Encore Capital Group (NASDAQ:ECPG) reported record collections and higher third-quarter earnings, as the debt buyer increased its full-year collections outlook and projected continued earnings growth in 2027.
Global collections rose 14% from a year earlier to $754 million, while net income increased 66% to $124 million. Earnings per share climbed to $5.57 from $3.17. Portfolio purchases totaled $390 million, including $310 million in the United States.
President and CEO Ashish Masih attributed the collections performance to portfolio purchases, operational improvements and investments in technology. The company also said consumer payment behavior remained stable despite economic uncertainty.
Higher collections and earnings outlook
Encore now expects 2026 global portfolio purchases of $1.5 billion to $1.55 billion and raised its global collections guidance to a range of $2.9 billion to $2.95 billion. The company expects earnings of $15.50 to $16 per share for the year and said it is confident earnings will continue to grow in 2027.
The earnings forecast excludes a potential fourth-quarter non-cash tax benefit of $15 million to $20 million, equivalent to $0.65 to $0.90 per share. Chief Financial Officer Tomas Hernanz said the possible benefit relates to tax assets created by past losses at Encore’s Cabot business. He said the company still needs to complete its accounting process and close the year before confirming the amount.
Encore continues to expect 2026 interest expense of $295 million and an effective tax rate in the mid-20% range, although the tax benefit would affect that rate if recognized. It also expects its full-year cash efficiency margin to exceed 58%.
U.S. purchasing remains the priority
Encore spent 80% of its third-quarter portfolio purchasing dollars in the U.S., where its Midland Credit Management business bought $310 million of receivables. Midland’s collections rose 17% to a record $589 million.
Masih said elevated consumer lending and credit card charge-off rates have supported a strong supply of portfolios. Using the latest Federal Reserve data available for the second quarter, he estimated annualized U.S. net charge-off volume at more than $50 billion.
Prices for comparable U.S. portfolios have increased slightly over the past two quarters, Masih said, but better collections have offset the effect on returns. He said the company expects the U.S. purchasing environment to remain robust for the foreseeable future.
In Europe, Cabot purchased $80 million of portfolios during the quarter. Its collections rose 2% to $164 million. Masih said Encore remains selective in its European purchases amid robust competition, while focusing on operational improvements and cost management.
Recovery forecasts rise
Portfolio revenue increased 12% to $414 million, supported by 11% growth in average receivable portfolios to $4.69 billion. Total revenue rose 18% to $545 million, while operating expenses increased 9% to $314 million. The quarterly cash efficiency margin improved to 59.6% from 58.4% a year earlier.
Changes in recoveries contributed $111 million in the quarter. That included $52 million collected above the company’s forecast and $59 million from increases in expected future recoveries. Hernanz said U.S. portfolios purchased in 2023, 2024 and 2025 accounted for $88 million of the total.
Management said technology and operational initiatives have helped Encore reach more consumers and establish payment plans earlier in a portfolio’s life. Masih said the improved outlook reflects additional expected collections rather than simply payments arriving sooner. Hernanz said higher recovery forecasts mechanically increase the portfolio’s accounting basis and should increase portfolio revenue going forward.
The company also accelerated some legal collection expenses during the quarter. Masih said the increase reflects large 2024 and 2025 portfolios reaching the legal collection stage, rather than a shift in the business model.
Balance sheet and capital allocation
Encore ended the quarter with leverage of 2.3 times, down from 2.5 times a year earlier and within its target range of 2 to 3 times. The company repurchased approximately $27 million of shares during the quarter, bringing repurchases for the first nine months of 2026 to about $73 million.
Masih said portfolio purchases remain Encore’s first capital allocation priority. He added that the company would be comfortable temporarily moving toward the higher end of its leverage range for the right purchasing opportunity, provided it had a clear path to reducing leverage afterward.
About Encore Capital Group (NASDAQ:ECPG)
Encore Capital Group, Inc is a specialty finance company that purchases portfolios of charged-off consumer receivables and provides debt recovery and management services. Through its operating businesses, the company works with consumers to resolve outstanding obligations through payment plans and other repayment arrangements.
Encore serves consumers and creditors across multiple markets, including the United States, the United Kingdom and other European countries. Its major operating platforms include Midland Credit Management in the United States and Cabot Credit Management in Europe.
