(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | |||||||||||||||||||||||||||
Emerging growth company |
Class | Outstanding at April 28, 2021 | |||||||
Common Stock, $0.01 par value |
Page | |||||
March 31, 2021 | December 31, 2020 | ||||||||||
Assets | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Investment in receivable portfolios, net | |||||||||||
Property and equipment, net | |||||||||||
Other assets | |||||||||||
Goodwill | |||||||||||
Total assets | $ | $ | |||||||||
Liabilities and Equity | |||||||||||
Liabilities: | |||||||||||
Accounts payable and accrued liabilities | $ | $ | |||||||||
Borrowings | |||||||||||
Other liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and Contingencies (Note 10) | |||||||||||
Equity: | |||||||||||
Convertible preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated earnings | |||||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Total Encore Capital Group, Inc. stockholders’ equity | |||||||||||
Noncontrolling interest | |||||||||||
Total equity | |||||||||||
Total liabilities and equity | $ | $ |
March 31, 2021 | December 31, 2020 | ||||||||||
Assets | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Investment in receivable portfolios, net | |||||||||||
Other assets | |||||||||||
Liabilities | |||||||||||
Borrowings | |||||||||||
Other Liabilities |
Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
Revenues | |||||||||||
Revenue from receivable portfolios | $ | $ | |||||||||
Changes in expected current and future recoveries | ( | ||||||||||
Servicing revenue | |||||||||||
Other revenues | |||||||||||
Total revenues | |||||||||||
Operating expenses | |||||||||||
Salaries and employee benefits | |||||||||||
Cost of legal collections | |||||||||||
General and administrative expenses | |||||||||||
Other operating expenses | |||||||||||
Collection agency commissions | |||||||||||
Depreciation and amortization | |||||||||||
Total operating expenses | |||||||||||
Income from operations | |||||||||||
Other (expense) income | |||||||||||
Interest expense | ( | ( | |||||||||
Other (expense) income | ( | ||||||||||
Total other expense | ( | ( | |||||||||
Income (loss) before income taxes | ( | ||||||||||
Provision for income taxes | ( | ( | |||||||||
Net income (loss) | ( | ||||||||||
Net (income) loss attributable to noncontrolling interest | ( | ||||||||||
Net income (loss) attributable to Encore Capital Group, Inc. stockholders | $ | $ | ( | ||||||||
Earnings (loss) per share attributable to Encore Capital Group, Inc.: | |||||||||||
Basic | $ | $ | ( | ||||||||
Diluted | $ | $ | ( | ||||||||
Weighted average shares outstanding: | |||||||||||
Basic | |||||||||||
Diluted |
Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
Net income (loss) | $ | $ | ( | ||||||||
Other comprehensive income (loss), net of tax: | |||||||||||
Change in unrealized gain (loss) on derivative instruments: | |||||||||||
Unrealized gain (loss) on derivative instruments | ( | ||||||||||
Income tax effect | ( | ||||||||||
Unrealized gain (loss) on derivative instruments, net of tax | ( | ||||||||||
Change in foreign currency translation: | |||||||||||
Unrealized gain (loss) on foreign currency translation | ( | ||||||||||
Other comprehensive income (loss), net of tax: | ( | ||||||||||
Comprehensive income (loss) | ( | ||||||||||
Comprehensive (income) loss attributable to noncontrolling interest: | |||||||||||
Net (income) loss attributable to noncontrolling interest | ( | ||||||||||
Unrealized (gain) loss on foreign currency translation | ( | ||||||||||
Comprehensive (income) loss attributable to noncontrolling interest: | ( | ||||||||||
Comprehensive income (loss) attributable to Encore Capital Group, Inc. stockholders | $ | $ | ( |
Three Months Ended March 31, 2021 | |||||||||||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-In Capital | Accumulated Earnings | Accumulated Other Comprehensive (Loss) Income | Noncontrolling Interest | Total Equity | ||||||||||||||||||||||||||||||||||||
Shares | Par | ||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2020 | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||
Cumulative adjustment | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Exercise of stock options and issuance of share-based awards, net of shares withheld for employee taxes | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||
Repurchase of common stock | ( | ( | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Balance as of March 31, 2021 | $ | $ | $ | $ | ( | $ | $ |
Three Months Ended March 31, 2020 | |||||||||||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-In Capital | Accumulated Earnings | Accumulated Other Comprehensive Loss | Noncontrolling Interest | Total Equity | ||||||||||||||||||||||||||||||||||||
Shares | Par | ||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2019 | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||
Cumulative adjustment | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Net loss | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||
Issuance of share-based awards, net of shares withheld for employee taxes | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Balance as of March 31, 2020 | $ | $ | $ | $ | ( | $ | $ |
Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
Operating activities: | |||||||||||
Net income (loss) | $ | $ | ( | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Other non-cash interest expense, net | |||||||||||
Stock-based compensation expense | |||||||||||
Deferred income taxes | ( | ( | |||||||||
Changes in expected current and future recoveries | ( | ||||||||||
Other, net | |||||||||||
Changes in operating assets and liabilities | |||||||||||
Other assets | ( | ||||||||||
Prepaid income tax and income taxes payable | |||||||||||
Accounts payable, accrued liabilities and other liabilities | ( | ( | |||||||||
Net cash provided by operating activities | |||||||||||
Investing activities: | |||||||||||
Purchases of receivable portfolios, net of put-backs | ( | ( | |||||||||
Collections applied to investment in receivable portfolios, net | |||||||||||
Other, net | ( | ( | |||||||||
Net cash provided by (used in) investing activities | ( | ||||||||||
Financing activities: | |||||||||||
Proceeds from credit facilities | |||||||||||
Repayment of credit facilities | ( | ( | |||||||||
Repayment of senior secured notes | ( | ( | |||||||||
Repayment of convertible senior notes | ( | ||||||||||
Repurchase of common stock | ( | ||||||||||
Other, net | ( | ( | |||||||||
Net cash used in financing activities | ( | ( | |||||||||
Net increase in cash and cash equivalents | |||||||||||
Effect of exchange rate changes on cash and cash equivalents | ( | ( | |||||||||
Cash and cash equivalents, beginning of period | |||||||||||
Cash and cash equivalents, end of period | $ | $ | |||||||||
Supplemental disclosure of cash information: | |||||||||||
Cash paid for interest | $ | $ | |||||||||
Cash paid for taxes, net of refunds |
Balance as of December 31, 2020 | Adjustment | Opening Balance as of January 1, 2021 | |||||||||||||||
Liabilities | |||||||||||||||||
Convertible notes and exchangeable notes | $ | $ | $ | ||||||||||||||
Debt discount | ( | ||||||||||||||||
Other liabilities (for deferred tax liabilities) | ( | ||||||||||||||||
Equity | |||||||||||||||||
Additional paid-in capital | ( | ||||||||||||||||
Accumulated earnings |
Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
Net income (loss) attributable to Encore Capital Group, Inc. stockholders | $ | $ | ( | ||||||||
Total weighted-average basic shares outstanding | |||||||||||
Dilutive effect of stock-based awards | |||||||||||
Total weighted-average dilutive shares outstanding | |||||||||||
Basic earnings (loss) per share | $ | $ | ( | ||||||||
Diluted earnings (loss) per share | $ | $ | ( |
Fair Value Measurements as of March 31, 2021 | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
Assets | |||||||||||||||||||||||
Interest rate cap contracts | $ | $ | $ | $ | |||||||||||||||||||
Liabilities | |||||||||||||||||||||||
Interest rate swap agreements | ( | ( | |||||||||||||||||||||
Cross-currency swap agreements | ( | ( | |||||||||||||||||||||
Contingent consideration | ( | ( |
Fair Value Measurements as of December 31, 2020 | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
Assets | |||||||||||||||||||||||
Cross-currency swap agreements | $ | $ | $ | $ | |||||||||||||||||||
Interest rate cap contracts | |||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||
Interest rate swap agreements | ( | ( | |||||||||||||||||||||
Contingent consideration | ( | ( |
Amount | |||||
Balance as of December 31, 2019 | $ | ||||
Issuance of contingent consideration in connection with acquisition | |||||
Payment of contingent consideration | ( | ||||
Effect of foreign currency translation | |||||
Balance as of December 31, 2020 | |||||
Payment of contingent consideration | ( | ||||
Effect of foreign currency translation | |||||
Balance as of March 31, 2021 | $ |
March 31, 2021 | December 31, 2020 | ||||||||||||||||||||||
Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | ||||||||||||||||||||
Financial Assets | |||||||||||||||||||||||
Investment in receivable portfolios, net | $ | $ | $ | $ | |||||||||||||||||||
Financial Liabilities | |||||||||||||||||||||||
Convertible notes and exchangeable notes(1) | |||||||||||||||||||||||
Senior secured notes(2) |
March 31, 2021 | December 31, 2020 | ||||||||||||||||||||||
Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||||||||||||||
Derivatives designated as hedging instruments: | |||||||||||||||||||||||
Interest rate cap contracts | Other assets | $ | Other assets | $ | |||||||||||||||||||
Interest rate swap agreements | Other liabilities | ( | Other liabilities | ( | |||||||||||||||||||
Cross-currency swap agreements | Other liabilities | ( | Other assets | ||||||||||||||||||||
Derivatives Designated as Hedging Instruments | Gain (Loss) Recognized in OCI | Location of Gain (Loss) Reclassified from OCI into Income (Loss) | Gain (Loss) Reclassified from OCI into Income (Loss) | |||||||||||||||||||||||||||||
Three Months Ended March 31, | Three Months Ended March 31, | |||||||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||
Foreign currency exchange contracts | $ | $ | ( | Salaries and employee benefits | $ | $ | ||||||||||||||||||||||||||
Foreign currency exchange contracts | ( | General and administrative expenses | ||||||||||||||||||||||||||||||
Interest rate swap agreements | ( | ( | Interest expense | ( | ( | |||||||||||||||||||||||||||
Interest rate cap contracts | ( | Interest expense | ( | ( | ||||||||||||||||||||||||||||
Cross-currency swap agreements | ( | Interest expense / Other (expense) income | ( |
Amount of Gain (Loss) Recognized in Income (Loss) | ||||||||||||||||||||
Three Months Ended March 31, | ||||||||||||||||||||
Derivatives Not Designated as Hedging Instruments | Location of Gain (Loss) Recognized in Income on Derivative | 2021 | 2020 | |||||||||||||||||
Foreign currency exchange contracts | Other (expense) income | $ | $ |
Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
Purchase price | $ | $ | |||||||||
Allowance for credit losses | |||||||||||
Amortized cost | |||||||||||
Noncredit discount | |||||||||||
Face value | |||||||||||
Write-off of amortized cost | ( | ( | |||||||||
Write-off of noncredit discount | ( | ( | |||||||||
Negative allowance | |||||||||||
Negative allowance for expected recoveries - current period purchases | $ | $ |
Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
Balance, beginning of period | $ | $ | |||||||||
Purchases of receivable portfolios | |||||||||||
Put-backs and Recalls | ( | ( | |||||||||
Disposals and transfers to assets held for sale | ( | ( | |||||||||
Cash collections | ( | ( | |||||||||
Revenue from receivable portfolios | |||||||||||
Changes in expected current period recoveries | |||||||||||
Changes in expected future period recoveries | ( | ( | |||||||||
Foreign currency adjustments | ( | ( | |||||||||
Balance, end of period | $ | $ | |||||||||
March 31, 2021 | December 31, 2020 | ||||||||||
$ | $ | ||||||||||
Identifiable intangible assets, net | |||||||||||
Real estate owned | |||||||||||
Deferred tax assets | |||||||||||
Service fee receivables | |||||||||||
Prepaid expenses | |||||||||||
Equity method investments | |||||||||||
Other financial receivables | |||||||||||
Income tax deposits | |||||||||||
Other | |||||||||||
Total | $ | $ |
March 31, 2021 | December 31, 2020 | ||||||||||
Global senior secured revolving credit facility | $ | $ | |||||||||
Encore private placement notes | |||||||||||
Senior secured notes | |||||||||||
Convertible notes and exchangeable notes | |||||||||||
Cabot securitisation senior facility | |||||||||||
Other | |||||||||||
Less: debt discount and issuance costs, net of amortization | ( | ( | |||||||||
Total | $ | $ |
March 31, 2021 | December 31, 2020 | Maturity Date | Interest Payment Dates | Interest Rate | |||||||||||||||||||||||||
Cabot 2023 Notes | $ | $ | Oct 1, 2023 | Apr 1, Oct 1 | % | ||||||||||||||||||||||||
Encore 2025 Notes | Oct 15, 2025 | Apr 15, Oct 15 | % | ||||||||||||||||||||||||||
Encore 2026 Notes | Feb 15, 2026 | Feb 15, Aug 15 | % | ||||||||||||||||||||||||||
Encore 2028 Floating Rate Notes | Jan 15, 2028 | Jan 15, Apr 15, Jul 15, Oct 15 | EURIBOR + | ||||||||||||||||||||||||||
$ | $ |
March 31, 2021 | December 31, 2020 | Maturity Date | Interest Payment Dates | Interest Rate | |||||||||||||||||||||||||
2021 Convertible Notes(1) | $ | $ | Mar 15, 2021 | Mar 15, Sep 15 | % | ||||||||||||||||||||||||
2022 Convertible Notes | Mar 15, 2022 | Mar 15, Sep 15 | % | ||||||||||||||||||||||||||
2023 Exchangeable Notes | Sep 1, 2023 | Mar 1, Sep 1 | % | ||||||||||||||||||||||||||
2025 Convertible Notes | Oct 1, 2025 | Apr 1, Oct 1 | % | ||||||||||||||||||||||||||
$ | $ |
2022 Convertible Notes | 2023 Exchangeable Notes | 2025 Convertible Notes | |||||||||||||||
Initial conversion or exchange price | $ | $ | $ | ||||||||||||||
Closing stock price at date of issuance | $ | $ | $ | ||||||||||||||
Closing stock price date | Feb 27, 2017 | Jul 20, 2018 | Sep 4, 2019 | ||||||||||||||
Conversion or exchange rate (shares per $1,000 principal amount) | 21.9467 | 22.4090 | 25.0000 | ||||||||||||||
Free conversion or exchange date | Sep 15, 2021 | Mar 1, 2023 | Jul 1, 2025 | ||||||||||||||
Stated interest rate | % | % | % |
Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
Interest expense—stated coupon rate | $ | $ | |||||||||
Interest expense—amortization of debt discount | |||||||||||
Interest expense—Convertible Notes and Exchangeable Notes | $ | $ |
2023 Exchangeable Notes | |||||
Cost of the hedge transaction(s) | $ | ||||
Initial exchange price | $ | ||||
Effective exchange price | $ |
Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
Total revenues(1): | |||||||||||
United States | $ | $ | |||||||||
International | |||||||||||
Europe(2) | |||||||||||
Other geographies | |||||||||||
Total | $ | $ |
Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
Balance, beginning of period | $ | $ | |||||||||
Effect of foreign currency translation | ( | ||||||||||
Balance, end of period | $ | $ |
As of March 31, 2021 | As of December 31, 2020 | ||||||||||||||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||||||||||||||
Customer relationships | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
Developed technologies | ( | ( | |||||||||||||||||||||||||||||||||
Trade name and other | ( | ( | |||||||||||||||||||||||||||||||||
Total intangible assets | $ | $ | ( | $ | $ | $ | ( | $ |
Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
MCM (United States) | $ | 92,352 | $ | 185,252 | |||||||
Cabot (Europe) | 77,826 | 28,861 | |||||||||
Total purchases of receivable portfolios | $ | 170,178 | $ | 214,113 |
Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
MCM (United States): | |||||||||||
Call center and digital collections | $ | 267,984 | $ | 214,238 | |||||||
Legal collections | 164,332 | 158,026 | |||||||||
Collection agencies | 3,257 | 2,465 | |||||||||
Subtotal | 435,573 | 374,729 | |||||||||
Cabot (Europe): | |||||||||||
Call center and digital collections | 70,551 | 63,789 | |||||||||
Legal collections | 49,065 | 42,900 | |||||||||
Collection agencies | 42,985 | 37,414 | |||||||||
Subtotal | 162,601 | 144,103 | |||||||||
Other geographies: | |||||||||||
Collection agencies | 8,287 | 8,447 | |||||||||
Subtotal | 8,287 | 8,447 | |||||||||
Total collections from purchased receivables | $ | 606,461 | $ | 527,279 |
Three Months Ended March 31, | |||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||
Revenues | |||||||||||||||||||||||
Revenue from receivable portfolios | $ | 338,018 | 81.1 | % | $ | 357,365 | 123.6 | % | |||||||||||||||
Changes in expected current and future recoveries | 44,537 | 10.7 | % | (98,661) | (34.1) | % | |||||||||||||||||
Servicing revenue | 32,516 | 7.8 | % | 28,680 | 9.9 | % | |||||||||||||||||
Other revenues | 1,766 | 0.4 | % | 1,697 | 0.6 | % | |||||||||||||||||
Total revenues | 416,837 | 100.0 | % | 289,081 | 100.0 | % | |||||||||||||||||
Operating expenses | |||||||||||||||||||||||
Salaries and employee benefits | 96,456 | 23.1 | % | 93,098 | 32.2 | % | |||||||||||||||||
Cost of legal collections | 67,142 | 16.1 | % | 66,279 | 22.9 | % | |||||||||||||||||
General and administrative expenses | 32,148 | 7.7 | % | 31,877 | 11.0 | % | |||||||||||||||||
Other operating expenses | 28,441 | 6.8 | % | 27,164 | 9.4 | % | |||||||||||||||||
Collection agency commissions | 12,824 | 3.1 | % | 13,176 | 4.6 | % | |||||||||||||||||
Depreciation and amortization | 11,512 | 2.8 | % | 10,285 | 3.6 | % | |||||||||||||||||
Total operating expenses | 248,523 | 59.6 | % | 241,879 | 83.7 | % | |||||||||||||||||
Income from operations | 168,314 | 40.4 | % | 47,202 | 16.3 | % | |||||||||||||||||
Other (expense) income | |||||||||||||||||||||||
Interest expense | (46,526) | (11.2) | % | (54,662) | (18.9) | % | |||||||||||||||||
Other (expense) income | (55) | 0.0 | % | 1,439 | 0.5 | % | |||||||||||||||||
Total other expense | (46,581) | (11.2) | % | (53,223) | (18.4) | % | |||||||||||||||||
Income (loss) before income taxes | 121,733 | 29.2 | % | (6,021) | (2.1) | % | |||||||||||||||||
Provision for income taxes | (26,968) | (6.5) | % | (4,558) | (1.6) | % | |||||||||||||||||
Net income (loss) | 94,765 | 22.7 | % | (10,579) | (3.7) | % | |||||||||||||||||
Net (income) loss attributable to noncontrolling interest | (135) | (0.1) | % | 125 | 0.1 | % | |||||||||||||||||
Net income (loss) attributable to Encore Capital Group, Inc. stockholders | $ | 94,630 | 22.6 | % | $ | (10,454) | (3.6) | % |
Three Months Ended March 31, | |||||||||||||||||||||||
2021 | 2020 | $ Change | % Change | ||||||||||||||||||||
Revenue recognized from portfolio basis | $ | 324,254 | $ | 340,815 | $ | (16,561) | (4.9) | % | |||||||||||||||
ZBA revenue | 13,764 | 16,550 | (2,786) | (16.8) | % | ||||||||||||||||||
Revenue from receivable portfolios | 338,018 | 357,365 | (19,347) | (5.4) | % | ||||||||||||||||||
Changes in expected current period recoveries | 91,401 | 10,315 | 81,086 | 786.1 | % | ||||||||||||||||||
Changes in expected future period recoveries | (46,864) | (108,976) | 62,112 | (57.0) | % | ||||||||||||||||||
Changes in expected current and future recoveries | 44,537 | (98,661) | 143,198 | (145.1) | % | ||||||||||||||||||
Servicing revenue | 32,516 | 28,680 | 3,836 | 13.4 | % | ||||||||||||||||||
Other revenues | 1,766 | 1,697 | 69 | 4.1 | % | ||||||||||||||||||
Total revenues | $ | 416,837 | $ | 289,081 | $ | 127,756 | 44.2 | % |
Three Months Ended March 31, 2021 | As of March 31, 2021 | ||||||||||||||||||||||||||||
Collections | Revenue from Receivable Portfolios | Changes in Expected Current and Future Recoveries | Investment in Receivable Portfolios | Monthly EIR | |||||||||||||||||||||||||
United States: | |||||||||||||||||||||||||||||
ZBA | $ | 12,501 | $ | 12,501 | $ | — | $ | — | — | % | |||||||||||||||||||
2011 | 6,187 | 4,673 | 1,484 | 1,712 | 88.6 | % | |||||||||||||||||||||||
2012 | 6,306 | 5,011 | 993 | 3,735 | 42.0 | % | |||||||||||||||||||||||
2013 | 13,600 | 12,974 | 1,351 | 10,460 | 40.5 | % | |||||||||||||||||||||||
2014 | 9,475 | 6,671 | (726) | 30,417 | 6.7 | % | |||||||||||||||||||||||
2015 | 12,994 | 6,038 | 2,617 | 48,589 | 3.9 | % | |||||||||||||||||||||||
2016 | 26,378 | 11,181 | 7,020 | 89,806 | 4.0 | % | |||||||||||||||||||||||
2017 | 43,518 | 21,140 | 9,601 | 125,608 | 5.3 | % | |||||||||||||||||||||||
2018 | 68,358 | 29,587 | 10,694 | 238,022 | 3.8 | % | |||||||||||||||||||||||
2019 | 114,690 | 51,761 | 9,482 | 415,502 | 3.8 | % | |||||||||||||||||||||||
2020 | 113,142 | 54,252 | 21,108 | 457,785 | 3.7 | % | |||||||||||||||||||||||
2021 | 8,424 | 3,829 | 4,061 | 91,748 | 4.3 | % | |||||||||||||||||||||||
Subtotal | 435,573 | 219,618 | 67,685 | 1,513,384 | 4.4 | % | |||||||||||||||||||||||
Europe: | |||||||||||||||||||||||||||||
ZBA | 34 | 34 | — | — | — | % | |||||||||||||||||||||||
2013 | 24,748 | 22,383 | (13,588) | 216,432 | 3.2 | % | |||||||||||||||||||||||
2014 | 22,477 | 17,590 | (7,411) | 185,531 | 3.1 | % | |||||||||||||||||||||||
2015 | 14,996 | 10,891 | (5,407) | 143,115 | 2.4 | % | |||||||||||||||||||||||
2016 | 13,996 | 10,679 | (939) | 125,215 | 2.8 | % | |||||||||||||||||||||||
2017 | 23,146 | 14,584 | (2,160) | 249,313 | 1.8 | % | |||||||||||||||||||||||
2018 | 21,712 | 14,296 | (3,007) | 294,406 | 1.6 | % | |||||||||||||||||||||||
2019 | 23,979 | 13,443 | 1,438 | 234,835 | 1.8 | % | |||||||||||||||||||||||
2020 | 15,121 | 8,703 | 5,801 | 124,989 | 2.3 | % | |||||||||||||||||||||||
2021 | 2,392 | 2,013 | 864 | 76,456 | 1.9 | % | |||||||||||||||||||||||
Subtotal | 162,601 | 114,616 | (24,409) | 1,650,292 | 2.2 | % | |||||||||||||||||||||||
Other geographies: | |||||||||||||||||||||||||||||
ZBA | 1,229 | 1,229 | — | — | — | % | |||||||||||||||||||||||
2014(1) | 1,252 | 396 | 141 | 44,413 | 98.2 | % | |||||||||||||||||||||||
2015(1) | 1,192 | 542 | 368 | 3,076 | 96.7 | % | |||||||||||||||||||||||
2016 | 635 | 305 | 144 | 1,261 | 6.7 | % | |||||||||||||||||||||||
2017(1) | 2,269 | 750 | 306 | 9,128 | 6.2 | % | |||||||||||||||||||||||
2018 | 1,640 | 535 | 292 | 3,958 | 3.7 | % | |||||||||||||||||||||||
2019 | 70 | 27 | 10 | 166 | 4.6 | % | |||||||||||||||||||||||
Subtotal | 8,287 | 3,784 | 1,261 | 62,002 | 7.9 | % | |||||||||||||||||||||||
Total | $ | 606,461 | $ | 338,018 | $ | 44,537 | $ | 3,225,678 | 3.4 | % |
Three Months Ended March 31, 2020 | As of March 31, 2020 | ||||||||||||||||||||||||||||
Collections | Revenue from Receivable Portfolios | Changes in Expected Current and Future Recoveries | Investment in Receivable Portfolios | Monthly EIR | |||||||||||||||||||||||||
United States: | |||||||||||||||||||||||||||||
ZBA | $ | 15,274 | $ | 15,274 | $ | — | $ | — | — | % | |||||||||||||||||||
2011 | 7,249 | 6,865 | (215) | 2,021 | 88.6 | % | |||||||||||||||||||||||
2012 | 8,495 | 7,664 | (480) | 4,795 | 42.0 | % | |||||||||||||||||||||||
2013 | 17,687 | 18,136 | (3,984) | 11,564 | 40.5 | % | |||||||||||||||||||||||
2014 | 14,591 | 10,089 | (2,026) | 44,820 | 6.7 | % | |||||||||||||||||||||||
2015 | 18,302 | 9,309 | (1,079) | 73,901 | 3.8 | % | |||||||||||||||||||||||
2016 | 33,377 | 16,785 | (2,412) | 133,941 | 3.8 | % | |||||||||||||||||||||||
2017 | 55,435 | 30,850 | (1,103) | 178,176 | 5.2 | % | |||||||||||||||||||||||
2018 | 89,418 | 46,938 | (15,629) | 362,553 | 3.8 | % | |||||||||||||||||||||||
2019 | 102,534 | 72,048 | (2,104) | 601,892 | 3.8 | % | |||||||||||||||||||||||
2020 | 12,367 | 8,175 | (5,010) | 176,543 | 3.6 | % | |||||||||||||||||||||||
Subtotal | 374,729 | 242,133 | (34,042) | 1,590,206 | 4.4 | % | |||||||||||||||||||||||
Europe: | |||||||||||||||||||||||||||||
ZBA | 58 | 58 | — | — | — | % | |||||||||||||||||||||||
2013 | 25,259 | 22,262 | (6,306) | 215,495 | 3.2 | % | |||||||||||||||||||||||
2014 | 23,271 | 17,887 | (4,972) | 186,139 | 3.0 | % | |||||||||||||||||||||||
2015 | 15,173 | 11,189 | (2,096) | 143,275 | 2.4 | % | |||||||||||||||||||||||
2016 | 13,102 | 11,259 | (11,028) | 122,994 | 2.8 | % | |||||||||||||||||||||||
2017 | 23,494 | 15,696 | (9,692) | 260,314 | 1.9 | % | |||||||||||||||||||||||
2018 | 22,658 | 15,662 | (22,493) | 305,824 | 1.6 | % | |||||||||||||||||||||||
2019 | 20,106 | 14,292 | (7,633) | 240,124 | 1.8 | % | |||||||||||||||||||||||
2020 | 982 | 1,400 | 249 | 28,086 | 2.6 | % | |||||||||||||||||||||||
Subtotal | 144,103 | 109,705 | (63,971) | 1,502,251 | 2.3 | % | |||||||||||||||||||||||
Other geographies: | |||||||||||||||||||||||||||||
ZBA | 1,218 | 1,218 | — | — | — | % | |||||||||||||||||||||||
2014 (1) | 1,174 | 545 | (19) | 47,819 | 100.2 | % | |||||||||||||||||||||||
2015 | 1,557 | 941 | 76 | 4,544 | 17.1 | % | |||||||||||||||||||||||
2016 | 971 | 686 | (249) | 3,391 | 5.1 | % | |||||||||||||||||||||||
2017 | 1,875 | 1,140 | (323) | 11,586 | 6.1 | % | |||||||||||||||||||||||
2018 | 1,580 | 955 | (120) | 5,986 | 3.7 | % | |||||||||||||||||||||||
2019 | 72 | 42 | (13) | 235 | 4.6 | % | |||||||||||||||||||||||
Subtotal | 8,447 | 5,527 | (648) | 73,561 | 67.7 | % | |||||||||||||||||||||||
Total | $ | 527,279 | $ | 357,365 | $ | (98,661) | $ | 3,166,018 | 3.4 | % |
Three Months Ended March 31, | |||||||||||||||||||||||
2021 | 2020 | $ Change | % Change | ||||||||||||||||||||
Salaries and employee benefits | $ | 96,456 | $ | 93,098 | $ | 3,358 | 3.6 | % | |||||||||||||||
Cost of legal collections | 67,142 | 66,279 | 863 | 1.3 | % | ||||||||||||||||||
General and administrative expenses | 32,148 | 31,877 | 271 | 0.9 | % | ||||||||||||||||||
Other operating expenses | 28,441 | 27,164 | 1,277 | 4.7 | % | ||||||||||||||||||
Collection agency commissions | 12,824 | 13,176 | (352) | (2.7) | % | ||||||||||||||||||
Depreciation and amortization | 11,512 | 10,285 | 1,227 | 11.9 | % | ||||||||||||||||||
Total operating expenses | $ | 248,523 | $ | 241,879 | $ | 6,644 | 2.7 | % |
Three Months Ended March 31, | |||||||||||||||||||||||
2021 | 2020 | $ Change | % Change | ||||||||||||||||||||
Court costs | $ | 41,682 | $ | 41,355 | $ | 327 | 0.8 | % | |||||||||||||||
Legal collection fees | 25,460 | 24,924 | 536 | 2.2 | % | ||||||||||||||||||
Total cost of legal collections | $ | 67,142 | $ | 66,279 | $ | 863 | 1.3 | % |
Three Months Ended March 31, | |||||||||||||||||||||||
2021 | 2020 | $ Change | % Change | ||||||||||||||||||||
Stated interest on debt obligations | $ | 41,776 | $ | 48,755 | $ | (6,979) | (14.3) | % | |||||||||||||||
Amortization of debt issuance costs | 4,397 | 2,778 | 1,619 | 58.3 | % | ||||||||||||||||||
Amortization of debt discount | 353 | 3,129 | (2,776) | (88.7) | % | ||||||||||||||||||
Total interest expense | $ | 46,526 | $ | 54,662 | $ | (8,136) | (14.9) | % |
Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
Provision for income taxes | $ | 26,968 | $ | 4,558 | |||||||
Effective tax rate | 22.2 | % | (75.7) | % |
Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
GAAP net income, as reported | $ | 94,765 | $ | (10,579) | |||||||
Adjustments: | |||||||||||
Interest expense | 46,526 | 54,662 | |||||||||
Interest income | (474) | (1,000) | |||||||||
Provision for income taxes | 26,968 | 4,558 | |||||||||
Depreciation and amortization | 11,512 | 10,285 | |||||||||
Stock-based compensation expense | 3,405 | 4,527 | |||||||||
Acquisition, integration and restructuring related expenses(1) | — | 187 | |||||||||
Adjusted EBITDA | $ | 182,702 | $ | 62,640 | |||||||
Collections applied to principal balance(2) | $ | 229,510 | $ | 268,575 |
Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
GAAP total operating expenses, as reported | $ | 248,523 | $ | 241,879 | |||||||
Adjustments: | |||||||||||
Operating expenses related to non-portfolio purchasing and recovery business(1) | (42,653) | (41,489) | |||||||||
Stock-based compensation expense | (3,405) | (4,527) | |||||||||
Acquisition, integration and restructuring related expenses(2) | — | (187) | |||||||||
Adjusted operating expenses related to portfolio purchasing and recovery business | $ | 202,465 | $ | 195,676 |
Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
United States | 34.5 | % | 39.5 | % | |||||||
Europe | 29.4 | % | 29.9 | % | |||||||
Other geographies | 52.1 | % | 52.6 | % | |||||||
Overall cost per dollar collected | 33.4 | % | 37.1 | % |
Year of Purchase | Purchase Price(1) | Cumulative Collections through March 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
<2012 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | Total(2) | Multiple(3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
United States: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
<2012 | $ | 2,143,800 | $ | 3,983,166 | $ | 760,285 | $ | 554,597 | $ | 391,737 | $ | 293,528 | $ | 206,933 | $ | 155,456 | $ | 121,545 | $ | 99,300 | $ | 77,101 | $ | 17,651 | $ | 6,661,299 | 3.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | 548,808 | — | 187,721 | 350,134 | 259,252 | 176,914 | 113,067 | 74,507 | 48,832 | 37,327 | 27,797 | 6,344 | 1,281,895 | 2.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | 551,894 | — | — | 230,051 | 397,646 | 298,068 | 203,386 | 147,503 | 107,399 | 84,665 | 64,436 | 14,599 | 1,547,753 | 2.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | 517,677 | — | — | — | 144,178 | 307,814 | 216,357 | 142,147 | 94,929 | 69,059 | 47,628 | 9,475 | 1,031,587 | 2.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2015 | 499,226 | — | — | — | — | 105,610 | 231,102 | 186,391 | 125,673 | 85,042 | 64,133 | 12,994 | 810,945 | 1.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 | 553,284 | — | — | — | — | — | 110,875 | 283,035 | 234,690 | 159,279 | 116,452 | 26,378 | 930,709 | 1.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 | 528,314 | — | — | — | — | — | — | 111,902 | 315,853 | 255,048 | 193,328 | 43,518 | 919,649 | 1.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2018 | 630,704 | — | — | — | — | — | — | — | 175,042 | 351,696 | 308,302 | 68,358 | 903,398 | 1.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2019 | 677,176 | — | — | — | — | — | — | — | — | 174,693 | 416,315 | 114,690 | 705,698 | 1.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | 539,553 | — | — | — | — | — | — | — | — | — | 213,450 | 113,142 | 326,592 | 0.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2021 | 92,282 | — | — | — | — | — | — | — | — | — | — | 8,424 | 8,424 | 0.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Subtotal | 7,282,718 | 3,983,166 | 948,006 | 1,134,782 | 1,192,813 | 1,181,934 | 1,081,720 | 1,100,941 | 1,223,963 | 1,316,109 | 1,528,942 | 435,573 | 15,127,949 | 2.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Europe: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | 619,079 | — | — | 134,259 | 249,307 | 212,129 | 165,610 | 146,993 | 132,663 | 113,228 | 93,203 | 24,748 | 1,272,140 | 2.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | 623,129 | — | — | — | 135,549 | 198,127 | 156,665 | 137,806 | 129,033 | 105,337 | 84,255 | 22,477 | 969,249 | 1.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2015 | 419,941 | — | — | — | — | 65,870 | 127,084 | 103,823 | 88,065 | 72,277 | 55,261 | 15,016 | 527,396 | 1.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 | 258,218 | — | — | — | — | — | 44,641 | 97,587 | 83,107 | 63,198 | 51,609 | 14,010 | 354,152 | 1.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 | 461,571 | — | — | — | — | — | — | 68,111 | 152,926 | 118,794 | 87,549 | 23,146 | 450,526 | 1.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2018 | 433,302 | — | — | — | — | — | — | — | 49,383 | 118,266 | 78,846 | 21,712 | 268,207 | 0.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2019 | 273,354 | — | — | — | — | — | — | — | — | 44,118 | 80,502 | 23,979 | 148,599 | 0.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | 116,899 | — | — | — | — | — | — | — | — | — | 22,721 | 15,121 | 37,842 | 0.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2021 | 77,826 | — | — | — | — | — | — | — | — | — | — | 2,392 | 2,392 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Subtotal | 3,283,319 | — | — | 134,259 | 384,856 | 476,126 | 494,000 | 554,320 | 635,177 | 635,218 | 553,946 | 162,601 | 4,030,503 | 1.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other geographies: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | 6,721 | — | — | 3,848 | 2,561 | 1,208 | 542 | 551 | 422 | 390 | 294 | 95 | 9,911 | 1.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | 29,568 | — | — | 6,617 | 17,615 | 10,334 | 4,606 | 3,339 | 2,468 | 1,573 | 1,042 | 297 | 47,891 | 1.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | 86,989 | — | — | — | 9,652 | 16,062 | 18,403 | 9,813 | 7,991 | 6,472 | 4,300 | 1,391 | 74,084 | 0.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2015 | 83,198 | — | — | — | — | 15,061 | 57,064 | 43,499 | 32,622 | 17,499 | 4,688 | 1,192 | 171,625 | 2.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 | 64,450 | — | — | — | — | — | 29,269 | 39,710 | 28,992 | 16,078 | 5,196 | 1,333 | 120,578 | 1.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 | 49,670 | — | — | — | — | — | — | 15,471 | 23,075 | 15,383 | 7,303 | 2,269 | 63,501 | 1.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2018 | 26,371 | — | — | — | — | — | — | — | 12,910 | 15,008 | 5,892 | 1,640 | 35,450 | 1.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2019 | 2,668 | — | — | — | — | — | — | — | — | 3,198 | 245 | 70 | 3,513 | 1.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Subtotal | 349,635 | — | — | 10,465 | 29,828 | 42,665 | 109,884 | 112,383 | 108,480 | 75,601 | 28,960 | 8,287 | 526,553 | 1.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 10,915,672 | $ | 3,983,166 | $ | 948,006 | $ | 1,279,506 | $ | 1,607,497 | $ | 1,700,725 | $ | 1,685,604 | $ | 1,767,644 | $ | 1,967,620 | $ | 2,026,928 | $ | 2,111,848 | $ | 606,461 | $ | 19,685,005 | 1.8 |
Purchase Price(1) | Historical Collections(2) | Estimated Remaining Collections | Total Estimated Gross Collections | Total Estimated Gross Collections to Purchase Price | |||||||||||||||||||||||||
United States: | |||||||||||||||||||||||||||||
<2011 | $ | 1,760,006 | $ | 5,501,203 | $ | 105,360 | $ | 5,606,563 | 3.2 | ||||||||||||||||||||
2011 | 383,794 | 1,160,096 | 51,789 | 1,211,885 | 3.2 | ||||||||||||||||||||||||
2012 | 548,808 | 1,281,895 | 56,219 | 1,338,114 | 2.4 | ||||||||||||||||||||||||
2013(3) | 551,894 | 1,547,753 | 159,200 | 1,706,953 | 3.1 | ||||||||||||||||||||||||
2014(3) | 517,677 | 1,031,587 | 98,327 | 1,129,914 | 2.2 | ||||||||||||||||||||||||
2015 | 499,226 | 810,945 | 109,999 | 920,944 | 1.8 | ||||||||||||||||||||||||
2016 | 553,284 | 930,709 | 204,119 | 1,134,828 | 2.1 | ||||||||||||||||||||||||
2017 | 528,314 | 919,649 | 332,635 | 1,252,284 | 2.4 | ||||||||||||||||||||||||
2018 | 630,704 | 903,398 | 502,810 | 1,406,208 | 2.2 | ||||||||||||||||||||||||
2019 | 677,176 | 705,698 | 891,534 | 1,597,232 | 2.4 | ||||||||||||||||||||||||
2020 | 539,553 | 326,592 | 1,002,765 | 1,329,357 | 2.5 | ||||||||||||||||||||||||
2021 | 92,282 | 8,424 | 223,227 | 231,651 | 2.5 | ||||||||||||||||||||||||
Subtotal | 7,282,718 | 15,127,949 | 3,737,984 | 18,865,933 | 2.6 | ||||||||||||||||||||||||
Europe: | |||||||||||||||||||||||||||||
2013(3) | 619,079 | 1,272,140 | 865,462 | 2,137,602 | 3.5 | ||||||||||||||||||||||||
2014(3) | 623,129 | 969,249 | 642,939 | 1,612,188 | 2.6 | ||||||||||||||||||||||||
2015(3) | 419,941 | 527,396 | 413,504 | 940,900 | 2.2 | ||||||||||||||||||||||||
2016 | 258,218 | 354,152 | 319,524 | 673,676 | 2.6 | ||||||||||||||||||||||||
2017 | 461,571 | 450,526 | 558,605 | 1,009,131 | 2.2 | ||||||||||||||||||||||||
2018 | 433,302 | 268,207 | 610,538 | 878,745 | 2.0 | ||||||||||||||||||||||||
2019 | 273,354 | 148,599 | 502,757 | 651,356 | 2.4 | ||||||||||||||||||||||||
2020 | 116,899 | 37,842 | 302,226 | 340,068 | 2.9 | ||||||||||||||||||||||||
2021 | 77,826 | 2,392 | 175,991 | 178,383 | 2.3 | ||||||||||||||||||||||||
Subtotal | 3,283,319 | 4,030,503 | 4,391,546 | 8,422,049 | 2.6 | ||||||||||||||||||||||||
Other geographies: | |||||||||||||||||||||||||||||
2012 | 6,721 | 9,911 | 63 | 9,974 | 1.5 | ||||||||||||||||||||||||
2013 | 29,568 | 47,891 | 774 | 48,665 | 1.6 | ||||||||||||||||||||||||
2014 | 86,989 | 74,084 | 50,516 | 124,600 | 1.4 | ||||||||||||||||||||||||
2015 | 83,198 | 171,625 | 13,321 | 184,946 | 2.2 | ||||||||||||||||||||||||
2016 | 64,450 | 120,578 | 4,289 | 124,867 | 1.9 | ||||||||||||||||||||||||
2017 | 49,670 | 63,501 | 26,781 | 90,282 | 1.8 | ||||||||||||||||||||||||
2018 | 26,371 | 35,450 | 7,664 | 43,114 | 1.6 | ||||||||||||||||||||||||
2019 | 2,668 | 3,513 | 323 | 3,836 | 1.4 | ||||||||||||||||||||||||
Subtotal | 349,635 | 526,553 | 103,731 | 630,284 | 1.8 | ||||||||||||||||||||||||
Total | $ | 10,915,672 | $ | 19,685,005 | $ | 8,233,261 | $ | 27,918,266 | 2.6 |
Estimated Remaining Gross Collections by Year of Purchase(1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2021(3) | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | >2029 | Total(2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
United States: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
<2011 | $ | 26,212 | $ | 26,102 | $ | 18,170 | $ | 12,578 | $ | 8,578 | $ | 5,814 | $ | 3,861 | $ | 2,385 | $ | 1,260 | $ | 400 | $ | 105,360 | |||||||||||||||||||||||||||||||||||||||||||
2011 | 12,457 | 12,168 | 8,473 | 5,928 | 4,171 | 2,944 | 2,080 | 1,474 | 1,047 | 1,047 | 51,789 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | 13,437 | 12,995 | 9,133 | 6,406 | 4,510 | 3,181 | 2,249 | 1,596 | 1,136 | 1,576 | 56,219 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013(4) | 37,028 | 36,243 | 25,680 | 18,191 | 12,903 | 9,156 | 6,498 | 4,614 | 3,277 | 5,610 | 159,200 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014(4) | 23,588 | 22,761 | 15,677 | 10,805 | 7,630 | 5,402 | 3,829 | 2,717 | 1,931 | 3,987 | 98,327 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2015 | 27,168 | 26,079 | 18,006 | 12,193 | 8,121 | 5,575 | 3,933 | 2,781 | 1,971 | 4,172 | 109,999 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 | 53,665 | 47,533 | 31,980 | 21,983 | 15,104 | 10,293 | 7,195 | 5,067 | 3,576 | 7,723 | 204,119 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 | 88,721 | 78,385 | 49,933 | 35,497 | 24,340 | 16,930 | 11,827 | 8,352 | 5,889 | 12,761 | 332,635 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2018 | 137,797 | 125,833 | 81,381 | 54,057 | 35,510 | 23,418 | 15,449 | 10,112 | 6,730 | 12,523 | 502,810 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2019 | 246,003 | 209,162 | 134,096 | 93,610 | 63,905 | 44,357 | 31,261 | 21,994 | 15,234 | 31,912 | 891,534 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | 222,665 | 280,072 | 163,837 | 106,095 | 71,412 | 48,451 | 34,062 | 24,314 | 17,327 | 34,530 | 1,002,765 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2021 | 45,237 | 60,671 | 41,106 | 24,362 | 16,147 | 11,131 | 7,554 | 5,313 | 3,761 | 7,945 | 223,227 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Subtotal | 933,978 | 938,004 | 597,472 | 401,705 | 272,331 | 186,652 | 129,798 | 90,719 | 63,139 | 124,186 | 3,737,984 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Europe: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013(4) | 70,401 | 91,831 | 88,191 | 82,241 | 75,011 | 68,559 | 61,460 | 55,275 | 49,680 | 222,813 | 865,462 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014(4) | 60,729 | 74,390 | 69,269 | 63,117 | 56,840 | 48,712 | 43,025 | 38,018 | 34,305 | 154,534 | 642,939 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2015(4) | 39,471 | 48,472 | 44,854 | 40,580 | 36,778 | 32,232 | 27,720 | 24,603 | 22,134 | 96,660 | 413,504 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 | 44,969 | 51,726 | 39,178 | 32,325 | 28,688 | 24,039 | 19,958 | 16,698 | 14,291 | 47,652 | 319,524 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 | 62,593 | 79,825 | 69,366 | 58,865 | 50,329 | 42,446 | 36,620 | 30,472 | 26,128 | 101,961 | 558,605 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2018 | 62,749 | 82,001 | 74,626 | 65,036 | 57,067 | 49,158 | 41,453 | 35,629 | 30,312 | 112,507 | 610,538 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2019 | 62,358 | 75,770 | 64,237 | 55,012 | 45,847 | 37,406 | 30,879 | 26,291 | 21,933 | 83,024 | 502,757 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | 34,809 | 46,700 | 42,482 | 34,029 | 27,257 | 23,904 | 19,361 | 16,099 | 13,306 | 44,279 | 302,226 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2021 | 17,842 | 24,467 | 21,842 | 18,550 | 15,895 | 13,844 | 12,226 | 10,718 | 8,884 | 31,723 | 175,991 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Subtotal | 455,921 | 575,182 | 514,045 | 449,755 | 393,712 | 340,300 | 292,702 | 253,803 | 220,973 | 895,153 | 4,391,546 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other geographies: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | 46 | 17 | — | — | — | — | — | — | — | — | 63 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | 338 | 282 | 154 | — | — | — | — | — | — | — | 774 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | 7,463 | 8,166 | 7,350 | 6,342 | 4,803 | 2,822 | 1,606 | 1,462 | 1,462 | 9,040 | 50,516 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2015 | 2,149 | 2,202 | 2,197 | 1,627 | 1,136 | 761 | 637 | 534 | 449 | 1,629 | 13,321 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 | 1,972 | 1,325 | 500 | 243 | 158 | 91 | — | — | — | — | 4,289 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 | 5,195 | 5,085 | 3,773 | 2,241 | 1,987 | 1,489 | 854 | 752 | 752 | 4,653 | 26,781 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2018 | 2,353 | 1,959 | 1,368 | 898 | 483 | 315 | 207 | 81 | — | — | 7,664 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2019 | 113 | 90 | 60 | 50 | 10 | — | — | — | — | — | 323 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Subtotal | 19,629 | 19,126 | 15,402 | 11,401 | 8,577 | 5,478 | 3,304 | 2,829 | 2,663 | 15,322 | 103,731 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio ERC | 1,409,528 | 1,532,312 | 1,126,919 | 862,861 | 674,620 | 532,430 | 425,804 | 347,351 | 286,775 | 1,034,661 | 8,233,261 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
REO ERC(5) | 20,586 | 26,884 | 17,796 | 7,970 | 1,988 | 68 | 11 | 76 | 283 | — | 75,662 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total ERC | $ | 1,430,114 | $ | 1,559,196 | $ | 1,144,715 | $ | 870,831 | $ | 676,608 | $ | 532,498 | $ | 425,815 | $ | 347,427 | $ | 287,058 | $ | 1,034,661 | $ | 8,308,923 |
84-Month ERC | 120-Month ERC | ||||||||||
United States | $ | 3,485,857 | $ | 3,666,276 | |||||||
Europe | 3,088,406 | 3,733,609 | |||||||||
Other geographies | 83,645 | 91,634 | |||||||||
Portfolio ERC | 6,657,908 | 7,491,519 | |||||||||
REO ERC | 75,304 | 75,662 | |||||||||
Total ERC | $ | 6,733,212 | $ | 7,567,181 |
Years Ending December 31, | United States | Europe | Other Geographies | Total | |||||||||||||||||||
2021(1) | $ | 370,692 | $ | 138,034 | $ | 12,997 | $ | 521,723 | |||||||||||||||
2022 | 402,587 | 187,848 | 13,286 | 603,721 | |||||||||||||||||||
2023 | 242,472 | 175,413 | 10,088 | 427,973 | |||||||||||||||||||
2024 | 158,932 | 155,195 | 6,675 | 320,802 | |||||||||||||||||||
2025 | 105,328 | 138,573 | 5,233 | 249,134 | |||||||||||||||||||
2026 | 70,715 | 120,586 | 3,104 | 194,405 | |||||||||||||||||||
2027 | 48,851 | 103,157 | 1,767 | 153,775 | |||||||||||||||||||
2028 | 34,319 | 90,071 | 1,532 | 125,922 | |||||||||||||||||||
2029 | 24,064 | 80,059 | 1,462 | 105,585 | |||||||||||||||||||
2030 | 17,016 | 72,111 | 1,462 | 90,589 | |||||||||||||||||||
2031 | 12,198 | 68,219 | 1,462 | 81,879 | |||||||||||||||||||
2032 | 8,977 | 67,798 | 1,462 | 78,237 | |||||||||||||||||||
2033 | 7,035 | 70,246 | 1,462 | 78,743 | |||||||||||||||||||
2034 | 5,828 | 74,719 | 10 | 80,557 | |||||||||||||||||||
2035 | 3,660 | 84,216 | — | 87,876 | |||||||||||||||||||
2036 | 710 | 24,047 | — | 24,757 | |||||||||||||||||||
Total | $ | 1,513,384 | $ | 1,650,292 | $ | 62,002 | $ | 3,225,678 |
Quarter | # of Accounts | Face Value | Purchase Price | ||||||||||||||
Q1 2019 | 854 | $ | 1,732,977 | $ | 262,335 | ||||||||||||
Q2 2019 | 778 | 2,307,711 | 242,697 | ||||||||||||||
Q3 2019 | 1,255 | 5,313,092 | 259,910 | ||||||||||||||
Q4 2019 | 803 | 2,241,628 | 234,916 | ||||||||||||||
Q1 2020 | 943 | 1,703,022 | 214,113 | ||||||||||||||
Q2 2020 | 754 | 1,305,875 | 147,939 | ||||||||||||||
Q3 2020 | 735 | 1,782,733 | 170,131 | ||||||||||||||
Q4 2020 | 558 | 1,036,332 | 127,689 | ||||||||||||||
Q1 2021 | 749 | 1,328,865 | 170,178 |
Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
(Unaudited) | |||||||||||
Net cash provided by operating activities | $ | 69,119 | $ | 70,805 | |||||||
Net cash provided by (used in) investing activities | 95,267 | (43,255) | |||||||||
Net cash used in financing activities | (160,110) | (21,762) |
Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)(2) | Maximum Number of Shares (or Approximate Dollar Value) That May Yet Be Purchased Under the Publicly Announced Plans or Programs(1) | |||||||||||||||||||
January 1, 2021 to January 31, 2021 | — | $ | — | — | $ | 50,000,000 | |||||||||||||||||
February 1, 2021 to February 28, 2021 | 11,142 | $ | 32.41 | 11,142 | $ | 49,638,834 | |||||||||||||||||
March 1, 2021 to March 31, 2021 | 506,718 | $ | 39.53 | 506,718 | $ | 29,610,273 | |||||||||||||||||
Total | 517,860 | $ | 39.37 | 517,860 | $ | 29,610,273 |
Number | Description | |||||||
3.1.1 | ||||||||
3.1.2 | ||||||||
3.1.3 | ||||||||
3.3 | ||||||||
31.1 | ||||||||
31.2 | ||||||||
32.1 | ||||||||
101.INS | XBRL Instance Document - The instance document does not appear in the interactive data file because XBRL tags are embedded within the inline XBRL document. (filed herewith) | |||||||
101.SCH | XBRL Taxonomy Extension Schema Document (filed herewith) | |||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith) | |||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document (filed herewith) | |||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document (filed herewith) | |||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith) | |||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101 |
ENCORE CAPITAL GROUP, INC. | |||||||||||
By: | /s/ Jonathan C. Clark | ||||||||||
Jonathan C. Clark | |||||||||||
Executive Vice President, | |||||||||||
Chief Financial Officer and Treasurer | |||||||||||
/s/ Peter Reck | |||||||||||
Peter Reck | |||||||||||
Vice President, | |||||||||||
Chief Accounting Officer |
By: | /S/ ASHISH MASIH | |||||||
Ashish Masih President and Chief Executive Officer |
By: | /S/ JONATHAN C. CLARK | |||||||
Jonathan C. Clark Executive Vice President, Chief Financial Officer and Treasurer |
/s/ ASHISH MASIH | |||||
Ashish Masih | |||||
President and Chief Executive Officer |
/s/ JONATHAN C. CLARK | |||||
Jonathan C. Clark | |||||
Executive Vice President, Chief Financial Officer and Treasurer |
Consolidated Statements of Financial Condition (Parenthetical) - $ / shares |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Convertible preferred stock, par value (USD per share) | $ 0.01 | $ 0.01 |
Convertible preferred stock authorized (shares) | 5,000,000 | 5,000,000 |
Convertible preferred stock issued (shares) | 0 | 0 |
Convertible preferred stock outstanding (shares) | 0 | 0 |
Common stock, par value (USD per share) | $ 0.01 | $ 0.01 |
Common stock authorized (shares) | 75,000,000 | 75,000,000 |
Common stock issued (shares) | 31,010,000 | 31,345,000 |
Common stock outstanding (shares) | 31,010,000 | 31,345,000 |
Ownership, Description of Business, and Summary of Significant Accounting Policies |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ownership, Description of Business, and Summary of Significant Accounting Policies | Ownership, Description of Business, and Summary of Significant Accounting Policies Encore Capital Group, Inc. (“Encore”), through its subsidiaries (collectively with Encore, the “Company”), is an international specialty finance company providing debt recovery solutions and other related services for consumers across a broad range of financial assets. The Company purchases portfolios of defaulted consumer receivables at deep discounts to face value and manages them by working with individuals as they repay their obligations and work toward financial recovery. Defaulted receivables are consumers’ unpaid financial obligations to credit originators, including banks, credit unions, consumer finance companies and commercial retailers. Defaulted receivables may also include receivables subject to bankruptcy proceedings. The Company also provides debt servicing and other portfolio management services to credit originators for non-performing loans. Through Midland Credit Management, Inc. and its domestic affiliates (collectively, “MCM”), the Company is a market leader in portfolio purchasing and recovery in the United States. Through Cabot Credit Management Limited (“CCM”) and its subsidiaries and European affiliates (collectively, “Cabot”), the Company is one of the largest credit management services providers in Europe and a market leader in the United Kingdom and Ireland. These are the Company’s primary operations. The Company also has investments and operations in Latin America and Asia-Pacific, which the Company refers to as “LAAP.” COVID-19 On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a global pandemic, which continues to spread throughout the United States and around the world. The COVID-19 outbreak and resulting containment measures implemented by governments around the world, as well as increased business uncertainty, have impacted the Company. The circumstances around the COVID-19 pandemic continue to rapidly evolve and will continue to impact the Company’s business and its estimation of expected recoveries in future periods. The Company will continue to closely monitor the COVID-19 situation and update its assumptions accordingly. Financial Statement Preparation and Presentation The accompanying interim consolidated financial statements have been prepared by the Company, without audit, in accordance with the instructions to the Quarterly Report on Form 10-Q, and Rule 10-01 of Regulation S-X promulgated by the United States Securities and Exchange Commission (the “SEC”) and, therefore, do not include all information and footnotes necessary for a fair presentation of its consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). In the opinion of management, the unaudited financial information for the interim periods presented reflects all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the Company’s consolidated financial statements. These consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in the Company’s financial statements and the accompanying notes. The inputs into the judgments and estimates consider the economic implications of the COVID-19 pandemic on the Company’s critical and significant accounting estimates. Actual results could materially differ from those estimates. Basis of Consolidation The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and reflect the accounts and operations of the Company and those of its subsidiaries in which the Company has a controlling financial interest. The Company also consolidates variable interest entities for which it is the primary beneficiary. The primary beneficiary has both (a) the power to direct the activities of the VIE that most significantly affect the entity’s economic performance, and (b) either the obligation to absorb losses or the right to receive benefits. Refer to “Note 8: Variable Interest Entities” for further details. All intercompany transactions and balances have been eliminated in consolidation. Translation of Foreign Currencies The financial statements of certain of the Company’s foreign subsidiaries are measured using their local currency as the functional currency. Assets and liabilities of foreign operations are translated into U.S. dollars using period-end exchange rates, and revenues and expenses are translated into U.S. dollars using average exchange rates in effect during each period. The resulting translation adjustments are recorded as a component of other comprehensive income or loss. Equity accounts are translated at historical rates, except for the change in retained earnings during the year which is the result of the income statement translation process. Intercompany transaction gains or losses at each period end arising from subsequent measurement of balances for which settlement is not planned or anticipated in the foreseeable future are included as translation adjustments and recorded within other comprehensive income or loss. Translation gains or losses are the material components of accumulated other comprehensive income or loss and are reclassified to earnings upon the substantial sale or liquidation of investments in foreign operations. Recently Adopted Accounting Guidance On January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) No. 2020-06, Debt — Debt with Conversion and Other Options (“Subtopic 470-20”) and Derivatives and Hedging — Contracts in Entity’s Own Equity (“Subtopic 815-40”): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). The Company adopted ASU 2020-06 using the modified-retrospective approach, by recording a net cumulative-effect adjustment to equity of approximately $17.9 million. The ASU simplifies the accounting for convertible instruments by removing certain models in Subtopic 470-20 and revises the guidance in Subtopic 815-40 to simplify the accounting for contracts in an entity’s own equity. The ASU also amends the guidance to improve the consistency of earnings per share calculations, which requires the if-converted method be used for convertible instruments. Under ASU 2020-06, the Company’s convertible and exchangeable notes are no longer bifurcated to a debt component and an equity component, instead, they are carried as a single liability which reflects the principal amount of the convertible and exchangeable notes. The interest expense recognized on the convertible and exchangeable notes are based on coupon rates, rather than higher effective interest rates. As a result, the Company recognizes lower interest expense after the adoption. Additionally, effective January 1, 2021, the Company uses if-converted method in calculating dilutive effect of its convertible and exchangeable notes for earnings per share. The Company has not adjusted prior period comparative information and will continue to disclose prior period financial information in accordance with the previous accounting guidance. The following table summarizes the cumulative effects of adopting the new guidance on the Company’s consolidated statements of financial condition at January 1, 2021 (in thousands):
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Earnings (Loss) Per Share |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings (Loss) Per Share | Earnings (Loss) Per ShareBasic earnings per share is calculated by dividing net earnings attributable to Encore by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is calculated based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares during the period. Dilutive potential common shares include outstanding stock options, non-vested share awards, and the dilutive effect of the convertible and exchangeable senior notes, if applicable. The Company adopted ASU 2020-06 on January 1, 2021, using a modified retrospective approach. Effective January 1, 2021, the dilutive effect of the Company’s convertible and exchangeable notes are calculated using the if-converted method. Prior to the adoption, the dilutive effect of the convertible and exchangeable notes was calculated using the treasury stock method. Since all of the Company’s convertible and exchangeable notes require net share settlement, using the if-converted method results in a similar dilutive effect as using the treasury stock method under the previous accounting standard, due to the fact that only in-the-money shares are included in the dilutive effect. The Company did not have any dilutive effect from its convertible and exchangeable notes during the three months ended March 31, 2021 or 2020. In computing the diluted net loss per share for the three months ended March 31, 2020, dilutive potential common shares were excluded from the diluted loss per share calculation because of their anti-dilutive effect. On August 12, 2015, the Company’s Board of Directors approved a $50.0 million share repurchase program. On May 5, 2021, the Company announced that the Board of Directors had approved an increase in the size of the repurchase program from $50.0 million to $300.0 million (an increase of $250.0 million). Repurchases under this program are expected to be made with cash on hand and may be made from time to time, subject to market conditions and other factors, in the open market, through private transactions, block transactions, or other methods as determined by the Company’s management and Board of Directors, and in accordance with market conditions, other corporate considerations, and applicable regulatory requirements. The program does not obligate the Company to acquire any particular amount of common stock, and it may be modified or suspended at any time at the Company’s discretion. During the three months ended March 31, 2021, the Company repurchased 517,860 shares of our common stock for approximately $20.4 million, or $39.37 per share. The Company’s practice is to retire the shares repurchased. A reconciliation of shares used in calculating earnings per basic and diluted shares follows (in thousands, except per share amounts):
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements Fair value is defined as the price that would be received upon sale of an asset or the price paid to transfer a liability, in an orderly transaction between market participants at the measurement date (i.e., the “exit price”). The Company uses a fair value hierarchy that prioritizes the inputs used in valuation techniques to measure fair value into three broad levels. The following is a brief description of each level: •Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. •Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. •Level 3: Unobservable inputs, including inputs that reflect the reporting entity’s own assumptions. Financial Instruments Required To Be Carried At Fair Value Financial assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):
Derivative Contracts: The Company uses derivative instruments to manage its exposure to fluctuations in interest rates and foreign currency exchange rates. Fair values of these derivative instruments are estimated using industry standard valuation models. These models project future cash flows and discount the future amounts to a present value using market-based observable inputs, including interest rate curves, foreign currency exchange rates, and forward and spot prices for currencies. Contingent Consideration: The Company carries certain contingent liabilities resulting from its mergers and acquisition activities. Certain sellers of the Company’s acquired entities could earn additional earn-out payments in cash based on the entities’ subsequent operating performance. The Company recorded the acquisition date fair values of these contingent liabilities, based on the likelihood of contingent earn-out payments, as part of the consideration transferred. The earn-out payments are subsequently remeasured to fair value at each reporting date based on actual and forecasted operating performance. The following table provides a roll-forward of the fair value of contingent consideration for the three months ended March 31, 2021 and year ended December 31, 2020 (in thousands):
Non-Recurring Fair Value Measurement: Certain assets are measured at fair value on a nonrecurring basis. These assets include real estate-owned assets classified as held for sale at the lower of their carrying value or fair value less cost to sell. The fair value of the assets held for sale and estimated selling expenses were determined at the time of initial recognition using Level 3 measurements. The fair value estimate of these assets was approximately $40.1 million and $42.2 million as of March 31, 2021 and December 31, 2020, respectively. Financial Instruments Not Required To Be Carried At Fair Value The table below summarizes fair value estimates for the Company's financial instruments that are not required to be carried at fair value. The total of the fair value calculations presented does not represent, and should not be construed to represent, the underlying value of the Company. The carrying amounts in the following table are included in the consolidated statements of financial condition as of March 31, 2021 and December 31, 2020 (in thousands):
_______________________ (1)Prior to January 1, 2021, under the previous accounting standard, the convertible and exchangeable notes included a debt discount. The carrying amount as of December 31, 2020 represented the principal amount of the notes, net of the debt discount. (2)Carrying amount represents historical cost, adjusted for any related debt discount or debt premium. Investment in Receivable Portfolios: The fair value of investment in receivable portfolios is measured using Level 3 inputs by discounting the estimated future cash flows generated by the Company’s proprietary forecasting models. The key inputs include the estimated future gross cash flow, average cost to collect, and discount rate. The determination of such inputs requires significant judgment, including assessing the assumed market participant’s cost structure, its determination of whether to include fixed costs in its valuation, its collection strategies, and determining the appropriate weighted average cost of capital. The Company evaluates the use of these key inputs on an ongoing basis and refines the data as it continues to obtain better information from market participants in the debt recovery and purchasing business. Borrowings: The Company’s convertible notes, exchangeable notes and senior secured notes are carried at historical cost, adjusted for the debt discount. The fair value estimate for the convertible and exchangeable notes incorporates quoted market prices using Level 2 inputs. The fair value of the senior secured notes is estimated using widely accepted valuation techniques, including discounted cash flow analyses using available market information on discount and borrowing rates with similar terms, maturities, and credit ratings. Accordingly, the Company used Level 2 inputs for these debt instrument fair value estimates. The carrying value of the Company’s senior secured revolving credit facility agreement approximates fair value due to the short-term nature of the interest rate period. The Company’s borrowings also include private placement notes, a securitisation senior facility and finance lease liabilities for which the carrying value approximates respective fair value.
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Derivatives and Hedging Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives and Hedging Instruments | Derivatives and Hedging InstrumentsThe Company may periodically enter into derivative financial instruments to manage risks related to interest rates and foreign currency. The following table summarizes the fair value of derivative instruments as included in the Company’s consolidated statements of financial condition (in thousands):
Derivatives Designated as Hedging Instruments The Company has operations in foreign countries which expose the Company to foreign currency exchange rate fluctuations due to transactions denominated in foreign currencies. To mitigate a portion of this risk, the Company may enter into derivative financial instruments, principally foreign currency forward contracts with financial counterparties. The Company adjusts the level and use of derivatives as soon as practicable after learning that an exposure has changed and reviews all exposures and derivative positions on an ongoing basis. The Company may periodically enter into interest rate swap agreements to reduce its exposure to fluctuations in interest rates on variable interest rate debt and their impact on earnings and cash flows. Under the swap agreements, the Company receives floating interest rate payments and makes interest payments based on fixed interest rates. The Company designates its interest rate swap instruments as cash flow hedges. Previously, the Company held four interest rate swap agreements that hedged the risk of USD-LIBOR interest rate fluctuations for the Encore revolving credit facility and term loan facility. As part of the financing transactions completed in September 2020, the Company settled two of the interest rate swap agreements. As of March 31, 2021, there were two interest rate swap agreements outstanding with a total notional amount of $191.3 million. The Company expects to reclassify approximately $6.4 million of net derivative loss from OCI into earnings relating to interest rate swaps within the next 12 months. In connection with the financing transactions discussed above, the Company entered into cross-currency swap agreements, which are used to manage foreign currency exchange risk by converting fixed-rate Euro-denominated borrowings including periodic interest payments and the payment of principal at maturity to fixed-rate USD debt and are accounted for as cash flow hedges. As of March 31, 2021, there were four cross-currency swap agreements outstanding with a total notional amount of €350.0 million (approximately $410.5 million based on an exchange rate of $1.00 to €0.85, the exchange rate as of March 31, 2021). The Company expects to reclassify approximately $4.6 million of net derivative loss from OCI into earnings relating to cross-currency swaps within the next 12 months. Previously, the Company held two interest rate cap contracts (the “2018 Caps”) that hedged the risk of GBP-LIBOR interest rate fluctuations for the Cabot Securitisation Senior Facility interest payments. In February 2020, the Company settled the 2018 Caps and ceased the hedge relationship, which resulted in the reclassification of the associated other comprehensive loss balance to interest expense for approximately $2.5 million during the first quarter of 2020. As of March 31, 2021, the Company held two interest rate cap contracts with a notional amount of approximately $951.5 million that are used to manage its risk related to interest rate fluctuations on the Company’s variable interest rate bearing debt. The interest rate cap hedging the fluctuations in three-month EURIBOR floating rate debt (“2019 Cap”) has a notional amount of €400.0 million (approximately $469.1 million based on an exchange rate of $1.00 to €0.85, the exchange rate as of March 31, 2021) and matures in 2024. The interest rate cap hedging the fluctuations in sterling overnight index average (“SONIA”) bearing debt (“2020 Cap”) has a notional amount of £350.0 million (approximately $482.4 million based on an exchange rate of $1.00 to £0.73, the exchange rate as of March 31, 2021) and matures in 2023. The Company expects the hedge relationships to be highly effective and designates the 2019 Cap and 2020 Cap as cash flow hedge instruments. The Company expects to reclassify approximately $0.6 million of net derivative loss from OCI into earnings relating to interest rate caps within the next 12 months. The following tables summarize the effects of derivatives in cash flow hedging relationships designated as hedging instruments in the Company’s consolidated financial statements (in thousands):
Derivatives Not Designated as Hedging Instruments The Company enters into currency exchange forward contracts to reduce the effects of currency exchange rate fluctuations between the British Pound and Euro. These derivative contracts generally mature within to three months and are not designated as hedge instruments for accounting purposes. The Company continues to monitor the level of exposure of the foreign currency exchange risk and may enter into additional short-term forward contracts on an ongoing basis. The gains or losses on these derivative contracts are recognized in other income or expense based on the changes in fair value. As of March 31, 2021, the Company had no outstanding currency exchange forward contracts that were not designated as cash flow hedging instruments. The following table summarizes the effects of derivatives in cash flow hedging relationships not designated as hedging instruments in the Company’s consolidated statements of operations (in thousands):
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Investment in Receivable Portfolios, Net |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment in Receivable Portfolios, Net | Investment in Receivable Portfolios, Net The Company’s purchased portfolios of loans are grossed-up to their face value with an offsetting allowance and noncredit discount allocated to the individual receivables as the unit of account is at the individual loan level. Since each loan is deeply delinquent and deemed uncollectible at the individual loan level, the Company applies its charge-off policy and fully writes-off the amortized costs (i.e., face value net of noncredit discount) of the individual receivables immediately after purchasing the portfolio. The Company then records a negative allowance that represents the present value of all expected future recoveries for pools of receivables that share similar risk characteristics using a discounted cash flow approach, which ultimately equals the amount paid for a portfolio purchase and presented as “Investment in receivable portfolios, net” in the Company’s consolidated statements of financial condition. The discount rate is an effective interest rate (or “purchase EIR”) based on the purchase price of the portfolio and the expected future cash flows at the time of purchase. Receivable portfolio purchases are aggregated into pools based on similar risk characteristics. Examples of risk characteristics include financial asset type, collateral type, size, interest rate, date of origination, term, and geographic location. The Company’s static pools are typically grouped into credit card, purchased consumer bankruptcy, and mortgage portfolios. The Company further groups these static pools by geographic location. Once a pool is established, the portfolios will remain in the designated pool unless the underlying risk characteristics change. The purchase EIR of a pool will not change over the life of the pool even if expected future cash flows change. Revenue is recognized for each static pool over the economic life of the pool. Revenue primarily includes two components: (1) accretion of the discount on the negative allowance due to the passage of time, and (2) changes in expected cash flows, which includes (a) the current period variances between actual cash collected and expected cash recoveries and (b) the present value change of expected future recoveries. The Company measures expected future recoveries based on historical experience, current conditions, and reasonable and supportable forecasts. Factors that may change the expected future recoveries may include both internal as well as external factors. Internal factors include operational performance, such as capacity and the productivity of our collection staff. External factors that may have an impact on our collections include new laws or regulations, new interpretations of existing laws or regulations, and macroeconomic conditions. The table below provides the detail on the establishment of negative allowance for expected recoveries of portfolios purchased during the periods presented (in thousands):
The following table summarizes the changes in the balance of the investment in receivable portfolios during the periods presented (in thousands):
Changes in expected current period recoveries represent over and under-performance in the reporting period. Collections during the three months ended March 31, 2021 significantly outperformed the projected cash flows. The Company believes the collection over-performance was a result of its sustained improvements in portfolio collections driven by change in consumer behavior during the COVID-19 pandemic and our liquidation improvement initiatives. The over-performance was also driven by higher collections as compared to the reduced near-term expected recoveries as a result of adjustments made to the projected cash flow forecast during 2020 associated with the COVID-19 pandemic. While the Company now has additional information with respect to the impact on collections of the COVID-19 pandemic, the future outlook remains uncertain, and will continue to evolve depending on future developments, including the duration and spread of the pandemic and related actions taken by governments. When reassessing the future forecasts of expected lifetime recoveries during three months ended March 31, 2021, management considered historical and current collection performance, as well as the uncertainty in economic forecasts in the geographies in which we operate, and believes that while some of the collection over-performance resulted in increased total expected recoveries for certain pool groups, the majority of the over-performance was a shift forward in timing rather than an increase in total estimated remaining collections. Additionally, the macroeconomic driven consumer distress has improved; although it is still present and will likely impact the Company’s collections performance in the near future. As a result of a combination of the above, the Company has updated its forecast, resulting in a net reduction of total estimated remaining collections which in turn, when discounted to present value, resulted in a provision for credit loss adjustment of approximately $46.9 million during the three months ended March 31, 2021. During the three months ended March 31, 2020, the Company recorded approximately $109.0 million in provision for credit loss adjustment due to significant uncertainty of the COVID-19 pandemic at that time. The circumstances around this pandemic continue to rapidly evolve, and will continue to impact the Company’s business and its estimation of expected recoveries in future periods. The Company will continue to closely monitor the COVID-19 situation and update its assumptions accordingly.
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Other Assets |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Assets | Other Assets Other assets consist of the following (in thousands):
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Borrowings |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Borrowings | Borrowings The Company is in compliance in all material respects with all covenants under its financing arrangements as of March 31, 2021. The components of the Company’s consolidated borrowings were as follows (in thousands):
Encore is the parent of the restricted group for the Global Senior Facility, the Senior Secured Notes and the Private Placement Notes, each of which is guaranteed by the same group of material Encore subsidiaries and secured by the same collateral, which represents substantially all of the assets of those subsidiaries. Global Senior Secured Revolving Credit Facility In September 2020, the Company entered into a multi-currency senior secured revolving credit facility agreement (as amended and restated, the “Global Senior Facility”). In previous periods, the Company referred to this facility as the Cabot Credit Facility. As of March 31, 2021, the Global Senior Facility provided for a total committed facility of $1,050.0 million that matures in September 2024 and included the following key provisions: •Interest at LIBOR (or EURIBOR for any loan drawn in euro) plus 2.50% per annum, with a LIBOR (or EURIBOR) floor of 0.75%; •A restrictive covenant that limits the LTV Ratio (defined in the Global Senior Facility) to 0.75 in the event that the Global Senior Facility is more than 20% utilized; •A restrictive covenant that limits the SSRCF LTV Ratio (defined in the Global Senior Facility) to 0.275; •A restrictive covenant that requires the Company to maintain a Fixed Charge Coverage Ratio (as defined in the Global Senior Facility) of at least 2.0; •Additional restrictions and covenants which limit, among other things, the payment of dividends and the incurrence of additional indebtedness and liens; and •Standard events of default which, upon occurrence, may permit the lenders to terminate the Global Senior Facility and declare all amounts outstanding to be immediately due and payable. The Global Senior Facility is secured by substantially all of the assets of the Company and the guarantors. Pursuant to the terms of an intercreditor agreement entered into with respect to the relative positions of (1) the Global Senior Facility, any super priority hedging liabilities and the Private Placement Notes (collectively, “Super Senior Liabilities”) and (2) the Senior Secured Notes, Super Senior Liabilities that are secured by assets that also secure the Senior Secured Notes will receive priority with respect to any proceeds received upon any enforcement action over any such assets. As of March 31, 2021, the outstanding borrowings under the Global Senior Facility were $520.5 million. The weighted average interest rate of the Global Senior Facility was 3.25% for the three months ended March 31, 2021. The weighted average interest rate of the previous Cabot Credit Facility was 3.55% for the three months ended March 31, 2020. The weighted average interest rate of the previous Encore revolving credit facility was 4.58% for the three months ended March 31, 2020. Available capacity under the Global Senior Facility was approximately $529.5 million as of March 31, 2021. Private Placement Notes In August 2017, Encore entered into $325.0 million in senior secured notes with a group of insurance companies (the “Private Placement Notes”). As of March 31, 2021, $136.8 million of the Private Placement Notes remained outstanding. The Private Placement Notes bear an annual interest rate of 5.625%, mature in August 2024 and require quarterly principal payments of $9.8 million. The covenants and material terms for the Private Placement Notes are substantially similar to those for the Global Senior Facility. Senior Secured Notes The following table provides a summary of the Senior Secured Notes ($ in thousands):
_______________________ (1)Interest rate is based on a three-months EURIBOR (subject to a 0% floor) plus 4.250% per annum, resets quarterly. The Senior Secured Notes are secured by the same collateral as the Global Senior Facility and the Private Placement Notes. The guarantees provided in respect of the Senior Secured Notes are pari passu with each such guarantee given in respect of the Global Senior Facility and Private Placement Notes. Subject to the intercreditor agreement described above under “Global Senior Secured Revolving Credit Facility,” Super Senior Liabilities that are secured by assets that also secure the Senior Secured Notes will receive priority with respect to any proceeds received upon any enforcement action over any such assets. Convertible Notes and Exchangeable Notes The following table provides a summary of the principal balance, maturity date and interest rate for the Company’s convertible and exchangeable senior notes (the “Convertible Notes” or “Exchangeable Notes,” as applicable) ($ in thousands):
_______________________ (1)The 2021 Convertible Notes matured on March 15, 2021 and the Company repaid the outstanding principal in cash. The Exchangeable Notes were issued by Encore Capital Europe Finance Limited (“Encore Finance”), a 100% owned finance subsidiary of Encore, and are fully and unconditionally guaranteed by Encore. Unless otherwise indicated in connection with a particular offering of debt securities, Encore will fully and unconditionally guarantee any debt securities issued by Encore Finance. Amounts related to Encore Finance are included in the consolidated financial statements of Encore subsequent to April 30, 2018, the date of the incorporation of Encore Finance. Prior to the close of business on the business day immediately preceding their respective free conversion or exchange date (listed below), holders may convert or exchange their Convertible Notes or Exchangeable Notes under certain circumstances set forth in the applicable indentures. On or after their respective free conversion or exchange dates until the close of business on the second scheduled trading day immediately preceding their respective maturity date, holders may convert or exchange their notes at any time. Certain key terms related to the convertible and exchangeable features as of March 31, 2021 are listed below:
In the event of conversion or exchange, the notes are convertible or exchangeable into cash up to the aggregate principal amount of the notes and the excess conversion premium, if any, may be settled in cash or shares of the Company’s common stock at the Company’s election and subject to certain restrictions contained in each of the indentures governing the Convertible Notes and Exchangeable Notes. As discussed in “Note 1: Ownership, Description of Business, and Summary of Significant Accounting Policies,” the Company adopted ASU 2020-06 on January 1, 2021 using a modified-retrospective approach. The Company’s convertible and exchangeable notes are no longer bifurcated to a debt component and an equity component, instead, they are carried as a single liability, which reflects the principal amount of the convertible and exchangeable notes. The interest expense recognized on the convertible and exchangeable notes is based on coupon rates, rather than higher effective interest rates. The Company has not adjusted prior period comparative information and will continue to disclose prior period financial information in accordance with the previous accounting guidance. Interest expense related to the Convertible Notes and Exchangeable Notes during the periods presented was as follows (in thousands):
Hedge Transactions In order to reduce the risk related to the potential dilution and/or the potential cash payments the Company may be required to make in the event that the market price of the Company’s common stock becomes greater than the exchange prices of the 2023 Exchangeable Notes, the Company maintains a hedge program that increases the effective exchange price for the 2023 Exchangeable Notes. The Company did not hedge the 2022 Convertible Notes or the 2025 Convertible Notes. The details of the hedge program are listed below (in thousands, except conversion or exchange price):
Cabot Securitisation Senior Facility Cabot Securitisation UK Ltd (“Cabot Securitisation”), an indirect subsidiary of Encore, has a senior facility for a committed amount of £350.0 million (as amended, the “Cabot Securitisation Senior Facility”). The Cabot Securitisation Senior Facility matures in March 2025. Funds drawn under the Cabot Securitisation Senior Facility bear interest at a rate per annum equal to SONIA plus a margin of 3.06% plus, for periods after March 15, 2023, a step-up margin ranging from zero to 1.00%. As of March 31, 2021, the outstanding borrowings under the Cabot Securitisation Senior Facility were £350.0 million (approximately $482.4 million based on an exchange rate of $1.00 to £0.73, the exchange rate as of March 31, 2021). The obligations of Cabot Securitisation under the Cabot Securitisation Senior Facility are secured by first ranking security interests over all of Cabot Securitisation’s property, assets and rights (including receivables purchased from Cabot Financial UK from time to time), the book value of which was approximately £381.9 million (approximately $526.4 million based on an exchange rate of $1.00 to £0.73, the exchange rate as of March 31, 2021) as of March 31, 2021. The weighted average interest rate was 3.11% and 3.52% for the three months ended March 31, 2021 and 2020, respectively. Cabot Securitisation is a securitized financing vehicle and is a VIE for consolidation purposes. Refer to “Note 8: Variable Interest Entities” for further details.
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Variable Interest Entities |
3 Months Ended |
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Mar. 31, 2021 | |
Variable Interest Entity, Measure of Activity [Abstract] | |
Variable Interest Entities | Variable Interest Entities A VIE is defined as a legal entity whose equity owners do not have sufficient equity at risk, or, as a group, the holders of the equity investment at risk lack any of the following three characteristics: decision-making rights, the obligation to absorb expected losses, or the right to receive expected residual returns of the entity. The primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and the obligation to absorb expected losses or the right to receive benefits from the entity that could potentially be significant to the VIE. The Company consolidates VIEs when it is the primary beneficiary. As of March 31, 2021, the Company’s VIEs include certain securitized financing vehicles and other immaterial special purpose entities that were created to purchase receivable portfolios in certain geographies. The Company is the primary beneficiary of these VIEs. The Company has the power to direct the activities of the VIEs which includes but is not limited to the ability to exercise discretion in the servicing of the financial assets. The Company evaluates its relationships with its VIEs on an ongoing basis to ensure that it continues to be the primary beneficiary. Most assets recognized as a result of consolidating these VIEs do not represent additional assets that could be used to satisfy claims against the Company’s general assets. Conversely, liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets; rather, they represent claims against the specific assets of the VIE.
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Income Taxes |
3 Months Ended |
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Mar. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company's effective tax rate for the three months ended March 31, 2021 was 22.2%. For the three months ended March 31, 2020, the Company recorded tax expense on a pre-tax loss resulting in a negative tax rate of 75.7%. The difference between the effective tax rate and the 21% federal statutory rate in 2020 was primarily due to a change in valuation allowance over consolidated pre-tax loss for the period, recognized in the period under the discrete method. The Company utilized the discrete method for recording income taxes during 2020 due to uncertainty in estimating annual pre-tax earnings, primarily due to the COVID-19 pandemic. The Company re-evaluated the methodology in calculating income taxes and returned to using the estimated annual effective tax rate method during the three months ended March 31, 2021. Each interim period is considered an integral part of the annual period and tax expense or benefit is measured using an estimated annual effective income tax rate. The estimated annual effective tax rate for the full year is applied to the respective interim period, taking into account year-to-date amounts and projected amounts for the year. Since the Company operates in foreign countries with varying tax rates, the Company's quarterly effective tax rate is dependent on the level of income or loss from international operations in the reporting period. The Company's subsidiary in Costa Rica is operating under a 100% tax holiday through December 31, 2026. The impact of the tax holiday in Costa Rica for the three months ended March 31, 2021 and 2020, was immaterial. The Company is subject to income taxes in the U.S. and foreign jurisdictions. Significant judgement is required in evaluating uncertain tax positions and determining our provision for income taxes. There has been no material change to the Company’s total gross unrecognized tax benefits from December 31, 2020.
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Commitments and Contingencies |
3 Months Ended |
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Mar. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Litigation and Regulatory The Company is involved in disputes, legal actions, regulatory investigations, inquiries, and other actions from time to time in the ordinary course of business. The Company, along with others in its industry, is routinely subject to legal actions based on the Fair Debt Collection Practices Act (“FDCPA”), comparable state statutes, the Telephone Consumer Protection Act (“TCPA”), state and federal unfair competition statutes, and common law causes of action. The violations of law investigated or alleged in these actions often include claims that the Company lacks specified licenses to conduct its business, attempts to collect debts on which the statute of limitations has run, has made inaccurate or unsupported assertions of fact in support of its collection actions and/or has acted improperly in connection with its efforts to contact consumers. Such litigation and regulatory actions could involve potential compensatory or punitive damage claims, fines, sanctions, injunctive relief, or changes in business practices. Many continue on for some length of time and involve substantial investigation, litigation, negotiation, and other expense and effort before a result is achieved, and during the process the Company often cannot determine the substance or timing of any eventual outcome. As of March 31, 2021, there were no material developments in any of the legal proceedings disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. In certain legal proceedings, the Company may have recourse to insurance or third-party contractual indemnities to cover all or portions of its litigation expenses, judgments, or settlements. The Company records loss contingencies in its financial statements only for matters in which losses are probable and can be reasonably estimated. Where a range of loss can be reasonably estimated with no best estimate in the range, the Company records the minimum estimated liability. The Company continuously assesses the potential liability related to its pending litigation and regulatory matters and revises its estimates when additional information becomes available. The Company’s legal costs are recorded to expense as incurred. As of March 31, 2021, the Company has no material reserves for legal matters. Purchase Commitments In the normal course of business, the Company enters into forward flow purchase agreements. A forward flow purchase agreement is a commitment to purchase receivables over a duration that is typically three to twelve months, but can be longer, generally with a specifically defined volume range, frequency, and pricing. Typically, these forward flow contracts have provisions that allow for early termination or price re-negotiation should the underlying quality of the portfolio deteriorate over time or if any particular month’s delivery is materially different than the original portfolio used to price the forward flow contract. Certain of these forward flow purchase agreements may also have termination clauses, whereby the agreements can be canceled by either party upon providing a certain specified amount of notice. As of March 31, 2021, the Company had entered into forward flow purchase agreements for the purchase of nonperforming loans with an estimated minimum aggregate purchase price of approximately $224.0 million. The Company expects actual purchases under these forward flow purchase agreements to be significantly greater than the estimated minimum aggregate purchase price.
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Segment and Geographic Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment and Geographic Information | Segment and Geographic InformationThe Company conducts business through several operating segments that have similar economic and other qualitative characteristics and have been aggregated in accordance with authoritative guidance into one reportable segment, portfolio purchasing and recovery. Since the Company operates in one reportable segment, all required segment information can be found in the consolidated financial statements. The Company has operations in the United States, Europe and other foreign countries. The following table presents the Company’s total revenues by geographic area in which the Company operates (in thousands):
________________________ (1)Total revenues are attributed to countries based on consumer location. (2)Based on the financial information that is used to produce the general-purpose financial statements, providing further geographic information is impracticable.
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Goodwill and Identifiable Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Identifiable Intangible Assets | Goodwill and Identifiable Intangible Assets The Company’s goodwill is tested for impairment at the reporting unit level annually and in interim periods if certain events occur that indicate that the fair value of a reporting unit may be below its carrying value. Determining the number of reporting units and the fair value of a reporting unit requires the Company to make judgments and involves the use of significant estimates and assumptions. The annual goodwill testing date for the reporting units that are included in the portfolio purchasing and recovery reportable segment is October 1st. There have been no events or circumstances during the three months ended March 31, 2021 that have required the Company to perform an interim assessment of goodwill carried at these reporting units. Management continues to evaluate and monitor all key factors impacting the carrying value of the Company’s recorded goodwill and long-lived assets. Adverse changes in the Company’s actual or expected operating results, market capitalization, business climate, economic factors or other negative events that may be outside the control of management could result in a material non-cash impairment charge in the future. The Company’s goodwill is attributable to reporting units included in its portfolio purchasing and recovery segment. The following table summarizes the activity in the Company’s goodwill balance (in thousands):
The Company’s acquired intangible assets are summarized as follows (in thousands):
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Ownership, Description of Business, and Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | The accompanying interim consolidated financial statements have been prepared by the Company, without audit, in accordance with the instructions to the Quarterly Report on Form 10-Q, and Rule 10-01 of Regulation S-X promulgated by the United States Securities and Exchange Commission (the “SEC”) and, therefore, do not include all information and footnotes necessary for a fair presentation of its consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). In the opinion of management, the unaudited financial information for the interim periods presented reflects all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the Company’s consolidated financial statements. These consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year.
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Use of Estimates | The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in the Company’s financial statements and the accompanying notes. The inputs into the judgments and estimates consider the economic implications of the COVID-19 pandemic on the Company’s critical and significant accounting estimates. Actual results could materially differ from those estimates. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Consolidation | Basis of Consolidation The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and reflect the accounts and operations of the Company and those of its subsidiaries in which the Company has a controlling financial interest. The Company also consolidates variable interest entities for which it is the primary beneficiary. The primary beneficiary has both (a) the power to direct the activities of the VIE that most significantly affect the entity’s economic performance, and (b) either the obligation to absorb losses or the right to receive benefits. Refer to “Note 8: Variable Interest Entities” for further details. All intercompany transactions and balances have been eliminated in consolidation.
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Translation of Foreign Currencies | Translation of Foreign CurrenciesThe financial statements of certain of the Company’s foreign subsidiaries are measured using their local currency as the functional currency. Assets and liabilities of foreign operations are translated into U.S. dollars using period-end exchange rates, and revenues and expenses are translated into U.S. dollars using average exchange rates in effect during each period. The resulting translation adjustments are recorded as a component of other comprehensive income or loss. Equity accounts are translated at historical rates, except for the change in retained earnings during the year which is the result of the income statement translation process. Intercompany transaction gains or losses at each period end arising from subsequent measurement of balances for which settlement is not planned or anticipated in the foreseeable future are included as translation adjustments and recorded within other comprehensive income or loss. Translation gains or losses are the material components of accumulated other comprehensive income or loss and are reclassified to earnings upon the substantial sale or liquidation of investments in foreign operations. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recently Adopted Accounting Pronouncement and Recent Accounting Pronouncements Not Yet Effective | Recently Adopted Accounting Guidance On January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) No. 2020-06, Debt — Debt with Conversion and Other Options (“Subtopic 470-20”) and Derivatives and Hedging — Contracts in Entity’s Own Equity (“Subtopic 815-40”): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). The Company adopted ASU 2020-06 using the modified-retrospective approach, by recording a net cumulative-effect adjustment to equity of approximately $17.9 million. The ASU simplifies the accounting for convertible instruments by removing certain models in Subtopic 470-20 and revises the guidance in Subtopic 815-40 to simplify the accounting for contracts in an entity’s own equity. The ASU also amends the guidance to improve the consistency of earnings per share calculations, which requires the if-converted method be used for convertible instruments. Under ASU 2020-06, the Company’s convertible and exchangeable notes are no longer bifurcated to a debt component and an equity component, instead, they are carried as a single liability which reflects the principal amount of the convertible and exchangeable notes. The interest expense recognized on the convertible and exchangeable notes are based on coupon rates, rather than higher effective interest rates. As a result, the Company recognizes lower interest expense after the adoption. Additionally, effective January 1, 2021, the Company uses if-converted method in calculating dilutive effect of its convertible and exchangeable notes for earnings per share. The Company has not adjusted prior period comparative information and will continue to disclose prior period financial information in accordance with the previous accounting guidance. The following table summarizes the cumulative effects of adopting the new guidance on the Company’s consolidated statements of financial condition at January 1, 2021 (in thousands):
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Earnings Per Share | Basic earnings per share is calculated by dividing net earnings attributable to Encore by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is calculated based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares during the period. Dilutive potential common shares include outstanding stock options, non-vested share awards, and the dilutive effect of the convertible and exchangeable senior notes, if applicable. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair value is defined as the price that would be received upon sale of an asset or the price paid to transfer a liability, in an orderly transaction between market participants at the measurement date (i.e., the “exit price”). The Company uses a fair value hierarchy that prioritizes the inputs used in valuation techniques to measure fair value into three broad levels. The following is a brief description of each level: •Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. •Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. •Level 3: Unobservable inputs, including inputs that reflect the reporting entity’s own assumptions.
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Derivatives | The Company may periodically enter into derivative financial instruments to manage risks related to interest rates and foreign currency. The Company has operations in foreign countries which expose the Company to foreign currency exchange rate fluctuations due to transactions denominated in foreign currencies. To mitigate a portion of this risk, the Company may enter into derivative financial instruments, principally foreign currency forward contracts with financial counterparties. The Company adjusts the level and use of derivatives as soon as practicable after learning that an exposure has changed and reviews all exposures and derivative positions on an ongoing basis. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment in Receivable Portfolios, Net | The Company’s purchased portfolios of loans are grossed-up to their face value with an offsetting allowance and noncredit discount allocated to the individual receivables as the unit of account is at the individual loan level. Since each loan is deeply delinquent and deemed uncollectible at the individual loan level, the Company applies its charge-off policy and fully writes-off the amortized costs (i.e., face value net of noncredit discount) of the individual receivables immediately after purchasing the portfolio. The Company then records a negative allowance that represents the present value of all expected future recoveries for pools of receivables that share similar risk characteristics using a discounted cash flow approach, which ultimately equals the amount paid for a portfolio purchase and presented as “Investment in receivable portfolios, net” in the Company’s consolidated statements of financial condition. The discount rate is an effective interest rate (or “purchase EIR”) based on the purchase price of the portfolio and the expected future cash flows at the time of purchase. Receivable portfolio purchases are aggregated into pools based on similar risk characteristics. Examples of risk characteristics include financial asset type, collateral type, size, interest rate, date of origination, term, and geographic location. The Company’s static pools are typically grouped into credit card, purchased consumer bankruptcy, and mortgage portfolios. The Company further groups these static pools by geographic location. Once a pool is established, the portfolios will remain in the designated pool unless the underlying risk characteristics change. The purchase EIR of a pool will not change over the life of the pool even if expected future cash flows change. Revenue is recognized for each static pool over the economic life of the pool. Revenue primarily includes two components: (1) accretion of the discount on the negative allowance due to the passage of time, and (2) changes in expected cash flows, which includes (a) the current period variances between actual cash collected and expected cash recoveries and (b) the present value change of expected future recoveries. The Company measures expected future recoveries based on historical experience, current conditions, and reasonable and supportable forecasts. Factors that may change the expected future recoveries may include both internal as well as external factors. Internal factors include operational performance, such as capacity and the productivity of our collection staff. External factors that may have an impact on our collections include new laws or regulations, new interpretations of existing laws or regulations, and macroeconomic conditions.
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Variable Interest Entities | A VIE is defined as a legal entity whose equity owners do not have sufficient equity at risk, or, as a group, the holders of the equity investment at risk lack any of the following three characteristics: decision-making rights, the obligation to absorb expected losses, or the right to receive expected residual returns of the entity. The primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and the obligation to absorb expected losses or the right to receive benefits from the entity that could potentially be significant to the VIE. The Company consolidates VIEs when it is the primary beneficiary. As of March 31, 2021, the Company’s VIEs include certain securitized financing vehicles and other immaterial special purpose entities that were created to purchase receivable portfolios in certain geographies. The Company is the primary beneficiary of these VIEs. The Company has the power to direct the activities of the VIEs which includes but is not limited to the ability to exercise discretion in the servicing of the financial assets. The Company evaluates its relationships with its VIEs on an ongoing basis to ensure that it continues to be the primary beneficiary. Most assets recognized as a result of consolidating these VIEs do not represent additional assets that could be used to satisfy claims against the Company’s general assets. Conversely, liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets; rather, they represent claims against the specific assets of the VIE.
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Segment Reporting | The Company conducts business through several operating segments that have similar economic and other qualitative characteristics and have been aggregated in accordance with authoritative guidance into one reportable segment, portfolio purchasing and recovery. Since the Company operates in one reportable segment, all required segment information can be found in the consolidated financial statements. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill | The Company’s goodwill is tested for impairment at the reporting unit level annually and in interim periods if certain events occur that indicate that the fair value of a reporting unit may be below its carrying value. Determining the number of reporting units and the fair value of a reporting unit requires the Company to make judgments and involves the use of significant estimates and assumptions.Management continues to evaluate and monitor all key factors impacting the carrying value of the Company’s recorded goodwill and long-lived assets. Adverse changes in the Company’s actual or expected operating results, market capitalization, business climate, economic factors or other negative events that may be outside the control of management could result in a material non-cash impairment charge in the future. |
Ownership, Description of Business, and Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of New Accounting Pronouncements and Changes in Accounting Principles | The following table summarizes the cumulative effects of adopting the new guidance on the Company’s consolidated statements of financial condition at January 1, 2021 (in thousands):
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Earnings (Loss) Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Reconciliation of Shares Used in Calculating Earnings Per Basic and Diluted Shares | A reconciliation of shares used in calculating earnings per basic and diluted shares follows (in thousands, except per share amounts):
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Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis | Financial assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):
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Schedule of Roll Forward of the Fair Value of Contingent Consideration | The following table provides a roll-forward of the fair value of contingent consideration for the three months ended March 31, 2021 and year ended December 31, 2020 (in thousands):
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Schedule of Financial Instruments Not Required to be Carried at Fair Value | The carrying amounts in the following table are included in the consolidated statements of financial condition as of March 31, 2021 and December 31, 2020 (in thousands):
_______________________ (1)Prior to January 1, 2021, under the previous accounting standard, the convertible and exchangeable notes included a debt discount. The carrying amount as of December 31, 2020 represented the principal amount of the notes, net of the debt discount. (2)Carrying amount represents historical cost, adjusted for any related debt discount or debt premium.
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Derivatives and Hedging Instruments (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value of Derivative Instruments | The following table summarizes the fair value of derivative instruments as included in the Company’s consolidated statements of financial condition (in thousands):
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Effects of Derivatives in Cash Flow Hedging Relationships | The following tables summarize the effects of derivatives in cash flow hedging relationships designated as hedging instruments in the Company’s consolidated financial statements (in thousands):
The following table summarizes the effects of derivatives in cash flow hedging relationships not designated as hedging instruments in the Company’s consolidated statements of operations (in thousands):
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Investment in Receivable Portfolios, Net (Tables) |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Transition of Receivable Portfolios | The table below provides the detail on the establishment of negative allowance for expected recoveries of portfolios purchased during the periods presented (in thousands):
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Schedule of Investment in Receivable Portfolios | The following table summarizes the changes in the balance of the investment in receivable portfolios during the periods presented (in thousands):
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Other Assets (Tables) |
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Other Assets | Other assets consist of the following (in thousands):
|
Borrowings (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Consolidated Debt and Capital Lease Obligations | The components of the Company’s consolidated borrowings were as follows (in thousands):
|
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Schedule of Notes | The following table provides a summary of the Senior Secured Notes ($ in thousands):
_______________________ (1)Interest rate is based on a three-months EURIBOR (subject to a 0% floor) plus 4.250% per annum, resets quarterly. The following table provides a summary of the principal balance, maturity date and interest rate for the Company’s convertible and exchangeable senior notes (the “Convertible Notes” or “Exchangeable Notes,” as applicable) ($ in thousands):
_______________________ (1)The 2021 Convertible Notes matured on March 15, 2021 and the Company repaid the outstanding principal in cash.
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Schedule of Hedge Program for Convertible Notes | Certain key terms related to the convertible and exchangeable features as of March 31, 2021 are listed below:
The details of the hedge program are listed below (in thousands, except conversion or exchange price):
|
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Schedule of Interest Expense | Interest expense related to the Convertible Notes and Exchangeable Notes during the periods presented was as follows (in thousands):
|
Segment and Geographic Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Geographical Areas of Operations | The Company has operations in the United States, Europe and other foreign countries. The following table presents the Company’s total revenues by geographic area in which the Company operates (in thousands):
________________________ (1)Total revenues are attributed to countries based on consumer location. (2)Based on the financial information that is used to produce the general-purpose financial statements, providing further geographic information is impracticable.
|
Goodwill and Identifiable Intangible Assets (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Activity in the Goodwill Balance | The following table summarizes the activity in the Company’s goodwill balance (in thousands):
|
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Schedule of Acquired Intangible Assets | The Company’s acquired intangible assets are summarized as follows (in thousands):
|
Fair Value Measurements - Contingent Consideration Roll Forward (Details) - Contingent Consideration - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2021 |
Dec. 31, 2020 |
|
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Balance at beginning of period | $ 2,957 | $ 66 |
Issuance of contingent consideration in connection with acquisition | 2,848 | |
Payment of contingent consideration | (56) | (88) |
Effect of foreign currency translation | 26 | 131 |
Balance at end of period | $ 2,927 | $ 2,957 |
Fair Value Measurements - Narrative (Details) - USD ($) $ in Thousands |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Fair Value Disclosures [Abstract] | ||
Assets held for sale | $ 40,059 | $ 42,173 |
Fair Value Measurements - Financial Instruments Not Required to be Carried at Fair Value (Details) - USD ($) $ in Thousands |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Carrying Amount | ||
Financial Assets | ||
Investment in receivable portfolios, net | $ 3,225,678 | $ 3,291,918 |
Carrying Amount | Convertible notes and exchangeable notes | ||
Financial Liabilities | ||
Convertible Notes and Exchangeable Notes | 422,500 | 564,136 |
Carrying Amount | Secured Debt | ||
Financial Liabilities | ||
Senior Secured Notes | 1,613,557 | 1,642,058 |
Estimated Fair Value | ||
Financial Assets | ||
Investment in receivable portfolios, net | 3,615,300 | 3,705,672 |
Estimated Fair Value | Convertible notes and exchangeable notes | ||
Financial Liabilities | ||
Convertible Notes and Exchangeable Notes | 481,126 | 622,081 |
Estimated Fair Value | Secured Debt | ||
Financial Liabilities | ||
Senior Secured Notes | $ 1,683,277 | $ 1,684,729 |
Derivatives and Hedging Instruments - Summary of Effects of Derivatives not Designated as Hedging Instruments (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Other Expense | Cash Flow Hedging | Foreign currency exchange contracts | ||
Derivative [Line Items] | ||
Amount of Gain (Loss) Recognized in Income (Loss) | $ 0 | $ 1,943 |
Investment in Receivable Portfolios, Net - Establishment of Negative Allowance (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Receivables [Abstract] | ||
Purchase price | $ 170,178 | $ 214,113 |
Allowance for credit losses | 374,575 | 521,194 |
Amortized cost | 544,753 | 735,307 |
Noncredit discount | 784,112 | 967,715 |
Face value | 1,328,865 | 1,703,022 |
Write-off of amortized cost | (544,753) | (735,307) |
Write-off of noncredit discount | (784,112) | (967,715) |
Negative allowance | 170,178 | 214,113 |
Negative allowance for expected recoveries - current period purchases | $ 170,178 | $ 214,113 |
Investment in Receivable Portfolios, Net - Change in the Balance of the Investment in Receivable Portfolios (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Investment in Receivables Portfolio [Roll Forward] | ||
Balance, beginning of period | $ 3,291,918 | $ 3,328,150 |
Purchases of receivable portfolios | 170,178 | 214,113 |
Put-backs and Recalls | (3,153) | (5,068) |
Disposals and transfers to assets held for sale | (1,665) | (1,531) |
Cash collections | (606,461) | (527,279) |
Revenue from receivable portfolios | 338,018 | 357,365 |
Changes in expected current period recoveries | 91,401 | 10,315 |
Changes in expected future period recoveries | (46,864) | (108,976) |
Foreign currency adjustments | (7,694) | (101,071) |
Balance, end of period | $ 3,225,678 | $ 3,166,018 |
Other Assets (Details) - USD ($) $ in Thousands |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | Total | Total |
Operating lease right-of-use assets | $ 69,426 | $ 72,164 |
Identifiable intangible assets, net | 42,991 | 45,012 |
Real estate owned | 40,059 | 42,173 |
Deferred tax assets | 33,834 | 33,202 |
Service fee receivables | 30,718 | 26,539 |
Prepaid expenses | 26,497 | 26,717 |
Equity method investments | 17,302 | 10,155 |
Other financial receivables | 12,036 | 12,238 |
Income tax deposits | 8,272 | 35,853 |
Other | 42,002 | 45,109 |
Total | $ 323,137 | $ 349,162 |
Borrowings - Encore Private Placement Notes - Narrative (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2021 |
Dec. 31, 2020 |
Aug. 31, 2017 |
|
Debt Instrument [Line Items] | |||
Debt issued | $ 422,500,000 | $ 583,500,000 | |
Encore private placement notes | Notes Payable, Other Payables | |||
Debt Instrument [Line Items] | |||
Debt issued | $ 325,000,000.0 | ||
Long-term debt | $ 136,780,000 | $ 146,550,000 | |
Stated interest rate (as a percent) | 5.625% | ||
Senior secured notes, periodic principal repayment | $ 9,800,000 |
Borrowings - Senior Secured Notes - Table and Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Dec. 31, 2020 |
|
Debt Instrument [Line Items] | ||
Senior secured notes | $ 1,622,407 | $ 1,651,619 |
Cabot 2023 Notes | Secured Debt | ||
Debt Instrument [Line Items] | ||
Senior secured notes | $ 311,779 | 309,034 |
Stated interest rate (as a percent) | 7.50% | |
Encore 2025 Notes | Secured Debt | ||
Debt Instrument [Line Items] | ||
Senior secured notes | $ 410,466 | 426,752 |
Stated interest rate (as a percent) | 4.875% | |
Encore 2026 Notes | Secured Debt | ||
Debt Instrument [Line Items] | ||
Senior secured notes | $ 413,466 | 409,827 |
Stated interest rate (as a percent) | 5.375% | |
Encore 2028 Floating Rate Notes | Secured Debt | ||
Debt Instrument [Line Items] | ||
Senior secured notes | $ 486,696 | $ 506,006 |
Variable rate floor | 0.00% | |
Euro Interbank Offered Rate (EURIBOR) | Encore 2028 Floating Rate Notes | Secured Debt | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate (as a percent) | 4.25% |
Borrowings - Interest Expense Related to Convertible and Exchangeable Notes (Details) - Convertible notes and exchangeable notes - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Debt Instrument [Line Items] | ||
Interest expense—stated coupon rate | $ 4,923 | $ 5,799 |
Interest expense—amortization of debt discount | 0 | 3,044 |
Total interest expense | $ 4,923 | $ 8,843 |
Borrowings - Conversion and EPS Impact of Convertible Notes Hedging Transactions (Details) - 2023 Exchangeable Notes - Exchangeable Notes $ / shares in Units, $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2021
USD ($)
$ / shares
| |
Debt Instrument [Line Items] | |
Cost of the hedge transaction(s) | $ | $ 17,785 |
Conversion price (USD per share) | $ 44.62 |
Hedging of Convertible Debt Instrument | |
Debt Instrument [Line Items] | |
Conversion price (USD per share) | $ 62.48 |
Income Taxes - Narrative (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Income Tax Contingency [Line Items] | ||
Effective rate (as a percent) | 22.20% | (75.70%) |
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 21.00% | |
Costa Rica | Tax holiday through December 31, 2026 | ||
Income Tax Contingency [Line Items] | ||
Holiday tax rate (as a percent) | 100.00% |
Commitments and Contingencies (Details) |
Mar. 31, 2021
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
Material reserves for litigation | $ 0 |
Purchase price | $ 224,000,000.0 |
Segment and Geographic Information (Details) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2021
USD ($)
segment
|
Mar. 31, 2020
USD ($)
|
|
Segment Reporting [Abstract] | ||
Number of reportable segments | segment | 1 | |
Segment Reporting Information [Line Items] | ||
Revenues | $ 416,837 | $ 289,081 |
United States | ||
Segment Reporting Information [Line Items] | ||
Revenues | 287,787 | 208,218 |
International | ||
Segment Reporting Information [Line Items] | ||
Revenues | 129,050 | 80,863 |
Europe | ||
Segment Reporting Information [Line Items] | ||
Revenues | 123,902 | 75,965 |
Other geographies | ||
Segment Reporting Information [Line Items] | ||
Revenues | $ 5,148 | $ 4,898 |
Goodwill and Identifiable Intangible Assets - Activity in Goodwill Balance (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Goodwill [Roll Forward] | ||
Balance at beginning of period | $ 906,962 | $ 884,185 |
Effect of foreign currency translation | 5,208 | (44,884) |
Balance at end of period | $ 912,170 | $ 839,301 |
Goodwill and Identifiable Intangible Assets - Acquired Intangible Assets (Details) - USD ($) $ in Thousands |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 72,614 | $ 78,488 |
Accumulated Amortization | (29,623) | (33,476) |
Net Carrying Amount | 42,991 | 45,012 |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 68,385 | 66,796 |
Accumulated Amortization | (26,174) | (22,714) |
Net Carrying Amount | 42,211 | 44,082 |
Developed technologies | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 2,643 | 5,048 |
Accumulated Amortization | (2,449) | (4,760) |
Net Carrying Amount | 194 | 288 |
Trade name and other | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 1,586 | 6,644 |
Accumulated Amortization | (1,000) | (6,002) |
Net Carrying Amount | $ 586 | $ 642 |
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