Encore Capital Group(US:ECPG)2022-02-24 04:45Financial Data and Key Metrics Changes - In 2021, global collections reached a record $2.3 billion, up 9% compared to the prior year [36] - Revenues increased by 8% to $1.6 billion in 2021, with US revenues up 12% to $1.1 billion [37] - The leverage ratio improved to 1.9x by the end of 2021, down from 2.4x a year ago [29] Business Line Data and Key Metrics Changes - The MCM business in the US saw collections grow 7% to an all-time high of $1.6 billion [20] - Cabot's collections in Europe reached a record $645 million in 2021, up 16% compared to the prior year [36] - Portfolio purchases in Q4 totaled $183 million, up 44% compared to Q4 of 2020 [35] Market Data and Key Metrics Changes - Portfolio purchases globally were $665 million in 2021, slightly exceeding the previous year's total of $660 million [10] - The US and UK markets experienced lower supply due to fewer charge-offs, but indications of credit normalization are beginning to emerge [11][17] Company Strategy and Development Direction - The company focuses on a three-pillar strategy: market focus, enhancing competitive advantages, and maintaining a strong balance sheet [16][25][28] - The company plans to increase portfolio purchases in 2022 as credit card balances rise and lending normalizes [44] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer behavior is starting to normalize, with rising credit card spending and expectations of increased charge-offs [67] - The company anticipates a continued normalization in the collections environment compared to the exceptional levels seen in 2021 [44] Other Important Information - The company repurchased approximately 23% of its outstanding shares for $390 million in 2021 [31] - The effective tax rate for Q4 was lower than normal at 11%, with expectations for 2022 to be in the low to mid-20s [35] Q&A Session Summary Question: Accounting question regarding recoveries line - Management acknowledged the challenges in forecasting due to unusual consumer behavior during the pandemic and indicated that forecasts are continuously adjusted based on the best available data [46][49] Question: Capital actions and returns - Management confirmed that they will continue to return capital to shareholders while maintaining a strong balance sheet and liquidity [52][54] Question: Normalization of collections - Management explained that they are adjusting forecasts based on the best estimates and that excess recoveries are being monitored closely [56] Question: Purchase environment and supply - Management expressed optimism about the purchase environment, noting that banks are reporting higher spending and charge-off volumes are expected to rise [66][67] Question: Operating expense structure - Management indicated that while the expense structure is largely in place, there will be some upward pressure on expenses as COVID-related savings normalize [69] Question: Pricing dynamics in the US and UK - Management clarified that the price increase is due to supply-demand dynamics rather than a change in the mix of portfolios [72][74] Question: Tax rate expectations - Management suggested that a tax rate in the mid to low 20s would be more appropriate going forward [76] Question: Interest expense and debt structure - Management provided details on the fixed versus floating rate debt, indicating that approximately 87% of their debt is fixed [78] Question: Third-party servicing as a strategic asset - Management highlighted the importance of servicing in their business model, particularly in Europe, and confirmed ongoing investments in this area [81][83]