Encore Capital Group Inc · NASDAQ:ECPG
Encore Capital — Q1 2025 Earnings Presentation
27 slides from Encore Capital's earnings presentation, May 7, 2025
Slide 1: First Quarter 2025 Investor Presentation
First Quarter 2025 Investor Presentation Encore Capital Group, Inc. May 7, 2025
Slide 2: Legal Disclaimers
Legal Disclaimers The statements in this presentation 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 “forwa
Slide 3: A strong start to Encore's 2025
A strong start to Encore’s 2025 Encore off to a strong start in 2025 o Portfolio purchases of $368M up 24% o Collections of $605M up 18% o EPS of $1.93 in Q1 2025 compared to $0.95 in Q1 2024 o Leverage1 improved to 2.6x from 2.8x year/year and flat quarter/quarter despite record U.S. purchasing o
Slide 4: Our Strategy and Market Presence
Our Strategy and Market Presence Our Business o Purchase NPL portfolios at attractive cash returns Our Market Presence o Focus on the consumer and ensure the highest level of compliance • Market leader in the United States o Meet or exceed collection expectations • 25+ years in operation o Maintain
Slide 5: Record U.S. portfolio purchasing in Q1 2025
Record U.S. portfolio purchasing in Q1 2025 as we continue to allocate capital to U.S. opportunities, where returns are highest Portfolio Purchases (in $M) 495 400 200 368 51 14% 296 Europe 279 282 59 42 52 200 86% 295 316 United 237 237 230 States 0 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 United St
Slide 6: Collections increased by 18% in Q1 2025
Collections increased by 18% in Q1 2025 compared to Q1 2024 Collections by Geography (in $M) +18% 605 547 550 555 511 150 500 149 148 150 141 454 397 402 404 369 0 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 United States Europe Other Note: Global, U.S. and Europe collections in Q1 2025 were 103%, 102%
Slide 7: Cash generation for trailing twelve months increased
Cash generation for trailing twelve months increased by 23% for Q1 2025 compared to Q1 2024 Encore TTM Cash Generation1 (in $M) +23% 1400 1200 1000 800 600 400 200 0 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 2 TTM adjusted EBITDA TTM collections applied to principal balance 1) Trailing Twelve Month (“
Slide 8: Strong portfolio supply driven by highest U.S. charge off rate
Strong portfolio supply driven by highest U.S. charge off rate in more than 10 years combined with growth in lending Outstanding U.S. Revolving Credit and U.S. Credit Card Charge Off Rate 1400 $1.33T Jan 6% 1200 2025 4.69% 5% 1000 Q4 2024 4% 800 $ Billions 3% 600 400 2% 200 1% 0 0% 2015 2016 2017 20
Slide 9: U.S. consumer credit card delinquency rates remain at high levels
U.S. consumer credit card delinquency rates remain at high levels U.S. Bankcard Balance Delinquency Rates 4.5% 4.0% 3.5% % of Balances Past Due 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Slide 10: MCM continues to deliver very strong results
MCM continues to deliver very strong results MCM (U.S.) MCM Collections (in $M) +23% 454 Portfolio supply in the U.S. remains robust 402 404 397 369 Record MCM portfolio purchases of $316M in Q1 2025 were up 34% compared to Q1 2024 Record MCM collections of $454M in Q1 2025 increased by 23% co
Slide 11: Cabot delivered a solid Q1
Cabot delivered a solid Q1 Cabot (Europe) Cabot Collections (in $M) +7% 149 148 150 150 141 Cabot collections in Q1 2025 of $150M increased by 7% compared to Q1 2024 Cabot portfolio purchases of $51M in Q1 2025 in line with historical trend U.K. market remains impacted by subdued consumer lend
Slide 12: Detailed Financial Discussion
Detailed Financial Discussion Encore Capital Group, Inc. 12
Slide 13: Financial Results
Financial Results Summary earnings statement Variance Key financial measures Variance $ in millions, except EPS Q1 25 Q1 24 $ in millions Q1 25 Q1 24 Portfolio revenue 345.2 315.9 29.4 9.3% Collections 604.8 510.9 93.9 18.4% Changes in recoveries 21.5 (12.4) 33.9 NM Portfolio purchases 367.9 295.7 7
Slide 14: Proactively managing borrowings with no significant maturities until 2027
Proactively managing borrowings with no significant maturities until 2027 Debt Maturity Profile at March 31, 2025 (in $M)1 2E+09 1,774 1.8E+09 1.6E+09 1.4E+09 894 1.2E+09 1E+09 829 800000000 730 323 329 600000000 230 400000000 323 200000000 100 23 557 500 500 0 300 0 100 2025 2026 2027 2028 2029 203
Slide 15: Our capital allocation priorities
Our capital allocation priorities Balance Sheet Objectives Capital Allocation Priorities Preserve financial flexibility Portfolio purchases at attractive returns Target leverage1 between 2.0x and 3.0x Share Repurchases Maintain a strong BB debt Strategic M&A rating Deliver strong ROIC th
Slide 16: Reiterating our full-year guidance
Reiterating our full-year guidance 2025 Guidance Portfolio Purchases Exceed $1.35B Collections +11% to $2.4B Guidance Interest expense in 2025 of $285M Effective tax rate in 2025 to be in the mid-20’s % Encore Capital Group, Inc. 16
Slide 17: Appendix
Appendix Encore Capital Group, Inc. 17
Slide 18: Receivable portfolios and annualized yields
Receivable portfolios and annualized yields Receivable portfolios $ in millions Q1 24 Q2 24 Q3 24 Q4 24 Q1 25 Balance, beginning of period 3,468.4 3,531.4 3,583.3 3,719.3 3,776.4 Portfolio purchases 295.7 278.7 282.5 495.1 367.9 Definitions: Collections (510.9) (546.7) (550.3) (554.6) (604.8) Collec
Slide 19: Supporting financial modeling formulas
Supporting financial modeling formulas Average receivable portfolios x Portfolio yield = Portfolio revenue Average receivable portfolios x Collections yield = Collections Servicing & other Collections + = Cash receipts revenue Cash receipts x ( 1 - Cashmargin efficiency ) = Operating expenses Encore
Slide 20: Quarterly Cash Efficiency Margin
Quarterly Cash Efficiency Margin Quarterly Cash Efficiency Margin and Cash Receipts (in $M) 631 574 577 579 536 58.3% 54.8% 56.2% 54.8% 52.6% Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 Cash Receipts Quarterly Cash Efficiency Margin Note: Quarterly cash efficiency margin utilizes non-GAAP metrics define
Slide 21: Q1 2025 Cash Collections and Revenue Reconciliation
Q1 2025 Cash Collections and Revenue Reconciliation Q1 2025 Collections and Revenue Reconciliation (in $M) +27 $578M Expected Cash Collections, equal to the sum of 600 A Q4 2024 ERC plus expected collections from portfolios purchased in Q1 2025 500 -260 400 $27M Recoveries Above Forecast, cash colle
Slide 22: Components of Debt Purchasing Revenue in Q1 2025
Components of Debt Purchasing Revenue in Q1 2025 Q1 2025 Debt Purchasing Revenue (in $M) E1. Portfolio Revenue is revenue from expected collections and is a formulaic calculation based on the investment in receivable balance and an effective interest rate (EIR) that is established at the time of the
Slide 23: Non-GAAP Financial Measures
Non-GAAP Financial Measures This presentation 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
Slide 24: Calculation of Quarterly Cash Efficiency Margin
Calculation of Quarterly Cash Efficiency Margin Quarterly cash efficiency margin1 $ in millions, except percentages Q1 24 Q2 24 Q3 24 Q4 24 Q1 25 Collections 510.9 546.7 550.3 554.6 604.8 Servicing revenues 20.4 21.1 22.8 20.5 22.5 Other revenues 4.6 6.5 3.5 4.2 3.5 Cash receipts (A) 535.8 574.3 576
Slide 25: Calculation of Cash Generation
Calculation of Cash Generation Reconciliation of Adjusted EBITDA to GAAP Net Income LTM Adjusted EBITDA $ in millions Q1 24 Q2 24 Q3 24 Q4 24 Q1 25 LTM GAAP net income, as reported (201.9) (196.0) (184.7) (139.2) (115.7) Adjustments: Interest expense 210.8 222.2 238.5 252.5 267.3 Interest income (5.
Slide 26: Calculation of Net Debt and Leverage
Calculation of Net Debt and Leverage Net debt and leverage $ in millions, except leverage Q1 24 Q2 24 Q3 24 Q4 24 Q1 25 GAAP Borrowings 3,364.0 3,455.1 3,550.6 3,672.8 3,790.7 Debt issuance costs and debt discounts 46.9 49.7 46.8 37.3 34.2 Cash & cash equivalents (173.0) (250.6) (247.4) (199.9) (187
Slide 27: Calculation of ROIC
Calculation of ROIC Reconciliation of Adjusted Income from Operations Adjusted income from operations and ROIC $ in millions, except percentages Q1 24 Q2 24 Q3 24 Q4 24 Q1 25 Numerator LTM income from operations 30.0 43.8 74.3 157.3 203.1 Adjustments: Acquisition, integration and restructuring relat