Encore Capital Group Q2 Earnings Call Highlights

Key Points

• Record growth: Encore reported record second-quarter global collections of $737 million, up 13% year over year, and portfolio purchases of $444 million, including a record $372 million in the U.S. Net income rose to $64 million, or $2.81 per share, despite a $30.5 million pretax refinancing charge.
• U.S. operations drove performance: MCM collections increased 17% to a record $572 million, supported by recent portfolio purchases, technology investments and stronger consumer engagement. European operations remained selective amid subdued U.K. lending, low delinquencies and intense competition.
• Outlook raised: Encore increased its 2026 global collections forecast to $2.8 billion-$2.85 billion and expects earnings per share of $13-$14, while maintaining its $1.4 billion-$1.5 billion portfolio-purchase outlook. Lower-cost refinancing is expected to generate approximately $50 million in annualized savings.

Encore Capital Group NASDAQ: ECPG reported higher second-quarter earnings, record U.S. portfolio purchases and record global collections, while raising its 2026 outlook for collections and earnings per share.

Chief Executive Officer Ashish Masih said the company’s second-quarter global portfolio purchases totaled $444 million, including a record $372 million in the United States. Global collections rose 13% year over year to a record $737 million, while average receivable portfolios increased 11% to $4.52 billion.

GAAP net income totaled $64 million, or $2.81 per share, compared with $2.49 per share in the prior-year quarter. Results included a $30.5 million pretax impact from refinancing costs, equivalent to about $1 per share, according to the company.

U.S. Purchases and Collections Drive Growth

Encore said its Midland Credit Management, or MCM, U.S. business purchased $372 million of portfolios during the quarter, with the total including opportunistic spot-market purchases. The U.S. represented 84% of Encore’s global portfolio purchasing dollars during the period.

Masih said the company continues to see favorable U.S. purchasing conditions, supported by elevated revolving consumer credit balances and credit-card charge-off rates that remain above their 10-year average. Using first-quarter 2026 Federal Reserve data, he said annualized net charge-off volume exceeded $50 billion.

MCM collections increased 17% from a year earlier to a record $572 million. Masih attributed the growth to substantial portfolio purchases in recent years, new technologies, digital capabilities and operational initiatives that have helped the company reach more consumers and generate more payments.

“These initiatives had a greater impact on the early stages of a portfolio’s life cycle, leading to over-performance of our recent vintages,” Masih said.

During the question-and-answer session, Masih said the stronger collection performance reflects both earlier consumer engagement and higher expected lifetime collections. He said improvements in collection efficiency have increased Encore’s purchasing power, allowing the company to selectively win more portfolios while retaining some benefit through higher returns.

European Business Remains Selective

Cabot Credit Management, Encore’s European business, purchased $72 million of portfolios during the second quarter. Collections were flat year over year at $164 million.

Masih said Cabot remains selective because the U.K. market continues to face subdued consumer lending, low delinquencies and robust competition. The company is focused on operational execution and cost management, including applying practices used within MCM.

He also said U.K. banks have increasingly been selling fresher portfolios and establishing forward-flow arrangements, a trend that has been developing for some time. While Cabot’s second-quarter purchasing was higher, Masih noted that European purchasing can be more variable from quarter to quarter.

Revenue Growth, Margin Expansion and Refinancing

Chief Financial Officer Tomas Hernanz said portfolio revenue rose 11% to $400 million, supported by an 11% increase in average receivable portfolios. Debt purchasing revenue increased 13% to $471 million, while total revenue, including servicing and other revenue, rose 11% to $492 million.

Collections exceeded the company’s forecasts during the quarter. Changes in recoveries totaled $71 million, including $53 million of collections above forecast and $18 million from changes in expected future recoveries.

Hernanz said Encore expects collection outperformance to transition into portfolio revenue over coming quarters as its forecasts reflect the impact of the company’s operational initiatives.

• Operating expenses increased 5% to $305 million, compared with 13% growth in collections.
• Cash efficiency margin improved 2.9 percentage points to 60.2%.
• Collection yield increased 0.8 percentage points to 65.2%.
• Leverage declined to 2.3 times, from 2.6 times a year earlier.

In May, Encore refinanced two bonds through the issuance of $750 million in high-yield debt due 2032 and €325 million in floating-rate notes due 2033. Hernanz said the transactions carried significantly lower coupons and are expected to provide approximately $50 million in annualized savings, with roughly half of that benefit expected to be captured in 2026.

The company incurred $30.5 million in refinancing costs during the second quarter. In July, Encore issued a soft call for its $230 million of convertible notes due 2029, with settlement expected in the third quarter. Hernanz said the company has no material maturities until 2028.

Guidance Raised

Encore maintained its 2026 global portfolio purchase outlook of $1.4 billion to $1.5 billion, though Masih said the company now expects to finish near the upper end of that range following its first-half performance.

The company raised its global collections outlook to $2.8 billion to $2.85 billion for 2026 and projected full-year earnings per share of $13 to $14, including the $1-per-share refinancing cost recorded in the second quarter.

Encore also expects 2026 interest expense of $295 million and an effective tax rate in the mid-20% range. The company continues to expect its full-year cash efficiency margin to exceed 58%.

Masih said the company repurchased approximately $27 million of its shares during the second quarter, bringing first-half repurchases to about $47 million. Its trailing 12-month return on invested capital rose to 14.7% from 9.1% in the prior-year quarter.

About Encore Capital Group (NASDAQ:ECPG)

Encore Capital Group, Inc is a global specialty finance company that focuses on the purchase and management of nonperforming consumer receivables. Through its subsidiaries, the company acquires charged-off debt portfolios from credit card issuers, banks, and other financial institutions, and seeks to recover outstanding balances through a combination of customer outreach, payment arrangements, and, where appropriate, legal collection efforts. Encore's business model emphasizes compliance with regulatory and industry standards to ensure ethical and transparent debt-recovery practices.

Headquartered in San Diego, California, Encore operates across North America and Europe.

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