- Deployments of $206 million worldwide included $142 million in the U.S.
- Encore’s share of portfolio allowance charge was $37 million after tax
SAN DIEGO, Nov. 09, 2016 (GLOBE NEWSWIRE) — Encore Capital Group, Inc. (NASDAQ:ECPG), an international specialty finance company providing debt recovery solutions for consumers across a broad range of assets, today reported consolidated financial results for the third quarter ended September 30, 2016.
“The U.S. market for charged off receivables continues to improve as stronger supply and lower prices contribute to increasingly favorable returns,” said Kenneth A. Vecchione, President and Chief Executive Officer. “Pricing leverage is shifting from sellers to buyers as supply increases and debt purchasers continue to demonstrate pricing discipline. We believe the better pricing environment, combined with benefits we’re seeing from our consumer-centric liquidation programs, will continue to drive higher returns in the U.S.”
“This quarter certain European pool groups incurred an allowance charge as near-term collections are now forecasted to be collected in later years. Encore’s portion of this non-cash charge was $37 million after taxes. With the comprehensive review of all of our European pool groups completed, we are highly confident in our estimated remaining collections and the accounting curves that support them.”
Key Financial Metrics for the Third Quarter of 2016:
- Investment in receivable portfolios was $206 million, including $142 million in the U.S., compared to $187 million deployed overall in the same period a year ago.
- Gross collections declined 4% to $407 million, compared to $422 million in the same period of the prior year.
- Total revenues were $179 million, compared to $279 million in the third quarter of 2015, with the difference primarily driven by a $94 million gross consolidated portfolio allowance charge, of which $43 million represents Encore’s share after adjusting for noncontrolling interest, or $37 million after tax.
- Total operating expenses decreased 19% to $201 million, compared to $248 million in the same period of the prior year, primarily reflecting the benefits of strategic cost management programs and the impact of the CFPB settlement in the third quarter of 2015. Adjusted operating expenses increased 1% to $167 million, compared to $165 million in the same period of the prior year.
- Adjusted operating expenses per dollar collected for the portfolio purchasing and recovery business, also known as cost-to-collect, was 41.1%, compared to 39.2% in the same period of the prior year. The increase reflected the impact of an $11.3 million adjustment to Cabot’s deferred court costs, of which $4.9 million represents Encore’s share after adjusting for noncontrolling interest, or $4.0 million after tax.
- Adjusted EBITDA decreased 7% to $245 million, compared to $264 million in the same period a year ago, reflecting the adjustment to deferred court costs.
- Total interest expense increased to $48.6 million, as compared to $47.8 million in the same period of the prior year, reflecting the financing of recent acquisitions and portfolio purchases.
- GAAP loss from continuing operations attributable to Encore was $1.5 million, or $0.06 per fully diluted share, as compared to a loss of $13.2 million, or $0.52 per fully diluted share in the same period a year ago, reflecting the allowance charges for certain European pool groups in the third quarter of 2016 and the impact of the CFPB settlement in the third quarter of 2015.
- Adjusted income from continuing operations attributable to Encore was $3.6 million, compared to $32.2 million in the third quarter of 2015, with the decline mainly attributed to the portfolio allowance charges for certain European pool groups.
- Adjusted income from continuing operations attributable to Encore per share (also referred to as Economic EPS) was $0.14, compared to $1.25 in the same period of the prior year. In the third quarter of 2016, Economic EPS was not adjusted for shares associated with Encore’s convertible notes. In calculating Economic EPS for the third quarter of 2015, 0.8 million shares associated with convertible notes that will not be issued but are reflected in the fully diluted share count were excluded for accounting purposes.
- Estimated Remaining Collections (ERC) increased 1% to $5.73 billion, compared to $5.65 billion at September 30, 2015.
- Available capacity under Encore’s revolving credit facility, subject to borrowing base and applicable debt covenants, was $176 million as of September 30, 2016, and total debt on a consolidated basis was $2.8 billion.
Conference Call and Webcast
Encore will host a conference call and slide presentation today, November 9, 2016, at 2:00 p.m. Pacific / 5:00 p.m. Eastern time, presenting and discussing the reported results.
Members of the public are invited to access the live webcast via the Internet by logging on at the Investor Relations page of Encore’s website at www.encorecapital.com. To access the live, listen-only telephone conference portion, please dial (855) 541-0982 or (704) 288-0606.
For those who cannot listen to the live broadcast, a telephonic replay will be available for seven days by dialing (800) 585-8367 or (404) 537-3406 and entering the conference number 8533103. A replay of the webcast will also be available shortly after the call on the Company’s website.
Non-GAAP Financial Measures
This news release includes certain financial measures that exclude the impact of certain items and therefore have not been calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company has included adjusted income attributable to Encore and adjusted income attributable to Encore per share (also referred to as economic EPS when adjusted for certain shares associated with our convertible notes that will not be issued but are reflected in the fully diluted share count for accounting purposes) because management uses this measure to assess operating performance, in order to highlight trends in the Company’s business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. The Company has included information concerning adjusted EBITDA because management utilizes this information, which is materially similar in calculation to a financial measure contained in covenants used in the Company’s revolving credit facility, in the evaluation of its operations and believes that this measure is a useful indicator of the Company’s ability to generate cash collections in excess of operating expenses through the liquidation of its receivable portfolios. The Company has included information concerning adjusted operating expenses in order to facilitate a comparison of approximate cash costs to cash collections for the portfolio purchasing and recovery business in the periods presented. Adjusted income attributable to Encore, adjusted income attributable to Encore per share/economic EPS, adjusted EBITDA, and adjusted operating expenses have not been prepared in accordance with GAAP. These non-GAAP financial measures should not be considered as alternatives to, or more meaningful than, net income, net income per share, and total operating expenses as indicators of the Company’s operating performance. Further, these non-GAAP financial measures, as presented by the Company, may not be comparable to similarly titled measures reported by other companies. The Company has attached to this news release a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.
About Encore Capital Group, Inc.
Encore Capital Group is an international specialty finance company that provides debt recovery solutions for consumers across a broad range of assets. Through its subsidiaries, Encore purchases portfolios of consumer receivables from major banks, credit unions and utility providers.
Encore partners with individuals as they repay their obligations, helping them on the road to financial recovery and ultimately improving their economic well-being. Encore is the first and only company of its kind to operate with a Consumer Bill of Rights that provides industry-leading commitments to consumers. Headquartered in San Diego, the company is a publicly traded NASDAQ Global Select company (ticker symbol: ECPG) and a component stock of the Russell 2000, the S&P Small Cap 600 and the Wilshire 4500. More information about Encore can be found at http://www.encorecapital.com. More information about the Company’s Cabot Credit Management subsidiary can be found at http://www.cabotcm.com. Information found on the Company’s website or Cabot’s website is not incorporated by reference.
Forward Looking Statements
The statements in this press release that are not historical facts, including, most importantly, those statements preceded by, or that include, the words “will,” “may,” “believe,” “projects,” “expects,” “anticipates” or the negation thereof, or similar expressions, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). These statements may include, but are not limited to, statements regarding our future operating results, performance, business plans or prospects. For all “forward-looking statements,” the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act. Such forward-looking statements involve risks, uncertainties and other factors which may cause actual results, performance or achievements of the Company and its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors are discussed in the reports filed by the Company with the Securities and Exchange Commission, including the most recent reports on Forms 10-K and 10-Q, as they may be amended from time to time. The Company disclaims any intent or obligation to update these forward-looking statements.