Newsroom PRESS RELEASE

Encore Capital Group Announces Third Quarter 2020 Financial Results

Monday, November 2, 2020

• GAAP net income up 41% to $55 million, or $1.72 per share
• Non-GAAP adjusted net income up 42% to $74 million, or $2.31 per share
• Global collections grew 8% to a record $540 million
• Estimated Remaining Collections (ERC) grew 15% to a record $8.5 billion

Encore Capital Group, Inc. (NASDAQ: ECPG), an international specialty finance company, today reported consolidated financial results for the third quarter ended September 30, 2020.

“The third quarter was an outstanding period for Encore as we achieved record global collections and ERC,” said Ashish Masih, President and Chief Executive Officer. “Many of our consumers are reaching out to us to assist them with their financial recovery. We deal with consumers in financial hardship every
day and have been able to extend relief when appropriate and also help increasing numbers of consumers resolve their debts, which contributed to our record collections in the quarter. We are also servicing an increasing proportion of our consumers through our lower cost call center and digital collections channel, which continues to operate at a high level of efficiency. As a result, we added another quarter to our strong GAAP earnings growth over the past five years,” said Masih.

“The CFPB’s new industry rules, released last week as expected, provide much needed clarity and create uniformity in the fair treatment of U.S. consumers in debt collection. The new rules are largely consistent with those proposed eighteen months ago and, as a result, we are well prepared to fully implement them
with no significant incremental operational changes. Through these new rules, we remain very much aligned with the CFPB’s goal of making consumer financial markets work for consumers, responsible providers, and the economy as a whole,” added Masih.

In September, the company implemented a new global funding structure which effectively combined the balance sheets of its Midland Credit Management (MCM) and Cabot Credit Management (Cabot businesses to maximize the company’s financial flexibility. The new structure is expected to allow Encore
to better leverage its global scale and allocate capital to the markets with the best returns, in addition to
enhancing its access to capital markets and reducing funding costs.

“Looking ahead, we believe more consumers than ever will need us to help them with their financial recovery. We are committed to being there when consumers need us, as well as supporting the banks who lend to them while fulfilling our important role in the credit ecosystem. In that regard, our new global
funding structure, our strong balance sheet and our liquidity have positioned us well for the substantial  increase in charged-off receivables we believe is coming to the U.S. and U.K. markets in 2021 and beyond,” said Masih.

Key Financial Metrics for the Third Quarter of 2020:

  • Estimated remaining collections (ERC) were a record $8.5 billion, up 15% compared to the third quarter of 2019.
  • Portfolio purchases were $170 million, consisting of $141 million in the U.S. and $29 million in Europe.
  • Gross collections were a record $540 million, up 8% compared to $499 million in the third quarter of 2019.
  • Total revenues were $404 million, up 13% compared to $356 million in the third quarter of 2019.
  • Total operating expenses increased 6% to $261 million, compared to $248 million in the same period of the prior year, and included a $15 million payment to the CFPB to settle a complaint filed in September and $7 million of expenses related to the implementation of the company’s new global funding structure.
  • Total interest expense increased 25% to $68 million, compared to $54 million in the same period of the prior year, principally as a result of $18 million in costs and expenses related to the financing transactions that implemented the company’s new global funding structure.
  • GAAP net income attributable to Encore was $55 million, or $1.72 per fully diluted share, and was net of the $15 million payment to the CFPB and $25 million of expenses ($19 million after tax), related to the implementation of the company’s new global funding structure. This compares to net income of $39 million, or $1.23 per fully diluted share in the third quarter of 2019.
  • Adjusted net income attributable to Encore was $74 million, or $2.31 per fully diluted share (also referred to as economic EPS), and was net of $19 million (after tax) of expenses related to the implementation of the company’s new global funding structure. This compares to adjusted net income of $52 million, or $1.64 per fully diluted share in the third quarter of 2019.
  • As of September 30, 2020, after taking into account borrowing base and applicable debt covenants, available capacity under Encore’s new global senior facility was $465 million. In addition, Encore ended the third quarter with $150 million of non-client cash on the balance sheet.
  • Debt to equity ratio improved to 2.9x and the ratio of Net Debt to Adjusted EBITDA plus collections applied to principal balance (the industry standard for leverage) improved to 2.4x.

Conference Call and Webcast. Encore will host a conference call and slide presentation today, November 2, 2020, at 2:00 p.m. Pacific /
5:00 p.m. Eastern time, to present and discuss third quarter results.

Members of the public are invited to access the live webcast via the Internet by logging in on the Investor
Relations page of Encore’s website at www.encorecapital.com. To access the live, listen-only telephone
conference portion, please dial (855) 541-0982 or (704) 288-0606.

For those who cannot listen to the live broadcast, a telephonic replay will be available for seven days by
dialing (800) 585-8367 or (404) 537-3406 and entering the conference ID number 6032536. A replay of
the webcast will also be available shortly after the call on the Company’s website.
Encore Capital Group, Inc.

Non-GAAP Financial Measures

This news release includes certain financial measures that exclude the impact of certain items and therefore have not been calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company has included adjusted income attributable to Encore and adjusted income attributable to Encore per share (also referred to as economic EPS when adjusted for certain shares associated with our convertible notes that will not be issued but are reflected in the fully diluted share count for accounting purposes) because management uses this measure to assess operating performance, in order to highlight trends in the Company’s business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. The Company has included information concerning adjusted operating expenses in order to facilitate a comparison of approximate costs to cash collections for the portfolio purchasing and recovery business in the periods presented. Adjusted income attributable to Encore, adjusted income attributable to Encore per share/economic EPS, and adjusted operating expenses have not been prepared in accordance with GAAP. These non-GAAP financial measures should not be considered as alternatives to, or more meaningful than, net income, net income per share, and total operating expenses as indicators of the Company’s operating performance. Further, these non-GAAP financial measures, as presented by the Company, may not be comparable to similarly titled measures reported by other companies. The Company has attached to this news release a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures. The Company has included references to constant currency growth rates to facilitate comparisons of underlying financial results excluding the impact of changes to foreign currency exchange rates. Constant Currency figures are calculated by employing foreign currency exchange rates from the year ago period to recalculate current period results. All constant currency values are calculated based on the average exchange rates during the respective periods, except for ERC, which is calculated using the changes in the period-ending exchange rates.

About Encore Capital Group, Inc.

Encore Capital Group is an international specialty finance company that provides debt recovery solutions and other related services across a broad range of financial assets. Through its subsidiaries around the globe, Encore purchases or services portfolios of receivables from major banks, credit unions and utility providers.

Headquartered in San Diego, Encore is a publicly traded NASDAQ Global Select company (ticker symbol: ECPG) and a component stock of the Russell 2000, the S&P Small Cap 600 and the Wilshire 4500. More information about Encore can be found at www.encorecapital.com. More information about the Company’s Midland Credit Management subsidiary can be found at www.midlandcreditonline.com. More information about the Company’s Cabot Credit Management subsidiary can be found at www.cabotcm.com. Information found on the Company’s, MCM’s, or Cabot’s websites is not incorporated by reference.

Forward Looking Statements

The statements in this press release that are not historical facts, including, most importantly, those statements preceded by, or that include, the words “will,” “may,” “believe,” “projects,” “expects,” “anticipates” or the negation thereof, or similar expressions, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). These statements may include, but are not limited to, statements regarding our future operating results, performance, business plans or prospects. For all “forward-looking statements,” the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act. Such forward-looking statements involve risks, uncertainties and other factors which may cause actual results, performance or achievements of the Company and its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors are discussed in the reports filed by the Company with the Securities and Exchange Commission, including the most recent reports on Forms 10-K and 10-Q, as they may be amended from time to time. The Company disclaims any intent or obligation to update these forward-looking statements.

Contact:

Bruce Thomas
Vice President, Investor Relations
Encore Capital Group, Inc.
(858) 309-6442
bruce.thomas@encorecapital.com