Encore Capital raises 2025 global collections growth guidance to 15.5% amid record U.S. portfolio purchases
Aug. 07, 2025 4:47 AM ET
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Earnings Call Insights: Encore Capital Group (ECPG) Q2 2025
Management View- Ashish Masih, President and CEO, highlighted that "Encore delivered another strong performance in the second quarter, which is reflected in our financial metrics across the board." Portfolio purchases reached $367 million, a 32% increase year-over-year, while collections climbed 20% to a record $655 million. Estimated remaining collections rose to $9.4 billion. Masih emphasized, "Our MCM business in the U.S. continues to deliver very strong results. Empowered by the ongoing favorable supply environment, MCM portfolio purchases in the second quarter were a record $317 million at very attractive returns." He further noted, "MCM also delivered record collections of $490 million in Q2, up 24% compared to Q2 a year ago." The company continued share repurchases, buying $15 million in Q2 and $25 million for the first half of the year.
- Masih described Encore's strategic approach: "Our concentration of portfolio purchases in the U.S., where we allocated 86% of our deployed capital in the second quarter, is a reminder that the flexibility of our global funding structure allows us to direct our capital toward markets with the highest returns."
- Tomas Hernanz, Executive VP and CFO, reported, "In the second quarter, we delivered a strong growth in collections and portfolio revenue of 20% and 12%, respectively." He stated, "Collection yield was 64.4% in Q2, an improvement of 2.9 percentage points compared to last year." Hernanz added, "Both of our businesses, MCM in the U.S. and Cabot in Europe were once again net positive contributors to changes in recoveries... we collected $52.3 million more than we forecasted in our ERC, which is incremental cash flow. This is an outstanding result that reflects the effectiveness of our collection platforms and the strength of the consumer."
Outlook- Masih updated forward-looking guidance, stating, "As we originally guided, we anticipate global portfolio purchasing in 2025 to exceed the $1.35 billion of purchases we made in 2024 as MCM is poised to surpass the record level of purchasing of a year ago. However, we are raising our guidance on global collections. We now expect global collections to grow by approximately 15.5% to $2.5 billion. This is an increase from a prior 11% growth expectation. We also continue to expect interest expense of approximately $285 million for the year, and we expect our effective tax rate for the year to be in the mid-20s on a percentage basis."
Financial Results- Encore reported portfolio revenue of $361 million, supported by 14% growth in average receivable portfolios and a portfolio yield of 35.5%. Debt purchasing revenue increased by 27% to $417 million, with a debt purchasing yield of 41%. Servicing and other revenues were $25 million, leading to total revenue of $442 million, representing 24% growth.
- Operating expenses rose 15% to $291 million, attributed to onboarding of new portfolios from increased purchasing levels. Cash efficiency margin improved to 57.3%. Interest expense and other income increased by 23% to $73 million. Net income increased 82% to $59 million, resulting in earnings per share of $2.49 compared to $1.34 in Q2 last year. Leverage remained at 2.6x.
- Encore increased the size of its RCF by $190 million to $1.485 billion and extended maturity to 2029. The U.S. facility was also expanded by $150 million to $450 million and extended to 2028, improving liquidity by up to $340 million.
Q&A- Mark Douglas Hughes, Truist Securities, asked about the $285 million full-year interest expense guidance and if Q2's $74 million included any one-timers. Hernanz replied, "No, I think it's the $285 million is roughly what we expect to close the year. So, we shouldn't -- we don't anticipate any one-offs there."
- Hughes also questioned supply trends in the U.S. Masih responded, "Overall, a very favorable environment in terms of supply, in terms of pricing and our ability to compete and win the portfolios we want... we feel very good and expect a very strong momentum in purchasing and collecting and expect MCM to exceed its 2024 record on purchasing."
- Michael John Grondahl, Northland, asked about collections growth drivers. Masih noted, "You highlight the 2 correct points on stable U.S. consumer as well as purchasing, but also the MCM business operationally is performing really well and driving innovation."
- Grondahl inquired about the breakdown of collections performance. Masih detailed, "It was 107% globally, 106% for MCM and 111% for Cabot. Now there's some FX or foreign currency issues. In constant currency, global MCM and Cabot were all 106% versus the December 31, 2024 ERC curves."
- Zachary Y. Oster, Citizens JMP Securities, sought more on competition and pricing. Masih said, "In U.S., supply is good. Pricing is stable and returns... very strong for MCM. So overall, a stable environment. In Europe as well, lending hasn't been growing... supply is low and not growing much."
- Hughes asked about cash flow from operations. Hernanz explained, "One of the key challenges in that cash flow statement from operations, you have basically -- you're backing out the changes in recoveries... which was a big component of the quarter."
Sentiment Analysis- Analysts focused on drivers of collections outperformance, competitive environment, and operational leverage. Their tone was neutral to positive, seeking clarification on sustainability of performance and guidance drivers.
- Management maintained a confident and slightly more optimistic tone than the prior quarter, especially when discussing U.S. market conditions, operational performance, and raised collections guidance. Masih frequently emphasized strong results and future momentum, while Hernanz detailed the technical drivers of financial outperformance.
- Compared to the previous quarter, management's remarks reflected increased confidence, especially with the raised collections guidance and continued record performance in the U.S.
Quarter-over-Quarter Comparison- Encore raised its global collections growth guidance for 2025 to 15.5% (from 11% last quarter), citing record portfolio purchases and operational outperformance, particularly in the U.S.
- Portfolio purchases remained concentrated in the U.S. at 86% of capital deployed, with record purchasing and collections at MCM. The European business, Cabot, maintained stable performance with continued selectivity in deployments.
- Key financials improved versus Q1: collections rose from $605 million to $655 million, and EPS increased from $1.93 to $2.49. Leverage remained stable.
- Management's tone strengthened, reflecting greater confidence in sustaining growth, while analysts maintained an inquisitive but constructive approach, focusing on operational details and sustainability of guidance.
Risks and Concerns- Management acknowledged macro uncertainty in the U.S. but stated, "our consumers' payment behavior remains stable. We continue to monitor for any signs of change."
- In Europe, subdued consumer lending and low delinquencies, alongside robust competition, were cited as reasons for continued selectivity in portfolio purchases.
- Analysts raised questions about the sustainability of collections outperformance and implications for future guidance, but management indicated no significant one-off events and reiterated confidence in guidance.
Final Takeaway
Encore Capital Group reported another quarter of record U.S. portfolio purchases and collections, driving a sharp increase in earnings and allowing the company to raise its full-year global collections growth guidance to 15.5%. Management attributed performance to favorable U.S. supply conditions, operational execution, and stable consumer behavior. Liquidity improvements and continued share repurchases reinforce strategic priorities, while ongoing monitoring of macro and competitive trends remains central to Encore’s outlook for the remainder of 2025.
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