Encore Capital Group Announces Fourth Quarter and Full-Year 2021 Financial Results

Encore Capital Group Announces Fourth Quarter and Full-Year 2021 Financial Results

  • Encore delivers records for collections, earnings and returns for the year
  • GAAP net income of $351 million in 2021, up 66%
  • GAAP EPS of $11.26 in 2021, up 69%
  • Share repurchases of $390 million in 2021 represented 23% of shares outstanding a year ago

SAN DIEGO, Feb. 23, 2022 (GLOBE NEWSWIRE) -- Encore Capital Group, Inc. (NASDAQ: ECPG), an international specialty finance company, today reported consolidated financial results for the fourth quarter and full year ended December 31, 2021.

“In a year of challenges across the globe related to the ongoing COVID-19 pandemic, Encore maintained a disciplined, consistent approach to our business, continued to execute on our strategy and delivered exceptional financial results,” said Ashish Masih, Encore’s President and Chief Executive Officer. “Our business in 2021 achieved new highs for collections, earnings and returns, all while continuing to position Encore for long-term success.”

“In the U.S., our MCM business delivered very strong collections in 2021 and continued its disciplined purchasing of portfolios at attractive returns. Our Cabot business in the U.K. and Europe, whose collections had been more impacted by the pandemic in 2020, returned to growth in 2021 as collections grew 16% and portfolio purchases were up sharply from the prior year.”

“Strong cash generation coupled with a lower level of purchasing opportunities and our strong balance sheet allowed us to return capital to shareholders, culminating in a highly successful tender offer in the fourth quarter. As a result of our actions, we repurchased approximately 23% of Encore’s outstanding shares during the year for $390 million. These share repurchases were consistent with our capital allocation priorities and fully aligned with our balance sheet objectives to preserve flexibility and maintain prudent leverage. Furthermore, the majority of our multi-year share repurchase authorization, which we expanded in May 2021, remained available at year end.”

Available capacity under Encore’s global senior facility was $643 million at the end of 2021. In addition, Encore ended the year with $160 million of non-client cash on the balance sheet.

“Looking ahead, our priorities in 2022 remain consistent with the fundamental objectives that have driven our financial performance and created shareholder value over the past several years. We are anchored by our three pillar strategy, focused on our balance sheet objectives and capital allocation priorities and expect to deliver a strong ROIC through the credit cycle. Encore is well positioned to capitalize on the opportunities that will emerge as portfolio supply rises,” continued Masih.

Financial Highlights for the Full Year of 2021:

 Year Ended December 31,
(in thousands, except percentages, earnings per share and leverage ratio) 2021   2020  Change
Collections$2,307,359  $2,111,848  9%
Revenues$1,614,499  $1,501,400  8%
Portfolio purchases(1)$664,529  $659,872  1%
Estimated Remaining Collections (ERC)$7,749,954  $8,525,984  (9)%
Operating expenses$981,227  $967,838  1%
GAAP net income attributable to Encore$350,782  $211,848  66%
GAAP earnings per share$11.26  $6.68  69%
Pre-tax ROIC(2) 15.2%  12.5% +270bps
Leverage Ratio(3) 1.9x  2.4x -0.5x


(1)   Includes U.S. purchases of $408.7 million and $543.0 million, and Europe purchases of $255.8 million and $116.9 million in 2021 and 2020, respectively.

(2)   This is a non-GAAP metric. See Supplemental Financial Information for a definition and calculation of Pre-tax ROIC (Return on Invested Capital).

(3)   This is a non-GAAP metric that we define as the ratio of Net Debt at period end to (Adjusted EBITDA plus collections applied to principal balance).

Financial Highlights for the Fourth Quarter of 2021:

 Three Months Ended December 31,
(in thousands, except percentages and earnings per share) 2021  2020 Change
Collections$521,781 $536,606 (3)%
Revenues$357,303 $382,610 (7)%
Portfolio purchases(1)$183,435 $127,689 44%
Operating expenses$233,279 $258,397 (10)%
GAAP net income attributable to Encore$76,083 $37,320 104%
GAAP earnings per share$2.53 $1.17 116%


(1)   Includes U.S. purchases of $124.5 million and $91.8 million, and Europe purchases of $58.9 million and $35.9 million in Q4 2021 and Q4 2020, respectively.

Conference Call and Webcast

The Company will host a conference call and slide presentation today, February 23, 2022, at 2:00 p.m. Pacific time / 5:00 p.m. Eastern time to discuss fourth quarter and full year results.

Members of the public are invited to access the live webcast via the Internet by logging on at the Investor Relations page of Encore's website at www.encorecapital.com. To access the live, listen-only telephone conference portion, please dial (855) 541-0982 or (704) 288-0606.

For those who cannot listen to the live broadcast, a telephonic replay will be available for seven days by dialing (800) 585-8367 or (404) 537-3406 and entering the conference ID number 1770117. A replay of the webcast will also be available shortly after the call on the Company's website.

Non-GAAP Financial Measures

This news release includes certain financial measures that exclude the impact of certain items and therefore have not been calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company has included information concerning adjusted EBITDA because management utilizes this information in the evaluation of its operations and believes that this measure is a useful indicator of the Company’s ability to generate cash collections in excess of operating expenses through the liquidation of its receivable portfolios. The Company has included Pre-Tax ROIC as management uses this measure to monitor and evaluate operating performance relative to our invested capital and because the Company believes it is a useful measure for investors to evaluate effective use of capital. The Company has included Net Debt and Leverage Ratio as management uses these measures to monitor and evaluate its ability to incur and service debt. Adjusted EBITDA, Adjusted Income from Operations (used in Pre-Tax ROIC), and Net Debt and Leverage Ratio have not been prepared in accordance with GAAP. These non-GAAP financial measures should not be considered as alternatives to, or more meaningful than, net income, income from operations and GAAP debt as indicators of the Company’s operating performance or liquidity. Further, these non-GAAP financial measures, as presented by the Company, may not be comparable to similarly titled measures reported by other companies. The Company has attached to this news release a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

About Encore Capital Group, Inc.

Encore Capital Group is an international specialty finance company that provides debt recovery solutions and other related services for consumers across a broad range of financial assets. Through its subsidiaries around the globe, Encore purchases portfolios of consumer receivables from major banks, credit unions, and utility providers. 

Encore partners with individuals as they repay their debt obligations, helping them on the road to financial recovery and ultimately improving their economic well-being. Encore is the first and only company of its kind to operate with a Consumer Bill of Rights that provides industry-leading commitments to consumers. Headquartered in San Diego, Encore is a publicly traded NASDAQ Global Select company (ticker symbol: ECPG) and a component stock of the Russell 2000, the S&P Small Cap 600 and the Wilshire 4500. More information about the company can be found at http://www.encorecapital.com.

Forward Looking Statements

The statements in this press release that are not historical facts, including, most importantly, those statements preceded by, or that include, the words “will,” “may,” “believe,” “projects,” “expects,” “anticipates” or the negation thereof, or similar expressions, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). These statements may include, but are not limited to, statements regarding our future operating results, performance, business plans or prospects. For all “forward-looking statements,” the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act. Such forward-looking statements involve risks, uncertainties and other factors which may cause actual results, performance or achievements of the Company and its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors are discussed in the reports filed by the Company with the Securities and Exchange Commission, including the most recent reports on Forms 10-K and 10-Q, each as it may be amended from time to time. The Company disclaims any intent or obligation to update these forward-looking statements.

Bruce Thomas
Encore Capital Group, Inc.
Vice President, Global Investor Relations
(858) 309-6442
[email protected]

SOURCE: Encore Capital Group, Inc.


Consolidated Statements of Financial Condition
(In Thousands, Except Par Value Amounts)

 December 31,
 December 31,
Cash and cash equivalents$189,645  $189,184 
Investment in receivable portfolios, net 3,065,553   3,291,918 
Property and equipment, net 119,857   127,297 
Other assets 335,275   349,162 
Goodwill 897,795   906,962 
Total assets$4,608,125  $4,864,523 
Liabilities and Equity   
Accounts payable and accrued liabilities$229,586  $215,920 
Borrowings 2,997,331   3,281,634 
Other liabilities 195,947   146,893 
Total liabilities 3,422,864   3,644,447 
Commitments and contingencies   
Convertible preferred stock, $0.01 par value, 5,000 shares authorized, no shares issued and outstanding     
Common stock, $0.01 par value, 75,000 shares authorized, 24,541 shares and 31,345 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively 245   313 
Additional paid-in capital    230,440 
Accumulated earnings 1,238,564   1,055,668 
Accumulated other comprehensive loss (53,548)  (68,813)
Total Encore Capital Group, Inc. stockholders’ equity 1,185,261   1,217,608 
Noncontrolling interest    2,468 
Total equity 1,185,261   1,220,076 
Total liabilities and equity$4,608,125  $4,864,523 

The following table presents certain assets and liabilities of consolidated variable interest entities (“VIEs”) included in the consolidated statements of financial condition above. Most assets in the table below include those assets that can only be used to settle obligations of consolidated VIEs. The liabilities exclude amounts where creditors or beneficial interest holders have recourse to the general credit of the Company.

 December 31,
 December 31,
Cash and cash equivalents$        1,927         $        2,223        
Investment in receivable portfolios, net         498,507                  553,621        
Other assets         3,452                  5,127        
Accounts payable and accrued liabilities         105                  —        
Borrowings         473,443                  478,131        
Other liabilities         10                  37        

Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)

Three Months Ended December 31,
 Year Ended December 31,
  2021   2020   2021   2020 
Revenue from receivable portfolios$305,337  $339,576  $1,287,730  $1,374,717 
Changes in recoveries 22,508   9,449   199,136   7,246 
Total debt purchasing revenue 327,845   349,025   1,486,866   1,381,963 
Servicing revenue 26,877   32,701   120,778   115,118 
Other revenues 2,581   884   6,855   4,319 
Total revenues 357,303   382,610   1,614,499   1,501,400 
Operating expenses       
Salaries and employee benefits 96,286   98,232   385,178   378,176 
Cost of legal collections 56,068   75,053   254,280   239,071 
General and administrative expenses 34,905   35,159   137,695   149,113 
Other operating expenses 25,043   25,417   106,938   108,944 
Collection agency commissions 8,592   13,192   47,057   49,754 
Depreciation and amortization 12,385   11,344   50,079   42,780 
Total operating expenses 233,279   258,397   981,227   967,838 
Income from operations 124,024   124,213   633,272   533,562 
Other (expense) income       
Interest expense (38,088)  (51,393)  (169,647)  (209,356)
Loss on extinguishment of debt    (25,963)  (9,300)  (40,951)
Other (expense) income (791)  854   (17,784)  (357)
Total other expense (38,879)  (76,502)  (196,731)  (250,664)
Income before income taxes 85,145   47,711   436,541   282,898 
Provision for income taxes (9,062)  (10,499)  (85,340)  (70,374)
Net income 76,083   37,212   351,201   212,524 
Net loss (income) attributable to noncontrolling interest    108   (419)  (676)
Net income attributable to Encore Capital Group, Inc. stockholders$76,083  $37,320  $350,782  $211,848 
Earnings per share attributable to Encore Capital Group, Inc.:       
Basic$2.72  $1.18  $11.64  $6.74 
Diluted$2.53  $1.17  $11.26  $6.68 
Weighted average shares outstanding:       
Basic 27,950   31,500   30,129   31,427 
Diluted 30,040   31,826   31,153   31,710 

Consolidated Statements of Cash Flows
(In Thousands)

 Year Ended December 31,
  2021   2020   2019 
Operating activities:     
Net income$351,201  $212,524  $168,909 
Adjustments to reconcile net income to net cash provided by operating activities:     
Depreciation and amortization 50,079   42,780   41,029 
Expense related to financing 9,300   51,117   3,523 
Other non-cash interest expense, net 17,785   23,639   30,299 
Stock-based compensation expense 18,330   16,560   12,557 
Deferred income taxes 35,371   8,549   20,706 
Goodwill impairment       10,718 
Changes in recoveries (199,136)  (7,246)   
Provision for allowances on receivable portfolios, net       8,108 
Other, net 17,130   16,260   9,794 
Changes in operating assets and liabilities     
Deferred court costs       (3,646)
Other assets 3,927   8,980   29,025 
Prepaid income tax and income taxes payable 7,758   (24,344)  (24,045)
Accounts payable, accrued liabilities and other liabilities (8,692)  (35,955)  (62,244)
Net cash provided by operating activities 303,053   312,864   244,733 
Investing activities:     
Purchases of receivable portfolios, net of put-backs (657,280)  (644,048)  (1,035,130)
Collections applied to investment in receivable portfolios, net 1,019,629   737,131   757,640 
Purchases of property and equipment (33,372)  (34,600)  (39,602)
Proceeds from sale of portfolios       107,937 
Other, net 10,919   24,343   6,822 
Net cash provided by (used in) investing activities 339,896   82,826   (202,333)
Financing activities:     
Payment of loan and debt refinancing costs (11,963)  (82,455)  (11,586)
Proceeds from credit facilities 821,931   1,820,634   603,634 
Repayment of credit facilities (896,418)  (2,290,822)  (586,429)
Proceeds from senior secured notes 353,747   1,313,385   454,573 
Repayment of senior secured notes (359,175)  (1,033,765)  (470,768)
Proceeds from issuance of convertible senior notes       100,000 
Repayment of convertible senior notes (161,000)  (89,355)  (84,600)
Repurchase of common stock (390,606)      
Other, net (12,208)  (40,822)  (24,594)
Net cash used in by financing activities (655,692)  (403,200)  (19,770)
Net (decrease) increase in cash and cash equivalents (12,743)  (7,510)  22,630 
Effect of exchange rate changes on cash and cash equivalents 13,204   4,359   12,287 
Cash and cash equivalents, beginning of period 189,184   192,335   157,418 
Cash and cash equivalents, end of period$189,645  $189,184  $192,335 
Supplemental disclosures of cash flow information:     
Cash paid for interest$132,400  $169,553  $178,948 
Cash paid for income taxes, net of refunds 42,039   88,816   43,973 
Supplemental schedule of non-cash investing and financing activities:     
Investment in receivable portfolios transferred to real estate owned$768  $2,214  $5,058 
Property and equipment acquired through finance leases 2,664   3,276   5,299 

Supplemental Financial Information

Reconciliation of Adjusted EBITDA to GAAP Net Income,
(In Thousands, Except Per Share amounts) (Unaudited)

 Three Months Ended December 31, Year Ended December 31,
 2021   2020   2021   2020 
GAAP net income, as reported$76,083  $37,212  $351,201  $212,524 
Interest expense 38,088   51,393   169,647   209,356 
Loss on extinguishment of debt    25,963   9,300   40,951 
Interest income (568)  (444)  (1,738)  (2,397)
Provision for income taxes 9,062   10,499   85,340   70,374 
Depreciation and amortization 12,385   11,344   50,079   42,780 
CFPB settlement fees(1)          15,009 
Stock-based compensation expense 5,427   3,371   18,330   16,560 
Acquisition, integration and restructuring related expenses(2) 2,609   22   20,559   4,962 
Adjusted EBITDA$143,086  $139,360  $702,718  $610,119 
Collections applied to principal balance(3)$201,322  $192,448  $843,087  $740,350 


(1)   Amount represents a charge resulting from the Stipulated Judgment with the CFPB. We have adjusted for this amount because we believe it is not indicative of ongoing operations; therefore, adjusting for it enhances comparability to prior periods, anticipated future periods, and our competitors’ results.

(2)   Amount represents acquisition, integration and restructuring related expenses. We adjust for this amount because we believe these expenses are not indicative of ongoing operations; therefore, adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results.

(3)   For periods prior to January 1, 2020, amount represents (a) gross collections from receivable portfolios less the sum of (b) revenue from receivable portfolios and (c) allowance charges or allowance reversals on receivable portfolios. For periods subsequent to January 1, 2020 amount represents (a) gross collections from receivable portfolios less (b) debt purchasing revenue. For consistency with the Company debt covenant reporting, for periods subsequent to June 30, 2020, the collections applied to principal balance also includes proceeds applied to basis from sales of REO assets and related activities; prior period amounts have not been adjusted to reflect this change as such amounts were immaterial. A reconciliation of “collections applied to investment in receivable portfolios, net” to “collections applied to principal balance” is available in the Form 10-K for the year ended December 31, 2021.

Pre-Tax Return on Invested Capital (“ROIC”)

ROIC is calculated as last twelve months adjusted income from operations, divided by our average invested capital. Adjusted income from operations excludes acquisition, integration and restructuring related expenses, amortization of certain acquired intangible assets and other charges or gains that are not indicative of ongoing operations. Average invested capital is defined as the aggregate of average Net Debt (defined below) and average GAAP equity and is calculated as the sum of current and prior period ending amounts divided by two.

 Twelve Months Ended December 31,
(in thousands, except percentages) 2021   2020 
Income from operations$633,272  $533,562 
CFPB settlement fees    15,009 
Acquisition, integration and restructuring related expenses 5,681   154 
Amortization of certain acquired intangible assets(2) 7,417   7,010 
Adjusted income from operations$646,370  $555,735 
Average Net Debt$3,049,979  $3,311,835 
Average equity 1,202,669   1,122,741 
Total average invested capital$4,252,648  $4,434,576 
Pre-tax ROIC 15.2%  12.5%


(1)   We believe these amounts are not indicative of ongoing operations; therefore, adjusting for them enhances comparability to prior periods, anticipated future periods, and our competitors’ results.

(2)   We have acquired intangible assets, such as trade names and customer relationships, as a result of our acquisition of debt solution service providers. These intangible assets are valued at the time of the acquisition and amortized over their estimated lives. We believe that amortization of acquisition-related intangible assets, especially the amortization of an acquired company’s trade names and customer relationships, is the result of pre-acquisition activities. In addition, the amortization of these acquired intangibles is a non-cash static expense that is not affected by operations during any reporting period.

Net Debt

Net Debt is GAAP borrowings adjusted for debt issuance costs and debt discounts, cash and cash equivalents and client cash. Net Debt is a measure commonly used by lenders to our industry to represent the net borrowings of market participants, and is also used regularly by lenders and others as the numerator in industry leverage calculations.

(in thousands)December 31,
 December 31,
 December 31,
GAAP Borrowings$2,997,331  $3,281,634  $3,513,197 
Debt issuance costs and debt discounts 58,350   91,859   73,237 
Cash & cash equivalents (189,645)  (189,184)  (192,335)
Client cash(1) 29,316   20,298   24,964 
Net Debt$2,895,352  $3,204,607  $3,419,063 


(1)   Client cash is cash that was collected on behalf of, and remains payable to, third party clients.