ENCORE CAPITAL GROUP INC [ECPG] Filings

10-Q 1 ecpg-20240630.htm 10-Q ecpg-20240630

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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 June 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 July 31, 2024
Common Stock, $0.01 par value						23,690,958 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			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			20
Note 9: Accumulated Other Comprehensive Loss			21
Note 10: Income Taxes			22
Note 11: Commitments and Contingencies			22
Note 12: Segment and Geographic Information			23
Note 13: Goodwill and Identifiable Intangible Assets			23
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3 – Quantitative and Qualitative Disclosures About Market Risk			48
Item 4 – Controls and Procedures			48

PART II – OTHER INFORMATION			49
Item 1 – Legal Proceedings			49
Item 1A – Risk Factors			49
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds			49
Item 5 – Other Information			49
Item 6 – Exhibits			50
SIGNATURES			51

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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)


	June 30, 2024		December 31, 2023
Assets
Cash and cash equivalents	$	250,621	$	158,364
Investment in receivable portfolios, net	3,583,322		3,468,432
Property and equipment, net	102,291		103,959
Other assets	277,799		293,256
Goodwill	602,811		606,475
Total assets	$	4,816,844	$	4,630,486
Liabilities and Equity
Liabilities:
Accounts payable and accrued liabilities	$	197,555	$	189,928
Borrowings	3,455,130		3,318,031
Other liabilities	176,032		185,989
Total liabilities	3,828,717		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 June 30, 2024 and December 31, 2023, respectively	237		235
Additional paid-in capital	13,257		11,052
Accumulated earnings	1,104,591		1,049,171
Accumulated other comprehensive loss	(129,958)		(123,920)
Total stockholders’ equity	988,127		936,538
Total liabilities and stockholders’ equity	$	4,816,844	$	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.


	June 30, 2024		December 31, 2023
Assets
Cash and cash equivalents	$	26,714	$	24,472
Investment in receivable portfolios, net	774,104		717,556
Other assets	9,294		19,358
Liabilities
Accounts payable and accrued liabilities	2,266		1,854
Borrowings	466,267		494,925
Other liabilities	7		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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues
Revenue from receivable portfolios	$	321,930	$	301,184	$	637,782	$	596,858
Changes in recoveries	5,754		(3,486)		(6,655)		(12,987)
Total debt purchasing revenue	327,684		297,698		631,127		583,871
Servicing revenue	21,107		21,008		41,486		43,593
Other revenues	6,494		4,338		11,058		8,210
Total revenues	355,285		323,044		683,671		635,674
Operating expenses
Salaries and employee benefits	106,608		95,855		210,792		199,705
Cost of legal collections	64,249		57,150		122,970		111,251
General and administrative expenses	36,779		34,529		73,020		72,494
Other operating expenses	30,845		26,349		61,212		53,905
Collection agency commissions	7,504		10,387		14,938		18,537
Depreciation and amortization	7,461		10,702		15,309		21,572

Total operating expenses	253,446		234,972		498,241		477,464
Income from operations	101,839		88,072		185,430		158,210
Other expense
Interest expense	(61,376)		(49,983)		(117,141)		(96,818)

Other income (expense), net	2,047		(1,755)		4,713		(23)
Total other expense	(59,329)		(51,738)		(112,428)		(96,841)
Income before income taxes	42,510		36,334		73,002		61,369
Provision for income taxes	(10,329)		(10,029)		(17,582)		(16,438)
Net income	$	32,181	$	26,305	$	55,420	$	44,931

Earnings per share:
Basic	$	1.35	$	1.11	$	2.33	$	1.90
Diluted	$	1.34	$	1.08	$	2.28	$	1.83

Weighted average shares outstanding:
Basic	23,883		23,670		23,834		23,610
Diluted	24,097		24,280		24,282		24,611

See accompanying notes

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ENCORE CAPITAL GROUP, INC.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited, In Thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income	$	32,181	$	26,305	$	55,420	$	44,931
Other comprehensive (loss) income, net of tax:
Change in unrealized (loss) gain on derivative instruments:
Unrealized (loss) gain on derivative instruments	(731)		1,962		4,744		(6,091)
Income tax effect	(1,088)		253		(3,773)		1,129
Unrealized (loss) gain on derivative instruments, net of tax	(1,819)		2,215		971		(4,962)
Change in foreign currency translation:


Unrealized (loss) gain on foreign currency translation	(1,146)		17,532		(7,292)		33,540
Income tax effect	443		(279)		283		(662)
Unrealized (loss) gain on foreign currency translation, net of tax	(703)		17,253		(7,009)		32,878
Other comprehensive (loss) income, net of tax:	(2,522)		19,468		(6,038)		27,916
Total comprehensive income	$	29,659	$	45,773	$	49,382	$	72,847

See accompanying notes

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ENCORE CAPITAL GROUP, INC.

Condensed Consolidated Statements of Equity

(Unaudited, In Thousands)


	Three Months Ended June 30, 2024
	Common Stock			Additional Paid-In Capital		Accumulated Earnings		Accumulated Other Comprehensive Loss		Total Equity
	Shares	Par
Balance as of March 31, 2024	23,687	$	237	$	8,648	$	1,072,410	$	(127,436)	$	953,859

Net income	—	—		—		32,181		—		32,181
Other comprehensive loss, net of tax	—	—		—		—		(2,522)		(2,522)
Issuance of share-based awards, net of shares withheld for employee taxes	4	—		(28)		—		—		(28)
Stock-based compensation	—	—		4,637		—		—		4,637

Balance as of June 30, 2024	23,691	$	237	$	13,257	$	1,104,591	$	(129,958)	$	988,127


	Three Months Ended June 30, 2023
	Common Stock			Additional Paid-In Capital		Accumulated Earnings		Accumulated Other Comprehensive (Loss)/ Income		Total Equity
	Shares	Par
Balance as of March 31, 2023	23,482	$	235	$	—	$	1,274,289	$	(90,368)	$	1,184,156
Net income	—	—		—		26,305		—		26,305
Other comprehensive income, net of tax	—	—		—		—		19,468		19,468
Exercise of stock options and issuance of share-based awards, net of shares withheld for employee taxes	3	—		33		—		—		33
Stock-based compensation	—	—		3,873		—		—		3,873



Balance as of June 30, 2023	23,485	$	235	$	3,906	$	1,300,594	$	(70,900)	$	1,233,835


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

Net income	—	—		—		55,420		—		55,420
Other comprehensive loss, net of tax	—	—		—		—		(6,038)		(6,038)
Issuance of share-based awards, net of shares withheld for employee taxes	146	2		(5,789)		—		—		(5,787)
Stock-based compensation	—	—		7,994		—		—		7,994

Balance as of June 30, 2024	23,691	$	237	$	13,257	$	1,104,591	$	(129,958)	$	988,127

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	Six Months Ended June 30, 2023
	Common Stock			Additional Paid-In Capital		Accumulated Earnings (Loss)		Accumulated Other Comprehensive (Loss)/ Income		Total Equity
	Shares	Par
Balance as of December 31, 2022	23,323	$	233	$	—	$	1,278,210	$	(98,816)	$	1,179,627
Net income	—	—		—		44,931		—		44,931
Other comprehensive income, net of tax	—	—		—		—		27,916		27,916
Exercise of stock options and issuance of share-based awards, net of shares withheld for employee taxes	162	2		(6,322)		—		—		(6,320)
Stock-based compensation	—	—		7,925		—		—		7,925
Purchase of capped call options, net of tax effect	—	—		(13,865)		—		—		(13,865)
Unwind of the existing capped call options	—	—		28,542		—		—		28,542
Settlement of convertible notes	—	—		(12,374)		(22,547)		—		(34,921)
Balance as of June 30, 2023	23,485	$	235	$	3,906	$	1,300,594	$	(70,900)	$	1,233,835

See accompanying notes

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ENCORE CAPITAL GROUP, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited, In Thousands)


	Six Months Ended June 30,
	2024		2023
Operating activities:
Net income	$	55,420	$	44,931
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	15,309		21,572

Other non-cash interest expense, net	7,941		8,660
Stock-based compensation expense	7,994		7,925
Deferred income taxes	(810)		2,785

Changes in recoveries	6,655		12,987
Other, net	3,357		985
Changes in operating assets and liabilities
Other assets	(25,896)		(35,730)

Accounts payable, accrued liabilities and other liabilities	16,727		(1,492)
Net cash provided by operating activities	86,697		62,623
Investing activities:

Purchases of receivable portfolios, net of put-backs	(566,960)		(544,721)
Collections applied to investment in receivable portfolios	419,833		342,020
Purchases of asset held for sale	(212)		(24,645)
Purchases of property and equipment	(14,251)		(9,503)
Other, net	29,704		22,603
Net cash used in investing activities	(131,886)		(214,246)
Financing activities:
Payment of loan and debt refinancing costs	(17,201)		(8,151)
Proceeds from credit facilities	393,455		444,805
Repayment of credit facilities	(1,234,189)		(259,843)
Proceeds from senior secured notes	1,000,000		—
Repayment of senior secured notes	(19,540)		(19,540)

Proceeds from issuance of convertible senior notes	—		230,000
Repayment of exchangeable senior notes	—		(192,457)
Proceeds from convertible hedge instruments, net	—		10,050

Other, net	16,967		(14,238)
Net cash provided by financing activities	139,492		190,626
Net increase in cash and cash equivalents	94,303		39,003
Effect of exchange rate changes on cash and cash equivalents	(2,046)		1,956
Cash and cash equivalents, beginning of period	158,364		143,912
Cash and cash equivalents, end of period	$	250,621	$	184,871

Supplemental disclosure of cash information:
Cash paid for interest	$	80,945	$	79,167
Cash paid for taxes, net of refunds	42,365		36,822
Supplemental schedule of non-cash investing activities:
Investment in receivable portfolios transferred to real estate owned	$	3,098	$	6,244

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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income	$	32,181	$	26,305	$	55,420	$	44,931
Shares:
Total weighted-average basic shares outstanding	23,883		23,670		23,834		23,610
Dilutive effect of stock-based awards	19		117		109		204
Dilutive effect of convertible and exchangeable senior notes	195		493		339		797

Total weighted-average dilutive shares outstanding	24,097		24,280		24,282		24,611

Basic earnings per share	$	1.35	$	1.11	$	2.33	$	1.90
Diluted earnings per share	$	1.34	$	1.08	$	2.28	$	1.83

There were no anti-dilutive employee stock options outstanding during the three and six months ended June 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 June 30, 2024
	Level 1		Level 2		Level 3		Total
Assets
Foreign currency exchange contracts	$	—	$	873	$	—	$	873
Interest rate cap contracts	—		3,417		—		3,417
Interest rate swap agreements	—		138		—		138

Liabilities
Interest rate swap agreements	—		(6,570)		—		(6,570)
Cross-currency swap agreements	—		(41,631)		—		(41,631)


	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 $55.3 million and $70.6 million as of June 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 June 30, 2024 and December 31, 2023 (in thousands):


	June 30, 2024				December 31, 2023
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets
Investment in receivable portfolios, net	$	3,583,322	$	3,629,834	$	3,468,432	$	3,515,651
Financial Liabilities
Global senior secured revolving credit facility	—		—		816,880		816,880
Encore private placement notes	9,770		9,771		29,310		28,922
Senior secured notes(1)	2,620,254		2,610,487		1,649,621		1,598,636


Convertible senior notes due October 2025	100,000		117,761		100,000		136,403
Convertible senior notes due March 2029	230,000		208,582		230,000		226,794
Cabot securitisation senior facility	322,557		322,557		324,646		324,646
U.S. facility	150,000		150,000		175,000		175,000
Other borrowings	66,058		66,058		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):


	June 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	$	2,635	Other assets	$	14,564
Interest rate swap agreements	Other assets	138		—	—
Interest rate swap agreements	Other liabilities	(6,570)		Other liabilities	(22,510)
Cross-currency swap agreements	—	—		Other assets	361
Cross-currency swap agreements	Other liabilities	(41,631)		Other liabilities	(28,039)
Derivatives not designated as hedging instruments:
Interest rate cap contracts	Other assets	782		Other assets	2,386
Foreign currency exchange contracts	Other assets	873		—	—

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:

June 30, 2024

Effective date

Maturity Date

Hedge Designation

Notional Amount

Receive Floating Rate Index

Interest rate cap contracts

2021 Cap(1)

November 2021

September 2024

Cash flow hedge

$316.2 million

SONIA

2024 Cap

September 2024

September 2026

Cash flow hedge

$322.6 million

SONIA

Interest rate swap agreements

2023 Euro IR Swap

October 2023

January 2028

Cash flow hedge

$107.4 million

3-month EURIBOR

2024 Euro IR Swaps

June 2024

January 2028

Cash flow hedge

$445.7 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

$375.9 million

—

2023 GBP Swaps

July 2023

February 2026

Fair value hedge

$379.5 million

—

______________________

(1)The total notional amount of the 2021 Cap was $442.7 million, of which $316.2 million was hedge designated and $126.5 million was not hedge designated as of June 30, 2024.

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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.

The Company expects to reclassify approximately $2.5 million of net derivative gain from OCI into earnings relating to its cash flow designated derivatives within the next 12 months.

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	Gain (Loss) Recognized in OCI				Location of Gain (Loss) Reclassified from OCI into Income (Loss)	Gain (Loss) Reclassified from OCI into Income
	Three Months Ended June 30,					Three Months Ended June 30,
	2024		2023			2024		2023


Interest rate swap agreements	$	6,199	$	—	Interest expense	$	655	$	—
Interest rate cap contracts	(5,777)		3,423		Interest expense	(664)		(391)
Cross-currency swap agreements	(4,289)		(1,896)		Interest expense	(1,757)		(1,395)
					Other (expense) income	(1,370)		1,351


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
	Six Months Ended June 30,					Six Months Ended June 30,
	2024		2023			2024		2023


Interest rate swap agreements	$	17,273	$	—	Interest expense	$	1,195	$	—
Interest rate cap contracts	(11,828)		(3,501)		Interest expense	(1,376)		(841)
Cross-currency swap agreements	(17,299)		170		Interest expense	(3,537)		(2,903)
					Other (expense) income	(12,880)		6,504

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 hedge instruments for accounting purposes. The Company also holds an interest rate cap contract, the 2021 Cap, that was partially hedge designated. The gains or losses on these unhedged derivative contracts are recognized in other income or expense based on the changes in fair value.

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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 six months ended June 30, 2024 and 2023 (in thousands):


Derivatives Not Designated as Hedging Instruments	Location of Gain Recognized in Income on Derivative	Amount of Gain Recognized in Income
		Three Months Ended June 30,				Six Months Ended June 30,
		2024		2023		2024		2023
Interest rate cap contract	Other income	$	79	$	—	$	274	$	—
Foreign currency exchange contract	Other income	873		—		873		—

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.

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



	June 30, 2024		December 31, 2023
Amortized cost	$	—	$	—
Negative allowance for expected recoveries	3,583,322		3,468,432
Balance, end of period	$	3,583,322	$	3,468,432

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Balance, beginning of period	$	3,531,387	$	3,214,792	$	3,468,432	$	3,088,261
Negative allowance for expected recoveries - current period purchases(1)	278,692		274,325		574,406		550,756
Collections applied to investment in receivable portfolios, net (2)	(224,798)		(175,338)		(419,833)		(342,020)
Changes in recoveries (3)	5,754		(3,486)		(6,655)		(12,987)
Put-backs and recalls	(3,099)		(4,229)		(7,446)		(6,035)

Disposals and transfers to real estate owned	(1,053)		(5,139)		(3,098)		(6,244)
Foreign currency translation adjustments	(3,561)		30,061		(22,484)		59,255
Balance, end of period	$	3,583,322	$	3,330,986	$	3,583,322	$	3,330,986

_______________________

(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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Purchase price	$	278,692	$	274,325	$	574,406	$	550,756
Allowance for credit losses	649,642		690,501		1,294,156		1,350,145
Amortized cost	928,334		964,826		1,868,562		1,900,901
Noncredit discount	1,211,961		1,049,233		2,467,754		2,054,454
Face value	2,140,295		2,014,059		4,336,316		3,955,355
Write-off of amortized cost	(928,334)		(964,826)		(1,868,562)		(1,900,901)
Write-off of noncredit discount	(1,211,961)		(1,049,233)		(2,467,754)		(2,054,454)
Negative allowance	278,692		274,325		574,406		550,756
Negative allowance for expected recoveries - current period purchases	$	278,692	$	274,325	$	574,406	$	550,756

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Cash Collections	$	546,728	$	476,522	$	1,057,615	$	938,878
Less - amounts classified to revenue from receivable portfolios	(321,930)		(301,184)		(637,782)		(596,858)
Collections applied to investment in receivable portfolios, net	$	224,798	$	175,338	$	419,833	$	342,020

(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:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Recoveries above (below) forecast	$	27,443	$	(477)	$	28,296	$	(15,835)
Changes in expected future recoveries	(21,689)		(3,009)		(34,951)		2,848
Changes in recoveries	$	5,754	$	(3,486)	$	(6,655)	$	(12,987)

Recoveries above or below forecast represent over and under-performance in the reporting period, respectively. Collections during the three and six months ended June 30, 2024, over-performed the forecasted collections by approximately $27.4 million and $28.3 million, respectively. Collections during the three and six months ended June 30, 2023, under-performed the forecasted collections by approximately $0.5 million and $15.8 million, respectively.

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When reassessing the forecasts of expected lifetime recoveries during the three and six months ended June 30, 2024, management considered, among other factors, historical and current collection performance, changes in consumer behavior, and the macroeconomic environment. Management believes that most of the current period collections over-performance was due to changes in timing of the estimated remaining collections, and therefore reduced the respective estimated remaining collections accordingly. These reductions, when discounted to present value, resulted in a net negative change in expected future recoveries of approximately $21.7 million, and $35.0 million for the three and six months ended June 30, 2024, respectively. During the three and six months ended June 30, 2023, the Company recorded approximately $3.0 million in net negative change and $2.8 million in net positive change in expected future period recoveries, respectively.

Note 6: Other Assets

Other assets consist of the following (in thousands):


	June 30, 2024		December 31, 2023
Operating lease right-of-use assets	$	60,378	$	67,019
Real estate owned	55,253		70,590
Prepaid expenses	36,543		32,910
Income tax deposits	30,927		8,735
Deferred tax assets, net	15,060		17,277
Service fee receivables	11,292		9,080
Derivative instruments	4,428		17,311

Other	63,918		70,334
Total	$	277,799	$	293,256

Note 7: Borrowings

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


	June 30, 2024		December 31, 2023
Global senior secured revolving credit facility	$	—	$	816,880


Encore private placement notes	9,770		29,310
Senior secured notes	2,624,620		1,654,989
Convertible senior notes	330,000		330,000

Cabot securitisation senior facility	322,557		324,646
U.S. facility	150,000		175,000
Other	66,058		24,904
Finance lease liabilities	1,778		2,818
	3,504,783		3,358,547
Less: debt discount and issuance costs, net of amortization	(49,653)		(40,516)
Total	$	3,455,130	$	3,318,031

Encore is the parent of the restricted group for the Global Senior Facility, the Senior Secured Notes and the Encore Private Placement Notes, each of which is 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 June 30, 2024, the Global Senior Facility provided for a total committed facility of $1,203.0 million that matures in September 2027 and includes the following key provisions:

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•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.

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, any super priority hedging liabilities and the Encore Private Placement Notes (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 June 30, 2024, we had no borrowings under the Global Senior Facility. The weighted average interest rate of the Global Senior Facility was 7.85% and 7.51% for the three months ended June 30, 2024 and 2023, respectively, and 7.88% and 7.30% for the six months ended June 30, 2024 and 2023, respectively. Available capacity under the Global Senior Facility, after taking into account applicable debt covenants, was approximately $1,203.0 million as of June 30, 2024.

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”). As of June 30, 2024, $9.8 million of the Encore Private Placement Notes remained outstanding. The Encore Private Placement Notes bear an annual interest rate of 5.625%, mature in August 2024 and require quarterly principal payments of $9.8 million. The covenants and material terms for the Encore Private Placement Notes are substantially similar to those for the Global Senior Facility.

Senior Secured Notes

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


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


2025 Notes	$	375,859	$	386,324	EUR	Oct 15, 2025	Apr 15, Oct 15	4.875	%
2026 Notes	379,479		381,937		GBP	Feb 15, 2026	Feb 15, Aug 15	5.375	%
2028 Notes	316,233		318,280		GBP	Jun 1, 2028	Jun 1, Dec 1	4.250	%
2028 Floating Rate Notes	553,049		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	%
	$	2,624,620	$	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 and the Encore Private Placement Notes. The guarantees provided in respect of the Senior Secured Notes are pari passu with each such guarantee given in respect of the Global Senior Facility and Encore Private Placement Notes. 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.

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The 2028 Floating Rate Notes had a weighted average interest rate of 8.16% and 7.28% for the three months ended June 30, 2024 and 2023, respectively, and 8.18% and 6.83% for the six months ended June 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 5.47% and 4.36% for the three months ended June 30, 2024 and 2023, respectively, and 5.24% and 4.34% for the six months ended June 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.

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):


	June 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 June 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)	$	4,872	$	—
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.

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(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 June 30, 2024 using a hypothetical share price based on the closing stock price on June 28, 2024, the last trading day for the six months ended June 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 $3.3 million during the three months ended June 30, 2024 and 2023, respectively, and $6.2 million and $6.2 million during the six months ended June 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.

As of June 30, 2024, the outstanding borrowings under the Cabot Securitisation Senior Facility were £255.0 million (approximately $322.6 million based on an exchange rate of $1.00 to £0.79, the exchange rate as of June 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 £330.4 million (approximately $417.9 million based on an exchange rate of $1.00 to £0.79, the exchange rate as of June 30, 2024) as of June 30, 2024. The weighted average interest rate of the Cabot Securitisation Senior Facility was 8.41% and 7.46% for the three months ended June 30, 2024 and 2023, respectively, and 8.41% and 7.17% for the six months ended June 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 5.51% and 5.25% for the three months ended June 30, 2024 and 2023, respectively, and 5.51% and 5.25% for the six months ended June 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 (the “U.S. Facility”). The U.S. Facility matures in October 2026. 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 June 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 June 30, 2024, this included receivables acquired from MCM, the book value of which was approximately $312.2 million. The weighted average interest rate of the U.S. Facility was 8.82% and 8.83% for the three and six months ended June 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 7.95% and 7.97% for the three and six months ended June 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.

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As of June 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.

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 June 30, 2024
	Derivatives		Currency Translation Adjustments		Accumulated Other Comprehensive Loss
Balance at beginning of period	$	(303)	$	(127,133)	$	(127,436)
Other comprehensive loss before reclassification	(3,867)		(1,146)		(5,013)
Reclassification	3,136		—		3,136
Tax effect	(1,088)		443		(645)
Balance at end of period	$	(2,122)	$	(127,836)	$	(129,958)


	Three Months Ended June 30, 2023
	Derivatives		Currency Translation Adjustments		Accumulated Other Comprehensive Loss
Balance at beginning of period	$	29,317	$	(119,685)	$	(90,368)
Other comprehensive income before reclassification	1,527		17,532		19,059
Reclassification	435		—		435
Tax effect	253		(279)		(26)
Balance at end of period	$	31,532	$	(102,432)	$	(70,900)


	Six Months Ended June 30, 2024
	Derivatives		Currency Translation Adjustments		Accumulated Other Comprehensive Loss
Balance at beginning of period	$	(3,093)	$	(120,827)	$	(123,920)
Other comprehensive loss before reclassification	(11,854)		(7,292)		(19,146)
Reclassification	16,598		—		16,598
Tax effect	(3,773)		283		(3,490)
Balance at end of period	$	(2,122)	$	(127,836)	$	(129,958)


	Six Months Ended June 30, 2023
	Derivatives		Currency Translation Adjustments		Accumulated Other Comprehensive Loss
Balance at beginning of period	$	36,494	$	(135,310)	$	(98,816)
Other comprehensive (loss) income before reclassification	(3,331)		33,540		30,209
Reclassification	(2,760)		—		(2,760)
Tax effect	1,129		(662)		467
Balance at end of period	$	31,532	$	(102,432)	$	(70,900)

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Note 10: Income Taxes

The Company’s effective tax rate for the three and six months ended June 30, 2024 was 24.3% and 24.1%, respectively. For the three and six months ended June 30, 2023, the Company’s effective tax rate was 27.6% and 26.8%, respectively. For the three and six months ended June 30, 2024, the difference between the effective tax rate and the federal statutory rate was primarily due to state income taxes. For the three months ended June 30, 2023, the difference between the effective tax rate and the federal statutory rate was primarily due to state income taxes and a foreign adjustment. For the six months ended June 30, 2023, the difference between the 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.

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 six months ended June 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 six months ended June 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 June 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 six months ended June 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 June 30, 2024, the Company has no material reserves for legal matters.

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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 June 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 $440.1 million. The Company 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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Total revenues:
United States	$	239,750	$	206,765	$	458,886	$	406,983
Europe
United Kingdom	76,725		75,223		149,152		153,208
Other European countries(1)	38,188		41,056		74,292		75,294
Total Europe	114,913		116,279		223,444		228,502

Other geographies(1)	622		—		1,341		189
Total	$	355,285	$	323,044	$	683,671	$	635,674

________________________

(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 six months ended June 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.

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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 March 31, 2024	$	148,936	$	453,464	$	602,400
Effect of foreign currency translation	—		411		411
Balance as of June 30, 2024	$	148,936	$	453,875	$	602,811

______________________

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


	MCM		Cabot		Total
Balance as of March 31, 2023	$	148,936	$	685,238	$	834,174
Effect of foreign currency translation	—		18,022		18,022
Balance as of June 30, 2023	$	148,936	$	703,260	$	852,196

There was no accumulated goodwill impairment loss as of June 30, 2023 and March 31, 2023.


	MCM		Cabot(1)		Total
Balance as of December 31, 2023	$	148,936	$	457,539	$	606,475
Effect of foreign currency translation	—		(3,664)		(3,664)
Balance as of June 30, 2024	$	148,936	$	453,875	$	602,811

______________________

(1)The amount is net of accumulated goodwill impairment loss of $238.2 million as of June 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	—		30,982		30,982
Balance as of June 30, 2023	$	148,936	$	703,260	$	852,196

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

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


	As of June 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 also purchased: (1) portfolios that are in insolvency status, in particular, individual voluntary arrangements; and (2) non-performing secured mortgage portfolios and real estate assets previously securing mortgage portfolios. When we take possession of the underlying real estate assets or purchase real estate assets, we refer to those as real estate-owned assets, or REO assets.

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 surpassing pre-pandemic levels and with rising delinquency rates, we have seen an increase in supply. 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 second 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.

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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.

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, supply remains slightly below pre-pandemic levels while 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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
MCM (United States)	$	236,826	$	213,374	$	473,335	$	426,826
Cabot (Europe)	41,866		60,951		101,071		123,930

Total purchases of receivable portfolios	$	278,692	$	274,325	$	574,406	$	550,756

In the United States, capital deployment increased during the three and six months ended June 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 decreased during the three and six months ended June 30, 2024, as compared to the corresponding periods in the prior year, primarily driven by continued competitive pricing environment in Europe. The decreases were 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):

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	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
MCM (United States):
Call center and digital collections	$	247,074	$	195,014	$	482,165	$	386,119
Legal collections	144,249		140,472		273,152		277,983
Collection agencies	5,306		330		10,790		384
Subtotal	396,629		335,816		766,107		664,486
Cabot (Europe):
Call center and digital collections	60,298		54,155		116,945		111,153
Legal collections	52,496		49,212		101,190		92,921
Collection agencies	36,430		35,971		71,786		68,052
Subtotal	149,224		139,338		289,921		272,126




Other geographies:	875		1,368		1,587		2,266
Total collections from purchased receivables	$	546,728	$	476,522	$	1,057,615	$	938,878

Gross collections from purchased receivables increased by $70.2 million, or 14.7%, to $546.7 million during the three months ended June 30, 2024, as compared to $476.5 million during the three months ended June 30, 2023. Gross collections from purchased receivables increased by $118.7 million, or 12.6%, to $1,057.6 million during the six months ended June 30, 2024, as compared to $938.9 million during the six months ended June 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 $4.6 million, during the six months ended June 30, 2024, primarily as a result of the weakening of the U.S. dollar against the British Pound by approximately 2.5% for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The foreign currency translation effect to collections in Europe was immaterial during the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

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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 June 30,
	2024				2023
Revenues
Revenue from receivable portfolios	$	321,930	90.6	%	$	301,184	93.2	%
Changes in recoveries	5,754		1.7	%	(3,486)		(1.0)	%
Total debt purchasing revenue	327,684		92.3	%	297,698		92.2	%
Servicing revenue	21,107		5.9	%	21,008		6.5	%
Other revenues	6,494		1.8	%	4,338		1.3	%
Total revenues	355,285		100.0	%	323,044		100.0	%


Operating expenses
Salaries and employee benefits	106,608		30.0	%	95,855		29.7	%
Cost of legal collections	64,249		18.1	%	57,150		17.7	%
General and administrative expenses	36,779		10.4	%	34,529		10.7	%
Other operating expenses	30,845		8.6	%	26,349		8.1	%
Collection agency commissions	7,504		2.1	%	10,387		3.2	%
Depreciation and amortization	7,461		2.1	%	10,702		3.3	%
Total operating expenses	253,446		71.3	%	234,972		72.7	%
Income from operations	101,839		28.7	%	88,072		27.3	%
Other expense
Interest expense	(61,376)		(17.3)	%	(49,983)		(15.5)	%
Other income (expense), net	2,047		0.6	%	(1,755)		(0.5)	%
Total other expense	(59,329)		(16.7)	%	(51,738)		(16.0)	%
Income before income taxes	42,510		12.0	%	36,334		11.3	%
Provision for income taxes	(10,329)		(2.9)	%	(10,029)		(3.2)	%
Net income	$	32,181	9.1	%	$	26,305	8.1	%

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	Six Months Ended June 30,
	2024				2023
Revenues
Revenue from receivable portfolios	$	637,782	93.3	%	$	596,858	93.9	%
Changes in recoveries	(6,655)		(1.0)	%	(12,987)		(2.0)	%
Total debt purchasing revenue	631,127		92.3	%	583,871		91.9	%
Servicing revenue	41,486		6.1	%	43,593		6.9	%
Other revenues	11,058		1.6	%	8,210		1.2	%
Total revenues	683,671		100.0	%	635,674		100.0	%


Operating expenses
Salaries and employee benefits	210,792		30.8	%	199,705		31.4	%
Cost of legal collections	122,970		18.0	%	111,251		17.5	%
General and administrative expenses	73,020		10.7	%	72,494		11.4	%
Other operating expenses	61,212		9.0	%	53,905		8.5	%
Collection agency commissions	14,938		2.2	%	18,537		2.9	%
Depreciation and amortization	15,309		2.2	%	21,572		3.4	%
Total operating expenses	498,241		72.9	%	477,464		75.1	%
Income from operations	185,430		27.1	%	158,210		24.9	%
Other expense
Interest expense	(117,141)		(17.1)	%	(96,818)		(15.2)	%
Other income (expense), net	4,713		0.7	%	(23)		—	%
Total other expense	(112,428)		(16.4)	%	(96,841)		(15.2)	%
Income before income taxes	73,002		10.7	%	61,369		9.7	%
Provision for income taxes	(17,582)		(2.6)	%	(16,438)		(2.6)	%
Net income	$	55,420	8.1	%	$	44,931	7.1	%

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 June 30,
	2024		2023		$ Change		% Change
Revenue recognized from portfolio basis	$	315,668	$	293,509	$	22,159	7.5	%
ZBA revenue	6,262		7,675		(1,413)		(18.4)	%
Revenue from receivable portfolios	321,930		301,184		20,746		6.9	%

Recoveries above (below) forecast	27,443		(477)		27,920
Changes in expected future recoveries	(21,689)		(3,009)		(18,680)
Changes in recoveries	5,754		(3,486)		9,240		(265.1)	%
Debt purchasing revenue	327,684		297,698		29,986		10.1	%

Servicing revenue	21,107		21,008		99		0.5	%
Other revenues	6,494		4,338		2,156		49.7	%
Total revenues	$	355,285	$	323,044	$	32,241	10.0	%


	Six Months Ended June 30,
	2024		2023		$ Change		% Change
Revenue recognized from portfolio basis	$	625,416	$	581,899	$	43,517	7.5	%
ZBA revenue	12,366		14,959		(2,593)		(17.3)	%
Revenue from receivable portfolios	637,782		596,858		40,924		6.9	%

Recoveries above (below) forecast	28,296		(15,835)		44,131
Changes in expected future recoveries	(34,951)		2,848		(37,799)
Changes in recoveries	(6,655)		(12,987)		6,332		(48.8)	%
Debt purchasing revenue	631,127		583,871		47,256		8.1	%

Servicing revenue	41,486		43,593		(2,107)		(4.8)	%
Other revenues	11,058		8,210		2,848		34.7	%
Total revenues	$	683,671	$	635,674	$	47,997	7.6	%

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 $3.7 million, during the six months ended June 30, 2024, primarily as a result of the weakening of the U.S. dollar against the British Pound by approximately 2.5% for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The foreign currency translation effect was immaterial to our operating results during the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

The increases in revenue recognized from portfolio basis during the three and six months ended June 30, 2024, as compared to the three and six months ended June 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 and six months ended June 30, 2024, management considered, among other factors, historical and current collection performance, changes in consumer behavior, and the macroeconomic environment. Management believes that most of the current period collections over-performance was due to changes in timing of the estimated remaining collections, and therefore reduced the respective estimated remaining collections accordingly. These reductions, when discounted to present value, resulted in a net negative change in expected future recoveries of approximately $21.7 million and $35.0 million for the three and six months ended June 30, 2024, respectively. During the three and six months ended June 30, 2023, the Company recorded approximately $3.0 million in net negative change and $2.8 million in net positive change in expected future period 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 June 30, 2024						As of June 30, 2024
	Collections		Revenue from Receivable Portfolios		Changes in Recoveries		Investment in Receivable Portfolios		Monthly EIR
United States:
ZBA	$	6,261	$	6,261	$	—	$	—	—	%
2011	2,640		2,324		251		827		88.6	%
2012	2,744		2,749		(179)		2,062		42.0	%
2013	7,392		6,026		949		4,674		40.5	%
2014	4,290		2,892		375		13,830		6.7	%
2015	4,130		2,054		568		16,487		3.9	%
2016	7,595		3,775		667		28,150		4.2	%
2017	10,629		6,284		546		35,164		5.5	%
2018	16,935		8,872		1,141		69,006		4.0	%
2019	29,680		16,107		(596)		131,559		3.8	%
2020	33,931		18,148		(630)		152,393		3.7	%
2021	35,565		17,929		4,172		144,167		3.9	%
2022	67,121		32,055		(4,470)		320,275		3.1	%
2023	124,551		71,689		5,867		699,893		3.3	%
2024	43,165		33,214		711		462,940		3.6	%
Subtotal	396,629		230,379		9,372		2,081,427		3.7	%
Europe:
ZBA	1		1		—		—		—	%
2013	13,481		11,618		(2,019)		117,380		3.2	%
2014	13,374		10,202		(1,457)		110,338		3.0	%
2015	8,751		6,249		(154)		82,684		2.5	%
2016(1)	7,785		5,679		319		71,414		2.8	%
2017	10,727		6,363		(275)		109,673		1.9	%
2018	11,086		6,806		(2,815)		140,202		1.6	%
2019	12,066		6,986		(2)		121,170		1.9	%
2020	8,078		5,200		203		76,681		2.2	%
2021	13,381		8,862		(604)		153,377		1.9	%
2022	16,673		8,657		(586)		178,896		1.6	%
2023	23,327		10,121		2,151		222,685		1.5	%
2024	10,494		4,807		952		94,950		2.2	%
Subtotal	149,224		91,551		(4,287)		1,479,450		2.0	%
Other geographies:(2)









All vintages	875		—		669		22,445		—	%
Subtotal	875		—		669		22,445		—	%
Total	$	546,728	$	321,930	$	5,754	$	3,583,322	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 June 30, 2023						As of June 30, 2023
	Collections		Revenue from Receivable Portfolios		Changes in Recoveries		Investment in Receivable Portfolios		Monthly EIR
United States:
ZBA	$	7,661	$	7,661	$	—	$	—	—	%
2011	3,838		2,911		933		1,148		88.6	%
2012	4,401		3,474		904		2,822		42.0	%
2013	9,618		8,424		783		6,624		40.5	%
2014	5,983		3,588		1,308		17,219		6.7	%
2015	5,323		2,774		445		22,190		3.9	%
2016	9,781		5,141		935		38,939		4.1	%
2017	16,059		9,175		1,524		51,617		5.5	%
2018	24,267		13,287		(468)		103,689		4.0	%
2019	44,135		23,853		1,428		196,740		3.8	%
2020	52,308		27,263		1,855		230,967		3.7	%
2021	49,660		28,831		(6,322)		226,694		3.9	%
2022	67,843		46,166		(10,489)		477,683		3.1	%
2023	34,939		25,640		5,742		425,692		2.9	%
Subtotal	335,816		208,188		(1,422)		1,802,024		3.8	%
Europe:
ZBA	14		14		—		—		—	%
2013	14,968		13,342		(2,475)		136,517		3.2	%
2014	14,483		11,492		(1,262)		126,193		3.0	%
2015	9,364		7,019		(336)		94,405		2.5	%
2016(1)	10,031		6,489		360		75,211		2.8	%
2017	13,098		7,613		(16)		131,793		1.9	%
2018	12,709		8,217		(2,291)		171,570		1.6	%
2019	14,189		8,103		1,807		143,331		1.9	%
2020	9,585		6,074		2,597		91,317		2.2	%
2021	14,850		10,402		1,570		184,929		1.9	%
2022	17,998		10,518		(4,169)		216,668		1.6	%
2023	8,049		3,713		2,151		124,221		1.3	%
Subtotal	139,338		92,996		(2,064)		1,496,155		2.1	%
Other geographies:(2)
All vintages	1,368		—		—		32,807		—	%
Subtotal	1,368		—		—		32,807		—	%
Total	$	476,522	$	301,184	$	(3,486)	$	3,330,986	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.


	Six Months Ended June 30, 2024						As of June 30, 2024
	Collections		Revenue from Receivable Portfolios		Changes in Recoveries		Investment in Receivable Portfolios		Monthly EIR
United States:
ZBA	$	12,364	$	12,364	$	—	$	—	—	%
2011	5,177		4,885		116		827		88.6	%
2012	5,749		5,765		(433)		2,062		42.0	%
2013	14,254		12,617		710		4,674		40.5	%
2014	8,560		6,082		37		13,830		6.7	%
2015	8,217		4,229		1,436		16,487		3.9	%
2016	14,667		7,816		1,499		28,150		4.2	%
2017	21,143		13,199		320		35,164		5.5	%
2018	34,722		18,684		1,277		69,006		4.0	%
2019	60,921		33,948		(2,262)		131,559		3.8	%
2020	70,656		38,325		(2,409)		152,393		3.7	%
2021	73,744		37,964		4,307		144,167		3.9	%
2022	138,437		67,738		(7,198)		320,275		3.1	%
2023	245,264		148,228		6,903		699,893		3.3	%
2024	52,232		42,133		606		462,940		3.6	%
Subtotal	766,107		453,977		4,909		2,081,427		3.7	%
Europe:
ZBA	2		2		—		—		—	%
2013	27,119		23,636		(3,746)		117,380		3.2	%
2014	25,641		20,774		(2,964)		110,338		3.0	%
2015	17,067		12,754		(1,194)		82,684		2.5	%
2016(1)	15,837		11,594		(40)		71,414		2.8	%
2017	20,810		13,043		(1,506)		109,673		1.9	%
2018	22,491		14,017		(6,498)		140,202		1.6	%
2019	24,247		14,324		(631)		121,170		1.9	%
2020	16,330		10,642		(100)		76,681		2.2	%
2021	27,279		18,039		(645)		153,377		1.9	%
2022	33,586		17,769		(703)		178,896		1.6	%
2023	45,751		20,846		3,419		222,685		1.5	%
2024	13,761		6,365		1,693		94,950		2.2	%
Subtotal	289,921		183,805		(12,915)		1,479,450		2.0	%
Other geographies:(2)
All vintages	1,587		—		1,351		22,445		—	%
Subtotal	1,587		—		1,351		22,445		—	%
Total	$	1,057,615	$	637,782	$	(6,655)	$	3,583,322	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.


	Six Months Ended June 30, 2023						As of June 30, 2023
	Collections		Revenue from Receivable Portfolios		Changes in Recoveries		Investment in Receivable Portfolios		Monthly EIR
United States:
ZBA	$	14,943	$	14,943	$	—	$	—	—	%
2011	7,207		6,367		663		1,148		88.6	%
2012	8,669		7,262		1,140		2,822		42.0	%
2013	18,709		17,382		551		6,624		40.5	%
2014	11,051		7,395		1,531		17,219		6.7	%
2015	10,714		5,793		752		22,190		3.9	%
2016	19,690		10,769		1,323		38,939		4.1	%
2017	33,109		19,269		3,047		51,617		5.5	%
2018	51,045		28,079		(2,058)		103,689		4.0	%
2019	93,342		50,119		3,360		196,740		3.8	%
2020	110,805		57,509		3,145		230,967		3.7	%
2021	104,148		60,751		(9,717)		226,694		3.9	%
2022	138,723		95,302		(19,288)		477,683		3.1	%
2023	42,331		31,822		9,773		425,692		2.9	%
Subtotal	664,486		412,762		(5,778)		1,802,024		3.8	%
Europe:
ZBA	16		16		—		—		—	%
2013	30,375		26,571		(3,371)		136,517		3.2	%
2014	28,313		22,892		(1,692)		126,193		3.0	%
2015	18,065		13,999		(1,057)		94,405		2.5	%
2016(1)	19,378		13,037		46		75,211		2.8	%
2017	26,212		15,370		(709)		131,793		1.9	%
2018	24,669		16,537		(4,855)		171,570		1.6	%
2019	28,074		16,361		490		143,331		1.9	%
2020	19,944		12,289		2,869		91,317		2.2	%
2021	30,929		20,897		1,226		184,929		1.9	%
2022	35,430		21,100		(3,548)		216,668		1.6	%
2023	10,721		5,027		3,392		124,221		1.3	%
Subtotal	272,126		184,096		(7,209)		1,496,155		2.1	%
Other geographies:(2)








All vintages	2,266		—		—		32,807		—	%
Subtotal	2,266		—		—		32,807		—	%
Total	$	938,878	$	596,858	$	(12,987)	$	3,330,986	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 remained relatively consistent during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Service revenues decreased by approximately $2.1 million during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. The decrease was primarily attributable to reduced demand from BPO clients.

Other revenues increased during the three and six months ended June 30, 2024 as compared to the three and six months ended June 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 June 30,
	2024		2023		$ Change		% Change
Salaries and employee benefits	$	106,608	$	95,855	$	10,753	11.2	%
Cost of legal collections	64,249		57,150		7,099		12.4	%
General and administrative expenses	36,779		34,529		2,250		6.5	%
Other operating expenses	30,845		26,349		4,496		17.1	%
Collection agency commissions	7,504		10,387		(2,883)		(27.8)	%
Depreciation and amortization	7,461		10,702		(3,241)		(30.3)	%
Total operating expenses	$	253,446	$	234,972	$	18,474	7.9	%


	Six Months Ended June 30,
	2024		2023		$ Change		% Change
Salaries and employee benefits	$	210,792	$	199,705	$	11,087	5.6	%
Cost of legal collections	122,970		111,251		11,719		10.5	%
General and administrative expenses	73,020		72,494		526		0.7	%
Other operating expenses	61,212		53,905		7,307		13.6	%
Collection agency commissions	14,938		18,537		(3,599)		(19.4)	%
Depreciation and amortization	15,309		21,572		(6,263)		(29.0)	%
Total operating expenses	$	498,241	$	477,464	$	20,777	4.4	%

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. The foreign currency translation effect was immaterial to our operating results during the three and six months ended June 30, 2024 compared to the three and six months ended June 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 June 30, 2024, as compared to the three months ended June 30, 2023, was primarily due to the following reasons:

•An increase in salaries and bonus of approximately $7.8 million primarily due to an increase in overall headcount; and

•An increase in employee benefits and payroll taxes of approximately $2.1 million.

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

•An increase in salaries and bonus of approximately $7.7 million primarily due to an increase in overall headcount; and

•An increase in employee benefits and payroll taxes of approximately $3.3 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 June 30,
	2024		2023		$ Change		% Change
Court costs	$	41,881	$	33,009	$	8,872	26.9	%
Legal collection fees	22,368		24,141		(1,773)		(7.3)	%
Total cost of legal collections	$	64,249	$	57,150	$	7,099	12.4	%


	Six Months Ended June 30,
	2024		2023		$ Change		% Change
Court costs	$	79,968	$	63,026	$	16,942	26.9	%
Legal collection fees	43,002		48,225		(5,223)		(10.8)	%
Total cost of legal collections	$	122,970	$	111,251	$	11,719	10.5	%

The increases of cost of legal collections during the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, were primarily due to increased legal placement in this channel in the U.S. The increases were 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 June 30, 2024 as compared to the three months ended June 30, 2023, was primarily due to the following reasons:

•Approximately $1.5 million of increased general and administrative expense include costs associated with our information technology, and consulting fees.

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

•An increase in information technology expenses of approximately $3.1 million; and

•The increase was partially offset by a decrease in legal expenses of approximately $1.9 million and a decrease in consulting fees of approximately $1.2 million.

Other Operating Expenses

The increase in other operating expenses during the three months and six months ended June 30, 2024, as compared to the three months ended June 30, 2023, was primarily due to an increase in postage and printing expenses of approximately $2.8 million and $4.9 million, respectively.

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 $2.9 million and $3.6 million during the three and six months ended June 30, 2024 as compared to the three and six months ended June 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.

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Depreciation and Amortization

The decrease in depreciation and amortization expenses during the three and six months ended June 30, 2024, as compared to three and six months ended June 30, 2023, was primarily due to smaller depreciable and amortizable asset balances during the three and six months ended June 30, 2024, as compared to three and six months ended June 30, 2023. Depreciation expenses and amortization expenses decreased by approximately $2.1 million and $1.1 million during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, and by approximately $3.9 million and $2.4 million during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, respectively.

Interest Expense

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


	Three Months Ended June 30,
	2024		2023		$ Change		% Change
Stated interest on debt obligations	$	57,163	$	45,917	$	11,246	24.5	%
Amortization of debt issuance costs	3,780		3,706		74		2.0	%
Amortization of debt discount	433		360		73		20.3	%
Total interest expense	$	61,376	$	49,983	$	11,393	22.8	%


	Six Months Ended June 30,
	2024		2023		$ Change		% Change
Stated interest on debt obligations	$	109,201	$	88,158	$	21,043	23.9	%
Amortization of debt issuance costs	7,080		7,950		(870)		(10.9)	%
Amortization of debt discount	860		710		150		21.1	%
Total interest expense	$	117,141	$	96,818	$	20,323	21.0	%

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

•The effect resulting from increased average debt balance of approximately $5.7 million; and

•The effect resulting from rising interest rates of approximately $5.0 million.

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

•The effect resulting from increased average debt balance of approximately $11.7 million;

•The effect resulting from rising interest rates of approximately $7.8 million; and

•An unfavorable impact of foreign currency translation of approximately $0.7 million driven by the weakening of the U.S. dollar against the British Pound.

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 $2.0 million and $4.7 million during the three and six months ended June 30, 2024, respectively. Other expenses, net, was $1.8 million and $0.1 million during the three and six months ended June 30, 2023, respectively. Interest income included in other income, net of other expense, was approximately $1.8 million and $3.1 million for the three and six months ended June 30, 2024, respectively, and $1.1 million and $2.1 million for the three and six months ended June 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 June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Provision for income taxes	$	10,329		$	10,029		$	17,582		$	16,438
Effective tax rate	24.3		%	27.6		%	24.1		%	26.8		%

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For the three and six months ended June 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 June 30, 2023 the difference between our effective tax rate and the federal statutory rate was primarily due to state taxes and a foreign adjustment. For the six months ended June 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):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
GAAP net income, as reported	$	32,181	$	26,305	$	55,420	$	44,931
Adjustments:
Interest expense	61,376		49,983		117,141		96,818
Interest income	(1,760)		(1,123)		(3,128)		(2,067)
Provision for income taxes	10,329		10,029		17,582		16,438
Depreciation and amortization	7,461		10,702		15,309		21,572
Net gain on derivative instruments(1)	(78)		—		(273)		—
Stock-based compensation expense	4,637		3,873		7,994		7,925
Acquisition, integration and restructuring related expenses(2)	1,883		454		4,202		5,980


Adjusted EBITDA	$	116,029	$	100,223	$	214,247	$	191,597
Collections applied to principal balance(3)	$	228,923	$	190,658	$	443,474	$	373,639

_______________________

(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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Collections applied to investment in receivable portfolios, net	$	224,798	$	175,338	$	419,833	$	342,020
Changes in recoveries	(5,754)		3,486		6,655		12,987
REO proceeds applied to basis	9,879		11,834		16,986		18,632
Collections applied to principal balance	$	228,923	$	190,658	$	443,474	$	373,639

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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 June 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	$	46,104	$	10,960,490	2.9
2015	499,034		—		105,610		231,102		186,391		125,673		85,042		64,133		42,774		25,655		19,518		8,217		894,115		1.8
2016	552,971		—		—		110,875		283,035		234,690		159,279		116,452		87,717		51,650		35,130		14,667		1,093,495		2.0
2017	527,448		—		—		—		111,902		315,853		255,048		193,328		144,243		85,348		57,985		21,143		1,184,850		2.2
2018	629,246		—		—		—		—		175,042		351,696		308,302		228,919		144,566		89,548		34,722		1,332,795		2.1
2019	675,193		—		—		—		—		—		174,693		416,315		400,250		256,444		164,106		60,921		1,472,729		2.2
2020	537,806		—		—		—		—		—		—		213,450		430,514		311,573		194,522		70,656		1,220,715		2.3
2021	403,820		—		—		—		—		—		—		—		120,354		240,605		188,895		73,744		623,598		1.5
2022	549,939		—		—		—		—		—		—		—		—		98,277		268,516		138,437		505,230		0.9
2023	808,606		—		—		—		—		—		—		—		—		—		184,182		245,264		429,446		0.5
2024	472,440		—		—		—		—		—		—		—		—		—		—		52,232		52,232		0.1
Subtotal	9,418,560		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		766,107		19,769,695		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		52,760		2,671,378		2.2
2015	419,941		—		65,870		127,084		103,823		88,065		72,277		55,261		57,817		42,660		36,249		17,069		666,175		1.6
2016	258,218		—		—		44,641		97,587		83,107		63,198		51,609		51,017		40,214		35,278		15,837		482,488		1.9
2017	461,571		—		—		—		68,111		152,926		118,794		87,549		86,107		61,762		48,763		20,810		644,822		1.4
2018	432,258		—		—		—		—		49,383		118,266		78,846		80,629		61,691		49,675		22,491		460,981		1.1
2019	273,354		—		—		—		—		—		44,118		80,502		88,448		63,607		54,544		24,247		355,466		1.3
2020	116,227		—		—		—		—		—		—		22,721		59,803		45,757		37,363		16,330		181,974		1.6
2021	255,788		—		—		—		—		—		—		—		43,082		66,529		58,515		27,279		195,405		0.8
2022	244,508		—		—		—		—		—		—		—		—		36,957		70,385		33,586		140,928		0.6
2023	259,255		—		—		—		—		—		—		—		—		—		40,975		45,751		86,726		0.3
2024	101,071		—		—		—		—		—		—		—		—		—		—		13,761		13,761		0.1
Subtotal	4,064,399		519,115		476,126		494,000		554,320		635,177		635,218		553,946		644,979		553,271		544,031		289,921		5,900,104		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		1,587		547,823		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		1,587		547,823		1.6
Total	$	13,823,242	$	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	$	1,057,615	$	26,217,622	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 June 30, 2024, excluding collections on behalf of others.

(3)Cumulative Collections Money Multiple (“CCMM”) through June 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	$	10,960,490	$	207,956	$	11,168,446	3.0
2015	499,034		894,115		35,948		930,063		1.9
2016	552,971		1,093,495		63,125		1,156,620		2.1
2017	527,448		1,184,850		97,251		1,282,101		2.4
2018	629,246		1,332,795		158,752		1,491,547		2.4
2019	675,193		1,472,729		287,917		1,760,646		2.6
2020	537,806		1,220,715		332,948		1,553,663		2.9
2021	403,820		623,598		326,333		949,931		2.4
2022	549,939		505,230		624,070		1,129,300		2.1
2023	808,606		429,446		1,465,815		1,895,261		2.3
2024	472,440		52,232		1,054,219		1,106,451		2.3
Subtotal	9,418,560		19,769,695		4,654,334		24,424,029		2.6
Europe:
<2015(4)	1,242,208		2,671,378		878,629		3,550,007		2.9
2015(4)	419,941		666,175		248,229		914,404		2.2
2016	258,218		482,488		201,563		684,051		2.6
2017	461,571		644,822		254,462		899,284		1.9
2018	432,258		460,981		295,164		756,145		1.7
2019	273,354		355,466		275,125		630,591		2.3
2020	116,227		181,974		178,427		360,401		3.1
2021	255,788		195,405		335,326		530,731		2.1
2022	244,508		140,928		340,343		481,271		2.0
2023	259,255		86,726		394,250		480,976		1.9
2024	101,071		13,761		201,534		215,295		2.1
Subtotal	4,064,399		5,900,104		3,603,052		9,503,156		2.3
Other geographies(5):










All vintages	340,283		547,823		37,250		585,073		1.7
Subtotal	340,283		547,823		37,250		585,073		1.7
Total	$	13,823,242	$	26,217,622	$	8,294,636	$	34,512,258	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 June 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)	$	38,533	$	58,714	$	38,598	$	26,309	$	17,856	$	11,777	$	7,542	$	4,597	$	2,623	$	1,407	$	207,956
2015	6,871		9,795		5,991		4,107		2,895		2,043		1,444		1,024		727		1,051		35,948
2016	12,036		17,412		10,425		7,097		4,990		3,515		2,481		1,754		1,244		2,171		63,125
2017	17,128		25,454		17,199		11,461		7,886		5,560		3,930		2,786		1,980		3,867		97,251
2018	27,044		41,484		28,664		19,501		12,869		8,860		6,255		4,429		3,146		6,500		158,752
2019	51,947		76,066		51,099		34,584		23,530		15,622		10,805		7,611		5,375		11,278		287,917
2020	57,218		87,517		60,147		40,788		27,821		18,927		12,644		8,799		6,206		12,881		332,948
2021	55,932		84,808		59,634		39,528		26,912		18,603		12,845		8,783		6,114		13,174		326,333
2022	114,847		167,328		106,768		73,089		49,315		34,393		24,376		17,385		12,171		24,398		624,070
2023	214,697		396,785		275,893		179,070		124,500		85,528		59,727		41,584		29,094		58,937		1,465,815
2024	130,057		262,344		224,349		136,061		90,875		64,402		45,013		31,854		22,297		46,967		1,054,219
Subtotal	726,310		1,227,707		878,767		571,595		389,449		269,230		187,062		130,606		90,977		182,631		4,654,334
Europe:
<2015(4)	51,328		96,519		87,541		80,181		73,980		68,735		62,895		57,637		52,996		246,817		878,629
2015(4)	15,862		29,406		26,727		24,297		21,709		19,564		17,557		15,742		14,425		62,940		248,229
2016	18,694		26,578		24,165		21,434		17,798		15,601		13,654		11,949		10,096		41,594		201,563
2017	19,335		34,701		30,204		27,110		22,695		19,935		17,302		15,098		13,142		54,940		254,462
2018	22,359		39,082		34,531		30,824		27,135		23,682		20,356		17,802		15,455		63,938		295,164
2019	22,533		40,928		33,514		28,229		23,615		20,655		17,894		15,512		13,643		58,602		275,125
2020	18,319		28,589		24,683		19,442		14,779		12,117		10,507		8,612		7,474		33,905		178,427
2021	27,740		50,308		44,682		38,821		33,225		26,967		21,541		18,151		15,709		58,182		335,326
2022	31,461		56,017		47,484		40,066		32,622		26,720		21,436		17,313		14,441		52,783		340,343
2023	39,982		69,598		57,396		47,666		38,834		30,852		24,365		19,724		16,004		49,829		394,250
2024	19,042		38,281		30,757		24,473		19,579		15,288		11,891		9,338		7,578		25,307		201,534
Subtotal	286,655		510,007		441,684		382,543		325,971		280,116		239,398		206,878		180,963		748,837		3,603,052
Other geographies(5):











All vintages	3,120		5,542		4,606		3,999		3,482		3,143		2,813		2,477		2,094		5,974		37,250
Subtotal	3,120		5,542		4,606		3,999		3,482		3,143		2,813		2,477		2,094		5,974		37,250
Portfolio ERC	1,016,085		1,743,256		1,325,057		958,137		718,902		552,489		429,273		339,961		274,034		937,442		8,294,636
REO ERC(6)	15,650		24,826		25,645		15,882		11,716		4,081		3,268		992		—		—		102,060
Total ERC	$	1,031,735	$	1,768,082	$	1,350,702	$	974,019	$	730,618	$	556,570	$	432,541	$	340,953	$	274,034	$	937,442	$	8,396,696

________________________

(1)As of June 30, 2024, ERC for Zero Basis Portfolios include approximately $48.0 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 $41.1 million from cost recovery portfolios, primarily in other geographies.

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


	84-Month ERC		120-Month ERC
United States	$	4,321,166	$	4,558,660
Europe	2,573,918		3,085,743
Other geographies	27,995		33,697
Portfolio ERC	6,923,079		7,678,100
REO ERC	101,742		102,060
Total ERC	$	7,024,821	$	7,780,160

(3)Amount for 2024 consists of six months data from July 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 assets ERC includes approximately $101.3 million and $0.7 million of estimated future cash flows for Europe and Other Geographies, respectively.

Estimated Future Collections Applied to Investment in Receivable Portfolios

As of June 30, 2024, we had $3.6 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)	$	289,408	$	110,880	$	2,489	$	402,777
2025	544,670		195,235		4,432		744,337
2026	417,457		169,899		3,669		591,025
2027	259,549		147,982		3,180		410,711
2028	173,761		123,693		2,756		300,210
2029	119,395		105,391		2,456		227,242
2030	82,944		88,414		2,184		173,542
2031	58,486		76,028		1,279		135,793
2032	41,240		67,848		—		109,088
2033	29,250		62,290		—		91,540
2034	21,010		58,851		—		79,861
2035	15,655		57,431		—		73,086
2036	12,238		57,589		—		69,827
2037	9,377		59,388		—		68,765
2038	5,653		65,162		—		70,815
2039	1,334		33,261		—		34,595
2040	—		108		—		108
Total	$	2,081,427	$	1,479,450	$	22,445	$	3,583,322

________________________

(1)Amount for 2024 consists of six months data from July 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):


	Six Months Ended June 30,
	2024		2023
	(Unaudited)
Net cash provided by operating activities	$	86,697	$	62,623
Net cash used in investing activities	(131,886)		(214,246)
Net cash provided by financing activities	139,492		190,626

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 $86.7 million and $62.6 million during the six months ended June 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. Changes in recoveries increased the operating cash flows by $6.7 million and $13.0 million during the six months ended June 30, 2024 and 2023, respectively. 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 $131.9 million and $214.2 million during the six months ended June 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 $567.0 million and $544.7 million during the six months ended June 30, 2024 and 2023, respectively. Collection proceeds applied to the investment in receivable portfolios, were $419.8 million and $342.0 million during the six months ended June 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 $139.5 million and $190.6 million during the six months ended June 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 $393.5 million and $444.8 million during the six months ended June 30, 2024 and 2023, respectively. Repayments of amounts outstanding under our credit facilities were $1,234.2 million and $259.8 million during the six months ended June 30, 2024 and 2023, respectively. During the six months ended June 30, 2024, we issued two $500.0 million senior secured notes that mature in 2029 and 2030, respectively. We used a portion of the proceeds from the senior secured notes issuance to repay drawings under our Global Senior Facility. During the six months ended June 30, 2023, we issued $230.0 million 4.00% convertible senior notes that mature in 2029, and used $192.5 million of the proceeds from the convertible senior notes to partially repurchase 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 $1,203.0 million as of June 30, 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 six months ended June 30, 2024 and 2023, the Company did not make any repurchases under the share repurchase program. Our practice is to retire the shares repurchased. As of June 30, 2024, authorization for $91.9 million of share repurchases remained under the share repurchase program.

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Our cash and cash equivalents as of June 30, 2024, consisted of $83.3 million held by U.S.-based entities and $167.3 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 $20.9 million as of June 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 June 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 June 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 June 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

During the quarterly period ended June 30, 2024, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as each term is defined in Item 408 of Regulation S-K).

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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)

4.1						Indenture dated May 2 1 , 2024 between Encore Capital Group, Inc., the subsidiary guarantors party thereto, GLAS Trust Company LLC as trustee and Truist Bank as security agent for 20 30 Notes (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on May 21, 2024)

10.1+						I nternational Assignment Agreement with John Yung dated July 31, 2023

10.2+						Non-Employee Director Compensation Program Guidelines, effective June 7, 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


+			Management contract or compensatory plan or arrangement.
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: August 7, 2024