Encore Capital Group Inc · NASDAQ:ECPG
Encore Capital — Q4 2024 Earnings Presentation
32 slides from Encore Capital's earnings presentation, Feb 26, 2025
Slide 1: Fourth Quarter 2024 Investor Presentation
Fourth Quarter 2024 Investor Presentation Encore Capital Group, Inc. February 26, 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: Today's Call
Today’s Call o 2024 Highlights o Our Strategy and Market Presence o Financial Results o Priorities and Outlook for 2025 Encore Capital Group, Inc. 3
Slide 4: Encore's momentum in 2024 driven by U.S. business
Encore’s momentum in 2024 driven by U.S. business Encore delivered significant growth in 2024 (Purchasing up 26%, Collections up 16%, Cash generation up 20%) MCM delivered strong results o U.S. market continues to be robust with revolving credit at record high and charge-off rate still growing o
Slide 5: 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 6: Record global portfolio purchasing up 26% over 2023
Record global portfolio purchasing up 26% over 2023 as we continue to allocate capital to U.S. opportunities, where returns are highest Portfolio Purchases (in $M) +26% 1,400 1,352 1,200 353 26% 1,074 Cabot 1,000 259 801 800 660 665 245 600 117 256 999 74% 400 815 MCM 543 556 200 409 0 2020 2021 202
Slide 7: Collections increased by 16% in 2024
After being impacted by several years of lower deployments, collections increased by 16% in 2024 Collections by Geography (in $M) 2,307 +16% 2,112 2,162 1,912 1,863 645 588 554 553 544 1,529 1,642 1,572 1,355 1,315 2020 2021 2022 2023 2024 United States Europe Other Note: Global, U.S. and Europe col
Slide 8: Cash generation increased by 20% in 2024
Similar to collections, after being impacted by several years of lower deployments, cash generation increased by 20% in 2024 Encore Cash Generation1 (in $M) 1600 1400 +20% 1200 1000 800 600 400 200 0 2020 2021 2022 2023 2024 2 Adjusted EBITDA Collections applied to principal balance 1) Cash generati
Slide 9: Record portfolio supply driven by highest U.S. charge off rate
Record 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 $1.38T Dec 6% 1300 2024 +$282B 1200 4.69% 5% 1100 Q4 2024 4% $ Billions 1000 900 3% 800 2% 700 1% 600 500 0
Slide 10: U.S. consumer credit card delinquency rates continue to rise
U.S. consumer credit card delinquency rates continue to rise 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 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2
Slide 11: Record year of portfolio purchasing for U.S. business
2024 was a record year of portfolio purchasing for our U.S. business with deployments of $1B, up 23% compared to 2023 MCM Portfolio Purchases in the U.S. (in $M) 1,000 Pandemic impact +23% 800 600 999 400 815 638 682 562 536 543 556 506 200 409 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Enc
Slide 12: MCM continues to deliver strong results across the board
MCM continues to deliver strong results across the board MCM (U.S.) Portfolio supply in the U.S. in 2024 surged to its highest level ever Record MCM portfolio purchases of $1B in 2024 were up 23% compared to 2023, including a single quarter record $295M in Q4 MCM collections of $1.57B in 2024
Slide 13: U.K. consumer credit continues to grow slowly
U.K. consumer credit continues to grow slowly and charge off rate remains low U.K. Consumer Credit Outstanding Balances and U.K. Annual Charge Off Rate 250 5% £234B Dec 2024 200 4% 150 3% £ Billions 100 1.6% 2% Q3 50 2024 1% 0 0% 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 2020
Slide 14: Cabot issues are now behind us
Cabot issues are now behind us Actions in Q4 to address persistent Cabot issues Q4 2024 Q4 2024 Impacts from Cabot Actions and other items Reductions to Cabot ERC led to negative changes in Impact EPS Impact1 expected future recoveries of $129M, of which: Cabot changes in expected future recoverie
Slide 15: Cabot positioned for positive, predictable trajectory
Cabot positioned for positive, predictable trajectory Cabot (Europe) Cabot (Europe) Collections (in $M) 645 +8% 588 554 553 544 Cabot collections in 2024 of $588M increased by 8% compared to 2023 Cabot portfolio purchases of $353M in 2024 were up 36% compared to 2023, driven by exceptional Q4 of
Slide 16: Detailed Financial Discussion
Detailed Financial Discussion Encore Capital Group, Inc. 16
Slide 17: Q4 and Full Year 2024 Key Financial Measures
Q4 and Full Year 2024 Key Financial Measures Q4 2024 2024 Key Financial Measures Q4 2024 Q4 2023 vs. 2024 2023 vs. Q4 2023 2023 Collections $555M $458M +21% $2.16B $1.86B +16% Revenues1 $266M $277M -4% $1.32B $1.22B +8% Portfolio Purchases $495M $292M +69% $1.35B $1.07B +26% ERC2 $8.50B $8.19B +4% $
Slide 18: Leverage continues to decrease despite record purchases
Leverage continues to decrease – even with record global portfolio purchases in 2024 Leverage 4.0x 3.0x Target 2.8x 2.9x Leverage Ratio 2.7x 2.6x Range 2.4x 2.4x 2.0x 1.9x 1.0x 1 Leverage Ratio 0.0x 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 18 18 18 18 19 19
Slide 19: No significant maturities until 2028
Proactively managing borrowings with no significant maturities until 2028 Debt Maturity Profile1 at December 31, 2024 (in $M) 1.8E+09 1,689 1.6E+09 1.4E+09 1.2E+09 843 1E+09 819 800000000 730 313 319 600000000 230 400000000 306 200000000 100 533 500 500 - 284 23 0 100 2025 2026 2027 2028 2029 2030 S
Slide 20: Revised capital allocation priorities
Revised capital allocation priorities raise Share Repurchases above Strategic M&A 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 de
Slide 21: Well-positioned to capitalize on opportunities ahead
Well-positioned to capitalize on opportunities ahead 2023 Actual 2024 Actual 2025 Guidance1 Portfolio Purchases $1.07B +26% to $1.35B Exceed $1.35B Collections $1.86B +16% to $2.16B +11% to $2.4B Guidance Resume share repurchases in 2025 We also expect: − Interest expense in 2025 of $285M − Effe
Slide 22: Appendix
Appendix Encore Capital Group, Inc. 22
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: Reconciliation of Adjusted EBITDA to GAAP Net Income
Reconciliation of Adjusted EBITDA to GAAP Net Income (Unaudited, in $ thousands) 2020 2021 2022 2023 2024 GAAP net income (loss), as reported $ 212,524 $ 351,201 $ 194,564 ($ 206,492) ($ 139,244) Interest expense 209,356 169,647 153,308 201,877 252,545 Loss on extinguishment of debt 40,951 9,300 ---
Slide 25: Calculation of ROIC
Calculation of ROIC Reconciliation of Adjusted Income from Operations (Unaudited, in $ thousands, except percentages) 2020 2021 2022 2023 2024 Numerator GAAP Income from operations $ 533,562 $ 633,272 $ 462,174 $ 16,535 $ 157,330 Adjustments:1 Acquisition, integration and restructuring related expen
Slide 26: Reconciliation of Net Debt
Reconciliation of Net Debt 2018 2019 2020 (Unaudited, in $ millions) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 GAAP Borrowings, as reported $ 3,607 $ 3,530 $ 3,561 $ 3,491 $ 3,593 $ 3,530 $ 3,429 $ 3,513 $ 3,404 $ 3,354 $3,252 $ 3,282 Debt issuance costs and debt discounts 77 70 89 85 79 73 75 73 69 63 10
Slide 27: Debt/Equity and Leverage Ratio
Debt/Equity and Leverage Ratio 2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Debt / Equity1 5.9x 5.7x 4.6x 4.3x 4.1x 3.9x 3.7x 3.4x 3.8x 3.2x 2.9x 2.7x Leverage Ratio2 3.2x 3.0x 2.9x 2.8x 2.8x 2.7x 2.7x 2.7x 2.6x 2.4x 2.4x 2.4x 2021 2022 2023 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Debt / Equity1 2
Slide 28: Impact of Fluctuations in Foreign Currency Exchange Rates
Impact of Fluctuations in Foreign Currency Exchange Rates (Unaudited, in $ millions, except per share amounts) Three Months Ended 12/31/24 As Reported Constant Currency Twelve Months Ended 12/31/24 As Reported Constant Currency Collections $ 555 $ 552 Collections $ 2,162 $ 2,152 Revenues $ 266 $ 266
Slide 29: Cash Efficiency Margin
Cash Efficiency Margin Cash Efficiency Margin and Cash Receipts (in $M) 2,428 2,227 2,247 2,006 1,946 60.1% 57.5% 53.9% 54.2% 51.8% 2020 2021 2022 2023 2024 Cash Receipts Cash Efficiency Margin Note: Cash Efficiency Margin defined as (Cash receipts – Adjusted operating expenses) ÷ Cash receipts, whe
Slide 30: Calculation of Cash Efficiency Margin
Calculation of Cash Efficiency Margin1 (Unaudited, in $ thousands, except percentages) 2020 2021 2022 2023 2024 Collections $ 2,111,848 $ 2,307,359 $ 1,911,537 $ 1,862,567 $ 2,162,478 Servicing revenue 115,118 120,778 94,922 83,136 84,783 Cash receipts (A) $ 2,226,966 $ 2,428,137 $ 2,006,459 $ 1,945
Slide 31: 2024 Cash Collections and Revenue Reconciliation
2024 Cash Collections and Revenue Reconciliation 2024 Collections and Revenue Reconciliation (in $M) +78 $2,084M Expected Cash Collections, equal to the sum A of 2023 ERC plus expected collections from portfolios 2000 purchased in 2024 -860 1500 $78M Recoveries Above Forecast, cash collections B abo
Slide 32: Components of Debt Purchasing Revenue in 2024
Components of Debt Purchasing Revenue in 2024 2024 Debt Purchasing Revenue (in $M) E1. Revenue from Receivable Portfolios 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