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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
______________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
February 22, 2023
Date of report (Date of earliest event reported)
______________________
ENCORE CAPITAL GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
000-26489
48-1090909
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)
350 Camino de la Reina, Suite 100
San Diego, California 92108
(Address of principal executive offices)(Zip Code)
(877) 445-4581
(Registrant’s telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report.)
_____________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.01 Par Value Per Share ECPG The NASDAQ Stock Market LLC
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company  ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐



Item 2.02.    Results of Operations and Financial Condition.
On February 22, 2023, Encore Capital Group, Inc. (“Encore”) issued a press release announcing its financial results for the quarter and full fiscal year ended December 31, 2022. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.
The information in Item 2.02 of this Current Report on Form 8-K, including the information contained in Exhibit 99.1, is being furnished to the Securities and Exchange Commission pursuant to Item 2.02, and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by a specific reference in such filing.
Item 9.01.    Financial Statements and Exhibits.
Exhibit Number
Description
Press release dated February 22, 2023
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)




SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ENCORE CAPITAL GROUP, INC.
Date:
February 22, 2023
/s/ Jonathan C. Clark
Jonathan C. Clark
Executive Vice President, Chief Financial Officer and Treasurer




EXHIBIT INDEX
Exhibit Number Description
Press release dated February 22, 2023
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)




EX-99.1 2 ex991ecpgq42022earningspre.htm EX-99.1 Document
encorelogoa24.jpg
Exhibit 99.1
Encore Capital Group Announces Fourth Quarter and Full-Year 2022 Financial Results
•GAAP net income of $195 million in 2022
•GAAP EPS of $7.46 in 2022
•Portfolio purchases up 20% to $801 million in 2022
•U.S. market for portfolio supply now growing
SAN DIEGO, February 22, 2023 -- 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, 2022.

“2022 marked another year of strong financial and operational performance for Encore as we delivered earnings per share that were second only to our extraordinary result from a year ago,” said Ashish Masih, Encore’s President and Chief Executive Officer. “The exceptional collections environment of 2021 in the U.S. gave way to more typical consumer behavior as the year progressed, which had the dual effect of reducing collections and increasing the supply of charged off receivables in the market.”

“After roughly two and a half years of reduced market supply, increased lending by banks and rising delinquencies have led to the beginning of a transition in the U.S. credit cycle in which opportunities to deploy capital at strong returns are also steadily rising. As a result, our largest business, MCM, increased U.S. portfolio purchasing in 2022 by 36%, which helped increase Encore’s global portfolio purchasing by 20% for the year.”

“In Europe, we have maintained our purchasing discipline in the face of portfolio pricing that we believe does not yet reflect recent higher funding costs. As a result, and because we are seeing double-digit inflation in parts of Europe, we are taking actions to control the cost base in our Cabot business. Consistent with our capital allocation priorities we will continue to focus our investments in markets with the highest risk adjusted returns.”

“In the fourth quarter, a number of accounting items negatively impacted our results including small percentage reductions to our ERC forecast and certain one-time tax items. Despite these impacts, we delivered strong results for the full year.”

“Looking ahead, our priorities in 2023 remain consistent with the fundamental objectives that have driven our financial performance and created shareholder value over the past several years. We remain anchored by our three pillar strategy and focused on our balance sheet objectives and capital allocation priorities. Against a backdrop of growing market supply in the U.S., we expect MCM’s portfolio purchases in Q1 2023 to be at least $200 million dollars at attractive returns, more than double Q1 2022 purchases. The purchasing pipeline for 2023 appears equally robust. Encore is well positioned to capitalize on these opportunities that are emerging as portfolio supply rises,” continued Masih.

Available capacity under Encore’s global senior facility was $478 million at the end of 2022. In addition, Encore ended the year with $126 million of non-client cash on the balance sheet.

Encore Capital Group, Inc.
Page 2

Financial Highlights for the Full Year of 2022:
Year Ended December 31,
(in thousands, except percentages and earnings per share) 2022 2021 Change
Collections
 $ 1,911,537  $ 2,307,359  (17)%
Revenues
 $ 1,398,347  $ 1,614,499  (13)%
Portfolio purchases(1)
 $ 800,507  $ 664,529  20%
Estimated Remaining Collections (ERC)
 $ 7,555,003  $ 7,749,954  (3)%
Operating expenses
 $ 936,173  $ 981,227  (5)%
Effective tax rate 37.4  % 19.5  % +1790bps
GAAP net income attributable to Encore
 $ 194,564  $ 350,782  (45)%
GAAP earnings per share
 $ 7.46  $ 11.26  (34)%
__________________
(1)Includes U.S. purchases of $556.0 million and $408.7 million, and Europe purchases of $244.5 million and $255.8 million in 2022 and 2021, respectively.

Financial Highlights for the Fourth Quarter of 2022:
Three Months Ended December 31,
(in thousands, except percentages and earnings per share) 2022 2021 Change
Collections
 $ 436,156  $ 521,781  (16)%
Revenues
 $ 233,996  $ 357,303  (35)%
Portfolio purchases(1)
 $ 225,343  $ 183,435  23%
Operating expenses
 $ 236,301  $ 233,279  1%
Effective tax rate (59.3) % 10.6  % N/A
GAAP net (loss) income
 $ (73,118) $ 76,083  (196)%
GAAP (loss) income per share
 $ (3.11) $ 2.53  (223)%
__________________
(1)Includes U.S. purchases of $168.9 million and $124.5 million, and Europe purchases of $56.4 million and $58.9 million in Q4 2022 and Q4 2021, respectively.

Conference Call and Webcast
The Company will host a conference call and slide presentation today, February 22, 2023, 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.








Encore Capital Group, Inc.
Page 3

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.

Encore Capital Group, Inc.
Page 4

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.
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.
Page 5

ENCORE CAPITAL GROUP, INC.
Consolidated Statements of Financial Condition
(In Thousands, Except Par Value Amounts)
December 31,
2022		 December 31,
2021
Assets
Cash and cash equivalents $ 143,912  $ 189,645 
Investment in receivable portfolios, net 3,088,261  3,065,553 
Property and equipment, net 113,900  119,857 
Other assets 341,073  335,275 
Goodwill 821,214  897,795 
Total assets $ 4,508,360  $ 4,608,125 
Liabilities and Equity
Liabilities:
Accounts payable and accrued liabilities $ 198,217  $ 229,586 
Borrowings 2,898,821  2,997,331 
Other liabilities 231,695  195,947 
Total liabilities 3,328,733  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, 23,323 shares and 24,541 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively 233  245 
Additional paid-in capital —  — 
Accumulated earnings 1,278,210  1,238,564 
Accumulated other comprehensive loss (98,816) (53,548)
Total stockholders’ equity 1,179,627  1,185,261 
Total liabilities and stockholders’ equity $ 4,508,360  $ 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.
December 31,
2022		 December 31,
2021
Assets
Cash and cash equivalents $ 1,344  $ 1,927 
Investment in receivable portfolios, net 431,350  498,507 
Other assets 3,627  3,452 
Liabilities
Accounts payable and accrued liabilities 150  105 
Borrowings 423,522  473,443 
Other liabilities 105  10 
 

Encore Capital Group, Inc.
Page 6

ENCORE CAPITAL GROUP, INC.
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
 
  (Unaudited)
Three Months Ended December 31,		 Year Ended December 31,
  2022 2021 2022 2021
Revenues
Revenue from receivable portfolios $ 294,755  $ 305,337  $ 1,202,361  $ 1,287,730 
Changes in recoveries (86,148) 22,508  93,145  199,136 
Total debt purchasing revenue 208,607  327,845  1,295,506  1,486,866 
Servicing revenue 22,996  26,877  94,922  120,778 
Other revenues 2,393  2,581  7,919  6,855 
Total revenues 233,996  357,303  1,398,347  1,614,499 
Operating expenses
Salaries and employee benefits 90,058  96,286  375,135  385,178 
Cost of legal collections 54,188  56,068  217,944  254,280 
General and administrative expenses 40,023  34,905  145,798  137,695 
Other operating expenses 28,516  25,043  111,234  106,938 
Collection agency commissions 8,156  8,592  35,568  47,057 
Depreciation and amortization 15,360  12,385  50,494  50,079 
Total operating expenses 236,301  233,279  936,173  981,227 
(Loss) income from operations (2,305) 124,024  462,174  633,272 
Other expense
Interest expense (42,313) (38,088) (153,308) (169,647)
Loss on extinguishment of debt —  —  —  (9,300)
Other (expense) income (1,269) (791) 2,123  (17,784)
Total other expense (43,582) (38,879) (151,185) (196,731)
(Loss) income before income taxes (45,887) 85,145  310,989  436,541 
Provision for income taxes (27,231) (9,062) (116,425) (85,340)
Net (loss) income (73,118) 76,083  194,564  351,201 
Net income attributable to noncontrolling interest —  —  —  (419)
Net (loss) income attributable to Encore Capital Group, Inc. stockholders $ (73,118) $ 76,083  $ 194,564  $ 350,782 
(Loss) income per share attributable to Encore Capital Group, Inc.:
Basic $ (3.11) $ 2.72  $ 8.06  $ 11.64 
Diluted $ (3.11) $ 2.53  $ 7.46  $ 11.26 
Weighted average shares outstanding:
Basic 23,544  27,950  24,142  30,129 
Diluted 23,544  30,040  26,092  31,153 



Encore Capital Group, Inc.
Page 7

ENCORE CAPITAL GROUP, INC.
Consolidated Statements of Cash Flows
(In Thousands)
Year Ended December 31,
2022 2021 2020
Operating activities:
Net income $ 194,564  $ 351,201  $ 212,524 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 50,494  50,079  42,780 
Expense related to financing —  9,300  51,117 
Other non-cash interest expense, net 15,875  17,785  23,639 
Stock-based compensation expense 15,402  18,330  16,560 
Deferred income taxes 46,410  35,371  8,549 
Changes in recoveries (93,145) (199,136) (7,246)
Other, net 18,798  17,130  16,260 
Changes in operating assets and liabilities
Other assets (6,722) 38,941  (33,663)
Accounts payable, accrued liabilities and other liabilities (30,995) (35,948) (17,656)
Net cash provided by operating activities 210,681  303,053  312,864 
Investing activities:
Purchases of receivable portfolios, net of put-backs (790,569) (657,280) (644,048)
Collections applied to investment in receivable portfolios, net 709,176  1,019,629  737,131 
Purchases of assets held for sale (39,340) (17,090) (1,502)
Purchases of property and equipment (37,224) (33,372) (34,600)
Other, net 27,722  28,009  25,845 
Net cash (used in) provided by investing activities (130,235) 339,896  82,826 
Financing activities:
Payment of loan and debt refinancing costs (1,659) (11,963) (82,455)
Proceeds from credit facilities 779,513  821,931  1,820,634 
Repayment of credit facilities (515,703) (896,418) (2,290,822)
Proceeds from senior secured notes —  353,747  1,313,385 
Repayment of senior secured notes (39,080) (359,175) (1,033,765)
Repayment of convertible senior notes (221,153) (161,000) (89,355)
Repurchase and retirement of common stock (87,006) (390,606) — 
Other, net (22,357) (12,208) (40,822)
Net cash used in financing activities (107,445) (655,692) (403,200)
Net decrease in cash and cash equivalents (26,999) (12,743) (7,510)
Effect of exchange rate changes on cash and cash equivalents (18,734) 13,204  4,359 
Cash and cash equivalents, beginning of period 189,645  189,184  192,335 
Cash and cash equivalents, end of period $ 143,912  $ 189,645  $ 189,184 
Supplemental disclosures of cash flow information:
Cash paid for interest $ 131,391  $ 132,400  $ 169,553 
Cash paid for income taxes, net of refunds 71,276  42,039  88,816 
Supplemental schedule of non-cash investing and financing activities:
Investment in receivable portfolios transferred to real estate owned $ 1,903  $ 768  $ 2,214 
Property and equipment acquired through finance leases 3,273  2,664  3,276 


Encore Capital Group, Inc.
Page 8

ENCORE CAPITAL GROUP, INC.
Supplemental Financial Information
Reconciliation of Non-GAAP Metrics

Adjusted EBITDA
(in thousands, unaudited) Three Months Ended December 31, Year Ended December 31,
2022 2021 2022 2021
GAAP net (loss) income, as reported $ (73,118) $ 76,083  $ 194,564  $ 351,201 
Adjustments:
Interest expense 42,313  38,088  153,308  169,647 
Loss on extinguishment of debt —  —  —  9,300 
Interest income —  (568) (1,774) (1,738)
Provision for income taxes 27,231  9,062  116,425  85,340 
Depreciation and amortization 15,360  12,385  50,494  50,079 
Stock-based compensation expense 3,171  5,427  15,402  18,330 
Acquisition, integration and restructuring related expenses(1)
 34  2,609  1,213  20,559 
Adjusted EBITDA $ 14,991  $ 143,086  $ 529,632  $ 702,718 
Collections applied to principal balance(2)
 $ 232,420  $ 201,322  $ 635,262  $ 843,087 
________________________
(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-K for the period ending December 31, 2022.