Q2 2025 Encore Capital Group Inc Earnings Call
There'll be a question 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 your hand is raised to withdraw your question. Please press star one again.
Speaker #2: Good day, everyone, and thank you for standing by. Welcome to the ENCORE CAPITAL GROUP's second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode.
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 Investor Relations for Encore Bruce. Please go ahead.
Speaker #2: 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 one *11 on your telephone; you will then hear an automated message advising your hand is raised.
Thank you operator, good afternoon, and welcome to Encore capital group's second quarter 2025 earnings call.
Speaker #2: To withdraw your question, please press *11 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 Investor Relations for ENCORE.
Joining me on the call today are Ashish Masih, our president and Chief Executive Officer.
<unk> Executive Vice President and Chief Financial Officer, Ryan Bell, President of Midland Credit management, and John Young President of Cabot credit management.
Speaker #2: Bruce, please go head.
<unk> will make prepared remarks today, and then we'll be happy to take your questions.
Speaker #3: Thank you, operator. Good afternoon, and welcome to ENCORE CAPITAL GROUP's second quarter 2025 earnings call. Joining me on the call today are Ashish Masih, our president and chief executive officer; vice president and chief financial officer; Ryan Bell, president of Midland Credit Management; and John Young, president of Cabot Credit Management.
Unless otherwise noted comparisons on this conference call will be made between the second quarter of 2025.
Second quarter of 2024. 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.
Speaker #3: Ashish and Tomas will make prepared remarks today, and then we'll be happy to take your questions. Unless otherwise noted, comparisons on this conference call will be made between the second quarter 2025 and the second quarter of 2024.
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.
During this call, we will use rounding and abbreviations for the sake of brevity.
Speaker #3: In addition, today's discussion will include forward-looking statements that are based on current expectations and assumptions. And our subject to risks and uncertainties. Actual results could differ materially from our expectations.
We will also be discussing non-GAAP financial measures.
Conciliations to the most directly comparable GAAP financial measures are included in our Investor presentation, which is available on the investors section of our website.
Speaker #3: Please refer to our SEC filings for a detailed discussion of potential risks and uncertainties. We undertake no obligation to update any forward-looking statement. During this call, we will use rounding and abbreviations for the sake of brevity.
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.
With that let me turn the call over to Ashish Masih, our president and Chief Executive Officer.
Speaker #3: We will also be discussing non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are included in our investor presentation which is available on the Investors section of our website.
Thanks, Bruce and good afternoon, everyone. Thank you for joining us.
<unk> delivered another strong performance in the second quarter, which is reflected in our financial metrics across the board.
Speaker #3: As a With that, let me turn the call over to Ashish Masih, our president and chief executive officer.
Speaker #3: inder, 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 site.
Portfolio purchases in Q2 of $367 million were up 32% compared to the second quarter last year.
Collections increased 20% to a record $655 million.
Speaker #4: Thanks, Bruce, and good afternoon, everyone. Thank you for joining us. ENCORE ivered another strong performance in the second quarter. Which is reflected in our financial metrics across the board.
Estimated remaining collections or ERC increased 12% to a record nine $4 billion.
Speaker #4: Portfolio purchases in Q2 of 367 million dollars were up 32% compared to the second quarter last year. Collections increased 20% to a record 655 million dollars.
A record collections performance helped earnings increased sharply with Q2 earnings per share of $2 49.
Up 86% compared to the second quarter a year ago.
Our leverage improved to two six times at the end of Q2 compared to two seven times, a year ago and were flat compared to Q1 2025, despite significant portfolio purchasing again in the second quarter.
Speaker #4: Estimated remaining collections or ERC increased 12% to a record 9.4 billion dollars. Our record collections performance helped earnings increase sharply, with Q2 earnings per share of $2.49 cents.
Additionally.
We continued our share repurchases in Q2, which is a $15 million upon core shares in the quarter.
Speaker #4: Up 86% compared to the second ago. Our leverage improved to 2.6 times at the end of Q2, compared 2.7 times a year ago and was flat compared to Q1 2025 despite significant portfolio purchasing again in the second quarter.
Bringing our total to $25 million for the first half of the year.
Our MCM business in the U S continues to deliver very strong results in.
Empowered by the ongoing favorable supply environment.
Cm portfolio purchases in the second quarter.
Speaker #4: Additionally, we continued our share repurchases in Q2, purchasing 15 million dollars of ENCORE shares in the quarter a year quarter. Bringing our total to 25 million dollars for the first half of the year.
A record $317 million at very attractive returns.
<unk> also delivered record collections of $490 million in Q2.
Up 24% compared to Q2 a year ago.
Speaker #4: Our MCM business in the US continues to deliver very strong results. Empowered by the ongoing favorable supply environment, MCM portfolio purchases in the second quarter were a record 317 million dollars at very attractive returns.
Turning to Europe, our cabinet business delivered a solid second quarter.
Portfolio purchases of $50 million, but in line with the historical trend.
Cabot's collections of $164 million.
Up 10% compared to a year ago as reported.
Speaker #4: MCM also delivered record collections of 490 million dollars in Q2, up 24% compared to Q2 a year ago. Turning to Europe, our Cabot business delivered a solid second quarter.
And were up 4% in constant currency.
At this time I believe it is helpful to remind investors of the critical role we play in the consumer credit ecosystem by.
By assisting in the resolution of unpaid debts.
Speaker #4: Portfolio purchases of 50 million dollars were in line with the historical trend. Cabot's collections of 164 million dollars were up 10% compared to a year ago as reported, and were up 4% in constant currency.
These unpaid debts are unexpected and necessary outcome of the lending business model.
<unk> mission is to create pathways to economic freedom for the consumers, we serve by helping them resolve their past two deaths we.
We achieved this by engaging consumers and honest and pathetic and respectful conversations.
Speaker #4: At this time, I believe it's pful 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.
Our business is to purchase portfolios of nonperforming loans at attractive returns, while minimizing funding costs.
For each portfolio that we own we strive to exceed our collection expectations.
Speaker #4: 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 conversations.
While both maintaining an efficient cost structure and ensuring the highest level of compliance and consumer focus.
We achieved these objectives through a three pillar strategy.
This strategy enables us to deliver outstanding performance and.
Speaker #4: 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.
And positions us well to capitalize on future opportunities.
We believe this is instrumental for building long term shareholder value.
The first pillar of our strategy market focus <unk>.
Speaker #4: While both maintaining an efficient cost structure and ensuring the highest level of compliance and consumer focus. We achieve these objectives through our three-pillar strategy.
<unk> efforts in the markets, where we can achieve the highest risk adjusted returns.
To that end, we pursue business in countries, where the credit markets are large and have consistent flows of purchasing opportunities.
Speaker #4: This strategy enables us to deliver outstanding performance and positions us well to capitalize on future opportunities. We believe this is instrumental for building long-term shareholder value.
We believe the best markets have a strong regulatory framework have sophisticated centers, who make data available and where we can achieve stable long term returns.
Speaker #4: The first pillar of our strategy, market focus, concentrates our efforts on the markets where we can achieve the highest risk-adjusted returns. To that end, we pursue business in countries with a credit market so large and have consistent flows of purchasing opportunities.
The markets we've chosen shared these characteristics.
As a reminder, our largest business Midland credit management or MCM is in the United States, where it has been operating for over 25 years and as a leader in the world's most valuable market.
Speaker #4: We believe the best markets have a ong regulatory framework, have sophisticated sellers who make data available and where we can achieve stable, long-term chosen share these characteristics.
Cabot credit management has been operating for over 20 years and is one of the largest players in the United Kingdom and continues to build a stronger presence in the European markets of France and Spain.
Speaker #4: As a reminder, our largest business, Midland Credit Management, or MCM, is in the United States, where it has been operating for over 25 years, and is a leader in the world's most valuable market.
We recently released the third edition of our economic Freedom study.
Which is a part of our continuing commitment to understand consumers' personal finances in the U S and the UK.
And how they plan to manage past due that the.
Speaker #4: Cabot Credit Management has been operating for over 20 years, and is one of the largest players in United Kingdom, and continues to build a stronger presence in the European markets of France and Spain.
The detailed report as well as a summary of key findings can be found on our website.
I would now like to highlight encores second quarter performance in terms of several key metrics starting with portfolio purchasing.
Speaker #4: We recently released the third edition of our ic freedom study, which is a part of our continuing commitment to understand consumers' personal finances in the US and the UK.
Encores global portfolio purchases for the quarter were $367 million, an increase of 32% compared to Q2 2024.
Speaker #4: And how they plan to manage past due debt, the detailed report, as well as a summary of key findings can be found on our website.
This increased level of purchasing will help drive encores continued collections growth in 2025 and beyond.
Speaker #4: I would now like to highlight ENCORE's second returns. quarter performance in The markets we have terms of several key metrics. Starting portfolio purchasing, ENCORE's global portfolio purchases for the quarter were 367 million dollars and increased of 32% compared to Q2 2024.
Our concentration of portfolio purchases in the U S, where we allocated 86% of our deployed capital in the second quarter is the reminder, that the flexibility of our global funding structure allows us to direct our capital towards markets with the highest returns.
Global collections in Q2 were up 20% to a record $655 million.
Speaker #4: This increased level of purchasing will help drive ENCORE's continued collections growth in 2025 and beyond. Our centration of portfolio purchases in the US, where we allocated 86% of our deployed capital in the second quarter, is a reminder that the flexibility of our global funding structure allows us to direct our capital toward markets with the highest returns.
After several years of lower deployments the past few years of higher portfolio purchases at strong returns, particularly in the U S have led to meaningful growth in collections, which we expect to continue.
Our global collections performance year to date through the second quarter.
Speaker #4: Global collections in Q2 were up 20% to a record 655 million dollars. After several years of lower deployments, the past few years of higher portfolio purchases had strong returns, particularly in the US, have led to meaningful growth in collections which we expect to continue.
Third to our ERC at the end of 2024 was 107%.
We believe that 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 I mentioned earlier higher portfolio purchases at strong returns over the past few years have also led to meaningful growth in cash generation.
Speaker #4: Our global collections performance year-to-date through the second quarter compared to our ERC at the end of 2024 was 107%. We believe our ability to generate significant cash provides us with an important competitive advantage.
Our cash generation for the second quarter on a trailing 12 month basis was up 23% compared to the same period a year ago.
Let's now take a look at our two largest markets beginning with the U S.
Speaker #4: Which is also a key component of our three-pillar strategy. Similar to the dynamic I mentioned earlier, higher portfolio purchases at strong returns over the past few years have also led to meaningful growth in cash generation.
The U S. Federal reserve reports that revolving credit in the U S remains near record levels.
At the same time since bottoming out in late 2021, the credit card charge off rate in the U S has increased to its highest level in more than 10 years and remains at an elevated level.
Speaker #4: Our cash generation for the second quarter on a trailing 12-month basis was up 23% compared to the same period a year ago. Let's now take a look at our two largest markets, beginning with the US.
The combination of strong lending and elevated charge off rates continues to drive robust portfolio of supply in the U S.
Speaker #4: The US Federal Reserve reports that revolving credit in the US remains near a record levels. At the same time, since bottoming out in late 2021, the credit card charge-off rate in the US has increased to its highest level in more than 10 years and remains at an elevated level.
Similarly U S consumer credit card delinquencies, which are a leading indicator of future charge offs also remained near multiyear highs.
With both lending and the charge off rate at elevated levels were changing conditions in the U S market remain highly favorable.
Speaker #4: The combination of strong lending and elevated charge-off rates continues to drive robust portfolio supply in the US. Similarly, US consumer credit card delinquencies which are a leading indicator of future charge-offs also remain near multi-year highs.
We are observing continued strong U S market supply and attractive pricing as well.
Second quarter delinquency data.
Of course, our expectation that 2025 would be another record year of portfolio purchasing by our MCM business in the U S.
After searching to its highest level ever in 2024.
Speaker #4: With both lending and the charge-off rate at elevated levels, purchasing conditions in the US market remain highly favorable. We are observing continued strong US market supply and attractive pricing as well.
Portfolio supply in the U S market remains robust and Sam continues to capture a significant portion of this opportunity.
Flying a record $317 million in Q2 at very strong returns.
Speaker #4: Second quarter delinquency data supports our ectation that 2025 will be another record year of folio purchasing by our MCM business in the US. After surging to its highest level ever in 2024, portfolio supply in the US market remains robust.
This was a 34% increase in portfolio purchases compared to Q2 a year ago.
In addition to its record portfolio purchases in Q2 <unk>.
MCM business continues to excel operationally.
And same collections in the second quarter with a record $490 million, an increase of 24% compared to Q2 last year.
Speaker #4: MCM continues to capture significant portions of this opportunity. Deploying a record 317 million dollars in Q2, at very strong returns. This was a 34% increase in portfolio purchases compared to Q2 a year ago.
Driven by strong execution in what is typically a seasonally strong first half of the year.
Consumer payment behavior in the U S remained stable.
Speaker #4: In addition to its record portfolio purchases in Q2, our MCM business continues to excel operationally. MCM collections in the second quarter were a record 490 million dollars, an increase of 24% compared to Q2 last year.
Turning to our business in Europe.
Cabot delivered solid performance in the second quarter of 2025.
Collections in Q2 were $164 million.
Up 10% compared to Q2 last year as reported and.
Speaker #4: Driven by strong execution in what is typically a seasonally strong first half of the year. Consumer payment behavior in US remains stable. Turning to our business in Europe, Cabot delivered solid performance in the second quarter of 2025.
And were up 4% in constant currency.
Cabot's portfolio purchases in the first quarter were $50 million in line with the historical trend.
We continue to be selective with cabot's deployments as the UK market remains impacted by subdued consumer lending and low delinquencies. In addition to continued robust competition.
Speaker #4: Collections in Q2 were 164 million dollars, up 10% compared to Q2 last year as reported. And were up 4% in constant currency. Cabot's portfolio purchases in the first quarter were 50 million dollars in line with the historical trend.
I would now like to hand, the call over to Mark for a more detailed look at our financial results.
Thank you Ashish moving to the financial results slide in the second quarter, we delivered strong growth in collections and portfolio revenue of 20 and 12% respectively.
Speaker #4: We continue to be selective with Cabot's deployments as the UK market remains impacted by subdued consumer lending and low delinquencies. In addition to continued robust competition.
A strong collections performance was supported by record levels of U S portfolio purchases in recent quarters, a stable consumer behavior, our focus on operational execution as seasonality, Delaware, particularly in the U S.
Speaker #4: I'd now like hand the call over to Tomas, for a more detailed look at our cial results. Thank you, Ashish. Moving to the financial results slide, in the second quarter, we delivered a strong growth in collections and portfolio revenue of 20 and 12 percent respectively.
Collections yield was 64, 4% in Q2, an improvement of two nine percentage points compared to last year.
Portfolio revenue increased by 12% to $361 million supported by 14% growth in average receivable portfolios on a portfolio yield of 35, 5%.
Speaker #4: A strong collections performance was supported by record levels of US portfolio purchases in recent quarters, a stable consumer behavior our focus on operational execution and seasonality tailwinds, particularly in the US.
As a reminder.
<unk> recoveries is a solid two numbers first recoveries or both or real forecast is the amount, we collected above or below our EOC expectations for the quarter.
Speaker #4: Collections yield was 64.4% in Q2, an improvement of 2.9 percentage points compared to last year. Portfolio revenue increased by 12% to 361 million dollars, supported by 14% growth in average receivable portfolios and a portfolio yield of 35.5%.
And it's also known as cash or cash on those.
Changes in expected future recoveries is the net present value of changes in the ERC forecast beyond the core.
During the quarter.
Changing our recoveries were $55 $6 million for the quarter.
Speaker #4: As a reminder, changes in recoveries is the sum of two numbers: first, recoveries above or below forecast is the amount we collected above or below our ERC expectation for the quarter.
Of that total the vast majority $52 $3 million were recoveries above forecast.
Changes in the expected future recoveries were $3 $3 million both of our businesses MCM in the U S and <unk> in Europe, where once again net positive contributor to changes in recoveries.
Speaker #4: And it's also known as cash overs, or cash unders. Second, changes in expected future recoveries is the net present value of changes in the ERC forecast beyond our the current quarter.
Differently.
Speaker #4: Changes in recoveries were 55.6 million dollars for the quarter. Of that total, the vast majority, 52.3 million dollars, were recoveries above forecast. Changes in expected future recoveries were 3.3 million dollars.
We collected $52 $3 million more than we're forecasting our ERC, which is incremental cash flow. This is an outstanding result that reflects the effectiveness of our collection platforms and the strength of the consumer.
Despite some of them they got to have news on macro uncertainty in the U S. Our consumer payment behavior remained stable, we continue to morningstar for any signs of change.
Speaker #4: Both of our businesses, MCM in US and Cabot in Europe, were once again net positive contributors to changes in recoveries. Put differently, we collected 52.3 million dollars more than we forecasted in our ERC, which is incremental cash flow.
Net purchasing revenue increased by 25% to $410 million and the resulting debt purchasing yield was 41%.
Speaker #4: This is an outstanding result that reflects the effectiveness of our collection platforms and the strength of the consumer. Despite some the negative news and macro uncertainty in the US, our consumers' payment behavior remains stable.
Approximately five 5% was the impact of changes in recoveries.
Servicing a motor revenues were $25 million, bringing total revenue to $442 million, reflecting growth of 24%.
Speaker #4: We continue to monitor for any signs of change. Debt urchasing revenue increased 27% to 47 million dollars, and the resulting debt purchasing yield was 41%.
Operating expenses increased by 15% to $291 million compared.
Compared to 20% growth in collections.
The expenses growth continued to be driven by awarding our portfolios, resulting from increased purchasing levels in recent quarters.
Speaker #4: Approximately 5.5% was the impact of changes in recoveries. Servicing another revenues were 25 million dollars, bringing total revenue to 442 million dollars, reflecting growth of 24%.
Cash efficiency margin for the quarter improved 1%, that's 40 to 55, 3% compared to $56 in Q2 last year we.
We expect cash efficiency market to remain near current levels for the remainder of the year.
Speaker #4: Operating expenses increased by 15% to 291 million dollars, compared to 20% growth in collections. Operating expenses growth continues to be driven by onboarding of new portfolios resulting from increased purchasing levels in recent quarters.
Interest expense and other income increased by 23% to $73 million, reflecting higher debt balances as well as higher interest rates from bond issuances in 2024.
Our tax provision of $19 million and by the corporate tax rate of approximately 25%, which is in line with our previous guidance.
Speaker #4: Cash efficiency margin for the quarter improved 1 percentage point to 57.3% compared to 56.2 in Q2 last year. We expect cash efficiency margin to remain near current levels for the remainder of year.
Finally, net income increased by 82% to $59 million, resulting in earnings per share for the quarter of <unk> 49.
Speaker #4: Interest expense and other income increased by 23% to 73 million dollars, reflecting higher debt balances as well as higher interest rates from both issuances in 2024.
Compared to $1 34.
In Q2 last year.
We delivered a solid quarter with strong operational execution and financial discipline.
Speaker #4: Our tax provision of 19 million dollars implies our corporate tax rate of approximately 25%, which is in line with our previous guidance. Finally, net income increased by 82% to 59 million dollars, resulting in earnings per share for the quarter of $2.49.
We believe our balance sheet provides us with very competitive funding cost 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.
Speaker #4: Compared $1.34 in Q2 last the year. To conclude, we delivered a solid quarter through a strong operational execution and financial discipline. We believe our balance sheet provides us with very competitive funding costs when compared to our peers.
Average gross at two six times or 0.1 times improvement versus last year and flat versus the previous quarter.
During Q2, we increased the size of our RCI by $190 million to $1 485 billion and extended its maturity.
Speaker #4: Our funding structure also provides us with financial flexibility and diversified funding sources to compete effectively in this growing supply at 2.6 times or 0.1 times improvement versus last year and flat versus the previous quarter.
2029.
In July or increase the size of our U S facility by $150 million to 450 million loss and extending its maturity to 2028.
The combination of those two transactions and improve our liquidity by up to $340 million.
Speaker #4: During Q2, we increased the size of our RCF by 180 million dollars to 1.485 billion dollars. And extended this maturity to 2029. In July, we increased the size of our US facility by 150 million dollars to 450 million dollars.
As a result of our actions in <unk> July we don't have any material maturities until 2028.
A strong liquidity to continue to grow our U S business in 2025 and beyond with that.
I would like to turn it back over to Ashish.
Speaker #4: And extended this maturity to environment. Leverage growth 2028. The combination of those two transactions improved our liquidity by up to 340 million dollars. As a result of our actions in May and July, we don't have any material maturities until 2028, and we have a strong liquidity to continue to grow our US business in 2025 and beyond.
Thanks, Tim US now I would like to remind everyone of our key financial objectives and priorities.
Maintaining a strong and flexible balance sheet, including a strong double b debt rating as well as operating within our target leverage range of two to three times.
<unk> critical objectives.
With regard to our capital allocation priorities buying portfolios, particularly in today's attractive U S market offers the best opportunity to create long term shareholder value by deploying capital at attractive returns.
Speaker #4: With that, I would like to turn it back over to Ashish. Thanks, Tomas. Now, I would like to remind everyone of our key financial objectives and priorities.
Speaker #4: Maintaining a strong and flexible balance sheet including a strong double B debt rating as well as operating within a target leverage range of two to three times remain critical objectives.
This is indeed, what we're doing as highlighted by our recent purchasing history.
Next on our capital allocation priority list, our share repurchases, we repurchased $15 million of oncor shares in the second quarter.
Speaker #4: With regard to our capital allocation priorities, buying portfolios particularly in today's attractive US market offers the best opportunity to create long-term shareholder value by deploying capital at attractive returns.
Consistent with the framework, we've laid out in the past.
This brings our total share repurchases to $25 million for the first half of the year.
Speaker #4: This is indeed what we are doing as highlighted by a recent purchasing history. Next on our capital allocation priority list are share repurchases. We repurchased 15 million dollars of ENCORE shares in the second quarter.
Before I close I'd like to summarize where we stand today and how the year is progressing.
The U S market continues to be very favorable with a robust supply of portfolio available for purchase at strong returns.
Speaker #4: Consistent with a framework we've laid out in the past. This brings our total share repurchases to 25 million dollars for the first half of the year.
As a result, we continue to allocate the vast majority of our capital to the U S market and expect Mcm's purchasing to again grow in 2025.
<unk> was also collecting very effectively on these purchases empowering encores collections growth.
Speaker #4: Before I close, I'd like to summarize where we stand today and how the year is progressing. The US market continues to be very favorable, with a bust supply of portfolios available for purchase at strong returns.
And the European market at Cabot, we are staying disciplined and expect to continue purchasing at a level similar to the first two quarters of 2025.
Speaker #4: As a result, we continue allocate the vast majority of our capital to the US market. And expect MCM's purchasing to again grow in 2025.
In terms of operations cabinet continues to deliver stable collections performance.
Overall, if you look back at the past several quarters.
Speaker #4: MCM is collecting very effectively on these purchases. Empowering ENCORE's collections growth. In the European market at Cabot, we are staying disciplined and expect to continue purchasing at a level similar to the first two quarters of 2025.
Our actions have led to very strong purchasing and a positive growth trend in collections and cash generation.
And I feel really good about our position how the year is going and expect this momentum to continue.
Speaker #4: In terms of operations, Cabot continues to deliver stable collections performance. Overall, if you look back at the past several quarters, our actions have led to very strong purchasing, and a positive growth trend in collections and cash generation.
And so as a result of our strong first half of the year and a positive outlook for the remainder of 2025.
We are providing the following guidance on key metrics for the year.
As you originally guided we anticipate global portfolio purchasing in 2025% to exceed the $135 billion of purchases we made in 2024.
Speaker #4: And I feel really good about our position. How the year is going, and expect this momentum to continue. And so, as a result of our strong first half of the year and a positive outlook for the remainder of 2025, we are providing the following guidance on key metrics for the year.
As MCM is poised to surpass the record level of purchasing of a year ago.
However, we are raising our guidance on global collections.
We now expect global collections to grow by approximately 15, 5% to $2 5 billion.
Speaker #4: As we originally guided, we anticipate global portfolio purchasing in 2025 to exceed the 1.35 billion dollars of purchases we made in 2024. As MCM is poised to surpass the record level of purchasing of a year ago.
This is an increase from our prior 11% growth expectation.
We also continue to expect interest expense of approximately $285 million for the year.
Speaker #4: However, we are raising our guidance on global collections. We now expect global collections to grow by approximately 15.5% to 2.5 billion dollars. This is an increase from a prior 11% growth expectation.
And we expect our effective tax rate for the year to be in the mid twenties on a percentage basis.
Now we'd be happy to answer any questions that you may have.
Operator, please open up the lines for questions.
Thank you.
At this time, we will conduct a question and answer session.
Speaker #4: We also continue to expect interest expense of approximately 285 million dollars for the year. And we expect our effective tax rate for the year to be in the mid-20s on a percentage basis.
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 will be compile the Q&A roster.
Speaker #4: Now, we'd be happy to answer any questions that you may have operator, please open up the lines for questions.
The first question comes from Mark Hughes of <unk> Securities. Your line is now open.
Speaker #2: 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 *11 on your telephone and wait for your name to be announced.
Yes. Thank you good afternoon.
Mark.
The guidance for the 285 for the full year was there any one timers in the second quarter.
Speaker #2: To withdraw your question, please press *11 again. Please stand by while we compile the Q&A roster. Our first question comes from Mark Hughes of Truist Securities.
That $74 million.
Looking at just assuming that if it stayed at that level for the balance of the year.
Would come in above your guidance on.
Just want to make sure I understand.
Speaker #2: Your line is now open.
If there's any moving parts there.
Speaker #3: Yeah, thank you. Good afternoon.
No I think it's too.
<unk> hundred 85 is Roku Lewis with.
Speaker #4: Hey, Mark.
Speaker #3: Tomas, the guidance for the 285 for the full year was there any one-timers in second quarter? That the 74 million is what I'm looking at.
With respect to close the year. So we shouldn't we don't anticipate any one offs there.
Okay very good.
And then the.
U S supply Ashish.
Speaker #3: Just assuming that if it stayed at that level for the balance of the year, the that would come in above your guidance on I just want to make sure I understand if there's any moving parts there.
Your updated charts on charge off rates and delinquencies show a little bit of it.
Downtick.
What do you think is going to.
Happen the balance of the year, what do you think that means for supply I hear your point it sounds like.
Speaker #4: No, think it's the 285 is roughly where we spent to where we spent to close the year. So we shouldn't we don't anticipate anyone else there.
Youre in a very favorable favorable environment, now, but how will that trend.
Coming periods.
Speaker #3: Okay, very good. And then the US supply, Ashish, your updated charts on charge-off rates and delinquencies show a little bit of a downtick. What do you think is going happen in the balance of the year?
Yes, Mark.
The overall supply kind of if you multiply the tube remains at an elevated level and all of the issuers, who sell are selling at very strong levels. So.
We remain very confident in our purchasing ability.
Speaker #3: What do you think that means for supply? I hear your point. It unds like the you're in a very favorable environment now, but how will that trend in the coming periods?
And MCM as I stated is expected to surpass its 2024 record.
In 2025 in terms of total purchasing so.
Yes quarter to quarter, there could be ups and downs here and there a little bit but overall very.
Speaker #4: Yeah, Mark. The overall supply kind of if you multiply the two remains at an elevated level. And it all the issuers who sell are selling at very strong levels.
A very favorable environment in terms of supply in terms of pricing.
In our ability to compete and win the portfolios we want given how well we are collecting in MCM in how we liquidate the portfolios as the multiples show.
Speaker #4: So we remain very confident in our purchasing ability. And MCM, as I stated, is expected to surpass its 2024 record. In 2025, in terms total purchasing.
So.
For rest of the year, but we feel very good and expect to have a strong momentum in purchasing and collecting and expect MCM to exceed its 2000 clinical record on purchasing.
Speaker #4: So yeah, quarter to quarter, they could be ups and downs here and there a little bit. But overall, very favorable environment in terms supply.
And then one final question do you have the updated collections multiple for the.
Speaker #4: In terms pricing, in our ability to compete and win the portfolios we want. Given how well we are collecting in MCM and how we liquidate the portfolios as a multiple show.
MCM and Cabot.
In the.
Core paper I think the Q probably coming in.
Speaker #4: So for the rest of the year, we feel very good and expect a very strong momentum in purchasing and collecting and expect MCM to exceed its 2024 record on purchasing.
Favorable we'll see it then but.
Yes, so for 2025 vintage for MCM. The multiple is at two three in the Q.
And for Cabot the multiple is two four for the 2025 vintage.
Speaker #3: And then one final question. Do you have the updated collections multiples for the MCM and Cabot in the core paper? I ink the Q probably is coming out soon and maybe we'll see it then, but.
Thank you very much.
Youre welcome Thanks Mark.
Thank you.
Our next question is from Mike Grondahl of Northland. Your line is now open.
Speaker #4: Yeah, so for 2025 vintage, for MCM, the multiple is at 2.3 in Q. And for Cabot, the multiple is 2.4 for the 2025 vintage.
Hey, guys.
Collections year over year growth at 20%.
Stepped up nicely.
It sounded like you guys were calling out two things weaken.
Several quarters of higher purchase levels.
Speaker #3: Thank you very much.
Speaker #4: You're come.
Just stable U S consumer.
Speaker #5: Thanks, Mark.
Speaker #2: Thank you. Our next question is from Mike Grundel of Northland. Your line is now open.
Anything else to add to that.
I would say, Mike a couple of things.
There is.
Speaker #6: Hey, guys. Collections year over year growth at 20%. You know, it stepped up nicely. It sounded like you guys were calling out two things recent, you know, several quarters of higher purchase levels and just a stable US consumer.
Highlight the two correct points on stable use consumer as well as purchasing but also the MCM business.
Operationally, its performing very well and driving innovation. So we're seeing kind of more performance improvement and our call Center and digital channel. That's more in the early stages of a vintage so thats, where we are seeing and we are seeing really good performance and are confident about that continuing and hence raising the overall.
Speaker #6: Anything else to add to that?
Speaker #4: I would say, Mike, a couple of things. There's you highlight the two correct points on stable US consumer as well as purchasing, but also the MCM business operationally is performing very well and driving innovation.
Collections guidance for encore to $2 5 billion, which would be about 15, 5% compared to our earlier guidance six months ago up 11%.
Speaker #4: So we are seeing kind of more performance improvement in our call center and digital channel. That's more in the early stages of a vintage.
Got it and I think you said global collections were 107% of expectations can you break that out for the U S and Cabot.
Speaker #4: So that's where we are seeing and we are seeing really good performance and are confident about that continuing and hence raising the overall collections guidance for ENCORE to 2.5 billion which will be about 15.5% compared to our earlier guidance six months ago of 11%.
Yes, it's in our presentation in slide deck.
I think on page six so it was 107% globally 106 for MCM in 111 or cabinet now theres, some FX or foreign currency issues.
Speaker #6: Got it. And I think you said global collections were 107% of expectations. Can you break that out for the US and Cabot?
Constant currency global MCM, and Cabot will all 106% versus the December 31, 2024 ERC curves.
Got it.
Speaker #4: Yeah, it's in our presentation and slide deck. I think on page six. So it was 107% globally, 106 for MCM, and 111 for Cabot.
And then.
The.
52 million.
I'll call it outperformance on collections.
Speaker #4: Now there's some effects of foreign currency issues. In constant currency, global MCM and Cabot were all 106%. Versus the December 31 2024 ERC curves.
Can you break that out between the U S and Cabot in dollars.
So that we don't have on our disclosures what I will tell you is out of the 55 six <unk>.
Changes in <unk>.
Speaker #6: Got it. And then the 52 million of, I'll call it, outperformance on collections can you break that out between the US and Cabot in dollars?
About $45 million is MCM.
So okay and also.
In terms of the overall, 95% of that $55 six is recoveries above forecast. So you can kind of get a sense.
Real dollars that came in the door.
It is real dollars and $45 million or the $55 six was MCM all our businesses are performing well as you can see from the ERC performance versus the December forecast, we're exceeding those forecasts. So hopefully that gives you a good sense of how both businesses are performing operationally.
Speaker #4: So that we don't have in our disclosures. What I will tell you is out of the 55.6 recoveries, about 45 million is MCM. So and also in terms of the overall, 95% of that 55.6 is recoveries above forecast.
Speaker #4: total, changes in So you can kind get a sense.
Yes, no definitely okay, hey, thank you.
Of course.
Speaker #6: Well, real dollars that came in the door.
Thank you.
Speaker #4: Yeah, it's real dollars and 45 million out of the 55.6 was MCM. All our businesses are performing well, as you can see. From that ERC performance versus the December forecast, we are exceeding those forecasts.
Our next question comes from David Scharf of citizens capital markets. Your line is now open.
Hi, This is actually on for David Thanks for taking our question I wanted to just take out a little bit on the purchasing environment has kind of mentioned before and see if there's any incremental detail on the competitive dynamics and pricing for both buckets.
Speaker #4: So hopefully that gives you good sense of how both businesses are performing and operationally.
Speaker #6: Yeah, no, definitely. Okay. Hey, thank ou.
Priest tables in U S supply is good pricing is stable and returns, especially given our liquidation are very strong for MCM.
Speaker #4: Of course.
Speaker #2: Thank you. Our next question comes from David Sharf of Citizens Capital Markets. Your line is now open.
So overall, a stable environment in Europe as well.
Speaker #7: Hi, this is Zach. m for David. Thanks for taking our questions. I wanted to just dig in a little bit on the purchasing environment as kind of mentioned before and see if there's any incremental detail on the competitive dynamics and pricing for both markets.
Lending hasn't been growing as we've noted many times and charge off rates are pre record low including delinquency rates of supplies.
Low and not growing much.
Speaker #4: Pretty stable, and US supply is good. Pricing is stable. And returns especially given our liquidation are very strong for MCM. So overall, a stable environment.
And competition levels, while they are improved from two to three years ago.
Still higher relatively higher revenue compared to U S. So some of that behavior has changed and we like that but it's not fully where we would like it to be but no real change from last quarter.
Speaker #4: In Europe as well, lending hasn't been growing as we've noted many times. And charge-off rates are at pretty record low. Including delinquency rates, so supply is low.
Got it thank you.
Thank you.
Our next question is from Mark Hughes of true Securities. Your line is now open.
Speaker #4: And not growing much. And competition levels, while they've improved from two to three years ago, are still higher relatively higher when you compare to US.
Yes, thanks for the follow up on the <unk>.
Cash provided by operating activities, obviously, there's a lot of ways to look at cash cash from operating activities was down a little bit through the six months.
Speaker #4: So some of that behavior has changed and we like that. But it's not fully where we would like it to be. But no real change from last quarter.
I see payables and accrued liabilities.
Speaker #7: Got it. Thank you.
Yes.
Speaker #2: Thank ou. Our next question is from Mark Hughes of Truist Securities. Your line is now open.
Negative any comments you would make on on that again.
Looking at the cash flow statement cash from operating activities.
Speaker #3: Yeah, thanks for the follow-up. On the cash provided by operating activities, obviously there's a lot of ways to look at cash. The cash from operating activities was down a little bit through the six months.
Yes, so the.
The one other key tenant is in that cash flow statement for collaborations you have basically.
They are backing out the changes in recoveries right, So which was a big component of the of the quarter so by doing that.
Speaker #3: I see payables and accrued liabilities were a net negative. Any comments you would make on that, that again, it's just looking at the cash flow statement, cash from operating activities?
Youku you create a negative impact which is why you are seeing that.
Slightly odd comparison.
Okay, well. Thank you wanted to see the full Q, we kind of walk you through it in more detail.
Speaker #4: Yeah, so the one of the key challenges in that cash flow statement for operations, you have basically your backing out and the changes in recoveries, right?
I appreciate that thank you.
Thank you.
Speaker #4: So which was a big component of the quarter. So by doing that, you create a negative impact, which is why you are seeing that slightly odd comparison.
Again as a reminder.
To ask a question you will need to press star one on your telephone.
Please standby.
Okay.
Speaker #3: Okay. Well, thank you.
I am showing no further questions at this time I would now like to turn it back.
Speaker #4: Once you see the full queue and you know can walk you through it in more detail.
Speaker #3: Appreciate that. Thank ou.
Thanks, Steve for closing remark.
Speaker #2: Thank you. Again, as a reminder, to ask a question, you will need to press *11 on our telephone. Please stand by. I am showing no further questions at this time.
Thanks for taking the time to join US today, and we look forward to providing our third quarter results in November.
Thank you for your.
Participation in today's conference. This does conclude the program you may now disconnect.
Speaker #2: I would now like to turn it back to Ashish for closing remarks.
Speaker #4: Okay. Well, thanks for taking the time to join us today. And we look forward to providing a third quarter results in November.