Encore Capital Q3 Profit Rises 66% as Collections Hit Record

Encore Capital Group reported sharp year-over-year gains in third-quarter 2026 earnings and record collections, supported by stronger U.S. performance and higher recoveries. The debt purchaser also set updated full-year guidance for GAAP earnings per share of $15.50 to $16.00, alongside constant-currency expectations for portfolio purchases of $1.50 billion to $1.55 billion and collections of $2.90 billion to $2.95 billion.

Net income rose 66% to $124.0 million from $74.7 million a year earlier, while diluted earnings per share increased 76% to $5.57 from $3.17. Total revenue advanced 18% to $544.5 million, and income from operations climbed 33% to $230.6 million despite a 9% increase in operating expenses to $313.9 million.

Debt-purchasing revenue increased 21% to $525.5 million. That included portfolio revenue of $414.4 million, up 12%, and $111.0 million of changes in recoveries, compared with $63.6 million in the prior-year quarter. Encore said third-quarter collections included $52 million of recoveries above forecast and $59 million of changes in expected future recoveries.

Collections reached a quarterly record of $753.8 million, up 14% from $663.0 million. Average receivable portfolios increased 11% to $4.69 billion, while estimated remaining collections rose 10% to $10.45 billion. The annualized debt-purchasing yield increased to 44.9% from 41.0%, reflecting a 35.4% portfolio yield and a 9.5% impact from changes in recoveries.

Encore’s non-GAAP quarterly cash-efficiency margin was 59.6%, compared with 58.4% a year earlier. Trailing-12-month cash generation, defined as adjusted EBITDA plus collections applied to principal balances, increased 18%. The company’s non-GAAP leverage ratio declined to 2.3 times from 2.5 times.

U.S. Business Drives Collection Growth

Encore continued to direct most of its purchasing capital to the United States. Of the $389.7 million of portfolios acquired during the quarter, $310 million, or 80%, was allocated to U.S. opportunities, while Europe accounted for $80 million.

Midland Credit Management, Encore’s U.S. operation, generated record collections of $589 million, up 17% from the prior-year period. Management attributed the performance to the deployment of new technologies, enhanced digital capabilities, continued operational innovation, and a growing and resilient payer base. The company said consumer payment behavior remained stable.

Encore described U.S. portfolio supply as robust, citing high credit-card charge-off rates alongside continued lending. The presentation showed U.S. revolving credit at $1.35 trillion in August 2026 and the credit-card charge-off rate at 3.82% in the second quarter. It also indicated that bankcard delinquency rates remained elevated.

Cabot, Encore’s European business, reported collections of $164 million, up 2% year over year, and purchased $80 million of portfolios. The company characterized the U.K. market as stable as consumer lending continued to grow, although competition remained robust. Cabot continued to focus on cost controls and operational improvement.

Guidance and Balance-Sheet Priorities

Encore’s updated 2026 guidance is presented on a constant-currency basis. In addition to its portfolio-purchase, collection and EPS ranges, the company expects interest expense, including other income, of $295 million and an effective tax rate in the mid-20% range.

The EPS forecast excludes a potential positive impact of $0.65 to $0.90 per share from a discrete, non-cash tax benefit that could be recognized in the fourth quarter of 2026.

At September 30, Encore had $658 million of available liquidity, consisting of $510 million under its available revolving credit facility and $148 million of cash, excluding client cash. The company said it had no significant debt maturities until 2028. During the quarter, it extended the maturity of its U.S. facility by one year to October 2029 and settled $230 million of convertible notes due in 2029 with cash.

Management’s balance-sheet objectives include preserving financial flexibility, maintaining leverage between 2.0 and 3.0 times, and retaining a strong BB debt rating. Capital-allocation priorities include portfolio purchases at attractive returns, share repurchases and strategic mergers and acquisitions.

Encore cautioned that its outlook remains subject to risks involving portfolio supply and pricing, collection performance, consumer behavior, interest rates, access to capital markets, foreign-exchange movements and broader macroeconomic conditions. Actual results could also differ from expectations for recoveries, cash generation, yields and the potential fourth-quarter tax benefit.