Q2 2024 Encore Capital Group Inc Earnings Call

Operator: Good afternoon, everyone. We will begin the program in a few moments.

Good afternoon, everyone. We will begin the program in a few moments.

Okay.

Speaker Change: Uh huh.

Uh huh.

Yeah.

Yeah.

Operator: Good afternoon, everyone, and thank you for standing by.

Good afternoon, everyone and thank you for standing by.

Operator: Welcome to the Encore Capital Group's second quarter 2024 earnings call. At this time, all participants are in a listen-only mode.

Speaker Change: Come to the Encore capital group's second quarter, 'twenty 'twenty four earnings call.

Operator: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.

Operator: For the first time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Bruce Thomas, VP of Global Industrial Relations for Encore. Bruce, please go ahead.

Speaker Change: At this time all participants are in a listen only mode.

Operator: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press Star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again.

After the speaker's presentation, there will be a question and answer session.

To ask a question during the session you will need to press star one one on your telephone.

You will then hear an automated message advising that your hand is raised to withdraw your question. Please press star one one again.

Operator: Please be advised that today's conference is being recorded.

Please be advised that today's conference is being recorded.

Bruce Thomas: We would now like to hand the conference over to your first speaker today, Bruce Thomas, VP of Global Industrial Relations for Encore. Bruce, please go ahead.

Bruce Thomas: I would now like to hand, the conference over to your first speaker today, Bruce Thomas VP of Global Industrial Relations for Encore Bruce. Please go ahead.

Bruce Thomas: Thank you, operator. Good afternoon, and welcome to Encore Capital Group's second quarter 2024 earnings call. Joining me on the call today are Ashish Masih, our President and Chief Executive Officer; Jonathan Clark, Executive Vice President and Chief Financial Officer; and Ryan Bell, President of Midland Credit Management.

Bruce Thomas: Thank you, operator. Good afternoon, and welcome to Encore Capital Group's second quarter 2024 earnings call. Joining me on the call today are Ashish Masih, our President and Chief Executive Officer, Jonathan Clark, our Executive Vice President and Chief Financial Officer, and Ryan Bell, President of Midland Credit Management. Ashish and Jonathan will make prepared remarks today, and then we will be happy to take your questions. Unless otherwise noted, comparisons on this conference call will be made between the second quarter of 2024 and the second quarter of 2023.

Bruce Thomas: Thank you operator, good afternoon, and welcome to Encore capital group's second quarter 2024 earnings call.

Speaker Change: Joining me on the call today are Ashish Masih, our president and Chief Executive Officer, Jonathan Clark Executive Vice President and Chief Financial Officer, and Ryan Bell President of Midland Credit management.

Bruce Thomas: Ashish and John will make prepared remarks today, and then we will be happy to take your questions. Unless otherwise noted, comparisons on this conference call will be made between the second quarter of 2024 and the second quarter of 2023.

Ashish Masih: Ashish and John will make prepared remarks today, and then we will be happy to take your questions. We undertake no obligation to update any forward-looking statements. During this call, we will use rounding and abbreviations for the sake of brevity. We will also be discussing non-GAAP financial measures.

Speaker Change: Ashish and Jon will make prepared remarks today, and then we will be happy to take your questions.

Unless otherwise noted.

Harrisons on this conference call will be made between the second quarter of 2024 in the second quarter of 2023.

Bruce Thomas: In addition, today's discussion will include forward-looking statements that are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially from our expectations. Please refer to our SEC filings for a detailed discussion of potential risks and uncertainties. We undertake no obligations to update any forward-looking statement.

Bruce Thomas: In addition, today's discussion will include four forward-looking statements that are based on current expectations and assumptions and are subject to risks and uncertainty. Actual results could differ materially from our expectations; please refer to our SEC filings for a detailed discussion of potential risks and uncertainties. We undertake no obligation to update any forward-looking statements.

In addition, today's discussion will include forward looking statements that are based on current expectations and assumptions and are subject to risks and uncertainties.

Speaker Change: Actual results could differ materially from our expectations.

Please refer to our SEC filings for a detailed discussion of potential risks and uncertainties.

Speaker Change: We undertake no obligation to update any forward looking statement.

Bruce Thomas: During this call, we will use rounding and abbreviations for the sake of brevity. We will also be discussing non-GAAP financial measures. Reconciliation to the most directly comparable GAAP financial measures are included in our investor presentation, which is available on the Investor's section of our website.

Bruce Thomas: During this call, we will use rounding and abbreviations for the sake of brevity. We will also be discussing non-GAAP financial measures. Reconciliations to the Most Directly Comparable Gap financial measures are included in our investor presentation, which is available on the investor section of our website. As a reminder, following the conclusion of this call, a replay of this conference call, along with our prepared remarks, will also be available on the investment section of our website. With that, let me turn the call over to Ashish Masih, our President and Chief Executive Officer.

Speaker Change: During this call we will use rounding and abbreviations for the sake of brevity, we will also be discussing non-GAAP financial measures.

Speaker Change: Patients to the most directly comparable GAAP financial measures are included in our Investor presentation, which is available on the investors section of our website.

Bruce Thomas: As a reminder, following the conclusion of this call, a replay of this conference call, along with our prepared remarks, will also be available on the investor's section of our website.

Speaker Change: As a reminder, following the conclusion of this call a replay of this conference call along with our prepared remarks will also be available on the investors section of our website.

Ashish Masih: Let me turn the call over to Ashish Masi, our President and Chief Executive Officer. Thanks, Bruce, and good afternoon, everyone. Thank you for joining us.

Speaker Change: With that let me turn the call over to Ashish Masih, our president and Chief Executive Officer.

Ashish Masih: Thanks, Bruce, and good afternoon, everyone. Thank you for joining us.

Ashish Masih: Thanks, Bruce and good afternoon, everyone. Thank.

Speaker Change: Thank you for joining us.

Ashish Masih: Before I begin today's quarterly remarks, I'd like to spend a moment addressing the news of Jonathan's retirement next year, which you've likely seen in the separate press release, issued today alongside our Q2 earnings release. This is something we've been carefully planning for, and although it's too early to start the goodbyes, I want to acknowledge John's invaluable contribution to Encore and a leadership team and extend my gratitude for his dedication to Encore for more than a decade. So much of what makes Encore a respected industry leader today has been directly influenced by John's vision and guidance.

Ashish Masih: Before I begin today's quarterly remarks, I'd like to spend a moment addressing the news of Jonathan's retirement next week, which you've likely seen in the separate press release we issued today alongside our Q2 earnings release. This is something we've been carefully planning for, and although it's too early to start the goodbyes.

Speaker Change: Before I begin todays quarterly remarks, I'd like to spend a moment.

Ashish Masih: addressing the news of Jonathan's retirement next week and extend my gratitude for his dedication to Encore for more than a decade. And I look forward to working with Thomas closely in his new role.

Speaker Change: Addressing the news of Jonathan's retirement next year.

Rich: Rich you've likely seen in the separate press release, we issued today alongside our Q2 earnings release.

Jonathan Clark: This is something we've been carefully planning for.

Jonathan Clark: And although it's too early to start the goodbyes.

Ashish Masih: I want to acknowledge John's invaluable contribution to Encore and our leadership team and extend my gratitude for his dedication to Encore for more than a decade. So much of what makes Encore a respected industry leader today has been directly influenced by John's vision and guidance. John has made sure we'll continue to be in good hands after his departure with Thomas Hernandes transitioning into the Encore CFO role in April 2025. Many of you have met and even gotten to know Thomas over the years since he joined us back in 2016, with his proven track record of substantial industry and company knowledge.

Speaker Change: I want to acknowledge John's invaluable contribution to encore and a leadership team and.

Speaker Change: And extend my gratitude for his dedication to encore for more than a decade.

Speaker Change: So much of what makes encore a respected industry leader today has been directly influenced by John's vision and guidance.

Ashish Masih: John has made sure we'll continue to be in good hands after his departure, with Thomas Hernandez transitioning into the Encore CFO role in April 2025. Many of you have met and even gotten to know Thomas over the years since he joined us back in 2016. With his proven track record and substantial industry and company knowledge, I'm confident Thomas will smoothly transition into the Encore CFO role and continue to be an important driver of a disciplined strategy and financial excellence. And I look forward to working with Thomas closely in his new role.

Jonathan Clark: John had made sure we will continue to be in good hands. After his departure with Thomas Hernandez transitioning into the encore CFO role in April 2025.

Speaker Change: Many of you have met and even gotten to know Thomas over the years since he joined us back in 2016.

Speaker Change: With his proven track record and substantial industry and company knowledge I'm confident Thomas will smoothly transition into the encore CFO role and continue to be an important driver of our disciplined strategy and financial excellence.

Ashish Masih: I'm confident Thomas will smoothly transition into the Encore CFO role and continue to be an important driver of a disciplined strategy and financial expertise. And I look forward to working with Thomas closely in his new role. Now, I'll begin with key highlights from the second quarter.

Speaker Change: And I look forward to working with Thomas closely in his new role.

Ashish Masih: I'll now begin with key highlights from the second quarter. Encore second quarter results are a continuation of a strong performance trajectory. This performance was driven by sustained strong portfolio purchasing in the US and double digital global collections growth. In the US, the market for charged-off receivable portfolios continues to grow to record levels driven by simultaneous growth in both credit card lending and the charge-off rate. As a result, we continue to see very attractive pricing and returns in the US. Accordingly, we are currently allocating the vast majority of our capital to our MCM business in the US, which set another deployment record in the second quarter.

Speaker Change: I'll now begin with key highlights from the second quarter.

Ashish Masih: Encore's second quarter results are a continuation of a strong performance trajectory. This performance was driven by sustained, strong portfolio purchasing in the U.S. and Double-Digit Global Collections Group. In the U.S., the market for charged-off receivable portfolios continues to grow to record levels, driven by simultaneous growth in both credit card lending and charge-off rates. As a result, we continue to see very attractive pricing and returns in the U.S. Accordingly, we are currently allocating the vast majority of our capital to our MCM business in the U.S., which set another deployment record in the second quarter.

Speaker Change: Encore second quarter results are a continuation of our strong performance trajectory.

Ashish Masih: This performance was driven by sustained, strong portfolio purchasing in the U.S. In the U.S., the market for charged-off receivable portfolios continues to grow to record levels. As a result, we continue to see very attractive pricing and returns in the U.S., which has led to reduced cabinet portfolio purchases. These unpaid debts are an expected and necessary outcome of the lending business model, which, depending on the stage of the macroeconomic cycle, concentrates our efforts on the markets where we can achieve the highest risk-adjusted returns.

Speaker Change: This performance was driven by sustained strong portfolio purchasing in the U S.

Speaker Change: And double digit global collections growth.

Speaker Change: In the U S. The market for charged off receivable portfolios continues to grow to record levels.

Speaker Change: Driven by simultaneous growth in both credit card lending and the charge off rate.

Speaker Change: As a result, we continue to see very attractive pricing and returns in the U S. Okay.

Speaker Change: Accordingly, we are currently allocating the vast majority of our capital to our MCM business in the U S.

Speaker Change: <unk> set another deployment record in the second quarter.

Ashish Masih: In Europe, the portfolio purchasing market is continuing to show signs of improvement, but remains competitive. Although we see examples of improved pricing, we believe European portfolio pricing still does not consistently reflect the higher cost of capital caused by higher interest rates. We are maintaining a discipline and continue to be selective, which has led to reduce capital portfolio purchases.

Ashish Masih: In Europe, the portfolio purchasing market is continuing to show signs of improvement but remains competitive. Although we see examples of improved pricing, we believe European portfolio pricing still does not consistently reflect the higher cost of capital caused by higher interest rates. We are maintaining our discipline and continuing to be selective, which has led to reduced cabinet portfolio purchases.

Speaker Change: In Europe, the portfolio purchasing market is continuing to show signs of improvement but.

Speaker Change: But remains competitive.

Speaker Change: Although we see examples of improved pricing, we believe European portfolio pricing still does not consistently reflect the higher cost of capital caused by higher interest rates.

Speaker Change: We are maintaining our discipline and continue to be selective.

Speaker Change: Which has led to reduced cabot portfolio purchases.

Ashish Masih: Overall, a year-to-date growth in portfolio purchasing, collections, and cash generation reinforces a belief that 2024 will be a turning point in Encore's operational and financial results.

Ashish Masih: Overall, year-to-date growth in portfolio purchasing, collections, and cash generation reinforces a belief that 2024 will be a turning point in Encore's operational and financial results. I believe it's helpful to remind investors of the critical role we play in the consumer credit ecosystem by assisting in the resolution of unpaid debt. These unpaid debts are an expected and necessary outcome of the lending business model, although the levels may vary depending on the stage of the macroeconomic cycle.

Speaker Change: Overall, our year to date growth in portfolio purchasing collections and cash generation reinforces our belief that 2024 will be a turning point in encores operational and financial results.

Ashish Masih: I believe it's helpful to remind investors of the critical role we play in the consumer credit ecosystem by assisting in the resolution of unpaid debts. These unpaid debts are an expected and necessary outcome of the lending business model. Although the levels may vary, depending on the stage of the macroeconomic cycle, regardless of where we are in the cycle, our mission is to create pathways to economic freedom for the consumers we serve by helping them resolve their past due debts. We achieve this by engaging consumers in honest and pathetic and respectful conversation. Our business is to purchase portfolios of non-performing loans at attractive returns while minimizing funding costs.

Speaker Change: I believe it is helpful to remind investors of the critical role we play in the consumer credit ecosystem.

Speaker Change: By assisting in the resolution of unpaid debts.

Speaker Change: Unpaid debts are an expected and necessary outcome with the lending business model.

Speaker Change: Although the levels may vary.

Speaker Change: Depending on the stage of the macroeconomic cycle.

Ashish Masih: Regardless of where we are in the cycle, our mission is to create pathways to economic freedom for the consumers we serve by helping them resolve their past-due debts. We achieve this by engaging consumers in honest, empathetic, and respectful conversation.

Speaker Change: Regardless of where we are in the cycle. Our mission is to create pathways to economic freedom for the consumers we serve.

Speaker Change: By helping them resolve their past due debts.

Speaker Change: We achieved this by engaging consumers and honest and pathetic and respectful conversations.

Ashish Masih: Our business is to purchase portfolios of non-performing loans at attractive returns while minimizing funding costs. For each portfolio that we own, we strive to exceed our collection expectations while maintaining an efficient cost structure, as well as ensuring the highest level of compliance and consumer focus. We achieve these objectives through a three-pillar strategy.

Speaker Change: Our business is to purchase portfolios of nonperforming loans at attractive returns, while minimizing funding costs.

Ashish Masih: For each portfolio that we own, we strive to exceed our collection expectations while maintaining an efficient cost structure, as well as ensuring a higher level of compliance and consumer focus.

Speaker Change: Our <unk> portfolio that we own we strive to exceed our collection expectations.

Speaker Change: While maintaining an efficient cost structure as well as ensuring the highest level of compliance and consumer focus.

Ashish Masih: We achieve these objectives through a three-pillar strategy. This strategy enables us to deliver strong financial performance while positioning us well to capitalize and portfolio purchasing opportunities. We believe this is instrumental for building long-term shareholder value.

Speaker Change: We achieved these objectives through a three pillar strategy.

Ashish Masih: This strategy enables us to deliver strong financial performance while positioning us well to capitalize on portfolio purchasing opportunities. We believe this is instrumental in building long-term shareholder value. The first pillar of our strategy, market focus, concentrates our efforts in the markets where we can achieve the highest risk-adjusted return.

Speaker Change: This strategy enables us to deliver strong financial performance, while positioning us well to capitalize on portfolio purchasing opportunities.

Speaker Change: We believe this is instrumental for building long term shareholder value.

Ashish Masih: The first pillar of our strategy, market focus. Concentrates are efforts on the markets where we can achieve the highest risk-adjusted returns.

Speaker Change: The first pillar of our strategy market focus.

Speaker Change: Concentrating our efforts in the markets, where we can achieve the highest risk adjusted returns.

Ashish Masih: Let's now take a look at our two largest markets, beginning with the U.S. U.S. revolving credit has been steadily rising since early 2021, up 18% compared to the second quarter of 2020. Consumer payment behavior remains stable throughout the quarter. In addition, UK charge-offs remain at low levels.

Ashish Masih: Let's now take a look at our two largest markets, beginning with the U.S. U.S. revolving credit has been steadily rising since early 2021. Each month for the last three years, the U.S. Federal Reserve has reported a new record level of outstanding loans, and it continues to grow. At the same time, since bottoming out in late 2021, the credit card charge-off rate in the U.S. has also been steadily rising and is now at the highest level in more than 10 years. Similarly, U.S. consumer credit card delinquency, which is a leading indicator of future charge-offs, also continues to rise.

Ashish Masih: Let's now take a look at our two largest markets, beginning with the US. US revolving credit has been steadily rising since early 2021. Each month for the last three years, the US Federal Reserve has reported a new record level of outstanding, and it continues to grow. At the same time, since bottoming out in late 2021, the credit card charge of rate in the US has also been steadily rising and is now at the highest level in more than 10 years. Similarly, US consumer credit card delinquencies, which are a leading indicator of future charge-offs, also continue to rise.

Speaker Change: Let's now take a look at our two largest markets beginning with the U S.

Speaker Change: U S revolving credit has been steadily rising since early 2021 each.

Speaker Change: Each month for the last three years the U S. Federal Reserve has reported a new record level of Outstandings and it continues to grow.

Speaker Change: At the same time since bottoming out in late 2021, the credit card charge off rate in the U. S has also been steadily rising and is now at the highest level in more than 10 years.

Speaker Change: Similarly U S consumer credit card delinquencies, which are a leading indicator of future charge offs also continued to rise.

Ashish Masih: With both lending and the charge-off rate growing simultaneously, purchasing conditions in the US market remain highly favorable. We are observing not only continued strong growth in US market supply but attractive pricing as well. The most recent quarterly delinquency data reflects a typical seasonal pattern but at meaningfully higher levels than a year ago. This data supports our expectation that 2024 will be another year of record portfolio sales by US banks and credit card issuers.

Ashish Masih: With both lending and the charge-off rate growing simultaneously, purchasing conditions in the U.S. market remain highly favorable. We are observing not only continued strong growth in U.S. market supply but attractive pricing as well. The most recent quarterly delinquency data, which reflects a typical seasonal pattern, were at meaningfully higher levels than a year ago.

Speaker Change: With both lending and the charge off rate growing simultaneously purchasing conditions in the U S market remain highly favorable.

Speaker Change: We are observing not only continued strong growth in U S market supply, but attractive pricing as well.

Speaker Change: The most recent quarterly delinquency data reflects a typical seasonal pattern.

Speaker Change: But at meaningfully higher levels than a year ago.

Ashish Masih: This data supports our expectation that 2024 will be another year of record portfolio sales by U.S. banks and credit card issuers, with this highly favorable purchasing environment as a backdrop. Q2 was another strong quarter of portfolio purchasing for our MCM business. We deployed a record $237 million in the U.S. with a strong return. MCM collections in the second quarter were $397 million, up 18% compared to the second quarter of 2020. Consumer payment behavior remains stable throughout the quarter.

Speaker Change: This data supports our expectation that 2024 will be another year of record portfolio sales by U S banks and credit card issuers.

Ashish Masih: With this highly favorable purchasing environment as a backdrop, Q2 was another strong quarter of quarterly purchasing for our MCM business. We deployed a record $237 million in the U.S. It's stronger terms. MCM Collections in the second quarter were $397 million. Up 18% compared to the second quarter of 2023. Consumer payment behavior remains stable throughout the quarter. We are now purchasing significantly more volume than we ever have in the US.

Speaker Change: With this highly favorable purchasing environment as a backdrop Q2 was another strong quarter of portfolio purchasing for our MCM business.

Speaker Change: We deployed a record $237 million in the U S at strong returns.

Speaker Change: MCM collections in the second quarter were $397 million.

Speaker Change: Up 18% compared to the second quarter of 2023.

Speaker Change: Consumer payment behavior remained stable throughout the quarter.

Ashish Masih: We are now purchasing significantly more volume than we ever have in the U.S., given current and expected market conditions as well as our forward flow commitments already in hand. We anticipate 2024 to be another record year of portfolio purchasing for our MCM business in the U.S. In contrast to the U.S., supply in the U.K. has been growing much more slowly. Credit card outstandings just recently returned to pre-pandemic levels, and banks in the UK, unlike those in the US, have not been meaningfully increasing consumer lending. In addition, UK charge-offs remain at low levels.

Speaker Change: We are now purchasing significantly more volume than we ever have in the U S.

Ashish Masih: Given current and expected market conditions, as well as our forward flow commitments already in hand, we anticipate 2024 to be another record year of portfolio purchasing for our MCM business in the US.

Speaker Change: Given current and expected market conditions as well as our forward flow commitments already in hand.

Speaker Change: We anticipate 2024 to be another record year of portfolio purchasing for our MCM business in the U S.

Ashish Masih: In contrast to the US, supply in the UK has been growing much more slowly. Credit card outstanding just recently returned to pre-pandemic levels. as banks in the UK, unlike those in the US, have not been meaningfully increasing consumer lending. In addition, UK charge-offs remain at low levels. Cabot's collections in Q2 were $149 million, up 7% compared to second quarter a year ago. We believe ongoing weakness in consumer confidence is marginally impacting one-time settlements, while existing payment plan performance remains stable. We continue to be selective with Cabot's portfolio purchases, which were $42 million in the second quarter.

Speaker Change: In contrast to the U S supplier in the U K has been growing much more slowly.

Speaker Change: Credit card Outstandings, just recently returned to pre pandemic levels.

Speaker Change: Banks in the UK.

Speaker Change: Like those in the U S have not been meaningfully increasing consumer lending.

Speaker Change: In addition, you could charge offs remain at low levels.

John Rowan: Cabot's collections in Q2 were $149 million. We believe ongoing weakness in consumer confidence is marginally impacting one-time settlements while existing payment plan performance remains stable, which has higher returns consistent with a well-established strategic focus. I would now like to highlight Encore's second quarter performance in terms of two key metrics, starting with portfolio purchasing. Encore's global portfolio purchases increased 2% in Q2 to $279 million.

Ashish Masih: Cabot's collections in Q2 were $149 million, up 7% compared to the second quarter a year ago. We believe ongoing weakness in consumer confidence is marginally impacting one-time settlements while existing payment plan performance remains stable. We continue to be selective with Cabot's portfolio purchases, which were $42 million in the second quarter. Although portfolio pricing continues to improve, we believe it still does not yet consistently reflect higher funding costs. Accordingly, we expect to continue to deploy at modest levels until returns in Cabot's markets become more attractive.

Speaker Change: Cabot's collections in Q2 were $149 million up 7% compared to second quarter a year ago.

Speaker Change: We believe ongoing weakness in consumer confidence is marginally impacting onetime settlements while existing payment plan performance remained stable.

Speaker Change: We continue to be selective with cabot's portfolio purchases, which were $42 million in the second quarter.

Ashish Masih: Although portfolio pricing continues to improve, we believe it still does not yet consistently reflect higher funding costs. Accordingly, we expect to continue to deploy at modest levels until returns in Cabot's markets become more attractive. We are currently choosing to allocate significantly more capital to the US market, which has higher returns consistent with a well-established strategic focus. We also continue to prudently manage the Cabot cost structure, given the reduced level of portfolio purchases in recent quarters.

Speaker Change: ALDA portfolio pricing continues to improve we believe it still does not yet consistently reflect higher funding costs.

Speaker Change: Accordingly, we expect to continue to deploy at modest levels until returns in cabot's markets become more attractive.

Ashish Masih: We are currently choosing to allocate significantly more capital to the U.S. market, which has higher returns consistent with a well-established strategic focus. We also continue to prudently manage the Cabot cost structure, given the reduced level of portfolio purchases in recent quarters.

Speaker Change: We are currently choosing to allocate significantly more capital to the U S market, which has higher returns consistent with our well established strategic focus.

Speaker Change: We also continue to prudently manage the Cabot cost structure, given the reduced level of portfolio purchases in recent quarters.

Ashish Masih: I would now like to highlight Encore's second quarter performance in terms of two key metrics, starting with portfolio purchasing. Encore's global portfolio purchases increased 2% in Q2 to $279 million, with record US deployments in a largest business MCM. This increased level of portfolio purchasing will help drive Encore's collections growth over the next few years. The fact that the vast majority of our global deployment and the second quarter was in the US is a reminder of the flexibility that our global funding structure provides to us. This structure enables us to allocate capital to opportunities in the markets with the highest returns.

Ashish Masih: I would now like to highlight Encore's second quarter performance in terms of two key metrics Starting with portfolio purchases, Encore's global portfolio purchases increased 2% in Q2 to $279 million, with record U.S. deployments in our largest business, MCM. This increased level of portfolio purchasing will help drive Encore's collections growth over the next few years. The fact that the vast majority of our global deployment in the second quarter was in the U.S. is a reminder of the flexibility that our global funding structure provides to us.

Speaker Change: I would now like to highlight encores second quarter performance in terms of two key metrics starting with portfolio purchasing.

Speaker Change: Encores global portfolio purchases increased 2% in Q2 to $279 million.

Speaker Change: With the record U S deployments in our largest business MCM.

Speaker Change: This increased level of portfolio purchasing will help drive encores collections growth over the next few years.

Speaker Change: The fact that the vast majority of our global deployment in the second quarter was in the U S. As a reminder of the flexibility that our global funding structure provides to us.

Ashish Masih: This structure enables us to allocate capital to opportunities in the markets with the highest returns. Global collections in the second quarter were $547 million, and were up 15% compared to Q2 a year ago. The past several quarters of higher portfolio purchases, particularly in the U.S., have led to meaningful growth and collection, which we expect to continue. I'd now like to hand the call over to John for a more detailed look at the financial results.

Speaker Change: This structure enables us to allocate capital to opportunities in the markets with the highest returns.

Ashish Masih: Global collections in the second quarter were $547 million and were up 15% compared to Q2 a year ago. The past several quarters of higher portfolio purchases, particularly in the US, has led to meaningful growth in collections, a trend we expect to continue.

Speaker Change: Global collections in the second quarter were $547 million and were up 15% compared to Q2 a year ago.

Speaker Change: The past several quarters of higher portfolio purchases, particularly in the U S has led to meaningful growth in collections a trend we expect to continue.

Jonathan Clark: I'd now like to hand the call over to John for a more detailed look at our financial results. Thank you, Shish. The second quarter was another period of strong purchasing for our US business at attractive returns, while collections grew in each of our key markets. Collections were higher than our forecast for the quarter, and we made small adjustments to our ERC forecast, which together resulted in a positive impact on earnings. I'd like to highlight a few items and provide more detail. Q2 collections of $547 million was up 15% compared to the second quarter last year.

Speaker Change: I would now like to hand, the call over to John for a more detailed look at our financial results.

John: Thank you Ashish.

Jonathan Clark: The second quarter was another period of strong purchasing for our U.S. business at attractive returns, while collections grew in each of our key markets. Collections were higher than our forecast for the quarter, and we made small adjustments to our ERC forecast, which together resulted in a positive impact on earnings. I'd like to highlight a few items and provide more detail.

John: The second quarter was another period of strong purchasing for our U S business at attractive returns while collections grew in each of our key markets.

John: Collections were higher than our forecast for the quarter and we made small adjustments to our ERC forecast, which together resulted in a positive impact to earnings.

John Rowan: I'd like to highlight a few items and provide more detail. Our cash generation in the second quarter was up 19% compared to Q2 of 2023. The third pillar of our strategy ensures that the strength of our balance sheet is a constant priority. This cash generation is driven by increased volumes of purchases over the last several quarters, the higher returns associated with those purchases, and continued strong collection. We believe our balance sheet provides us with very competitive funding costs when compared to our peers.

John: I'd like to highlight a few items and provide more detail.

Jonathan Clark: Q2 collections of $547 million were up 15% compared to the second quarter last year. ERC at the end of the quarter was $8.4 billion, up 5% compared to a year ago. Operating expenses remain well controlled and were up 8% compared to Q2 last year as we continue to realize operating leverage and the scale benefits of collections growth in our business. Gap net income of $32 million and gap EPS of $1.34 in the second quarter were up 22% and 24%, respectively, compared to the second quarter of 2023.

John: Q2 collections of $547 million was up 15% compared to the second quarter last year.

Jonathan Clark: ERC at the end of the quarter was $8.4 billion of 5% compared to a year ago.

John: ERC at the end of the quarter was $8 4 billion up 5% compared to a year ago.

Jonathan Clark: Operating expenses remain well-controlled and were up 8% compared to Q2 last year, as we continued to realize operating leverage and the scale benefits of collections growth. In our Gap net income of $32 million in Gap EPS of $1.34 in the second quarter were up 22% and 24% respectively compared to the second quarter of 2023. We believe our ability to generate significant cash provides us with an important competitive advantage, which is also a key component of our three-pillar strategy. Similar to the dynamic Ashish mentioned earlier, higher portfolio purchases that strong returns over the past several quarters have also led to meaningful growth in cash generation; a trend we expect to continue.

John: Operating expenses remained well controlled and were up 8% compared to Q2 last year as we continue to realize operating leverage and the scale benefits of collections growth in our business.

John: GAAP net income of $32 million and GAAP EPS of $1 34 in the second quarter were up 22% and 24% respectively compared to the second quarter of 2023.

Jonathan Clark: We believe our ability to generate significant cash provides us with an important competitive advantage, which is also a key component of our three-pillar strategy. Similar to the dynamic Ashish mentioned earlier, higher portfolio purchases at strong returns over the past several quarters have also led to meaningful growth in cash generation, a trend we expect to continue. Our cash generation in the second quarter was up 19% compared to Q2 of 2023. The third pillar of our strategy ensures that the strength of our balance sheet is a constant priority.

John: We believe our ability to generate significant cash provides us with an important competitive advantage, which is also a key component of our three pillar strategy.

John: Similar to the dynamic Ashish mentioned earlier higher portfolio purchases at strong returns over the past several quarters have also led to meaningful growth in cash generation a trend we expect to continue.

Jonathan Clark: Our cash generation in the second quarter was up 19% compared to Q2 of 2023.

Speaker Change: Our cash generation in the second quarter was up 19% compared to Q2 of 2023.

Jonathan Clark: The third pillar of our strategy ensures that the strength of our balance sheet is a constant priority. Our unified global funding structure provides us with financial flexibility, diversified sources of financing, and extended maturities. It also underpins one of the best balance sheets in our industry, with comparatively attractive leverage. Importantly, even with two consecutive quarters of record portfolio purchases in the US, our leverage declined again during the second quarter, given our strong cash generation, just as we expected it would. This cash generation is driven by increased volume of purchases over the last several quarters, the higher returns associated with those purchases, and continued strong collections.

Speaker Change: The third pillar of our strategy ensures that the strength of our balance sheet is a constant priority.

Jonathan Clark: Our unified global funding structure provides us with financial flexibility, diversified sources of financing, and extended maturity. It also underpins one of the best balance sheets in our industry with comparatively attractive leverage. Importantly, even with two consecutive quarters of record portfolio purchases in the U.S., our leverage declined again during the second quarter given our strong cash generation, just as we expected it would. This cash generation is driven by the increased volume of purchases in the last several quarters. Higher returns associated with those purchases and continued strong collections.

Speaker Change: Our unified global funding structure provides us with financial flexibility diversified sources of financing and extended maturities. It also underpins one of the best balance sheets in our industry with comparatively attractive leverage.

John: Importantly, even with two consecutive quarters of record portfolio purchases in the U S. Our leverage declined again during the second quarter, given our strong cash generation just as we expected it would.

Speaker Change: This cash generation is driven by increased volume of purchases over the last several quarters the higher returns associated with those purchases and continued strong collections.

Jonathan Clark: Our leverage ratio of 2.7 times at the end of the second quarter remains well within our target range and is down from 2.9 times at the end of 2023. We believe our balance sheet provides us very competitive funding costs from compared to our peers. Our funding structure also provides us financial flexibility and diversified funding sources to compete effectively in this growing supply environment. In the second quarter, we again made good use of our diversified funding structure to proactively manage our debt maturities. We issued $500 million of 2030 senior secured notes in Q2 in a transaction similar to our first quarter offering.

Jonathan Clark: Our leverage ratio of 2.7 times at the end of the second quarter remains well within our target range and is down from 2.9 times at the end of 2023. We believe our balance sheet provides us with very competitive funding costs when compared to our peers. Our funding structure also provides us with financial flexibility and diversified funding sources to compete effectively in this growing supply environment. In the second quarter, we again made good use of our diversified funding structure to proactively manage our debt maturity. We issued $500 million of 2030 Senior Secured Notes in Q2 in a transaction similar to our first quarter offering.

Speaker Change: Our leverage ratio of two seven times at the end of the second quarter remains well within our target range and is down from two nine times at the end of 2023.

Speaker Change: Yes.

Speaker Change: We believe our balance sheet provides us very competitive funding costs when compared to our peers. Our funding structure also provides us financial flexibility and diversified funding sources to compete effectively in this growing supply environment.

Speaker Change: In the second quarter, we again made good use of our diversified funding structure to proactively manage our debt maturities.

Speaker Change: We issued $500 million of 2030 senior secured notes in Q2, and a transaction similar to our first quarter offering.

Jonathan Clark: These two bonds expanded our option for future financing, establishing our access to the broad and deep U.S. high yield bond market. While we initially use the proceeds from these bonds to pay down a revolver, we plan to eventually use the proceeds to redeem our 2025 Euro notes and 2026 sterling notes at par in October 2024 and November 2024, respectively. As a result, we now effectively have no material maturities until 2027. We estimate that after incorporating the impacts of these actions, interest expense for the full year 2024 will be approximately $250 million. Importantly, we've been incorporating higher rates into our bidding strategy since interest rates started to rise two years ago.

Jonathan Clark: These two bonds expanded our options for future financing, establishing our access to the broad and deep U.S. high yield bond market. While we initially used the proceeds from these bonds to pay down a revolver, we plan to eventually use the proceeds to redeem our 2025 euro notes and 2026 sterling notes at par in October 2024 and November 2024, respectively. As a result, we now effectively have no material maturities until 2027. We estimate that after incorporating the impacts of these actions, interest expense for the full year 2024 will be approximately $250 million.

Speaker Change: These two bonds expanded our options for future financing, establishing our access to the broad and deep U S high yield bond market.

Speaker Change: While we initially used the proceeds from these bonds to pay down our revolver. We plan to eventually use the proceeds to redeem our 2025 Euro notes in 2026 Sterling notes at par in October 2024 in November 2024, respectively.

Speaker Change: As a result, we now effectively have no material maturities until 2027.

We estimate that after incorporating the impact of these actions interest expense for the full year 2024 will be approximately $250 million.

Jonathan Clark: Importantly, we've been incorporating higher rates into our bidding strategy since interest rates started to rise two years ago. This is precisely why we have been emphasizing that pricing in the U.K. and Europe has not consistently adjusted to the currently higher cost of funding. In the U.S., however, market pricing has indeed adjusted to this higher cost of funding.

John Rowan: Importantly, we have been incorporating higher rates into our bidding strategy since interest rates started to rise two years ago. This.

Jonathan Clark: This is precisely why we have been emphasizing that pricing in the UK and Europe has not consistently adjusted to the currently higher cost of funding. In the US, however, market pricing has indeed adjusted to this higher cost of funding.

Speaker Change: This is precisely why we have been emphasizing that pricing in the UK and Europe is not consistently adjusted to the currently higher cost of funding.

Speaker Change: In the U S. However market pricing has indeed adjusted to this higher cost of funding.

Jonathan Clark: with that.

John Rowan: With that, I'd like to turn it back over to Ashish.

Ashish Masih: With that, I'd like to turn it back over to Ashish.

Ashish Masih: I'd like to turn it back over to Ashish.

With that I'd like to turn it back over to Ashish.

Ashish Masih: Thanks, John. Before I close, I'd like to remind everyone of our commitment to a consistent set of financial priorities that we established long ago. The importance of a strong, diversified balance sheet in our industry cannot be overstated, especially in the midst of the ongoing growth in U.S. supply. We will continue to be good stewards of your capital by always taking the long view and prioritizing portfolio purchases at attractive returns in order to build long-term shareholder value. I'd now like to highlight how we differentiate it from others in our industry, especially during a time when a number of our competitors are dealing with their own challenges.

Thanks, John.

Ashish Masih: Before I close, I'd like to remind everyone of our commitment to a consistent set of financial priorities that we established long ago. The importance of a strong, diversified balance sheet in our industry cannot be overstated, especially in the midst of the ongoing growth in U.S. market supply. First, we are the largest player in the attractive U.S. debt purchasing market, which in turn generates more cash, more earnings, and ultimately higher returns. And third, our well-diversified global balance sheet allows us to allocate capital to opportunities with the highest returns. Our balance sheet also provides us with the flexibility to fund our business in a myriad of ways. This provides a significant advantage in times when traditional markets become less certain and more expensive.

Ashish Masih: Before I close, I'd like to remind everyone of our commitment to a consistent set of financial priorities that we established long ago. The importance of a strong, diversified balance sheet in our industry cannot be overstated, especially in the midst of the ongoing growth in U.S. market supply. We will continue to be good stewards of your capital by always taking the long view and prioritizing portfolio purchases at attractive returns in order to build long-term shareholder value.

Ashish Masih: Before I close I'd now.

Ashish Masih: Like to remind everyone of our commitment to a consistent set of financial priorities that we established long ago.

Ashish Masih: The importance of a strong diversified balance sheet and our industry cannot be overstated.

Ashish Masih: Especially in the midst of the ongoing growth in U S market supply.

Ashish Masih: We will continue to be good stewards of your capital by always taking the long view and prioritizing portfolio purchases at attractive returns in order to build long term shareholder value.

Ashish Masih: I'd now like to highlight how we differentiate ourselves from others in our industry, especially during a time when a number of our competitors are dealing with their own challenges. First, we are the largest player in the attractive U.S. debt purchasing market.

Ashish Masih: And now I'd like to highlight how we're differentiated from others in our industry.

Ashish Masih: Especially during a time when a number of our competitors are dealing with their own challenges.

Ashish Masih: First, we are the largest player in the attractive U.S. debt purchasing market. Second, we believe our ability to collect on the portfolios we buy and a corresponding purchase price multiples lead to collecting more over a vintage lifetime, which in turn generates more cash, more earnings, and ultimately higher returns. And third, our well-diversified global balance sheet allows us to allocate capital to opportunities with the highest returns. This flexibility is vital, as demonstrated by a current allocation of the vast majority of our capital to our MCM business in the U.S. in order to maximize overall returns. Our balance sheet also provides us a flexibility to fund our business in a myriad of ways.

Ashish Masih: First we are the largest player in the attractive U S debt purchasing market.

Ashish Masih: Second, we believe our ability to collect on the portfolios we buy and a corresponding purchase price multiple leads to collecting more over a vintage's lifetime, which in turn generates more cash, more earnings, and ultimately higher returns. And third, our well-diversified global balance sheet allows us to allocate capital to opportunities with the highest returns. This flexibility is vital, as demonstrated by the current allocation of the vast majority of our capital to our MCM business in the U.S. in order to maximize overall return.

Ashish Masih: Second we believe our ability to collect on the portfolios, we buy and a corresponding purchase price multiples.

Ashish Masih: Lead to collecting more over vintages lifetime.

Ashish Masih: Each in turn generate more cash.

Ashish Masih: Our earnings and ultimately higher returns.

Ashish Masih: And third our well diversified global balance sheet allows us to allocate capital to opportunities with the highest returns.

Ashish Masih: This flexibility is vital as demonstrated by our current allocation of the vast majority of our capital to our MCM business in the U S in order to maximize overall returns.

Ashish Masih: A balance sheet also provides us with the flexibility to fund our business in a myriad of ways. This provides a significant advantage in times when traditional markets become less certain and more expensive. In closing, I'd like to quickly summarize our second quarter performance.

Ashish Masih: Our balance sheet also provides us the flexibility to fund our business and a myriad of ways.

Ashish Masih: This provides a significant advantage in times when traditional markets become less certain and more expensive.

Ashish Masih: This provides a significant advantage in times when traditional markets become less certain and more expensive.

Ashish Masih: In closing, I'd like to quickly summarize our second quarter performance. What fully supply in the U.S. market continues to grow to record levels, which is where we are currently focusing the majority of our capital deployment against this highly favorable backdrop. We deployed a record $237 million in the U.S. in Q2 at strong returns. In the UK and Europe, we are maintaining our discipline and continue to be very selective in our purchases until returns become more attractive. Our overall performance through Q2 is ahead of our expectations, driven by strong portfolio purchasing and collections. Due to the strength of our position in the favorable U.S.

Ashish Masih: In closing, I'd like to quickly summarize our second quarter performance. Against this highly favorable backdrop, we deployed a record $237 million in the U.S. in Q2 at a strong return. Our overall performance through Q2 is ahead of our expectations, driven by strong portfolio purchasing and collection. We now anticipate our global portfolio purchasing this year to exceed $1.15 billion, an increase of $75 million when compared to 2023. Thank you.

Ashish Masih: In closing I'd like to quickly summarize our second quarter performance.

Ashish Masih: Portfolio supply in the U.S. market continues to grow to record levels, which is where we are currently focusing the majority of our capital deployment. Against this highly favorable backdrop, we deployed a record $237 million in the U.S. in Q2 at a strong return. In the UK and Europe, we are maintaining our discipline and continue to be very selective in our purchases until returns become more attractive.

Ashish Masih: We're fully supply in the U S market continues to grow to record levels, which.

Ashish Masih: Which is where we are currently focusing the majority of our capital deployment.

Ashish Masih: Against this highly favorable backdrop, we deployed a record $237 million in the U S. In Q2 and strong returns.

Ashish Masih: In the UK and Europe, we are maintaining our discipline.

Ashish Masih: And continue to be very selective in our purchases until returns become more attractive.

Ashish Masih: Our overall performance through Q2 was ahead of our expectations, driven by strong portfolio purchasing and collection. Due to the strength of our position in the favorable U.S. market for portfolio purchasing and the continued execution of our strategy, we are raising our 2024 guidance provided in February. We now anticipate our global portfolio purchasing this year to exceed $1.15 billion, an increase of $75 million when compared to 2023. In addition, we expect our year-over-year collections growth to be approximately 11% to over $2.075 billion, an increase of over $200 million when compared to 2020. Now, we'd be happy to answer any questions that you may have. Operator, please open up the lines for questions. Thank you.

Ashish Masih: Our overall performance through Q2 is ahead of our expectations.

Ashish Masih: Driven by strong portfolio purchasing and collections.

Ashish Masih: Due to the strength of our position in the favorable U S market for portfolio purchasing and the continued execution of our strategy.

Ashish Masih: market for portfolio purchasing and the continued execution of our strategy, we are raising at 2024 guidance provided in February. We now anticipate our global portfolio purchasing this year to exceed $1.15 billion. And increase of $75 million when compared to 2023. In addition, we expect our year-over-year collections growth to be approximately 11% to over $2.075 billion.

Ashish Masih: We are raising our 2024 guidance provided in February.

Ashish Masih: We now anticipate a global portfolio purchasing this year to exceed 115 billion.

Ashish Masih: An increase of $75 million when compared to 2023.

Ashish Masih: In addition, we expect our year over year collections growth to be approximately 11% to over 2.0 75 billion.

Operator: And increase of over $200 million. Now, we'd be happy to answer any questions that you may have.

Speaker Change: An increase of over $200 million when compared to 2023.

Ashish Masih: Now we'd be happy to answer any questions that you may have.

Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we prepare the roster. The first question comes from Mark Hughes with Truist Securities. Go ahead, Mark. Your line is open.

Operator: Operator, please open up the lines for questions. Thank you. At this time, we will conduct a question and answer session. As a reminder to ask a question, you will need to press the star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we prepare the ruster.

Speaker Change: Operator, please open up the lines for questions.

Ashish Masih: Hi Mark, this is Ashish.

Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we prepare the roster.

Mark Hughes: Yeah, thank you. Um... Jonathan, did you give the collections versus expectations for the UK and for the US?

Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby while we prepare the roster.

Mark Hughes: First question comes from Mark Hughes with Truist Securities. Go ahead, Mark; your line is open. Yes, thank you.

Speaker Change: First question comes from Mark Hughes with terrific Securities Go ahead, Mark Your line is open.

Unnamed Speaker: Yeah, thank you.

Speaker Change: Yes. Thank you.

Mark Hughes: Jonathan, did you get the collections versus expectations for the UK and the US?

Unnamed Speaker: Jonathan did you get the collections versus expectation.

Speaker Change: For the U S U K and for the U S.

Ashish Masih: Hi, Mark. This is Ashish. I'll jump in. I have it in front of me. So, in terms of, against the expectations of December 31, 2023, which I believe you're asking, so globally, we performed 101%. The US was 104% and Europe 97%. Now, in constant currency, those numbers become globally 102%. The US, of course, it stays at 104%. And Europe is 99%. Against expectations.

Ashish Masih: I'll jump in. I have it in front of me. So in terms of against the expectations of December 31st, 2023, which I believe you're asking, globally, we performed at 101%. The U.S. was 104%, and Europe 97%. Now, in constant currency, those numbers become 102 percent. The U.S., of course, it stays at 104 percent, and Europe is 99 percent against expectations.

Ashish Masih: Hi, Mark this is ashish ill jump in and have it in front of.

Speaker Change: In terms of against the expectations of December 31, 2023, which I believe you're asking so globally, we performed at 101%.

Speaker Change: <unk> was 104% and Europe, 97% now.

Speaker Change: Now in constant currency those numbers become globally, 102% U S of course, it stays at 104%.

Speaker Change: And Europe is 99% against expectations.

Mark Hughes: And is that six months, or is that two Q?

Unnamed Speaker: And is that six months, or is that 2Q?

Ashish Masih: And is that six months, or is that 2Q?

Speaker Change: And is that six months or is that <unk>.

Unnamed Speaker: It's been six months, year-to-date.

Ashish Masih: It's been six months, year-to-date.

Mark Hughes: It's six months, year to date, yep. Okay.

Unnamed Speaker: <unk>.

Speaker Change: Six months year to date.

Mark Hughes: And then what is your collections multiple now on the 2024 paper in the US and UK? I'm sorry, I didn't see if the Q was out, so I apologize. But since I have to. Okay. Yeah, so the year-to-date multiple on US vintage is 2.3 times. And for Europe, it is 2.1. For 2024, vintage is year-to-date. So, the 2.3 times is that am I writing thing that's down a little bit from the 2.4 at the first quarter?

Ashish Masih: And then what is your collections multiple now on the 2024 paper in the U.S. and U.K. I'm sorry, I didn't see if the queue was out, so I apologize. Yeah, so the year to date multiple

Unnamed Speaker: And then what is your collections multiple now on the 2024 paper in the U.S. and U.K. I'm sorry, I didn't see if the queue was out, so I apologize. Yeah, so the year to date multiple

Unnamed Speaker: Okay.

Unnamed Speaker: And then.

Speaker Change: What is your collection multiple now on the 2020 for our paper in the <unk>.

Unnamed Speaker: U S and U K I'm sorry.

Speaker Change: I didn't see a big Q was out so I apologize, but since I have okay.

Unnamed Speaker: Okay.

Ashish Masih: Yeah, so the year to date multiple on US vintage is 2.3 times, and for Europe, it is 2.1 for 2024 vintage here today.

Unnamed Speaker: Yeah, so the year to date multiple on US vintage is 2.3 times, and for Europe, it is 2.1 for 2024 vintage here today.

Speaker Change: Yes, so the year to date multiple on U S vintages too.

Speaker Change: Three times.

Unnamed Speaker: And for Europe. It is two one.

Unnamed Speaker: For 2024 vintages year to date.

Mark Hughes: So the 2.3 times, is that, am I right in thinking that's down a little bit from the 2.4 in the first quarter, and if so, what's driving that?

Ashish Masih: So the 2.3 times, is that, am I right in thinking that's down a little bit from the 2.4 in the first quarter? And if so, what, uh, what's driving it?

Unnamed Speaker: Yeah.

Unnamed Speaker: So the two three times.

Speaker Change: And the thing Thats down a little bit from the two four at the first quarter and if so what.

Ashish Masih: And if so, what's driving that? Yeah, you're right, Mark. So cumulative number is that likely down from 2.4. I would say there's just overall the multiples are still strong. And for like-for-like portfolios, we have not seen any degradation in return. So there's often product differences, types of portfolios by high balance, large balance, or low balance, for example. And I would say on a like-for-like basis returns are absolutely very strong, and no degradation. Multiples move around a little bit here and there, but there's still very strong multiples. And on Europe, the multiple has been increasing.

Speaker Change: What's driving that.

Ashish Masih: Yeah, you're right, Mark. So the cumulative number is that slightly down from 2.4. I would say Overall, the multiples are still strong, and for like-for-like portfolios, we have not seen any degradation in returns. So there are often product differences, types of portfolios you buy, high balance, large balance, or low balance, for example. And I would say on a like-for-like basis, returns are absolutely very strong with no degradation. Multiples may move around a little bit here and there, but they're still very strong multiples. And in Europe, the number of multiples has been increasing. I know you asked just for the U.S., but that's the other thing I would highlight.

John Rowan: Yeah, you're right, Mark. So the cumulative number is that slightly down from 2.4. I would say Overall, the multiples are still strong, and for like-for-like portfolios, we have not seen any degradation in returns. So there are often product differences, types of portfolios you buy, high balance, large balance, or low balance, for example. And I would say on a like-for-like basis, returns are absolutely very strong with no degradation. Multiples may move around a little bit here and there, but they're still very strong multiples. And in Europe, the number of multiples has been increasing. I know you asked just for the U.S., but that's the other thing I would highlight.

Speaker Change: Yeah, Youre right Mark so cumulative number is slightly down from $2 four.

John Rowan: I would say.

Speaker Change: There's just.

John Rowan: Overall, the multiples are still strong and for like for like portfolios, we have not seen any degradation in returns.

John Rowan: Often product differences types of portfolios, we buy high balance large balanced low balance for example.

John Rowan: And I would say on a like for like basis returns are absolutely very strong and no degradation multiples may move around a little bit here and there, but it's still very strong multiples and on Europe. The multiple has been increasing I know you asked just for us, but thats. The other thing I would highlight.

Ashish Masih: I know you asked just for US, but that's the other thing I would highlight.

Mark Hughes: Yeah. How about availability under the credit facility? Well, right now, with what we've done the bond deals, it's the full commitment. So it's 1.2 billion.

Unnamed Speaker: How about availability under the credit facility?

Jonathan Clark: How about availability under the credit facility?

John Rowan: Yes.

Speaker Change: How about the availability under the credit facility.

Jonathan Clark: Well, right now, with what we've done, the bond deals, it's the full commitment, so it's $1.2 billion.

John Rowan: Well, right now, with what we've done, the bond deals, it's the full commitment, so it's $1.2 billion.

Speaker Change: Well right now with what we've done the bond deals. It's the full commitment so it's $1 2 billion.

Mark Hughes: And then, Jonathan, how was the interest expense going to play out next year? I hear your guidance for this year. Sort of implies something what in the mid-60s for the second half. Once you pay off those obligations, is that going to continue next year in the mid-60s, or is that going to dip down all depending on interest rates obviously? Yeah, I tell you, to quantify much into 2025 at this point.

Jonathan Clark: And then, Jonathan, how's the interest expense going to play out next year? I hear your guidance for this year sort of implies something, what in the mid-60s for the second half. Once you pay out those obligations, is that going to continue next year in the mid-60s, or is that going to dip down? All depending on interest rates, obviously. Yeah, yeah, I tell you, to quantify.

John Rowan: And then Jonathan our has the interest expense is going to play out next year.

Speaker Change: Your guidance for this year.

Unnamed Speaker: sort of implies something, what in the mid-60s for the second half. Once you pay off those obligations, is that going to continue next year in the mid-60s, or is that going to dip down? All depending on interest rates, obviously. Yeah.

Speaker Change: Sort of implies something.

Unnamed Speaker: Hello.

Unnamed Speaker: Mid <unk> for the second half once you pay.

Unnamed Speaker: Pay off those.

Unnamed Speaker: Those obligations is that going to continue next year in the mid <unk> or is that kind of dipped down.

Unnamed Speaker: Depending on interest rates, obviously, but.

Jonathan Clark: Yeah, I'll tell you, to quantify much into 2025 at this point, I think I'll and I'm going to beg off on that. Just in general, we do expect the general trends to continue that we've seen this year into next year, and that could probably be a true statement for what you're seeing in the back half of the year for interest rates. As you point out, as long as the interest rate environment remains stable.

Speaker Change: Yes, I'd tell you too.

Unnamed Speaker: <unk> much into 2025 at this point.

Jonathan Clark: I think I'll beg off on that. Just in general, we do expect the general trends to continue that we've seen this year into next year, and that's probably could be a true statement for what you're saying in the back cap of the year for interest rates. As you point out, as long as as long as interest rate environment remains stable. Yeah, okay.

Unnamed Speaker: <unk>.

Unnamed Speaker: Thank you all.

Unnamed Speaker: Just in general, we do expect the general trends to continue that we have seen this year into next year, and that could probably be a true statement for what you are seeing in the back half of the year for interest rates. As you point out, as long as the interest rate environment remains consistent and stable.

Unnamed Speaker: Beg off on that.

Speaker Change: Just in general we do expect that general trends to continue but we've seen this year.

Speaker Change: Next year probably.

Unnamed Speaker: To be a true statement for what Youre seeing in the back half of the year for interest rates as you called out as long as as long as interest rate environment remains.

Unnamed Speaker: Stable.

Unnamed Speaker: Yeah, okay. All right, thank you very much.

Unnamed Speaker: Yes.

Mark Hughes: All right. Thank you very much.

Unnamed Speaker: Okay.

Speaker Change: Alright, Thank you very much.

Operator: We stand by for the next question.

Operator: Please stand by for the next question. The next question comes from Zach Oster with Citizens JNP. Go ahead, your line is open.

Operator: Please stand by for the next question. The next question comes from Zach Oster with Citizens J&P. Go ahead, your line is open.

Speaker Change: Please standby for the next question.

Zach Oster: Next question comes from Zach Oster with Citizens JMP. Go ahead. Your line is open. I think if you're taking the question, this is Zach on for David.

Speaker Change: Next question comes from Zach <unk> with citizens JMP go ahead. Your line is open.

Zach Oster: Hi, thank you for taking the question. This is Zach on behalf of David.

Zach Oster: Hi, thank you for taking the question. This is Zach on behalf of David.

Zach Oster: Alright. Thank you for taking my question Zack on for David.

Zach Oster: So we wanted to just quickly check in on two things. So first of all, on the macro front, you kind of mentioned stable payment rates. We want to see if there are any consumers that are opting for any longer payment rates or longer payment plans, and if there's any other kind of general signs of a more stressed consumer. And then, on the funding side, I just wanted to see if we can get a reminder on whether the global credit facility has any limits to how much of it can be deployed in the U.S. as we kind of talk about that flexible deployment. Thank you.

Zach Oster: I do want to just quickly check in on two things. So, first of all, on the macro front, you kind of mentioned stable payment rates. We want to see if there are any consumers that are opting for any longer payment rates or longer payment plans, and if there's any other kind of general signs of a more stressed consumer. And then, on the funding side, I just wanted to see if we can get a reminder on whether the global credit facility has any limits to how much of it can be deployed in the U.S., as you kind of talk about that flexible deployment. Thank you.

Zach Oster: I do want to just quickly check in on two things. And so, first of all, just on the macro front, you know, you kind of mentioned the stable payment rates. Everyone's safe. There's any consumers that are, you know, offering for any longer payment rates or longer, longer payment plans. And if there's any other kind of general signs of a more stressed consumer.

Zach Oster: So just quickly check in on two things. So first of all just on the macro front I know you kind of mentioned that stable payment rates that we want to see if theres any consumers that are opting for any longer payment rates for longer payment plans and if there is any other kind of general signs of a more stressed consumer and then on the funding side just wanted to see if you can we can get a reminder on that.

Zach Oster: And then in the funding side, just want to see if you can, we can get a reminder on if the global credibility has any limits to how much of it can be deployed in the US. As you kind of talk about that flexible climate. Thank you.

Zach Oster: The global credit facility has any limits to how much of it can be deployed in the U S. As you kind of talk about that flexible deployment. Thank you.

Ashish Masih: Zach, this is Ashish. Let me take the first one, and I'll let John take the funding one in terms of the consumer. I think you're leading to the US consumer. It's been very stable and consistent from what we have seen and last time several months quarters. No real, no deterioration in any way of payment rates or people's ability to stay on the payment plans. So it's very much a normalized environment when you compare to 2019 pre-pandemic. And it's continuing. We are continuing to see that as well. And that's showing up in a very strong collections driven by stable consumer behavior combined with higher purchasing, and that's driving increased connections.

Ashish Masih: Zach, this is Ashish. Let me take the first one, and I'll let John take the funding one.

Ashish Masih: Zach, this is Ashish. Let me take the first one, and I'll let John take the funding one. In terms of the consumer, I think you're alluding to the U.S. consumer. It's been very stable and consistent from what we have seen in the last several months and quarters. No deterioration in any way of payment rates or people's ability to stay on the payment plans. So it's very much a normalized environment when you compare it to 2019, pre-pandemic. And we are continuing to see that as well, and that's showing up in very strong collections driven by stable consumer behavior combined with higher purchasing that's driving increased connection. John on the funding. Yeah.

Zach Oster: Okay.

Speaker Change: Ashish, let me take the first one and I'll, let John take funding one in terms of the consumer I think you are alluding to the U S. Consumer it's been very stable and consistent from what we have seen in last time several months quarters.

Ashish Masih: In terms of the consumer, I think you're alluding to the U.S. consumer. It's been very stable and consistent from what we have seen over the last several months, quarters, with no deterioration in any way of payment rates or people's ability to stay on the payment plans. So it's very much a normalized environment when you compare it to 2019, pre-pandemic, and we are continuing to see that as well. And that's showing up in very strong collections driven by stable consumer behavior combined with higher purchasing that's driving increased collections. John on the funding. Yeah.

John Rowan: No real no.

Ashish Masih: Deterioration in any bill payment rates, our peoples ability to stay on the payment plan. So it's very much a normalized environment when you compared to 2019 on pre pandemic and its continuing we're continuing to see that as well and that's showing up in a very strong collections driven by.

John Rowan: Stable consumer behavior combined with higher purchasing that's driving increased connections.

Jonathan Clark: Yeah, in terms of the funding, yeah, there's no restriction. We can, and we will deploy dollars where we see the best returns, and that could continue to mean a heavy skew to the U.S. for a period of time, and that's fine.

Jonathan Clark: John on the funding. Yeah, in terms of funding. Yeah, there's no restriction within. We will. Employee dollars where we see the best returns and that could continue to mean a heavy skewed to the US for a period of time. That's fine.

Ashish Masih: John on the funding beta in terms of funding, yes, there is no restriction.

John Rowan: We will.

John Rowan: Deploy dollars, where we see the best returns.

John Rowan: That could continue to mean, the heavy skew to the U S for a period of time and that's fine.

Zach Oster: Yeah, thank you. The reminder.

Ashish Masih: Yes.

John Rowan: Yes. Thank you.

Ashish Masih: Okay.

Operator: To ask a question, please press star 11 on your telephone and wait for your name to be announced. And then, to withdraw that question, please press star 11 again. Please stand by for the next question.

John Rowan: As a reminder.

Operator: To ask a question, please press star 1 1 on your telephone and wait for your name to be announced, and then to withdraw that question, please press star 1 1 again. Please stand by for the next question. The next question comes from Robert Dodd with Raymond James. Go ahead, your line is open.

Speaker Change: To ask a question. Please press star one on your telephone and wait for your name to be announced and then to withdraw that question. Please press star one again please.

Operator: But after noon everyone, we will begin the program in a few moments.

Operator: Good afternoon everyone, and thank you for standing by. Welcome to the Uncore Capital Group's second quarter, 2024 earnings call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. So ask a question during the session. You will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised. Who will withdraw your question? Please press star 1-1 again.

Speaker Change: Please standby for the next question.

Robert Dodd: Next question comes from Robert Dodd with Raymond James. Go ahead; your line is open. Hi, guys.

Operator: The next question comes from Robert Dodd with Raymond James. Go ahead. Your line is open.

Speaker Change: Next question comes from Robert Dodd with Raymond James Go ahead. Your line is open.

Robert Dodd: Hi guys, and congratulations on the quarter and on Jonathan.

Robert Dodd: Hi guys, and congratulations on the quarter and on Jonathan, not eventually, on the changes in curves, recoveries, et cetera, in the quarter. It's the first time it's been positive in a while. So congrats on that pretty small number. Looks to me like it was maybe a million dollars negative on cash collections versus expectations and then plus six and a half on changes in curves. So is that right? And if it is, I realize those are really small numbers.

Robert Dodd: Congratulations on the quarter and on Jonathan on, not eventually, at the time. On that, that the changes in curves or coverage, except in the quarter, it's first time it's been positive in a while. So congrats on that, and pretty small number. Looks to me like it was maybe a million dollars negative on cash collections versus expectations and plus six and a half on changes in curves. So is it that right? And if it is, I realize there's a really small number. Can you give us any color like if there were vintage or geographic concentrations in the year?

Robert Dodd: Hi, guys congratulations on the quarter then on Jonathan.

Robert Dodd: Eventually.

Robert Dodd: Tom.

Robert Dodd: On.

John Rowan: The changes in terms of coverage et cetera, and recorded its first time, it's been positive in a while.

Operator: Please be advised that today's conference is being recorded.

Speaker Change: That's on that.

Bruce Thomas: But now, like to hand the conference over to your first speaker today, Bruce Thomas, VP of Global Industrial Relations for Encore. Bruce, please go ahead. Thank you, operator.

John Rowan: Small number looks to me like it was maybe a $1 million negative on cash collections versus expectations.

John Rowan: Six and a half on.

Speaker Change: On changes and curve so is that right and if it is I realize this is a very small numbers could you give us any color Mike.

Bruce Thomas: Good afternoon and welcome to Uncore Capital Group's second quarter, 2024 earnings call. Joining me on the call today are Ashish Masih, our president and chief executive officer, Jonathan Clark, executive vice president and chief financial officer. And Ryan Bell, president of Midland Credit Management. Ashish and John will make prepare remarks today and then we will be happy to take your questions. Unless otherwise noted, comparisons on this conference call will be made between the second quarter of 2024 and the second quarter of 2023.

Robert Dodd: Can you give us any color, like if there were vintages or geographic concentrations in any of that? I would guess maybe a little weakness in Europe, but where the curve changes are occurring, is there any particular concentration in any of the areas?

John Rowan: There were vintages or geographic concentrations in India, I would guess, maybe a little weakness in.

Robert Dodd: I would guess maybe a little bit missing in Europe, but where the curve changes are occurring. Is there any particular concentration in any of the advantages there?

Speaker Change: In Europe, where the curve changes are occurring is there any.

Speaker Change: Any particular concentration in any job.

John Rowan: Vintages there.

Ashish Masih: Robert, this is Ashish. So the numbers are actually slightly different. So the performance above forecast was about $27 million, and the impact of NPV on curve changes was about $21.7 million. So net is 5.7 positive in terms of total CECL impact for the quarter for the company. Now, in terms of your question on region, so Overall, I would say the numbers are very small and really noise against how we adapt a forecast and refine it quarter over quarter, but in our queue, you will find that The other way to look at the 5.7 is that it's positive about 9 million for NCM in the U.S., and for Cabot, Again, those numbers combine action versus forecast performance and the change in forecast. So, just be mindful of kind of how that's calculated; that's how it divides up.

Ashish Masih: Robert, this is Ashish. So the numbers are actually slightly different. So the performance above forecast was about 27 million dollars, and the impact of NPV on curve changes was about 21.7 million dollars. So net is 5.7 positive in terms of total season impact for the quarter for the company. Now, in terms of your question on region. So overall, I would say the numbers are very small and really noise against how we adapt the forecast and refine it quarter or quarter. But in our queue, you will find that the other way to look at the 5.7 is it's positive about 9 million for NCM and US, and for cabinets about negative 4 million or so.

Robert Dodd: And Robert this is ashish so.

Speaker Change: The numbers are actually slightly different so deep.

John Rowan: The performance above forecast was about $27 million.

Bruce Thomas: In addition today's discussion will include forward-looking statements that are based on current expectations and assumptions in our subject to risks and uncertainties. Actual results could differ materially from our expectations. Please refer to our SEC filings for a detailed discussion of potential risks and uncertainties. We undertake no obligations update any forward-looking statement. During this call, we will use rounding and abbreviations for the sake of brevity. We will also be discussing non-gap financial measures.

John Rowan: And the impact of NPV on curve changes was about $21 $7 million net is five seven positive in terms of total seasonal impact for the quarter for the company.

John Rowan: Now in terms of your question on region. So.

Unnamed Speaker: Overall, I would say the numbers are very small and really noise against how we adapt a forecast and refine it quarter over quarter, but in our queue, you will find that The other way to look at the 5.7 is that it's positive about 9 million for NCM in the US, and for CABOT, it's about negative 4 million or so.

John Rowan: Overall, I would say the numbers are very small.

Unnamed Speaker: Really noise against how we adapt to forecast and refining it quarter over quarter, but in our Q you will find that.

Unnamed Speaker: The other way to look at the $5 seven as it.

Bruce Thomas: Reconciliation to the most directly comparable gap financial measures are included in our investor presentation. Which is available on the investor section of our website. As a reminder, following the conclusion of this call, a replay of this conference call along with our prepared remarks will also be available on the investor section of our website. We'll tap.

Unnamed Speaker: It is positive about $9 million for MCM in U S and for Cabot, it's about negative $4 million or so.

Ashish Masih: Again, those numbers combine actual versus forecast performance and the change in forecast. So just be mindful of kind of how that's calculated. That's how it divides up. And any, I mean, is any vintage differences? I mean, obviously, the 2001's were a problem, but I think stabilized. Anything that's particular to 20 year in now is it just spread out. I would say overall, any changes invented you might see. Again, those are change impact of two things. First, performance against forecast, and second, a change in forecast. So overall, I would say these are just minor, very minor impacts and noise.

Unnamed Speaker: Again, those numbers combined accurately forecast performance and the change in forecast. So just be mindful of kind of how that was calculated that's how divides up.

Ashish Masih: Okay, and any, I mean, any, any vintage differences? I mean, obviously, like the 2001s were a problem, but I think it's stabilized. You know, anything that's particular to 20-year-olds in there, or is it just, you know, spread out?

Unnamed Speaker: Okay.

Ashish Masih: Let me turn the call over to Ashish Masih, our president and chief executive officer. Thanks Bruce and good afternoon everyone. Thank you for joining us.

Unnamed Speaker: Any any vintage differences obviously.

Unnamed Speaker: You know, the 2001s were a problem, but I think it's stabilized. You know, anything that's particular to 20-year-olds in there, or is it just spread out?

Unnamed Speaker: The 2001.

Unnamed Speaker: But I think stabilized.

Unnamed Speaker: Yes.

Speaker Change: Taking particular.

Speaker Change: Particular to twice a year in now.

Ashish Masih: Before I begin today's quarterly remarks, I'd like to spend a moment addressing the news of Jonathan's retirement next year. Which you've likely seen in the separate press release, we issued today alongside a Q2 earnings release. This is something we've been carefully planning for, and although it's too early to start the goodbyes, I want to acknowledge John's invaluable contribution to Encore and a leadership team and extend my gratitude for his dedication to Encore for more than a decade.

Ashish Masih: I would say, overall, any changes in vintage you might see, again, those are the impact of two things, performance against forecast, and second, changing forecast. So overall, I would say these are just minor, very minor impacts and noise.

Speaker Change: Spread out.

Speaker Change: I would say overall any changes in vintage you might see again, those that gene impact of two things first.

Unnamed Speaker: performance against forecast, and second is changing forecast. So overall, I would say these are just

Unnamed Speaker: Performance against forecast and second achieving forecast. So overall I would say these are just.

Unnamed Speaker: Minor.

Unnamed Speaker: Minor impacts and noise I would not draw any conclusions from vintage level.

Ashish Masih: I would not draw any conclusions from vintage level data that you will see in our queue. The overall number is a sum of all those vintage across geography, the cross product types. And there's no real differences across vintage or anything that are overall collections. As I said, we had a very good quarter in terms of collections. And the seasonal impacts are small, and there are more about forecasting refinements and impacts on those than anything around major vintage performance or consumer behavior or anything like that.

Ashish Masih: I would not draw any conclusions from the vintage level data that you will see in our queue. The overall number is a sum of all those vintages across geographies, across product types, and there are no real differences across vintage or anything. Our overall collections, as I said, we had a very good quarter in terms of collections, and the CECL impacts are small and are more about forecasting refinements and impacts on those than anything around major vintage performance or consumer behavior or anything like that.

Unnamed Speaker: Data that you will see in our Q.

Unnamed Speaker: The overall number as a sum of all those vintages across geographies across product types.

Unnamed Speaker: And there's no real differences across vintages or anything our overall collections that said are we had a very good quarter in terms of collections and the T.

Ashish Masih: So much of what makes Encore a respected industry leader today has been directly influenced by John's vision and guidance. John has made sure we'll continue to be in good hands after his departure with Thomas Hernandez transitioning into the Encore CFO role in April 2025. Many of you have met and even gotten to know Thomas over the years since he joined us back in 2016. With his proven track record and substantial industry and company knowledge, I'm confident Thomas will smoothly transition into the Encore CFO role and continue to be an important driver of a disciplined strategy and financial excellence. And I look forward to working with Thomas closely in his new role.

Unnamed Speaker: Seasonal impacts are small and they are more about forecasting refinements and impact on those Dan anything around major vintage performance or consumer behavior or anything like that.

Robert Dodd: Got it, thank you. And then just one more thing, on legal collections in total, like it broke over 60 for the first time in a while on the show, you know, is that... So, Robert, I want to make sure I understand.

Robert Dodd: Got it. Thank you. And then there is just one more thing.

Robert Dodd: Thank you.

Robert Dodd: And then just one more thing, on legal collections and total, right? It broke over over 60 for the first time in in a while. So, you know, is that, are we now starting to hit a period of length in legal given you have been buying a lot for some period of time. There's always a lag before legal goes up following purchases because it's not your first choice. The procedure, the legal avenue, but is this, you know, the beginning of a rising trend only in legal, and was there anything just unusual in Q2 about timing of items. Robert, I want to make sure I understood you meant, excuse you meant the legal collections expense, correct?

Speaker Change: Got it thank you.

Robert Dodd: Just one more on <unk>.

Robert Dodd: Legal collections in total <unk> 60 for the first time in a while.

Robert Dodd: Our on that.

Robert Dodd: So is that.

Robert Dodd: On legal collections in total, it broke over 60 for the first time in a while on the show. Are we now starting to hit a period of ramp in legal, given you have been buying a lot for some period of time? There's always a lag before legal costs go up following purchases because it's not your first choice to pursue the legal avenue. But is this the beginning of a rising trend only in legal costs, or was there anything just unusual in Q2 about the timing of ICOs? So, Robert, I want to make sure I understand.

Robert Dodd: We now starting to hit.

Robert Dodd: A period of ramp in legal given you have been buying a lot for some period of time, there's always a lag before legal goes up following purchases because it's not your first choice to proceed the legal Avenue.

Ashish Masih: I'll now begin with key highlights from the second quarter. Encore second quarter results are a continuation of a strong performance trajectory. This performance was driven by sustained strong portfolio purchasing in the US and double digital global collections growth. In the US, the market for charged off receivable portfolios continues to grow to record levels driven by simultaneous growth in both credit card lending and the charge off rate. As a result, we continue to see very attractive pricing and returns in the US. Accordingly, we are currently allocating the vast majority of our capital to our MCM business in the US, which set another deployment record in the second quarter.

Speaker Change: Is this.

Robert Dodd: And at the beginning of a rising trend in legal and was there anything unusual in Q2 about timing.

Ashish Masih: So, Robert, I want to make sure I understood. You meant the legal collections expense, correct? Is that your question? Yes, correct, correct. Yeah, all of that is coming from a U.S. business as we are growing purchasing, and just there's a natural placement. Now that said, the overall legal collections as a percent of total for MCM were in the 35-36 percent range, kind of on the lower side, similar to Q1. So we continue to get very good success in our call center and digital channel. Any rise in legal expense is just part of increased purchasing, and it's all coming from the U.S. side of the MCM business. I got it.

Robert Dodd: Items.

Robert Dodd: So Robert, I want to make sure I understood you meant the legal collections expense, correct? Is that your question? Yes, correct.

Robert Dodd: So Robert I wanted to make sure I understood human <unk> legal collections expense correct is that.

Ashish Masih: Is that your question? Yes, correct, correct. Yes, correct. Yeah, all of that is coming from a US business as we are growing purchasing and just there's a natural, some statements about that said. The overall legal collections as a percent of total for NCM was in the 35, 36% range, kind of on the lower side, similar to Q1. So, we continue to get very good success in our call center and digital channel. Any rise in legal expense is just part of increased purchasing, and it's all coming from the US side from the NCM business. Got it.

Robert Dodd: Correct correct, yes, okay.

Speaker Change: Yes, all of that is coming from our U S business.

Speaker Change: We are growing purchasing and just there is a natural.

Speaker Change: Placements and now that said the overall legal collections as a percent of total for MCM.

Speaker Change: Was in the 35%, 36% range kind of on the lower side similar to Q1. So we continue to get very good success in our call Center and digital channel.

Ashish Masih: In Europe, the portfolio purchasing market is continuing to show signs of improvement, but remains competitive. Although we see examples of improved pricing, we believe European portfolio pricing still does not consistently reflect the higher cost of capital caused by higher interest rates. We are maintaining a discipline and continue to be selective, which has led to reduce capital portfolio purchases.

Speaker Change: When any rise in legal expenses as part of increased purchasing and it's all coming from the U S.

Speaker Change: Side from the MTM business.

Operator: Thank you. And seeing no further questions at this time.

Speaker Change: Got it thank you.

Operator: Okay, I'm seeing no further questions at this time, so I would like to hand the call back to Ashish Masih for his closing statement.

Speaker Change: And seeing no further questions at this time.

Ashish Masih: I would like to hand the call back to Ashish Maseve for his closing statement.

Robert Dodd: So I would like to hand, the call back to Ashish Masih for his closing statements.

Ashish Masih: As we close the call, I'd like to reiterate a few important points. We believe one core is truly differentiated in a sector with a solid track record of operating results and superior capabilities, guided by a consistent strategy and clear financial priorities. As the company needs to turn, the US market for portfolio supply is growing to record levels. We continue to apply our discipline for fully purchasing approach by allocating record amounts of capital to the US market, which has the highest returns. When combined with our effective collections operation, we believe this approach is enabling 2024 to be a turning point in our operational and financial results.

Ashish Masih: As we close the call, I'd like to reiterate a few important points. We believe Encore is truly differentiated in our sector, with a solid track record of operating results and superior capabilities, guided by a consistent strategy and clear financial priorities. As the consumer price operation continues to turn, the U.S. market for portfolio supply is growing to record levels. We continue to apply a disciplined portfolio purchasing approach by allocating

Speaker Change: As we close the call I'd like to reiterate a few important points.

Ashish Masih: Overall, a year-to-date growth in portfolio purchasing, collections and cash generation reinforces a belief that 2024 will be a turning point in Encore's operational and financial results. I believe it's helpful to remind investors of the critical role we play in the consumer credit ecosystem by assisting in the resolution of unpaid debts. These unpaid debts are an expected and necessary outcome of the lending business model. Although the levels may vary, depending on the stage of the macroeconomic cycle, regardless of where we are in the cycle, our mission is to create pathways to economic freedom for the consumers we serve by helping them resolve their past due debts.

Speaker Change: We believe encore is truly differentiated in our sector with a solid track record of operating results and superior capabilities guided by our consistent strategy and clear financial priorities.

Speaker Change: As the consumer continues to return the U S market for portfolio of supply is growing to record levels. We continue to apply our disciplined portfolio purchasing approach by allocating record amounts of capital to the U S market.

John Rowan: We continue to apply a disciplined portfolio purchasing approach by allocating record amounts of capital to the U.S. market. When combined with our effective collections operation, we believe this approach is enabling 2024 to be a turning point for our operational and financial results.

Speaker Change: And which has the highest returns.

John Rowan: When combined with our effective collections operation. We believe this approach is enabling 2024 to be a turning point in our operational and financial results.

Ashish Masih: Thanks for taking the time to join us, and we look forward to providing third quarter results in November. Thank you for your participation in today's conference.

Speaker Change: Thanks for taking the time to join US and we look forward to providing our third quarter results in November.

John Rowan: Okay.

Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Operator: This does conclude the program.

Ashish Masih: We achieve this by engaging consumers in honest and pathetic and respectful conversation. Our business is to purchase portfolios of non-performing loans at attractive returns while minimizing funding costs. For each portfolio that we own, we strive to exceed our collection expectations, while maintaining an efficient cost structure as well as ensuring a higher level of compliance and consumer focus.

Operator: You may now disconnect. Thank you very much.

John Rowan: Okay.

John Rowan: [music].

John Rowan: Okay.

John Rowan: Okay.

John Rowan: Yes.

John Rowan: [music].

Ashish Masih: We achieve these objectives through a three-pillar strategy. This strategy enables us to deliver strong financial performance while positioning us well to capitalize and portfolio purchasing opportunities. We believe this is instrumental for building long-term shareholder value.

John Rowan: Sure.

John Rowan: [music].

Ashish Masih: The first pillar of our strategy, market focus. Concentrates are efforts on the markets where we can achieve the highest risk adjusted returns.

John Rowan: Okay.

John Rowan: [music].

Ashish Masih: Let's now take a look at our two largest markets beginning with the US. US Revolving Credit has been steadily rising since early 2021. Each month for the last three years, the US Federal Reserve has reported a new record level of outstanding and it continues to grow. At the same time, since bottoming out in late 2021, the credit card charge of rate in the US has also been steadily rising and is now at the highest level in more than 10 years.

Ashish Masih: Similarly, US consumer credit card delinquencies, which are a leading indicator of future charge-offs, also continue to rise. With both lending and the charge-off rate growing simultaneously, purchasing conditions in the US market remain highly favorable. We are observing not only continued strong growth in US market supply but attractive pricing as well. The most recent quarterly delinquency data reflects a typical seasonal pattern but at meaningfully higher levels than a year ago.

Ashish Masih: This data supports our expectation that 2024 will be another year of record portfolio sales by US banks and credit card issuers. With this highly favorable purchasing environment as a backdrop, Q2 was another strong quarter of quarterly purchasing for our MCM business. We deployed a record $237 million in the US. It's stronger terms. MCM collections in the second quarter were $397 million. Up 18% compared to the second quarter of 2023. Consumer payment behavior remains stable throughout the quarter. We are now purchasing significantly more volume than we ever have in the US.

Ashish Masih: Given current and expected market conditions, as well as our forward flow commitments already in hand, we anticipate 2024 to be another record year of portfolio purchasing for our MCM business in the US.

Ashish Masih: In contrast to the US, supply in the UK has been growing much more slowly. Credit card outstanding just recently returned to pre-pandemic levels, as banks in the UK, unlike those in the US, have not been meaningfully increasing consumer lending. In addition, UK charge-offs remain at low levels. Cabots collections in Q2 were $149 million, up 7% compared to second quarter a year ago. We believe ongoing weakness in consumer confidence is marginally impacting one-time settlements, while existing payment plan performance remains stable.

Ashish Masih: We continue to be selective with Cabots portfolio purchases, which were $42 million in the second quarter. Although portfolio pricing continues to improve, we believe it still does not yet consistently reflect higher funding costs. Accordingly, we expect to continue to deploy at modest levels until returns in Cabots markets become more attractive.

Ashish Masih: We are currently choosing to allocate significantly more capital to the US market, which has higher returns consistent with a well-established strategic focus. We also continue to prurently manage the Cabot cost structure, given the reduced level of portfolio purchases in recent quarters.

Ashish Masih: I would now like to highlight Encore's second quarter performance in terms of two key metrics starting with portfolio purchasing. Encore's global portfolio purchases increased 2% in Q2 to $279 million, with record US deployments in a largest business MCM. This increased level of portfolio purchasing will help drive Encore's collections growth over the next few years. The fact that the vast majority of our global deployment and the second quarter was in the US is a reminder of the flexibility that our global funding structure provides to us. This structure enables us to allocate capital to opportunities in the markets with the highest returns. Global collections in the second quarter were $547 million and were up 15% compared to Q2 a year ago.

Ashish Masih: The past several quarters of higher portfolio purchases, particularly in the US, has led to meaningful growth in collections, a trend we expect to continue.

Jonathan Clark: I'd now like to hand the call over to John for a more detailed look at our financial results. Thank you, Shish. The second quarter was another period of strong purchasing for our US business at attractive returns, while collections grew in each of our key markets. Collections were higher than our forecast for the quarter, and we made small adjustments to our ERC forecast, which together resulted in a positive impact earnings.

Jonathan Clark: I'd like to highlight a few items and provide more detail. Q2 collections of $547 million was up 15% compared to the second quarter last year. ERC at the end of the quarter was $8.4 billion of 5% compared to a year ago. Operating expenses remain well-controlled and were up 8% compared to Q2 last year, as we continued to realize operating leverage and the scale benefits of collections growth in our Gap net income of $32 million in Gap EPS of $1.34 in the second quarter were up 22% and 24% respectively compared to the second quarter of 2023.

Jonathan Clark: We believe our ability to generate significant cash provides us with an important competitive advantage, which is also a key component of our three-pillar strategy. Similar to the dynamic Ashish mentioned earlier, higher portfolio purchases that strong returns over the past several quarters have also led to meaningful growth in cash generation a trend we expect to continue. Our cash generation in the second quarter was up 19% compared to Q2 of 2023.

Jonathan Clark: The third pillar of our strategy ensures that the strength of our balance sheet is a constant priority. Our unified global funding structure provides us with financial flexibility, diversified sources of financing and extended maturities. It also underpins one of the best balance sheets in our industry with comparatively attractive leverage. Importantly, even with two consecutive quarters of record portfolio purchases in the US, our leverage declined again during the second quarter given our strong cash generation, just as we expected it would.

Jonathan Clark: This cash generation is driven by increased volume of purchases over the last several quarters, the higher returns associated with those purchases and continued strong collections. Our leverage ratio of 2.7 times at the end of the second quarter remains well within our target range and is down from 2.9 times at the end of 2023. We believe our balance sheet provides us very competitive funding costs from compared to our peers. Our funding structure also provides us financial flexibility and diversified funding sources to compete effectively in this growing supply environment.

Jonathan Clark: In the second quarter, we again made good use of our diversified funding structure to proactively manage our debt maturities. We issued $500 million of 2030 senior secured notes in Q2 in a transaction similar to our first quarter offering. These two bonds expanded our option for future financing, establishing our access to the broad and deep US high yield bond market. While we initially use the proceeds from these bonds to pay down a revolver, we plan to eventually use the proceeds to redeem our 2025 Euro notes and 2026 sterling notes at par in October 2024 and November 2024 respectively.

Jonathan Clark: As a result, we now effectively have no material maturities until 2027. We estimate that after incorporating the impacts of these actions, interest expense for the full year 2024 will be approximately $250 million. Importantly, we've been incorporating higher rates into our bidding strategy since interest rates started to rise two years ago. This is precisely why we have been emphasizing that pricing in the UK and Europe has not consistently adjusted to the currently higher cost of funding. In the US, however, market pricing has indeed adjusted to this higher cost of funding, with that.

Ashish Masih: I'd like to turn it back over to Ashish. Thanks, John.

Ashish Masih: Before I close, I'd like to remind everyone of our commitment to a consistent set of financial priorities that we established long ago. The importance of a strong, diversified balance sheet in our industry cannot be overstated, especially in the midst of the ongoing growth in U.S, supply. We will continue to be good stewards of your capital by always taking the long view and prioritizing portfolio purchases at attractive returns in order to build long-term shareholder value.

Ashish Masih: I'd now like to highlight how we differentiate it from others in our industry, especially during a time when a number of our competitors are dealing with their own challenges. First, we are the largest player in the attractive U.S, debt purchasing market. Second, we believe our ability to collect on the portfolios we buy and a corresponding purchase price multiples lead to collecting more over a vintage lifetime, which in turn generates more cash, more earnings and ultimately higher returns.

Ashish Masih: And third, our well-deversified global balance sheet allows us to allocate capital to opportunities with the highest returns. This flexibility is vital as demonstrated by a current allocation of the vast majority of our capital to our MCM business in the U.S, in order to maximize overall returns. Our balance sheet also provides us a flexibility to fund our business in a myriad of ways. This provides a significant advantage in times when traditional markets become less certain and more expensive.

Ashish Masih: In closing, I'd like to quickly summarize our second quarter performance. What fully supply in the U.S, market continues to grow to record levels, which is where we are currently focusing the majority of our capital deployment against this highly favorable backdrop. We deployed a record $237 million in the U.S, in Q2 at strong returns. In the UK and Europe, we are maintaining our discipline and continue to be very selective in our purchases until returns become more attractive. Our overall performance through Q2 is ahead of our expectations driven by strong portfolio purchasing and collections.

Ashish Masih: Due to the strength of our position in the favorable U.S, market for portfolio purchasing and the continued execution of our strategy, we are raising at 2024 guidance provided in February. We now anticipate our global portfolio purchasing this year to exceed $1.15 billion. And increase of $75 million when compared to 2023. In addition, we expect our year-over-year collections growth to be approximately 11% to over $2.075 billion.

Ashish Masih: And increase of over $200 million Now, we'd be happy to answer any questions that you may have.

Operator: Operator, please open up the lines for questions. Thank you. At this time, we will conduct for question and answer session. As a reminder to ask a question, you will need to press the star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we prepare the ruster.

Mark Hughes: First question comes from Mark Hughes with Truist Securities. Go ahead, Mark, your line is open. Yes, thank you.

Ashish Masih: Jonathan, did you get the collections versus expectations for the UK and the US? Hi, Mark.

Ashish Masih: This is Ashish. I'll jump in. I have it in front of me. So, in terms of, against the expectations of December 31, 2023, which I believe you're asking, so globally, we performed 101%. The US was 104% and Europe 97%. Now, in constant currency, those numbers become globally 102%. The US, of course, it stays at 104%. And Europe is 99%. Against expectations. And is that six months or is that two Q?

Mark Hughes: It's six months, year to date, yep. Okay.

Mark Hughes: And then what is your collections multiple now on the 2024 paper in the US and UK? I'm sorry, I didn't see if the Q was out, so I apologize, but since I have to. Okay. Yeah, so the year-to-date multiple on US vintage is 2.3 times. And for Europe, it is 2.1. For 2024, vintage is year-to-date. So, the 2.3 times is that am I writing thing that's down a little bit from the 2.4 at the first quarter?

Mark Hughes: And if so, what's driving that? Yeah, you're right, Mark, so cumulative number is that likely down from 2.4. I would say there's just overall the multiples are still strong. And for like for like portfolios, we have not seen any degradation in return. So there's often product differences, types of portfolios by high balance, large balance or low balance, for example. And I would say on a like for like basis returns are absolutely very strong and no degradation multiples move around a little bit here and there, but there's still very strong multiples. And on Europe, the multiple has been increasing. I know you asked just for US, but that's the other thing I would highlight. Yeah.

Mark Hughes: How about availability under the credit facility? Well, right now with what we've done the bond deals, it's the full commitment. So it's 1.2 billion.

Mark Hughes: And then, Jonathan Howard, how's the interest expense going to play out next year? I hear your guidance for this year sort of implies something, what is the mid 60s for the second half? Once you pay off those obligations, is that going to continue next year in the mid 60s or is that going to dip down? Oh, depending on interest rates, obviously, but.

Jonathan Clark: Yeah, I tell you, to quantify much into in 2025 at this point, I think I'll beg off on that. Just in general, you know, we do expect the general trends to continue that we've seen this year in to next year and that's probably. To be a true statement for what you're saying in the back half of the year for interest rates. As you point out, as long as as long as interest rate environment remains stable. Yeah, okay.

Operator: All right, thank you very much. We stand by for the next question.

Zach Oster: Next question comes from Zach Oster with Citizens JMP go ahead. Your line is open. I think if you take any questions, this is back on for David.

Zach Oster: I do want to just quickly check in on two things. So first of all, just on the microphone, you know, you kind of mentioned the stable payment rates. Everyone's safe. There's any consumers that are, you know, often for any longer payment rates or longer payment plans. And if there's any other kind of general signs of a more stress consumer.

Ashish Masih: And then on the funding side, you want to see if you can, we can get a reminder on if the global credit facility has any limits to how much if it can be deployed in the US. As you kind of talk about that flexible claim. Thank you. Okay.

Ashish Masih: This is Ashish.

Ashish Masih: Let me take the first one and let John take funding one. In terms of the consumer, I think you're leading to the US consumer. It's been very stable and consistent from what we have seen and last several months quarters. No real, no deterioration in any. They have payment rates or people's ability to stay on the payment plans. So it's very much a normalized environment when you compare to 2019. Pre-pandemic. And it's continuing. We are continuing to see that as well. And that's showing up in a very strong collections driven by a stable consumer behavior combined with high purchasing and that's driving increased connections.

Jonathan Clark: John on the funding. Yeah, in terms of funding. Yeah, there's no structure. We will deploy dollars where we see the best returns. And that could continue to mean a heavy skewer to the US for a period of time. And that's fine.

Operator: Yeah, thank you. This is a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced. And then we're to withdraw that question. Please press star one one again. Please stand by for the next question.

Robert Dodd: Next question comes from Robert Dodd, with Raymond James. Go ahead, your line is open. Hi, guys.

Ashish Masih: Congratulations on the quarter and on Jonathan on, not eventually. On, that changes in curves recovery, except in the quarter. It's first time it's been positive in a while. So, congrats on that and put pretty small number. Looks to me like it was maybe a million dollars negative on cash collections versus expectations, then in plus six and a half on, on changes in curves. So, is that right? And if it is, I realize there's a lovely small numbers.

Ashish Masih: Can you give us any color like if there were vintage or geographic concentrations in an area? Or would guess maybe a little weakness in Europe, but where the curve changes are occurring, is there any, any particular concentration in any, vintage is there? Robert, this is Ashish. So, the numbers are actually slightly different. So, the performance above forecast was about $27 million. And the impact of NPV on curve changes was about $21.7 million.

Ashish Masih: So, net is $5.7 positive in terms of total seats and impact for the quarter for the company. Now, in terms of your question on region. So, overall, I would say the numbers are very small and really noise against how we adapt with forecast and refine it quarter or quarter. But, in our queue, you will find that the other way to look at the 5.7 is, it's positive about 9 million for NPM and US and for cabaret it's about the negative 4 million or so.

Ashish Masih: Again, those numbers combine actresses forecast performance and the change in forecast. So, just be mindful of kind of how that calculated. That's how it divides up. Okay, and any, I mean, is any, any vintage differences? I mean, all this is like, you know, the 2001's were a problem, but I think it's stabilized. You know, anything, the particular tip to 20 year and now is it just, you know, set out. I would say overall any changes invented you might see again, those are change impact of two things.

Ashish Masih: First, performance against forecast and second is changing forecast. So, overall, I would say these are just minor, very minor impacts and noise. I would not draw any conclusions from vintage level data that you will see in our queue. The overall number is of some of all those vintage is across geography, the cross product types, and there's no real difference is across vintage is or anything. Overall, collections, as I said, are we had a very good quarter in terms of collections. And the seasonal impacts are small and there are more about forecasting your finance and impacts on those than anything around major vintage performance or consumer behavior or anything like that.

Robert Dodd: Thank you.

Ashish Masih: And then just one more thing, on legal collections and total, right? It broke over over 60 for the first time in in a while. So, you know, is that, are we now starting to hit a period of length in legal given you have been buying a lot for some period of time. There's always a lag before legal goes up following purchases because it's not your first choice. The procedure, the legal avenue, but is this, you know, the beginning of a rising trend only in legal, and was there anything just unusual in Q2 about timing of items.

Ashish Masih: Robert, I want to make sure I understood you meant, excuse you meant the legal collections expense, correct? Is that your question? Yes, correct, correct. Yes, correct. Yeah, all of that is coming from a US business as we are growing purchasing and just there's a natural, some statements about that said. The overall legal collections as a percent of total for NCM was in the 35, 36% range kind of on the lower side, similar to Q1.

Ashish Masih: So, we continue to get very good success in our call center and digital channel. Any rise in legal expense is just part of increased purchasing and it's all coming from the US side from the NCM business. Got it. Thank you.

Operator: And seeing no further questions at this time.

Ashish Masih: I would like to hand the call back to Ashish Maseve for his closing statement. As we close the call, I'd like to reiterate a few important points. We believe one core is truly differentiated in a sector with a solid track record of operating results and superior capabilities guided by a consistent strategy and clear financial priorities. As the company needs to turn, the US market for portfolio supply is growing to record levels.

Ashish Masih: We continue to apply our discipline for fully purchasing approach by allocating record amounts of capital to the US market, which has the highest returns. When combined with our effective collections operation, we believe this approach is enabling 2024 to be a turning point in our operational and financial results.

Ashish Masih: Thanks for taking the time to join us and we look forward to providing a third quarter results in November. Thank you for your participation in today's conference.

Operator: This does conclude the program.

Operator: You may now disconnect.

Operator: Thank you very much.