ENCORE CAPITAL GROUP INC

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1: Ownership, Description of Business, and Summary of Significant Accounting Policies

Encore Capital Group, Inc. (“Encore”), through its subsidiaries (collectively with Encore, the “Company”), is an international specialty finance company providing debt recovery solutions and other related services for consumers across a broad range of financial assets. The Company purchases portfolios of defaulted consumer receivables at deep discounts to face value and manages them by working with individuals as they repay their obligations and work toward financial recovery. Defaulted receivables are consumers’ unpaid financial obligations to credit originators, including banks, credit unions, consumer finance companies and commercial retailers. Defaulted receivables may also include receivables subject to bankruptcy proceedings. The Company also provides debt servicing and other portfolio management services to credit originators for non-performing loans in Europe.

Through Midland Credit Management, Inc. and its domestic affiliates (collectively, “MCM”), the Company is a market leader in portfolio purchasing and recovery in the United States. Through Cabot Credit Management Limited and its subsidiaries and European affiliates (collectively, “Cabot”), the Company is one of the largest credit management services providers in Europe and the United Kingdom. These are the Company’s primary operations.

The Company also has investments and operations in Latin America and Asia-Pacific, which the Company refers to as “LAAP.”

Financial Statement Preparation and Presentation

The accompanying interim condensed consolidated financial statements have been prepared by the Company, without audit, in accordance with the instructions to the Quarterly Report on Form 10-Q, and Rule 10-01 of Regulation S-X promulgated by the United States Securities and Exchange Commission (the “SEC”) and, therefore, do not include all information and footnotes necessary for a fair presentation of its condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”).

In the opinion of management, the unaudited financial information for the interim periods presented reflects all adjustments, consisting of only normal and recurring adjustments, necessary for a fair statement of the Company’s condensed consolidated financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year.

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in the Company’s condensed consolidated financial statements and the accompanying notes. Actual results could materially differ from those estimates.

Basis of Consolidation

The condensed consolidated financial statements have been prepared in conformity with GAAP and reflect the accounts and operations of the Company and those of its subsidiaries in which the Company has a controlling financial interest. The Company also consolidates variable interest entities (“VIEs”) for which it is the primary beneficiary. The primary beneficiary has both (a) the power to direct the activities of the VIE that most significantly affect the entity’s economic performance, and (b) either the obligation to absorb losses or the right to receive benefits. Refer to “Note 8: Variable Interest Entities” for further details. All intercompany transactions and balances have been eliminated in consolidation.

Translation of Foreign Currencies

The condensed consolidated statements of certain of the Company’s foreign subsidiaries are measured using their local currency as the functional currency. Assets and liabilities of foreign operations are translated into U.S. dollars using period-end exchange rates, and revenues and expenses are translated into U.S. dollars using average exchange rates in effect during each period. The resulting translation adjustments are recorded as a component of other comprehensive income or loss. Equity accounts are translated at historical rates, except for the change in retained earnings during the year which is the result of the income statement translation process. Intercompany transaction gains or losses at each period end arising from subsequent measurement of balances for which settlement is not planned or anticipated in the foreseeable future are included as translation adjustments and recorded within other comprehensive income or loss. Translation gains or losses are the material components of accumulated other comprehensive income or loss and are reclassified to earnings upon the substantial sale or liquidation of investments in foreign operations.

Recent Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”) and in January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses: Clarifying the Effective Date (“ASU 2025-01”). ASU 2024-03 requires public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory; employee compensation; and depreciation, amortization and depletion expenses for each caption on the income statement where such expenses are included. ASU 2024-03, as clarified by ASU 2025-01, is effective for annual periods beginning after December 15, 2026 and interim periods with fiscal years beginning after December 15, 2027. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024-04, Debt - Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. The new standard is effective for annual periods beginning after December 15, 2025. The Company adopted ASU 2024-04 on a prospective basis as of January 1, 2026. The adoption did not have a material impact on the Company's condensed consolidated financial statements and related disclosures.

In November 2025, the FASB issued ASU 2025-08, Financial Instruments - Credit Losses (Topic 326): Purchased loans. Under ASU 2025-08, loans acquired without credit deterioration and deemed “seasoned” will be considered purchased seasoned loans and accounted for using the gross-up approach at acquisition. The amendments in this update also clarify the recognition and measurement guidance for purchased seasoned loans, including the determination of the initial allowance for credit losses and the subsequent accounting for changes in expected credit losses. The new standard is effective for annual reporting periods beginning after December 15, 2026, with early adoption permitted. The Company is currently evaluating the potential impact, but does not expect the adoption of this standard to have a material impact on its consolidated financial statements and related disclosures.

In December 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements. ASU 2025-09 introduces targeted amendments intended to further align hedge accounting with an entity’s risk management activities and to simplify the application of certain aspects of the hedge accounting guidance in ASC 815. The new standard is effective for annual periods beginning after December 15, 2026, with early adoption permitted. The Company is currently evaluating the potential impact, but does not expect the adoption of this standard to have a material impact on its consolidated financial statements and related disclosures.

Note 2: Earnings Per Share

Basic earnings per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period.

The number of shares used to calculate the diluted earnings per share is computed by using the basic weighted-average number of common shares outstanding plus any potentially dilutive common shares outstanding during the period, except when their effect is anti-dilutive. Dilutive potential common shares include outstanding stock-based awards, and the dilutive effect of the convertible senior notes, if applicable.

As announced in May 2021, the Company’s Board of Directors authorized a $300.0 million share repurchase program. In November 2025, the Company’s Board of Directors authorized an increase of an additional $300.0 million under the share repurchase program. During the three and six months ended June 30, 2026, the Company repurchased 330,121 and 675,669 shares of common stock for $26.7 million and $46.7 million, respectively, under the share repurchase program. During the three and six months ended June 30, 2025, the Company repurchased 418,499 and 707,924 shares of common stock for $15.0 million and $25.0 million, respectively. The Company’s practice is to retire the shares repurchased.

A reconciliation of shares used in calculating earnings per basic and diluted shares follows(in thousands, except per share amounts):

Note 3: Fair Value Measurements

Fair value is defined as the price that would be received upon sale of an asset or the price paid to transfer a liability, in an orderly transaction between market participants at the measurement date (i.e., the “exit price”). The Company uses a fair value hierarchy that prioritizes the inputs used in valuation techniques to measure fair value into three broad levels. The following is a brief description of each level:

•Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

•Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

•Level 3: Unobservable inputs, including inputs that reflect the reporting entity’s own assumptions.

Financial Instruments Required To Be Carried At Fair Value

Financial assets and liabilities measured at fair value on a recurring basis are summarized below(in thousands):

Derivative Contracts:

The Company uses derivative instruments to manage its exposure to fluctuations in interest rates and foreign currency exchange rates. Fair values of these derivative instruments are estimated using models that project future cash flows and discount the future amounts to a present value using market-based observable inputs, including interest rate curves, foreign currency exchange rates, and forward and spot prices for currencies.

Non-Recurring Fair Value Measurement:

Certain assets are measured at fair value on a nonrecurring basis. Goodwill and property and equipment are adjusted to fair value when an impairment charge is recognized. Such fair values are determined using various valuation techniques under Level 3 fair value hierarchy. REO assets are classified as held for sale at the lower of their carrying value or fair value less cost to sell. The fair value of the assets held for sale and estimated selling expenses were determined at the time of initial recognition and in each reporting period using Level 3 measurements based on appraised values using market comparables. The fair value estimate of the assets held for sale was $10.4 million and$18.1 million as of June 30, 2026 and December 31, 2025, respectively.

Financial Instruments Not Required To Be Carried At Fair Value

The table below summarizes fair value estimates for the Company's financial instruments that are not required to be carried at fair value. The total of the fair value calculations presented does not represent, and should not be construed to represent, the underlying value of the Company.

The carrying amounts in the following table are included in the condensed consolidated statements of financial condition as of June 30, 2026 and December 31, 2025(in thousands):

(1)Only includes financial instruments not required to be carried at fair value. Derivative instruments, which are required to be carried at fair value are excluded.

(2)Carrying amount represents historical cost, adjusted for any related debt discount.

Receivable Portfolios:

The fair value of receivable portfolios is measured by discounting the estimated future cash flows generated by the Company’s proprietary forecasting models. The key inputs include the estimated future gross cash flow, average cost to collect, and discount rate. The determination of such inputs requires significant judgment, including assessing the assumed market participant’s cost structure, its determination of whether to include fixed costs in its valuation, its collection strategies, and determining the appropriate weighted average cost of capital. The Company evaluates the use of these key inputs on an ongoing basis and refines the data as it continues to obtain better information from market participants in the debt recovery and purchasing business.

Borrowings:

The Company’s convertible notes and senior secured notes are carried at historical cost, adjusted for the applicable debt discount. The fair value estimate for the convertible notes and the senior secured notes incorporates quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

The carrying values of the Company’s senior secured revolving credit facility, securitisation senior facility, U.S. facility, and other borrowings approximate their respective fair values due to the use of current market rates that are repriced frequently.

Others:

The carrying values of the Company’s cash and cash equivalents, certain other assets, accounts payable and accrued liabilities, and other liabilities approximate their respective fair values due to their short-term nature.

Note 4: Derivatives and Hedging Instruments

The Company may periodically enter into derivative financial instruments to manage risks related to interest rates and foreign currency. Certain of the Company’s derivative financial instruments qualify for hedge accounting treatment.

The following table summarizes the fair value of derivative instruments as recorded in the Company’s condensed consolidated statements of financial condition(in thousands):

Derivatives Designated as Hedging Instruments

The Company may periodically enter into interest rate swap agreements and interest rate cap contracts to reduce its exposure to fluctuations in interest rates on variable interest rate debt and their impact on earnings and cash flows. Under the swap agreements, the Company receives floating interest rate payments and makes interest payments based on fixed interest rates. Under the cap contracts, the Company receives floating interest rate payments and makes interest payments based on capped interest rates. The Company designates its interest rate swap and interest rate cap instruments as cash flow hedges at inception.

The following tables summarize the terms of the derivative instruments designated as hedging instruments as recorded in the Company’s condensed consolidated statements of financial condition:

The Company expects to reclassify approximately $5.4 million of net derivative loss from OCI into earnings relating to its cash flow designated derivatives within the next 12 months. This amount will vary due to fluctuations in benchmark interest rates.

The following table summarizes the effects of derivatives designated as hedging instruments in the Company’s condensed consolidated financial statements(in thousands):

Note 5: Receivable Portfolios, Net

The Company’s purchased portfolios of loans are grossed-up to their face value with an offsetting allowance and noncredit discount allocated to the individual receivables as the unit of account is at the individual loan level. Since each loan is deeply delinquent and deemed uncollectible at the individual loan level, the Company applies its charge-off policy and fully writes-off the amortized costs (i.e., face value net of noncredit discount) of the individual receivables immediately after purchasing the portfolio. The Company then records a negative allowance that represents the present value of all expected future recoveries for pools of receivables that share similar risk characteristics using a discounted cash flow approach, which ultimately equals the amount paid for a portfolio purchase and presented as “Receivable portfolios, net” in the Company’s condensed consolidated statements of financial condition. The discount rate is an effective interest rate (or “purchase EIR”) based on the purchase price of the portfolio and the expected future cash flows at the time of purchase. The amount of the negative allowance (i.e., receivable portfolios) will not exceed the total amortized cost basis of the loans written-off.

Receivable portfolio purchases are aggregated into pools based on similar risk characteristics. Examples of risk characteristics include financial asset type, collateral type, size, interest rate, date of origination, term, and geographic location. The Company’s static pools are typically grouped into credit card, purchased consumer bankruptcy, and mortgage portfolios. The Company further groups these static pools by geographic location. Once a pool is established, the portfolios will remain in the designated pool unless the underlying risk characteristics change. The purchase EIR of a pool will not change over the life of the pool even if expected future cash flows change.

Revenue is recognized for each static pool over the economic life of the pool. Debt purchasing revenue includes two components:

(1) 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 also includes all revenue from zero basis portfolio (“ZBA”) collections, and

(2) Changes in recoveries, which includes

(a) Recoveries above or below forecast, which is the difference between (i) actual cash collected/recovered during the current period and (ii) expected cash recoveries for the current period, which generally represents over or under performance for the period; and

(b) Changes in expected future recoveries, which is the present value change of expected future recoveries, where such change generally results from (i) collections “pulled forward from” or “pushed out to” future periods (i.e. amounts either collected early or expected to be collected later) and (ii) magnitude and timing changes to estimates of expected future collections (which can be increases or decreases).

The Company measures expected future recoveries based on historical experience, current conditions, reasonable and supportable forecasts, and other quantitative and qualitative factors. Factors that may change the expected future recoveries may include both internal as well as external factors. Internal factors include operational performance, such as capacity and the productivity of the Company’s collection staff. External factors that may have an impact on the Company’s collections include new laws or regulations, new interpretations of existing laws or regulations, and macroeconomic conditions.

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

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

(1)The table below provides the detail on the establishment of negative allowance for expected recoveries of portfolios purchased during the periods presented:

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

(3)Changes in recoveries is calculated as follows during the periods presented, where recoveries include cash collections, put-backs and recalls, and other cash-based adjustments:

Recoveries above or below forecast represent over and under-performance in the reporting period, respectively. Collections during the three and six months ended June 30, 2026 over-performedthe forecasted collections by $53.1 million and $99.2 million, respectively, primarily driven by collections over-performance in the U.S. resulting from enhanced collections strategies. Collections during the three and six months ended June 30, 2025 over-performed the forecasted collections by $52.3 million and $79.2 million, respectively.

Changes in expected future recoveries are reassessed each quarter; the Company considers, among other factors, historical and current collection performance, changes in consumer behavior, and the macroeconomic environment when updating the forecasts of expected lifetime recoveries. The significant recoveries above forecast during the three and six months ended June 30, 2026 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. Additionally, the sustained over-performance in recent quarters led to increases in forecasted future recoveries for recently acquired vintages. As a result, the Company recorded a net positive change of $18.0 million and $34.7 million in expected future recoveries during the three and six months ended June 30, 2026, respectively. During the three and six months ended June 30, 2025, the Company recorded a net positive change of $3.3 million and a net negative change of $2.2 million in expected future recoveries, respectively.

Note 6: Other Assets

Other assets consist of the following(in thousands):

Note 7: Borrowings

The Company is in compliance in all material respects with all covenants under its financing arrangements as of June 30, 2026. The components of the Company’s consolidated borrowings were as follows(in thousands):

Encore is the parent of the restricted group for the Global Senior Facility and the Senior Secured Notes, both of which are guaranteed by the same group of material Encore subsidiaries and secured by the same collateral, which represents substantially all of the assets of those subsidiaries.

Global Senior Secured Revolving Credit Facility

In September 2020, the Company entered into a multi-currency senior secured revolving credit facility agreement (as amended and restated, the “Global Senior Facility”). As of June 30, 2026, the Global Senior Facility provided for a total committed facility of $1,485.0 million that matures in September 2029, except for a $69.5 million tranche that terminates in September 2028, and included the following key provisions:

•Interest at Term SOFR (or EURIBOR for any loan drawn in Euro or a rate based on SONIA for any loan drawn in British Pounds), with a Term SOFR (or EURIBOR or SONIA) floor of 0.00%, plus a margin of 2.25%, plus in the case of Term SOFR borrowings, a credit adjustment spread of 0.10%;

•An unused commitment fee of 0.40% per annum, payable quarterly in arrears;

•A restrictive covenant that limits the LTV Ratio (defined in the Global Senior Facility) to 0.75 in the event that the Global Senior Facility is more than 20% utilized;

•A restrictive covenant that limits the SSRCF LTV Ratio (defined in the Global Senior Facility) to 0.275;

•A restrictive covenant that requires the Company to maintain a Fixed Charge Coverage Ratio (as defined in the Global Senior Facility) of at least 2.0;

•Additional restrictions and covenants which limit, among other things, the payment of dividends and the incurrence of additional indebtedness and liens; and

•Standard events of default which, upon occurrence, may permit the lenders to terminate the Global Senior Facility and declare all amounts outstanding to be immediately due and payable.

The Global Senior Facility is secured by substantially all of the assets of the Company and the guarantors. Pursuant to the terms of an intercreditor agreement entered into with respect to the relative positions of (1) the Global Senior Facility and any super priority hedging liabilities (collectively, “Super Senior Liabilities”) and (2) the Senior Secured Notes, Super Senior Liabilities that are secured by assets that also secure the Senior Secured Notes will receive priority with respect to any proceeds received upon any enforcement action over any such assets.

As of June 30, 2026, the outstanding borrowings under the Global Senior Facility were $691.6 million. The weighted average interest rate of the Global Senior Facility was 5.59% and 6.49% for the three months ended June 30, 2026 and 2025, respectively, and 5.56% and 6.52% for the six months ended June 30, 2026 and 2025, respectively. Available capacity under the Global Senior Facility, after taking into account applicable debt covenants, was approximately $793.4 million as of June 30, 2026.

Senior Secured Notes

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

(1)Interest rate was based on three-month EURIBOR (subject to a 0% floor) plus 4.250% per annum, that reset quarterly.

(2)Interest rate is based on three-month EURIBOR (subject to a 0% floor) plus 3.250% per annum, resets quarterly.

The Senior Secured Notes are secured by the same collateral as the Global Senior Facility. The guarantees provided in respect of the Senior Secured Notes are pari passu with the guarantee given in respect of the Global Senior Facility. Subject to the intercreditor agreement described above under the section “Global Senior Secured Revolving Credit Facility,” Super Senior Liabilities that are secured by assets that also secure the Senior Secured Notes will receive priority with respect to any proceeds received upon any enforcement action over any such assets.

On May 22, 2026, the Company issued $750.0 million in aggregate principal amount of 6.625% Senior Secured Notes due June 2032 at an issue price of 100.000% (the “Encore 2032 Notes”). Interest on the Encore 2032 Notes is payable semi-annually, in arrears, on June 1 and December 1 of each year, commencing on December 1, 2026. The Company used a portion of the proceeds from this offering to redeem in full the $500.0 million principal outstanding under the Encore 2029 Notes, and to pay certain transaction fees and expenses incurred in connection with the offering of the Encore 2032 Notes. In connection with the redemption of the Encore 2029 Notes, the Company recognized a total loss on extinguishment of debt of $28.0 million, which included a $23.1 million make-whole premium for the early redemption and the write-off of the related unamortized issuance costs, during the three and six months ended June 30, 2026.

On May 28, 2026, the Company issued €325.0 million (approximately $371.2 million based on an exchange rate of $1.00 to €0.88, the exchange rate as of June 30, 2026) in aggregate principal amount of senior secured floating rate Notes due July 2033 at an issue price of 100.000% (the “Encore 2033 Floating Rate Notes”). The Encore 2033 Floating Rate Notes bear interest at a rate equal to the sum of (i) three-month EURIBOR (subject to a 0% floor) plus (ii)3.250% per annum, reset quarterly. Interest on the Encore 2033 Floating Rate Notes is payable quarterly, in arrears, on January 15, April 15, July 15, and October 15 of each year, commencing on July 15, 2026. The Company used the proceeds from this offering, together with drawings under its Global Senior Facility, to redeem in full the €415.0 million (approximately $474.0 million based on an exchange rate of $1.00 to €0.88, the exchange rate as of June 30, 2026) principal outstanding under the Encore 2028 Floating Rate Notes, and to pay certain transaction fees and expenses incurred in connection with the offering of the Encore 2033 Floating Rate Notes. In connection with the redemption of the Encore 2028 Floating Rate Notes, the Company recognized a loss on extinguishment of debt of $2.5 million, which consisted of the write-off of the related unamortized debt discount and issuance costs, during the three and six months ended June 30, 2026.

The Encore 2028 Floating Rate Notes had a weighted average interest rate, through redemption on May 28, 2026, of 6.41% and 6.61% for the three months ended June 30, 2026 and 2025, respectively, and 6.32% and 6.85% for the six months ended June 30, 2026 and 2025, respectively.

The Encore 2033 Floating Rate Notes had a weighted average interest rate of 5.44% from issuance on May 28, 2026 through June 30, 2026.

Convertible Notes

The following table provides a summary of the principal balance, maturity date and interest rate for the Company’s convertible senior notes (the “Convertible Notes”)($ in thousands):

In order to reduce the risk related to the potential dilution and/or the potential cash payments the Company may be required to make in the event that the market price of the Company’s common stock becomes greater than the conversion prices of the Convertible Notes, the Company may enter into hedge programs that increase the effective conversion price for the Convertible Notes. In connection with the issuance of the 2029 Convertible Notes, the Company entered into privately negotiated capped call transactions that effectively raised the conversion price of the 2029 Convertible Notes from $65.89 to $82.69. These hedging instruments have been determined to be indexed to the Company’s own stock and meet the criteria for equity classification. The Company recorded the cost of the hedge instruments as a reduction in additional paid-in capital, and does not recognize subsequent changes in fair value of these financial instruments in its condensed consolidated financial statements.

Certain key terms related to the convertible features as of June 30, 2026 are listed below($ in thousands, except conversion price):

(1)As discussed above, the Company maintains a hedge program that increases the effective conversion price for the 2029 Convertible Notes to $82.69.

(2)Represents the premium the Company would have to pay assuming the Convertible Notes were converted on June 30, 2026 using a hypothetical share price based on the closing stock price on June 30, 2026.

Prior to the close of business on the business day immediately preceding the free conversion date (listed above), holders may convert their Convertible Notes only under certain circumstances set forth in the indenture. On or after the free conversion date until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time.

In the event of conversion, the Convertible Notes are convertible into cash up to the aggregate principal amount of the notes and the excess conversion premium, if any, may be settled in cash or shares of the Company’s common stock at the Company’s election and subject to certain restrictions contained in each of the indentures governing the Convertible Notes.

On July 22, 2026, in accordance with the redemption rights set forth in the indenture of the 2029 Convertible Notes, the Company called all $230.0 million aggregate principal amount of its outstanding 2029 Convertible Notes for redemption (the “Redemption”) on September 24, 2026 (the “Redemption Date”).

The redemption price will be paid in cash and equal to 100% of the principal amount of the notes being redeemed, plus accrued and unpaid interest to, but excluding, the Redemption Date, which equates to a redemption price of $1,001 per $1,000 principal amount of any 2029 Convertible Notes called for Redemption.

The issuance of the redemption notice constitutes a “Make-Whole Fundamental Change” under the indenture. As a result, the conversion rate for notes surrendered for conversion during the applicable make-whole conversion period will increase from 15.1763 shares to 16.2056 shares of common stock per $1,000 principal amount of notes, subject to further adjustment in accordance with the terms of the indenture.

The Company elected to settle all conversions of the 2029 Convertible Notes in cash. In connection with the Redemption, the Company expects the capped call transactions entered into in connection with the issuance of the 2029 Convertible Notes to unwind and terminate in full. In connection with any such unwind and termination, the Company expects to receive from each option counterparty an amount of cash (or shares of the Company’s common stock if agreed with the applicable option counterparty) reflecting the then-current option value of such capped call transaction. The Company expects to enter into bilateral unwind agreements with each option counterparty to unwind and terminate its respective capped call transaction as of or shortly following the Redemption Date.

The Company’s convertible notes are carried as a single liability, which reflects the principal amount of the convertible notes. Interest expense related to the Convertible Notes was $2.3 million and $3.1 million during the three months ended June 30, 2026 and 2025, respectively, and $4.6 million and $6.2 million for the six months ended June 30, 2026 and 2025, respectively.

Cabot Securitisation Senior Facility

Cabot Securitisation UK Ltd (“Cabot Securitisation”), an indirect subsidiary of Encore, has a senior facility for a committed amount of £255.0 million (as amended, the “Cabot Securitisation Senior Facility”). Funds drawn under the Cabot Securitisation Senior Facility bear interest at a rate per annum equal to SONIA plus a margin of 3.00% plus, for periods after January 18, 2029, a step up margin ranging from zero to 1.00%. The Cabot Securitisation Senior Facility matures in January 2031.

As of June 30, 2026, the outstanding borrowings under the Cabot Securitisation Senior Facility were £255.0 million (approximately $338.2 million based on an exchange rate of $1.00 to £0.75, the exchange rate as of June 30, 2026). The obligations of Cabot Securitisation under the Cabot Securitisation Senior Facility are secured by first ranking security interests over all of Cabot Securitisation’s property, assets and rights (including receivables purchased from Cabot Financial UK from time to time), the book value of which was £275.1 million (approximately $364.8 million based on an exchange rate of $1.00 to £0.75, the exchange rate as of June 30, 2026) as of June 30, 2026. The weighted average interest rate of the Cabot Securitisation Senior Facility was 6.74% and 7.54% for the three months ended June 30, 2026 and 2025, respectively, and 6.82% and 7.66% for the six months ended June 30, 2026 and 2025, respectively.

Cabot Securitisation is a securitized financing vehicle and is a VIE for consolidation purposes. Refer to “Note 8: Variable Interest Entities” for further details.

U.S. Facility

An indirect subsidiary of Encore (“U.S. Financing Subsidiary”) has a facility for a committed amount of $450.0 million (as amended, the “U.S. Facility”) that matures in October 2028. Funds drawn under the U.S. Facility bear interest at a rate per annum equal to Term SOFR plus a margin of 3.50%.

As of June 30, 2026, the outstanding borrowings under the U.S. Facility were $450.0 million. The obligations under the U.S. Facility are secured by first ranking security interests over all of U.S. Financing Subsidiary’s assets and rights. As of June 30, 2026, this included receivables acquired from MCM, the book value of which was $852.5 million. The weighted average interest rate of the U.S. Facility was 7.15% and 7.82% for the three months ended June 30, 2026 and 2025, respectively, and 7.17% and 7.82% for the six months ended June 30, 2026 and 2025, respectively.

The U.S. Facility is a securitized financing vehicle and is a VIE for consolidation purposes. Refer to “Note 8: Variable Interest Entities” for further details.

Note 8: Variable Interest Entities

A VIE is defined as a legal entity whose equity owners do not have sufficient equity at risk, or, as a group, the holders of the equity investment at risk lack any of the following three characteristics: decision-making rights, the obligation to absorb expected losses, or the right to receive expected residual returns of the entity. The primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and the obligation to absorb expected losses or the right to receive residual returns from the entity that could potentially be significant to the VIE. The Company consolidates VIEs when it is the primary beneficiary.

As of June 30, 2026, the Company’s VIEs include certain securitized financing vehicles and other immaterial special purpose entities that were created to purchase receivable portfolios in certain geographies. The Company is the primary beneficiary of these VIEs. The Company has the power to direct the activities of the VIEs including the ability to exercise discretion in the servicing of the financial assets and has the right to receive residual returns that could potentially be significant to the VIEs. The Company evaluates its relationships with its VIEs on an ongoing basis to ensure that it continues to be the primary beneficiary.

Most assets recognized as a result of consolidating these VIEs do not represent additional assets that could be used to satisfy claims against the Company’s general assets. Conversely, liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets; rather, they represent claims against the specific assets of the VIE.

Note 9: Accumulated Other Comprehensive Loss

A summary of the Company’s changes in accumulated other comprehensive loss by component is presented below(in thousands):

Note 10: Income Taxes

The Company’s effective tax rate was 22.8% for both the three and six months ended June 30, 2026. For the three and six months ended June 30, 2025, the Company’s effective tax rate was 24.7% and 23.8%, respectively. For the three and six months ended June 30, 2026 and 2025, the differences between the effective tax rate and the federal statutory rate were primarily due to state income taxes offset by other foreign adjustments.

Each interim period is considered an integral part of the annual period and tax expense or benefit is measured using an estimated annual effective income tax rate. The estimated annual effective tax rate for the full year is applied to the respective interim period, taking into account year-to-date amounts and projected amounts for the year. Since the Company operates in foreign countries with varying tax rates, the Company’s quarterly effective tax rate is dependent on the level of income or loss from international operations in the reporting period.

The Company’s subsidiary in Costa Rica is operating under a 100% tax holiday through April 6, 2034. The impact of the tax holiday in Costa Rica for the three and six months ended June 30, 2026 and 2025, was immaterial.

The Company is subject to income taxes in the U.S. and foreign jurisdictions. Significant judgment is required in evaluating uncertain tax positions and determining the provision for income taxes.

In December 2021, the Organization for Economic Cooperation and Development (“OECD”) enacted model rules for a new global minimum tax framework (“Pillar Two”). Under the Pillar Two rules, a company is required to determine a combined effective tax rate for each jurisdiction. If the jurisdictional effective tax rate determined under the Pillar Two rules is less than 15%, a top-up tax will be due to bring the jurisdictional effective tax rate up to 15%. In December 2022, European Union Member States adopted a directive implementing the Pillar Two rules requiring Member States to enact the directive into their national laws and these began to go into effect from January 1, 2024. The Company has estimated the applicable top-up tax and recorded this in tax expense for the three and six months ended June 30, 2026. The estimated impact of top-up tax for the three and six months ended June 30, 2026 was immaterial.

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (“OBBBA”), which includes a broad range of tax reform provisions affecting businesses. The legislation features permanent extension, with modifications, of key 2017 Tax Cuts and Jobs Act provisions that were set to change at the end of 2025. The effects of the OBBBA were included in the Company’s condensed consolidated financial statements for the three and six months ended June 30, 2026 and the impact was immaterial.

Note 11: Commitments and Contingencies

Litigation and Regulatory

The Company is involved in disputes, legal actions, regulatory investigations, inquiries, and other actions from time to time in the ordinary course of business. The Company, along with others in its industry, is routinely subject to legal actions asserting various claims, including those based on the Fair Debt Collection Practices Act (“FDCPA”), the Fair Credit Reporting Act (“FCRA”), the Telephone Consumer Protection Act (“TCPA”), comparable state statutes, state and federal unfair competition statutes, and common law causes of action. The violations of law investigated or alleged in these actions often include claims that the Company lacks specified licenses to conduct its business, attempts to collect debts on which the statute of limitations has run, has made inaccurate or unsupported assertions of fact in support of its collection actions and/or has acted improperly in connection with its efforts to contact consumers. Such litigation and regulatory actions could involve potential compensatory or punitive damage claims, fines, sanctions, injunctive relief, or changes in business practices. Many continue on for some length of time and involve substantial investigation, litigation, negotiation, and other expense and effort before a result is achieved, and during the process the Company often cannot determine the substance or timing of any eventual outcome.

As of June 30, 2026, there were no material developments in any of the legal proceedings disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 or any new material legal proceedings during the three and six months ended June 30, 2026.

In certain legal proceedings, the Company may have recourse to insurance or third-party contractual indemnities to cover all or portions of its litigation expenses, judgments, or settlements. The Company records loss contingencies in its financial statements only for matters in which losses are probable and can be reasonably estimated. Where a range of loss can be reasonably estimated with no best estimate in the range, the Company records the minimum estimated liability. The Company continuously assesses the potential liability related to its pending litigation and regulatory matters and revises its estimates when additional information becomes available. The Company’s legal costs are recorded to expense as incurred. As of June 30, 2026, the Company hasno material reserves for legal matters.

Purchase Commitments

In the normal course of business, the Company enters into forward flow purchase agreements. A forward flow purchase agreement is a commitment to purchase receivables over a duration that is typically three to twelve months, but can be longer, generally with a specifically defined volume range, frequency, and pricing. Typically, these forward flow contracts have provisions that allow for early termination or price re-negotiation should the underlying quality of the portfolio deteriorate over time or if any particular month’s delivery is materially different than the original portfolio used to price the forward flow contract. Certain of these forward flow purchase agreements may also have termination clauses, whereby the agreements can be canceled by either party upon providing a certain specified amount of notice.

As of June 30, 2026, the Company had entered into forward flow purchase agreements for the purchase of nonperforming loans with an estimated minimum aggregate purchase price of $557.4 million. The Company expects actual purchases under these forward flow purchase agreements to be significantly greater than the estimated minimum aggregate purchase price.

Note 12: Segment and Geographic Information

The Company hasone reportable segment, the debt purchasing and recovery segment. Segment assets are presented in the Company’s condensed consolidated statements of financial condition as total assets. The following tables present the results of operations of the Company’s reportable segment for the periods presented(in thousands):

(1)Certain corporate activities that are not allocated to the debt purchasing and recovery segment are recorded under corporate and other unallocated. During the three months ended June 30, 2026, such non-allocated operating expenses primarily consisted of salaries and employee benefits of $13.1 million for corporate employees and general and administrative expenses of $4.8 million.

(2)The other segment items category includes other income, and loss on extinguishment of debt.

(1)Certain corporate activities that are not allocated to the debt purchasing and recovery segment are recorded under corporate and other unallocated. During the three months ended June 30, 2025, such non-allocated operating expenses primarily consisted of salaries and employee benefits of $12.2 million for corporate employees and general and administrative expenses of $4.4 million.

(2)The other segment items category includes other income.

(1)Certain corporate activities that are not allocated to the debt purchasing and recovery segment are recorded under corporate and other unallocated. During the six months ended June 30, 2026, such non-allocated operating expenses primarily consisted of salaries and employee benefits of $23.4 million for corporate employees and general and administrative expenses of $9.7 million.

(2)The other segment items category includes other income, and loss on extinguishment of debt.

(1)Certain corporate activities that are not allocated to the debt purchasing and recovery segment are recorded under corporate and other unallocated. During the six months ended June 30, 2025, such non-allocated operating expenses primarily consisted of salaries and employee benefits of $20.3 million for corporate employees and general and administrative expenses of $9.8 million.

(2)The other segment items category includes other income.

The following table presents information about geographic areas in which the Company operates(in thousands):

(1)None of these countries comprise greater than 10% of the Company's consolidated revenues.

Note 13: Goodwill

The Company’s goodwill is tested for impairment at the reporting unit level annually and in interim periods if certain events occur that indicate that the fair value of a reporting unit may be below its carrying value. Determining the number of reporting units and the fair value of a reporting unit requires the Company to make judgments and involves the use of significant estimates and assumptions.

There have been no events or circumstances during the three and six months ended June 30, 2026 that have required the Company to perform an interim assessment of goodwill carried at these reporting units. Management continues to evaluate and monitor all key factors impacting the carrying value of the Company’s recorded goodwill. Adverse changes in the Company’s actual or expected operating results, market capitalization, business climate, economic factors or other negative events that may be outside the control of management could result in a material non-cash impairment charge in the future.

The Company’s goodwill is attributable to reporting units included in its portfolio purchasing and recovery segment. The following table summarizes the activity in the Company’s goodwill balance(in thousands):