Encore Capital Group(ECPG) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Portfolio purchases in Q3 2025 were $346 million, up 23% compared to Q3 2024 [4] - Collections increased 20% to a record $663 million [4] - Average receivable portfolios rose 16% to $4.2 billion [4] - Estimated remaining collections (ERC) increased 10% to a record $9.5 billion [4] - Earnings per share for Q3 2025 were $3.17, up more than 150% compared to Q3 2024 [4][18] - Leverage improved to 2.5 times at the end of Q3, compared to 2.7 times a year ago [4][18] Business Line Data and Key Metrics Changes - The MCM business in the U.S. drove strong performance, with portfolio purchases of $261 million in Q3, a 13% increase year-over-year [12] - MCM collections reached a record $502 million, up 25% compared to Q3 2024 [12] - Cabot's portfolio purchases were $85 million, higher than historical trends, with collections of $160 million, up 8% year-over-year [14] Market Data and Key Metrics Changes - U.S. revolving credit remains near record levels, with elevated charge-off rates driving robust portfolio supply [10] - Annualized net charge-off volume in the U.S. was estimated at $55 billion, significantly higher than previous years [11] - U.S. consumer credit delinquencies remain near multi-year highs, indicating favorable purchasing conditions [11] Company Strategy and Development Direction - The company employs a three-pillar strategy focusing on large markets, competitive advantages, and a strong balance sheet [8] - The focus remains on purchasing portfolios in the U.S. market, which accounted for 75% of capital deployed in Q3 [9] - The company plans to exceed $1.35 billion in global portfolio purchases for 2025, with MCM expected to surpass its 2024 purchases [22] Management's Comments on Operating Environment and Future Outlook - Management noted stable consumer behavior despite macroeconomic uncertainties, with no significant impact on payment plans [49] - The company expects continued strong performance in collections and cash generation, driven by operational improvements and technology deployment [64] - Future acquisitions are considered but will be approached with caution, focusing on opportunities that create sustained shareholder value [68] Other Important Information - The company repurchased $10 million of shares in Q3 and nearly $25 million in Q4, totaling approximately $60 million year-to-date [5] - An additional $300 million was authorized for share repurchases, reflecting confidence in future prospects [21] Q&A Session Summary Question: Insights on fourth quarter purchasing - Management confirmed robust purchasing conditions in the U.S. and reiterated guidance to exceed $1.35 billion in purchases [28][29] Question: Comparison with peers on purchasing - Management stated that their strong purchasing reflects favorable market conditions and opportunities not taken by peers [31] Question: Collections multiple for U.S. and U.K. core paper - The collections multiple for both U.S. and Cabot is 2.3, stable throughout the year [37] Question: Impact of new technologies on operations - Management highlighted significant improvements in collections due to the implementation of new technologies and digital capabilities [42] Question: Sustainability of collections overperformance - Management expressed confidence in the sustainability of collections performance, driven by MCM's operational excellence [64] Question: Future acquisition opportunities - Management indicated that while acquisition opportunities are monitored, the focus remains on portfolio purchases due to reliable returns [68]