- GAAP EPS of $1.23 per share and record non-GAAP Economic EPS of $1.64 per share
- Encore global revenues up 6% to a record $356 million
- MCM (United States) portfolio purchases up 41% to $173 million and on track for record in 2019
SAN DIEGO, Nov. 06, 2019 (GLOBE NEWSWIRE) — Encore Capital Group, Inc. (NASDAQ: ECPG), an international specialty finance company, today reported consolidated financial results for the third quarter ended September 30, 2019.
“The third quarter was another outstanding period for Encore,” said Ashish Masih, President and Chief Executive Officer. “We have again achieved record results across a number of key financial measures and we are delivering our strongest performance in years.
“We continue to make solid progress on our strategic priorities that are contributing to our success. We are strengthening our balance sheet, focusing our resources on the U.S. and U.K. markets, where we have the highest returns, and continuing to enhance our competitive advantages through innovation.
“In the U.S., portfolio purchases of $173 million were up 41% compared to the same period a year ago, keeping us on track to establish a new record for purchases in the U.S. in 2019. In Europe, Cabot’s debt leverage continues to improve, driven by gains in operating efficiency and our focus on purchasing portfolios at higher returns. At the same time in Europe, cash collections grew 3% and estimated remaining collections grew 4%, both in constant currency terms,” said Masih.
In August, the Company sold its Australian subsidiary Baycorp, which reduced Encore’s operating footprint, consistent with the Company’s initiative to focus its resources on businesses with higher risk-adjusted returns. As a result of the transaction, Encore’s GAAP net income in the quarter was reduced by $7.0 million after tax, or $0.22 per share.
Key Financial Metrics for the Third Quarter of 2019:
- Estimated remaining collections (ERC) increased $76 million compared to the end of the same period of the prior year, to $7.3 billion.
- Portfolio purchases were $260 million, including $173 million in the U.S. and $85 million in Europe.
- Gross collections of $499 million were approximately equal to the same period of the prior year.
- Total revenues, adjusted by net allowances, increased 6% to a record $356 million, compared to $337 million in the third quarter of 2018.
- Total operating expenses, which include a $10.7 million goodwill impairment related to the sale of Baycorp, increased 3% to $248 million, compared to $239 million in the same period of the prior year.
- Adjusted operating expenses, which represent the expenses related to our portfolio purchasing and recovery business, increased 4% to $187 million, compared to $180 million in the same period of the prior year.
- Total interest expense decreased to $54.4 million, compared to $65.1 million in the same period of the prior year. Interest expense in the third quarter a year ago included approximately $9.1 million of expenses related to the refinancing of Cabot’s senior secured notes and a bridge loan commitment for the purchase of Cabot.
- GAAP net income attributable to Encore was up 88% to $38.9 million, or $1.23 per fully diluted share, which was reduced by $0.22 per share due to the impact from the Baycorp transaction. This compares to $20.7 million, or $0.69 per fully diluted share in the third quarter of 2018, when Encore incurred transaction costs related to the purchase of Cabot.
- Adjusted net income attributable to Encore was up 45% to $51.9 million, or $1.64 per fully diluted share. This compares to $35.8 million, or $1.19 per fully diluted share in the third quarter of 2018.
- As of September 30, 2019, after taking into account borrowing base and applicable debt covenants, available capacity under Encore’s U.S. revolving credit facility was $225 million and availability under Cabot’s revolving credit facility was £136 million (approximately $168 million).
Conference Call and Webcast
Encore will host a conference call and slide presentation today, November 6, 2019, at 2:00 p.m. Pacific / 5:00 p.m. Eastern time, to present and discuss third quarter results.
Members of the public are invited to access the live webcast via the Internet by logging in on 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 ID number 9981504. 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 operating expenses in order to facilitate a comparison of approximate 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, 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. The Company has included references to constant currency growth rates to facilitate comparisons of underlying financial results excluding the impact of changes to foreign currency exchange rates. Constant Currency figures are calculated by employing foreign currency exchange rates from the year ago period to recalculate current period results. All constant currency values are calculated based on the average exchange rates during the respective periods, except for ERC, which is calculated using the changes in the period-ending exchange rates.
About Encore Capital Group, Inc.
Encore Capital Group is an international specialty finance company that provides debt recovery solutions and other related services across a broad range of financial assets. Through its subsidiaries around the globe, Encore purchases or services portfolios of receivables from major banks, credit unions and utility providers.
Headquartered in San Diego, Encore 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 www.encorecapital.com. More information about the Company’s Midland Credit Management subsidiary can be found at www.midlandcreditonline.com. More information about the Company’s Cabot Credit Management subsidiary can be found at www.cabotcm.com. Information found on the Company’s, MCM’s, or Cabot’s websites 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.
Contact:
Bruce Thomas
Vice President, Investor Relations
Encore Capital Group, Inc.
(858) 309-6442
bruce.thomas@encorecapital.com