GAAP net income of $60 million
GAAP EPS of $2.29
Global collections of $498 million
Portfolio purchases of $173 million at attractive returns

SAN DIEGO, Aug. 03, 2022 (GLOBE NEWSWIRE) -- Encore Capital Group, Inc. (NASDAQ:ECPG), an international specialty finance company, today reported consolidated financial results for the second quarter ended June 30, 2022.

"Encore delivered another quarter of strong operating performance in Q2," said Ashish Masih, President and Chief Executive Officer. "Our financial results in the period were again driven primarily by collections within our MCM business in the U.S. As a result of our collections over-performance in recent quarters, we increased the estimated remaining collections (ERC) for certain vintages for the second straight quarter, but this time on a much smaller scale."

"On a global basis, our portfolio purchases were $173 million in the quarter, an increase of 21% compared to the second quarter a year ago. We continue to acquire portfolios at attractive returns, enabled by our disciplined purchasing and collections effectiveness. Credit card lending, which has been growing steadily, has surpassed pre-pandemic levels in the U.S. and we have started to see an increase in portfolio supply for our MCM business. We remain well-positioned for future portfolio purchasing opportunities and will continue to focus on our consumer-centric approach to collections and our strong balance sheet," said Masih.

Financial Highlights for the Second Quarter of 2022:

	Three Months Ended June 30,
(in thousands, except percentages and earnings per share)		2022			2021		Change
Collections	$	497,711		$	612,427		(19)%
Revenues	$	356,917		$	427,735		(17)%
Portfolio purchases⁽¹⁾	$	173,007		$	142,728		21%
Estimated Remaining Collections (ERC)	$	7,559,820		$	8,111,917		(7)%
Operating expenses	$	237,969		$	253,448		(6)%
GAAP net income attributable to Encore	$	60,439		$	96,503		(37)%
GAAP earnings per share	$	2.29		$	3.07		(25)%
LTM Pre-tax ROIC⁽²⁾		16.8	%		15.0	%	+180bps
Leverage Ratio⁽³⁾	2.0x			1.9x			+0.1x

______________________
(1)	Includes U.S. purchases of $116.2 million and $89.5 million, and Europe purchases of $56.8 million and $53.2 million in Q2 2022 and Q2 2021, respectively.
(2)	This is a non-GAAP metric. See Supplemental Financial Information for a definition and calculation of LTM 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 for the preceding twelve months). See Supplemental Financial Information for a definition of Net Debt and Adjusted EBITDA and a reconciliation of Net Debt to total debt and Adjusted EBITDA to net income.

Conference Call and Webcast

Encore will host a conference call and slide presentation today, August 3, 2022, at 2:00 p.m. Pacific / 5:00 p.m. Eastern time, to present and discuss second quarter 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. 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), 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 and net income per share 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, liquidity, ability to access capital markets, 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.

Contact:

Bruce Thomas

Encore Capital Group, Inc.

Vice President, Global Investor Relations

(858) 309-6442

bruce.thomas@encorecapital.com

SOURCE: Encore Capital Group, Inc.

FINANCIAL TABLES FOLLOW

ENCORE CAPITAL GROUP, INC.

Consolidated Statements of Financial Condition

(In Thousands, Except Par Value Amounts)

(Unaudited)

	June 30, 2022			December 31, 2021
Assets
Cash and cash equivalents	$	154,295		$	189,645
Investment in receivable portfolios, net		3,035,123			3,065,553
Property and equipment, net		109,591			119,857
Other assets		336,265			335,275
Goodwill		824,210			897,795
Total assets	$	4,459,484		$	4,608,125
Liabilities and Equity
Liabilities:
Accounts payable and accrued liabilities	$	201,168		$	229,586
Borrowings		2,793,009			2,997,331
Other liabilities		233,707			195,947
Total liabilities		3,227,884			3,422,864
Commitments and Contingencies
Equity:
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, 23,989 and 24,541 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		240			245
Additional paid-in capital		—			—
Accumulated earnings		1,349,937			1,238,564
Accumulated other comprehensive loss		(118,577	)		(53,548	)
Total stockholders' equity		1,231,600			1,185,261
Total liabilities and stockholders' equity	$	4,459,484		$	4,608,125

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.

	June 30, 2022		December 31, 2021
Assets
Cash and cash equivalents	$	1,130	$	1,927
Investment in receivable portfolios, net		452,013		498,507
Other assets		3,545		3,452
Liabilities
Accounts payable and accrued liabilities		159		105
Borrowings		426,108		473,443
Other liabilities		17		10

ENCORE CAPITAL GROUP, INC.

Consolidated Statements of Income

(In Thousands, Except Per Share Amounts)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
		2022			2021			2022			2021
Revenues
Revenue from receivable portfolios	$	306,282		$	328,150		$	610,387		$	666,168
Changes in recoveries		25,150			66,178			192,373			110,715
Total debt purchasing revenue		331,432			394,328			802,760			776,883
Servicing revenue		23,788			32,064			49,934			64,580
Other revenues		1,697			1,343			3,905			3,109
Total revenues		356,917			427,735			856,599			844,572
Operating expenses
Salaries and employee benefits		98,880			97,774			195,836			194,230
Cost of legal collections		55,148			66,900			110,865			134,042
General and administrative expenses		34,967			34,823			68,501			66,971
Other operating expenses		27,405			28,228			54,432			56,669
Collection agency commissions		9,923			13,677			19,528			26,501
Depreciation and amortization		11,646			12,046			23,475			23,558
Total operating expenses		237,969			253,448			472,637			501,971
Income from operations		118,948			174,287			383,962			342,601
Other expense
Interest expense		(37,054	)		(44,159	)		(71,687	)		(90,685	)
Loss on extinguishment of debt		—			(9,300	)		—			(9,300	)
Other income		1,795			566			2,187			511
Total other expense		(35,259	)		(52,893	)		(69,500	)		(99,474	)
Income before income taxes		83,689			121,394			314,462			243,127
Provision for income taxes		(23,250	)		(24,607	)		(78,274	)		(51,575	)
Net income		60,439			96,787			236,188			191,552
Net income attributable to noncontrolling interest		—			(284	)		—			(419	)
Net income attributable to Encore Capital Group, Inc. stockholders	$	60,439		$	96,503		$	236,188		$	191,133

Earnings per share attributable to Encore Capital Group, Inc.:
Basic	$	2.48		$	3.12		$	9.63		$	6.13
Diluted	$	2.29		$	3.07		$	8.77		$	6.04

Weighted average shares outstanding:
Basic		24,359			30,909			24,539			31,187
Diluted		26,411			31,415			26,945			31,622

ENCORE CAPITAL GROUP, INC.

Consolidated Statements of Cash Flows

(Unaudited, In Thousands)

	Six Months Ended June 30,
		2022			2021
Operating activities:
Net income	$	236,188		$	191,552
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		23,475			23,558
Loss on extinguishment of debt		—			9,300
Other non-cash interest expense, net		8,149			9,403
Stock-based compensation expense		9,040			9,056
Deferred income taxes		3,699			(5,097	)
Changes in recoveries		(192,373	)		(110,715	)
Other, net		9,267			12,006
Changes in operating assets and liabilities
Other assets		39,037			60,880
Accounts payable, accrued liabilities and other liabilities		(37,952	)		(50,978	)
Net cash provided by operating activities		98,530			148,965
Investing activities:
Purchases of receivable portfolios, net of put-backs		(337,932	)		(306,549	)
Collections applied to investment in receivable portfolios		406,738			552,720
Purchases of asset held for sale		(35,178	)		(3,639	)
Purchases of property and equipment		(11,937	)		(10,351	)
Other, net		13,416			8,516
Net cash provided by investing activities		35,107			240,697
Financing activities:
Proceeds from credit facilities		446,853			358,063
Repayment of credit facilities		(298,743	)		(511,200	)
Proceeds from senior secured notes		—			353,747
Repayment of senior secured notes		(19,540	)		(339,585	)
Repayment of convertible senior notes		(221,153	)		(161,000	)
Repurchase of common stock		(50,835	)		(47,421	)
Other, net		(12,182	)		(22,251	)
Net cash used in financing activities		(155,600	)		(369,647	)
Net (decrease) increase in cash and cash equivalents		(21,963	)		20,015
Effect of exchange rate changes on cash and cash equivalents		(13,387	)		(10,683	)
Cash and cash equivalents, beginning of period		189,645			189,184
Cash and cash equivalents, end of period	$	154,295		$	198,516

Supplemental disclosure of cash information:
Cash paid for interest	$	64,366		$	69,152
Cash paid for taxes, net of refunds	$	44,671		$	24,273

ENCORE CAPITAL GROUP, INC.

Supplemental Financial Information

Reconciliation of Non-GAAP Metrics

Adjusted EBITDA

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, unaudited)		2022			2021			2022			2021
GAAP net income, as reported	$	60,439		$	96,787		$	236,188		$	191,552
Adjustments:
Interest expense		37,054			44,159			71,687			90,685
Interest income		(588	)		(426	)		(1,025	)		(900	)
Provision for income taxes		23,250			24,607			78,274			51,575
Depreciation and amortization		11,646			12,046			23,475			23,558
Stock-based compensation expense		5,119			5,651			9,040			9,056
Acquisition, integration and restructuring related expenses⁽¹⁾		487			—			1,166			—
Loss on extinguishment of debt	$	—		$	9,300		$	—		$	9,300
Adjusted EBITDA	$	137,407		$	192,124		$	418,805		$	374,826
Collections applied to principal balance⁽²⁾	$	170,112		$	224,074		$	223,679		$	453,584

________________________
(1)	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.
(2)	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-Q for the period ending June 30, 2022.

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.

	Last Twelve Months Ended June 30,
(in thousands, except percentages, unaudited)		2022			2021
Numerator
Income from operations	$	674,633		$	609,269
Adjustments:⁽¹⁾
CFPB settlement fees		—			15,009
Acquisition, integration and restructuring related expenses		6,847			(1	)
Amortization of certain acquired intangible assets⁽²⁾		7,110			7,326
Adjusted income from operations	$	688,590		$	631,603

Denominator
Average Net Debt	$	2,798,699		$	3,016,599
Average equity		1,292,975			1,198,369
Total average invested capital	$	4,091,674		$	4,214,968

Pre-tax ROIC		16.8	%		15.0	%

________________________
(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, unaudited)	June 30, 2022			June 30, 2021			June 30, 2020
GAAP Borrowings	$	2,793,009		$	2,999,296		$	3,353,730
Debt issuance costs and debt discounts		50,304			64,468			63,017
Cash & cash equivalents		(154,295	)		(198,516	)		(293,800	)
Client cash⁽¹⁾		19,227			23,907			21,097
Net Debt	$	2,708,245		$	2,889,155		$	3,144,044

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

Encore Capital Group Announces Second Quarter 2022 Financial Results