Encore Capital Shares Plunge 21.9% Since Q4 Earnings Miss

Core Insights - Encore Capital Group, Inc. (ECPG) shares have dropped 21.9% following the release of its fourth-quarter 2024 results, raising investor concerns about declining debt-purchasing revenues [1] - Despite the revenue decline, rising collections and strong portfolio purchasing have partially mitigated the negative impact [1] Financial Performance - ECPG reported adjusted earnings per share (EPS) of $1.50, missing the Zacks Consensus Estimate by 3.2%, but showing a 20% year-over-year improvement [2] - Revenues decreased by 4.2% year over year to $265.6 million, falling short of the consensus estimate by 28.9% [2] - Total debt purchasing revenues fell 4.6% year over year to $240.9 million, while servicing revenues increased by 4.5% to $20.5 million, exceeding the consensus mark of $20 million [4] Collections and Purchases - Global collections grew by 21% year over year to $554.6 million, although this was below the consensus estimate of $585.5 million [5] - Portfolio purchases in the U.S. rose significantly, contributing to a total of $495.1 million, up from $292.5 million a year ago [6] Operating Expenses and Cash Flow - Total operating expenses decreased by 19% year over year to $399.8 million, attributed to lower collection agency commissions and goodwill impairment [5] - Cash efficiency margin improved to 53% from 51.2% a year ago [6] - Net cash provided by operating activities increased by 2.1% year over year to $156.2 million [8] Financial Position - As of December 31, 2024, total assets were $4.8 billion, up from $4.6 billion at the end of 2023 [8] - Cash and cash equivalents rose to $199.9 million, while borrowings increased to $3.67 billion from $3.32 billion at the end of 2023 [8] Full-Year Update and Guidance - For the full year 2024, revenues increased by 8% year over year, with collections and portfolio purchases rising by 16% and 26%, respectively [9] - Management anticipates portfolio purchasing to exceed $1.35 billion in 2025 and collections to grow by approximately 11% to $2.4 billion [10]