of defaulted consumer receivables remains elevated due to record lending and high charge-off rates, with pricing remaining at favorable levels[139] - Smaller competitors face difficulties in the U.S. portfolio purchasing market due to high operating costs and increasing cost of capital, favoring larger participants like MCM[140] - The UK market provides a relatively consistent pipeline of opportunities, and France and Spain are significant markets in Europe for non-performing loan disposals[141][142] - Portfolio pricing remains competitive across European markets, constraining the amount of capital deployed in Europe[143] Purchases by Geographic Location This section provides a breakdown of capital deployed for receivable portfolio purchases across different geographic regions | Geographic Location | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------ | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | MCM (United States) | $317,264 | $236,826 | $633,630 | $473,335 | | Cabot (Europe) | $49,835 | $41,866 | $101,320 | $101,071 | | Total purchases of receivable portfolios | $367,099 | $278,692 | $734,950 | $574,406 | - U.S. capital deployments increased during the three and six months ended June 30, 2025, due to increased supply and favorable pricing[144] - European capital deployment increased during the three months ended June 30, 2025, primarily due to favorable foreign currency translation, while remaining relatively consistent for the six-month period[145] Collections from Purchased Receivables by Channel and Geographic Location This section details gross collections from purchased receivables, segmented by geographic area and collection channel | Geographic Area | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | MCM (United States) - Subtotal | $490,352 | $396,629 | $944,377 | $766,107 | | Cabot (Europe) - Subtotal | $163,967 | $149,224 | $313,943 | $289,921 | | Total collections from purchased receivables | $654,985 | $546,728 | $1,259,792 | $1,057,615 | - Gross collections from purchased receivables increased by 19.8% to $655.0 million (three months) and 19.1% to $1.26 billion (six months) in 2025[148] - Increases were driven by consistent capital deployments in the U.S. and a combination of increased capital deployments and acquisitions of portfolios with higher returns in Europe[148] Results of Operations This section analyzes the company's financial performance, including revenues, operating expenses, interest expense, and income taxes Revenues This section examines the sources and drivers of the company's total revenues, including portfolio revenue and servicing revenue | Revenue Category | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Portfolio revenue | $361,174 | $321,930 | $706,392 | $637,782 | | Changes in recoveries | $55,599 | $5,754 | $77,063 | $(6,655) | | Total debt purchasing revenue | $416,773 | $327,684 | $783,455 | $631,127 | | Servicing revenue | $22,300 | $21,107 | $44,847 | $41,486 | | Other revenues | $3,049 | $6,494 | $6,595 | $11,058 | | Total revenues | $442,122 | $355,285 | $834,897 | $683,671 | - Revenue recognized from portfolio basis increased due to a higher receivable portfolios balance in the U.S. driven by consistent higher purchase volumes in recent periods[157] - Collections over-performed forecasted collections by approximately $52.3 million (three months) and $79.2 million (six months) in 2025, primarily driven by enhanced U.S. collection strategies[158] Operating Expenses This section details changes in key operating expense categories, such as salaries, legal collections, and general and administrative costs | Expense Category | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Salaries and employee benefits | $117,738 | $106,608 | $223,670 | $210,792 | | Cost of legal collections | $79,649 | $64,249 | $147,662 | $122,970 | | General and administrative expenses | $41,327 | $36,779 | $82,345 | $73,020 | | Other operating expenses | $36,990 | $30,845 | $71,242 | $61,212 | | Total operating expenses | $291,389 | $253,446 | $554,821 | $498,241 | - Salaries and employee benefits increased primarily due to an increase in overall headcount and employee benefits/payroll taxes[174] - Cost of legal collections increased due to increased legal placements in this channel in the United States[176] Interest Expense This section discusses the factors contributing to changes in interest expense, including debt balances and interest rates | Expense Category | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Stated interest on debt obligations | $70,276 | $57,163 | $137,262 | $109,201 | | Total interest expense | $73,943 | $61,376 | $144,473 | $117,141 | - The increase in interest expense was primarily due to increased average debt balance and rising interest rates[183] - Foreign currency translation had an unfavorable impact on interest expense, driven by the weakening of the U.S. dollar against the British Pound[183] Other Income, net of Other Expense This section provides an overview of other non-operating income and expenses impacting the company's financial results | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Other income, net | $1,226 | $2,047 | $2,873 | $4,713 | | Interest income | $1,400 (approx.) | $1,800 (approx.) | $2,900 (approx.) | $3,100 (approx.) | Provision for Income Taxes This section analyzes the provision for income taxes and the effective tax rate, highlighting key reconciling items | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Provision for income taxes | $19,295 | $10,329 | $32,959 | $17,582 | | Effective tax rate | 24.7% | 24.3% | 23.8% | 24.1% | - The differences between the effective tax rate and the federal statutory rate were primarily due to state income taxes offset by other foreign adjustments for 2025, and state income taxes for 2024[184] Non-GAAP Disclosure This section defines and reconciles Adjusted EBITDA, a non-GAAP financial measure, to GAAP net income for performance evaluation - Adjusted EBITDA is a non-GAAP financial measure used to evaluate operating performance, defined as net income before interest, taxes, depreciation and amortization, stock-based compensation, acquisition/integration/restructuring expenses, and other non-indicative charges or gains[187] | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | GAAP net income, as reported | $58,721 | $32,181 | $105,517 | $55,420 | | Adjusted EBITDA | $164,233 | $116,029 | $304,693 | $214,247 | Supplemental Performance Data This section presents key performance metrics, including cumulative collections money multiples and estimated remaining gross collections - Supplemental performance data, including purchases, collections, and Estimated Remaining Collections (ERC), is impacted by foreign currency translation[192] Cumulative Collections Money Multiple - Cumulative Collections from Purchased Receivables to Purchase Price Multiple This section provides the cumulative collections money multiple, comparing total collections to purchase price by geographic area | Geographic Area | Total Purchase Price (in thousands) | Total Cumulative Collections (in thousands) | CCMM (Multiple) | | :-------------- | :---------------------------------- | :------------------------------------------ | :-------------- | | United States | $10,567,420 | $21,519,619 | 2.0 | | Europe | $4,366,630 | $6,512,157 | 1.5 | | Other geographies | $340,283 | $550,501 | 1.6 | | Total | $15,274,333 | $28,582,277 | 1.9 | Purchase Price Multiple - Total Estimated Collections from Purchased Receivables to Purchase Price Multiple This section presents the purchase price multiple, comparing total estimated gross collections to purchase price by geographic area | Geographic Area | Purchase Price (in thousands) | Total Estimated Gross Collections (in thousands) | Purchase Price Multiple | | :-------------- | :---------------------------- | :----------------------------------------------- | :---------------------- | | United States | $10,567,420 | $27,175,949 | 2.6 | | Europe | $4,366,630 | $10,146,612 | 2.3 | | Other geographies | $340,283 | $575,287 | 1.7 | | Total | $15,274,333 | $37,897,848 | 2.5 | Estimated Remaining Gross Collections by Year of Purchase This section details the estimated remaining gross collections (ERC) for portfolios and real estate owned, segmented by geographic area | Category | Total ERC (in thousands) | | :--------------- | :----------------------- | | Portfolio ERC | $9,315,571 | | REO ERC | $46,829 | | Total ERC | $9,362,400 | | Geographic Area | Portfolio ERC (in thousands) | | :-------------- | :--------------------------- | | United States | $5,656,330 | | Europe | $3,634,455 | | Other geographies | $24,786 | Estimated Future Collections Applied to Receivable Portfolios This section outlines the projected amortization schedule for estimated future collections applied to receivable portfolios | Years Ending December 31, | Total Amortization (in thousands) | | :----------------------- | :-------------------------------- | | 2025 (July-Dec) | $469,704 | | 2026 | $926,570 | | 2027 | $698,223 | | 2028 | $485,396 | | 2029 | $357,310 | | 2030 | $268,196 | | Total | $4,184,780 | Liquidity and Capital Resources This section discusses the company's cash flow activities, primary capital sources, and available funding capacity Liquidity This section analyzes the company's cash flows from operating, investing, and financing activities and their impact on overall liquidity | Cash Flow Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------- | :------------------------------------ | :------------------------------------ | | 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 cash provided by operating activities decreased due to adjustments for changes in recoveries, which resulted in a $77.1 million decrease in operating cash flows for the six months ended June 30, 2025[209] - Net cash used in investing activities was primarily affected by $725.4 million in receivable portfolio purchases (net of put-backs) and $553.4 million in collections applied to receivable portfolios for the six months ended June 30, 2025[210] Capital Resources This section identifies the primary sources of capital, including debt facilities and share repurchase programs, and their utilization - Primary sources of capital include cash collections from receivable portfolios, bank borrowings, debt offerings, and equity offerings[212] - Available capacity under the Global Senior Facility was $397.2 million as of June 30, 2025[213] - The company repurchased 707,924 shares of common stock for approximately $25.0 million during the six months ended June 30, 2025, under its $300.0 million share repurchase program, with $66.9 million remaining authorization[214] Critical Accounting Estimates This section highlights key accounting estimates, particularly the ongoing reassessment of expected future recoveries of receivable portfolios - The preparation of condensed consolidated financial statements requires management to make estimates and assumptions, particularly regarding the ongoing reassessment of expected future recoveries of receivable portfolios under the CECL accounting policy[218] - No material changes to critical accounting policies and estimates have occurred since the Annual Report on Form 10-K for the year ended December 31, 2024, other than the ongoing reassessment of expected future recoveries[218] Item 3 – Quantitative and Qualitative Disclosures About Market Risk As of June 30, 2025, there were no material changes in foreign currency exchange rates or interest rate risk information compared to the 2024 Annual Report on Form 10-K - No material change in foreign currency risk information as of June 30, 2025, compared to the 2024 Annual Report on Form 10-K[220] - No material change in interest rate risk information as of June 30, 2025, compared to the 2024 Annual Report on Form 10-K[221] Item 4 – Controls and Procedures Management confirmed effective disclosure controls as of June 30, 2025, with no material changes to internal control during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[225] - There were no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting during the quarter ended June 30, 2025[226] PART II – OTHER INFORMATION This section provides information on legal proceedings, risk factors, equity sales, other disclosures, and exhibits Item 1 – Legal Proceedings Information regarding legal proceedings is incorporated by reference from "Note 11: Commitments and Contingencies" in the condensed consolidated financial statements - Information with respect to legal proceedings is found in "Note 11: Commitments and Contingencies" to the condensed consolidated financial statements[228] Item 1A – Risk Factors There were no material changes in the risk factors reported in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - 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, 2024[230] Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 418,499 shares for $15.0 million in Q2 2025, with $66.9 million remaining under its $300.0 million share repurchase program - The company repurchased 418,499 shares of common stock for approximately $15.0 million during the three months ended June 30, 2025, under its $300.0 million share repurchase program[232] - As of June 30, 2025, authorization for $66.9 million of share repurchases remained under the share repurchase program[232] Item 5 – Other Information John Yung adopted a Rule 10b5-1(c) trading plan to sell up to 6,000 shares of common stock between August 2025 and June 2026 - John Yung, President International and Cabot Credit Management, adopted a trading plan intended to satisfy the affirmative defense of Rule 10b5-1(c) to sell up to 6,000 shares of Encore Capital Group, Inc. common stock between August 15, 2025, and June 9, 2026[234] Item 6 – Exhibits This section lists Form 10-Q exhibits, including corporate documents, a Senior Facilities Agreement amendment, and officer certifications - Exhibits include the Restated Certificate of Incorporation, Amended and Restated Bylaws, an Amendment Letter to the Amended and Restated Senior Facilities Agreement, and certifications from the Principal Executive Officer and Principal Financial Officer[237] SIGNATURES This section confirms the official signing of the report by the company's Chief Financial Officer and Treasurer on August 6, 2025 - The report was signed on behalf of Encore Capital Group, Inc. by Tomas Hernanz, Executive Vice President, Chief Financial Officer and Treasurer, on August 6, 2025[241]