(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Exhibit Number | Description | ||||
Press release dated November 2, 2022 | |||||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
ENCORE CAPITAL GROUP, INC. | ||||||||
Date: | November 2, 2022 | /s/ Jonathan C. Clark | ||||||
Jonathan C. Clark | ||||||||
Executive Vice President, Chief Financial Officer and Treasurer |
Exhibit Number | Description | ||||
Press release dated November 2, 2022 | |||||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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Three Months Ended September 30, | |||||||||||||||||
(in thousands, except percentages and earnings per share) | 2022 | 2021 | Change | ||||||||||||||
Collections | $ | 458,256 | $ | 566,690 | (19)% | ||||||||||||
Revenues | $ | 307,752 | $ | 412,624 | (25)% | ||||||||||||
Portfolio purchases(1) | $ | 232,652 | $ | 168,188 | 38% | ||||||||||||
Estimated Remaining Collections (ERC) | $ | 7,312,336 | $ | 7,879,353 | (7)% | ||||||||||||
Operating expenses | $ | 227,235 | $ | 245,977 | (8)% | ||||||||||||
GAAP net income attributable to Encore | $ | 31,494 | $ | 83,566 | (62)% | ||||||||||||
GAAP earnings per share | $ | 1.22 | $ | 2.66 | (54)% | ||||||||||||
LTM Pre-tax ROIC(2) | 15.1 | % | 15.2 | % | -10bps | ||||||||||||
Leverage Ratio(3) | 2.1x | 1.8x | +0.3x |
September 30, 2022 | December 31, 2021 | ||||||||||
Assets | |||||||||||
Cash and cash equivalents | $ | 147,035 | $ | 189,645 | |||||||
Investment in receivable portfolios, net | 2,976,202 | 3,065,553 | |||||||||
Property and equipment, net | 104,051 | 119,857 | |||||||||
Other assets | 331,029 | 335,275 | |||||||||
Goodwill | 769,548 | 897,795 | |||||||||
Total assets | $ | 4,327,865 | $ | 4,608,125 | |||||||
Liabilities and Equity | |||||||||||
Liabilities: | |||||||||||
Accounts payable and accrued liabilities | $ | 197,471 | $ | 229,586 | |||||||
Borrowings | 2,690,220 | 2,997,331 | |||||||||
Other liabilities | 247,245 | 195,947 | |||||||||
Total liabilities | 3,134,936 | 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, 23,538 and 24,541 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively | 235 | 245 | |||||||||
Additional paid-in capital | — | — | |||||||||
Accumulated earnings | 1,358,415 | 1,238,564 | |||||||||
Accumulated other comprehensive loss | (165,721) | (53,548) | |||||||||
Total stockholders’ equity | 1,192,929 | 1,185,261 | |||||||||
Total liabilities and stockholders’ equity | $ | 4,327,865 | $ | 4,608,125 |
September 30, 2022 | December 31, 2021 | ||||||||||
Assets | |||||||||||
Cash and cash equivalents | $ | 1,072 | $ | 1,927 | |||||||
Investment in receivable portfolios, net | 410,630 | 498,507 | |||||||||
Other assets | 3,203 | 3,452 | |||||||||
Liabilities | |||||||||||
Accounts payable and accrued liabilities | 124 | 105 | |||||||||
Borrowings | 390,979 | 473,443 | |||||||||
Other liabilities | 16 | 10 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Revenues | |||||||||||||||||||||||
Revenue from receivable portfolios | $ | 297,219 | $ | 316,225 | $ | 907,606 | $ | 982,393 | |||||||||||||||
Changes in recoveries | (13,080) | 65,913 | 179,293 | 176,628 | |||||||||||||||||||
Total debt purchasing revenue | 284,139 | 382,138 | 1,086,899 | 1,159,021 | |||||||||||||||||||
Servicing revenue | 21,992 | 29,321 | 71,926 | 93,901 | |||||||||||||||||||
Other revenues | 1,621 | 1,165 | 5,526 | 4,274 | |||||||||||||||||||
Total revenues | 307,752 | 412,624 | 1,164,351 | 1,257,196 | |||||||||||||||||||
Operating expenses | |||||||||||||||||||||||
Salaries and employee benefits | 89,241 | 94,662 | 285,077 | 288,892 | |||||||||||||||||||
Cost of legal collections | 52,891 | 64,170 | 163,756 | 198,212 | |||||||||||||||||||
General and administrative expenses | 37,274 | 35,819 | 105,775 | 102,790 | |||||||||||||||||||
Other operating expenses | 28,286 | 25,226 | 82,718 | 81,895 | |||||||||||||||||||
Collection agency commissions | 7,884 | 11,964 | 27,412 | 38,465 | |||||||||||||||||||
Depreciation and amortization | 11,659 | 14,136 | 35,134 | 37,694 | |||||||||||||||||||
Total operating expenses | 227,235 | 245,977 | 699,872 | 747,948 | |||||||||||||||||||
Income from operations | 80,517 | 166,647 | 464,479 | 509,248 | |||||||||||||||||||
Other expense | |||||||||||||||||||||||
Interest expense | (39,308) | (40,874) | (110,995) | (131,559) | |||||||||||||||||||
Loss on extinguishment of debt | — | — | — | (9,300) | |||||||||||||||||||
Other income (expense) | 1,205 | (17,504) | 3,392 | (16,993) | |||||||||||||||||||
Total other expense | (38,103) | (58,378) | (107,603) | (157,852) | |||||||||||||||||||
Income before income taxes | 42,414 | 108,269 | 356,876 | 351,396 | |||||||||||||||||||
Provision for income taxes | (10,920) | (24,703) | (89,194) | (76,278) | |||||||||||||||||||
Net income | 31,494 | 83,566 | 267,682 | 275,118 | |||||||||||||||||||
Net income attributable to noncontrolling interest | — | — | — | (419) | |||||||||||||||||||
Net income attributable to Encore Capital Group, Inc. stockholders | $ | 31,494 | $ | 83,566 | $ | 267,682 | $ | 274,699 | |||||||||||||||
Earnings per share attributable to Encore Capital Group, Inc.: | |||||||||||||||||||||||
Basic | $ | 1.31 | $ | 2.76 | $ | 11.00 | $ | 8.90 | |||||||||||||||
Diluted | $ | 1.22 | $ | 2.66 | $ | 10.06 | $ | 8.71 | |||||||||||||||
Weighted average shares outstanding: | |||||||||||||||||||||||
Basic | 23,958 | 30,225 | 24,344 | 30,863 | |||||||||||||||||||
Diluted | 25,919 | 31,362 | 26,601 | 31,531 |
Nine Months Ended September 30, | |||||||||||
2022 | 2021 | ||||||||||
Operating activities: | |||||||||||
Net income | $ | 267,682 | $ | 275,118 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 35,134 | 37,694 | |||||||||
Loss on extinguishment of debt | — | 9,300 | |||||||||
Other non-cash interest expense, net | 11,984 | 13,677 | |||||||||
Stock-based compensation expense | 12,231 | 12,903 | |||||||||
Deferred income taxes | 2,127 | (8,504) | |||||||||
Changes in recoveries | (179,293) | (176,628) | |||||||||
Other, net | 14,319 | 18,003 | |||||||||
Changes in operating assets and liabilities | |||||||||||
Other assets | 36,768 | 58,772 | |||||||||
Accounts payable, accrued liabilities and other liabilities | (46,076) | (28,345) | |||||||||
Net cash provided by operating activities | 154,876 | 211,990 | |||||||||
Investing activities: | |||||||||||
Purchases of receivable portfolios, net of put-backs | (569,032) | (473,013) | |||||||||
Collections applied to investment in receivable portfolios | 567,775 | 803,185 | |||||||||
Purchases of asset held for sale | (38,604) | (11,744) | |||||||||
Purchases of property and equipment | (21,068) | (24,163) | |||||||||
Other, net | 20,257 | 18,543 | |||||||||
Net cash (used in) provided by investing activities | (40,672) | 312,808 | |||||||||
Financing activities: | |||||||||||
Proceeds from credit facilities | 637,342 | 418,941 | |||||||||
Repayment of credit facilities | (432,424) | (713,958) | |||||||||
Proceeds from senior secured notes | — | 353,747 | |||||||||
Repayment of senior secured notes | (29,310) | (349,355) | |||||||||
Repayment of convertible senior notes | (221,153) | (161,000) | |||||||||
Repurchase and retirement of common stock | (76,753) | (88,119) | |||||||||
Other, net | (18,394) | (24,929) | |||||||||
Net cash used in financing activities | (140,692) | (564,673) | |||||||||
Net decrease in cash and cash equivalents | (26,488) | (39,875) | |||||||||
Effect of exchange rate changes on cash and cash equivalents | (16,122) | 8,934 | |||||||||
Cash and cash equivalents, beginning of period | 189,645 | 189,184 | |||||||||
Cash and cash equivalents, end of period | $ | 147,035 | $ | 158,243 | |||||||
Supplemental disclosure of cash information: | |||||||||||
Cash paid for interest | $ | 94,828 | $ | 100,335 | |||||||
Cash paid for taxes, net of refunds | $ | 63,710 | $ | 42,815 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
(in thousands, unaudited) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
GAAP net income, as reported | $ | 31,494 | $ | 83,566 | $ | 267,682 | $ | 275,118 | |||||||||||||||
Adjustments: | |||||||||||||||||||||||
Interest expense | 39,308 | 40,874 | 110,995 | 131,559 | |||||||||||||||||||
Interest income | (749) | (270) | (1,774) | (1,170) | |||||||||||||||||||
Provision for income taxes | 10,920 | 24,703 | 89,194 | 76,278 | |||||||||||||||||||
Depreciation and amortization | 11,659 | 14,136 | 35,134 | 37,694 | |||||||||||||||||||
Stock-based compensation expense | 3,191 | 3,847 | 12,231 | 12,903 | |||||||||||||||||||
Acquisition, integration and restructuring related expenses(1) | 13 | 17,950 | 1,179 | 17,950 | |||||||||||||||||||
Loss on extinguishment of debt | — | — | — | 9,300 | |||||||||||||||||||
Adjusted EBITDA | $ | 95,836 | $ | 184,806 | $ | 514,641 | $ | 559,632 | |||||||||||||||
Collections applied to principal balance(2) | $ | 179,163 | $ | 188,181 | $ | 402,842 | $ | 641,765 |
Last Twelve Months Ended September 30, | |||||||||||
(in thousands, except percentages, unaudited) | 2022 | 2021 | |||||||||
Numerator | |||||||||||
Income from operations | $ | 588,503 | $ | 633,462 | |||||||
Adjustments:(1) | |||||||||||
Acquisition, integration and restructuring related expenses | 4,212 | 2,670 | |||||||||
Amortization of certain acquired intangible assets(2) | 6,717 | 7,409 | |||||||||
Adjusted income from operations | $ | 599,432 | $ | 643,541 | |||||||
Denominator | |||||||||||
Average Net Debt | $ | 2,666,562 | $ | 2,967,800 | |||||||
Average equity | 1,295,875 | 1,263,038 | |||||||||
Total average invested capital | $ | 3,962,437 | $ | 4,230,838 | |||||||
Pre-tax ROIC | 15.1 | % | 15.2 | % |
(in thousands, unaudited) | September 30, 2022 | September 30, 2021 | September 30, 2020 | ||||||||||||||
GAAP Borrowings | $ | 2,690,220 | $ | 2,796,224 | $ | 3,252,101 | |||||||||||
Debt issuance costs and debt discounts | 45,436 | 60,268 | 106,511 | ||||||||||||||
Cash & cash equivalents | (147,035) | (158,243) | (169,983) | ||||||||||||||
Client cash(1) | 17,911 | 28,343 | 20,379 | ||||||||||||||
Net Debt | $ | 2,606,532 | $ | 2,726,592 | $ | 3,209,008 |
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