ENCORE CAPITAL GROUP INC

Previous wording

Encore Capital Group, Inc. (“Encore”) has three business units: MCM, which consists of Midland Credit Management, Inc. and its 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.

Current wording

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 and its subsidiaries and European affiliates, and LAAP, which is comprised of our investments and operations in Latin America and Asia-Pacific.

Previous wording

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.

Current wording

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 unsecured personal loans.

Previous 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 accurately value portfolios and to develop collection strategies that maximize future returns. 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.

Current wording

In Europe, our purchased defaulted debt portfolios primarily consist of credit card and consumer loan accounts. We purchase receivable portfolios using proprietary pricing models that utilize account-level statistical and behavioral data. These models generally allow us to accurately value portfolios and to develop collection strategies that maximize future returns. 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 and charge-off rates remaining near recent peak levels, U.S. portfolio supply continues to be robust. Issuers have continued to sell predominantly fresh portfolios that are generally sold within six months of the consumer’s account being charged-off by the financial institution. Pricing in the third 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 steadying lending and delinquency rates at elevated levels will result in stable and strong market supply.

Current wording

With lending and charge-off rates remaining near recent peak levels, U.S. portfolio supply continues to be robust. 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 first 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 steady lending and delinquency rates at elevated levels will result in stable and strong market supply.

Previous 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 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 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-offs, as creditors have embedded debt sales as an integral part of their business models.

Previous wording

In the United States, capital deployments increased during the three and nine months ended September 30, 2025, 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 remained at favorable levels.

Current wording

In the United States, capital deployment remained consistent during the three months ended March 31, 2026, as compared to the corresponding period 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 remained at favorable levels.

Previous wording

In Europe, capital deployments increased during the three and nine months ended September 30, 2025, as compared to the corresponding periods in the prior year. Pricing continues to remain competitive in our European footprint; constraining the amount of capital we choose to deploy. Capital deployment in Europe increased during the three and nine months ended September 30, 2025. Capital deployment can fluctuate based on the timing of the forward flow contracts and spot purchases. The increases in capital deployment were also partially driven by favorable foreign currency translation effect resulting from the weakening of the U.S. dollar against the British Pound during the comparable periods.

Current wording

In Europe, capital deployment decreased during the three months ended March 31, 2026, as compared to the corresponding period in the prior year. Pricing continues to remain competitive in our European footprint, constraining the amount of capital we choose to deploy in Europe. Capital deployment can fluctuate based on the timing of the forward flow contracts and spot purchases.

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.

Current wording

We utilize three channels for the collection of our receivable portfolios: 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

Gross collections from purchased receivables increased by $112.8 million, or 20.5%, to $663.0 million during the three months ended September 30, 2025, as compared to $550.3 million during the three months ended September 30, 2024. Gross collections from purchased receivables increased by $314.9 million, or 19.6%, to $1,922.8 million during the nine months ended September 30, 2025, as compared to $1,607.9 million during the nine months ended September 30, 2024. The increases in collections in the United States were primarily a result of consistent increases in capital deployments in the United States in recent periods. The increases in collections from purchased receivables in Europe were primarily driven by a combination of increases in capital deployments and acquisitions of portfolios with higher returns in recent periods. Additionally, collections in Europe were favorably impacted by foreign currency translation by approximately $6.8 million and $13.5 million during the three and nine months ended September 30, 2025, respectively, primarily as a result of the weakening of the U.S. dollar against the British Pound by approximately 3.5% and 2.8% for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024, respectively.

Current wording

Collections from purchased receivables increased by $113.6 million, or 18.8%, to $718.4 million during the three months ended March 31, 2026, as compared to $604.8 million during the three months ended March 31, 2025. The increase in collections in the United States was primarily a result of consistent increases in capital deployments in the United States in recent periods. Collections in Europe were favorably impacted by foreign currency translation by approximately $12.2 million, during the three months ended March 31, 2026, primarily as a result of the weakening of the U.S. dollar against the British Pound by approximately 6.6% for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025.

Previous wording

(1) Portfolio revenue, 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

Current wording

(1) Portfolio revenue, which is the accretion of the discount on the negative allowance due to the passage of time (generally the receivable portfolio balance multiplied by the EIR), and

Previous wording

(2) Changes in recoveries, which includes

Current wording

(2)Changes in recoveries, which includes

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 portfolio revenue in our condensed consolidated statements of income. 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.

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. All subsequent collections to the ZBA pools are recognized as ZBA revenue, which is included in portfolio revenue in our condensed consolidated statements of income. 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. Our revenues were favorably impacted by foreign currency translation by approximately $5.2 million and $10.2 million during the three and nine months ended September 30, 2025, respectively, primarily as a result of the weakening of the U.S. dollar against the British Pound by approximately 3.5% and 2.8% for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024, respectively.

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 $9.2 million during the three months ended March 31, 2026, primarily as a result of the weakening of the U.S. dollar against the British Pound by approximately 6.6% for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025.

Previous wording

The increases in revenue recognized from portfolio basis during the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024, were primarily due to a higher portfolio basis (i.e. a higher receivable portfolios balance) in the U.S. driven by a consistent higher volume of purchases in recent periods.

Current wording

The increase in revenue recognized from portfolio basis during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, was primarily due to a higher portfolio basis (i.e. a higher receivable portfolios balance) in the U.S. driven by a consistent higher volume of purchases in recent periods.

Previous 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 during the three and nine months ended September 30, 2025, over-performed the forecasted collections by approximately $61.5 million and $140.7 million, respectively, primarily as a result of collections over-performance in the U.S. The collections over-performance in the U.S. was driven by the deployment of new technologies, enhanced digital capabilities and continued operational innovation, which enabled us to reach more consumers, leading to more payments as well as a larger payer book. These initiatives had a greater impact on the early stages of a portfolio’s lifecycle, leading to over-performance for our recent vintages. We expect that our collections forecasts will gradually adjust to reflect the positive impact of these initiatives. Collections during the three and nine months ended September 30, 2024, over-performed the forecasted collections by approximately $23.0 million and $51.3 million, respectively.

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 during the three months ended March 31, 2026 over-performed the forecasted collections by $46.0 million, primarily as a result of collections over-performance in the U.S. The collections over-performance in the U.S. was driven by the deployment of new technologies, enhanced digital capabilities and continued operational innovation, which enabled us to reach more consumers, leading to more payments as well as a larger payer book. These initiatives had a greater impact on the early stages of a portfolio’s lifecycle, leading to over-performance for our recent vintages. Collections during the three months ended March 31, 2025 over-performed the forecasted collections by $27.0 million.

Previous wording

When reassessing the forecasts of expected lifetime recoveries during the three months ended September 30, 2025, management considered, among other factors, historical and current collection performance, changes in consumer behavior, and the macroeconomic environment. The significant recoveries above forecast in recent periods were carefully evaluated. Management concluded that the recoveries above forecast were primarily current period collections over-performance and did not represent any material shift in timing of the collections. Therefore, the updated forecast did not result in a material change in expected future recoveries. We recorded a net positive change in expected future recoveries of approximately $2.2 million during the three months ended September 30, 2025. This $2.2 million net positive change recorded during the three months ended September 30, 2025 was offset by approximately $2.2 million net negative change recorded in the first half of fiscal year 2025 and as a result, the net change in expected future recoveries recorded during the nine months ended September 30, 2025 was negligible. During the three and nine months ended September 30, 2024, we recorded approximately $10.3 million and $45.2 million in net negative change in expected future recoveries, respectively.

Current wording

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 the macroeconomic environment. The significant recoveries above forecast during the three months ended March 31, 2026 were carefully evaluated. We concluded that the recoveries above forecast during the three months ended March 31, 2026 were primarily current period collections over-performance and did not represent any material shift in timing of the collections. Additionally, the sustained over-performance in recent quarters led to increases in forecasted future recoveries for recently acquired vintages. As a result, we recorded a net positive change of $16.7 million in expected future recoveries during the three months ended March 31, 2026. During the three months ended March 31, 2025, we recorded a net negative change of $5.5 million in expected future recoveries.

Previous wording

The following tables summarize collections from purchased receivables, portfolio revenue, end of period receivable portfolios balance and other related supplemental data, by year of purchase (in thousands, except percentages):

Current wording

The following tables summarize collections from receivable portfolios, portfolio revenue, changes in recoveries, end of period receivable portfolios balance and other related supplemental data, by year of purchase (in thousands, except percentages):

Previous wording

Servicing revenue increased during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, primarily driven by increased demand from BPO clients. Other revenues decreased during the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, primarily driven by a decrease in gains recognized on the sale of real estate assets.

Current wording

Servicing revenue decreased during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, primarily driven by decreases in BPO revenue and collection service fees. Other revenues decreased during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, primarily driven by a decrease in gains recognized on the sale of real estate assets.

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. Our operating expenses were unfavorably impacted by foreign currency translation by approximately $3.5 million and $7.1 million, during the three and nine months ended September 30, 2025, respectively, primarily as a result of the weakening of the U.S. dollar against the British Pound by approximately 3.5% and 2.8% for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024, respectively.

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 $6.6 million, during the three months ended March 31, 2026, primarily as a result of the weakening of the U.S. dollar against the British Pound by approximately 6.6% for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025.

Previous wording

The increases in salaries and employee benefits during the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024, respectively, were primarily due to increase in overall headcount.

Current wording

The increase in salaries and employee benefits during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, was primarily due to the following reasons:

Previous wording

The following tables summarize our cost of legal collections during the periods presented (in thousands, except percentages):

Current wording

The following table summarizes our cost of legal collections during the periods presented (in thousands, except percentages):

Previous wording

The increases of cost of legal collections during the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024, were primarily due to increased legal placements in this channel in the United States.

Current wording

The increase of cost of legal collections during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, was primarily due to increased legal placements in this channel in the United States.

Previous wording

•An increase in information technology expenses of approximately $3.6 million;

Current wording

The decrease in general and administrative expense during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, was primarily attributable to a decrease in consulting and audit fees of $1.9 million. The decrease was partially offset by an increase in information technology expenses of $1.1 million.

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 remained relatively consistent during the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024.

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 slightly decreased during the three months ended March 31, 2026, as compared to the same period in the prior year, due to fewer accounts placed with external agencies in the United States.

Previous wording

Depr eciation and amortization expenses decreased by approximately $1.0 million and $1.6 million during the three and nine months ended September 30, 2025, respectively, as compared to the three and nine months ended September 30, 2024. The decreases were primarily due to smaller depreciable and amortizable asset balances during the three and nine months ended September 30, 2025, as compared to corresponding periods in the prior year.

Current wording

Depr eciation and amortization expenses decreased by $0.5 million during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The decrease was primarily due to smaller depreciable and amortizable asset balances during the three months ended March 31, 2026, as compared to the corresponding period in the prior year.

Previous wording

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

Current wording

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

Previous wording

•The effect resulting from increased average debt balance of approximately $8.0 million; and

Current wording

•The effect resulting from increased average debt balance of approximately $4.0 million; and

Previous wording

•The effect resulting from an unfavorable impact of foreign currency translation of approximately $1.1 million driven by the weakening of the U.S. dollar against the British Pound.

Current wording

•The effect resulting from an unfavorable impact of foreign currency translation of approximately $1.7 million driven by the weakening of the U.S. dollar against the British Pound.

Previous wording

•The increase was partially offset by the effect resulting from a decrease in interest rates of approximately $1.8 million.

Current wording

•The increase was partially offset by the effect resulting from a decrease in interest rates of approximately $3.2 million..

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, net, was$0.9 million and $3.8 million during thethree and nine months ended September 30, 2025, respectively. Other income, net, was$1.6 million and $6.3 million during thethree and nine months ended September 30, 2024, respectively. Interest income included in other income, net of other expense, was approximately $1.0 million and $3.9 million during thethree and nine months ended September 30, 2025, respectively, and$1.9 million and$5.0 million for the three and nine months ended September 30, 2024, 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, net, was$0.8 million and $1.6 million during thethree months ended March 31, 2026 and 2025, respectively. Interest income included in other income, net of other expense, was $1.1 million and $1.5 million during thethree months ended March 31, 2026 and 2025, respectively.

Previous wording

For the three and nine months ended September 30, 2025, the differences between our effective tax rate and the federal statutory rate were primarily due to state income taxes offset by other foreign adjustments. For the three and nine months ended September 30, 2024, the differences between our effective tax rate and the federal statutory rate were primarily due to state income taxes.

Current wording

For thethree months ended March 31, 2026 and 2025, the differences between our effective tax rate and the federal statutory rate were primarily due to state income taxes offset by other foreign adjustments.

Previous wording

(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.

Current wording

(1)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.

Previous wording

(3)Collections applied to principal balance is calculated in the table below:

Current wording

(2)Collections applied to principal balance is calculated in the table below:

Previous wording

Cumulative Collections Money Multiple - Cumulative Collections from Purchased Receivables to Purchase Price Multiple

Current wording

Cumulative Collections Money Multiple - Cumulative Collections from Receivable Portfolios to Purchase Price Multiple

Previous wording

The following table summarizes our receivable purchases, related gross collections, and cumulative collections money multiples(in thousands, except multiples):

Current wording

The following table summarizes our receivable purchases, related collections, and cumulative collections money multiples(in thousands, except multiples):

Previous wording

Purchase Price Multiple - Total Estimated Collections from Purchased Receivables to Purchase Price Multiple

Current wording

Purchase Price Multiple - Total Estimated Collections from Receivable Portfolios to Purchase Price Multiple

Previous wording

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):

Current wording

The following table summarizes our purchases, resulting historical collections, estimated remaining collections from receivable portfolios, and purchase price multiple(in thousands, except multiples):

Previous wording

(3)Purchase Price Multiple represents total estimated gross collections divided by the purchase price.

Current wording

(3)Purchase Price Multiple represents total estimated collections divided by the purchase price.

Previous wording

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):

Current wording

The following table summarizes our estimated remaining collections from receivable portfolios and estimated future cash flows from real estate-owned assets(in thousands):

Previous wording

(1)As of September 30, 2025, ERC for Zero Basis Portfolios include approximately $30.9 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 includes approximately $23.6 million from non-accrual portfolios, primarily in other geographies.

Current wording

(1)As of March 31, 2026, ERC for Zero Basis Portfolios includes $22.9 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 includes $15.2 million from non-accrual portfolios, primarily in other geographies.