ECPG - Earnings call transcript Q2 2024 | Encore Capital Group, Inc.

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Operator

Good afternoon, everyone, and thank you for standing by. Welcome to the Encore Capital Group's Second Quarter 2024 Earnings Call. [Operator Instructions]. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Bruce Thomas, VP of Global Industrial Relations for Encore. ahead. go please Bruce,

Bruce Thomas

Good XXXX welcome Earnings operator. Group's Encore Second Quarter Call. afternoon, you, to and Capital Thank

Joining me Executive on President our Chief President the Officer; of call today Chief Financial Officer; are Midland Executive Credit Jonathan Ryan Clark, and Vice Management. and and President Bell, Ashish Masih,

of then the call questions. and and noted, Unless XXXX Ashish and comparisons will second will happy of be on prepared make will Jon conference be otherwise between made to quarter today, this quarter second remarks we take the your XXXX.

for on any forward-looking results In risks potential subject assumptions forward-looking expectations discussion our update from to We a will uncertainties. addition, Please and filings are differ could today's statements no statement. detailed include that and discussion expectations. obligation Actual are to based to our current of risks undertake materially uncertainties. and refer and SEC

brevity. During sake this rounding for abbreviations call, will we of and the use

We will discussing measures. non-GAAP financial also be

included financial Reconciliations to section website. the are the on is of most investor GAAP our Investors directly measures which available presentation, in comparable our

Investors call, of following remarks also this along the conclusion available of with of will replay a reminder, on conference As our this website. the prepared our a be call, section

call the President turn me to Executive let Officer. that, Ashish Masih, our over Chief With and

Ashish Masih

Thank Thanks, Bruce, everyone. and good us. you joining for afternoon,

the separate for. Jonathan's start early today's release. been carefully we Before release earnings of which it's something moment And goodbyes. next we've retirement a our in press although too news I alongside quarterly the year, the begin likely remarks, is I'd spend like planning issued to addressing to This QX you've today seen

leadership dedication to extend for contribution than to team and his decade. gratitude want I my acknowledge to invaluable a Encore more Encore for and Jon's our

CFO to transitioning by what of respected his in leader Hernan directly makes into sure departure with Encore guidance. hands been in has made has influenced April vision much role XXXX. and Thomas Jon Encore we'll the be industry Jon's good continue So today after a

into disciplined of joined Thomas I'm driver gotten financial and have and his I to will since years confident closely he working back you role. and knowledge, Encore with and excellence. us an our XXXX. and record met look of Thomas With transition know the in Many continue CFO company his industry track even in important strategy substantial over the forward be And to smoothly to role Thomas new proven

the quarter performance I'll growth double-digit growth. global receivable the portfolio strong our purchasing with both performance second sustained highlights results the levels, from by of quarter. rate. driven collections driven begin now U.S. record continues in In grow a in trajectory. the by strong U.S., and portfolios key and continuation second lending simultaneous the Encore's charge-off card market to This credit for are charged-off was to

attractive see result, vast a very U.S. capital the we allocating second As Accordingly, currently to in to returns in the pricing majority our the deployment MCM quarter. business and the our are record set another with in U.S. continue we of

competitive. remains is Europe, show signs In continuing purchasing but improvement portfolio to market the of

consistently Although of higher examples does we still pricing of cost we portfolio pricing, caused rates. higher not reflect see improved interest by European believe capital the

continue to be has portfolio selective, our Cabot reduced to and maintaining are which purchases. We discipline led

in helpful operational the play be the we role of believe of portfolio our in will growth by year-to-date point assisting it's XXXX debts. our turning that results. I and the to consumer a and Overall, purchasing, credit investors financial resolution remind unpaid reinforces generation Encore's collections belief ecosystem cash in in critical

unpaid business are an These expected lending necessary and model. outcome debts of the

their serve are Regardless pathways in where to and our honest, past to this freedom we by the stage We in the we of due may of consumers helping empathetic cycle. Although debts. create for vary, respectful economic resolve conversations. them engaging mission consumers the the levels cycle, depending achieved the on macroeconomic is by

attractive of is loans business portfolios nonperforming minimizing purchase to at while returns funding costs. Our

an a ensuring collection For level maintaining compliance efficient the structure as cost portfolio X-pillar strive to We strategy. our and highest these as well through that we we exceed while of achieved expectations consumer own, focus. our objectives

is strategy performance shareholder to us building purchasing enables deliver We This positioning us to believe long-term portfolio financial opportunities. capitalize value. strong well while on for this instrumental

the first highest our of efforts markets we can pillar concentrates strategy, market on focus, risk-adjusted our The the where returns. achieve

leading Each X a record U.S. Federal revolving to last has and level take now markets, to the largest bottoming card continue highly At been than in more the which in grow. time, years. both outstandings U.S. favorable. steadily lending at since Reserve in the our growing also been the XXXX, charge-off credit market X at U.S. has the conditions XX and out rate and is same indicator U.S. in reported charge-offs late future month XXXX. remain look rate the beginning a credit rise. of since of years, it Let's now the the the U.S. purchasing with for highest new U.S. rising level early continues has steadily also charge-off consumer credit delinquencies, rising card With are a simultaneously, Similarly,

but continued well. only in as growth We are U.S. pricing supply observing attractive not strong market

million a highly backdrop, issuers. With of U.S. MCM record the a environment strong supports sales be a another this purchasing than typical and quarter portfolio This portfolio credit card year The at $XXX strong higher We meaningfully seasonal record that our a year expectation pattern, by as another was levels purchasing quarterly U.S. returns. for banks delinquency in reflects QX recent of XXXX favorable most our at data business. ago. deployed data but will

compared payment throughout the in quarter $XXX up quarter XXXX. to were stable the second collections million, XX% MCM remained Consumer the quarter. second of behavior

XXXX significantly the anticipate U.S. to purchasing MCM we our and record are the be as forward market already in business another in more of current for in ever volume We purchasing conditions U.S, well given than commitments our we year have expected now hand, as flow portfolio

In to supply U.S., the the Credit just growing been in much levels. U.K. slowly. has more pre-pandemic contrast recently card outstandings to returned

have U.K., in those not meaningfully the U.S. consumer the lending. unlike in increasing banks As been

addition, charge-offs low compared plan QX consumer believe at collections second a is in remained X% stable. impacting to ago. onetime performance $XXX in ongoing In quarter weakness marginally Cabot's U.K. while We payment confidence levels. up million, year remain existing settlements were

We continue with purchases, portfolio were million which to the second be selective quarter. Cabot's in $XX

reflect to believe higher improve, modest continue still to become more portfolio Although we pricing returns markets costs. until Cabot we at does funding expect attractive. yet in Accordingly, not continues consistently deploy to it levels

has the well-established strategic our choosing consistent which U.S. currently to with significantly higher allocate are returns, capital We more focus. to market,

U.S. prudently Encore's Cabot continue given X in recent to business, of also quarter in $XXX purchasing. metrics, Encore's with our QX terms next level growth now cost would over with We few in record This increased deployments global collections to highlight in will largest to purchases of million, the portfolio of Encore's manage years. like the starting portfolio portfolio increased performance portfolio purchasing second MCM. I purchases the key X% structure help reduced drive level quarters.

to to provides fact is the capital in flexibility quarters a a second $XXX the our were highest second U.S. in higher funding to in led the year us returns. to particularly the global up structure expect we growth Global past QX continue. This several portfolio The collections compared to meaningful in million collections, to has were ago. of and in XX% quarter the the us. purchases, trend reminder U.S. a opportunities enables deployment The of with our markets in allocate that structure vast of the the quarter global was that majority

results. I'd now like to to for detailed hand the our more a at call over financial Jon look

Jonathan Clark

Ashish. you, Thank

was few to second the period items of our quarter, forecast $XXX to collections quarter the impact X% for detail. XX% our provide end second another to $X.X year. was and the Collections returns, forecast, last QX compared adjustments year and earnings. U.S. at million ERC grew was while business higher markets. than I'd billion, were of together our a each at ago. we of made positive for to collections the more a which in up ERC strong The like quarter resulted compared attractive a purchasing to of our up in quarter highlight small key

XX% a our an QX were key growth to our the compared were Income second up quarter continue well remained to in quarter of our the controlled XX%, $X.XX advantage, believe we is to as provides X-pillar year to and expenses respectively, second operating benefits $XX which us of in scale collections Net significant and GAAP Operating generate of of and leverage of ability the business. also important last realize competitive component EPS up compared million X% XXXX. We GAAP strategy. cash and with

cash in past continue. the purchases Similar generation, strong have expect dynamic also we led mentioned higher trend over to meaningful the portfolio to growth at Ashish several quarters a to earlier, returns

compared quarter in Our to QX of XX% cash second XXXX. generation the up was

our third our pillar sheet is The strategy of constant balance of that strength ensures a priority. the

Our unified one diversified provides industry extended balance comparatively attractive with global of also us the funding with financial in underpins leverage. structure financing of sheets sources our It maturities. and best flexibility,

This purchases the the we purchases continued our it U.S., with higher returns Importantly, just collections. and increased with of our given the of is record several declined second during purchases as in generation, volume would. again associated cash cash over even X strong quarters expected consecutive portfolio leverage by quarters, driven last generation the quarter, those strong

our within the range at end leverage is target X.Xx of the down the Our second at and XXXX. X.Xx end remains well ratio from quarter of of

our us We when funding costs very to believe peers. sheet our compared balance competitive provides

growing made financial XXXX our We good our secured our sources Our funding QX structure effectively to structure maturities. manage in quarter proactively this funding we debt In in environment. $XXX use a also similar quarter, notes of and to first provides and million issued offering. funding second to the diversified of again transaction flexibility senior diversified us compete supply

and options These broad X U.S. the our future access high-yield establishing market. bonds expanded deep to for our financing, bond

proceeds par notes and respectively. down revolver, While these eventually sterling notes from bonds November the and in XXXX, to XXXX our to redeem we October the proceeds we plan initially XXXX use to euro at pay a XXXX used

no result, XXXX. As material a we until effectively now have maturities

the year We actions, will XXXX the be estimate that full of these impacts interest for approximately expense million. after $XXX incorporating

to This this we've the why rates market however, consistently Europe cost pricing have funding. X years been that adjusted indeed cost higher into in bidding and rates the to interest our funding. higher been of we not incorporating Importantly, of has is U.S., has In strategy the higher to currently started ago. precisely adjusted since pricing U.K. emphasizing rise

back like over it that, With I'd turn to to Ashish.

Ashish Masih

Jon. Thanks,

sheet priorities midst Before especially of I like established everyone financial to supply. industry the a commitment consistent long a to of overstated, strong our the we market importance balance diversified in set that in U.S. ago. ongoing of The cannot remind in close, I'd our of be growth

taking always order by We to will capital be attractive at stewards purchases long prioritizing returns continue long-term view to in good shareholder and the build your of portfolio value.

I'd number now from time their we with a especially a how are competitors our like others our of to in dealing differentiated challenges. highlight own industry, during when

First, in we debt purchasing player are the attractive the U.S. largest market.

purchase collect corresponding we more to Second, in our buy we lifetime, believe price ultimately, generates portfolios a returns. a to more multiples on vintage's and which lead ability earnings turn more and the cash, higher over collecting

to in current returns. sheet capital And demonstrated overall allocation business returns. opportunities with flexibility our order as our us of allows by maximize our third, our vast MCM capital the to U.S. well-diversified This the majority highest global of is in balance vital to the to allocate

provides a and provides myriad the fund business when more in significant Our advantage become expensive. a balance also in less markets sheet This certain flexibility us of times ways. to traditional our

and are like record I'd the U.S. performance. quarter majority highly focusing grow second Portfolio Against backdrop, deployed we of currently levels, capital which the in $XXX to quickly to returns. our closing, million in the deployment. QX U.S. is In market a continues record we where summarize in this favorable to our supply strong

Europe, and are continue selective returns we and become U.K. until our purchases more maintaining to in discipline be the In attractive. very our

purchasing and raising XXXX strength purchasing collections. the through position are market performance our driven overall of U.S. of and Due in guidance to by QX provided the is the we strategy, for continued ahead February. Our our execution strong portfolio favorable our expectations, of in portfolio our

when now purchasing portfolio We this million $X.XX to billion, compared $XX anticipate XXXX. global to year exceed an our of increase

over billion, we to approximately addition, million collections $X.XXX expect our XXXX. $XXX increase XX% over year-over-year compared In when of growth to to an be

answer any happy may you be to we'd have. questions Now that

open questions. please lines up Operator, for the

Operator

roster. [Operator by prepare Instructions]. stand Please while the we

Mark from comes question First Truist Securities. Hughes with

Mark Hughes

you. collections Jonathan, you U.S? expectations Thank versus did U.K. for the Yes. for give and the the

Ashish Masih

Ashish. of Mark, I'll have this jump is in I in. it lease. front

which XXXX, against you're asking. December XX, So, in terms of expectations I of the believe

was U.S. XXX%. and we XX%. globally, So at XXX% performed Europe,

Now is XXX%, it against in expectations. course, globally constant currency, those XXX%. XX% U.S., Europe numbers at of become and stays

Mark Hughes

months? X that And is is that XQ? Or

Ashish Masih

It's X months year-to-date.

Mark Hughes

Yes.

the in if was collections I the is I'm now what you. U.K.? I U.S. XXXX on your then and the But see I since multiples And so Q Okay. apologize. didn't have sorry, paper out,

Ashish Masih

That's okay. Yes.

So, U.S. vintage vintages XXXX X.Xx. for the X.X for year-to-date multiple is is it on year-to-date. And Europe,

Mark Hughes

So, so, thinking little the in what's right that's X.Xx if in down -- the the am X.X bit I from And first that? quarter? at driving a

Ashish Masih

Mark. you're right, Yes,

in cumulative down slightly X.X. just would multiples not strong. number from is I there's overall, And we returns. seen say for still the portfolios, So are any degradation like-for-like -- have

there's example. product balance, differences, large types buy, balance portfolios of low for balance you So, high often or

on but there, no And U.S., but still other a highlight. Multiples increasing. you for returns would thing the may I degradation. a been has move strong like-for-like say, on very I that's And know bit strong would I the very multiples. Europe, absolutely asked and and around little multiple basis, there's here just are

Mark Hughes

Yes. under How the about credit facility? availability

Jonathan Clark

now, we've deals, on right the Well, bond the what full it's done with commitment.

So, $X.X it's billion.

Mark Hughes

second guidance how this continue to then, -- for the going once And something depending year play implies obligations, pay those interest Jonathan, off down sort how hear year? is that to dip what, your expense for on going you mid-XXs but. going the all out Or in year mid-XXs? to half, interest is next the I in the of obviously, that rates, is next were

Jonathan Clark

you tell this quantify I'd much at Yes, in to XXXX point.

beg off I'll think that. I on

we've year back this for next statement the for interest the that seeing into the general what to probably that's true Just in continue in of trends could expect be and year, seen a do we general, you're rates. year half

environment interest As stable. you point rate long as out, as remains

Operator

for question. by the stand We next

comes from question Next JMP. with Oster Zach Citizens

Zach Oster

This is David. Zach on for

quickly to on check wanted things. in X So just

then longer front, the to if payment So, rates and other on there's macro of kind want more payment there's any you signs the rates. consumers opting any see payment mentioned stable first if that or of are longer any of just kind We all, for has the general of plans, a it of the global to on can kind I much get as And talk if reminder credit can that about just you funding we if any stressed flexible on in be to of limits the side, consumer. how see U.S. wanted deployment. a facility deployed

Ashish Masih

Ashish. Okay. This is

take one. the first and I'll the one, take let me Let Jon funding

have to been of the I very to rates of terms from consistent people's In No months last several consumer, on in alluding no the seen think you're stable payment and U.S. consumer. quarters. we the payment ability deterioration what stay plans. It's real way any or

well, it's a that's a in to purchasing it's driven pre-pandemic, collections. to combined So, that -- you continuing as by with consumer much stable it are very and normalized continuing increased strong XXXX, when compare driving and up very see we behavior, collections showing that's environment higher

Jon, on the funding.

Jonathan Clark

Yes.

to that fine. can In -- dollars restriction. and could best of time We U.S. and no the continue SKU returns to the of period there's yes, for ] we a see the we be that's [ where deploy terms funding, will heavy

Operator

stand question. Instructions]. the [Operator Please next for by

question Next ahead with Raymond James. Robert Go Dodd you open. comes line from is

Robert Dodd

quarter venture the on -- in on except the first quarter, Jonathan, time curve on -- it's the and changes on while. recoveries in been the in a positive Congratulations

versus curve. that like X.X% on expectations It negative a collections changes on plus maybe me on cash number. was $X looks congrats to So, million it small and in pretty in than

concentrations Europe, Is that changes in maybe is or EMEA right? concentration ], but numbers. any there little weakness in us you I the where any curve is vintages like I vintages color would realize there So, particular guess is, were any are a in occurring? And give if [ this there? small Can really it if geographic

Ashish Masih

Robert, this is Ashish.

are different. actually the So, numbers slightly

about NPV So, performance of $XX million. changes on above the curve was And forecast was million. the $XX.X impact about

X.X% is [ total company. for net impact the terms So of quarter for CECL in the positive ]

Now question in on your terms region. of

MCM noise very will look and in and our our about and $X combine change for Q, against in versus billion its find other small those for But numbers So, the it's the million forecast. overall, the say Again, quarter-over-quarter. U.S. positive are to really in we adapt or actual the I that about how at numbers refine way $X Cabot, would performance you and it's $X.X forecast so. million negative is forecast

of mindful that's of be how calculated. how just kind divides That's So up. it

Robert Dodd

Or that's Okay. And but I mean, there? -- particular year were in differences? the just is any mean obviously, I it has stabilized. any XX vintage Anything XXXX spread problem, like out? think I a to

Ashish Masih

I vintage of impact would those change Again, you things. might any say overall, X are see. changes in

change the forecast against is forecast. second in performance First, and

minor these our noise. in not say just draw any level data overall, vintage would I see So very will would are conclusions and I you from -- minor impacts Q. that

in product overall The and said, a overall good vintages those a number collections are the all there's terms around no anything quarter or small, forecasting geographies, we that. or there performance those had sum than impacts more on across refinements and impacts real and I anything about are across behavior of CECL vintages anything across is differences major types, vintage and like very consumer as or of collections,

Robert Dodd

about pursue But a of goes the up timing of in only your some a purchases was for are it have legal? of so on in that lag always choice this period time. not is first the one And a QX legal over just then in been And first while beginning the just lot it's of XX them hit a there it. the the collections trend avenue. unusual we given to in Got -- time is starting rising buying total, now period following for -- more There's like because legal before in a on legal broke you items? anything to legal

Ashish Masih

sure want I understood. I Robert, to make So,

Is your legal correct? that You collections expense, question? meant the

Robert Dodd

Yes. Correct. Correct.

Ashish Masih

Yes.

from All side, increase as kind the range, legal of of total that on similar a U.S. there's overall is collections lower are we And in for and that replacements. now the growing in percent XX% coming to some our XX%, the purchasing said, business the of a natural of MCM just was QX. as

we our Any increased just the center business. MCM channel. all U.S. is very part from it's side coming of rise So, get call in and and in expense continue to the legal good purchasing from success digital

Operator

statements. Ashish back closing Masih questions hand further no seeing would the I'm this I to time. his like to for at call

Ashish Masih

Encore As truly we capabilities points. with close consistent our solid superior the strategy operating financial call, We a believe results important in record sector and differentiated a clear I'd reiterate is few to a like track guided of and priorities. by

As the record to consumer process for continues supply U.S. market levels. portfolio growing turn, to is the

We point disciplined which effective approach highest amounts with has to a operation, the When XXXX apply turning continue returns. U.S. market, operational financial results. to portfolio our and collections in approach be purchasing allocating believe our record combined enabling we capital to our by of the is this

third us, for we in time the join to November. results Thanks to forward and look taking quarter providing our

Operator

Thank program. the today's conference. your conclude you This in does participation for

You disconnect. may now

Encore Capital (ECPG) 7 Aug 242024 Q2 Earnings call transcript