Encore Capital Group Announces Fourth Quarter and Full-Year 2023 Financial Results

Encore Capital Group Announces Fourth Quarter and Full-Year 2023 Financial Results

  • U.S. market for portfolio supply continues strong growth
  • Global portfolio purchases in 2023 up 34% to $1,074 million with a record $815 million in the U.S.
  • Encore expects portfolio purchases and collections to grow in 2024

SAN DIEGO, Feb. 21, 2024 (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, 2023.

“For the debt buying industry as a whole, 2023 was a year characterized by continued rapid growth of portfolio supply in the U.S. contrasted by slower growth in the U.K. and Europe. In addition, all debt buyers now face higher funding costs,” said Ashish Masih, Encore’s President and Chief Executive Officer. “Our disciplined approach to purchasing portfolios and the flexibility of our global balance sheet have allowed us to redirect our capital deployment to higher return opportunities in the U.S., consistent with our well-established strategic focus. In fact, 76% of our portfolio purchasing in 2023 was allocated to the U.S. market compared to 56% five years ago. As a result of this focus, we believe Encore has emerged from 2023 in a stronger competitive position and a clear leader in the industry.”

“Continued increases in lending by banks coupled with rising delinquencies and charge-offs led to an exceptional purchasing environment in the U.S. market with record supply for non-performing loan portfolios in 2023. As a result, our largest business, MCM, increased U.S. portfolio purchases in 2023 to a record $815 million, which helped increase Encore’s global portfolio purchases by 34% for the year. In terms of consumer behavior, we are observing a more normal, stable environment in the U.S. that is similar to the pre-pandemic years, most notably in terms of payment plan performance.”

“For our Cabot business in the U.K. and Europe, we have maintained our purchasing discipline in the face of portfolio pricing that we believe still does not yet fully reflect higher funding costs. Against this backdrop we remain patient, choosing to deploy at currently low levels until the returns in Cabot’s markets become more attractive.”

“Our reported financial results in 2023, and in particular our net loss of $206 million dollars, or ($8.72) per share, were not indicative of the underlying strength of our business due to certain non-cash charges, the largest of which was a $238 million goodwill impairment. This charge was the result of our annual test for goodwill and was primarily driven by persistently low purchasing by our Cabot business and a sustained decline in debt purchasing industry valuations. This charge has no impact on our liquidity, on our ability to purchase portfolios, on our capability to collect on portfolios we have already purchased, or on our outlook for the business.”

“Looking ahead, our priorities in 2024 remain unchanged. We are guided by our three pillar strategy and focused on our balance sheet objectives and capital allocation priorities. Anchored by a robust pipeline of supply in the U.S., where we already have $230 million of committed portfolio purchases for the first quarter, we expect our portfolio purchases and collections to grow in 2024. Encore is well positioned to capitalize on the opportunities that lie ahead,” continued Masih.

Available capacity under Encore’s global senior facility was $364 million at the end of 2023. In addition, Encore ended the year with $142 million of non-client cash on the balance sheet.

Financial Highlights for the Full Year of 2023:

 Year Ended December 31,
(in thousands, except percentages and earnings per share)2023
 2022 Change
Collections$1,862,567  $1,911,537 (3)%
Revenues$1,222,680  $1,398,347 (13)%
Portfolio purchases(1)$1,073,812  $800,507 34%
Estimated Remaining Collections (ERC)$8,191,913  $7,555,003 8%
Operating expenses$1,206,145  $936,173 29%
GAAP net (loss) income$(206,492) $194,564 (206)%
GAAP (loss) income per share$(8.72) $7.46 (217)%


(1)   Includes U.S. purchases of $814.6 million and $556.0 million, and Europe purchases of $259.3 million and $244.5 million in 2023 and 2022, respectively.

Key Impacts for the Full Year of 2023:

 Year Ended December 31,
(in thousands, except earnings per share impact)2023
 EPS Impact(1)
Goodwill impairment$(238,200) $(10.06)
Impairment of intangible assets$(18,726) $(0.79)
Charges related to Cabot headcount reduction in Q1 2023(2)$(6,077) $(0.26)
Recoveries below forecast$(33,405) $(1.17)
Changes in expected future recoveries$(49,125) $(1.74)
Total impacts$(345,533) $(14.02)


(1)   Basic share count was used to calculate EPS impacts.

(2)   Impact of $6M charge related to Cabot headcount reduction in Q1 2023 is different in Q1 2023 versus full-year 2023 due to differences in share count and tax treatment.

Financial Highlights for the Fourth Quarter of 2023:

 Three Months Ended December 31,
(in thousands, except percentages and earnings per share)2023
Collections$458,350  $436,156  5%
Revenues$277,387  $233,996  19%
Portfolio purchases(1)$292,497  $225,343  30%
Operating expenses$494,580  $236,301  109%
GAAP net loss$(270,762) $(73,118) 270%
GAAP loss per share$(11.40) $(3.11) 267%


(1)   Includes U.S. purchases of $208.5 million and $168.9 million, and Europe purchases of $84.0 million and $56.4 million in Q4 2023 and Q4 2022, respectively.

Key Impacts for the Fourth Quarter of 2023:

 Three Months Ended December 31,
(in thousands, except earnings per share impact)
 EPS Impact(1)
Goodwill impairment$(238,200) $(10.03)
Impairment of intangible assets$(18,726) $(0.79)
Recoveries below forecast$(13,296) $(0.47)
Changes in expected future recoveries$(39,180) $(1.36)
Total impacts$(309,402) $(12.65)


(1)   Basic share count was used to calculate EPS impacts.

Conference Call and Webcast

The Company will host a conference call and slide presentation today, February 21, 2024, 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 in on the Investor Relations page of Encore's website at www.encorecapital.com. To access the live conference call by telephone, please pre-register using this link. Registrants will receive confirmation with dial-in details.

For those who cannot listen to the live broadcast, a replay of the webcast will be available on the Company's website shortly after the call concludes.

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. Adjusted EBITDA has not been prepared in accordance with GAAP and should not be considered an alternative to, or more meaningful than, net income as an indicator of the Company’s operating performance. Further, this non-GAAP financial measure, 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 as well as statements regarding future supply, consumer behavior, or macroeconomic environment. 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 Form 10-K, 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$158,364  $143,912 
Investment in receivable portfolios, net 3,468,432   3,088,261 
Property and equipment, net 103,959   113,900 
Other assets 293,256   341,073 
Goodwill 606,475   821,214 
Total assets$4,630,486  $4,508,360 
Liabilities and Equity   
Accounts payable and accrued liabilities$189,928  $198,217 
Borrowings 3,318,031   2,898,821 
Other liabilities 185,989   231,695 
Total liabilities 3,693,948   3,328,733 
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, 23,545 shares and 23,323 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively 235   233 
Additional paid-in capital 11,052    
Accumulated earnings 1,049,171   1,278,210 
Accumulated other comprehensive loss (123,920)  (98,816)
Total stockholders’ equity 936,538   1,179,627 
Total liabilities and stockholders’ equity$4,630,486  $4,508,360 

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$24,472 $1,344
Investment in receivable portfolios, net 717,556  431,350
Other assets 19,358  3,627
Accounts payable and accrued liabilities 1,854  150
Borrowings 494,925  423,522
Other liabilities 2,452  105

Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
Three Months Ended
December 31,
 Year Ended December 31,
 2023 2022 2023 2022
Revenue from receivable portfolios$304,892  $294,755  $1,204,437  $1,202,361 
Changes in recoveries (52,476)  (86,148)  (82,530)  93,145 
Total debt purchasing revenue 252,416   208,607   1,121,907   1,295,506 
Servicing revenue 19,650   22,996   83,136   94,922 
Other revenues 5,321   2,393   17,637   7,919 
Total revenues 277,387   233,996   1,222,680   1,398,347 
Operating expenses       
Salaries and employee benefits 96,760   90,058   391,532   375,135 
Cost of legal collections 56,727   54,188   224,252   217,944 
General and administrative expenses 36,809   40,023   144,862   145,798 
Other operating expenses 29,315   28,516   111,179   111,234 
Collection agency commissions 9,074   8,156   35,657   35,568 
Depreciation and amortization 8,969   11,285   41,737   46,419 
Goodwill impairment 238,200      238,200    
Impairment of intangible assets 18,726   4,075   18,726   4,075 
Total operating expenses 494,580   236,301   1,206,145   936,173 
(Loss) income from operations (217,193)  (2,305)  16,535   462,174 
Other expense       
Interest expense (54,501)  (42,313)  (201,877)  (153,308)
Other (expense) income (2)  (1,269)  5,078   2,123 
Total other expense (54,503)  (43,582)  (196,799)  (151,185)
(Loss) income before income taxes (271,696)  (45,887)  (180,264)  310,989 
Benefit (provision) for income taxes 934   (27,231)  (26,228)  (116,425)
Net (loss) income$(270,762) $(73,118) $(206,492) $194,564 
(Loss) income per share:       
Basic$(11.40) $(3.11) $(8.72) $8.06 
Diluted$(11.40) $(3.11) $(8.72) $7.46 
Weighted average shares outstanding:       
Basic 23,741   23,544   23,670   24,142 
Diluted 23,741   23,544   23,670   26,092 

Consolidated Statements of Cash Flows
(In Thousands)
 Year Ended December 31,
 2023 2022 2021
Operating activities:     
Net (loss) income$(206,492) $194,564  $351,201 
Adjustments to reconcile net income to net cash provided by operating activities:     
Depreciation and amortization 41,737   46,419   50,079 
Other non-cash interest expense, net 17,160   15,875   17,785 
Stock-based compensation expense 13,854   15,402   18,330 
Deferred income taxes (55,916)  46,410   35,371 
Goodwill impairment 238,200       
Impairment of intangible assets 18,726   4,075    
Changes in recoveries 82,530   (93,145)  (199,136)
Other, net (2,259)  18,798   26,430 
Changes in operating assets and liabilities     
Other assets 15,894   (6,722)  38,941 
Accounts payable, accrued liabilities and other liabilities (10,443)  (30,995)  (35,948)
Net cash provided by operating activities 152,991   210,681   303,053 
Investing activities:     
Purchases of receivable portfolios, net of put-backs (1,060,206)  (790,569)  (657,280)
Collections applied to investment in receivable portfolios, net 658,130   709,176   1,019,629 
Purchases of real estate owned (26,901)  (39,340)  (17,090)
Purchases of property and equipment (24,807)  (37,224)  (33,372)
Proceeds from sale of real estate owned 52,636   27,722   31,159 
Other, net (793)     (3,150)
Net cash (used in) provided by investing activities (401,941)  (130,235)  339,896 
Financing activities:     
Payment of loan and debt refinancing costs (13,707)  (1,659)  (11,963)
Proceeds from credit facilities 1,196,046   779,513   821,931 
Repayment of credit facilities (989,627)  (515,703)  (896,418)
Proceeds from senior secured notes 104,188      353,747 
Repayment of senior secured notes (39,080)  (39,080)  (359,175)
Proceeds from issuance of convertible senior notes 230,000       
Repayment of convertible senior notes (212,480)  (221,153)  (161,000)
Repurchase and retirement of common stock    (87,006)  (390,606)
Other, net (7,040)  (22,357)  (12,208)
Net cash provided by (used in) financing activities 268,300   (107,445)  (655,692)
Net increase (decrease) in cash and cash equivalents 19,350   (26,999)  (12,743)
Effect of exchange rate changes on cash and cash equivalents (4,898)  (18,734)  13,204 
Cash and cash equivalents, beginning of period 143,912   189,645   189,184 
Cash and cash equivalents, end of period$158,364  $143,912  $189,645 
Supplemental disclosures of cash flow information:     
Cash paid for interest$163,815  $131,391  $132,400 
Cash paid for income taxes, net of refunds 68,522   71,276   42,039 
Supplemental schedule of non-cash investing and financing activities:     
Investment in receivable portfolios transferred to real estate owned$7,957  $1,903  $768 
Property and equipment acquired through finance leases 234   3,273   2,664 

Supplemental Financial Information
Reconciliation of Non-GAAP Metrics
Adjusted EBITDA
(in thousands, unaudited)

Three Months Ended December 31, Year Ended December 31,
2023 2022 2023 2022
GAAP net (loss) income, as reported$(270,762) $(73,118) $(206,492) $194,564 
Interest expense 54,501   42,313   201,877   153,308 
Interest income (1,364)     (4,746)  (1,774)
(Benefit) provision for income taxes (934)  27,231   26,228   116,425 
Depreciation and amortization 8,969   11,285   41,737   46,419 
Net loss (gain) on derivative instruments(1) 342      (3,170)   
Stock-based compensation expense 2,837   3,171   13,854   15,402 
Acquisition, integration and restructuring related expenses(2) 827   34   7,401   1,213 
Goodwill Impairment(3) 238,200      238,200    
Impairment for Intangibles(3) 18,726   4,075   18,726   4,075 
Adjusted EBITDA$51,342  $14,991  $333,615  $529,632 
Collections applied to principal balance(4)$213,769  $232,420  $776,280  $635,262 


(1)   Amount represents gain or loss recognized on derivative instruments that are not designated as hedging instruments or gain or loss recognized on derivative instruments upon dedesignation of hedge relationships. We adjust for this amount because we believe the gain or loss on derivative contracts is not indicative of ongoing operations.

(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)   During the fourth quarter of 2023, we recorded a non-cash goodwill impairment charge of $238.2 million and an impairment of intangible assets of $18.7 million. We recorded a non-cash impairment of intangible assets of $4.1 million during the year ended December 31, 2022. We believe these non-cash impairment charges are not indicative of ongoing operations, therefore adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results. Refer to “Note 15: Goodwill and Identified Intangible Assets” to our consolidated financial statements for further details.

(4)   Amount represents (a) gross collections from receivable portfolios less (b) debt purchasing revenue, plus (c) proceeds applied to basis from sales of real estate owned (“REO”) assets and related activities. 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 period ending December 31, 2023.