Encore Capital Group, Inc. Q1 FY2026 earnings call

• Encore delivered strong performance with solid portfolio purchases, record collections, and increased earnings. - Business thrives on industry leadership and operational execution. - MCM in US excels in purchasing, collections, and efficiency. - Cabot in Europe has solid performance with selective deployments. - Value engine driven by buying, collecting, and funding. - Disciplined portfolio purchasing with superior data and analytics. - Operational excellence and consumer-centric approach lead to strong collections. - Balance sheet strength enables access to capital. - Key financial objectives include strong balance sheet, capital allocation to portfolio purchases, share repurchases, and strong ROIC.

In the first quarter, Encore's global portfolio purchases were $363 million. Global collections were a record $718 million, up 19% year-over-year. Average receivable portfolios increased 14% to $4.4 billion. Net income was $86 million and EPS was $3.86. MCM in the US had portfolio purchases of $316 million, collections of $556 million (up 23% year-over-year). Cabot in Europe had portfolio purchases of $47 million and collections of $161 million (up 7% year-over-year). Collection yield in Q1 was 65.2%, an improvement of 2.6 percentage points. Portfolio revenue was $390 million, up 13%. Changes in recoveries were $62.7 million, with $46 million being recoveries above forecast. Debt purchasing revenue was $453 million, up 23.5%. Operating expenses increased 11% while collections grew 19%. Cash efficiency margin improved by 2.6 percentage points to 16.9%. Leverage was 2.3 times at the end of Q1.

• Anticipate global portfolio purchases in 2026 to be within $1.4 billion to $1.5 billion. - Raise collections guidance to 8% growth to $2.8 billion. - Expect EPS in 2026 to increase 19% to $13 per share. - Continue to expect interest expense and other income to be approximately $300 million for the year. - Continue to expect effective tax rate in the mid-20s.

Q: Asks about new elements in purchasing and collection environments compared to previous quarters.

A: Things are similar in US market with stable supply, pricing, and returns; Europe is stable with disciplined deployment.

Q: Asks about AI in collection company and regulatory issues.

A: Leveraging technology for years, actively piloting AI, mindful of regulatory nuances in voice and legal processes.

Q: Asks about supply increase and collections multiple.

A: Supply is stable, collections multiple for 2026 vintage started at 2.4, 24 and 25 vintages performing well.

Q: Asks about portfolio purchasing and share buybacks.

A: Staying with portfolio purchase guidance, share repurchases done in Q1 with $20 million spent, priority on portfolio purchases.

Q: Asks about collection strength and vintage performance.

A: Collections growth driven by strong purchasing and improvements in MCM, 24 and 25 vintages performing well with overperformance.

Q: Asks about AI in pricing models and technological improvement runway.

A: Incorporating machine learning and AI techniques in modeling, with much runway left for efficiency improvements.