ENCORE CAPITAL GROUP INC
For the period ended Dec 31, 2024. Filed Feb 26, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 26, 2025
ECPG$114.14-9.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-21.
0001084961-24-000008
Item 7. —Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-26.
0001084961-25-000011
Item 7. —Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 184 previous paragraphs and 188 current paragraphs.
111 unchanged; 47 reworded; 25 added; 23 removed; 3 previous and 5 current paragraphs rearranged.
Tables are not compared: 20 previous and 22 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (25)
Current report
In Europe, capital deployment increased during both the year ended December 31, 2024, as compared to 2023, and during the year ended December 31, 2023, as compared to 2022. Pricing continues to remain competitive in our European footprint; constraining the amount of capital we can deploy in Europe. Capital deployment stayed relatively limited during the nine months ended September 30, 2024. During the fourth quarter of 2024, we made three large spot purchases totaling approximately $145.4 million and as a result, capital deployment increased by $93.9 million during the year ended December 31, 2024, as compared to the year ended December 31, 2023.
Current report
Gross collections from purchased receivables increased by $299.9 million, or 16.1%, to $2,162.5 million during the year ended December 31, 2024, from $1,862.6 million during the year ended December 31, 2023. The increase in collections in the United States was primarily a result of consistent increases in capital deployments in the United States in recent years. The increase in collections from purchased receivables in Europe was 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 $10.5 million, during the year ended December 31, 2024, primarily as a result of the weakening of the U.S. dollar against the British Pound by approximately 2.7% for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Current report
We reassess the forecasts of expected lifetime recoveries each quarter by considering, among other factors, historical and current collection performance, changes in consumer behaviors, and macroeconomic environment. During the fourth quarter of 2024, we deployed a new U.K. forecasting model that develops expected future recoveries for investment in receivable portfolios at Cabot. The new model update was primarily driven by recent changes in Cabot as it continues to acquire portfolios that have more dynamic characteristics and are better forecasted utilizing a model that processes data inputs at a more granular level. As part of the new model development process, management updated certain model inputs driven by collection experience, operational performance and recent changes in collection strategies. This new forecasting model was applied to all vintages, which resulted in a change in the estimate of expected future recoveries. This change in accounting estimate reduced Cabot’s estimated remaining collections by $361.6 million, which when discounted to present value, resulted in a negative change in expected future recoveries of $75.3 million. Additionally, we recognized approximately $22.2 million of negative changes in expected future recoveries resulting from the sale of our investment in receivable portfolios associated with the exit of our Italian debt purchasing and recovery business in November 2024. These significant changes in expected recoveries at Cabot during the fourth quarter of 2024, combined with changes driven by recurring reassessments of the expected future recoveries, reduced Cabot’s total estimated remaining collections by $452.9 million, which when discounted to present value, resulted in a net negative change in expected future recoveries of $129.1 million during the fourth quarter of 2024.
Current report
As a result of all the above during the fourth quarter, and the negative changes recorded during the previous quarters in 2024, we recorded a total net negative change in expected future recoveries of approximately $167.9 million during the year ended December 31, 2024. We recorded approximately $49.1 million in net negative change in expected future recoveries during the year ended December 31, 2023.
Current report
•An increase in employee benefits and payroll taxes of approximately $8.6 million.
Current report
•An increase in information technology expenses of approximately $8.9 million; and
Current report
•An increase in consulting fees of approximately $4.5 million; and
Current report
•An increase in miscellaneous general and administrative related expenses of approximately $3.8 million.
Current report
The increase in other operating expenses during the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily due to an increase in postage and printing expenses of approximately $10.3 million and an increase in costs relating to skip tracing of approximately $7.1 million.
Current report
During the fourth quarter of 2024, we performed our annual goodwill impairment assessment as of October 1, 2024, which did not result in any goodwill impairment charge. Subsequent to the annual goodwill impairment test, we significantly lowered the estimated future recoveries for our investment in receivable portfolios at Cabot during the fourth quarter of 2024, management considered this a triggering event and conducted another quantitative test for goodwill impairment as of December 31, 2024. This subsequent goodwill impairment analysis resulted in an impairment charge for the Cabot reporting unit of $100.6 million. The decline in the fair value of the Cabot reporting unit below its carrying value primarily resulted from changes in expected future cash flows as compared to our previous financial forecasts, and to a lesser extent, a decline in market multiples. We also recorded a goodwill impairment charge of $238.2 million during the year ended December 31, 2023. No triggering events were identified during the interim periods between the two annual goodwill impairment tests. Refer to “Note 15: Goodwill and Identifiable Intangible Assets” to our consolidated financial statements for further details.
Current report
Impairment of Assets
Current report
•An unfavorable impact of foreign currency translation of approximately $1.6 million driven by the weakening of the U.S. dollar against the British Pound.
Current report
Loss on Extinguishment of Debt
Current report
Loss on extinguishment of debt associated with write-offs of unamortized debt discount and debt issuance costs relating to the early redemptions of our senior secured notes and the refinancing of the Cabot Securitisation Senior Facility was $7.8 million during the year ended December 31, 2024. Refer to “Note 6: Borrowings” in the notes to our consolidated financial statements for details of our financing activities.
Current report
(3)Represents taxable foreign currency movement recognized in a foreign subsidiary.
Current report
Supplemental quarterly financial information
Current report
Financial highlights
Current report
(1)Includes U.S. purchases of $295.3 million and $208.5 million, and Europe purchases of $199.8 million and $84.0 million in Q4 2024 and Q4 2023, respectively.
Current report
(2)NM - Not meaningful.
Current report
Consolidated financial statements of operations
Current report
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.
Current report
In October 2024, we fully redeemed the Encore 2025 Notes at par using drawings from our Global Senior Facility and cash on hand. The Global Senior Facility was subsequently upsized by $92.0 million from $1,203.0 million to $1,295.0 million in October 2024. In November, 2024, we fully redeemed the Encore 2026 Senior Secured Notes at par using drawings from our Global Senior Facility and cash on hand.
Current report
(2) Changes in recoveries, which includes:
Current report
During the fourth quarter of 2024, we deployed a new U.K. forecasting model that develops expected future recoveries for investment in receivable portfolios at Cabot. The new model update was primarily driven by recent changes in Cabot as it continues to acquire portfolios that have more dynamic characteristics and are better forecasted utilizing a model that processes data inputs at a more granular level. As part of the new model development process, management updated certain model inputs driven by collection experience, operational performance and recent changes in collection strategies. This new forecasting model was applied to all vintages, which resulted in a change in the estimate of expected future recoveries. This change in accounting estimate reduced Cabot’s estimated remaining collections by $361.6 million, which when discounted to present value, resulted in a negative change in expected future recoveries of $75.3 million during the fourth quarter of 2024. This change in estimate had no effect on past periods. We develop a “best estimate” of our expected future recoveries based on reasonable and supportable information at each reporting period. We evaluate our estimates in light of developing information. Future changes to internal and external factors that affect our collection forecasts could have a material adverse effect on our financial condition, results of operations, and cash flows.
Current report
Valuation of Goodwill
Removed paragraphs (23)
Previous report
Macroeconomic Update
Previous report
During 2021, excess consumer liquidity resulting from the COVID-19 pandemic led to consumer behavior (particularly in the U.S.) that contributed to record collections. Similarly, as reported by leading financial industry publications, excess consumer liquidity resulted in lower levels of delinquencies and charge offs for leading lenders. As a result, 2021 was a period of decreased supply and competitive pricing.
Previous report
During 2022, consumer behavior in the U.S. that contributed to record collections in 2021 normalized, particularly in the second half of the year. Delinquencies, charge offs and market supply remained at lower levels primarily for the first half of the year, resulting in pressure on portfolio pricing. As the year progressed, we began to see signs of increased delinquencies and charge offs in the U.S., which we believe contributed to an increase in portfolio supply. Portfolio pricing in the U.S. in the fourth quarter began to soften, while pricing in the U.K. and Europe remained competitive. Throughout 2022 we noted higher interest rates, elevated levels of inflation, agent staffing challenges as a result of the tight labor market and large foreign exchange rate fluctuations.
Previous report
During 2023, we believe increased supply led to improved portfolio pricing in the U.S. Inflation in the U.K. put pressure on wages and other costs early in the year and we took action to control our cost base, including a headcount reduction in support functions at Cabot. Despite higher interest rates impacting funding costs for market participants in 2023, we believe that the portfolio pricing environment in the U.K. and Europe did not yet fully reflect increased funding costs that resulted from higher interest rates.
Previous report
In Europe, our purchased defaulted debt portfolios primarily consist of paying and non-paying consumer loan accounts. We also purchase: (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.
Previous report
In Europe, capital deployment increased during the year ended December 31, 2023, as compared to 2022. Pricing continues to remain competitive in Europe and as a result purchases were limited for all the periods presented as compared to pre-pandemic levels. In Europe, bank delinquencies remain at relatively low levels, and the level of outstanding unsecured consumer borrowings, while increasing, is still below pre-pandemic levels. Capital deployment decreased for the year ended December 31, 2022, as compared to 2021, primarily due to the unfavorable impact from foreign currency translation driven by the strengthening of the U.S. dollar against the British Pound.
Previous report
In addition to the purchases of receivable portfolios discussed above, during the years ended December 31, 2023, 2022, and 2021, we also invested $26.9 million, $39.3 million, and $17.1 million in REO assets, respectively.
Previous report
Gross collections from purchased receivables decreased $395.8 million, or 17.2%, to $1,911.5 million during the year ended December 31, 2022, from $2,307.4 million during the year ended December 31, 2021. The decrease of collections in the United States was primarily a result of an unusually high level of collections in 2021 resulting from changes in consumer behavior during the COVID-19 pandemic. The decrease was also a result of lower purchasing volumes in recent periods due to the COVID-19 pandemic. The changes in consumer behavior that resulted from the impacts of the COVID-19 pandemic, while more prevalent in 2021, continued through the first half of 2022. We believe the pandemic-related drivers of this changed behavior have normalized. The decrease in collections from purchased receivables in Europe was primarily due to the unfavorable impact from foreign currency translation, primarily by the strengthening of the U.S. dollar against the British Pound. In addition, continuing labor market tightness in the UK affected agent staffing levels and, consequently, mildly impacted collections for the year.
Previous report
We reassess the forecasts of expected lifetime recoveries each quarter by considering, among other factors, historical and current collection performance, changes in consumer behaviors, and macroeconomic environment. As a result, we have updated our forecast, including reducing expected future recoveries for certain static pools, primarily the 2022 and 2021 U.S. vintages, where the initial cash flow forecasts were established during a period marked by changed consumer behavior, which caused challenges in forecasting. The changes to the forecast, when discounted to present value, resulted in a net negative change in expected future recoveries of approximately $39.2 million for the three months ended December 31, 2023. This negative change in expected future recoveries when combined, together with net $9.9 million of negative changes in expected future recoveries recorded in the first nine months of the year resulted in a net negative change in expected future recoveries of approximately $49.1 million during the year ended December 31, 2023. We recorded approximately $64.0 million net negative change in expected future period recoveries during the three months ended December 31, 2022 and $63.9 million in net positive change in expected future period recoveries during the year ended December 31, 2022.
Previous report
The decrease in servicing revenues during the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily attributable to reduced service demand from BPO clients.
Previous report
Other revenues increased during the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily driven by the increased sale of real estate assets.
Previous report
•Costs relating to headcount reductions in Europe of approximately $7.4 million; and
Previous report
•The increase was partially offset by decreased stock-based compensation expense of $1.5 million primarily attributed to forfeiture of certain stock awards.
Previous report
•A decrease in rent and lease expenses of approximately $7.7 million and a decrease in legal expenses and consulting fees of approximately $7.3 million; and
Previous report
•This decrease was partial offset by an increase in general and administrative expense of approximately $13.7 million primarily relating to costs associated with information technology, business travel, and facilities expense.
Previous report
During the fourth quarter of 2023, we performed our annual goodwill impairment test and concluded that the fair value of our Cabot reporting was less than its carrying amount. As a result, we recorded an impairment charge of $238.2 million to goodwill during the year ended December 31, 2023. Refer to “Note 15: Goodwill and Identified Intangible Assets” to our consolidated financial statements for further details.
Previous report
Impairment of Intangible Assets
Previous report
(3)In 2023, represents a taxable gain recognized in a foreign subsidiary. In 2022, represents deductible loss recognized in a foreign subsidiary that maintains a full valuation allowance on its deferred tax assets. Accordingly, the deductible loss increased the valuation allowance and did not result in any tax benefit during the year ended December 31, 2022.
Previous report
The determination of the recorded value of intangible assets acquired in a business combination requires management to make estimates and assumptions that affect our consolidated financial statements. Valuation techniques consistent with the market approach, income approach and/or cost approach are used to measure fair value. An estimate of fair value can be affected by many assumptions that require significant judgment. We amortize identifiable intangible assets with finite lives over their useful lives. Changes in strategy and/or market condition may result in adjustments to recorded intangible asset balances or their useful lives.
Previous report
Income Taxes
Previous report
We are subject to income taxes in multiple tax jurisdictions worldwide. We record income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the carrying amounts of existing assets and liabilities and their respective tax bases, and attributable to operating loss and tax credit carryforwards.
Previous report
Accounting standards regarding income taxes require a reduction of the carrying amounts of deferred tax assets by a valuation allowance, if based on the available evidence, it is more likely than not such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed at each reporting period based on a more likely than not criteria. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, tax credit carryforwards and tax planning strategies.
Previous report
We recorded valuation allowances on the net deferred tax assets of certain foreign jurisdictions of $55.0 million and $66.6 million as of December 31, 2023 and 2022, respectively. Management will reassess the realization of deferred tax assets each reporting period and consider all available evidence including the scheduled reversal of deferred tax liabilities, sources of taxable income and tax planning strategies. To the extent the financial results of these operations improve and it becomes more likely than not the deferred tax assets are realizable, we will reduce the valuation allowance in the period such determination is made, as appropriate.
Reworded paragraphs (47)
Previous wording
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.
Current wording
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 primarily 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.
Previous wording
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.
Current wording
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”).
Previous wording
We have purchased non-performing loans in Mexico. Additionally, we have invested in Encore Asset Reconstruction Company (“EARC”) in India.
Current wording
We have purchased non-performing loans in Mexico. Additionally, we have a subsidiary Encore Asset Reconstruction Company (“EARC”) in India.
Previous wording
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.
Current wording
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 generally 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.
Previous wording
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.
Current wording
In Europe, our purchased defaulted debt portfolios primarily consist of credit card and consumer loan accounts. We purchase 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 generally 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.
Previous wording
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 fourth quarter continued to improve as a result of increased 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.
Current wording
With lending reaching record levels and the highest U.S. charge-off rate in ten years, supply remains elevated at a record level. 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 fourth 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.
Previous wording
The UK market for charged-off portfolios prior to the COVID-19 pandemic generally provided a relatively consistent pipeline of opportunities, despite a historically low level of charge-off rates, as creditors had embedded debt sales as an integral part of their business models. The percentage of volume that is sold in multi-year forward flow arrangements is increasing.
Current wording
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 had embedded debt sales as an integral part of their business models. The percentage of volume that is sold in multi-year forward flow arrangements is increasing.
Previous wording
The Spain, France, and Portugal debt markets continue to be three of the largest in Europe with significant debt sales and an expectation of a significant amount of debt to be sold in the future. Financial institutions continue to look to dispose of non-performing loans in these markets.
Current wording
France and Spain continue to be two of the largest markets in Europe with significant portfolio sales. Financial institutions continue to look to dispose of non-performing loans in these markets.
Previous wording
Banks decreased portfolio sales at the beginning of the COVID-19 pandemic in order to focus on customers’ needs. 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; however we began to see improvement in pricing in the fourth quarter.
Current wording
While we have seen sales activity across all of our European markets, underlying default rates are generally low by historic levels, and consumer lending volumes have stagnated. Sales levels are expected to fluctuate from quarter to quarter. In general, portfolio pricing remains competitive across our European footprint, constraining the amount of capital we can deploy in Europe.
Previous wording
In the United States, capital deployment increased during the year ended December 31, 2023, as compared to 2022. 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. Capital deployment increased for the year ended December 31, 2022, as compared to 2021, primarily due to an increase in supply in the U.S. to pre-pandemic levels.
Current wording
In the United States, capital deployment increased during both the year ended December 31, 2024, as compared to 2023, and during the year ended December 31, 2023, as compared to 2022. 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 remained at favorable levels.
Previous wording
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):
Current wording
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.
Previous wording
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 consolidated statements of operations.
Current wording
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 consolidated statements of operations. 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.
Previous wording
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. There was no material foreign currency translation impact to our revenue for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
Current wording
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 revenue was favorably impacted by foreign currency translation by approximately $6.2 million, during the year ended December 31, 2024, primarily as a result of the weakening of the U.S. dollar against the British Pound by approximately 2.7% for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Previous wording
Revenue recognized from portfolio basis stayed consistent during the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Current wording
The increase in revenue recognized from portfolio basis during the year ended December 31, 2024, as compared to the year ended December 31, 2023, was 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 recent years.
Previous wording
Recoveries above or below forecast represent over and under-performance in the reporting period, respectively. Collections under-performed the forecasted collections by approximately $13.3 million and $33.4 million during the three months and year ended December 31, 2023, respectively. The under-performance was primarily attributable to shortfalls in collections for our 2022 and 2021 U.S. vintages as consumers transitioned back to more normalized payment behavior. Recoveries below forecast were approximately $22.2 million during the three months ended December 31, 2022, recoveries above forecast were approximately $29.3 million during the year ended December 31, 2022.
Current wording
Recoveries above or below forecast represent over and under-performance in the reporting period, respectively and are expected to vary from period to period. Collections over-performed the forecasted collections by approximately $78.2 million during the year ended December 31, 2024. Collections under-performed the forecasted collections by approximately $33.4 million during the year ended December 31, 2023. The over and under performance in the periods presented represented only a small fraction of total collections in the corresponding periods.
Previous wording
(2)All portfolios are on non-accrual basis. Annual pool groups for other geographies have been aggregated for disclosure purposes.
Current wording
(1)All portfolios are on non-accrual basis. Annual pool groups for other geographies have been aggregated for disclosure purposes.
Previous wording
Other operating expenses remained relatively consistent during the year ended December 31, 2023, compared to the year ended December 31, 2022.
Current wording
Servicing revenues and other revenues remained relatively consistent during the year ended December 31, 2024, as compared to the year ended December 31, 2023.
Previous wording
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. There was no material foreign currency translation impact to operating expenses for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
Current wording
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. Our operating expenses were unfavorably impacted by foreign currency translation by approximately $7.2 million, during the year ended December 31, 2024, primarily as a result of the weakening of the U.S. dollar against the British Pound by approximately 2.7% for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Previous wording
•An increase in salaries and bonus and payroll related taxes of approximately $10.5 million primarily due to an increase in overall headcount and market adjustments; and
Current wording
•An increase in salaries and bonus of approximately $22.6 million primarily due to an increase in overall average headcount and general increase in wage during the year ended December 31, 2024 as compared to 2023; and
Previous wording
The increase in cost of legal collections during the year ended December 31, 2023, compared to the year ended December 31, 2022, was primarily due to an increase in court costs due to more placements in the legal collection channel.
Current wording
The increase in cost of legal collections during the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily due to an increase in court costs due to increased legal placements in this channel in the U.S. The increase was 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.
Previous wording
The decrease in general and administrative expenses during the year ended December 31, 2023, compared to the year ended December 31, 2022, was primarily due to the following reasons:
Current wording
The increase in general and administrative expenses during the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily due to the following reasons:
Previous wording
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 were consistent during the year ended December 31, 2023, compared to the year ended December 31, 2022.
Current wording
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 $5.1 million during the year ended December 31, 2024, compared to the year ended December 31, 2023. The decrease was primarily due to fewer accounts placed with external agencies and favorable commission rates received from such agencies in Europe.
Previous wording
The decrease in depreciation and amortization expenses during the year ended December 31, 2023, compared to the year ended December 31, 2022, was primarily due to a decrease in depreciation expenses of approximately $2.0 million and a decrease in amortizable expenses of approximately $2.7 million as a result of smaller depreciable and amortizable asset balances during the year ended December 31, 2023, compared to the year ended December 31, 2022.
Current wording
The decrease in depreciation and amortization expenses during the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily due to a decrease in depreciation expenses of approximately $5.8 million and a decrease in amortizable expenses of approximately $3.5 million as a result of smaller depreciable and amortizable asset balances during the year ended December 31, 2024, compared to the year ended December 31, 2023.
Previous wording
In connection with our annual goodwill impairment testing discussed above, we also tested for impairment of our long-lived intangible assets during the fourth quarter of 2023. As a result of the test, we recorded an impairment charge of approximately $18.7 million for our acquired definite-lived intangible assets during the year ended December 31, 2023. We recorded an impairment charge of $4.1 million for our acquired definite-lived intangible assets during the year ended December 31, 2022. Refer to “Note 15: Goodwill and Identified Intangible Assets” to our consolidated financial statements for further details.
Current wording
During the fourth quarter of 2024, we tested for impairment of our long-lived assets held at our servicing business and recorded an impairment charge relating to the computer systems of approximately $18.5 million. Refer to “Property and Equipment, Net” in “Note 5: Composition of Certain Financial Statement Items” to our consolidated financial statements for further details. We recorded an impairment charge of $18.7 million for our acquired definite-lived intangible assets during the year ended December 31, 2023.
Previous wording
•The effect resulting from rising interest rates of approximately $31.8 million; and
Current wording
•The effect resulting from rising interest rates of approximately $23.9 million; and
Previous wording
•The effect resulting from increased average debt balance of approximately $13.2 million.
Current wording
•The effect resulting from increased average debt balance of approximately $25.2 million; and
Previous wording
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 was $5.1 million and $2.1 million during the years ended December 31, 2023, and 2022, respectively.
Current wording
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 was $6.8 million and $5.1 million during the years ended December 31, 2024 and 2023, respectively. Interest income included in other income, net of other expense, was approximately $7.0 million and $4.7 million during the years ended December 31, 2024 and 2023, respectively.
Previous wording
During the years ended December 31, 2023, and 2022, we recorded income tax provisions of $26.2 million and $116.4 million, respectively.
Current wording
During the years ended December 31, 2024 and 2023, we recorded income tax provisions of $43.0 million and $26.2 million, respectively.
Previous wording
(1)In 2023, includes reduction in valuation allowance due to the forfeit of tax benefits on merger or liquidation of foreign subsidiaries that maintained full valuation allowances on their deferred tax assets. In 2022, includes valuation allowance recorded on U.K. deferred tax assets.
Current wording
(1)The change in valuation allowance during the year ended December 31, 2024 reflected certain foreign subsidiaries’ operating losses. The change in valuation allowance during the year ended December 31, 2023 was primarily due to the forfeit of tax benefits on merger or liquidation of foreign subsidiaries that maintained full valuation allowances on their deferred tax assets.
Previous wording
(2)During the fourth quarter of 2023, we recorded a non-cash goodwill impairment charge of $238.2 million at the Cabot reporting unit. Refer to “Note 15: Goodwill and Identified Intangible Assets” to our consolidated financial statements for further details.
Current wording
(2)During the years ended December 31, 2024 and 2023, we recorded a non-cash goodwill impairment charge of $100.6 million and $238.2 million at our Cabot reporting unit, respectively. Refer to “Note 15: Goodwill and Identifiable Intangible Assets” to our consolidated financial statements for further details.
Previous wording
(4)Represents the forfeit of tax benefits on merger or liquidation of foreign subsidiaries that maintained full valuation allowances on their deferred tax asset.
Current wording
(4)Represents the forfeit of tax benefits on merger or liquidation of foreign subsidiaries that maintained full valuation allowances on their deferred tax assets during the year ended December 31, 2023.
Previous wording
(3)During the fourth quarter of 2023, we recorded a non-cash goodwill impairment charge of $238.2 million and a non-cash impairment of intangible assets of $18.7 million. We recorded a non-cash impairment of intangible assets of $4.1 million during the year ended December 31, 2022. We believe these non-cash impairment charges are not indicative of ongoing operations, therefore adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results. Refer to “Note 15: Goodwill and Identified Intangible Assets” to our consolidated financial statements for further details.
Current wording
(3)During the years ended December 31, 2024 and 2023, we recorded a non-cash goodwill impairment charge of $100.6 million and $238.2 million, respectively. We recorded a non-cash impairment of long-lived assets of $18.5 million and a non-cash impairment of intangible assets of $18.7 million during the years ended December 31, 2024 and 2023, respectively. We believe these non-cash impairment charges are not indicative of ongoing operations, therefore adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results. Refer to “Note 15: Goodwill and Identifiable Intangible Assets” and “Property and Equipment, Net” in “Note 5: Composition of Certain Financial Statement Items” to our consolidated financial statements for further details.
Previous wording
(1)As of December 31, 2023, ERC for Zero Basis Portfolios includes approximately $51.7 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 include approximately $48.7 million from non-accrual portfolios, primarily in other geographies.
Current wording
(1)As of December 31, 2024, ERC for Zero Basis Portfolios includes approximately $38.9 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 include approximately $25.4 million from non-accrual portfolios, primarily in other geographies.
Previous wording
(2)Represents the expected remaining gross cash collections over a 180-month period. As of December 31, 2023, ERC for 84-month and 120-month periods were:
Current wording
(2)Represents the expected remaining gross cash collections over a 180-month period. As of December 31, 2024, ERC for 84-month was:
Previous wording
(5) Real estate-owned assets ERC includes approximately $125.0 million and $1.2 million of estimated future cash flows for Europe and Other Geographies, respectively.
Current wording
(5) Real estate-owned assets (“REO”) ERC includes approximately $59.9 million and $0.6 million of estimated future cash flows for Europe and Other Geographies, respectively.
Previous wording
As of December 31, 2023, we had $3.5 billion in investment in receivable portfolios. The estimated future collections applied to the investment in receivable portfolios net balance is as follows(in thousands):
Current wording
As of December 31, 2024, we had $3.8 billion in investment in receivable portfolios. The estimated future collections applied to the investment in receivable portfolios net balance is as follows(in thousands):
Previous wording
Net cash provided by operating activities was $153.0 million, $210.7 million, and $303.1 million during the years ended December 31, 2023, 2022, and 2021, respectively. Operating cash flows are derived by adjusting net income for non-cash operating items such as depreciation and amortization, changes in recoveries, goodwill impairment, impairment of intangible assets, stock-based compensation charges, deferred income tax, 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. During the year ended December 31, 2023, we recorded a goodwill impairment of $238.2 million and an impairment of intangible assets of $18.7 million. Changes in recoveries increased the operating cash flows by $82.5 million during the year ended December 31, 2023 and decreased the operating cash flows by $93.1 million and $199.1 million during the years ended December 31, 2022 and 2021, respectively. Refer to “Note 4: Investment in Receivable Portfolios, Net” in the notes to our consolidated financial statements for discussion relating to changes in recoveries.
Current wording
Net cash provided by operating activities was $156.2 million, $153.0 million, and $210.7 million during the years ended December 31, 2024, 2023, and 2022, respectively. Operating cash flows are derived by adjusting net income for non-cash operating items such as depreciation and amortization, changes in recoveries, goodwill impairment, impairment of assets, stock-based compensation charges, deferred income tax, 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. During the year ended December 31, 2024, we recorded a goodwill impairment of $100.6 million and an impairment of long-lived assets of $18.5 million. During the year ended December 31, 2023, we recorded a goodwill impairment of $238.2 million and an impairment of intangible assets of $18.7 million. Changes in recoveries increased the operating cash flows by $89.7 million, and $82.5 million during the years ended December 31, 2024, and 2023, respectively. Changes in recoveries decreased the operating cash flows by $93.1 million during the year ended December 31, 2022. Refer to “Note 4: Investment in Receivable Portfolios, Net” in the notes to our consolidated financial statements for discussion relating to changes in recoveries.
Previous wording
Net cash used in investing activities was $401.9 million, and $130.2 million during the years ended December 31, 2023, and 2022, respectively. Net cash provided by investing activities was $339.9 million during the year ended December 31 2021. 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 were $1,060.2 million, $790.6 million, and $657.3 million during the years ended December 31, 2023, 2022, and 2021, respectively. Collection proceeds applied to the principal of our receivable portfolios were $658.1 million, $709.2 million, and $1,019.6 million during the years ended December 31, 2023, 2022, and 2021, respectively. Refer to Purchases and Collections within “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” for discussion relating to purchases and collections.
Current wording
Net cash used in investing activities was $440.4 million, $401.9 million, and $130.2 million during the years ended December 31, 2024, 2023, and 2022, 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 were $1,336.4 million, $1,060.2 million, and $790.6 million during the years ended December 31, 2024, 2023, and 2022, respectively. Collection proceeds applied to the principal of our receivable portfolios were $859.9 million, $658.1 million, and $709.2 million during the years ended December 31, 2024, 2023, and 2022, respectively. Refer to Purchases and Collections within “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” for discussion relating to purchases and collections.
Previous wording
Net cash provided by financing activities was $268.3 million during the year ended December 31, 2023. Net cash used in financing activities was $107.4 million, and $655.7 million during the years ended December 31, 2022, and 2021, 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 $1,196.0 million, $779.5 million and $821.9 million during the years ended December 31, 2023, 2022, and 2021, respectively. Repayments of amounts outstanding under our credit facilities were $989.6 million, $515.7 million and $896.4 million during the years ended December 31, 2023, 2022, and 2021, respectively. Proceeds from the issuance of senior secured notes were $104.2 million and $353.7 million during the years ended December 31, 2023 and 2021, respectively. Repayments of senior secured notes were $39.1 million, $39.1 million and $359.2 million during the years ended December 31, 2023, 2022, and 2021, respectively. During the year ended December 31, 2023, we issued $230.0 million 4.00% convertible senior notes that mature in 2029, and used $212.5 million in cash to repurchase and settle our exchangeable senior notes due 2023. We repaid $221.2 million, and $161.0 million of convertible senior notes using cash on hand during the years ended December 31, 2022, and 2021, respectively.
Current wording
Net cash provided by financing activities was $317.8 million, and $268.3 million during the years ended December 31, 2024 and 2023, respectively. Net cash used in financing activities was $107.4 million during the year ended December 31, 2022. 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 $2,031.5 million, $1,196.0 million, and $779.5 million during the years ended December 31, 2024, 2023, and 2022, respectively. Repayments of amounts outstanding under our credit facilities were $1,868.1 million, $989.6 million, and $515.7 million during the years ended December 31, 2024, 2023, and 2022, respectively. During the year ended December 31, 2024, we issued $1.0 billion in senior secured notes (of which $500.0 million matures in 2029 and $500.0 million matures in 2030). We used a portion of the proceeds from the senior secured notes issuance to repay drawings under our Global Senior Facility. Proceeds from the issuance of senior secured notes were $104.2 million during the year ended December 31, 2023. Using drawings from its Global Senior Facility and cash on hand, we fully redeemed the Encore 2025 Notes and the Encore 2026 Notes in the fourth quarter of 2024. The total repayments of senior secured notes were $789.1 million, $39.1 million, and $39.1 million during the years ended December 31, 2024, 2023, and 2022, respectively. Additionally, in connection with the early redemptions of the Encore 2025 Notes and the Encore 2026 Notes, we settled the corresponding 2020 Euro Swaps and the 2023 GBP Swaps on the respective loan redemption date for approximately $40.0 million in cash. During the year ended December 31, 2023, we issued $230.0 million 4.00% convertible senior notes that mature in 2029, and used $212.5 million in cash to repurchase and settle our exchangeable senior notes due 2023. We repaid $221.2 million of convertible senior notes using cash on hand during the year ended December 31, 2022.
Previous wording
We are in material compliance with all covenants under our financing arrangements. See “Note 6: Borrowings” in the notes to our consolidated financial statements for a further discussion of our debt. Available capacity under our Global Senior Facility was $363.8 million as of December 31, 2023.
Current wording
We are in material compliance with all covenants under our financing arrangements. See “Note 6: Borrowings” in the notes to our consolidated financial statements for a further discussion of our debt. Available capacity under our Global Senior Facility was $402.8 million as of December 31, 2024.
Showing the first 40 of 47 pairs. Open the source sections for the rest.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
The following table summarizes the total collections by collection channel and geographic area during the periods presented (in thousands):
Current report — wording carried from elsewhere
(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
Current report — wording carried from elsewhere
(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
Current report — wording carried from elsewhere
(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).
Current report — wording carried from elsewhere
See “Note 4: Investment in Receivable Portfolios, Net” to our consolidated financial statements for further discussion of investment in receivable portfolios.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
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.
Previous report — wording carried elsewhere
(1)Portfolio balance includes non-accrual pool groups. The EIR presented is only for pool groups that accrete portfolio revenue.
Previous report — wording carried elsewhere
Valuation of Goodwill and Other Intangible Assets