Encore Capital 10Q 2024 Q3 Quarterly report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________________________________________________________________________

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024 or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________to__________.

COMMISSION FILE NUMBER: 000-26489

ENCORE CAPITAL GROUP, INC.

(Exact name of registrant as specified in its charter)


Delaware			48-1090909
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification No.)

350 Camino De La Reina, Suite 100

San Diego, California 92108

(Address of principal executive offices, including zip code)

(877) 445 - 4581

(Registrant’s telephone number, including area code)

(Not Applicable)

(Former name, former address and former fiscal year, if changed since last report)

_______________________________________________________________

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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class						Outstanding at October 30, 2024
Common Stock, $0.01 par value						23,691,291 shares

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ENCORE CAPITAL GROUP, INC.

INDEX TO FORM 10-Q


			Page
PART I – FINANCIAL INFORMATION			3
Item 1— Condensed Consolidated Financial Statements (Unaudited)			3
Condensed Consolidated Statements of Financial Condition			3
Condensed Consolidated Statements of Income			4
Condensed Consolidated Statements of Comprehensive Income (Loss)			5
Condensed Consolidated Statements of Equity			6
Condensed Consolidated Statements of Cash Flows			8
Notes to Condensed Consolidated Financial Statements			9
Note 1: Ownership, Description of Business, and Summary of Significant Accounting Policies			9
Note 2: Earnings Per Share			10
Note 3: Fair Value Measurements			10
Note 4: Derivatives and Hedging Instruments			12
Note 5: Investment in Receivable Portfolios, Net			15
Note 6: Other Assets			17
Note 7: Borrowings			17
Note 8: Variable Interest Entities			21
Note 9: Accumulated Other Comprehensive Loss			22
Note 10: Income Taxes			22
Note 11: Commitments and Contingencies			23
Note 12: Segment and Geographic Information			24
Note 13: Goodwill and Identifiable Intangible Assets			24
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations			26
Item 3 – Quantitative and Qualitative Disclosures About Market Risk			49
Item 4 – Controls and Procedures			49

PART II – OTHER INFORMATION			50
Item 1 – Legal Proceedings			50
Item 1A – Risk Factors			50
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds			50
Item 5 – Other Information			50
Item 6 – Exhibits			51
SIGNATURES			52

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PART I – FINANCIAL INFORMATION

Item 1—Condensed Consolidated Financial Statements (Unaudited)

ENCORE CAPITAL GROUP, INC.

Condensed Consolidated Statements of Financial Condition

(In Thousands, Except Par Value Amounts)

(Unaudited)


	September 30, 2024		December 31, 2023
Assets
Cash and cash equivalents	$	247,353	$	158,364
Investment in receivable portfolios, net	3,719,260		3,468,432
Property and equipment, net	103,550		103,959
Other assets	295,422		293,256
Goodwill	628,131		606,475
Total assets	$	4,993,716	$	4,630,486
Liabilities and Equity
Liabilities:
Accounts payable and accrued liabilities	$	222,841	$	189,928
Borrowings	3,550,574		3,318,031
Other liabilities	172,196		185,989
Total liabilities	3,945,611		3,693,948
Commitments and contingencies (Note 11)
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, 23,691 and 23,545 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively	237		235
Additional paid-in capital	17,016		11,052
Accumulated earnings	1,135,234		1,049,171
Accumulated other comprehensive loss	(104,382)		(123,920)
Total stockholders’ equity	1,048,105		936,538
Total liabilities and stockholders’ equity	$	4,993,716	$	4,630,486

The following table presents certain assets and liabilities of consolidated variable interest entities (“VIEs”) included in the condensed consolidated statements of financial condition above. The liabilities in the table below can only be settled from assets in the respective VIEs. Creditors of the VIEs do not have recourse to the general credit of the Company. See “Note 8: Variable Interest Entities” for additional information on the Company’s VIEs.


	September 30, 2024		December 31, 2023
Assets
Cash and cash equivalents	$	28,740	$	24,472
Investment in receivable portfolios, net	818,540		717,556
Other assets	5,485		19,358
Liabilities
Accounts payable and accrued liabilities	2,129		1,854
Borrowings	484,105		494,925
Other liabilities	2,915		2,452

See accompanying notes

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ENCORE CAPITAL GROUP, INC.

Condensed Consolidated Statements of Income

(In Thousands, Except Per Share Amounts)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenues
Revenue from receivable portfolios	$	328,119	$	302,687	$	965,901	$	899,545
Changes in recoveries	12,675		(17,067)		6,020		(30,054)
Total debt purchasing revenue	340,794		285,620		971,921		869,491
Servicing revenue	22,772		19,893		64,258		63,486
Other revenues	3,505		4,106		14,563		12,316
Total revenues	367,071		309,619		1,050,742		945,293
Operating expenses
Salaries and employee benefits	107,502		95,067		318,294		294,772
Cost of legal collections	67,339		56,274		190,309		167,525
General and administrative expenses	38,808		35,559		111,828		108,053
Other operating expenses	31,804		27,959		93,016		81,864
Collection agency commissions	7,370		8,046		22,308		26,583
Depreciation and amortization	8,158		11,196		23,467		32,768

Total operating expenses	260,981		234,101		759,222		711,565
Income from operations	106,090		75,518		291,520		233,728
Other expense
Interest expense	(66,906)		(50,558)		(184,047)		(147,376)

Other income	1,578		5,103		6,291		5,080
Total other expense	(65,328)		(45,455)		(177,756)		(142,296)
Income before income taxes	40,762		30,063		113,764		91,432
Provision for income taxes	(10,119)		(10,724)		(27,701)		(27,162)
Net income	$	30,643	$	19,339	$	86,063	$	64,270

Earnings per share:
Basic	$	1.28	$	0.82	$	3.61	$	2.72
Diluted	$	1.26	$	0.79	$	3.54	$	2.62

Weighted average shares outstanding:
Basic	23,912		23,712		23,859		23,644
Diluted	24,407		24,382		24,324		24,535

See accompanying notes

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ENCORE CAPITAL GROUP, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited, In Thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net income	$	30,643	$	19,339	$	86,063	$	64,270
Other comprehensive income (loss), net of tax:
Change in unrealized loss on derivative instruments:
Unrealized loss on derivative instruments	(23,315)		(6,310)		(18,571)		(12,401)
Income tax effect	6,014		(1,903)		2,241		(774)
Unrealized loss on derivative instruments, net of tax	(17,301)		(8,213)		(16,330)		(13,175)
Change in foreign currency translation:


Unrealized gain (loss) on foreign currency translation	42,237		(50,121)		34,945		(16,581)
Income tax effect	640		(257)		923		(919)
Unrealized gain (loss) on foreign currency translation, net of tax	42,877		(50,378)		35,868		(17,500)
Other comprehensive income (loss), net of tax:	25,576		(58,591)		19,538		(30,675)
Total comprehensive income (loss)	$	56,219	$	(39,252)	$	105,601	$	33,595

See accompanying notes

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ENCORE CAPITAL GROUP, INC.

Condensed Consolidated Statements of Equity

(Unaudited, In Thousands)


	Three Months Ended September 30, 2024
	Common Stock			Additional Paid-In Capital		Accumulated Earnings		Accumulated Other Comprehensive (Loss)/ Income		Total Equity
	Shares	Par
Balance as of June 30, 2024	23,691	$	237	$	13,257	$	1,104,591	$	(129,958)	$	988,127

Net income	—	—		—		30,643		—		30,643
Other comprehensive income, net of tax	—	—		—		—		25,576		25,576
Issuance of share-based awards, net of shares withheld for employee taxes	—	—		22		—		—		22
Stock-based compensation	—	—		3,737		—		—		3,737

Balance as of September 30, 2024	23,691	$	237	$	17,016	$	1,135,234	$	(104,382)	$	1,048,105


	Three Months Ended September 30, 2023
	Common Stock			Additional Paid-In Capital		Accumulated Earnings		Accumulated Other Comprehensive Loss		Total Equity
	Shares	Par
Balance as of June 30, 2023	23,485	$	235	$	3,906	$	1,300,594	$	(70,900)	$	1,233,835
Net income	—	—		—		19,339		—		19,339
Other comprehensive loss, net of tax	—	—		—		—		(58,591)		(58,591)
Exercise of stock options and issuance of share-based awards, net of shares withheld for employee taxes	44	—		1,105		—		—		1,105
Stock-based compensation	—	—		3,092		—		—		3,092
Exercise of capped call options	—	—		2,371		—		—		2,371
Settlement of convertible notes	—	—		(2,368)		—		—		(2,368)
Balance as of September 30, 2023	23,529	$	235	$	8,106	$	1,319,933	$	(129,491)	$	1,198,783


	Nine Months Ended September 30, 2024
	Common Stock			Additional Paid-In Capital		Accumulated Earnings		Accumulated Other Comprehensive (Loss)/ Income		Total Equity
	Shares	Par
Balance as of December 31, 2023	23,545	$	235	$	11,052	$	1,049,171	$	(123,920)	$	936,538

Net income	—	—		—		86,063		—		86,063
Other comprehensive income, net of tax	—	—		—		—		19,538		19,538
Issuance of share-based awards, net of shares withheld for employee taxes	146	2		(5,767)		—		—		(5,765)
Stock-based compensation	—	—		11,731		—		—		11,731

Balance as of September 30, 2024	23,691	$	237	$	17,016	$	1,135,234	$	(104,382)	$	1,048,105

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	Nine Months Ended September 30, 2023
	Common Stock			Additional Paid-In Capital		Accumulated Earnings (Loss)		Accumulated Other Comprehensive Loss		Total Equity
	Shares	Par
Balance as of December 31, 2022	23,323	$	233	$	—	$	1,278,210	$	(98,816)	$	1,179,627
Net income	—	—		—		64,270		—		64,270
Other comprehensive loss, net of tax	—	—		—		—		(30,675)		(30,675)
Exercise of stock options and issuance of share-based awards, net of shares withheld for employee taxes	206	2		(5,217)		—		—		(5,215)
Stock-based compensation	—	—		11,017		—		—		11,017
Purchase of capped call options, net of tax effect	—	—		(13,865)		—		—		(13,865)
Unwind and exercise of capped call options	—	—		30,913		—		—		30,913
Settlement of convertible notes	—	—		(14,742)		(22,547)		—		(37,289)
Balance as of September 30, 2023	23,529	$	235	$	8,106	$	1,319,933	$	(129,491)	$	1,198,783

See accompanying notes

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ENCORE CAPITAL GROUP, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited, In Thousands)


	Nine Months Ended September 30,
	2024		2023
Operating activities:
Net income	$	86,063	$	64,270
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	23,467		32,768

Other non-cash interest expense, net	12,379		12,526
Stock-based compensation expense	11,731		11,017
Deferred income taxes	1,718		952

Changes in recoveries	(6,020)		30,054
Other, net	7,477		(1,958)
Changes in operating assets and liabilities
Other assets	(35,277)		(21,820)

Accounts payable, accrued liabilities and other liabilities	31,086		(11,598)
Net cash provided by operating activities	132,624		116,211
Investing activities:

Purchases of receivable portfolios, net of put-backs	(844,868)		(772,101)
Collections applied to investment in receivable portfolios	641,982		504,672

Purchases of property and equipment	(20,451)		(16,765)
Other, net	47,632		13,468
Net cash used in investing activities	(175,705)		(270,726)
Financing activities:
Payment of loan and debt refinancing costs	(18,164)		(8,224)
Proceeds from credit facilities	458,844		630,079
Repayment of credit facilities	(1,292,578)		(446,724)
Proceeds from senior secured notes	1,000,000		—
Repayment of senior secured notes	(29,310)		(29,310)

Proceeds from issuance of convertible senior notes	—		230,000
Repayment of exchangeable senior notes	—		(212,480)
Proceeds from convertible hedge instruments, net	—		12,421

Other, net	11,695		(16,890)
Net cash provided by financing activities	130,487		158,872
Net increase in cash and cash equivalents	87,406		4,357
Effect of exchange rate changes on cash and cash equivalents	1,583		(3,558)
Cash and cash equivalents, beginning of period	158,364		143,912
Cash and cash equivalents, end of period	$	247,353	$	144,711

Supplemental disclosure of cash information:
Cash paid for interest	$	138,951	$	120,113
Cash paid for taxes, net of refunds	61,255		50,605
Supplemental schedule of non-cash investing activities:
Investment in receivable portfolios transferred to real estate owned	$	4,617	$	9,558

See accompanying notes

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ENCORE CAPITAL GROUP, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1: Ownership, Description of Business, and Summary of Significant Accounting Policies

Encore Capital Group, Inc. (“Encore”), through its subsidiaries (collectively with Encore, the “Company”), 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 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. Defaulted receivables 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.

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 (“CCM”) 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. These are the Company’s primary operations.

The Company also has investments and operations in Latin America and Asia-Pacific, which the Company refers to as “LAAP.”

Financial Statement Preparation and Presentation

The accompanying interim condensed consolidated financial statements have been prepared by the Company, without audit, in accordance with the instructions to the Quarterly Report on Form 10-Q, and Rule 10-01 of Regulation S-X promulgated by the United States Securities and Exchange Commission (the “SEC”) and, therefore, do not include all information and footnotes necessary for a fair presentation of its condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”).

In the opinion of management, the unaudited financial information for the interim periods presented reflects all adjustments, consisting of only normal and recurring adjustments, necessary for a fair statement of the Company’s condensed consolidated financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year.

The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in the Company’s condensed financial statements and the accompanying notes. Actual results could materially differ from those estimates.

Basis of Consolidation

The condensed consolidated financial statements have been prepared in conformity with GAAP and reflect the accounts and operations of the Company and those of its subsidiaries in which the Company has a controlling financial interest. The Company also consolidates variable interest entities (“VIEs”) for which it is the primary beneficiary. The primary beneficiary has both (a) the power to direct the activities of the VIE that most significantly affect the entity’s economic performance, and (b) either the obligation to absorb losses or the right to receive benefits. Refer to “Note 8: Variable Interest Entities” for further details. All intercompany transactions and balances have been eliminated in consolidation.

Translation of Foreign Currencies

The condensed financial statements of certain of the Company’s foreign subsidiaries are measured using their local currency as the functional currency. Assets and liabilities of foreign operations are translated into U.S. dollars using period-end exchange rates, and revenues and expenses are translated into U.S. dollars using average exchange rates in effect during each period. The resulting translation adjustments are recorded as a component of other comprehensive income or loss. Equity accounts are translated at historical rates, except for the change in retained earnings during the year which is the result of the income statement translation process. Intercompany transaction gains or losses at each period end arising from subsequent measurement of balances for which settlement is not planned or anticipated in the foreseeable future are included as translation adjustments and recorded within other comprehensive income or loss. Translation gains or losses are the material components of accumulated other comprehensive income or loss and are reclassified to earnings upon the substantial sale or liquidation of investments in foreign operations.

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Recent Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within the segment measure of profit or loss. This guidance will be applied retrospectively and is effective for annual reporting periods in fiscal years beginning after December 15, 2023, and interim reporting periods in fiscal years beginning after December 31, 2024. This ASU may result in additional required disclosures when adopted. The Company is currently evaluating the provisions of this ASU and the impact on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions and applies to all entities subject to income taxes. The new standard is effective for annual periods beginning after December 15, 2024. This ASU may result in additional required disclosures when adopted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

Note 2: Earnings Per Share

Basic earnings per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period.

The number of shares used to calculate the diluted earnings per share is computed by using the basic weighted-average number of common shares outstanding plus any dilutive potential common shares outstanding during the period, except when their effect is anti-dilutive. Dilutive potential common shares include outstanding stock based awards, and the dilutive effect of the convertible and exchangeable senior notes, if applicable.

A reconciliation of shares used in calculating earnings per basic and diluted shares follows (in thousands, except per share amounts):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net income	$	30,643	$	19,339	$	86,063	$	64,270
Shares:
Total weighted-average basic shares outstanding	23,912		23,712		23,859		23,644
Dilutive effect of stock-based awards	89		165		103		191
Dilutive effect of convertible and exchangeable senior notes	406		505		362		700

Total weighted-average dilutive shares outstanding	24,407		24,382		24,324		24,535

Basic earnings per share	$	1.28	$	0.82	$	3.61	$	2.72
Diluted earnings per share	$	1.26	$	0.79	$	3.54	$	2.62

There were no anti-dilutive employee stock options outstanding during the three and nine months ended September 30, 2024 and 2023.

Note 3: Fair Value Measurements

Fair value is defined as the price that would be received upon sale of an asset or the price paid to transfer a liability, in an orderly transaction between market participants at the measurement date (i.e., the “exit price”). The Company uses a fair value hierarchy that prioritizes the inputs used in valuation techniques to measure fair value into three broad levels. The following is a brief description of each level:

•Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

•Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

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•Level 3: Unobservable inputs, including inputs that reflect the reporting entity’s own assumptions.

The Company’s cash and cash equivalents, certain other assets, accounts payable and accrued liabilities, and other liabilities approximate their fair values due to their short-term nature, which are determined to be a Level 1 measurement.

Financial Instruments Required To Be Carried At Fair Value

Financial assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):


	Fair Value Measurements as of September 30, 2024
	Level 1		Level 2		Level 3		Total
Assets

Interest rate cap contracts	$	—	$	286	$	—	$	286

Cross-currency swap agreements	—		15,090		—		15,090
Liabilities
Foreign currency exchange contracts	—		(7,225)		—		(7,225)
Interest rate swap agreements	—		(22,782)		—		(22,782)
Cross-currency swap agreements	—		(26,103)		—		(26,103)


	Fair Value Measurements as of December 31, 2023
	Level 1		Level 2		Level 3		Total
Assets
Interest rate cap contracts	$	—	$	16,950	$	—	$	16,950
Cross-currency swap agreements	—		361		—		361
Liabilities
Interest rate swap agreements	—		(22,510)		—		(22,510)
Cross-currency swap agreements	—		(28,039)		—		(28,039)

Derivative Contracts:

The Company uses derivative instruments to manage its exposure to fluctuations in interest rates and foreign currency exchange rates. Fair values of these derivative instruments are estimated using industry standard valuation models. These models project future cash flows and discount the future amounts to a present value using market-based observable inputs, including interest rate curves, foreign currency exchange rates, and forward and spot prices for currencies. The Company’s derivative agreements are subject to underlying agreements with master netting arrangements, which provide for the right of offset in the event of default or in the event of bankruptcy of either party to the transactions. The Company reports its assets and liabilities subject to these arrangements on a gross basis for certain derivative agreements.

Non-Recurring Fair Value Measurement:

Certain assets are measured at fair value on a nonrecurring basis. These assets include real estate-owned assets classified as held for sale at the lower of their carrying value or fair value less cost to sell. The fair value of the assets held for sale and estimated selling expenses were determined at the time of initial recognition and in each reporting period using Level 3 measurements based on appraised values using market comparables. The fair value estimate of the assets held for sale was approximately $49.7 million and $70.6 million as of September 30, 2024 and December 31, 2023, respectively.

Financial Instruments Not Required To Be Carried At Fair Value

The table below summarizes fair value estimates for the Company's financial instruments that are not required to be carried at fair value. The total of the fair value calculations presented does not represent, and should not be construed to represent, the underlying value of the Company.

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The carrying amounts in the following table are included in the condensed consolidated statements of financial condition as of September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024				December 31, 2023
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets
Investment in receivable portfolios, net	$	3,719,260	$	3,753,299	$	3,468,432	$	3,515,651
Financial Liabilities
Global senior secured revolving credit facility	7,000		7,000		816,880		816,880
Encore private placement notes	—		—		29,310		28,922
Senior secured notes(1)	2,694,757		2,740,267		1,649,621		1,598,636


Convertible senior notes due October 2025	100,000		128,748		100,000		136,403
Convertible senior notes due March 2029	230,000		231,990		230,000		226,794
Cabot securitisation senior facility	341,041		341,041		324,646		324,646
U.S. facility	150,000		150,000		175,000		175,000
Other borrowings	68,946		68,946		24,904		24,904

_______________________

(1)Carrying amount represents historical cost, adjusted for any related debt discount.

Investment in Receivable Portfolios:

The fair value of investment in receivable portfolios is measured using Level 3 inputs by discounting the estimated future cash flows generated by the Company’s proprietary forecasting models. The key inputs include the estimated future gross cash flow, average cost to collect, and discount rate. The determination of such inputs requires significant judgment, including assessing the assumed market participant’s cost structure, its determination of whether to include fixed costs in its valuation, its collection strategies, and determining the appropriate weighted average cost of capital. The Company evaluates the use of these key inputs on an ongoing basis and refines the data as it continues to obtain better information from market participants in the debt recovery and purchasing business.

Borrowings:

The Company’s convertible notes, senior secured notes and private placement notes are carried at historical cost, adjusted for the applicable debt discount. The fair value estimate for the convertible notes incorporates quoted market prices using Level 2 inputs. The fair value of the senior secured notes and private placement notes is estimated using widely accepted valuation techniques, including discounted cash flow analyses using available market information on discount and borrowing rates with similar terms, maturities, and credit ratings. Accordingly, the Company used Level 2 inputs for these debt instrument fair value estimates.

The carrying value of the Company’s senior secured revolving credit facility, securitisation senior facility, U.S. facility, and other borrowings approximates fair value due to the use of current market rates that are repriced frequently, which are determined to be a Level 2 measurement.

Note 4: Derivatives and Hedging Instruments

The Company may periodically enter into derivative financial instruments to manage risks related to interest rates and foreign currency. Certain of the Company’s derivative financial instruments qualify for hedge accounting treatment.

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The following table summarizes the fair value of derivative instruments as recorded in the Company’s condensed consolidated statements of financial condition (in thousands):


	September 30, 2024			December 31, 2023
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Interest rate cap contracts	Other assets	$	286	Other assets	$	14,564

Interest rate swap agreements	Other liabilities	(22,782)		Other liabilities	(22,510)
Cross-currency swap agreements	Other assets	15,090		Other assets	361
Cross-currency swap agreements	Other liabilities	(26,103)		Other liabilities	(28,039)
Derivatives not designated as hedging instruments:
Interest rate cap contracts	—	—		Other assets	2,386
Foreign currency exchange contracts	Other liabilities	(7,225)		—	—

Derivatives Designated as Hedging Instruments

The Company may periodically enter into interest rate swap agreements and interest rate cap contracts to reduce its exposure to fluctuations in interest rates on variable interest rate debt and their impact on earnings and cash flows. Under the swap agreements, the Company receives floating interest rate payments and makes interest payments based on fixed interest rates. Under the cap contracts, the Company receives floating interest rate payments and makes interest payments based on capped interest rates. The Company designates its interest rate swap and interest rate cap instruments as cash flow hedges at inception.

The Company uses cross-currency swap agreements to manage foreign currency exchange risk by converting fixed-rate Euro-denominated borrowings and fixed-rate GBP-denominated borrowings including periodic interest payments and the payment of principal at maturity to fixed-rate USD debt. The cross-currency swap agreements are accounted for as fair value hedges.

The following tables summarize the terms of the derivative instruments designated as hedging instruments as recorded in the Company’s consolidated statements of financial condition:

September 30, 2024

Effective date

Maturity Date

Hedge Designation

Notional Amount

Receive Floating Rate Index

Interest rate cap contracts

2024 Cap

September 2024

September 2026

Cash flow hedge

$341.0 million

SONIA

Interest rate swap agreements

2023 Euro IR Swap

October 2023

January 2028

Cash flow hedge

$111.4 million

3-month EURIBOR

2024 Euro IR Swaps

June 2024

January 2028

Cash flow hedge

$462.1 million

3-month EURIBOR

2023 SOFR IR Swaps

November 2023

October 2026

Cash flow hedge

$150.0 million

1-month SOFR CME Term

Cross-currency swap agreements

2020 Euro Swaps

September 2020

October 2025

Fair value hedge

$389.8 million

—

2023 GBP Swaps

July 2023

February 2026

Fair value hedge

$401.2 million

—

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December 31, 2023

Effective date

Maturity Date

Hedge Designation

Notional Amount

Receive Floating Rate Index

Interest rate cap contracts

2019 Cap

January 2020

June 2024

Cash flow hedge

$441.5 million

3-month EURIBOR

2021 Cap(1)

November 2021

September 2024

Cash flow hedge

$318.3 million

SONIA

2024 Cap

September 2024

September 2026

Cash flow hedge

$324.6 million

SONIA

Interest rate swap agreements

2023 Euro IR Swap

October 2023

January 2028

Cash flow hedge

$110.4 million

3-month EURIBOR

2024 Euro IR Swaps

June 2024

January 2028

Cash flow hedge

$458.1 million

3-month EURIBOR

2023 SOFR IR Swaps

November 2023

October 2026

Cash flow hedge

$150.0 million

1-month SOFR CME Term

Cross-currency swap agreements

2020 Euro Swaps

September 2020

October 2025

Fair value hedge

$386.3 million

—

2023 GBP Swaps

July 2023

February 2026

Fair value hedge

$381.9 million

—

_______________________

(1)The total notional amount of the 2021 Cap was $445.6 million, of which $318.3 million was hedge designated and $127.3 million was not hedge designated as of December 31, 2023.

As discussed in “Note 7: Borrowings,” on October 15, 2024, the Company fully redeemed its Senior Secured Notes due October 2025 (the “2025 Notes”). In connection with the early redemption of the 2025 Notes, the Company settled the corresponding 2020 Euro Swaps on the same date for approximately $33.8 million. As a result of the early settlement, the Company reclassed the remaining OCI balance associated with the 2020 Euro Swaps of approximately $0.8 million into interest expense during the fourth quarter of 2024. Other than stated above, the settlement payment of the 2020 Euro Swaps will not result in any income statement recognition during the fourth quarter of 2024.

The Company expects to reclassify approximately $5.7 million of net derivative loss from OCI into earnings relating to its cash flow designated derivatives within the next 12 months. This amount will vary due to fluctuations in benchmark interest rates.

The following tables summarize the effects of derivatives designated as hedging instruments in the Company’s condensed consolidated financial statements (in thousands):


Derivatives Designated as Hedging Instruments	(Loss) Gain Recognized in OCI				Location of Gain (Loss) Reclassified from OCI into Income (Loss)	Gain (Loss) Reclassified from OCI into Income
	Three Months Ended September 30,					Three Months Ended September 30,
	2024		2023			2024		2023


Interest rate swap agreements	$	(15,272)	$	—	Interest expense	$	1,078	$	—
Interest rate cap contracts	(2,460)		(9,578)		Interest expense	(382)		(424)
Cross-currency swap agreements	29,718		(26,811)		Interest expense	(997)		(925)
					Other income (expense)	35,602		(32,401)


Derivatives Designated as Hedging Instruments	Gain (Loss) Recognized in OCI				Location of Gain (Loss) Reclassified from OCI into Income (Loss)	Gain (Loss) Reclassified from OCI into Income
	Nine Months Ended September 30,					Nine Months Ended September 30,
	2024		2023			2024		2023


Interest rate swap agreements	$	2,001	$	—	Interest expense	$	2,273	$	—
Interest rate cap contracts	(14,288)		(13,079)		Interest expense	(1,758)		(1,265)
Cross-currency swap agreements	12,419		(26,641)		Interest expense	(4,534)		(3,828)
					Other income (expense)	22,722		(25,897)

Derivatives Not Designated as Hedging Instruments

From time to time, the Company enters into currency exchange forward contracts to reduce the effects of currency exchange rate fluctuations. These derivative contracts generally mature within one to six months and are not designated as

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hedge instruments for accounting purposes. The gains or losses on these unhedged derivative contracts are recognized in other income or expense based on the changes in fair value.

The following table summarizes the effects of derivatives not designated as hedging instruments on the Company’s condensed consolidated statements of income for the three and nine months ended September 30, 2024 and 2023 (in thousands):


Derivatives Not Designated as Hedging Instruments	Location of (Loss) Gain Recognized in Income on Derivative	Amount of (Loss) Gain Recognized in Income
		Three Months Ended September 30,				Nine Months Ended September 30,
		2024		2023		2024		2023
Interest rate cap contract	Other (expense) income	$	(7)	$	(215)	$	267	$	(215)
Foreign currency exchange contract	Other expense	(8,098)		—		(7,225)		—

Note 5: Investment in Receivable Portfolios, Net

The Company’s purchased portfolios of loans are grossed-up to their face value with an offsetting allowance and noncredit discount allocated to the individual receivables as the unit of account is at the individual loan level. Since each loan is deeply delinquent and deemed uncollectible at the individual loan level, the Company applies its charge-off policy and fully writes-off the amortized costs (i.e., face value net of noncredit discount) of the individual receivables immediately after purchasing the portfolio. The Company then records a negative allowance that represents the present value of all expected future recoveries for pools of receivables that share similar risk characteristics using a discounted cash flow approach, which ultimately equals the amount paid for a portfolio purchase and presented as “Investment in receivable portfolios, net” in the Company’s condensed consolidated statements of financial condition. The discount rate is an effective interest rate (or “purchase EIR”) based on the purchase price of the portfolio and the expected future cash flows at the time of purchase.

Receivable portfolio purchases are aggregated into pools based on similar risk characteristics. Examples of risk characteristics include financial asset type, collateral type, size, interest rate, date of origination, term, and geographic location. The Company’s static pools are typically grouped into credit card, purchased consumer bankruptcy, and mortgage portfolios. The Company further groups these static pools by geographic location. Once a pool is established, the portfolios will remain in the designated pool unless the underlying risk characteristics change. The purchase EIR of a pool will not change over the life of the pool even if expected future cash flows change.

Revenue is recognized for each static pool over the economic life of the pool. Debt purchasing revenue includes two components:

(1) Revenue from receivable portfolios, which is the accretion of the discount on the negative allowance due to the passage of time (generally the portfolio balance multiplied by the EIR) and also includes all revenue from zero basis portfolio (“ZBA”) collections, and

(2) Changes in recoveries, which includes

(a) Recoveries above or below forecast, which is the difference between (i) actual cash collected/recovered during the current period and (ii) expected cash recoveries for the current period, which generally represents over or under performance for the period; and

(b) Changes in expected future recoveries, which is the present value change of expected future recoveries, where such change generally results from (i) collections “pulled forward from” or “pushed out to” future periods (i.e. amounts either collected early or expected to be collected later) and (ii) magnitude and timing changes to estimates of expected future collections (which can be increases or decreases).

The Company measures expected future recoveries based on historical experience, current conditions, reasonable and supportable forecasts, and other quantitative and qualitative factors. Factors that may change the expected future recoveries may include both internal as well as external factors. Internal factors include operational performance, such as capacity and the productivity of the Company’s collection staff. External factors include new laws or regulations, new interpretations of existing laws or regulations, and macroeconomic conditions. The Company continues to reassess its expected future recoveries in each reporting period.

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Investment in receivable portfolios, net consists of the following as of the dates presented (in thousands):



	September 30, 2024		December 31, 2023
Amortized cost	$	—	$	—
Negative allowance for expected recoveries	3,719,260		3,468,432
Balance, end of period	$	3,719,260	$	3,468,432

The following table summarizes the changes in the balance of investment in receivable portfolios, net during the periods presented (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Balance, beginning of period	$	3,583,322	$	3,330,986	$	3,468,432	$	3,088,261
Negative allowance for expected recoveries - current period purchases (1)	282,485		230,559		856,891		781,315
Collections applied to investment in receivable portfolios, net (2)	(222,149)		(162,652)		(641,982)		(504,672)
Changes in recoveries (3)	12,675		(17,067)		6,020		(30,054)
Put-backs and recalls	(4,577)		(3,179)		(12,023)		(9,214)

Disposals and transfers to real estate owned	(7,055)		(3,314)		(10,153)		(9,558)
Foreign currency translation adjustments	74,559		(54,789)		52,075		4,466
Balance, end of period	$	3,719,260	$	3,320,544	$	3,719,260	$	3,320,544

_______________________

(1)The table below provides the detail on the establishment of negative allowance for expected recoveries of portfolios purchased during the periods presented:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Purchase price	$	282,485	$	230,559	$	856,891	$	781,315
Allowance for credit losses	667,584		666,915		1,961,740		2,017,060
Amortized cost	950,069		897,474		2,818,631		2,798,375
Noncredit discount	1,220,316		1,171,383		3,688,070		3,225,837
Face value	2,170,385		2,068,857		6,506,701		6,024,212
Write-off of amortized cost	(950,069)		(897,474)		(2,818,631)		(2,798,375)
Write-off of noncredit discount	(1,220,316)		(1,171,383)		(3,688,070)		(3,225,837)
Negative allowance	282,485		230,559		856,891		781,315
Negative allowance for expected recoveries - current period purchases	$	282,485	$	230,559	$	856,891	$	781,315

(2)Collections applied to investment in receivable portfolios, net, is calculated as follows during the periods presented:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Cash Collections	$	550,268	$	465,339	$	1,607,883	$	1,404,217
Less - amounts classified to revenue from receivable portfolios	(328,119)		(302,687)		(965,901)		(899,545)
Collections applied to investment in receivable portfolios, net	$	222,149	$	162,652	$	641,982	$	504,672

(3)Changes in recoveries is calculated as follows during the periods presented, where recoveries include cash collections, put-backs and recalls, and other cash-based adjustments:

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	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Recoveries above (below) forecast	$	22,962	$	(4,274)	$	51,258	$	(20,109)
Changes in expected future recoveries	(10,287)		(12,793)		(45,238)		(9,945)
Changes in recoveries	$	12,675	$	(17,067)	$	6,020	$	(30,054)

Recoveries above or below forecast represent over and under-performance in the reporting period, respectively. Collections during the three and nine months ended September 30, 2024, over-performed the forecasted collections by approximately $23.0 million and $51.3 million, respectively. Collections during the three and nine months ended September 30, 2023, under-performed the forecasted collections by approximately $4.3 million and $20.1 million, respectively.

When reassessing the forecasts of expected lifetime recoveries during the three months ended September 30, 2024, management considered, among other factors, historical and current collection performance, changes in consumer behavior, and the macroeconomic environment. Most of the current period collections over-performance was from recent vintages acquired in 2023 and 2024 and did not trigger any significant forecasting adjustments to the estimated remaining collections. Therefore, no significant changes in future expected recoveries were recognized as a result of the recurring forecasting process. The Company recognized approximately $7.8 million of negative changes in expected future recoveries during the three and nine months ended September 30, 2024 resulting from the sale of certain secured mortgage portfolios in September 2024. As a result of the above, the Company recorded net negative changes in expected future recoveries of approximately $10.3 million, and $45.2 million during the three and nine months ended September 30, 2024, respectively. During the three and nine months ended September 30, 2023, the Company recorded approximately $12.8 million and $9.9 million in net negative changes in expected future recoveries, respectively.

Note 6: Other Assets

Other assets consist of the following (in thousands):


	September 30, 2024		December 31, 2023
Operating lease right-of-use assets	$	61,063	$	67,019
Real estate owned	49,727		70,590
Income tax deposits	44,600		8,735
Prepaid expenses	37,269		32,910
Derivative instruments	15,376		17,311
Deferred tax assets, net	15,149		17,277
Service fee receivables	11,014		9,080

Other	61,224		70,334
Total	$	295,422	$	293,256

Note 7: Borrowings

The Company is in compliance in all material respects with all covenants under its financing arrangements as of September 30, 2024. The components of the Company’s consolidated borrowings were as follows (in thousands):

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	September 30, 2024		December 31, 2023
Global senior secured revolving credit facility	$	7,000	$	816,880


Encore private placement notes	—		29,310
Senior secured notes	2,698,831		1,654,989
Convertible senior notes	330,000		330,000

Cabot securitisation senior facility	341,041		324,646
U.S. facility	150,000		175,000
Other	68,946		24,904
Finance lease liabilities	1,511		2,818
	3,597,329		3,358,547
Less: debt discount and issuance costs, net of amortization	(46,755)		(40,516)
Total	$	3,550,574	$	3,318,031

Encore is the parent of the restricted group for the Global Senior Facility and the Senior Secured Notes, both of which are guaranteed by the same group of material Encore subsidiaries and secured by the same collateral, which represents substantially all of the assets of those subsidiaries.

Global Senior Secured Revolving Credit Facility

In September 2020, the Company entered into a multi-currency senior secured revolving credit facility agreement (as amended and restated, the “Global Senior Facility”). As of September 30, 2024, the Global Senior Facility provided for a total committed facility of $1,203.0 million that matures in September 2027 and included the following key provisions:

•Interest at Term SOFR (or EURIBOR for any loan drawn in Euro or a rate based on SONIA for any loan drawn in British Pound), with a Term SOFR (or EURIBOR or SONIA) floor of 0.00%, plus a margin of 2.50%, plus in the case of Term SOFR borrowings, a credit adjustment spread of 0.10%;

•An unused commitment fee of 0.40% per annum, payable quarterly in arrears;

•A restrictive covenant that limits the LTV Ratio (defined in the Global Senior Facility) to 0.75 in the event that the Global Senior Facility is more than 20% utilized;

•A restrictive covenant that limits the SSRCF LTV Ratio (defined in the Global Senior Facility) to 0.275;

•A restrictive covenant that requires the Company to maintain a Fixed Charge Coverage Ratio (as defined in the Global Senior Facility) of at least 2.0;

•Additional restrictions and covenants which limit, among other things, the payment of dividends and the incurrence of additional indebtedness and liens; and

•Standard events of default which, upon occurrence, may permit the lenders to terminate the Global Senior Facility and declare all amounts outstanding to be immediately due and payable.

On October 17, 2024, the Company agreed to amend and restate the Global Senior Facility to, among other things, (1) upsize the facility by $92.0 million from $1,203.0 million to $1,295.0 million, (2) extend the termination date of the facility from September 2027 to September 2028 except for a $22.5 million tranche that will continue to terminate in September 2027, and (3) decrease the interest margin by 0.25% from 2.50% to 2.25%.

The Global Senior Facility is secured by substantially all of the assets of the Company and the guarantors. Pursuant to the terms of an intercreditor agreement entered into with respect to the relative positions of (1) the Global Senior Facility and any super priority hedging liabilities (collectively, “Super Senior Liabilities”) and (2) the Senior Secured Notes, Super Senior Liabilities that are secured by assets that also secure the Senior Secured Notes will receive priority with respect to any proceeds received upon any enforcement action over any such assets.

As of September 30, 2024, the outstanding borrowings under the Global Senior Facility were $7.0 million. The weighted average interest rate of the Global Senior Facility was 6.13% and 7.84% for the three months ended September 30, 2024 and 2023, respectively, and 7.87% and 7.48% for the nine months ended September 30, 2024 and 2023, respectively. Available capacity under the Global Senior Facility, after taking into account applicable debt covenants, was approximately $1,196.0 million as of September 30, 2024.

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Encore Private Placement Notes

In August 2017, Encore entered into $325.0 million in senior secured notes with a group of insurance companies (the “Encore Private Placement Notes”). The Encore Private Placement Notes bore an annual interest rate of 5.625%, and required quarterly principal payments of $9.8 million. The covenants and material terms for the Encore Private Placement Notes were substantially similar to those for the Global Senior Facility. The Encore Private Placement Notes matured in August 2024.

Senior Secured Notes

The following table provides a summary of the Company’s senior secured notes (the “Senior Secured Notes”) ($ in thousands):


	September 30, 2024		December 31, 2023		Issue Currency	Maturity Date	Interest Payment Dates	Interest Rate


2025 Notes	$	389,755	$	386,324	EUR	Oct 15, 2025	Apr 15, Oct 15	4.875	%
2026 Notes	401,225		381,937		GBP	Feb 15, 2026	Feb 15, Aug 15	5.375	%
2028 Notes	334,354		318,280		GBP	Jun 1, 2028	Jun 1, Dec 1	4.250	%
2028 Floating Rate Notes	573,497		568,448		EUR	Jan 15, 2028	Jan 15, Apr 15, Jul 15, Oct 15	EURIBOR +4.250%(1)
2029 Notes	500,000		—		USD	Apr 1, 2029	Apr 1, Oct 1	9.250	%
2030 Notes	500,000		—		USD	May 15, 2030	May 15, Nov 15	8.500	%
	$	2,698,831	$	1,654,989

_______________________

(1)Interest rate is based on three-month EURIBOR (subject to a 0% floor) plus 4.250% per annum, resets quarterly.

The Senior Secured Notes are secured by the same collateral as the Global Senior Facility. The guarantees provided in respect of the Senior Secured Notes are pari passu with the guarantee given in respect of the Global Senior Facility. Subject to the intercreditor agreement described above under the section “Global Senior Secured Revolving Credit Facility,” Super Senior Liabilities that are secured by assets that also secure the Senior Secured Notes will receive priority with respect to any proceeds received upon any enforcement action over any such assets.

The 2028 Floating Rate Notes had a weighted average interest rate of 7.97% and 7.83% for the three months ended September 30, 2024 and 2023, respectively, and 8.11% and 7.17% for the nine months ended September 30, 2024 and 2023, respectively. As discussed in “Note 4: Derivatives and Hedging Instruments,” the Company uses interest rate derivative contracts to manage its risk related to the interest rate fluctuation in its variable interest rate bearing debt. The weighted average interest rate of the 2028 Floating Rate Notes including the effect of the hedging instruments was 7.47% and 4.38% for the three months ended September 30, 2024 and 2023, respectively, and 5.99% and 4.35% for the nine months ended September 30, 2024 and 2023, respectively.

In March 2024, Encore issued $500.0 million in aggregate principal amount of 9.250% Senior Secured Notes due April 2029 at an issue price of 100.000% (the “2029 Notes”). Interest on the 2029 Notes is payable semi-annually, in arrears, on April 1 and October 1 of each year, commencing on October 1, 2024. The Company used the proceeds from this offering to pay down $493.0 million of the drawings under its Global Senior Facility and to pay certain transaction fees and expenses incurred in connection with the offering of the 2029 Notes.

In May 2024, Encore issued $500.0 million in aggregate principal amount of 8.500% Senior Secured Notes due May 2030 at an issue price of 100.000% (the “2030 Notes”). Interest on the 2030 Notes is payable semi-annually, in arrears, on May 15 and November 15 of each year, commencing on November 15, 2024. The Company used the proceeds from this offering to pay down $448.7 million of the drawings under its Global Senior Facility, pay certain transaction fees and expenses incurred in connection with the offering of the 2030 Notes and for general corporate purposes.

On October 15, 2024, the Company fully redeemed its 2025 Notes at par using drawings from its Global Senior Facility and cash on hand. In connection with the early redemption of the 2025 Notes, the Company also settled the corresponding euro cross currency swap contracts that were due to mature in October 2025 for approximately $33.8 million. Refer to “Note 4: Derivatives and Hedging Instruments” for further detail of the early settlement of the cross currency swap contracts. On October 25, 2024, the Company issued a conditional notice of redemption to redeem its 2026 Notes at par on or around November 15, 2024.

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Convertible Notes

The following table provides a summary of the principal balance, maturity date and interest rate for the Company’s convertible senior notes (the “Convertible Notes”) ($ in thousands):


	September 30, 2024		December 31, 2023		Maturity Date	Interest Payment Dates	Interest Rate


2025 Convertible Notes	$	100,000	$	100,000	Oct 1, 2025	Apr 1, Oct 1	3.250	%
2029 Convertible Notes	230,000		230,000		Mar 15, 2029	Mar 15, Sep 15	4.000	%
	$	330,000	$	330,000

In order to reduce the risk related to the potential dilution and/or the potential cash payments the Company may be required to make in the event that the market price of the Company’s common stock becomes greater than the conversion prices of the Convertible Notes, the Company may enter into hedge programs that increase the effective conversion price for the Convertible Notes. In connection with the issuance of the 2029 Convertible Notes, the Company entered into privately negotiated capped call transactions that effectively raised the conversion price of the 2029 Convertible Notes from $65.89 to $82.69. These hedging instruments have been determined to be indexed to the Company’s own stock and meet the criteria for equity classification. The Company recorded the cost of the hedge instruments as a reduction in additional paid-in capital, and does not recognize subsequent changes in fair value of these financial instruments in its condensed consolidated financial statements. The Company did not hedge the 2025 Convertible Notes.

Certain key terms related to the convertible features as of September 30, 2024 are listed below ($ in thousands, except conversion price):


	2025 Convertible Notes		2029 Convertible Notes
Initial conversion price	$	40.00	$	65.89
Closing stock price at date of issuance	$	32.00	$	51.68
Closing stock price date	Sep 4, 2019		Feb 28, 2023
Initial conversion rate (shares per $1,000 principal amount)	25.0000		15.1763
Adjusted conversion rate (shares per $1,000 principal amount)(1)	25.1310		15.1763
Adjusted conversion price(1)	$	39.79	$	65.89
Adjusted effective conversion price(2)	$	39.79	$	82.69
Excess of if-converted value compared to principal(3)	$	18,794	$	—
Conversion date	Jul 1, 2025		Dec 15, 2028

_______________________

(1)Pursuant to the indenture for the Company’s 2025 Convertible Notes, the conversion rate for the 2025 Convertible Notes was adjusted upon the completion of the Company’s tender offer in December 2021.

(2)As discussed above, the Company maintains a hedge program that increases the effective conversion price for the 2029 Convertible Notes to $82.69.

(3)Represents the premium the Company would have to pay assuming the Convertible Notes were converted on September 30, 2024 using a hypothetical share price based on the closing stock price on September 30, 2024.

In the event of conversion, the Convertible Notes are convertible into cash up to the aggregate principal amount of the notes and the excess conversion premium, if any, may be settled in cash or shares of the Company’s common stock at the Company’s election and subject to certain restrictions contained in each of the indentures governing the Convertible Notes.

Interest expense related to the Convertible Notes was $3.1 million and $3.2 million during the three months ended September 30, 2024 and 2023, respectively, and $9.4 million and $9.5 million during the nine months ended September 30, 2024 and 2023, respectively.

Cabot Securitisation Senior Facility

Cabot Securitisation UK Ltd (“Cabot Securitisation”), an indirect subsidiary of Encore, has a senior facility for a committed amount of £255.0 million (as amended, the “Cabot Securitisation Senior Facility”). Funds drawn under the Cabot Securitisation Senior Facility bear interest at a rate per annum equal to SONIA plus a margin of 3.20% plus, for periods after September 18, 2026, a step up margin ranging from 0% to 1.00%. The Cabot Securitisation Senior Facility matures in September 2028.

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As of September 30, 2024, the outstanding borrowings under the Cabot Securitisation Senior Facility were £255.0 million (approximately $341.0 million based on an exchange rate of $1.00 to £0.75, the exchange rate as of September 30, 2024). The obligations of Cabot Securitisation under the Cabot Securitisation Senior Facility are secured by first ranking security interests over all of Cabot Securitisation’s property, assets and rights (including receivables purchased from Cabot Financial UK from time to time), the book value of which was approximately £333.1 million (approximately $445.5 million based on an exchange rate of $1.00 to £0.75, the exchange rate as of September 30, 2024) as of September 30, 2024. The weighted average interest rate of the Cabot Securitisation Senior Facility was 8.22% and 8.13% for the three months ended September 30, 2024 and 2023, respectively, and 8.34% and 7.49% for the nine months ended September 30, 2024 and 2023, respectively. As discussed in “Note 4, Derivatives and Hedging Instruments,” the Company uses interest rate cap contracts to manage its risk related to the interest rate fluctuations in its variable interest rate bearing debt. The weighted average interest rate of the Cabot Securitisation Senior Facility including the effect of the hedging instruments was 5.88% and 5.35% for the three months ended September 30, 2024 and 2023, respectively, and 5.63% and 5.28% for the nine months ended September 30, 2024 and 2023, respectively.

Cabot Securitisation is a securitized financing vehicle and is a VIE for consolidation purposes. Refer to “Note 8: Variable Interest Entities” for further details.

U.S. Facility

In October 2023, an indirect subsidiary of Encore (“U.S. Financing Subsidiary”), entered into a facility for a committed amount of $175.0 million (as amended, the “U.S. Facility”). The Company amended its U.S. Facility, effective September 17, 2024, to extend the maturity date from October 2026 to October 2027 and to increase the committed amount from $175.0 million to $300.0 million. Funds drawn under the U.S. Facility bear interest at a rate per annum equal to Term SOFR plus a margin of 3.50%.

As of September 30, 2024, the outstanding borrowings under the U.S. Facility were $150.0 million. The obligations under the U.S. Facility are secured by first ranking security interests over all of U.S. Financing Subsidiary’s assets and rights. As of September 30, 2024, this included receivables acquired from MCM, the book value of which was approximately $330.8 million. The weighted average interest rate of the U.S. Facility was 8.80% and 8.82% for the three and nine months ended September 30, 2024, respectively. As discussed in “Note 4: Derivatives and Hedging Instruments,” the Company uses interest rate derivative contracts to manage its risk related to the interest rate fluctuation in its variable interest rate bearing debt. The weighted average interest rate of the U.S. Facility including the effect of the hedging instruments was 7.86% and 7.94% for the three and nine months ended September 30, 2024, respectively.

The U.S. Facility is a securitized financing vehicle and is a VIE for consolidation purposes. Refer to “Note 8: Variable Interest Entities” for further details.

Note 8: Variable Interest Entities

A VIE is defined as a legal entity whose equity owners do not have sufficient equity at risk, or, as a group, the holders of the equity investment at risk lack any of the following three characteristics: decision-making rights, the obligation to absorb expected losses, or the right to receive expected residual returns of the entity. The primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and the obligation to absorb expected losses or the right to receive residual returns from the entity that could potentially be significant to the VIE. The Company consolidates VIEs when it is the primary beneficiary.

As of September 30, 2024, the Company’s VIEs include certain securitized financing vehicles and other immaterial special purpose entities that were created to purchase receivable portfolios in certain geographies. The Company is the primary beneficiary of these VIEs. The Company has the power to direct the activities of the VIEs including the ability to exercise discretion in the servicing of the financial assets and has the right to receive residual returns that could potentially be significant to the VIEs. The Company evaluates its relationships with its VIEs on an ongoing basis to ensure that it continues to be the primary beneficiary.

Most assets recognized as a result of consolidating these VIEs do not represent additional assets that could be used to satisfy claims against the Company’s general assets. Conversely, liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets; rather, they represent claims against the specific assets of the VIE.

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Note 9: Accumulated Other Comprehensive Loss

A summary of the Company’s changes in accumulated other comprehensive loss by component is presented below (in thousands):


	Three Months Ended September 30, 2024
	Derivatives		Currency Translation Adjustments		Accumulated Other Comprehensive (Loss)/ Income
Balance at beginning of period	$	(2,122)	$	(127,836)	$	(129,958)
Other comprehensive income before reclassification	11,986		42,237		54,223
Reclassification	(35,301)		—		(35,301)
Tax effect	6,014		640		6,654
Balance at end of period	$	(19,423)	$	(84,959)	$	(104,382)


	Three Months Ended September 30, 2023
	Derivatives		Currency Translation Adjustments		Accumulated Other Comprehensive (Loss)/ Income
Balance at beginning of period	$	31,532	$	(102,432)	$	(70,900)
Other comprehensive loss before reclassification	(36,389)		(50,121)		(86,510)
Reclassification	30,079		—		30,079
Tax effect	(1,903)		(257)		(2,160)
Balance at end of period	$	23,319	$	(152,810)	$	(129,491)


	Nine Months Ended September 30, 2024
	Derivatives		Currency Translation Adjustments		Accumulated Other Comprehensive (Loss)/ Income
Balance at beginning of period	$	(3,093)	$	(120,827)	$	(123,920)
Other comprehensive income before reclassification	132		34,945		35,077
Reclassification	(18,703)		—		(18,703)
Tax effect	2,241		923		3,164
Balance at end of period	$	(19,423)	$	(84,959)	$	(104,382)


	Nine Months Ended September 30, 2023
	Derivatives		Currency Translation Adjustments		Accumulated Other Comprehensive (Loss)/ Income
Balance at beginning of period	$	36,494	$	(135,310)	$	(98,816)
Other comprehensive loss before reclassification	(39,720)		(16,581)		(56,301)
Reclassification	27,319		—		27,319
Tax effect	(774)		(919)		(1,693)
Balance at end of period	$	23,319	$	(152,810)	$	(129,491)

Note 10: Income Taxes

The Company’s effective tax rate for the three and nine months ended September 30, 2024 was 24.8% and 24.3%, respectively. For the three and nine months ended September 30, 2023, the Company’s effective tax rate was 35.7% and 29.7%, respectively. For the three and nine months ended September 30, 2024, the difference between the Company’s effective tax rate and the federal statutory rate was primarily due to state income taxes. For the three months ended September 30, 2023 the difference between the Company's effective tax rate and the federal statutory rate was primarily due to the recording of valuation allowances in certain foreign jurisdictions. For the nine months ended September 30, 2023, the difference between the Company's effective tax rate and the federal statutory rate was primarily due to state income taxes, an accrual related to state tax filing positions, and other foreign adjustments.

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Each interim period is considered an integral part of the annual period and tax expense or benefit is measured using an estimated annual effective income tax rate. The estimated annual effective tax rate for the full year is applied to the respective interim period, taking into account year-to-date amounts and projected amounts for the year. Since the Company operates in foreign countries with varying tax rates, the Company’s quarterly effective tax rate is dependent on the level of income or loss from international operations in the reporting period.

The Company’s subsidiary in Costa Rica is operating under a 100% tax holiday through December 31, 2026. The impact of the tax holiday in Costa Rica for the three and nine months ended September 30, 2024 and 2023, was immaterial.

The Company is subject to income taxes in the U.S. and foreign jurisdictions. Significant judgment is required in evaluating uncertain tax positions and determining the provision for income taxes.

In December 2021, the Organization for Economic Cooperation and Development (“OECD”) enacted model rules for a new global minimum tax framework (“Pillar Two”). Under the Pillar Two rules, a company is required to determine a combined effective tax rate for each jurisdiction. If the jurisdictional effective tax rate determined under the Pillar Two rules is less than 15%, a top-up tax will be due to bring the jurisdictional effective tax rate up to 15%. In December 2022, European Union Member States adopted a directive implementing the Pillar Two rules requiring Member States to enact the directive into their national laws and these began to go into effect from January 1, 2024. The Company has estimated the applicable top-up tax and recorded this in tax expense for the three and nine months ended September 30, 2024. The estimated impact of top-up tax for the quarter was immaterial.

Note 11: Commitments and Contingencies

Litigation and Regulatory

The Company is involved in disputes, legal actions, regulatory investigations, inquiries, and other actions from time to time in the ordinary course of business. The Company, along with others in its industry, is routinely subject to legal actions asserting various claims, including those based on the Fair Debt Collection Practices Act (“FDCPA”), the Fair Credit Reporting Act (“FCRA”), the Telephone Consumer Protection Act (“TCPA”), comparable state statutes, state and federal unfair competition statutes, and common law causes of action. The violations of law investigated or alleged in these actions often include claims that the Company lacks specified licenses to conduct its business, attempts to collect debts on which the statute of limitations has run, has made inaccurate or unsupported assertions of fact in support of its collection actions and/or has acted improperly in connection with its efforts to contact consumers. Such litigation and regulatory actions could involve potential compensatory or punitive damage claims, fines, sanctions, injunctive relief, or changes in business practices. Many continue on for some length of time and involve substantial investigation, litigation, negotiation, and other expense and effort before a result is achieved, and during the process the Company often cannot determine the substance or timing of any eventual outcome.

As of September 30, 2024, there were no material developments in any of the legal proceedings disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 or any new material legal proceedings during the three and nine months ended September 30, 2024.

In certain legal proceedings, the Company may have recourse to insurance or third-party contractual indemnities to cover all or portions of its litigation expenses, judgments, or settlements. The Company records loss contingencies in its financial statements only for matters in which losses are probable and can be reasonably estimated. Where a range of loss can be reasonably estimated with no best estimate in the range, the Company records the minimum estimated liability. The Company continuously assesses the potential liability related to its pending litigation and regulatory matters and revises its estimates when additional information becomes available. The Company’s legal costs are recorded to expense as incurred. As of September 30, 2024, the Company has no material reserves for legal matters.

Purchase Commitments

In the normal course of business, the Company enters into forward flow purchase agreements. A forward flow purchase agreement is a commitment to purchase receivables over a duration that is typically three to twelve months, but can be longer, generally with a specifically defined volume range, frequency, and pricing. Typically, these forward flow contracts have provisions that allow for early termination or price re-negotiation should the underlying quality of the portfolio deteriorate over time or if any particular month’s delivery is materially different than the original portfolio used to price the forward flow contract. Certain of these forward flow purchase agreements may also have termination clauses, whereby the agreements can be canceled by either party upon providing a certain specified amount of notice.

As of September 30, 2024, the Company had entered into forward flow purchase agreements for the purchase of nonperforming loans with an estimated minimum aggregate purchase price of approximately $466.1 million. The Company

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expects actual purchases under these forward flow purchase agreements to be significantly greater than the estimated minimum aggregate purchase price.

Note 12: Segment and Geographic Information

The Company conducts business through several operating segments. The Company’s Chief Operating Decision Maker relies on internal management reporting processes that provide segment revenue, segment operating income, and segment asset information in order to make financial decisions and allocate resources. The Company determined its operating segments meet the aggregation criteria, and therefore, it has one reportable segment, portfolio purchasing and recovery, based on similarities among the operating units including economic characteristics, the nature of the services, the nature of the production process, customer types for their services, the methods used to provide their services and the nature of the regulatory environment.

The following table presents information about geographic areas in which the Company operates (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Total revenues:
United States	$	258,300	$	201,550	$	717,186	$	608,533
Europe
United Kingdom	84,000		73,153		233,152		226,361
Other European countries(1)	24,415		34,916		98,707		110,210
Total Europe	108,415		108,069		331,859		336,571

Other geographies(1)	356		—		1,697		189
Total	$	367,071	$	309,619	$	1,050,742	$	945,293

________________________

(1)None of these countries comprise greater than 10% of the Company's consolidated revenues.

Note 13: Goodwill and Identifiable Intangible Assets

The Company’s goodwill is tested for impairment at the reporting unit level annually and in interim periods if certain events occur that indicate that the fair value of a reporting unit may be below its carrying value. Determining the number of reporting units and the fair value of a reporting unit requires the Company to make judgments and involves the use of significant estimates and assumptions.

The annual goodwill testing date for the reporting units that are included in the portfolio purchasing and recovery reportable segment is October 1st. There have been no events or circumstances during the three and nine months ended September 30, 2024, that have required the Company to perform an interim assessment of goodwill carried at these reporting units. Management continues to evaluate and monitor all key factors impacting the carrying value of the Company’s recorded goodwill and intangible assets. Adverse changes in the Company’s actual or expected operating results, market capitalization, business climate, economic factors or other negative events that may be outside the control of management could result in a material non-cash impairment charge in the future.

The Company’s goodwill is attributable to the MCM and Cabot reporting units included in its portfolio purchasing and recovery segment. The following tables summarize the activity in the Company’s goodwill balance (in thousands):


	MCM		Cabot(1)		Total
Balance as of June 30, 2024	$	148,936	$	453,875	$	602,811
Effect of foreign currency translation	—		25,320		25,320
Balance as of September 30, 2024	$	148,936	$	479,195	$	628,131

______________________

(1)The amount is net of accumulated goodwill impairment loss of $238.2 million as of September 30, 2024 and June 30, 2024, related to the Cabot reporting unit.

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	MCM		Cabot		Total
Balance as of June 30, 2023	$	148,936	$	703,260	$	852,196
Effect of foreign currency translation	—		(26,186)		(26,186)
Balance as of September 30, 2023	$	148,936	$	677,074	$	826,010

There was no accumulated goodwill impairment loss as of September 30, 2023 and June 30, 2023.


	MCM		Cabot(1)		Total
Balance as of December 31, 2023	$	148,936	$	457,539	$	606,475
Effect of foreign currency translation	—		21,656		21,656
Balance as of September 30, 2024	$	148,936	$	479,195	$	628,131

______________________

(1)The amount is net of accumulated goodwill impairment loss of $238.2 million as of September 30, 2024 and December 31, 2023, related to the Cabot reporting unit.


	MCM		Cabot		Total
Balance as of December 31, 2022	$	148,936	$	672,278	$	821,214
Effect of foreign currency translation	—		4,796		4,796
Balance as of September 30, 2023	$	148,936	$	677,074	$	826,010

There was no accumulated goodwill impairment loss as of September 30, 2023 and December 31, 2022.

The Company’s acquired intangible assets are summarized as follows (in thousands):


	As of September 30, 2024						As of December 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount


Trade name and other	$	918	$	(918)	$	—	$	918	$	(870)	$	48
Total intangible assets	$	918	$	(918)	$	—	$	918	$	(870)	$	48

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Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains “forward-looking statements” relating to Encore Capital Group, Inc. (“Encore”) and its subsidiaries (which we may collectively refer to as the “Company,” “we,” “our” or “us”) within the meaning of the securities laws. The words “believe,” “expect,” “anticipate,” “estimate,” “project,” “intend,” “plan,” “will,” “may,” and similar expressions often characterize forward-looking statements. These statements may include, but are not limited to, projections of collections, revenues, income or loss, estimates of capital expenditures, plans for future operations, products or services, and financing needs or plans, as well as assumptions relating to these matters. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we caution that these expectations or predictions may not prove to be correct or we may not achieve the financial results, savings, or other benefits anticipated in the forward-looking statements. These forward-looking statements are necessarily estimates reflecting the best judgment of our senior management and involve a number of risks and uncertainties, some of which may be beyond our control or cannot be predicted or quantified, that could cause actual results to differ materially from those suggested by the forward-looking statements. Many factors including, but not limited to, those set forth in our Annual Report on Form 10-K under “Part I, Item 1A—Risk Factors” could cause our actual results, performance, achievements, or industry results to be very different from the results, performance, achievements or industry results expressed or implied by these forward-looking statements. Our business, financial condition, or results of operations could also be materially and adversely affected by other factors besides those listed. Forward-looking statements speak only as of the date the statements were made. We do not undertake any obligation to update or revise any forward-looking statements to reflect new information or future events, or for any other reason, even if experience or future events make it clear that any expected results expressed or implied by these forward-looking statements will not be realized. In addition, it is generally our policy not to make any specific projections as to future earnings, and we do not endorse projections regarding future performance that may be made by third parties.

Our Business

We are an international specialty finance company providing debt recovery solutions and other related services for consumers across a broad range of financial assets. We purchase portfolios of defaulted consumer receivables at deep discounts to face value and manage them by working with individuals as they repay their obligations and work toward financial recovery. Defaulted receivables are consumers’ unpaid financial commitments to credit originators, including banks, credit unions, consumer finance companies and commercial retailers. Defaulted receivables may also include receivables subject to bankruptcy proceedings. We also provide debt servicing and other portfolio management services to credit originators for non-performing loans in Europe.

Encore Capital Group, Inc. (“Encore”) has three business units: MCM, which consists of Midland Credit Management, Inc. and its subsidiaries and domestic affiliates; Cabot, which consists of Cabot Credit Management Limited (“CCM”) and its subsidiaries and European affiliates, and LAAP, which is comprised of our investments and operations in Latin America and Asia-Pacific.

MCM (United States)

Through MCM, we are a market leader in portfolio purchasing and recovery in the United States.

Cabot (Europe)

Through Cabot, we are one of the largest credit management services providers in Europe and the United Kingdom. Cabot, in addition to its primary business of portfolio purchasing and recovery, also provides a range of debt servicing offerings such as early stage collections, business process outsourcing (“BPO”), and contingent collections, including through Wescot Credit Services Limited (“Wescot”), a leading UK contingency debt collection and BPO services company.

LAAP (Latin America and Asia-Pacific)

We have purchased non-performing loans in Mexico. Additionally, we have invested in Encore Asset Reconstruction Company (“EARC”) in India.

To date, operating results from LAAP have not been significant to our total consolidated operating results. Our long-term growth strategy is focused on continuing to invest in our core portfolio purchasing and recovery business in the United States and United Kingdom and strengthening and developing our business in the rest of Europe.

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Government Regulation

MCM (United States)

As discussed in more detail under “Part I - Item 1 - Business - Government Regulation” contained in our Annual Report on Form 10-K, our operations in the United States are subject to federal, state and municipal statutes, rules, regulations and ordinances that establish specific guidelines and procedures that debt purchasers and collectors must follow when collecting consumer accounts, including among others, specific guidelines and procedures for communicating with consumers and prohibitions on unfair, deceptive or abusive debt collection practices.

Cabot (Europe)

As discussed in more detail under “Part I - Item 1 - Business - Government Regulation” contained in our Annual Report on Form 10-K, our operations in Europe are affected by foreign statutes, rules and regulations regarding debt collection and debt purchase activities. These statutes, rules, regulations, ordinances, guidelines and procedures are modified from time to time by the relevant authorities charged with their administration, which could affect the way we conduct our business.

Portfolio Purchasing and Recovery

MCM (United States)

In the United States, the defaulted consumer receivable portfolios we purchase are primarily charged-off credit card debt portfolios. A small percentage of our capital deployment in the United States is comprised of receivable portfolios subject to Chapter 13 and Chapter 7 bankruptcy proceedings.

We purchase receivables based on robust, account-level valuation methods and employ proprietary statistical and behavioral models across our U.S. operations. These methods and models generally allow us to value portfolios accurately (limiting the risk of overpaying), avoid buying portfolios that are incompatible with our methods or strategies and align the accounts we purchase with our business channels to maximize future collections. As a result, we have been able to realize significant returns from the receivables we acquire. We maintain strong relationships with many of the largest financial service providers in the United States.

Cabot (Europe)

In Europe, our purchased defaulted debt portfolios primarily consist of paying and non-paying consumer loan accounts. We purchase paying and non-paying receivable portfolios using a proprietary pricing model that utilizes account-level statistical and behavioral data. This model generally allows us to value portfolios accurately and quantify portfolio performance in order to maximize future collections. As a result, we have been able to realize significant returns from the assets we have acquired. We maintain strong relationships with many of the largest financial services providers in the United Kingdom and Europe.

Purchases and Collections

Portfolio Pricing, Supply and Demand

MCM (United States)

With lending reaching record levels and the highest U.S. charge-off rate in ten years, supply remains elevated at a record level. Issuers have continued to sell predominantly fresh portfolios. Fresh portfolios are portfolios that are generally sold within six months of the consumer’s account being charged-off by the financial institution. Pricing in the third quarter remained at favorable levels as a result of elevated market supply. Issuers continue to sell their volume in mostly forward flow arrangements that are often committed early in the calendar year. We believe growth in lending and rising delinquency rates will drive continued growth in supply.

We believe that smaller competitors continue to face difficulties in the portfolio purchasing market because of the high cost to operate due to regulatory pressure and increasing cost of capital. We believe this favors larger participants, like MCM, because the larger market participants are better able to adapt to these pressures and commit to larger forward flow agreements and fluctuating volumes.

Cabot (Europe)

The UK market for charged-off portfolios generally provides a relatively consistent pipeline of opportunities, despite a historically low level of charge-off rates, as creditors have embedded debt sales as an integral part of their business models. The percentage of volume that is sold in multi-year forward flow arrangements has been consistent.

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The debt markets in France and Spain continue to be two of the largest in Europe with significant debt. Financial institutions continue to look to dispose of non-performing loans in these markets.

While we have seen a resumption of sales activity across all of our European markets, underlying default rates are generally low by historic levels, and sales levels are expected to fluctuate from quarter to quarter. In general, portfolio pricing remains competitive across our European footprint.

Purchases by Geographic Location

The following table summarizes purchases of receivable portfolios by geographic location during the periods presented (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
MCM (United States)	$	230,182	$	179,250	$	703,517	$	606,076
Cabot (Europe)	52,303		51,309		153,374		175,239

Total purchases of receivable portfolios	$	282,485	$	230,559	$	856,891	$	781,315

In the United States, capital deployment increased during the three and nine months ended September 30, 2024, as compared to the corresponding periods in the prior year. The majority of our deployments in the U.S. come from forward flow agreements, and the timing, contract duration, and volumes for each contract can fluctuate leading to variation when comparing to prior periods. Portfolio purchases in the U.S. were robust as supply increased and pricing improved.

In Europe, capital deployment remained relatively consistent during the three months ended September 30, 2024, as compared to the corresponding period in the prior year. Capital deployment decreased during the nine months ended September 30, 2024, primarily driven by continued competitive pricing environment in Europe. The decrease was partially offset by the favorable impact from foreign currency translation driven by the weakening of the U.S. dollar against the British Pound.

Collections from Purchased Receivables by Channel and Geographic Location

We utilize three channels for the collection of our purchased receivables: call center and digital collections; legal collections; and collection agencies. The call center and digital collections channel consists of collections that result from our call centers, direct mail program and online collections. The legal collections channel consists of collections that result from our internal legal channel or from our network of retained law firms. The collection agencies channel consists of collections from third-party collections agencies to whom we pay a fee or commission. We utilize this channel to supplement capacity in our internal call centers, to service accounts in regions where we do not have collections operations or for accounts purchased where we maintain the collection agency servicing relationship. The following table summarizes the total collections by collection channel and geographic area during the periods presented (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
MCM (United States):
Call center and digital collections	$	251,763	$	198,558	$	733,928	$	584,677
Legal collections	145,622		129,771		418,774		407,754
Collection agencies	4,317		1,657		15,107		2,041
Subtotal	401,702		329,986		1,167,809		994,472
Cabot (Europe):
Call center and digital collections	61,902		53,069		178,847		164,222
Legal collections	50,002		46,749		151,192		139,670
Collection agencies	35,894		34,688		107,680		102,740
Subtotal	147,798		134,506		437,719		406,632




Other geographies:	768		847		2,355		3,113
Total collections from purchased receivables	$	550,268	$	465,339	$	1,607,883	$	1,404,217

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Gross collections from purchased receivables increased by $84.9 million, or 18.3%, to $550.3 million during the three months ended September 30, 2024, as compared to $465.3 million during the three months ended September 30, 2023. Gross collections from purchased receivables increased by $203.7 million, or 14.5%, to $1,607.9 million during the nine months ended September 30, 2024, as compared to $1,404.2 million during the nine months ended September 30, 2023. The increases in collections in the United States were primarily a result of consistent increases in capital deployments in the United States in recent quarters. The increases in collections from purchased receivables in Europe were primarily due to the acquisition of portfolios with higher returns in recent periods. Additionally, collections in Europe were favorably impacted by foreign currency translation by approximately $3.2 million and $7.8 million during the three and nine months ended September 30, 2024, respectively, primarily as a result of the weakening of the U.S. dollar against the British Pound.

Results of Operations

Results of operations, in dollars and as a percentage of total revenues, were as follows for the periods presented (in thousands, except percentages):


	Three Months Ended September 30,
	2024				2023
Revenues
Revenue from receivable portfolios	$	328,119	89.4	%	$	302,687	97.8	%
Changes in recoveries	12,675		3.4	%	(17,067)		(5.5)	%
Total debt purchasing revenue	340,794		92.8	%	285,620		92.3	%
Servicing revenue	22,772		6.2	%	19,893		6.4	%
Other revenues	3,505		1.0	%	4,106		1.3	%
Total revenues	367,071		100.0	%	309,619		100.0	%


Operating expenses
Salaries and employee benefits	107,502		29.3	%	95,067		30.7	%
Cost of legal collections	67,339		18.3	%	56,274		18.2	%
General and administrative expenses	38,808		10.6	%	35,559		11.5	%
Other operating expenses	31,804		8.7	%	27,959		9.0	%
Collection agency commissions	7,370		2.0	%	8,046		2.6	%
Depreciation and amortization	8,158		2.2	%	11,196		3.6	%
Total operating expenses	260,981		71.1	%	234,101		75.6	%
Income from operations	106,090		28.9	%	75,518		24.4	%
Other expense
Interest expense	(66,906)		(18.2)	%	(50,558)		(16.3)	%
Other income	1,578		0.4	%	5,103		1.6	%
Total other expense	(65,328)		(17.8)	%	(45,455)		(14.7)	%
Income before income taxes	40,762		11.1	%	30,063		9.7	%
Provision for income taxes	(10,119)		(2.8)	%	(10,724)		(3.5)	%
Net income	$	30,643	8.3	%	$	19,339	6.2	%

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	Nine Months Ended September 30,
	2024				2023
Revenues
Revenue from receivable portfolios	$	965,901	91.9	%	$	899,545	95.2	%
Changes in recoveries	6,020		0.6	%	(30,054)		(3.2)	%
Total debt purchasing revenue	971,921		92.5	%	869,491		92.0	%
Servicing revenue	64,258		6.1	%	63,486		6.7	%
Other revenues	14,563		1.4	%	12,316		1.3	%
Total revenues	1,050,742		100.0	%	945,293		100.0	%


Operating expenses
Salaries and employee benefits	318,294		30.3	%	294,772		31.2	%
Cost of legal collections	190,309		18.1	%	167,525		17.7	%
General and administrative expenses	111,828		10.7	%	108,053		11.4	%
Other operating expenses	93,016		8.9	%	81,864		8.7	%
Collection agency commissions	22,308		2.1	%	26,583		2.8	%
Depreciation and amortization	23,467		2.2	%	32,768		3.5	%
Total operating expenses	759,222		72.3	%	711,565		75.3	%
Income from operations	291,520		27.7	%	233,728		24.7	%
Other expense
Interest expense	(184,047)		(17.5)	%	(147,376)		(15.6)	%
Other income	6,291		0.6	%	5,080		0.5	%
Total other expense	(177,756)		(16.9)	%	(142,296)		(15.1)	%
Income before income taxes	113,764		10.8	%	91,432		9.6	%
Provision for income taxes	(27,701)		(2.6)	%	(27,162)		(2.8)	%
Net income	$	86,063	8.2	%	$	64,270	6.8	%

Comparison of Results of Operations

Revenues

Our revenues primarily include debt purchasing revenue, which is revenue recognized from engaging in debt purchasing and recovery activities. We apply our charge-off policy and fully write-off the amortized costs (i.e., face value net of noncredit discount) of the individual receivables we acquire immediately after purchasing the portfolio. We then record a negative allowance that represents the present value of all expected future recoveries for pools of receivables that share similar risk characteristics using a discounted cash flow approach, which is presented as “Investment in receivable portfolios, net” in our condensed consolidated statements of financial condition. The discount rate is an effective interest rate (or “purchase EIR”) established based on the purchase price of the portfolio and the expected future cash flows at the time of purchase.

Debt purchasing revenue includes two components:

(1) Revenue from receivable portfolios, which is the accretion of the discount on the negative allowance due to the passage of time (generally the portfolio balance multiplied by the EIR), and also includes all revenue from zero basis portfolio (“ZBA”) collections, and

(2) Changes in recoveries, which includes

Certain pools already fully recovered their cost basis and became zero basis portfolios (“ZBA”) prior to our adoption of the accounting standard for Financial Instruments - Credit Losses (“CECL”) in January 2020. We did not establish a negative allowance for these pools as we elected the Transition Resource Group for Credit Losses’ practical expedient to retain the integrity of these legacy pools. Similar to how we treated ZBA collections prior to the adoption of CECL, all subsequent collections to the ZBA pools are recognized as ZBA revenue, which is included in revenue from receivable portfolios in our condensed consolidated statements of income.

Servicing revenue consists primarily of fee-based income earned on accounts collected on behalf of others, primarily credit originators. We earn fee-based income by providing debt servicing (such as early stage collections, BPO, contingent collections, trace services and litigation activities) to credit originators for non-performing loans in Europe.

Other revenues primarily include revenues recognized from the sale of real estate assets that are acquired as a result of our investments in non-performing secured residential mortgage portfolios as well as direct acquisition of real estate assets in Europe and LAAP.

The following table summarizes revenues for the periods presented (in thousands, except percentages):


	Three Months Ended September 30,
	2024		2023		$ Change		% Change
Revenue recognized from portfolio basis	$	322,491	$	296,015	$	26,476	8.9	%
ZBA revenue	5,628		6,672		(1,044)		(15.6)	%
Revenue from receivable portfolios	328,119		302,687		25,432		8.4	%

Recoveries above (below) forecast	22,962		(4,274)		27,236
Changes in expected future recoveries	(10,287)		(12,793)		2,506
Changes in recoveries	12,675		(17,067)		29,742		(174.3)	%
Debt purchasing revenue	340,794		285,620		55,174		19.3	%

Servicing revenue	22,772		19,893		2,879		14.5	%
Other revenues	3,505		4,106		(601)		(14.6)	%
Total revenues	$	367,071	$	309,619	$	57,452	18.6	%


	Nine Months Ended September 30,
	2024		2023		$ Change		% Change
Revenue recognized from portfolio basis	$	947,907	$	877,914	$	69,993	8.0	%
ZBA revenue	17,994		21,631		(3,637)		(16.8)	%
Revenue from receivable portfolios	965,901		899,545		66,356		7.4	%

Recoveries above (below) forecast	51,258		(20,109)		71,367
Changes in expected future recoveries	(45,238)		(9,945)		(35,293)
Changes in recoveries	6,020		(30,054)		36,074		(120.0)	%
Debt purchasing revenue	971,921		869,491		102,430		11.8	%

Servicing revenue	64,258		63,486		772		1.2	%
Other revenues	14,563		12,316		2,247		18.2	%
Total revenues	$	1,050,742	$	945,293	$	105,449	11.2	%

Our operating results are impacted by foreign currency translation, which represents the effect of translating operating results where the functional currency is different than our U.S. dollar reporting currency. The strengthening of the U.S. dollar relative to other foreign currencies has an unfavorable impact on our international revenues, and the weakening of the U.S. dollar relative to other foreign currencies has a favorable impact on our international revenues. Our revenues were favorably impacted by foreign currency translation by approximately $2.5 million and $6.2 million during the three and nine months ended September 30, 2024, respectively, primarily as a result of the weakening of the U.S. dollar against the British Pound by approximately 2.7% and 2.6% for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023, respectively.

The increases in revenue recognized from portfolio basis during the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, were primarily due to a higher portfolio basis (i.e. a higher investment in receivable balance) in the U.S. driven by a consistent higher volume of purchases in the past several quarters.

As discussed above, ZBA revenue represents collections from our legacy ZBA pools. We expect our ZBA revenue to continue to decline as we collect on these legacy pools. We do not expect to have new ZBA pools in the future.

When reassessing the forecasts of expected lifetime recoveries during the three months ended September 30, 2024, management considered, among other factors, historical and current collection performance, changes in consumer behavior, and the macroeconomic environment. Most of the current period collections over-performance was from recent vintages acquired in 2023 and 2024 and did not trigger any significant forecasting adjustments to the estimated remaining collections. Therefore, no significant changes in future expected recoveries were recognized as a result of our recurring forecasting process. We recognized approximately $7.8 million of negative changes in expected future recoveries during the three and nine months ended September 30, 2024 resulting from the sale of certain portfolios associated with the exit of our secured non-performing mortgage loan business in Spain in September 2024. As a result of the above, we recorded net negative changes in expected future recoveries of approximately $10.3 million, and $45.2 million during the three and nine months ended September 30, 2024, respectively. During the three and nine months ended September 30, 2023, we recorded approximately $12.8 million and $9.9 million in net negative changes in expected future recoveries, respectively.

The following tables summarize collections from purchased receivables, revenue from receivable portfolios, end of period receivable balance and other related supplemental data, by year of purchase (in thousands, except percentages):


	Three Months Ended September 30, 2024						As of September 30, 2024
	Collections		Revenue from Receivable Portfolios		Changes in Recoveries		Investment in Receivable Portfolios		Monthly EIR
United States:
ZBA	$	5,628	$	5,628	$	—	$	—	—	%
2011	2,670		2,130		465		752		88.6	%
2012	2,494		2,518		(323)		1,763		42.0	%
2013	6,307		5,515		386		4,266		40.5	%
2014	4,233		2,696		616		12,910		6.7	%
2015	4,037		1,877		1,492		15,819		3.9	%
2016	6,976		3,384		2,669		27,226		4.2	%
2017	9,748		5,662		2,234		33,308		5.5	%
2018	15,488		8,060		1,627		63,173		4.0	%
2019	27,024		14,526		(1,113)		117,894		3.8	%
2020	30,170		16,384		(1,069)		137,464		3.7	%
2021	30,867		16,397		963		130,575		3.9	%
2022	61,009		28,531		2,177		289,780		3.1	%
2023	117,460		66,842		7,805		656,348		3.3	%
2024	77,591		54,500		5,721		674,257		3.4	%
Subtotal	401,702		234,650		23,650		2,165,535		3.6	%
Europe:
ZBA	—		—		—		—		—	%
2013	13,674		11,591		(918)		121,015		3.2	%
2014	12,751		10,074		330		113,901		3.0	%
2015	8,651		6,226		(645)		84,119		2.4	%
2016(1)	7,157		5,552		(5,960)		64,238		2.7	%
2017	9,937		6,284		185		111,792		1.9	%
2018	9,916		6,653		(4,698)		139,021		1.6	%
2019	11,765		6,901		(555)		121,893		1.9	%
2020	7,927		4,982		(2,669)		72,052		2.2	%
2021	12,796		8,804		(710)		155,417		1.9	%
2022	16,046		8,471		1,912		181,895		1.6	%
2023	22,478		9,849		(216)		220,592		1.5	%
2024	14,700		8,082		2,473		148,590		2.2	%
Subtotal	147,798		93,469		(11,471)		1,534,525		2.1	%
Other geographies:(2)









All vintages	768		—		496		19,200		—	%
Subtotal	768		—		496		19,200		—	%
Total	$	550,268	$	328,119	$	12,675	$	3,719,260	3.0	%

_______________________

(1)Portfolio balance includes non-accrual pool groups. The EIR presented is only for pool groups that accrete portfolio revenue.

(2)All portfolios are on non-accrual basis. Annual pool groups for other geographies have been aggregated for disclosure purposes.


	Three Months Ended September 30, 2023						As of September 30, 2023
	Collections		Revenue from Receivable Portfolios		Changes in Recoveries		Investment in Receivable Portfolios		Monthly EIR
United States:
ZBA	$	6,671	$	6,671	$	—	$	—	—	%
2011	3,362		3,025		397		1,209		88.6	%
2012	4,031		3,468		580		2,839		42.0	%
2013	8,671		7,875		517		6,347		40.5	%
2014	5,206		3,360		712		16,086		6.7	%
2015	4,650		2,533		511		20,581		3.9	%
2016	8,236		4,688		599		35,986		4.1	%
2017	13,575		8,310		677		46,989		5.5	%
2018	20,980		12,041		(970)		93,742		4.0	%
2019	38,084		21,762		(4,069)		176,282		3.8	%
2020	45,294		24,793		(2,777)		207,618		3.7	%
2021	45,490		25,825		(7,422)		199,488		3.9	%
2022	66,028		43,223		(4,367)		450,261		3.1	%
2023	59,708		42,693		6,894		593,886		3.1	%
Subtotal	329,986		210,267		(8,718)		1,851,314		3.7	%
Europe:
ZBA	1		1		—		—		—	%
2013	13,916		13,071		(4,720)		125,830		3.2	%
2014	13,657		11,195		(2,415)		116,705		3.0	%
2015	9,442		6,850		(1,249)		87,125		2.5	%
2016(1)	7,937		6,109		40		69,477		2.8	%
2017	11,350		7,340		(880)		122,295		1.9	%
2018	12,015		7,915		(1,701)		159,945		1.6	%
2019	13,757		7,910		743		133,199		1.9	%
2020	9,160		5,969		661		85,211		2.2	%
2021	13,860		10,250		(1,252)		173,952		1.9	%
2022	17,410		9,990		(14)		201,110		1.6	%
2023	12,001		5,820		2,409		164,707		1.4	%
Subtotal	134,506		92,420		(8,378)		1,439,556		2.0	%
Other geographies:(2)
All vintages	847		—		29		29,674		—	%
Subtotal	847		—		29		29,674		—	%
Total	$	465,339	$	302,687	$	(17,067)	$	3,320,544	3.0	%

______________________

(1)Portfolio balance includes non-accrual pool groups. The EIR presented is only for pool groups that accrete portfolio revenue.

(2)Annual pool groups for other geographies have been aggregated for disclosure purposes.


	Nine Months Ended September 30, 2024						As of September 30, 2024
	Collections		Revenue from Receivable Portfolios		Changes in Recoveries		Investment in Receivable Portfolios		Monthly EIR
United States:
ZBA	$	17,992	$	17,992	$	—	$	—	—	%
2011	7,847		7,015		581		752		88.6	%
2012	8,243		8,283		(756)		1,763		42.0	%
2013	20,561		18,132		1,096		4,266		40.5	%
2014	12,793		8,778		653		12,910		6.7	%
2015	12,254		6,106		2,928		15,819		3.9	%
2016	21,643		11,200		4,168		27,226		4.2	%
2017	30,891		18,861		2,554		33,308		5.5	%
2018	50,210		26,744		2,904		63,173		4.0	%
2019	87,945		48,474		(3,375)		117,894		3.8	%
2020	100,826		54,709		(3,478)		137,464		3.7	%
2021	104,611		54,361		5,270		130,575		3.9	%
2022	199,446		96,269		(5,021)		289,780		3.1	%
2023	362,724		215,070		14,708		656,348		3.3	%
2024	129,823		96,633		6,327		674,257		3.4	%
Subtotal	1,167,809		688,627		28,559		2,165,535		3.6	%
Europe:
ZBA	2		2		—		—		—	%
2013	40,793		35,227		(4,664)		121,015		3.2	%
2014	38,392		30,848		(2,634)		113,901		3.0	%
2015	25,718		18,980		(1,839)		84,119		2.4	%
2016(1)	22,994		17,146		(6,000)		64,238		2.7	%
2017	30,747		19,327		(1,321)		111,792		1.9	%
2018	32,407		20,670		(11,196)		139,021		1.6	%
2019	36,012		21,225		(1,186)		121,893		1.9	%
2020	24,257		15,624		(2,769)		72,052		2.2	%
2021	40,075		26,843		(1,355)		155,417		1.9	%
2022	49,632		26,240		1,209		181,895		1.6	%
2023	68,229		30,695		3,203		220,592		1.5	%
2024	28,461		14,447		4,166		148,590		2.2	%
Subtotal	437,719		277,274		(24,386)		1,534,525		2.1	%
Other geographies:(2)
All vintages	2,355		—		1,847		19,200		—	%
Subtotal	2,355		—		1,847		19,200		—	%
Total	$	1,607,883	$	965,901	$	6,020	$	3,719,260	3.0	%

_______________________

(1)Portfolio balance includes non-accrual pool groups. The EIR presented is only for pool groups that accrete portfolio revenue.

(2)All portfolios are on non-accrual basis. Annual pool groups for other geographies have been aggregated for disclosure purposes.


	Nine Months Ended September 30, 2023						As of September 30, 2023
	Collections		Revenue from Receivable Portfolios		Changes in Recoveries		Investment in Receivable Portfolios		Monthly EIR
United States:
ZBA	$	21,614	$	21,614	$	—	$	—	—	%
2011	10,569		9,392		1,060		1,209		88.6	%
2012	12,700		10,730		1,720		2,839		42.0	%
2013	27,380		25,257		1,068		6,347		40.5	%
2014	16,257		10,755		2,243		16,086		6.7	%
2015	15,364		8,326		1,263		20,581		3.9	%
2016	27,926		15,457		1,922		35,986		4.1	%
2017	46,684		27,579		3,724		46,989		5.5	%
2018	72,025		40,120		(3,028)		93,742		4.0	%
2019	131,426		71,881		(709)		176,282		3.8	%
2020	156,099		82,302		368		207,618		3.7	%
2021	149,638		86,576		(17,139)		199,488		3.9	%
2022	204,751		138,525		(23,655)		450,261		3.1	%
2023	102,039		74,515		16,667		593,886		3.1	%
Subtotal	994,472		623,029		(14,496)		1,851,314		3.7	%
Europe:
ZBA	17		17		—		—		—	%
2013	44,291		39,642		(8,091)		125,830		3.2	%
2014	41,970		34,087		(4,107)		116,705		3.0	%
2015	27,507		20,849		(2,306)		87,125		2.5	%
2016(1)	27,315		19,146		86		69,477		2.8	%
2017	37,562		22,710		(1,589)		122,295		1.9	%
2018	36,684		24,452		(6,556)		159,945		1.6	%
2019	41,831		24,271		1,233		133,199		1.9	%
2020	29,104		18,258		3,530		85,211		2.2	%
2021	44,789		31,147		(26)		173,952		1.9	%
2022	52,840		31,090		(3,562)		201,110		1.6	%
2023	22,722		10,847		5,801		164,707		1.4	%
Subtotal	406,632		276,516		(15,587)		1,439,556		2.0	%
Other geographies:(2)








All vintages	3,113		—		29		29,674		—	%
Subtotal	3,113		—		29		29,674		—	%
Total	$	1,404,217	$	899,545	$	(30,054)	$	3,320,544	3.0	%

____________________

(1)Portfolio balance includes non-accrual pool groups. The EIR presented is only for pool groups that accrete portfolio revenue.

(2)Annual pool groups for other geographies have been aggregated for disclosure purposes.

Servicing revenues increased by approximately $2.9 million during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The increase was primarily attributable to increased demand from BPO clients. Service revenues remained relatively consistent during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023.

Other revenues remained relatively consistent during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. Other revenues increased during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily driven by increase of gains recognized on the sale of real estate assets.

Table of Contents

Operating Expenses

The following tables summarize operating expenses for the periods presented (in thousands, except percentages):


	Three Months Ended September 30,
	2024		2023		$ Change		% Change
Salaries and employee benefits	$	107,502	$	95,067	$	12,435	13.1	%
Cost of legal collections	67,339		56,274		11,065		19.7	%
General and administrative expenses	38,808		35,559		3,249		9.1	%
Other operating expenses	31,804		27,959		3,845		13.8	%
Collection agency commissions	7,370		8,046		(676)		(8.4)	%
Depreciation and amortization	8,158		11,196		(3,038)		(27.1)	%
Total operating expenses	$	260,981	$	234,101	$	26,880	11.5	%


	Nine Months Ended September 30,
	2024		2023		$ Change		% Change
Salaries and employee benefits	$	318,294	$	294,772	$	23,522	8.0	%
Cost of legal collections	190,309		167,525		22,784		13.6	%
General and administrative expenses	111,828		108,053		3,775		3.5	%
Other operating expenses	93,016		81,864		11,152		13.6	%
Collection agency commissions	22,308		26,583		(4,275)		(16.1)	%
Depreciation and amortization	23,467		32,768		(9,301)		(28.4)	%
Total operating expenses	$	759,222	$	711,565	$	47,657	6.7	%

Our operating results are impacted by foreign currency translation, which represents the effect of translating operating results where the functional currency is different than our U.S. dollar reporting currency. The strengthening of the U.S. dollar relative to other foreign currencies has a favorable impact on our international operating expenses, and the weakening of the U.S. dollar relative to other foreign currencies has an unfavorable impact on our international operating expenses. Our operating results were unfavorably impacted by foreign currency translation by approximately $1.8 million and $4.7 million during the three and nine months ended September 30, 2024, respectively, primarily as a result of the weakening of the U.S. dollar against the British Pound by approximately 2.7% and 2.6% for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023, respectively.

Operating expenses are explained in more detail as follows:

Salaries and Employee Benefits

The increase in salaries and employee benefits during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, was primarily due to the following reasons:

•An increase in salaries and bonus of approximately $8.9 million primarily due to an increase in overall headcount; and

•An increase in employee benefits and payroll taxes of approximately $2.8 million.

The increase in salaries and employee benefits during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was primarily due to the following reasons:

•An increase in salaries and bonus of approximately $16.6 million primarily due to an increase in overall headcount; and

•An increase in employee benefits and payroll taxes of approximately $6.2 million.

Table of Contents

Cost of Legal Collections

Cost of legal collections primarily includes contingent fees paid to our external network of attorneys and the cost of litigation. We pursue legal collections using a network of attorneys that specialize in collection matters and through our internal legal channel. Under the agreements with our contracted attorneys, we advance certain out-of-pocket court costs. Cost of legal collections does not include internal legal channel employee costs, which are included in salaries and employee benefits in our condensed consolidated statements of income.

The following tables summarize our cost of legal collections during the periods presented (in thousands, except percentages):


	Three Months Ended September 30,
	2024		2023		$ Change		% Change
Court costs	$	44,282	$	34,720	$	9,562	27.5	%
Legal collection fees	23,057		21,554		1,503		7.0	%
Total cost of legal collections	$	67,339	$	56,274	$	11,065	19.7	%


	Nine Months Ended September 30,
	2024		2023		$ Change		% Change
Court costs	$	124,250	$	97,746	$	26,504	27.1	%
Legal collection fees	66,059		69,779		(3,720)		(5.3)	%
Total cost of legal collections	$	190,309	$	167,525	$	22,784	13.6	%

The increases of cost of legal collections during the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, were primarily due to increased legal placements in this channel in the U.S. The increase in cost of legal collections during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was partially offset by decreased contingent fees paid to our external network of attorneys as we grow our legal collection activities through our internal legal channel.

General and Administrative Expenses

The increase in general and administrative expense during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, was primarily due to the following reasons:

•Approximately $2.9 million of increased general and administrative expense include costs associated with our information technology.

The increase in general and administrative expense during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, was primarily due to the following reasons:

•An increase in information technology expenses of approximately $6.0 million; and

•The increase was partially offset by a decrease in consulting fees of approximately $1.5 million and a decrease in facilities fees of approximately $1.4 million.

Other Operating Expenses

The increase in other operating expenses during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, was primarily due to an increase in postage and printing expenses and an increase in collections bank charges and trace agencies fees of approximately $3.1 million and $0.9 million, respectively. The increase in other operating expenses during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was primarily due to an increase in postage and printing expenses and an increase in collections bank charges and trace agencies fees of approximately $8.0 million and $2.4 million, respectively.

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Collection Agency Commissions

Collection agency commissions are commissions paid to third-party collection agencies. Collections through the collections agencies channel are predominately in Europe and vary from period to period depending on, among other things, the number of accounts placed with an agency versus accounts collected internally. Commission rates vary depending on, among other things, the amount of time that has passed since the charge-off of the accounts placed with an agency, the asset class, and the geographic location of the receivables. Generally, freshly charged-off accounts have a lower commission rate than accounts that have been charged off for a longer period of time, and commission rates for purchased bankruptcy portfolios are lower than the commission rates for charged-off credit card accounts. Collection agency commissions decreased by approximately $0.7 million and $4.3 million during the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023, respectively. The decreases were primarily due to fewer accounts placed with external agencies and favorable commission rates received from such agencies in Europe.

Depreciation and Amortization

The decrease in depreciation and amortization expenses during the three and nine months ended September 30, 2024, as compared to three and nine months ended September 30, 2023, was primarily due to smaller depreciable and amortizable asset balances during the three and nine months ended September 30, 2024, as compared to three and nine months ended September 30, 2023. Depreciation expenses and amortization expenses decreased by approximately $1.8 million and $1.2 million during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, and by approximately $5.8 million and $3.5 million during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, respectively.

Interest Expense

The following tables summarize our interest expense for the periods presented (in thousands, except percentages):


	Three Months Ended September 30,
	2024		2023		$ Change		% Change
Stated interest on debt obligations	$	62,467	$	46,692	$	15,775	33.8	%
Amortization of debt issuance costs	3,991		3,503		488		13.9	%
Amortization of debt discount	448		363		85		23.4	%
Total interest expense	$	66,906	$	50,558	$	16,348	32.3	%


	Nine Months Ended September 30,
	2024		2023		$ Change		% Change
Stated interest on debt obligations	$	171,668	$	134,850	$	36,818	27.3	%
Amortization of debt issuance costs	11,071		11,453		(382)		(3.3)	%
Amortization of debt discount	1,308		1,073		235		21.9	%
Total interest expense	$	184,047	$	147,376	$	36,671	24.9	%

The increase in interest expense during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, was primarily due to the following reasons:

•The effect resulting from increased average debt balance of approximately $6.0 million; and

•The effect resulting from rising interest rates of approximately $9.1 million; and

•An unfavorable impact of foreign currency translation of approximately $0.6 million driven by the weakening of the U.S. dollar against the British Pound.

The increase in interest expense during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was primarily due to the following reasons:

•The effect resulting from increased average debt balance of approximately $17.7 million;

•The effect resulting from rising interest rates of approximately $17.9 million; and

•An unfavorable impact of foreign currency translation of approximately $1.2 million driven by the weakening of the U.S. dollar against the British Pound.

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Other Income, net of Other Expense

Other income or expense consists primarily of foreign currency exchange gains or losses, interest income, and gains or losses recognized on certain transactions outside of our normal course of business. Other income, net, was $1.6 million and $6.3 million during the three and nine months ended September 30, 2024, respectively. Other income, net, was $5.1 million and $5.1 million during the three and nine months ended September 30, 2023, respectively. Interest income included in other income, net of other expense, was approximately $1.9 million and $5.0 million for the three and nine months ended September 30, 2024, respectively, and $1.3 million and $3.4 million for the three and nine months ended September 30, 2023, respectively.

Provision for Income Taxes

Provision for income taxes and effective tax rate are as follows for the periods presented ($ in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Provision for income taxes	$	10,119		$	10,724		$	27,701		$	27,162
Effective tax rate	24.8		%	35.7		%	24.3		%	29.7		%

For the three and nine months ended September 30, 2024, the differences between our effective tax rate and the federal statutory rate were primarily due to state income taxes. For the three months ended September 30, 2023 the difference between our effective tax rate and the federal statutory rate was primarily due to the recording of valuation allowances in certain foreign jurisdictions. For the nine months ended September 30, 2023, the difference between our effective tax rate and the federal statutory rate was primarily due to state income taxes, an accrual related to state tax filing positions, and other foreign adjustments.

Non-GAAP Disclosure

In addition to the financial information prepared in conformity with Generally Accepted Accounting Principles (“GAAP”), we provide historical non-GAAP financial information. Management believes that the presentation of such non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of our operations. Management believes that these non-GAAP financial measures reflect an additional way of viewing aspects of our business that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business.

Management believes that the presentation of these measures provides investors with greater transparency and facilitates comparison of operating results across a broad spectrum of companies with varying capital structures, compensation strategies, derivative instruments, and amortization methods, which provide a more complete understanding of our financial performance, competitive position, and prospects for the future. Readers should consider the information in addition to, but not instead of, our financial statements prepared in accordance with GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of these measures for comparative purposes.

Adjusted EBITDA. Management utilizes adjusted EBITDA (defined as net income before interest income and expense, taxes, depreciation and amortization, stock-based compensation expenses, acquisition, integration and restructuring related expenses, and other charges or gains that are not indicative of ongoing operations), in the evaluation of our operating performance. Adjusted EBITDA for the periods presented is as follows (in thousands):

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	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
GAAP net income, as reported	$	30,643	$	19,339	$	86,063	$	64,270
Adjustments:
Interest expense	66,906		50,558		184,047		147,376
Interest income	(1,909)		(1,315)		(5,037)		(3,382)
Provision for income taxes	10,119		10,724		27,701		27,162
Depreciation and amortization	8,158		11,196		23,467		32,768
Stock-based compensation expense	3,737		3,092		11,731		11,017
Net loss (gain) on derivative instruments(1)	7		(3,512)		(267)		(3,512)
Acquisition, integration and restructuring related expenses(2)	162		594		4,364		6,574


Adjusted EBITDA	$	117,823	$	90,676	$	332,069	$	282,273
Collections applied to principal balance(3)	$	223,292	$	188,872	$	666,766	$	562,511

_______________________

(1)Amount represents gain or loss recognized on derivative instruments that are not designated as hedging instruments or gain or loss recognized on derivative instruments upon dedesignation of hedge relationships. We adjust for this amount because we believe the gain or loss on derivative contracts is not indicative of ongoing operations.

(2)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.

(3)Collections applied to principal balance is calculated in the table below:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Collections applied to investment in receivable portfolios, net	$	222,149	$	162,652	$	641,982	$	504,672
Changes in recoveries	(12,675)		17,067		(6,020)		30,054
Other proceeds applied to basis	13,818		9,153		30,804		27,785
Collections applied to principal balance	$	223,292	$	188,872	$	666,766	$	562,511

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Supplemental Performance Data

The tables included in this supplemental performance data section include detail for purchases, collections and ERC by year of purchase.

Our collection expectations are based on account characteristics and economic variables. Additional adjustments are made to account for qualitative factors that may affect the payment behavior of our consumers and servicing related adjustments to ensure our collection expectations are aligned with our operations. We continue to refine our process of forecasting collections both domestically and internationally with a focus on operational enhancements. Our collection expectations vary between types of portfolio and geographic location. As a result, past performance of pools in certain geographic locations or of certain types of portfolio are not necessarily a suitable indicator of future results in other locations or for other types of portfolio.

The supplemental performance data presented in this section is impacted by foreign currency translation, which represents the effect of translating financial results where the functional currency of our foreign subsidiary is different than our U.S. dollar reporting currency. For example, the strengthening of the U.S. dollar relative to other foreign currencies has an unfavorable reporting impact on our international purchases, collections, and ERC, and the weakening of the U.S. dollar relative to other foreign currencies has a favorable impact on our international purchases, collections, and ERC.

We utilize proprietary forecasting models to continuously evaluate the economic life of each pool.

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Cumulative Collections Money Multiple - Cumulative Collections from Purchased Receivables to Purchase Price Multiple

The following table summarizes our receivable purchases, related gross collections, and cumulative collections money multiples (in thousands, except multiples):


Year of Purchase	Purchase Price(1)		Cumulative Collections through September 30, 2024
			<2015		2015		2016		2017		2018		2019		2020		2021		2022		2023		2024		Total(2)		CCMM(3)
United States:
<2015	$	3,762,057	$	7,258,767	$	1,076,324	$	739,743	$	519,613	$	372,705	$	290,351	$	216,962	$	186,927	$	140,814	$	112,180	$	67,436	$	10,981,822	2.9
2015	499,034		—		105,610		231,102		186,391		125,673		85,042		64,133		42,774		25,655		19,518		12,254		898,152		1.8
2016	552,970		—		—		110,875		283,035		234,690		159,279		116,452		87,717		51,650		35,130		21,643		1,100,471		2.0
2017	527,444		—		—		—		111,902		315,853		255,048		193,328		144,243		85,348		57,985		30,891		1,194,598		2.3
2018	629,214		—		—		—		—		175,042		351,696		308,302		228,919		144,566		89,548		50,210		1,348,283		2.1
2019	675,139		—		—		—		—		—		174,693		416,315		400,250		256,444		164,106		87,945		1,499,753		2.2
2020	537,732		—		—		—		—		—		—		213,450		430,514		311,573		194,522		100,826		1,250,885		2.3
2021	403,735		—		—		—		—		—		—		—		120,354		240,605		188,895		104,611		654,465		1.6
2022	549,745		—		—		—		—		—		—		—		—		98,277		268,516		199,446		566,239		1.0
2023	807,874		—		—		—		—		—		—		—		—		—		184,182		362,724		546,906		0.7
2024	701,121		—		—		—		—		—		—		—		—		—		—		129,823		129,823		0.2
Subtotal	9,646,065		7,258,767		1,181,934		1,081,720		1,100,941		1,223,963		1,316,109		1,528,942		1,641,698		1,354,932		1,314,582		1,167,809		20,171,397		2.1
Europe:
<2015	1,242,208		519,115		410,256		322,275		284,799		261,696		218,565		177,458		178,076		134,094		112,284		79,185		2,697,803		2.2
2015	419,941		—		65,870		127,084		103,823		88,065		72,277		55,261		57,817		42,660		36,249		25,720		674,826		1.6
2016	258,218		—		—		44,641		97,587		83,107		63,198		51,609		51,017		40,214		35,278		22,994		489,645		1.9
2017	461,571		—		—		—		68,111		152,926		118,794		87,549		86,107		61,762		48,763		30,747		654,759		1.4
2018	432,258		—		—		—		—		49,383		118,266		78,846		80,629		61,691		49,675		32,407		470,897		1.1
2019	273,354		—		—		—		—		—		44,118		80,502		88,448		63,607		54,544		36,012		367,231		1.3
2020	116,227		—		—		—		—		—		—		22,721		59,803		45,757		37,363		24,257		189,901		1.6
2021	255,788		—		—		—		—		—		—		—		43,082		66,529		58,515		40,075		208,201		0.8
2022	244,508		—		—		—		—		—		—		—		—		36,957		70,385		49,632		156,974		0.6
2023	259,255		—		—		—		—		—		—		—		—		—		40,975		68,229		109,204		0.4
2024	153,374		—		—		—		—		—		—		—		—		—		—		28,461		28,461		0.2
Subtotal	4,116,702		519,115		476,126		494,000		554,320		635,177		635,218		553,946		644,979		553,271		544,031		437,719		6,047,902		1.5
Other geographies(4):










All vintages	340,283		40,293		42,665		109,884		112,383		108,480		75,601		28,960		20,682		3,334		3,954		2,355		548,591		1.6
Subtotal	340,283		40,293		42,665		109,884		112,383		108,480		75,601		28,960		20,682		3,334		3,954		2,355		548,591		1.6
Total	$	14,103,050	$	7,818,175	$	1,700,725	$	1,685,604	$	1,767,644	$	1,967,620	$	2,026,928	$	2,111,848	$	2,307,359	$	1,911,537	$	1,862,567	$	1,607,883	$	26,767,890	1.9

________________________

(1)Adjusted for Put-Backs and Recalls. Put-Backs (“Put-Backs”) and recalls (“Recalls”) represent ineligible accounts that are returned by us or recalled by the seller pursuant to specific guidelines as set forth in the respective purchase agreement.

(2)Cumulative collections from inception through September 30, 2024, excluding collections on behalf of others.

(3)Cumulative Collections Money Multiple (“CCMM”) through September 30, 2024 refers to cumulative collections as a multiple of purchase price.

(4)Annual pool groups for other geographies have been aggregated for disclosure purposes.

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Purchase Price Multiple - Total Estimated Collections from Purchased Receivables to Purchase Price Multiple

The following table summarizes our purchases, resulting historical gross collections, estimated remaining gross collections from purchased receivables, and purchase price multiple (in thousands, except multiples):


	Purchase Price(1)		Historical Collections(2)		Estimated Remaining Collections		Total Estimated Gross Collections		Purchase Price Multiple(3)
United States:
<2015(4)	$	3,762,057	$	10,981,822	$	189,210	$	11,171,032	3.0
2015	499,034		898,152		33,940		932,092		1.9
2016	552,970		1,100,471		60,014		1,160,485		2.1
2017	527,444		1,194,598		90,823		1,285,421		2.4
2018	629,214		1,348,283		144,961		1,493,244		2.4
2019	675,139		1,499,753		259,584		1,759,337		2.6
2020	537,732		1,250,885		301,194		1,552,079		2.9
2021	403,735		654,465		295,993		950,458		2.4
2022	549,745		566,239		565,286		1,131,525		2.1
2023	807,874		546,906		1,355,471		1,902,377		2.4
2024	701,121		129,823		1,506,417		1,636,240		2.3
Subtotal	9,646,065		20,171,397		4,802,893		24,974,290		2.6
Europe:
<2015(4)	1,242,208		2,697,803		898,510		3,596,313		2.9
2015(4)	419,941		674,826		249,529		924,355		2.2
2016	258,218		489,645		193,724		683,369		2.6
2017	461,571		654,759		257,876		912,635		2.0
2018	432,258		470,897		294,891		765,788		1.8
2019	273,354		367,231		275,856		643,087		2.4
2020	116,227		189,901		169,723		359,624		3.1
2021	255,788		208,201		337,982		546,183		2.1
2022	244,508		156,974		346,132		503,106		2.1
2023	259,255		109,204		392,651		501,855		1.9
2024	153,374		28,461		317,749		346,210		2.3
Subtotal	4,116,702		6,047,902		3,734,623		9,782,525		2.4
Other geographies(5):










All vintages	340,283		548,591		33,075		581,666		1.7
Subtotal	340,283		548,591		33,075		581,666		1.7
Total	$	14,103,050	$	26,767,890	$	8,570,591	$	35,338,481	2.5

________________________

(1)Purchase price refers to the cash paid to a seller to acquire a portfolio less Put-backs, Recalls, and other adjustments. Put-Backs and Recalls represent ineligible accounts that are returned by us or recalled by the seller pursuant to specific guidelines as set forth in the respective purchase agreement.

(2)Cumulative collections from inception through September 30, 2024, excluding collections on behalf of others.

(3)Purchase Price Multiple represents total estimated gross collections divided by the purchase price.

(4)Includes portfolios acquired in connection with certain business combinations.

(5)Annual pool groups for other geographies have been aggregated for disclosure purposes.

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Estimated Remaining Gross Collections by Year of Purchase

The following table summarizes our estimated remaining gross collections from purchased receivable portfolios and estimated future cash flows from real estate-owned assets (in thousands):


	Estimated Remaining Gross Collections by Year of Purchase(1)
	2024(3)		2025		2026		2027		2028		2029		2030		2031		2032		>2032		Total(2)
United States:
<2015(4)	$	18,489	$	59,018	$	39,197	$	26,518	$	17,955	$	11,824	$	7,582	$	4,597	$	2,623	$	1,407	$	189,210
2015	3,507		10,708		6,434		4,107		2,895		2,043		1,444		1,024		727		1,051		33,940
2016	6,103		19,224		11,435		7,097		4,990		3,515		2,481		1,754		1,244		2,171		60,014
2017	8,559		26,844		17,950		11,461		7,886		5,560		3,930		2,786		1,980		3,867		90,823
2018	13,068		41,446		28,887		19,501		12,869		8,860		6,255		4,429		3,146		6,500		144,961
2019	24,196		75,439		51,099		34,584		23,530		15,622		10,805		7,611		5,375		11,323		259,584
2020	26,986		85,909		60,147		40,788		27,821		18,927		12,644		8,799		6,206		12,967		301,194
2021	26,660		83,845		59,401		39,528		26,912		18,603		12,845		8,783		6,114		13,302		295,993
2022	55,559		167,755		106,768		73,089		49,315		34,393		24,376		17,385		12,171		24,475		565,286
2023	104,315		396,823		275,893		179,070		124,500		85,528		59,727		41,584		29,094		58,937		1,355,471
2024	87,695		386,576		347,532		212,158		141,983		100,801		70,854		50,154		35,033		73,631		1,506,417
Subtotal	375,137		1,353,587		1,004,743		647,901		440,656		305,676		212,943		148,906		103,713		209,631		4,802,893
Europe:
<2015(4)	26,965		101,550		92,592		84,376		78,181		72,088		66,214		60,034		55,022		261,488		898,510
2015(4)	8,214		30,587		28,176		25,277		22,428		20,423		18,221		16,342		14,712		65,149		249,529
2016	7,706		26,381		23,691		21,162		18,585		16,282		13,992		12,202		10,245		43,478		193,724
2017	10,312		36,461		31,724		28,720		23,974		20,894		18,109		15,771		13,517		58,394		257,876
2018	10,593		40,138		35,556		31,710		27,503		24,720		21,357		18,679		16,530		68,105		294,891
2019	11,971		42,359		35,228		29,306		25,129		21,876		18,678		16,004		14,030		61,275		275,856
2020	7,834		28,720		25,353		19,952		15,162		12,036		10,431		8,633		7,427		34,175		169,723
2021	14,260		53,339		46,782		40,849		34,843		28,244		22,389		18,963		16,207		62,106		337,982
2022	16,361		59,563		49,722		42,719		34,935		28,460		22,986		18,366		15,412		57,608		346,132
2023	20,728		71,601		59,344		49,034		40,504		32,381		25,629		20,771		16,925		55,734		392,651
2024	15,296		60,219		51,621		40,540		32,179		25,360		19,841		15,676		12,766		44,251		317,749
Subtotal	150,240		550,918		479,789		413,645		353,423		302,764		257,847		221,441		192,793		811,763		3,734,623
Other geographies(5):











All vintages	1,325		5,156		4,285		3,720		3,239		2,923		2,617		2,304		1,948		5,558		33,075
Subtotal	1,325		5,156		4,285		3,720		3,239		2,923		2,617		2,304		1,948		5,558		33,075
Portfolio ERC	526,702		1,909,661		1,488,817		1,065,266		797,318		611,363		473,407		372,651		298,454		1,026,952		8,570,591
REO ERC(6)	8,326		30,016		27,954		9,189		2,749		61		—		—		—		—		78,295
Total ERC	$	535,028	$	1,939,677	$	1,516,771	$	1,074,455	$	800,067	$	611,424	$	473,407	$	372,651	$	298,454	$	1,026,952	$	8,648,886

________________________

(1)As of September 30, 2024, ERC for Zero Basis Portfolios include approximately $44.1 million for purchased consumer and bankruptcy receivables in the United States. ERC for Zero Basis Portfolios in Europe and other geographies was immaterial. ERC also includes approximately $33.1 million from cost recovery portfolios, primarily in other geographies.

(2)Represents the expected remaining gross cash collections over a 180-month period. As of September 30, 2024, ERC for 84-month and 120-month periods were:


	84-Month ERC		120-Month ERC
United States	$	4,457,135	$	4,704,272
Europe	2,676,722		3,205,304
Other geographies	25,038		30,090
Portfolio ERC	7,158,895		7,939,666
REO ERC	78,295		78,295
Total ERC	$	7,237,190	$	8,017,961

(3)Amount for 2024 consists of three months data from October 1, 2024 to December 31, 2024.

(4)Includes portfolios acquired in connection with certain business combinations.

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(5)Annual pool groups for other geographies have been aggregated for disclosure purposes.

(6)Real estate-owned (“REO”) assets ERC includes approximately $77.7 million and $0.6 million of estimated future cash flows for Europe and Other Geographies, respectively.

Estimated Future Collections Applied to Investment in Receivable Portfolios

As of September 30, 2024, we had $3.7 billion in investment in receivable portfolios. The estimated future collections applied to the investment in receivable portfolios net balance is as follows (in thousands):


Years Ending December 31,	United States		Europe		Other Geographies		Total

2024(1)	$	142,237	$	56,880	$	1,057	$	200,174
2025	589,111		209,149		4,123		802,383
2026	484,016		185,080		3,413		672,509
2027	296,941		160,074		2,958		459,973
2028	197,928		135,428		2,564		335,920
2029	136,649		115,134		2,284		254,067
2030	95,317		96,302		2,032		193,651
2031	67,383		81,727		769		149,879
2032	47,454		72,121		—		119,575
2033	33,596		66,046		—		99,642
2034	23,923		61,387		—		85,310
2035	17,770		60,086		—		77,856
2036	13,796		59,317		—		73,113
2037	10,564		60,299		—		70,863
2038	6,615		65,219		—		71,834
2039	2,235		50,276		—		52,511

Total	$	2,165,535	$	1,534,525	$	19,200	$	3,719,260

________________________

(1)Amount for 2024 consists of three months data from October 1, 2024 to December 31, 2024.

Liquidity and Capital Resources

Liquidity

The following table summarizes our cash flow activities for the periods presented (in thousands):


	Nine Months Ended September 30,
	2024		2023
	(Unaudited)
Net cash provided by operating activities	$	132,624	$	116,211
Net cash used in investing activities	(175,705)		(270,726)
Net cash provided by financing activities	130,487		158,872

Operating Cash Flows

Cash flows from operating activities represent the cash receipts and disbursements related to all of our activities other than investing and financing activities.

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Net cash provided by operating activities was $132.6 million and $116.2 million during the nine months ended September 30, 2024 and 2023, respectively. Operating cash flows are derived by adjusting net income for non-cash operating items such as depreciation and amortization, changes in recoveries, stock-based compensation charges, and changes in operating assets and liabilities which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in results of operations. Adjusting for the changes in recoveries resulted in a decrease in operating cash flows by $6.0 million during the nine months ended September 30, 2024 and an increase in operating cash flows by $30.1 million during the nine months ended September 30, 2023. Refer to “Note 5: Investment in Receivable Portfolios, Net” in the notes to our consolidated financial statements for discussion relating to changes in recoveries.

Investing Cash Flows

Net cash used in investing activities was $175.7 million and $270.7 million during the nine months ended September 30, 2024 and 2023, respectively. Cash provided by or used in investing activities is primarily affected by receivable portfolio purchases offset by collection proceeds applied to the principal of our receivable portfolios. Receivable portfolio purchases, net of put-backs, were $844.9 million and $772.1 million during the nine months ended September 30, 2024 and 2023, respectively. Collection proceeds applied to the investment in receivable portfolios, were $642.0 million and $504.7 million during the nine months ended September 30, 2024 and 2023, respectively. Refer to Purchases and Collections within “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations” for discussion relating to purchases and collections.

Financing Cash Flows

Net cash provided by financing activities was $130.5 million and $158.9 million during the nine months ended September 30, 2024 and 2023, respectively. Financing cash flows are generally affected by borrowings under our credit facilities and proceeds from various debt offerings, offset by repayments of amounts outstanding under our credit facilities and repayments of various notes. Borrowings under our credit facilities were $458.8 million and $630.1 million during the nine months ended September 30, 2024 and 2023, respectively. Repayments of amounts outstanding under our credit facilities were $1,292.6 million and $446.7 million during the nine months ended September 30, 2024 and 2023, respectively. During the nine months ended September 30, 2024, we issued $1.0 billion in senior secured notes (of which $500.0 million matures in 2029 and $500.0 million matures in 2030). We used a portion of the proceeds from the senior secured notes issuance to repay drawings under our Global Senior Facility. During the nine months ended September 30, 2023, we issued $230.0 million 4.00% convertible senior notes that mature in 2029, and used $212.5 million in cash to repurchase and settle our exchangeable senior notes due 2023.

Capital Resources

Our primary sources of capital are cash collections from our investment in receivable portfolios, bank borrowings, debt offerings, and equity offerings. Depending on the capital markets, we consider additional financings to fund our operations and any potential acquisitions. From time to time, we may repurchase outstanding debt or equity and/or restructure or refinance debt obligations. Our primary cash requirements include funding the purchase of receivable portfolios, operating expenses, the payment of interest and principal on borrowings, the payment of income taxes, funding any entity acquisitions and share repurchases.

We are in material compliance with all covenants under our financing arrangements. See “Note 7: Borrowings” in the notes to our condensed consolidated financial statements for a further discussion of our debt. Available capacity under our Global Senior Facility, was $1,196.0 million as of September 30, 2024. In October 2024, the Company redeemed the 2025 Notes at par, which was funded in part by a utilization of the Global Senior Facility of approximately $314.3 million. The Global Senior Facility was subsequently upsized by $92.0 million from $1,203.0 million to $1,295.0 million in October 2024.

In March 2024, we issued $500.0 million in aggregate principal amount of 9.250% Senior Secured Notes due 2029 at an issue price of 100.000% through a private placement offering. Additionally, in May 2024, we issued $500.0 million in aggregate principal amount of 8.500% Senior Secured Notes due 2030 at an issue price of 100.000% through a separate private placement offering.

Our Board of Directors has approved a $300.0 million share repurchase program. Repurchases under this program are expected to be made from cash on hand and/or a drawing from our Global Senior Facility and may be made from time to time, subject to market conditions and other factors, in the open market, through private transactions, block transactions, or other methods as determined by our management and Board of Directors, and in accordance with market conditions, other corporate considerations, and applicable regulatory requirements. The program does not obligate us to acquire any particular amount of common stock, and it may be modified or suspended at our discretion. During the three and nine months ended September 30, 2024 and 2023, the Company did not make any repurchases under the share repurchase program. Our practice is to retire the

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shares repurchased. As of September 30, 2024, authorization for $91.9 million of share repurchases remained under the share repurchase program.

Our cash and cash equivalents as of September 30, 2024, consisted of $40.9 million held by U.S.-based entities and $206.5 million held by foreign entities. Most of our cash and cash equivalents held by foreign entities is indefinitely reinvested and may be subject to material tax effects if repatriated. However, we believe that our sources of cash and liquidity are sufficient to meet our business needs in the United States and do not expect that we will need to repatriate the funds.

Included in cash and cash equivalents is cash that was collected on behalf of, and remains payable to, third-party clients. The balance of cash held for clients was $23.4 million as of September 30, 2024.

Cash from operations could also be affected by various risks and uncertainties, including, but not limited to, timing of cash collections from our consumers, and other risks detailed in our Risk Factors. However, we believe that we have sufficient liquidity to fund our operations for at least the next twelve months, given our expectation of continued positive cash flows from operations, our cash and cash equivalents, our access to capital markets, and availability under our credit facilities. Our future cash needs will depend on our acquisitions of portfolios and businesses.

Critical Accounting Estimates

Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions based on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Our actual results could differ from these estimates under different assumptions or conditions. Refer to “Critical Accounting Estimates” contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, for a complete discussion of our critical accounting estimates. Other than the ongoing reassessment of expected future recoveries of our investment in receivable portfolios during each reporting period under our CECL accounting policy as discussed in “Note 5: Investment in Receivable Portfolios, Net” to our condensed consolidated financial statements, there have been no material changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended December 31, 2023.

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Item 3 – Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Rates. As of September 30, 2024, there had not been a material change in any of the foreign currency risk information disclosed in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Interest Rates. As of September 30, 2024, there had not been a material change in the interest rate risk information disclosed in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Item 4 – Controls and Procedures

Attached as exhibits to this Form 10-Q are the certifications required by Rule 13a-14 of the Securities Exchange Act of 1934, as amended. This section includes information concerning the controls and controls evaluation referred to in the certifications.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”) and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and accordingly, management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on their most recent evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act are effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1 – Legal Proceedings

Information with respect to this item may be found in “Note 11: Commitments and Contingencies,” to the condensed consolidated financial statements.

Item 1A – Risk Factors

There is no material change in the information reported under “Part I-Item 1A-Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 5 - Other Information

On August 28, 2024, Laura Olle, a member of the Company's board of directors, adopted a trading plan intended to satisfy the affirmative defense of Rule 10b5-1(c) to sell up to 1,340 shares of Encore Capital Group, Inc. common stock between November 27, 2024, and February 27, 2025, subject to certain conditions.

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Item 6 – Exhibits


Number						Description
3.1.1						Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Amendment No. 2 to the Company’s Registration Statement on Form S-1/A filed on June 14, 1999, File No. 333-77483)

3.1.2						Certificate of Amendment to the Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on April 4, 2002, File No. 000-26489)

3.1.3						Second Certificate of Amendment to the Certificate of Incorporation (incorporated by reference to Exhibit 3.1.3 to the Company’s Quarterly Report on Form 10-Q filed on August 7, 2019)

3.2						Amended and Restated Bylaws, as amended through December 13, 2022 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on December 16, 2022)

10.1						Amended and Restated Senior Facilities Agreement, dated October 17, 2024, by and among Encore Capital Group, Inc., the several guarantors, banks and other financial institutions and lenders from time to time party thereto and Truist Bank as Agent and Security Agent (incorporated by reference to Exhibit 10.1 to t h e Company ’s Current Report on Form 8-K filed on October 23, 2024)

31.1						Certification of the Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

31.2						Certification of the Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

32.1						Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)

101.INS						Inline XBRL Instance Document - The instance document does not appear in the interactive data file because XBRL tags are embedded within the inline XBRL document. (filed herewith)

101.SCH						Inline XBRL Taxonomy Extension Schema Document (filed herewith)

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith)

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith)

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith)

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith)

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101


In accordance with Item 601(b)(4)(iii)(A) of Regulation S-K, copies of certain instruments defining the rights of holders of long-term debt of the company are not filed herewith. Pursuant to this regulation, we hereby agree to furnish a copy of any such instrument to the SEC upon request.

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SIGNATURES

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 thereunto duly authorized.


			ENCORE CAPITAL GROUP, INC.

			By:						/s/ Jonathan C. Clark
									Jonathan C. Clark
									Executive Vice President,
									Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

Date: November 6, 2024

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Encore Capital (ECPG) 10-Q2024 Q3 Quarterly report

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