Encore Capital Group Q4 Earnings Call Highlights

Key Points

• Record 2025 results: Encore posted global portfolio purchases of $1.4B, collections of $2.6B and estimated remaining collections of $9.7B, drove net income of $257M and EPS of $10.91, while reducing leverage to 2.4x and repurchasing about 9% of shares (~$90M).
• U.S. outperformance driven by technology: Midland Credit Management delivered record U.S. purchases of $1.17B and collections of $1.95B (Q4 collections a record $503M), with management attributing gains to digital, analytics and operational innovations that are lifting early-vintage recoveries.
• 2026 outlook and capital allocation: Guidance calls for global purchases of $1.4–$1.5B, collections of ~$2.7B (+~5%), and EPS of about $12 (≈10% growth), with portfolio buying prioritized over buybacks and an expectation of continuing deleveraging and improved cash efficiency (>58%).

Encore Capital Group NASDAQ: ECPG executives said 2025 delivered record portfolio purchases, collections, and estimated remaining collections, as the company leaned into what it described as favorable U.S. market conditions while continuing to invest in operational innovation and maintaining a stronger balance sheet.

On the company’s fourth-quarter 2025 earnings call, President and CEO Ashish Masih attributed the year’s performance to “exceptional execution and investments in innovation,” particularly at Midland Credit Management (MCM) in the U.S. CFO Tomas Hernanz said collections strength, improved yields, and operating leverage supported higher earnings and cash efficiency.

2025 highlights: record purchases, collections, and ERC

Masih said global portfolio purchases rose 4% to a record $1.4 billion in 2025, while global collections increased 20% to a record $2.6 billion. Average receivable portfolios increased 12% to $4.1 billion, and estimated remaining collections (ERC) rose 14% to a record $9.7 billion.

The company reported leverage of 2.4x at year-end, down from 2.6x a year earlier, and Masih noted that deleveraging continued even as Encore maintained significant portfolio buying and resumed share repurchases. The company repurchased about 9% of outstanding shares in 2025 for roughly $90 million.

Encore’s record collections contributed to net income of $257 million and earnings per share of $10.91 for 2025, according to management.

U.S. market conditions and MCM performance

Masih said the U.S. environment remained supportive, citing Federal Reserve data showing revolving credit near record levels and credit card charge-off rates elevated after rising to their highest level in more than 10 years in 2024. Using Q3 2025 Federal Reserve data, he estimated annualized net charge-off volume at more than $54 billion. He also pointed to credit card delinquencies near multi-year highs as a leading indicator of future charge-offs.

Against that backdrop, Masih said MCM finished 2025 with record U.S. portfolio purchases of $1.17 billion, up 18% versus the prior record in 2024. MCM collections rose 24% to a record $1.95 billion, and fourth-quarter collections of $503 million were described as the highest quarterly figure ever for the U.S. business.

Management tied the U.S. collections outperformance to new technologies, enhanced digital capabilities, and operational innovation, which it said helped the company reach more consumers and build a “large and growing payer book.” Masih and Hernanz both said these initiatives had a greater impact in the early stages of a portfolio’s lifecycle, contributing to overperformance in recent vintages. They added that collection forecasts are expected to “gradually adjust” to reflect the impact of these initiatives.

Masih also emphasized that consumer payment behavior remained stable despite macro uncertainty, aligning with comments he said have been heard on recent bank and credit card issuer earnings calls.

Cabot results and European market dynamics

In Europe, Masih described Cabot Credit Management’s 2025 performance as “solid.” Cabot collections rose 9% to $641 million. Portfolio purchases were $234 million, which management said was consistent with historical trends but lower than 2024 due to what Masih called an “exceptional” $200 million of purchases by Cabot in the fourth quarter of 2024 that included large spot-market opportunities.

Masih said Encore remained selective with Cabot’s deployments as the U.K. market was affected by subdued consumer lending and low delinquencies, alongside “continued robust competition.” He also said Cabot’s focus on operational excellence and cost management—along with leveraging best practices from MCM—supported stable performance, particularly as U.K. banks increasingly sell fresh portfolios and forward flows.

Financial details: yields, cash overs, and operating leverage

Hernanz reported that 2025 collections and portfolio revenue increased 20% and 12%, respectively, with a collection yield of 63.6%, up 3.9 percentage points year over year. Portfolio revenue increased 12% to $1.46 billion, supported by 12% growth in average receivable portfolios and a portfolio yield of 35.7%.

He also discussed “changes in recoveries,” which he described as the sum of recoveries above or below forecast (cash overs/unders) and changes in expected future recoveries (the net present value impact of forecast changes beyond the current quarter). Changes in recoveries totaled $209 million for 2025, including $198 million of recoveries above forecast and $11 million in changes to expected future recoveries. In the fourth quarter, changes in recoveries were $68 million, including $57 million above forecast and $11 million in changes to expected future recoveries. Hernanz said both MCM and Cabot were net positive contributors to changes in recoveries for the quarter and the full year.

Hernanz said as forecast curves adjust over the coming quarters, the company expects cash overs to “migrate eventually into portfolio revenues.”

Other reported metrics included:

• Debt purchasing revenue increased 37% to $1.66 billion, with a debt purchasing yield of 40.8% (including an estimated 5.1% impact from changes in recoveries).
• Other revenue was $104 million, bringing total revenue to $1.77 billion, up 34%.
• Operating expenses decreased 1% as reported to $1.14 billion; adjusted for one-time items, expenses were up 11% versus 20% collections growth, which management characterized as “significant operating leverage.”
• Cash efficiency margin improved to 57.8% from 54.6% in 2024; Hernanz said the company expects the metric to exceed 58% in 2026.
• Interest expense and other income rose 15% to $291 million, reflecting higher debt balances.
• The tax provision was $79 million, implying an effective tax rate of about 24%.

On funding and maturities, Hernanz highlighted several fourth-quarter balance sheet actions, including issuing $100 million of senior secured high-yield notes due 2031 at a 6.625% coupon, settling $100 million of 2025 convertible notes entirely in cash, and repaying EUR 100 million under 2028 floating-rate notes. He said the transactions left the company with no material maturities until 2028.

2026 outlook and investor Q&A themes

Management provided guidance for 2026, including global portfolio purchases of $1.4 billion to $1.5 billion and global collections expected to rise 5% to $2.7 billion. Masih said the company expects EPS to increase 10% to $12 per share, citing what he described as a “new level of earnings power” after 2025’s productivity enhancements and execution.

Masih also guided to interest expense plus other income of approximately $300 billion for the year, and an effective tax rate in the mid-twenties. (Management did not address the apparent scale of that interest and other income figure on the call.)

In the Q&A, Masih said Encore chose to provide EPS guidance because the company believed its earnings power and outlook were not being reflected in external estimates. He said the company was comfortable with the $12 figure and would monitor performance through the year.

Analysts also asked about share repurchases. Masih reiterated Encore’s capital allocation framework—prioritizing portfolio buying first, then buybacks—and said leverage should continue to trend down given collections strength even as purchases grow. He did not provide a specific buyback target for 2026, but noted repurchases accelerated in late 2025 and said the company was “well-positioned” to continue supporting repurchases under its leverage-based framework.

Other Q&A topics included competition and regulation in the U.S., where Masih said industry rules were stable and he was not seeing new competitors entering in a meaningful way. He also said the U.S. purchasing environment remained steady entering 2026, with stable supply and pricing, and described technology investments as primarily helping collections performance (the “revenue side”) rather than simply lowering costs.

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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