ENCORE CAPITAL GROUP INC (ECPG) FY 2024 MD&A

Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is intended to help investors understand our business, financial condition, results of operations, liquidity and capital resources. You should read this discussion together with our consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. This Annual Report on Form 10-K contains “forward-looking statements” relating to Encore Capital Group, Inc. (“Encore”) and its subsidiaries (which we may collectively refer to as the “Company,” “we,” “our” or “us”) within the meaning of the securities laws. The words “believe,” “expect,” “anticipate,” “estimate,” “project,” “intend,” “plan,” “will,” “may,” and similar expressions often characterize forward-looking statements. These statements may include, but are not limited to, projections of collections, revenues, income or loss, estimates of capital expenditures, plans for future operations, products or services, and financing needs or plans, as well as assumptions relating to these matters. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we caution that these expectations or predictions may not prove to be correct or we may not achieve the financial results, savings or other benefits anticipated in the forward-looking statements. These forward-looking statements are necessarily estimates reflecting the best judgment of our senior management and involve a number of risks and uncertainties, some of which may be beyond our control or cannot be predicted or quantified, that could cause actual results to differ materially from those suggested by the forward-looking statements. Many factors including, but not limited to, those set forth in this Annual Report on Form 10-K under “Part I, Item 1A—Risk Factors,” could cause our actual results, performance, achievements, or industry results to be very different from the results, performance, achievements or industry results expressed or implied by these forward-looking statements. Our business, financial condition, or results of operations could also be materially and adversely affected by other factors besides those listed. Forward-looking statements speak only as of the date the statements were made. We do not undertake any obligation to update or revise any forward-looking statements to reflect new information or future events, or for any other reason, even if experience or future events make it clear that any expected results expressed or implied by these forward-looking statements will not be realized. In addition, it is generally our policy not to make any specific projections as to future earnings, and we do not endorse projections regarding future performance that may be made by third parties.

Our Business

We are an international specialty finance company providing debt recovery solutions and other related services for consumers across a broad range of financial assets. We primarily purchase portfolios of defaulted consumer receivables at deep discounts to face value and manage them by working with individuals as they repay their obligations and work toward financial recovery. Defaulted receivables are consumers’ unpaid financial commitments to credit originators, including banks, credit unions, consumer finance companies and commercial retailers. Defaulted receivables may also include receivables subject to bankruptcy proceedings. We also provide debt servicing and other portfolio management services to credit originators for non-performing loans in Europe.

Encore Capital Group, Inc. (“Encore”) has three business units: MCM, which consists of Midland Credit Management, Inc. and its subsidiaries and domestic affiliates; Cabot, which consists of Cabot Credit Management Limited (“CCM”) and its subsidiaries and European affiliates, and LAAP, which is comprised of our investments and operations in Latin America and Asia-Pacific.

MCM (United States)

Through MCM, we are a market leader in portfolio purchasing and recovery in the United States.

Cabot (Europe)

Through Cabot, we are one of the largest credit management services providers in Europe and the United Kingdom. Cabot, in addition to its primary business of portfolio purchasing and recovery, also provides a range of debt servicing offerings such as early stage collections, business process outsourcing (“BPO”), and contingent collections, including through Wescot Credit Services Limited (“Wescot”).

LAAP (Latin America and Asia-Pacific)

We have purchased non-performing loans in Mexico. Additionally, we have a subsidiary Encore Asset Reconstruction Company (“EARC”) in India.

To date, operating results from LAAP have not been significant to our total consolidated operating results. Our long-term growth strategy is focused on continuing to invest in our core portfolio purchasing and recovery business in the United States and United Kingdom and strengthening and developing our business in the rest of Europe.

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Government Regulation

As discussed in more detail under “Part I - Item 1—Business - Government Regulation” contained in this Annual Report on Form 10-K, our operations in the United States are subject to federal, state and municipal statutes, rules, regulations and ordinances that establish specific guidelines and procedures that debt purchasers and collectors must follow when collecting consumer accounts, including among others, specific guidelines and procedures for communicating with consumers and prohibitions on unfair, deceptive or abusive debt collection practices. Additionally, our operations in Europe are affected by foreign statutes, rules and regulations regarding debt collection and debt purchase activities. These statutes, rules, regulations, ordinances, guidelines and procedures are modified from time to time by the relevant authorities charged with their administration, which could affect the way we conduct our business.

Portfolio Purchasing and Recovery

MCM (United States)

In the United States, the defaulted consumer receivable portfolios we purchase are primarily charged-off credit card debt portfolios. A small percentage of our capital deployment in the United States is comprised of receivable portfolios subject to Chapter 13 and Chapter 7 bankruptcy proceedings.

We purchase receivables based on robust, account-level valuation methods and employ proprietary statistical and behavioral models across our U.S. operations. These methods and models generally allow us to value portfolios accurately (limiting the risk of overpaying), avoid buying portfolios that are incompatible with our methods or strategies and align the accounts we purchase with our business channels to maximize future collections. As a result, we have generally been able to realize significant returns from the receivables we acquire. We maintain strong relationships with many of the largest financial service providers in the United States.

Cabot (Europe)

In Europe, our purchased defaulted debt portfolios primarily consist of credit card and consumer loan accounts. We purchase receivable portfolios using a proprietary pricing model that utilizes account-level statistical and behavioral data. This model generally allows us to value portfolios accurately and quantify portfolio performance in order to maximize future collections. As a result, we have generally been able to realize significant returns from the assets we have acquired. We maintain strong relationships with many of the largest financial services providers in the United Kingdom and Europe.

Purchases and Collections

Portfolio Pricing, Supply and Demand

MCM (United States)

With lending reaching record levels and the highest U.S. charge-off rate in ten years, supply remains elevated at a record level. Issuers have continued to sell predominantly fresh portfolios. Fresh portfolios are portfolios that are generally sold within six months of the consumer’s account being charged-off by the financial institution. Pricing in the fourth quarter remained at favorable levels as a result of elevated market supply. Issuers continue to sell their volume in mostly forward flow arrangements that are often committed early in the calendar year. We believe growth in lending and rising delinquency rates will drive continued growth in supply.

We believe that smaller competitors continue to face difficulties in the portfolio purchasing market because of the high cost to operate due to regulatory pressure and increasing cost of capital. We believe this favors larger participants, like MCM, because the larger market participants are better able to adapt to these pressures and commit to larger forward flow agreements and fluctuating volumes.

Cabot (Europe)

The UK market for charged-off portfolios generally provides a relatively consistent pipeline of opportunities, despite a historically low level of charge-off rates, as creditors had embedded debt sales as an integral part of their business models. The percentage of volume that is sold in multi-year forward flow arrangements is increasing.

France and Spain continue to be two of the largest markets in Europe with significant portfolio sales. Financial institutions continue to look to dispose of non-performing loans in these markets.

While we have seen sales activity across all of our European markets, underlying default rates are generally low by historic levels, and consumer lending volumes have stagnated. Sales levels are expected to fluctuate from quarter to quarter. In

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general, portfolio pricing remains competitive across our European footprint, constraining the amount of capital we can deploy in Europe.

Purchases by Geographic Location

The following table summarizes purchases of receivable portfolios by geographic location during the periods presented (in thousands):

In the United States, capital deployment increased during both the year ended December 31, 2024, as compared to 2023, and during the year ended December 31, 2023, as compared to 2022. The majority of our deployments in the U.S. come from forward flow agreements, and the timing, contract duration, and volumes for each contract can fluctuate leading to variation when comparing to prior periods. Portfolio purchases in the U.S. were robust as supply increased and pricing remained at favorable levels.

In Europe, capital deployment increased during both the year ended December 31, 2024, as compared to 2023, and during the year ended December 31, 2023, as compared to 2022. Pricing continues to remain competitive in our European footprint; constraining the amount of capital we can deploy in Europe. Capital deployment stayed relatively limited during the nine months ended September 30, 2024. During the fourth quarter of 2024, we made three large spot purchases totaling approximately $145.4 million and as a result, capital deployment increased by $93.9 million during the year ended December 31, 2024, as compared to the year ended December 31, 2023.

Collections from Purchased Receivables by Channel and Geographic Location

We utilize three channels for the collection of our purchased receivables: call center and digital collections; legal collections; and collection agencies. The call center and digital collections channel consists of collections that result from our call centers, direct mail program and online collections. The legal collections channel consists of collections that result from our internal legal channel or from our network of retained law firms. The collection agencies channel consists of collections from third-party collections agencies to whom we pay a fee or commission. We utilize this channel to supplement capacity in our internal call centers, to service accounts in regions where we do not have collections operations or for accounts purchased where we maintain the collection agency servicing relationship.

The following table summarizes the total collections by collection channel and geographic area during the periods presented (in thousands):

Gross collections from purchased receivables increased by $299.9 million, or 16.1%, to $2,162.5 million during the year ended December 31, 2024, from $1,862.6 million during the year ended December 31, 2023. The increase in collections in the United States was primarily a result of consistent increases in capital deployments in the United States in recent years. The

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increase in collections from purchased receivables in Europe was primarily due to the acquisition of portfolios with higher returns in recent periods. Additionally, collections in Europe were favorably impacted by foreign currency translation by approximately $10.5 million, during the year ended December 31, 2024, primarily as a result of the weakening of the U.S. dollar against the British Pound by approximately 2.7% for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

Gross collections from purchased receivables remained relatively stable during the year ended December 31, 2023, as compared to gross collections during the year ended December 31, 2022.

Results of Operations

Results of operations, in dollars and as a percentage of total revenues, were as follows for the periods presented (in thousands, except percentages):

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Comparison of Results of Operations

Our Annual Report on Form 10-K for the year ended December 31, 2023 includes discussion and analysis of our financial condition and results of operations for the year ended December 31, 2023 as compared to the year ended December 31, 2022 in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Revenues

Our revenues primarily include debt purchasing revenue, which is revenue recognized from engaging in debt purchasing and recovery activities. We apply our charge-off policy and fully write-off the amortized costs (i.e., face value net of noncredit discount) of the individual receivables we acquire immediately after purchasing the portfolio. We then record 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 is presented as “Investment in receivable portfolios, net” in our consolidated statements of financial condition. The discount rate is an effective interest rate (or “purchase EIR”) established based on the purchase price of the portfolio and the expected future cash flows at the time of purchase.

Debt purchasing revenue includes two components:

(1)     Revenue from receivable portfolios, which is the accretion of the discount on the negative allowance due to the passage of time (generally the portfolio balance multiplied by the EIR), and

(2)     Changes in recoveries, which includes:

(a)     Recoveries above (below) forecast, which is the difference between (i) actual cash collected/recovered during the current period and (ii) expected cash recoveries for the current period, which generally represents over or under performance for the period; and

(b)     Changes in expected future recoveries, which is the present value change of expected future recoveries, where such change generally results from (i) collections “pulled forward from” or “pushed out to” future periods (i.e. amounts either collected early or expected to be collected later) and (ii) magnitude and timing changes to estimates of expected future collections (which can be increases or decreases).

Certain pools already fully recovered their cost basis and became zero basis portfolios (“ZBA”) prior to our adoption of the accounting standard for Financial Instruments - Credit Losses (“CECL”) in January 2020. We did not establish a negative allowance for these pools as we elected the Transition Resource Group for Credit Losses’ practical expedient to retain the integrity of these legacy pools. Similar to how we treated ZBA collections prior to the adoption of CECL, all subsequent collections to the ZBA pools are recognized as ZBA revenue, which is included in revenue from receivable portfolios in our consolidated statements of operations. We expect our ZBA revenue to continue to decline as we collect on these legacy pools. We do not expect to have new ZBA pools in the future.

Servicing revenue consists primarily of fee-based income earned on accounts collected on behalf of others, primarily credit originators. We earn fee-based income by providing debt servicing (such as early stage collections, BPO, contingent collections, trace services and litigation activities) to credit originators for non-performing loans in Europe.

Other revenues primarily include revenues recognized from the sale of real estate assets that are acquired as a result of our investments in non-performing secured residential mortgage portfolios and real estate assets in Europe and LAAP.

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The following table summarizes revenues for the periods presented (in thousands, except percentages):

Our operating results are impacted by foreign currency translation, which represents the effect of translating operating results where the functional currency is different than our U.S. dollar reporting currency. The strengthening of the U.S. dollar relative to other foreign currencies has an unfavorable impact on our international revenues, and the weakening of the U.S. dollar relative to other foreign currencies has a favorable impact on our international revenues. Our revenue was favorably impacted by foreign currency translation by approximately $6.2 million, during the year ended December 31, 2024, primarily as a result of the weakening of the U.S. dollar against the British Pound by approximately 2.7% for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

The increase in revenue recognized from portfolio basis during the year ended December 31, 2024, as compared to the year ended December 31, 2023, was primarily due to a higher portfolio basis (i.e. a higher investment in receivable balance) in the U.S. driven by a consistent higher volume of purchases in recent years.

Recoveries above or below forecast represent over and under-performance in the reporting period, respectively and are expected to vary from period to period. Collections over-performed the forecasted collections by approximately $78.2 million during the year ended December 31, 2024. Collections under-performed the forecasted collections by approximately $33.4 million during the year ended December 31, 2023. The over and under performance in the periods presented represented only a small fraction of total collections in the corresponding periods.

We reassess the forecasts of expected lifetime recoveries each quarter by considering, among other factors, historical and current collection performance, changes in consumer behaviors, and macroeconomic environment. During the fourth quarter of 2024, we deployed a new U.K. forecasting model that develops expected future recoveries for investment in receivable portfolios at Cabot. The new model update was primarily driven by recent changes in Cabot as it continues to acquire portfolios that have more dynamic characteristics and are better forecasted utilizing a model that processes data inputs at a more granular level. As part of the new model development process, management updated certain model inputs driven by collection experience, operational performance and recent changes in collection strategies. This new forecasting model was applied to all vintages, which resulted in a change in the estimate of expected future recoveries. This change in accounting estimate reduced Cabot’s estimated remaining collections by $361.6 million, which when discounted to present value, resulted in a negative change in expected future recoveries of $75.3 million. Additionally, we recognized approximately $22.2 million of negative changes in expected future recoveries resulting from the sale of our investment in receivable portfolios associated with the exit of our Italian debt purchasing and recovery business in November 2024. These significant changes in expected recoveries at Cabot during the fourth quarter of 2024, combined with changes driven by recurring reassessments of the expected future recoveries, reduced Cabot’s total estimated remaining collections by $452.9 million, which when discounted to present value, resulted in a net negative change in expected future recoveries of $129.1 million during the fourth quarter of 2024.

As a result of all the above during the fourth quarter, and the negative changes recorded during the previous quarters in 2024, we recorded a total net negative change in expected future recoveries of approximately $167.9 million during the year ended December 31, 2024. We recorded approximately $49.1 million in net negative change in expected future recoveries during the year ended December 31, 2023.

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The following tables summarize collections from purchased receivables, revenue from receivable portfolios, end of period receivable balance and other related supplemental data, by year of purchase (in thousands, except percentages):

_______________________

(1)All portfolios are on non-accrual basis. Annual pool groups for other geographies have been aggregated for disclosure purposes.

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_______________________

(1)Portfolio balance includes non-accrual pool groups. The EIR presented is only for pool groups that accrete portfolio revenue.

(2)All portfolios are on non-accrual basis. Annual pool groups for other geographies have been aggregated for disclosure purposes.

Servicing revenues and other revenues remained relatively consistent during the year ended December 31, 2024, as compared to the year ended December 31, 2023.

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Operating Expenses

The following table summarizes operating expenses during the periods presented (in thousands, except percentages):

Our operating results are impacted by foreign currency translation, which represents the effect of translating operating results where the functional currency is different than our U.S. dollar reporting currency. The strengthening of the U.S. dollar relative to other foreign currencies has a favorable impact on our international operating expenses, and the weakening of the U.S. dollar relative to other foreign currencies has an unfavorable impact on our international operating expenses. Our operating expenses were unfavorably impacted by foreign currency translation by approximately $7.2 million, during the year ended December 31, 2024, primarily as a result of the weakening of the U.S. dollar against the British Pound by approximately 2.7% for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

Operating expenses are explained in more detail as follows:

Salaries and Employee Benefits

The increase in salaries and employee benefits during the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily due to the following reasons:

•An increase in salaries and bonus of approximately $22.6 million primarily due to an increase in overall average headcount and general increase in wage during the year ended December 31, 2024 as compared to 2023; and

•An increase in employee benefits and payroll taxes of approximately $8.6 million.

Cost of Legal Collections

Cost of legal collections primarily includes contingent fees paid to our external network of attorneys and the cost of litigation. We pursue legal collections using a network of attorneys that specialize in collection matters and through our internal legal channel. Under the agreements with our contracted attorneys, we advance certain out-of-pocket court costs. Cost of legal collections does not include internal legal channel employee costs, which are included in salaries and employee benefits in our consolidated statements of operations.

The following table summarizes our cost of legal collections during the periods presented (in thousands, except percentages):

The increase in cost of legal collections during the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily due to an increase in court costs due to increased legal placements in this channel in the U.S. The increase was partially offset by decreased contingent fees paid to our external network of attorneys as we grow our legal collection activities through our internal legal channel.

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General and Administrative Expenses

The increase in general and administrative expenses during the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily due to the following reasons:

•An increase in information technology expenses of approximately $8.9 million; and

•An increase in consulting fees of approximately $4.5 million; and

•An increase in miscellaneous general and administrative related expenses of approximately $3.8 million.

Other Operating Expenses

The increase in other operating expenses during the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily due to an increase in postage and printing expenses of approximately $10.3 million and an increase in costs relating to skip tracing of approximately $7.1 million.

Collection Agency Commissions

Collection agency commissions are commissions paid to third-party collection agencies. Collections through the collections agencies channel are predominately in Europe and vary from period to period depending on, among other things, the number of accounts placed with an agency versus accounts collected internally. Commission rates vary depending on, among other things, the amount of time that has passed since the charge-off of the accounts placed with an agency, the asset class, and the geographic location of the receivables. Generally, freshly charged-off accounts have a lower commission rate than accounts that have been charged off for a longer period of time, and commission rates for purchased bankruptcy portfolios are lower than the commission rates for charged-off credit card accounts. Collection agency commissions decreased by approximately $5.1 million during the year ended December 31, 2024, compared to the year ended December 31, 2023. The decrease was primarily due to fewer accounts placed with external agencies and favorable commission rates received from such agencies in Europe.

Depreciation and Amortization

The decrease in depreciation and amortization expenses during the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily due to a decrease in depreciation expenses of approximately $5.8 million and a decrease in amortizable expenses of approximately $3.5 million as a result of smaller depreciable and amortizable asset balances during the year ended December 31, 2024, compared to the year ended December 31, 2023.

Goodwill Impairment

During the fourth quarter of 2024, we performed our annual goodwill impairment assessment as of October 1, 2024, which did not result in any goodwill impairment charge. Subsequent to the annual goodwill impairment test, we significantly lowered the estimated future recoveries for our investment in receivable portfolios at Cabot during the fourth quarter of 2024, management considered this a triggering event and conducted another quantitative test for goodwill impairment as of December 31, 2024. This subsequent goodwill impairment analysis resulted in an impairment charge for the Cabot reporting unit of $100.6 million. The decline in the fair value of the Cabot reporting unit below its carrying value primarily resulted from changes in expected future cash flows as compared to our previous financial forecasts, and to a lesser extent, a decline in market multiples. We also recorded a goodwill impairment charge of $238.2 million during the year ended December 31, 2023. No triggering events were identified during the interim periods between the two annual goodwill impairment tests. Refer to “Note 15: Goodwill and Identifiable Intangible Assets” to our consolidated financial statements for further details.

Impairment of Assets

During the fourth quarter of 2024, we tested for impairment of our long-lived assets held at our servicing business and recorded an impairment charge relating to the computer systems of approximately $18.5 million. Refer to “Property and Equipment, Net” in “Note 5: Composition of Certain Financial Statement Items” to our consolidated financial statements for further details. We recorded an impairment charge of $18.7 million for our acquired definite-lived intangible assets during the year ended December 31, 2023.

Interest Expense

The following table summarizes our interest expense (in thousands, except percentages):

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The increase in interest expense during the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily due to the following reasons:

•The effect resulting from rising interest rates of approximately $23.9 million; and

•The effect resulting from increased average debt balance of approximately $25.2 million; and

•An unfavorable impact of foreign currency translation of approximately $1.6 million driven by the weakening of the U.S. dollar against the British Pound.

Loss on Extinguishment of Debt

Loss on extinguishment of debt associated with write-offs of unamortized debt discount and debt issuance costs relating to the early redemptions of our senior secured notes and the refinancing of the Cabot Securitisation Senior Facility was $7.8 million during the year ended December 31, 2024. Refer to “Note 6: Borrowings” in the notes to our consolidated financial statements for details of our financing activities.

Other Income (Expense)

Other income or expense consists primarily of foreign currency exchange gains or losses, interest income and gains or losses recognized on certain transactions outside of our normal course of business. Other income was $6.8 million and $5.1 million during the years ended December 31, 2024 and 2023, respectively. Interest income included in other income, net of other expense, was approximately $7.0 million and $4.7 million during the years ended December 31, 2024 and 2023, respectively.

Provision for Income Taxes

During the years ended December 31, 2024 and 2023, we recorded income tax provisions of $43.0 million and $26.2 million, respectively.

The effective tax rates for the respective periods are shown below:

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(1)The change in valuation allowance during the year ended December 31, 2024 reflected certain foreign subsidiaries’ operating losses. The change in valuation allowance during the year ended December 31, 2023 was primarily due to the forfeit of tax benefits on merger or liquidation of foreign subsidiaries that maintained full valuation allowances on their deferred tax assets.

(2)During the years ended December 31, 2024 and 2023, we recorded a non-cash goodwill impairment charge of $100.6 million and $238.2 million at our Cabot reporting unit, respectively. Refer to “Note 15: Goodwill and Identifiable Intangible Assets” to our consolidated financial statements for further details.

(3)Represents taxable foreign currency movement recognized in a foreign subsidiary.

(4)Represents the forfeit of tax benefits on merger or liquidation of foreign subsidiaries that maintained full valuation allowances on their deferred tax assets during the year ended December 31, 2023.

Our effective tax rate could fluctuate significantly on a quarterly basis and could be adversely affected to the extent earnings are lower than anticipated in countries that have lower statutory tax rates and higher than anticipated in countries that have higher statutory tax rates.

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Non-GAAP Disclosure

In addition to the financial information prepared in conformity with Generally Accepted Accounting Principles (“GAAP”), we provide historical non-GAAP financial information. Management believes that the presentation of such non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of our operations. Management believes that these non-GAAP financial measures reflect an additional way of viewing aspects of our business that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business.

Management believes that the presentation of these measures provides investors with greater transparency and facilitates comparison of operating results across a broad spectrum of companies with varying capital structures, compensation strategies, derivative instruments, and amortization methods, which provide a more complete understanding of our financial performance, competitive position, and prospects for the future. Readers should consider the information in addition to, but not instead of, our financial statements prepared in accordance with GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of these measures for comparative purposes.

Adjusted EBITDA. Management utilizes adjusted EBITDA (defined as net income before interest income and expense, taxes, depreciation and amortization, stock-based compensation expenses, acquisition, integration and restructuring related expenses, and other charges or gains that are not indicative of ongoing operations), in the evaluation of our operating performance. Adjusted EBITDA for the periods presented is as follows (in thousands):

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(1)Amount represents gain or loss recognized on derivative instruments that are not designated as hedging instruments or gain or loss recognized on derivative instruments upon dedesignation of hedge relationships. We adjust for this amount because we believe the gain or loss on derivative contracts is not indicative of ongoing operations.

(2)Amount represents acquisition, integration and restructuring related expenses. We adjust for this amount because we believe these expenses are not indicative of ongoing operations; therefore, adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results.

(3)During the years ended December 31, 2024 and 2023, we recorded a non-cash goodwill impairment charge of $100.6 million and $238.2 million, respectively. We recorded a non-cash impairment of long-lived assets of $18.5 million and a non-cash impairment of intangible assets of $18.7 million during the years ended December 31, 2024 and 2023, respectively. We believe these non-cash impairment charges are not indicative of ongoing operations, therefore adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results. Refer to “Note 15: Goodwill and Identifiable Intangible Assets” and “Property and Equipment, Net” in “Note 5: Composition of Certain Financial Statement Items” to our consolidated financial statements for further details.

(4)Collections applied to principal balance is calculated in the table below:

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Supplemental Performance Data

The tables included in this supplemental performance data section include detail for purchases, collections and ERC by year of purchase.

Our collection expectations are based on account characteristics and economic variables. Additional adjustments are made to account for qualitative factors that may affect the payment behavior of our consumers and servicing related adjustments to ensure our collection expectations are aligned with our operations. We continue to refine our process of forecasting collections both domestically and internationally with a focus on operational enhancements. Our collection expectations vary between types of portfolio and geographic location. As a result, past performance of pools in certain geographic locations or of certain types of portfolio are not necessarily a suitable indicator of future results in other locations or for other types of portfolio.

The supplemental performance data presented in this section is impacted by foreign currency translation, which represents the effect of translating financial results where the functional currency of our foreign subsidiary is different than our U.S. dollar reporting currency. For example, the strengthening of the U.S. dollar relative to other foreign currencies has an unfavorable reporting impact on our international purchases, collections, and ERC, and the weakening of the U.S. dollar relative to other foreign currencies has a favorable impact on our international purchases, collections, and ERC.

We utilize proprietary forecasting models to continuously evaluate the economic life of each pool.

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Cumulative Collections Money Multiple - Cumulative Collections from Purchased Receivables to Purchase Price Multiple

The following table summarizes our receivable purchases, related gross collections, and cumulative collections money multiples (in thousands, except multiples):

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(1)Adjusted for Put-Backs and Recalls. Put-Backs (“Put-Backs”) and recalls (“Recalls”) represent ineligible accounts that are returned by us or recalled by the seller pursuant to specific guidelines as set forth in the respective purchase agreement.

(2)Cumulative collections from inception through December 31, 2024, excluding collections on behalf of others.

(3)Cumulative Collections Money Multiple (“CCMM”) through December 31, 2024 refers to cumulative collections as a multiple of purchase price.

(4)Annual pool groups for other geographies have been aggregated for disclosure purposes.

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Purchase Price Multiple - Total Estimated Collections from Purchased Receivables to Purchase Price Multiple

The following table summarizes our purchases, resulting historical gross collections, estimated remaining gross collections from purchased receivables, and purchase price multiple (in thousands, except multiples):

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(1)Purchase price refers to the cash paid to a seller to acquire a portfolio less Put-backs, Recalls, and other adjustments. Put-Backs and Recalls represent ineligible accounts that are returned by us or recalled by the seller pursuant to specific guidelines as set forth in the respective purchase agreement.

(2)Cumulative collections from inception through December 31, 2024, excluding collections on behalf of others.

(3)Purchase Price Multiple represents total estimated gross collections divided by the purchase price.

(4)Includes portfolios acquired in connection with certain business combinations.

(5)Annual pool groups for other geographies have been aggregated for disclosure purposes.

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Estimated Remaining Gross Collections by Year of Purchase

The following table summarizes our estimated remaining gross collections from purchased receivable portfolios and estimated future cash flows from real estate-owned assets (in thousands):

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(1)As of December 31, 2024, ERC for Zero Basis Portfolios includes approximately $38.9 million for purchased consumer and bankruptcy receivables in the United States. ERC for Zero Basis Portfolios in Europe and other geographies was immaterial. ERC also include approximately $25.4 million from non-accrual portfolios, primarily in other geographies.

(2)Represents the expected remaining gross cash collections over a 180-month period. As of December 31, 2024, ERC for 84-month was:

(3) Includes portfolios acquired in connection with certain business combinations.

(4) Annual pool groups for other geographies have been aggregated for disclosure purposes.

(5) Real estate-owned assets (“REO”) ERC includes approximately $59.9 million and $0.6 million of estimated future cash flows for Europe and Other Geographies, respectively.

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Estimated Future Collections Applied to Investment in Receivable Portfolios

As of December 31, 2024, we had $3.8 billion in investment in receivable portfolios. The estimated future collections applied to the investment in receivable portfolios net balance is as follows (in thousands):

Headcount by Function by Geographic Location

The following table summarizes our headcount by function and by geographic location:

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(1)Headcount for other geographies includes employees in India and Costa Rica that service accounts originated in the United States.

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Supplemental quarterly financial information

Financial highlights

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(1)Includes U.S. purchases of $295.3 million and $208.5 million, and Europe purchases of $199.8 million and $84.0 million in Q4 2024 and Q4 2023, respectively.

(2)NM - Not meaningful.

Consolidated financial statements of operations

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Liquidity and Capital Resources

Liquidity

The following table summarizes our cash flow activities for the periods presented (in thousands):