Earnings Per Share

9 Months Ended

Sep. 30, 2021

Earnings 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 is 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. In September 2021, in accordance with the indenture for the convertible senior notes due in March 2022 (the “2022 Convertible Notes”), the Company irrevocably elected “combination settlement” with a specified dollar amount equal to $1,750 per $1,000 principal amount of the 2022 Convertible Notes for all conversions of the 2022 Convertible Notes that occur on or after September 15, 2021, the free conversion date, which effectively will result in an all cash settlement for the 2022 Convertible Notes so long as the stock price is less than $79.74 at the time of conversion. As a result, the 2022 Convertible Notes were only dilutive prior to September 15, 2021. All of the Company’s other 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 had 0.7 million and 0.3 million shares of dilutive effect from its convertible and exchangeable notes during the three and nine months ended September 30, 2021.

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 and nine months ended September 30, 2021, the Company repurchased 854,002 and 1,976,857 shares of our common stock for approximately $40.7 million and $88.1 million, respectively. 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):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income attributable to Encore Capital Group, Inc. stockholders	$	83,566	$	54,650	$	274,699	$	174,528

Total weighted-average basic shares outstanding	30,225		31,484		30,863		31,402
Dilutive effect of stock-based awards	404		342		358		270
Dilutive effect of convertible and exchangeable senior notes	733		—		310		—

Total weighted-average dilutive shares outstanding	31,362		31,826		31,531		31,672

Basic earnings per share	$	2.76	$	1.74	$	8.90	$	5.56
Diluted earnings per share	$	2.66	$	1.72	$	8.71	$	5.51

Anti-dilutive employee stock options outstanding were 0 and approximately 4,000 during the three and nine months ended September 30, 2021, respectively. Anti-dilutive employee stock options outstanding were approximately 13,000 and 64,000 during each of the three and nine months ended September 30, 2020, respectively.