ENCORE CAPITAL GROUP INC

Encore Capital Group, Inc. is an international specialty finance company providing debt recovery solutions and other related services for consumers across a broad range of financial assets. The company primarily purchases portfolios of defaulted consumer receivables at deep discounts to face value and manages them by working with individuals as they repay their obligations and work toward financial recovery. Defaulted receivables are consumers' unpaid financial obligations to credit originators, including banks, credit unions, consumer finance companies and commercial retailers, and may also include receivables subject to bankruptcy proceedings. The company also provides debt servicing and other portfolio management services to credit originators for non-performing loans in Europe. The consumer credit recovery industry is highly competitive in the United States, the United Kingdom and throughout Europe, with competition based on price, ease of negotiating and closing prospective portfolio purchases, ability to obtain funding, and reputation with respect to the quality of services provided. Smaller competitors in the United States and the United Kingdom have faced difficulties in the portfolio purchasing market because of the high cost of regulatory compliance, and sellers of charged-off consumer receivables are sensitive to reputational risks, favoring larger participants such as Encore.

Through Midland Credit Management, Inc. and its domestic affiliates (collectively, MCM), the company is a market leader in portfolio purchasing and recovery in the United States. Through Cabot Credit Management Limited and its subsidiaries and European affiliates (collectively, Cabot), the company is one of the largest credit management services providers in Europe and the United Kingdom. The company's competitive advantages include analytic strength, consumer intelligence and principled intent, regulatory expertise, strong capital stewardship, and operational scale and cost efficiency. The company competes with a wide range of collection and financial services companies, traditional contingency collection agencies and in-house recovery departments. The company believes that its ability to compete effectively depends upon relationships with credit originators and portfolio resellers, and its ability to provide quality collection strategies in compliance with applicable laws.

The company generates revenue primarily through debt purchasing revenue, which includes portfolio revenue (accretion of the discount on the negative allowance due to the passage of time) and changes in recoveries (recoveries above or below forecast and changes in expected future recoveries). The company also generates servicing revenue from fee-based income earned on accounts collected on behalf of others, primarily credit originators, and other revenues primarily from the sale of real estate assets. The company's primary customer segments are consumers with defaulted consumer receivables, and it serves credit originators including banks, credit unions, consumer finance companies and commercial retailers. The company's business model is centered on purchasing portfolios of defaulted consumer receivables at deep discounts and collecting on them through call center and digital collections, legal collections, and collection agencies.

The company operates through three business units: MCM (United States), Cabot (Europe), and LAAP (Latin America and Asia-Pacific). MCM is a market leader in portfolio purchasing and recovery in the United States, primarily purchasing charged-off credit card debt portfolios with a small percentage of unsecured personal loans. Cabot is one of the largest credit management services providers in Europe and the United Kingdom, purchasing defaulted debt portfolios primarily consisting of credit card and consumer loan accounts, and also provides debt servicing offerings such as early stage collections, business process outsourcing (BPO), and contingent collections. LAAP includes investments in non-performing loans in Mexico and a subsidiary Encore Asset Reconstruction Company (EARC) in India, though operating results from LAAP have not been significant to total consolidated operating results. The company's long-term growth strategy is focused on continuing to invest in its core portfolio purchasing and recovery business in the United States and United Kingdom and strengthening and developing its business in France and Spain.

The company utilizes three collection channels: call center and digital collections, legal collections, and collection agencies. For MCM, call centers are maintained in Phoenix, Arizona; St. Cloud, Minnesota; Troy, Michigan; Roanoke, Virginia; Gurgaon, India; and San Jose, Costa Rica. For Cabot, call centers are maintained in various locations in Europe. The company's collection approaches include direct mail, call centers, digital collections, legal action, and third-party collection agencies. The company's policy is to not resell accounts to third parties in the ordinary course of business. The company's debt servicing operations, performed by subsidiaries of Cabot, include early stage collections, business process outsourcing and contingent collections for credit originators, mainly for consumer accounts but also for business-to-business accounts.

During the year ended December 31, 2025, the company repurchased 2,117,733 ¹ shares of its common stock for $89.5 million ² under the share repurchase program. In November 2025, the Board of Directors authorized an increase of an additional $300.0 million ³ under the share repurchase program. On October 1, 2025, the company issued $500.0 million ⁴ in aggregate principal amount of 6.625% Senior Secured Notes due April 2031 at an issue price of 100.000% through a private placement offering. Also on October 1, 2025, the company settled its $100.0 million ⁵ 2025 Convertible Notes in cash for $106.2 million ⁶, of which $6.2 million ⁷ (the excess above the principal amount) represented the conversion spread. In November 2025, the company repaid €100.0 million ⁸ (approximately $117.5 million ⁹ based on an exchange rate of $1.00 to €0.85) of the principal outstanding under its 2028 Floating Rate Notes, funded by borrowings from its Global Senior Facility. As of December 31, 2025, the company had remaining authority to purchase $302.4 million ¹⁰ of its common stock.

Total revenues for the year ended December 31, 2025 were $1,768,802 ¹¹ compared to $1,316,361 ¹² for the year ended December 31, 2024, an increase of $452,441 ¹³ or 34.4% ¹⁴. Net income for the year ended December 31, 2025 was $256,834 ¹⁵ compared to a net loss of $139,244 ¹⁶ for the year ended December 31, 2024. Income from operations was $626,647 ¹⁷ for the year ended December 31, 2025 compared to $157,330 ¹⁸ for the year ended December 31, 2024. Total debt purchasing revenue was $1,664,566 ¹⁹ for the year ended December 31, 2025 compared to $1,212,827 ²⁰ for the year ended December 31, 2024. Total collections from receivable portfolios were $2,592,786 ²¹ for the year ended December 31, 2025 compared to $2,162,478 ²² for the year ended December 31, 2024. Adjusted EBITDA was $676,958 ²³ for the year ended December 31, 2025 compared to $332,928 ²⁴ for the year ended December 31, 2024.

The company's long-term growth strategy is focused on continuing to invest in its core portfolio purchasing and recovery business in the United States and United Kingdom and strengthening and developing its business in France and Spain. The company believes the U.S. and UK markets have attractive structural characteristics including a large and consistent flow of purchasing opportunities, a strong regulatory framework that creates advantages for firms with sufficient financial and operational capabilities, a high degree of sophistication and data availability, and stable long term returns and resilience in the event of macroeconomic disruption. The company is strengthening its presence in Spain and France, each of which it believes shares a number of these same attractive market characteristics.

The company intends to continue investing in analytics and technology, risk management and compliance to enhance its competitive advantages, which it expects will result in collections growth and improved productivity. The company will also continue investing in initiatives that enhance its relationships with consumers, expand its digital capabilities and collections, improve liquidation rates on its portfolios or reduce costs. The company expects digital collections to increase as it continues to enhance its digital strategies and increase consumer awareness of its digital channels. The company believes its global funding structure enhances access to capital markets and provides financial flexibility, particularly with respect to its ability to allocate capital to its markets with the best risk-adjusted returns.

The company is focused on strengthening its balance sheet while delivering strong financial and operational results, including increasing its cash flow generation through efficient collection operations. Depending on relative leverage and other factors, the company may apply excess cash toward reducing its debt or, in circumstances in which it is operating within its target leverage range or below the lower end of its target leverage range, allocate capital toward share repurchases. The company strives to preserve financial flexibility and operate with leverage in a range that it believes benefits the company, and also targets a strong debt rating.

The company's capital allocation priorities include portfolio purchases at attractive returns, the return of capital to stockholders through share repurchases and the consideration of strategic merger and acquisition (M&A). In May 2021, the Board of Directors authorized a $300.0 million ²⁵ share repurchase program. In November 2025, the Board of Directors authorized an increase of an additional $300.0 million ²⁶ under the share repurchase program. Repurchases under this program are expected to be made from cash on hand and/or a drawing from the Global Senior Facility. As of December 31, 2025, the company had remaining authority to purchase $302.4 million ²⁷ of its common stock. The company has never declared or paid dividends on its common stock.

The company's ability to purchase receivable portfolios at favorable prices depends on a number of factors including volume of defaults in consumer debt, continued sale of receivable portfolios by originating institutions at sufficient volumes and acceptable price levels, competition in the marketplace, ability to develop and maintain favorable relationships with key major credit originators, ability to obtain adequate data from credit originators to appropriately evaluate collectability, and changes in laws and regulations governing consumer lending, bankruptcy, and collections. The company faces intense competition in the charged-off receivables purchasing market, and some competitors may obtain alternative sources of financing at more favorable rates or may elect to pay prices for portfolios that the company determines are not economically sustainable.

Financial, economic and other conditions affect the ability of consumers to pay their obligations, and adverse conditions including natural disasters and extreme weather events, economic changes including significant inflation, changes in trade policy and tariffs, political volatility and financial disruptions including unemployment could place financial pressure on consumers, which may reduce the company's ability to collect on its consumer receivable portfolios. Increased financial pressures on the financially distressed consumer may result in additional regulatory requirements or restrictions on operations and increased litigation. The company's business model may be uniquely vulnerable to an economic recession, which typically results in an increase in the amount of defaulted consumer receivables and personal bankruptcy filings. Since the defaulted consumer receivables the company purchases are generally unsecured, the company often is not able to collect on those receivables in bankruptcy filings.

The company's business is subject to extensive laws and regulations, and failure to comply could result in suspension or termination of its ability to conduct business, significant fines and penalties, or other expenditures. The CFPB has broad authority to prevent unfair, deceptive, or abusive acts or practices and has brought enforcement actions against debt collectors, including a 2020 lawsuit against Encore that resulted in a Stipulated Judgment requiring payment of a $15.0 million ²⁸ civil monetary penalty. The company's significant indebtedness of $4.0 billion ²⁹ as of December 31, 2025 could increase vulnerability to economic downturns, require substantial cash flow for debt service, and limit flexibility. The company recorded goodwill impairment charges at the Cabot reporting unit of $238.2 million ³⁰ and $100.6 million ³¹ during the fourth quarters of 2023 and 2024, respectively, and there can be no assurance that additional impairment charges will not be required in the future. The company's ability to collect on receivable portfolios depends on success in individual lawsuits, and a decrease in the willingness of courts to grant judgments or changes in requirements could have an adverse effect.

Management's message emphasizes a focus on continuing to invest in the core portfolio purchasing and recovery business in the United States and United Kingdom and strengthening and developing the business in France and Spain. The strategic priorities include enhancing competitive advantages through innovation in analytics and technology, risk management and compliance, and investing in initiatives that enhance consumer relationships, expand digital capabilities, improve liquidation rates, or reduce costs. Management also emphasizes strengthening the balance sheet while delivering strong financial and operational results, including increasing cash flow generation through efficient collection operations, and allocating capital toward portfolio purchases at attractive returns, share repurchases, and strategic M&A. The company's financial priorities include preserving financial flexibility, operating with leverage in a range that benefits the company, and targeting a strong debt rating.