Encore Capital Group Inc

Good day, and thank you for standing by. Welcome to the Encore Capital Group's third quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You'll then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Bruce Thomas, VP of Global Investor Relations for Encore. Please go ahead.

Thank you, operator. Good afternoon, and welcome to Encore Capital Group's third quarter 2025 earnings call. Joining me on the call today are Ashish Masih, our President and Chief Executive Officer, Tomas Hernández, Executive Vice President and Chief Financial Officer, Ryan Bell, President of Midland Credit Management, and John Young, President of Cabot Credit Management. Ashish and Tomas will make prepared remarks today, and then we'll be happy to take your questions. Unless otherwise noted, Comparisons on this conference call will be made between the third quarter of 2025 and the third quarter of 2024. In addition, today's discussion will include forward-looking statements that are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially from our expectations. Please refer to our SEC filings for a detailed discussion of potential risks and uncertainties. We undertake no obligation to update any forward-looking statements. During this call, we'll be using rounding and abbreviations for the sake of brevity. We will also be discussing non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are included in our investor presentation, which is available on the investor section of our website. As a reminder, following the conclusion of this call, a replay of this conference call, along with our prepared remarks, will also be available on the investor section of our website. With that, let me turn the call over to Ashish Massey, our President and Chief Executive Officer.

Thanks, Bruce, and good afternoon, everyone. Thank you for joining us. Encore delivered another strong performance in the third quarter as our industry leadership and operational execution become increasingly evident in our results. Portfolio purchases in Q3 of $346 million were up 23%. compared to the third quarter last year. Collections increased 20% to a record $663 million. Average receivable portfolios increased 16% to $4.2 billion. Estimated remaining collections, or ERC, increased 10% to a record $9.5 billion. Our record collections performance helped earnings increase sharply, with Q3 earnings per share of $3.17, up more than 150% compared to the third quarter a year ago. Our leverage improved to 2.5 times at the end of Q3 compared to 2.7 times a year ago and 2.6 times in Q2 2025, even with continued significant portfolio purchases in the third quarter. Encore's strong operating and financial results are primarily driven by the exceptional performance of our MCM business in the US across all dimensions of purchasing, collections, and efficiency. I will provide more details on MCM's results later in the presentation. In addition to delivering strong results in Q3, we repurchased $10 million of Encore shares in the third quarter, consistent with the framework we've laid out in the past. We also repurchased nearly $25 million of our shares so far in Q4, bringing a total to approximately $60 million year-to-date, reflecting our confidence in OnCore's future prospects. In support of our ongoing commitment to return capital to shareholders, our board also recently authorized an additional $300 million under our share repurchase program. Before I continue our recap of the quarter, I believe it's helpful to remind investors of the critical role we play in the consumer credit ecosystem by assisting in the resolution of unpaid debts. These unpaid debts are an expected outcome of the lending business model. Our mission is to create pathways to economic freedom for the consumers we serve by helping them resolve their past due debts. We achieve this by engaging consumers in honest, empathetic, and respectful conversations. Our business is to purchase portfolios of non-performing loans at attractive returns while minimizing funding costs. For each portfolio that we own, we strive to exceed our collection expectations, while both maintaining an efficient cost structure and ensuring the highest level of compliance and consumer focus. We achieve these objectives through a three-pillar strategy of participating in the largest and most valuable markets, developing and sustaining a competitive advantage in these markets and maintaining a strong balance sheet. We employ a strategy across our two main businesses, Midland Credit Management, or MCM, in the US, and Cabot Credit Management in select European markets. I would now like to highlight Encore's third quarter performance in terms of several key metrics, starting with portfolio purchasing. OnCore's global portfolio purchases for the third quarter were $346 million, an increase of 23% compared to Q3 2024. This increased level of purchasing will help drive OnCore's continued collections growth for the rest of this year and well into the future. A concentration of portfolio purchases in the U.S. where we allocated 75% of our deployed capital in the third quarter is a reminder that the flexibility of our global funding structure allows us to direct our capital toward markets with the highest returns. Global collections in Q3 were up 20% to a record $663 million. The past few years of higher portfolio purchases at strong returns, particularly in the US, have led to meaningful growth in collections, which we expect to continue. A global collections performance year-to-date through the third quarter compared to our ERC at the end of 2024 was 108%. We believe that our ability to generate significant cash provides us with an important competitive advantage, which is also a key component of our three-pillar strategy. Similar to the dynamic I mentioned earlier, higher portfolio purchases at strong returns over the past few years have also led to meaningful growth in cash generation. Our cash generation for the third quarter on a trailing 12-month basis was up 23% compared to the same period a year ago, and we expect it to continue to grow. Let's now take a look at our two largest markets, beginning with the US. The US Federal Reserve reports that revolving credit in the US remains near record levels. At the same time, Since bottoming out in late 2021, the credit card charge-off rate in the US increased to its highest level in more than 10 years in 2024 and still remains at an elevated level. The combination of strong lending and elevated charge-off rates continues to drive robust portfolio supply in the US. Let me illustrate this impact by highlighting the annualized amount of net dollar charge-offs. which can be estimated by multiplying outstandings by the net charge-off rate. Using Q2 2025 data, the most recent quarter reported by the Federal Reserve, annualized net charge-off volume was $55 billion, which is over three times the $17 billion in annualized net charge-off volume in Q4 2021 at the bottom of the current cycle. Similarly, U.S. consumer credit delinquencies, which are a leading indicator of future charge-offs, also remain near multi-year highs. With both lending and the charge-off rate at elevated levels, purchasing conditions in the U.S. market remain highly favorable. We are observing continued strong U.S. market supply and attractive pricing as well. Third quarter delinquency data supports our expectation that the portfolio purchasing environment for our MCM business in the U.S. is expected to remain favorable for the foreseeable future. MCM continues to capture significant portions of this U.S. market supply opportunity, deploying $261 million in Q3 at very strong returns. This was a 13 percent increase in portfolio purchases compared to Q3 a year ago. For the full year in 2025, we expect MCM to well exceed its 2024 purchases of $999 million. In addition to its solid portfolio purchases in Q3, our MCM business continues to excel operationally. All the third quarter collections in the US are typically lower than second quarter collections due to seasonality. MCM collections increased in the third quarter to a record $502 million. which was an increase of 25 percent compared to Q3 last year. The collection's overperformance in the U.S. was driven by the deployment of new technologies, enhanced digital capabilities, and continued operational innovation, which enabled us to reach more consumers, leading to more payments, as well as a larger payer book. These initiatives had a greater impact on the early stages of a portfolio's lifecycle. leading to overperformance of our recent vintages. We expect that our collections forecast will gradually adjust to reflect the positive impact of these initiatives. Our outstanding results not only reflect the improvements we've made in our collections operation and the overall effectiveness of our collections platforms, but also the strength of the consumer. Despite some of the negative news and macro uncertainty in the U.S., our consumers payment behavior remains stable. We continue to monitor for any signs of change. Turning to our business in Europe, Cabot delivered another quarter of solid performance in Q3. Cabot's portfolio purchases in the third quarter were $85 million, which was higher than the historical trend due to attractive sport market portfolio purchases. We continue to be selective with Cabot's deployment as the UK market remains impacted by subdued consumer lending and low delinquencies, in addition to continued robust competition. Cabot collections in the third quarter were $160 million, up 8% compared to Q3 last year. We continue to be focused on operational excellence and cost management, including leveraging relevant best practices from our MCM business. This is particularly relevant in the UK. The banks are increasingly selling fresh portfolios and forward flows. Our operational focus and initiatives have enabled Cabot to deliver stable collections performance. I'd now like to hand the call over to Tomas for a more detailed look at our financial results.