Encore Capital Group Inc

Good day and thank you for standing by. Welcome to the Encore Capital Group's first quarter 2026 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 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 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, Vice President of Global Investor Relations. Please go ahead.

Thank you, operator. Good afternoon and welcome to Encore Capital Group's first quarter 2026 earnings call. Joining me on the call today are Ashish Massey, our President and Chief Executive Officer, Tomas Hernández, Executive Vice President and Chief Financial Officer, and Ryan Bell, President of Midland 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 first quarter of 2026 and the first quarter of 2025. 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 statement. During this call, we will use 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 conference call, a replay along with our prepared remarks will also be available on the Investors 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 first quarter as our industry leadership and operational execution are on full display. Our business continues to thrive with solid first quarter portfolio purchases of $363 million and record collections of $718 million, which are up 19% compared to a year ago. Average receivable portfolios increased 14% to $4.4 billion. Our record collections performance helped earnings increase sharply with net income in the first quarter of $86 million and earnings per share of $3.86. Our leverage improved to 2.3 times at the end of Q1, compared to 2.6 times a year ago, even with continued significant portfolio purchases in the first quarter. On course, 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. Before I continue, 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. We pursue our business 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 the two main businesses, Midland Credit Management or MCM in the US and Cabot Credit Management in select European markets. We believe values created in the consumer debt buying industry through optimal execution of three critical drivers. buying, collecting, and funding. When these drivers are executed well within attractive markets, leveraging the resources we possess and a strong balance sheet, we believe they enable high consistent returns and profitability. The cycle begins with a commitment to purchase portfolios of charged off receivables at attractive returns, which is the buy well component of our value engine. Our disciplined portfolio purchasing is underpinned by superior data and analytics capabilities, which, when applied to a very large data set stemming from a scale and history, optimize portfolio valuation through account-level underwriting. As a result, we win more portfolios at strong returns enabled by superior collections as reflected in our industry-leading portfolio yield and collections yield. The cycle continues with our commitment to collect efficiently, maximizing net collections to realize strong yields. Our operational excellence, advanced analytics, and our consumer-centric approach produce industry-leading yields while still exhibiting a solid cash efficiency margin. As a result, our very effective, personalized engagement with consumers leads to payments with predictable, consistent cash flow. This cash flow helps to complete the cycle as it contributes to our commitment to fund competitively based on low-cost funding and strong balance sheet. Importantly, a balance sheet strength enables access to capital at competitive costs through the credit cycle. In summary, Encore's value engine is the critical enabler of a competitive advantage that allows us to execute a proven three-pillar strategy to drive shareholder value. I would now like to highlight Encore's first quarter performance in terms of several key metrics, starting with portfolio purchasing. Encore's global portfolio purchases for the first quarter were $363 million. As a result of the attractive market conditions and higher returns available in the United States, 87% of our portfolio purchasing dollars was spent in the US during the first quarter. Global collections in Q1 were up 19% to a record $718 million. This exceptional collections performance is a result of strong execution and continued significant portfolio purchasing, as well as the deployment of new technologies, enhanced digital capabilities, and continued operational innovation, especially in the US. Our global collections performance in the first quarter compared to our ERC at the end of 2025 was 106%. 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 collections dynamic I mentioned earlier, strong execution, higher portfolio purchases, and strong returns over the past few years as well as operational improvements have also led to meaningful growth in cash generation. Our cash generation in the first quarter was up 21% compared to Q1 last year, and we expect it to continue to grow. Let's now take a look at our two largest markets beginning with the U.S. The U.S. Federal Reserve reports that revolving credit in the U.S. 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 analyzed amount of net dollar charge-offs. which can be estimated by multiplying the revolving credit outstandings by the net charge-off rate. Using Q4 2025 data, the most recent quarter reported by the Federal Reserve, annualized net charge-off volume was more than $54 billion. Similarly, US consumer credit card delinquencies, which are a leading indicator of future charge-offs, also remain near multi-year highs. With revolving consumer credit at an elevated level and charge-off rate of about 4%, purchasing conditions in the U.S. market remain favorable. We are observing continued strong U.S. market supply and favorable pricing as well. First quarter delinquency data supports our expectation that the portfolio purchasing environment in the U.S. is expected to remain robust for the foreseeable future. MCM continues to capture significant portions of this U.S. market supply opportunity. MCM portfolio purchases in the first quarter were $316 million, one of our strongest portfolio purchasing quarters ever. In addition to its solid portfolio purchases in Q1, our MCM business continues to excel operationally. MCM collections increased to a record $556 million, which was an increase of 23% compared to Q1 last year. The collection's overperformance in the US 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 large and growing pair 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 forecasts will gradually adjust to reflect the positive impact of these initiatives. Our outstanding results reflect a substantial portfolio purchasing over the last few years at strong returns as well as improvements we made in our collections operation. Despite some of the negative news and macro uncertainty in the U.S., our consumers payment behavior remains stable. This is in line with what many of the banks and credit card issuers are saying in the recent earnings calls. We, of course, continue to monitor for any signs of change. Turning to a business in Europe, Cabot delivered another quarter of solid performance in Q1. Cabot's portfolio purchases of $47 million in the first quarter were consistent with Cabot's recent historical trend. We continue to be selective with Cabot's deployments as the UK market remains impacted by subdued consumer lending and low delinquencies, as well as continued robust competition. Cabot collections in the first quarter were $161 million, up 7% compared to Q1 last year, supported by currency tailwinds. We continue to focus on Cabot's operational excellence and cost management, including leveraging relevant best practices from our MCM business. This is particularly relevant in the UK, where banks are increasingly selling fresh portfolios and forward flows. Our operational focus and initiatives within the Cabot business continue to drive cash efficiency margin improvement. I'd now like to hand the call over to Tomas for a more detailed look at our financial results.