Encore Capital Group(ECPG)2024-11-07 05:57Financial Data and Key Metrics Changes - The company reported Q3 collections of 31 million, representing a 58% increase year-over-year, with GAAP EPS of 8.65 billion, up 10% year-over-year [23] Business Line Data and Key Metrics Changes - Portfolio purchases in the U.S. increased by 28% to 402 million [14][19] - Cabot collections in Q3 were 52 million [17] - Global portfolio purchases increased 23% to 282 million, driven primarily by U.S. deployments [19] Market Data and Key Metrics Changes - The U.S. market is experiencing record portfolio supply due to the highest charge-off rate in over 10 years and increased lending [7][12] - In contrast, the U.K. market is growing slowly, with credit card outstandings just returning to pre-pandemic levels [16] Company Strategy and Development Direction - The company is focusing on purchasing portfolios in the U.S. market, which offers the best opportunity for long-term shareholder value [30] - The company has shifted its capital allocation strategy to prioritize stock repurchases over strategic M&A due to a lack of value-creating opportunities [31] - The company aims to maintain a strong balance sheet and operate within a leverage range of 2x to 3x [32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the U.S. market, expecting continued growth in lending and charge-offs, indicating a favorable purchasing environment [40] - The company anticipates 2024 to be another record year for portfolio purchasing, with global portfolio purchasing expected to reach approximately 1.25 billion [36] Other Important Information - The company exited the secured NPL market in Spain, resulting in a pretax loss of 1.295 billion and extending its maturity to September 2028 [29] Q&A Session Summary Question: How should investors think about the capital allocation strategies in light of increasing supply in the U.S.? - Management clarified that there is no change in the favorable U.S. market conditions and the priority remains on buying portfolios at strong returns [40][41] Question: What are the collections multiples for U.S. core paper and Cabot paper? - The collections multiple for both U.S. and Cabot businesses for the 2024 vintage is expected to be 2.3 [43] Question: Is there an active buyback in place? - Yes, there is an active buyback authorization with about $92 million remaining [51] Question: Should legal expenses be expected to continue rising? - As purchasing levels increase, legal expenses are expected to steadily rise, but improved operating leverage is anticipated [55]