1 unchanged sentence
Evaluation of Disclosure Controls and Procedures
−Removed: As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the
−Removed: effectiveness of the design and operation of our disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e) and 15d-15(e).
+Added: As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e) and 15d-15(e).
Based upon that evaluation, our CEO and CFO concluded that, as of December 31, 2023, our disclosure controls and procedures were effective, at the reasonable assurance level, as of such date.
5 unchanged sentences
Under the supervision of and with the participation of our management, we assessed the effectiveness of our internal control over financial reporting as of December 31, 2023, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework.
−Removed: As disclosed in “Part II Item 9A Controls and Procedures” in our Annual Report on Form 10-K for the year ended December 31, 2021, we identified a material weakness in internal control related to ineffective controls within our Midland Credit Management operating unit with respect to the determination of certain qualitative factors applied to our estimates of future recoveries.
−Removed: During the year ended December 31, 2022, management implemented our previously disclosed remediation plan that included documenting and maintaining evidence that demonstrates:
−Removed: (1) that the application of qualitative factors to our forecasts operates at a level of precision that would prevent or detect a material misstatement, (2) that a review of the application of the qualitative factors occurred and (3) that any findings related to the review are appropriately resolved.
−Removed: During the fourth quarter of 2022, we completed our testing of the operating effectiveness of the implemented controls and found them to be effective.
−Removed: As a result, we have concluded the material weakness has been remediated as of December 31, 2022.
+Added: BDO USA, P.C., the independent registered public accounting firm that audited the consolidated financial statements included in this Annual Report on Form 10-K, was engaged to attest to and report on the effectiveness of Encore’s internal control over financial reporting as of December 31, 2023, as stated in its report below.
Report of Independent Registered Public Accounting Firm
5 unchanged sentences
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.
−Removed: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated statements of financial condition of the Company as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 22, 2023 expressed an unqualified opinion thereon.
+Added: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated statements of financial condition of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive (loss) income, equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and our report dated February 21, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
−Removed: The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Item 9A, Management’s Report on Internal Control over Financial Reporting”.
−Removed: Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
+Added: The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Item 9A, Management’s Report on Internal Control over Financial Reporting.” Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.
12 unchanged sentences
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
−Removed: /s/ BDO USA, LLP
+Added: /s/ BDO USA, P.C.
San Diego, California
1 unchanged sentence
Changes in Internal Control over Financial Reporting
−Removed: Except for the changes in connection with our implementation of the remediation plan discussed in Item 9A, there have been no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
+Added: There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B—Other Information
+Added: On November 14, 2023 , Ryan Bell , President of MCM , adopted a trading plan intended to satisfy the affirmative defense of Rule 10b5-1(c) to sell up to 7,500 shares of Encore Capital Group, Inc.
+Added: common stock between February 26, 2024, and February 28, 2025, subject to certain conditions.
Item 9C—Disclosure Regarding Foreign Jurisdictions that Prevent Inspection
15 unchanged sentences
Consolidated Statements of Financial Condition at December 31, 202 3 and 20 22
−Removed: Consolidated Statements of Income for the years ended December 31, 202 2 , 202 1 and 20 20
−Removed: Consolidated Statements of Comprehensive Income for the years ended December 31, 202 2 , 202 1 and 20 20
+Added: Consolidated Statements of Operations for the years ended December 31, 202 3 , 202 2 and 20 21
+Added: Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 202 3 , 202 2 and 20 21
Consolidated Statements of Equity for the years ended December 31, 202 3 , 202 2 and 20 21
14 unchanged sentences
S-3 333-163876 4.7 12/21/2009
−Removed: 4.2 Fourth Amended and Restated Senior Secured Note Purchase Agreement (including the forms of the Notes), dated as of September 1, 2020, by and among Encore Capital Group, Inc.
−Removed: and the purchasers named therein
−Removed: 8-K 000-26489 10.2 9/1/2020
−Removed: 4.2.1 Amendment No.
−Removed: 1 to Fourth Amended and Restated Senior Secured Note Purchase Agreement, dated August 17, 2021, by and among Encore Capital Group, Inc.
−Removed: and the purchasers named therein
−Removed: 10-Q 000-26489 10.2 11/3/2021
−Removed: 4.2.2 Amendment No.
−Removed: 2 to the Fourth Amended and Restated Senior Secured Note Purchase Agreement, dated March 30, 2022, by and among Encore Capital Group, Inc.
−Removed: and the noteholders party thereto
−Removed: 8-K 000-26489 10.2 4/1/2022
−Removed: 4.2.3 Amendment No.
−Removed: 3 to Fourth Amended and Restated Senior Secured Note Purchase Agreement, dated November 14, 2022, by and among Encore Capital Group, Inc.
−Removed: and the purchasers named therein
−Removed: 4.11 Indenture, dated July 20, 2018, between Encore Capital Europe Finance Limited and MUFG Union Bank, N.A.
−Removed: 8-K 000-26489 4.1 7/20/2018
−Removed: Incorporated By Reference
−Removed: Exhibit Number Exhibit Description Form File Number Exhibit Filing Date Filed or Furnished Herewith
−Removed: 4.11.1 Supplemental Indenture (including the form of 4.50% Exchangeable Senior Notes due 2023), dated July 20, 2018, among Encore Capital Europe Finance Limited, Encore Capital Group, Inc.
−Removed: and MUFG Union Bank, N.A.
−Removed: 8-K 000-26489 4.2 7/20/2018
−Removed: 4.11.2 Second Supplemental Indenture, dated October 29, 2020, to the Indenture, dated as of July 20, 2018, by and among Encore Capital Europe Finance Limited, Encore Capital Group, Inc., as guarantor, and MUFG Union Bank, N.A., as trustee
−Removed: 10-Q 000-26489 4.6 11/2/2020
4.13 Indenture (including form of note), dated September 9, 2019, by and among Encore Capital Group, Inc., Midland Credit Management, Inc., as guarantor, and MUFG Union Bank, N.A., as trustee for 2025 Convertible Notes
3 unchanged sentences
4.14 Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
−Removed: 10-K 000-26489 4.14 2/26/2020
4.15 Indenture dated September 24, 2020 between Encore Capital Group, Inc., the subsidiary guarantors party thereto, Citibank, N.A., London Branch as trustee and Truist Bank as security agent for Encore 2025 Notes
8-K 000-26489 4.1 9/24/2020
+Added: Incorporated By Reference
+Added: Exhibit Number Exhibit Description Form File Number Exhibit Filing Date Filed or Furnished Herewith
4.15.1 First Supplemental Indenture, dated November 14, 2022, to the Indenture, dated September 24, 2020, by and between Encore Capital Group, Inc., the subsidiary guarantors party thereto, Citibank, N.A., London Branch as trustee and Truist Bank as security agent for Encore 2025 Notes
+Added: 000-26489 4.15.1
4.16 Indenture dated November 23, 2020 between Encore Capital Group, Inc., the subsidiary guarantors party thereto, Citibank, N.A., London Branch as trustee and Truist Bank as security agent for Encore 2026 Notes
1 unchanged sentence
4.16.1 First Supplemental Indenture, dated November 14, 2022, to the Indenture, dated November 23, 2020, by and between Encore Capital Group, Inc., the subsidiary guarantors party thereto, Citibank, N.A., London Branch as trustee and Truist Bank as security agent for Encore 2026 Notes
+Added: 000-26489 4.16.1
4.17 Indenture dated December 21, 2020 between Encore Capital Group, Inc., the subsidiary guarantors party thereto, Citibank, N.A., London Branch as trustee and Truist Bank as security agent for Encore 2028 Floating Rate Notes
8-K 000-26489 4.1 12/21/2020
−Removed: Incorporated By Reference
−Removed: Exhibit Number Exhibit Description Form File Number Exhibit Filing Date Filed or Furnished Herewith
4.17.1 First Supplemental Indenture, dated November 14, 2022, to the Indenture, dated December 21, 2020, by and between Encore Capital Group, Inc., the subsidiary guarantors party thereto, Citibank, N.A., London Branch as trustee and Truist Bank as security agent for Encore 2028 Floating Rate Notes
+Added: 000-26489 4.17.1
4.18 Indenture dated June 1, 2021 between Encore Capital Group, Inc., the subsidiary guarantors party thereto, GLAS Trust Company LLC as trustee and Truist Bank as security agent for Encore 2028 Notes
1 unchanged sentence
4.18.1 First Supplemental Indenture, dated November 14, 2022, to the Indenture, dated June 1, 2021, by and between Encore Capital Group, Inc., the subsidiary guarantors party thereto, GLAS Trust Company LLC as trustee and Truist Bank as security agent for Encore 2028 Notes
+Added: 000-26489 4.18.1
+Added: Indenture (including form of note), dated March 3, 2023, by and among Encore Capital Group, Inc.
+Added: and Truist Bank, as trustee, for 2029 Convertible Notes
+Added: 000-26489 4.1
10.1+ Form of Indemnification Agreement
1 unchanged sentence
10.5+ Encore Capital Group, Inc.
−Removed: 2013 Incentive Compensation Plan
−Removed: Def 14A 000-26489 Appendix A 4/26/2013
−Removed: 10.4.1+ First Amendment to Encore Capital Group, Inc.
−Removed: 2013 Incentive Compensation Plan, dated February 20, 2014
−Removed: 10-K 000-26489 10.84 2/25/2014
−Removed: 10.4.2+ Form of Non-Incentive Stock Option Agreement under the Encore Capital Group, Inc.
−Removed: 2013 Incentive Compensation Plan
−Removed: 10-Q 000-26489 10.5 8/8/2013
−Removed: 10.4.8+ Form of Restricted Stock Unit Grant Notice and Agreement (Non-Employee Director) under the Encore Capital Group, Inc.
−Removed: 2013 Incentive Compensation Plan
−Removed: 10-Q 000-26489 10.11 8/8/2013
−Removed: 10.4.14+ Form of Performance Stock Option Agreement under the Encore Capital Group, Inc.
−Removed: 2013 Incentive Compensation Plan
−Removed: 10-K 000-26489 10.108 2/23/2017
−Removed: 10.5+ Encore Capital Group, Inc.
Executive Separation Plan
6 unchanged sentences
10-Q 000-26489 10.1 11/9/2016
+Added: Incorporated By Reference
+Added: Exhibit Number Exhibit Description Form File Number Exhibit Filing Date Filed or Furnished Herewith
10.11+ The Encore Capital Group, Inc.
10 unchanged sentences
8-K 000-26489 10.6 6/20/2017
−Removed: Incorporated By Reference
−Removed: Exhibit Number Exhibit Description Form File Number Exhibit Filing Date Filed or Furnished Herewith
10.11.4+ Form of Stock Option Grant Notice and Award Agreement under the Encore Capital Group, Inc.
13 unchanged sentences
8-K 000-26489 10.4 3/15/2018
−Removed: 10.11.9+ Form of Performance Share Unit Award Grant Notice and Award Agreement (ROAE) under the Encore Capital Group, Inc.
−Removed: 2017 Incentive Award Plan
−Removed: 10-K 000-26489 10.11.9 2/26/2020
10.11.10+ Form of Performance Share Unit Award Grant Notice and Award Agreement (ROIC) under the Encore Capital Group, Inc.
1 unchanged sentence
10-K 000-26489 10.11.10 2/23/2023
−Removed: 10.19 Amended and Restated Senior Facilities Agreement, dated March 29, 2022, by and among Encore Capital Group, Inc., the several guarantors, banks and other financial institutions and lenders from time to time party thereto and Truist Bank as Agent and Security Agent
−Removed: 8-K 000-26489 10.1 04/01/2022
−Removed: 10.19.1 Amendment Letter, dated November 9, 2022, to the Amended and Restated Senior Facilities Agreement, dated March 29, 2022, by and among Encore Capital Group, Inc., the several guarantors, banks and other financial institutions and lenders from time to time party thereto and Truist Bank as Agent and Security Agen t
−Removed: 10.22 Senior Facility Agreement, dated November 12, 2021, between Cabot Securitisation UK Limited, Cabot Financial (UK) Limited, HSBC Corporate Trustee Company (UK) Limited as Security Trustee, HSBC Bank PLC as Senior Agent and Goldman Sachs International Bank as Senior Lender
−Removed: 8-K 000-26489 10.1 11/12/2021
−Removed: 10.23.1 Letter Agreement, dated July 17, 2018, between Bank of Montreal and Encore Capital Group, Inc.
−Removed: regarding the Base Capped Call Transaction
−Removed: 8-K 000-26489 10.1 7/20/2018
−Removed: Incorporated By Reference
−Removed: Exhibit Number Exhibit Description Form File Number Exhibit Filing Date Filed or Furnished Herewith
−Removed: 10.23.2 Letter Agreement, dated July 17, 2018, between Credit Suisse International and Encore Capital Group, Inc.
−Removed: regarding the Base Capped Call Transaction
−Removed: 8-K 000-26489 10.2 7/20/2018
−Removed: 10.23.3 Letter Agreement, dated July 17, 2018, between Bank of America, N.A.
−Removed: and Encore Capital Group, Inc.
−Removed: regarding the Base Capped Call Transaction
−Removed: 8-K 000-26489 10.3 7/20/2018
−Removed: 10.23.4 Letter Agreement, dated July 19, 2018, between Bank of Montreal and Encore Capital Group, Inc.
−Removed: regarding the Additional Capped Call Transaction
−Removed: 8-K 000-26489 10.4 7/20/2018
−Removed: 10.23.5 Letter Agreement, dated July 19, 2018, between Credit Suisse International and Encore Capital Group, Inc.
−Removed: regarding the Additional Capped Call Transaction
−Removed: 8-K 000-26489 10.5 7/20/2018
−Removed: 10.23.6 Letter Agreement, dated July 19, 2018, between Bank of America, N.A.
−Removed: and Encore Capital Group, Inc.
−Removed: regarding the Additional Capped Call Transaction
−Removed: 8-K 000-26489 10.6 7/20/2018
−Removed: 10.26+ Executive Service Agreement, dated November 25, 2019, between Cabot UK Holdco Limited and Craig Buick
−Removed: 10-Q 000-26489 10.2+ 5/11/2020
−Removed: 10.26.1+ Letter Agreement, dated November 1, 2022, between Encore Capital Group, Inc.
−Removed: and Craig Buick
−Removed: 10-Q 000-26489 10.1+ 11/2/2022
+Added: 10.19 Amended and Restated Senior Facilities Agreement, dated September 15, 2023 , by and among Encore Capital Group, Inc., the several guarantors, banks and other financial institutions and lenders from time to time party thereto and Truist Bank as Agent and Security Agent
+Added: 000-26489 10.1 11/1/2023
+Added: F orm of Capped Call Confirmations for 2029 Convertible Notes
+Added: 000-26489 10.1 3/3/2023
21 List of Subsidiaries
−Removed: 22 List of Issuers of Guaranteed Securities
−Removed: 23 Consent of Independent Registered Public Accounting Firm, BDO USA, LLP
+Added: 23 Consent of Independent Registered Public Accounting Firm, BDO USA, P.C.
31.1 Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934
31.2 Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934
+Added: Incorporated By Reference
+Added: Exhibit Number Exhibit Description Form File Number Exhibit Filing Date Filed or Furnished Herewith
32.1 Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
+Added: Encore Policy for Recovery of Erro neously Awarded Compensation
101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document X
3 unchanged sentences
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X
−Removed: Incorporated By Reference
−Removed: Exhibit Number Exhibit Description Form File Number Exhibit Filing Date Filed or Furnished Herewith
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X
1 unchanged sentence
+ Management contract or compensatory plan or arrangement.
+Added: In accordance with Item 601(b)(4)(iii)(A) of Regulation S-K, copies of certain instruments defining the rights of holders of long-term debt of the company are not filed herewith.
+Added: Pursuant to this regulation, we hereby agree to furnish a copy of any such instrument to the SEC upon request.
Item 16—Form 10-K Summary
34 unchanged sentences
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Report of Independent Registered Public Accounting Firm ( BDO USA, LLP ;
+Added: Report of Independent Registered Public Accounting Firm ( BDO USA, P.C.
San Diego, California ;
1 unchanged sentence
Consolidated Statements of Financial Condition at December 31, 2023 and 2022
−Removed: Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020
−Removed: Consolidated Statements of Comprehensive Income for the years ended December 31, 2022, 2021 and 2020
+Added: Consolidated Statements of Ope rations for the years ended December 31, 2023, 2022 and 2021
+Added: Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2023, 2022 and 2021
Consolidated Statements of Equity for the years ended December 31, 2023, 2022 and 2021
18 unchanged sentences
We have audited the accompanying consolidated statements of financial condition of Encore Capital Group, Inc.
−Removed: (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).
+Added: (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive (loss) income, equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated February 21, 2024 expressed an unqualified opinion thereon.
−Removed: Change in Accounting Principle
−Removed: As discussed in Note 1 to the consolidated financial statements, effective January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) No.
−Removed: 2020-06, Debt — Debt with Conversion and Other Options (“Subtopic 470-20”) and Derivatives and Hedging — Contracts in Entity’s Own Equity (“Subtopic 815-40”):
−Removed: Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”).
Basis for Opinion
14 unchanged sentences
Estimate of Expected Future Recoveries on Purchased Credit Deteriorated Assets
−Removed: As more fully described in Notes 1 and 4 to the consolidated financial statements, the Company’s investment in receivable portfolios, net balance was approximately $3.1 billion at December 31, 2022 and the resulting changes in recoveries for the year ended December 31, 2022 were $93.1 million.
+Added: As more fully described in Notes 1 and 4 to the consolidated financial statements, the Company’s investment in receivable portfolios, net balance was approximately $3.5 billion at December 31, 2023 and the resulting changes in recoveries for the year ended December 31, 2023 was a decrease of $82.5 million.
Investment in receivable portfolios, net is comprised of purchased loans that have experienced significant deterioration of credit quality since origination.
In accordance with the Company’s charge-off policy, each individual loan is deemed to be uncollectible.
−Removed: Receivable portfolio purchases are aggregated based on similar risk
−Removed: characteristics (“pool”), and a negative allowance is established based on expected future recoveries of the pool using a discounted cash flow approach.
+Added: Receivable portfolio purchases are aggregated based on similar risk characteristics (“pool”), and a negative allowance is established based on expected future recoveries of the pool using a discounted cash flow approach.
Subsequent changes (favorable and unfavorable) in expected future recoveries are recognized within changes in recoveries in the consolidated statements of income.
3 unchanged sentences
Specifically, management is required to make significant judgments and assumptions to estimate expected future recoveries.
−Removed: Estimated future recoveries are based on historical experience, current conditions, reasonable and supportable forecasts, and certain qualitative factors.
+Added: Estimated future recoveries are based on historical experience, current conditions, reasonable and supportable forecasts, and other quantitative and qualitative factors.
Auditing these elements involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters.
The primary procedures we performed to address this critical audit matter included:
−Removed: • Testing the design and operating effectiveness of controls over management’s assessment of the reasonableness of inputs and outputs from the Company’s proprietary statistical and behavioral models used to forecast expected future recoveries, and performance monitoring of expected future recoveries.
−Removed: • Testing the completeness and accuracy of collection data used by management to monitor each pool for current trends, actual versus expected performance, and the expected amount and timing of future recoveries (curve shape).
−Removed: • Evaluating management’s process used to develop estimates of expected future recoveries and certain qualitative factors by testing source data and evaluating the reasonableness of assumptions by comparing to historical results, including current period forecasts to actual performance, recent performance trends, and curve shape.
+Added: • Testing the design and operating effectiveness of controls over management’s assessment of the reasonableness of inputs and outputs from the Company’s proprietary statistical and behavioral models used to forecast expected future recoveries, and performance monitoring of expected future recoveries, which included the observation of certain key governance meetings.
+Added: • Testing the collection data used by management to monitor each pool for current trends, actual versus expected performance, and the expected amount and timing of future recoveries (curve shape).
+Added: • Evaluating management’s process used to develop estimates of expected future recoveries and certain qualitative factors by:
+Added: (i) testing source data;
+Added: (ii) assessing external evidence, such as macroeconomic data;
+Added: and (iii) evaluating the reasonableness of assumptions by comparing to historical results, including current and past period forecasts to actual performance, recent performance trends, and curve shape.
Goodwill Impairment Assessment
As more fully described in Notes 1 and 15 to the consolidated financial statements, the Company’s goodwill balance was approximately $606.5 million at December 31, 2023, which was allocated between two reporting units, MCM and Cabot, that carried goodwill.
−Removed: The Company performed its annual goodwill impairment assessment as of October 1, 2022 and determined that the fair value of each reporting unit was in excess of its carrying value.
−Removed: For the MCM and Cabot reporting units, management performed a quantitative analysis, which utilized a combination of the income and the market approaches.
+Added: The Company performed its annual quantitative goodwill impairment assessment for both the MCM and Cabot reporting units as of October 1, 2023, which utilized a combination of the income and the market approaches.
The Company also evaluated the aggregate fair value of its reporting units to its aggregate market capitalization at the testing date.
+Added: As a result of this analysis, the Company determined that the fair value of the MCM reporting unit exceeded its carrying value, while the fair value of the Cabot reporting unit was less than its carrying value, and recorded an impairment charge of $238.2 million, which represented the difference between the assessed fair value and carrying value thereof.
We identified the goodwill impairment assessment of the MCM and Cabot reporting units as a critical audit matter because of the significant assumptions and judgments management made as part of the assessment to estimate the fair value of the reporting units.
4 unchanged sentences
• Evaluating management’s process for developing fair value estimates determined using the income and market approaches including testing the relevance and reliability of underlying data, and evaluating significant management assumptions to historical results and market participant data.
+Added: • Recalculating the impairment charge to the Cabot reporting unit based on the difference between the assessed fair value and carrying value thereof.
• Testing the reconciliation of the estimated fair value of the Company’s reporting units to the indicated market capitalization of the Company, as a whole.
• Utilizing personnel with specialized knowledge and skill in valuation to assist in:
−Removed: (i) assessing the appropriateness of the fair value methodology, (ii) evaluating the reasonableness of certain assumptions used including the discount rate, selection of peer group companies, valuation multiples, and the terminal value, (iii) assessing the reasonableness of the discount rate by developing independent estimates and comparing estimates to those utilized by management, and (iv) evaluating the reasonableness of the market capitalization reconciliation.
−Removed: /s/ BDO USA, LLP
+Added: (i) assessing the appropriateness of the fair value methodology;
+Added: (ii) evaluating the reasonableness of certain assumptions used including the discount rate, selection of peer group companies, valuation multiples, and the terminal value;
+Added: (iii) assessing the reasonableness of the discount rate by developing independent estimates and comparing estimates to those utilized by management;
+Added: and (iv) evaluating the reasonableness of the market capitalization reconciliation.
+Added: /s/ BDO USA, P.C.
We have served as the Company's auditor since 2001.
38 unchanged sentences
ENCORE CAPITAL GROUP, INC.
−Removed: Consolidated Statements of Income
+Added: Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
14 unchanged sentences
Depreciation and amortization 41,737 46,419 50,079
+Added: Goodwill impairment 238,200 — —
+Added: Impairment of intangible assets 18,726 4,075 —
Total operating expenses 1,206,145 936,173 981,227
5 unchanged sentences
Total other expense ( 196,799 ) ( 151,185 ) ( 196,731 )
−Removed: Income before income taxes 310,989 436,541 282,898
+Added: (Loss) income before income taxes
+Added: ( 180,264 ) 310,989 436,541
Provision for income taxes ( 26,228 ) ( 116,425 ) ( 85,340 )
−Removed: Net income 194,564 351,201 212,524
+Added: Net (loss) income
+Added: ( 206,492 ) 194,564 351,201
Net income attributable to noncontrolling interest — — ( 419 )
−Removed: Net income attributable to Encore Capital Group, Inc.
−Removed: stockholders $ 194,564 $ 350,782 $ 211,848
−Removed: Earnings per share attributable to Encore Capital Group, Inc.:
+Added: Net (loss) income attributable to Encore Capital Group, Inc.
+Added: $ ( 206,492 ) $ 194,564 $ 350,782
+Added: (Loss) income per share attributable to Encore Capital Group, Inc.:
+Added: Basic (loss) income per share from:
Basic $ ( 8.72 ) $ 8.06 $ 11.64
5 unchanged sentences
ENCORE CAPITAL GROUP, INC.
−Removed: Consolidated Statements of Comprehensive Income
+Added: Consolidated Statements of Comprehensive (Loss) Income
(In Thousands)
1 unchanged sentence
2023 2022 2021
−Removed: Net income $ 194,564 $ 351,201 $ 212,524
+Added: Net (loss) income
+Added: $ ( 206,492 ) $ 194,564 $ 351,201
Other comprehensive (loss) income, net of tax:
−Removed: Change in unrealized gain on derivative instruments:
−Removed: Unrealized gain on derivative instruments 36,385 12,835 234
+Added: Change in unrealized (loss) gain on derivative instruments:
+Added: Unrealized (loss) gain on derivative instruments
+Added: ( 44,478 ) 36,385 12,835
Income tax effect 4,891 ( 407 ) ( 2,165 )
−Removed: Unrealized gain on derivative instruments, net of tax 35,978 10,670 168
+Added: Unrealized (loss) gain on derivative instruments, net of tax
+Added: ( 39,587 ) 35,978 10,670
Change in foreign currency translation:
−Removed: Unrealized (loss) gain on foreign currency translation ( 78,232 ) ( 15,309 ) 17,160
+Added: Unrealized gain (loss) on foreign currency translation
+Added: 15,376 ( 78,232 ) ( 15,309 )
Income tax effect ( 893 ) ( 3,014 ) —
Removal of other comprehensive loss in connection with divestiture — — 19,904
−Removed: Unrealized (loss) gain on foreign currency translation, net of divestiture ( 81,246 ) 4,595 19,792
+Added: Unrealized gain (loss) on foreign currency translation, net of divestiture
+Added: 14,483 ( 81,246 ) 4,595
Other comprehensive (loss) income, net of tax ( 25,104 ) ( 45,268 ) 15,265
−Removed: Comprehensive income 149,296 366,466 232,484
+Added: Comprehensive (loss) income
+Added: ( 231,596 ) 149,296 366,466
Comprehensive income attributable to noncontrolling interest:
Net income attributable to noncontrolling interest — — ( 419 )
−Removed: Unrealized income on foreign currency translation — — ( 7 )
Comprehensive income attributable to noncontrolling interest — — ( 419 )
−Removed: Comprehensive income attributable to Encore Capital Group, Inc.
+Added: Comprehensive (loss) income attributable to Encore Capital Group, Inc.
$ ( 231,596 ) $ 149,296 $ 366,047
12 unchanged sentences
Net income — — — 350,782 — 419 351,201
−Removed: Other comprehensive income, net of tax — — — — 17,321 7 17,328
−Removed: Purchase of noncontrolling interest — — ( 2,394 ) — — ( 1,428 ) ( 3,822 )
−Removed: Issuance of share-based awards, net of shares withheld for employee taxes 248 2 ( 6,316 ) — — — ( 6,314 )
−Removed: Stock-based compensation — — 16,560 — — — 16,560
−Removed: Removal of other comprehensive loss in connection with divestiture — — — — 2,632 — 2,632
−Removed: Balance as of December 31, 2020 31,345 313 230,440 1,055,668 ( 68,813 ) 2,468 1,220,076
−Removed: Cumulative adjustment — — ( 40,372 ) 22,458 — — ( 17,914 )
−Removed: Net income — — — 350,782 — 419 351,201
Other comprehensive loss, net of tax — — — — ( 4,639 ) — ( 4,639 )
13 unchanged sentences
Balance as of December 31, 2022 23,323 233 — 1,278,210 ( 98,816 ) — 1,179,627
+Added: — — — ( 206,492 ) — — ( 206,492 )
+Added: Other comprehensive loss, net of tax
+Added: — — — — ( 25,104 ) — ( 25,104 )
+Added: Exercise of stock options and issuance of share-based awards, net of shares withheld for employee taxes 222 2 ( 5,108 ) — — — ( 5,106 )
+Added: Stock-based compensation — — 13,854 — — — 13,854
+Added: Purchase of capped call options, net of tax effect — — ( 13,865 ) — — — ( 13,865 )
+Added: Unwind of the existing capped call options — — 30,913 — — — 30,913
+Added: Settlement of convertible senior notes — — ( 14,742 ) ( 22,547 ) — — ( 37,289 )
+Added: Balance as of December 31, 2023
+Added: 23,545 $ 235 $ 11,052 $ 1,049,171 $ ( 123,920 ) $ — $ 936,538
See accompanying notes to consolidated financial statements
5 unchanged sentences
Operating activities:
−Removed: Net income $ 194,564 $ 351,201 $ 212,524
+Added: Net (loss) income $ ( 206,492 ) $ 194,564 $ 351,201
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 41,737 46,419 50,079
−Removed: Expense related to financing — 9,300 51,117
Other non-cash interest expense, net 17,160 15,875 17,785
1 unchanged sentence
Deferred income taxes ( 55,916 ) 46,410 35,371
+Added: Goodwill impairment 238,200 — —
+Added: Impairment of intangible assets 18,726 4,075 —
Changes in recoveries 82,530 ( 93,145 ) ( 199,136 )
7 unchanged sentences
Collections applied to investment in receivable portfolios, net 658,130 709,176 1,019,629
−Removed: Purchases of assets held for sale ( 39,340 ) ( 17,090 ) ( 1,502 )
+Added: Purchases of real estate owned
+Added: ( 26,901 ) ( 39,340 ) ( 17,090 )
Purchases of property and equipment ( 24,807 ) ( 37,224 ) ( 33,372 )
+Added: Proceeds from sale of real estate owned
+Added: 52,636 27,722 31,159
Other, net ( 793 ) — ( 3,150 )
6 unchanged sentences
Repayment of senior secured notes ( 39,080 ) ( 39,080 ) ( 359,175 )
+Added: Proceeds from issuance of convertible senior notes 230,000 — —
Repayment of convertible senior notes ( 212,480 ) ( 221,153 ) ( 161,000 )
1 unchanged sentence
Other, net ( 7,040 ) ( 22,357 ) ( 12,208 )
−Removed: Net cash used in financing activities ( 107,445 ) ( 655,692 ) ( 403,200 )
−Removed: Net decrease in cash and cash equivalents ( 26,999 ) ( 12,743 ) ( 7,510 )
+Added: Net cash provided by (used in) financing activities
+Added: 268,300 ( 107,445 ) ( 655,692 )
+Added: Net increase (decrease) in cash and cash equivalents
+Added: 19,350 ( 26,999 ) ( 12,743 )
Effect of exchange rate changes on cash and cash equivalents ( 4,898 ) ( 18,734 ) 13,204
38 unchanged sentences
Translation gains or losses are the material components of accumulated other comprehensive income or loss and are reclassified to earnings upon the substantial sale or liquidation of investments in foreign operations.
−Removed: Recently Adopted Accounting Guidance
−Removed: On January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) No.
−Removed: 2020-06, Debt — Debt with Conversion and Other Options (“Subtopic 470-20”) and Derivatives and Hedging — Contracts in Entity’s Own Equity (“Subtopic 815-40”):
−Removed: Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”).
−Removed: The Company adopted ASU 2020-06 using the modified-retrospective approach.
−Removed: The ASU simplifies the accounting for convertible instruments by removing certain models in Subtopic 470-20 and revises the guidance in Subtopic 815-40 to simplify the accounting for contracts in an entity’s own equity.
−Removed: The ASU also amends the guidance to improve the consistency of earnings per share calculations, which requires the if-converted method be used for convertible instruments.
−Removed: Under ASU 2020-06, the Company’s convertible and exchangeable notes are no longer bifurcated to a debt component and an equity component, instead, they are carried as a single liability which reflects the principal amount of the convertible and exchangeable notes.
−Removed: The interest expense recognized on the convertible and exchangeable notes is based on coupon rates, rather than higher effective interest rates.
−Removed: As a result, the Company recognizes lower interest expense after the adoption.
−Removed: Additionally, effective January 1, 2021, the Company uses the if-converted method in calculating the dilutive effect of its convertible and exchangeable notes for earnings per share.
−Removed: The Company has not adjusted prior period comparative information and will continue to disclose prior period financial information in accordance with the previous accounting guidance.
−Removed: The following table summarizes the cumulative effects of adopting the new guidance on the Company’s consolidated statements of financial condition at January 1, 2021 ( in thousands ):
−Removed: Balance as of December 31, 2020 Adjustment Opening Balance as of January 1, 2021
−Removed: Convertible notes and exchangeable notes $ 583,500 $ — $ 583,500
−Removed: Debt discount ( 19,364 ) 19,364 —
−Removed: Other liabilities (for deferred tax liabilities) 146,893 ( 1,450 ) 145,443
−Removed: Additional paid-in capital 230,440 ( 40,372 ) 190,068
−Removed: Accumulated earnings 1,055,668 22,458 1,078,126
−Removed: With the exception of the updated standard discussed above, there have been no recent accounting pronouncements or changes in accounting pronouncements during the year ended December 31, 2022.
+Added: Reclassification
+Added: The Company made immaterial reclassifications to the prior year’s consolidated financial statements to conform to current year presentation.
+Added: The Company presented impairment of intangible assets within the depreciation and amortization expense line item in the consolidated statements of income on its Form 10-K for the year ended December 31, 2022, and has reclassed such impairment charge as a single line item in the Company’s consolidated statements of operations on this Form 10-K for the year ended December 31, 2023.
+Added: The Company made the same reclassification to its consolidated statements of cash flows accordingly.
+Added: The reclassifications have no effect on net income, total assets, or accumulated earnings as previously reported.
+Added: Recently Adopted Accounting Pronouncements
+Added: There were no recently adopted accounting pronouncements.
+Added: Recent Accounting Standards or Updates Not Yet Effective
+Added: In August 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) 2023-05, Business Combinations - Joint Venture Formations (Subtopic 805-60):
+Added: Recognition and Initial Measurement, which addresses the accounting by a joint venture for contributions received upon its formation (“ASU 2023-05”).
+Added: ASU 2023-05 requires joint ventures to measure all assets and liabilities upon formation at fair value.
+Added: This guidance will be applied prospectively to all joint venture formations with a formation date on or after January 1, 2025.
+Added: This amendment would only impact the Company upon adoption if, in the future, it entered into an applicable transaction.
+Added: In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements:
+Added: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, to amend certain disclosure and presentation requirements for a variety of topics within the Accounting Standards Codification (“ASC”).
+Added: These amendments align the requirements in the ASC to the removal of certain disclosure requirements set out in Regulation S-X and Regulation S-K, announced by the SEC.
+Added: The effective date for each amended topic in the ASC is either the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or on June 30, 2027, if the SEC has not removed the requirements by that date.
+Added: Early adoption is prohibited.
+Added: The Company is currently evaluating the potential impact, but we do not expect the adoption of this guidance to have a material impact on its consolidated financial statements and related disclosures.
+Added: In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):
+Added: Improvements to Reportable Segment Disclosures (“ASU 2023-07”).
+Added: ASU 2023-07 requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within the segment measure of profit or loss.
+Added: This guidance will be applied retrospectively and is effective for annual reporting periods in fiscal years beginning after December 15, 2023, and interim reporting periods in fiscal years beginning after December 31, 2024.
+Added: This ASU will likely result in additional required disclosure when adopted.
+Added: The Company is currently evaluating the provisions of this ASU and the impact on its consolidated financial statements and related disclosures.
+Added: In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):
+Added: Improvements to Income Tax Disclosures (“ASU 2023-09”).
+Added: ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.
+Added: The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions and applies to all entities subject to income taxes.
+Added: The new standard is effective for annual periods beginning after December 15, 2024.
+Added: The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.
Use of Estimates
The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
−Removed: On an ongoing basis, the Company evaluates significant estimates, including changes in estimated future recoveries on its investment in receivable portfolios, fair value of goodwill, and income taxes, among others.
+Added: On an ongoing basis, the Company evaluates significant estimates, including estimated future recoveries on its investment in receivable portfolios, fair value of goodwill, and income taxes, among others.
The Company bases its estimates on assumptions, both historical and forward looking, that are believed to be reasonable.
21 unchanged sentences
The Company further groups these static pools by geographic location.
−Removed: Once a pool is established, the portfolios will remain in
−Removed: the designated pool unless the underlying risk characteristics change, which is not expected due to the delinquent nature of the individual loans.
+Added: Once a pool is established, the portfolios will remain in the designated pool unless the underlying risk characteristics change.
The purchase EIR of a pool will not change over the life of the pool even if expected future cash flows change.
13 unchanged sentences
The Company did not establish a negative allowance from ZBA pools as the Company elected the Transition Resource Group for Credit Losses’ practical expedient to retain the integrity of its legacy pools.
−Removed: All subsequent collections to the ZBA pools are recognized as ZBA revenue, which is included in revenue from receivable portfolios in the Company’s consolidated statements of income.
+Added: All subsequent collections to the ZBA pools are recognized as ZBA revenue, which is included in revenue from receivable portfolios in the Company’s consolidated statements of operations.
Transfers of Financial Assets
1 unchanged sentence
Whether control has been relinquished requires, among other things, an evaluation of relevant legal considerations and an assessment of the nature and extent of the Company’s ongoing involvement with the assets transferred.
−Removed: Gains and losses stemming from transfers reported as sales are included in “Other revenues” in the Company’s consolidated statements of income.
+Added: Gains and losses stemming from transfers reported as sales are included in “Other revenues” in the Company’s consolidated statements of operations.
Assets obtained and liabilities incurred in connection with transfers reported as sales are initially recognized in the statements of financial condition at fair value.
26 unchanged sentences
If the asset is not recoverable, its carrying amount would be adjusted down to its fair value.
+Added: Real Estate Owned
+Added: Real estate-owned assets, or REO assets, represent real estate assets acquired when (1) the Company takes possession of the underlying real estate assets of non-performing secured mortgage portfolio previously purchased or (2) when the Company purchases real estate assets.
+Added: Upon repossession or foreclosure, the Company initially records the property received at its fair value less costs to sell.
+Added: Subsequent to acquisition, REO is carried at the lower of cost or fair value, less estimated selling costs.
+Added: Management performs valuations at each reporting period end using Level 3 measurements based on appraised values using market comparables and a valuation allowance is established by a charge to income for any excess of the carrying value over the fair value, less estimated costs to sell the property.
+Added: The REOs are generally acquired at deeply discounted values and therefore the valuation allowances associated with these assets are immaterial.
+Added: Recoveries in fair value during the holding period are recognized until the valuation allowance is reduced to zero.
+Added: Proceeds received in excess of the carrying value of the REO and any associated direct selling costs are recorded as other revenues within the Company’s consolidated statements of operations.
+Added: Costs related to holding and maintaining the property are charged to operating expenses.
The Company recognizes operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated statements of financial condition.
21 unchanged sentences
The Company has certain share awards that include market conditions that affect vesting, the fair value of these shares is estimated using a lattice model.
−Removed: Compensation cost is not adjusted if the market condition is not met, as long as the
−Removed: requisite service is provided.
+Added: Compensation cost is not adjusted if the market condition is not met, as long as the requisite service is provided.
For share awards that require service and performance conditions, the Company recognizes compensation cost only for those awards expected to meet the service and performance vesting conditions over the requisite service period of the award.
Forfeiture rates are estimated based on the Company’s historical experience.
−Removed: Stock-based compensation expenses are included in “Salaries and Employee Benefits” in the Company’s consolidated statements of income.
+Added: Stock-based compensation expenses are included in “Salaries and Employee Benefits” in the Company’s consolidated statements of operations.
See “Note 10:
3 unchanged sentences
Changes in the fair value of derivative instruments are recorded in earnings unless hedge accounting criteria are met.
−Removed: The Company designates certain derivative instruments as cash flow hedges.
+Added: The Company designates derivative instruments as cash flow hedges or fair value hedges based on the intended use of the derivative.
+Added: The changes in fair value of derivatives designated as fair value hedges is recorded each period in other income (expense) with the offsetting changes in fair value of the hedged item attributed to the risk being hedged.
+Added: Changes in the fair value of derivatives that are not highly effective in hedging the changes in fair value of the hedged item are recognized immediately in current earnings.
The changes in fair value of derivatives designated as cash flow hedges is recorded each period, net of tax, in accumulated other comprehensive income or loss until the related hedged transaction occurs.
1 unchanged sentence
If the hedged cash flows are still reasonably possible to occur, the hedged cash flows will continue to be recorded in accumulated other comprehensive income or loss until the hedged cash flows are no longer probable of occurring.
−Removed: The Company classifies the cash flows from a derivative instrument that is accounted for as a cash flow hedge (and that does not contain an other-than-insignificant financing element at inception) in the same category as the cash flows from the items being hedged.
+Added: The Company classifies the cash flows from a derivative instrument
+Added: that is accounted for as a cash flow hedge (and that does not contain an other-than-insignificant financing element at inception) in the same category as the cash flows from the items being hedged.
Derivatives and Hedging Instruments” for further discussion.
3 unchanged sentences
The Company may be unable to find alternative sources from which to purchase charged-off receivables, and even if it could successfully replace these purchases, the search could take time and the receivables could be of lower quality, cost more, or both, any of which could adversely affect the Company’s business, financial condition and operating results.
−Removed: Earnings Per Share
−Removed: Basic earnings per share is calculated by dividing net earnings attributable to Encore by the weighted average number of shares of common stock outstanding during the period.
−Removed: Diluted earnings per share is calculated based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period.
+Added: Income or Loss Per Share
+Added: Basic income or loss per share is calculated by dividing net income or loss attributable to Encore by the weighted average number of shares of common stock outstanding during the period.
+Added: The number of shares used to calculate the diluted earnings per share is computed by using the basic weighted-average number of common shares outstanding plus any potentially dilutive potential common shares outstanding during the period, except when their effect is anti-dilutive.
Dilutive potential common shares include outstanding stock based awards, and the dilutive effect of the convertible and exchangeable senior notes, if applicable.
5 unchanged sentences
All of the Company’s other convertible and exchangeable notes require net share settlement, using the if-converted method results in a similar dilutive effect as using the treasury stock method under the previous accounting standard, due to the fact that only in-the-money shares are included in the dilutive effect.
−Removed: A reconciliation of shares used in calculating earnings per basic and diluted shares follows (in thousands, except per share amounts) :
+Added: A reconciliation of shares used in calculating income or loss per basic and diluted shares follows (in thousands, except per share amounts) :
Year Ended December 31,
2023 2022 2021
−Removed: Net income attributable to Encore Capital Group, Inc.
+Added: Net (loss) income attributable to Encore Capital Group, Inc.
$ ( 206,492 ) $ 194,564 $ 350,782
3 unchanged sentences
Total weighted-average dilutive shares outstanding 23,670 26,092 31,153
−Removed: Basic earnings per share $ 8.06 $ 11.64 $ 6.74
−Removed: Diluted earnings per share $ 7.46 $ 11.26 $ 6.68
−Removed: Anti-dilutive employee stock options outstanding were approximately zero , 3,000 and 51,000 during the years ended December 31, 2022, 2021, and 2020, respectively.
+Added: Basic (loss) income per share
+Added: $ ( 8.72 ) $ 8.06 $ 11.64
+Added: Diluted (loss) income per share
+Added: $ ( 8.72 ) $ 7.46 $ 11.26
+Added: Anti-dilutive employee stock options outstanding were negligible during the years ended December 31, 2023, 2022, and 2021.
Fair Value Measurements
6 unchanged sentences
Unobservable inputs, including inputs that reflect the reporting entity’s own assumptions.
+Added: The Company's cash and cash equivalents, certain other current assets, accounts payable and accrued liabilities, and other current liabilities approximate their fair values due to their short-term nature, which are determined to be a Level 1 measurement.
Financial Instruments Required To Be Carried At Fair Value
4 unchanged sentences
Cross-currency swap agreements — 361 — 361
+Added: Interest rate swap agreements — ( 22,510 ) — ( 22,510 )
+Added: Cross-currency swap agreements — ( 28,039 ) — ( 28,039 )
Fair Value Measurements as of December 31, 2022
2 unchanged sentences
Cross-currency swap agreements — ( 36,918 ) — ( 36,918 )
−Removed: Contingent consideration — — ( 5,218 ) ( 5,218 )
Derivative Contracts:
1 unchanged sentence
Fair values of these derivative instruments are estimated using industry standard valuation models.
−Removed: models project future cash flows and discount the future amounts to a present value using market-based observable inputs, including interest rate curves, foreign currency exchange rates, and forward and spot prices for currencies.
+Added: These models project future cash flows and discount the future amounts to a present value using market-based observable inputs, including interest rate curves, foreign currency exchange rates, and forward and spot prices for currencies.
Contingent Consideration:
4 unchanged sentences
All of the Company’s contingent consideration obligations were fully resolved as of December 31, 2022.
+Added: There were no new contingent liabilities resulted from mergers and acquisitions activities for the year ended December 31, 2023.
The following table provides a roll-forward of the fair value of contingent consideration, for the years ended December 31, 2022, and 2021 (in thousands) :
1 unchanged sentence
Issuance of contingent consideration in connection with purchase of noncontrolling interest
−Removed: Payment of contingent consideration ( 88 )
−Removed: Effect of foreign currency translation 131
−Removed: Balance as of December 31, 2020 2,957
−Removed: Issuance of contingent consideration in connection with purchase of noncontrolling interest
Change in fair value of contingent consideration ( 388 )
8 unchanged sentences
Certain assets are measured at fair value on a nonrecurring basis.
−Removed: These assets include real estate-owned assets classified as held for sale at the lower of their carrying value or fair value less cost to sell.
+Added: The fair values of goodwill and intangible assets are determined using various valuation techniques under Level 3 fair value hierarchy, refer to “Note 15, Goodwill and Intangible Assets” for further details.
+Added: REO assets are classified as held for sale at the lower of their carrying value or fair value less cost to sell.
The fair value of the assets held for sale and estimated selling expenses were determined at the time of initial recognition and in each reporting period using Level 3 measurements based on appraised values using market comparables.
13 unchanged sentences
1,649,621 1,598,636 1,480,258 1,334,686
−Removed: Convertible senior notes due March 2022 (2)
−Removed: — — 150,000 195,009
Exchangeable senior notes due September 2023 — — 172,500 205,227
Convertible senior notes due October 2025 100,000 136,403 100,000 130,556
+Added: Convertible senior notes due March 2029 230,000 226,794 — —
Cabot securitisation senior facility 324,646 324,646 423,522 423,522
175,000 175,000 — —
+Added: Other borrowings 24,904 24,904 23,512 23,512
+Added: ________________________
(1) Carrying amount represents historical cost, adjusted for any related debt discount or debt premium.
−Removed: (2) The 2022 Convertible Senior Notes matured on March 15, 2022 and the Company repaid the notes in cash.
Investment in Receivable Portfolios:
7 unchanged sentences
Accordingly, the Company used Level 2 inputs for these debt instrument fair value estimates.
−Removed: The carrying value of the Company’s senior secured revolving credit facility and securitisation senior facility approximates fair value due to the use of current market rates that are repriced frequently.
+Added: The carrying value of the Company’s senior secured revolving credit facility, securitisation senior facility and U.S.
+Added: facility approximates fair value due to the use of current market rates that are repriced frequently.
Derivatives and Hedging Instruments
6 unchanged sentences
Location Fair Value
+Added: Derivatives designated as hedging instruments:
Interest rate cap contracts Other assets $ 14,564 Other assets $ 36,807
+Added: Interest rate swap agreements Other liabilities ( 22,510 ) — —
+Added: Cross-currency swap agreements Other assets 361 — —
Cross-currency swap agreements Other liabilities ( 28,039 ) Other liabilities ( 36,918 )
+Added: Derivatives not designated as hedging instruments:
+Added: Interest rate cap contracts Other assets 2,386 — —
Derivatives Designated as Hedging Instruments
−Removed: The Company may periodically enter into interest rate swap agreements to reduce its exposure to fluctuations in interest rates on variable interest rate debt and their impact on earnings and cash flows.
+Added: The Company may periodically enter into interest rate swap agreements and interest rate cap contracts to reduce its exposure to fluctuations in interest rates on variable interest rate debt and their impact on earnings and cash flows.
Under the swap agreements, the Company receives floating interest rate payments and makes interest payments based on fixed interest rates.
−Removed: As of December 31, 2022, there were no interest rate swap agreements outstanding.
−Removed: The Company also uses interest rate cap contracts to manage its risk related to the interest rate fluctuations in its variable interest rate bearing debt.
−Removed: As of December 31, 2022, the Company held two interest rate cap contracts with a notional amount of approximately $ 852.5 million.
−Removed: The interest rate cap hedging the fluctuations in three-month EURIBOR floating rate debt (“2019 Cap”) has a notional amount of € 400.0 million (approximately $ 428.9 million based on an exchange rate of $1.00 to € 0.93 , the exchange rate as of December 31, 2022) and matures in June 2024.
−Removed: The interest rate cap hedging the fluctuations in sterling overnight index average (“SONIA”) bearing debt (“2021 Cap”) has a notional amount of £ 350.0 million (approximately $ 423.5 million based on an exchange rate of $1.00 to £ 0.83 , the exchange rate as of December 31, 2022) and matures in September 2024.
−Removed: The Company expects the hedge relationships to be highly effective and designates the 2019 Cap and 2021 Cap as cash flow hedge instruments.
−Removed: The Company expects to reclassify approximately $ 20.3 million of net derivative gain from OCI into earnings relating to interest rate caps within the next 12 months.
−Removed: The Company uses cross-currency swap agreements to manage foreign currency exchange risk by converting fixed-rate Euro-denominated borrowings including periodic interest payments and the payment of principal at maturity to fixed-rate USD debt.
−Removed: The cross-currency swap agreements are accounted for as cash flow hedges.
−Removed: As of December 31, 2022, there were four cross-currency swap agreements outstanding with a total notional amount of € 350.0 million (approximately $ 375.3 million based on an exchange rate of $1.00 to € 0.93 , the exchange rate as of December 31, 2022).
−Removed: The Company expects to reclassify approximately $ 4.4 million of net derivative loss from OCI into earnings relating to cross-currency swaps within the next 12 months.
−Removed: The following table summarizes the effects of derivatives in cash flow hedging relationships designated as hedging instruments in the Company’s consolidated financial statements (in thousands):
+Added: Under the cap contracts, the Company receives floating interest rate payments and makes interest payments based on capped interest rates.
+Added: The Company designates its interest rate swap and interest rate cap instruments as cash flow hedges at inception.
+Added: The Company uses cross-currency swap agreements to manage foreign currency exchange risk by converting fixed-rate Euro-denominated borrowings and fixed-rate GBP-denominated borrowings including periodic interest payments and the payment of principal at maturity to fixed-rate USD debt.
+Added: The cross-currency swap agreements are accounted for as fair value hedges.
+Added: The following table summarizes the terms of the derivative instruments designated as hedging instruments as recorded in the Company’s consolidated statements of financial condition:
+Added: December 31, 2023
+Added: Effective date Maturity Date Hedge Designation Notional Amount Receive Floating Rate Index
+Added: Interest rate cap contracts
+Added: 2019 Cap January 2020 June 2024 Cash flow hedge $ 441.5 million 3-month EURIBOR
+Added: November 2021 September 2024 Cash flow hedge $ 318.3 million SONIA
+Added: 2024 Cap September 2024 September 2026 Cash flow hedge $ 324.6 million SONIA
+Added: Interest rate swap agreements
+Added: 2023 Euro IR Swap October 2023 January 2028 Cash flow hedge $ 110.4 million 3-month EURIBOR
+Added: 2024 Euro IR Swaps
+Added: June 2024 January 2028 Cash flow hedge $ 458.1 million 3-month EURIBOR
+Added: 2023 SOFR IR Swaps
+Added: November 2023 October 2026 Cash flow hedge $ 150.0 million 1-month SOFR CME Term
+Added: Cross-currency swap agreements
+Added: 2020 Euro Swaps September 2020 October 2025 Fair value hedge $ 386.3 million —
+Added: 2023 GBP Swaps July 2023 February 2026 Fair value hedge $ 381.9 million —
+Added: _______________________
+Added: (1) The total notional amount of the 2021 Cap was $ 445.6 million, of which $ 318.3 million was hedge designated and $ 127.3 million was not hedge designated as of December 31, 2023.
+Added: December 31, 2022
+Added: Effective date Maturity Date Hedge Designation Notional Amount Receive Floating Rate Index
+Added: Interest rate cap contracts
+Added: 2019 Cap January 2020 June 2024 Cash flow hedge $ 428.9 million 3-month EURIBOR
+Added: 2021 Cap November 2021 September 2024 Cash flow hedge $ 423.5 million SONIA
+Added: Cross-currency swap agreements
+Added: 2020 Euro Swaps September 2020 October 2025 Cash flow hedge
+Added: $ 375.3 million —
+Added: The Company expects to reclassify approximately $ 10.6 million of net derivative gain from OCI into earnings relating to its cash flow designated derivatives within the next 12 months.
+Added: The following table summarizes the effects of derivatives designated as hedging instruments in the Company’s consolidated financial statements (in thousands):
Derivatives Designated as Hedging Instruments Gain (Loss)
3 unchanged sentences
2023 2022 2021 2023 2022 2021
−Removed: Foreign currency exchange contracts $ — $ — $ ( 341 ) Salaries and employee benefits $ — $ — $ 49
−Removed: Foreign currency exchange contracts — — ( 44 ) General and administrative expenses — — 11
Interest rate swap agreements $ ( 22,184 ) $ — $ ( 69 ) Interest expense $ 325 $ — $ ( 8,743 )
1 unchanged sentence
Cross-currency swap agreements 3,496 ( 27,617 ) ( 33,464 ) Interest expense ( 5,057 ) ( 7,601 ) ( 4,984 )
−Removed: Other (expense) income ( 22,394 ) ( 28,548 ) 11,196
+Added: Other income (expense)
+Added: 5,886 ( 22,394 ) ( 28,548 )
Derivatives Not Designated as Hedging Instruments
−Removed: The Company did not have any derivatives that were not designated as hedging instruments during the year ended December 31, 2022.
−Removed: The following table summarizes the effects of derivatives not designated as hedging instruments on the Company’s consolidated statements of income during the periods presented (in thousands) :
+Added: In September 2023, the Company partially dedesignated the 2021 Cap.
+Added: As a result of the partial dedesignation, the Company reclassified the existing deferred gain of approximately $ 3.7 million from accumulated other comprehensive loss into Other income (expense), net in its consolidated statements of operations for the year ended December 31, 2023.
+Added: As of December 31, 2023, £ 100.0 million (approximately $ 127.3 million based on an exchange rate of $1.00 to £ 0.79 , the exchange rate as of December 31, 2023) of the notional amount of the 2021 Cap is not designated as hedging instrument for accounting purposes.
+Added: Refer above for terms relating to the 2021 Cap.
+Added: The following table summarizes the effects of derivatives not designated as hedging instruments on the Company’s consolidated statements of operations during the periods presented (in thousands) :
Derivatives Not Designated as Hedging Instruments Location of Gain (Loss) Recognized in Income on Derivative Amount of Gain (Loss) Recognized in Income
1 unchanged sentence
2023 2022 2021
−Removed: Foreign currency exchange contracts Other (expense) income $ — $ ( 20 ) $ 3,564
+Added: Foreign currency exchange contracts Other expense $ — $ — $ ( 20 )
+Added: Interest rate cap contracts Other expense ( 556 ) — —
Interest rate swap agreements Other expense — — ( 73 )
42 unchanged sentences
2023 2022 2021
−Removed: Recoveries above forecast $ 29,253 $ 326,006 $ 228,075
+Added: Recoveries (below) above forecast
+Added: $ ( 33,405 ) $ 29,253 $ 326,006
Changes in expected future recoveries ( 49,125 ) 63,892 ( 126,870 )
1 unchanged sentence
Recoveries above or below forecast represent over and under-performance in the reporting period, respectively.
−Removed: Collections during the year ended December 31, 2022 outperformed the projected cash flows by approximately $ 29.3 million.
+Added: Collections during the year ended December 31, 2023, under-performed the projected cash flows by approximately $ 33.4 million.
Changes in expected future recoveries are reassessed each quarter, the Company considers, among other factors, historical and current collection performance, changes in consumer behavior, and the macroeconomic environment when updating the forecasts of expected lifetime recoveries.
−Removed: The Company recorded a net positive change in expected future period recoveries of approximately $ 63.9 million during the year ended December 31, 2022.
+Added: As a result, the Company has updated its forecast, including reducing expected future recoveries for certain static pools, primarily the 2022 and 2021 U.S.
+Added: vintages, where the initial cash flow forecasts were established during a period marked by changed consumer behavior, which caused challenges in forecasting.
+Added: The changes to the forecast, when discounted to present value, resulted in a net negative change in expected future period recoveries of approximately $ 49.1 million during the year ended December 31, 2023.
Composition of Certain Financial Statement Items
6 unchanged sentences
Construction in process
−Removed: Telecommunications equipment and other 1,600 3,075
273,099 269,054
−Removed: accumulated depreciation and amortization ( 155,154 ) ( 153,041 )
+Added: accumulated depreciation
( 169,140 ) ( 155,154 )
−Removed: Depreciation and amortization expense related to property and equipment was $ 40.1 million, $ 42.2 million, and $ 34.8 million during the years ended December 31, 2022, 2021, and 2020, respectively.
+Added: $ 103,959 $ 113,900
+Added: Depreciation expense related to property and equipment was $ 38.2 million, $ 40.1 million, and $ 42.2 million during the years ended December 31, 2023, 2022, and 2021, respectively.
Other assets consist of the following as of the dates presented ( in thousands ):
2023 December 31,
−Removed: Operating lease right-of-use assets $ 70,074 $ 68,812
Real estate owned $ 70,590 $ 68,242
−Removed: Derivative instruments 36,807 3,541
+Added: Operating lease right-of-use assets 67,019 70,074
Prepaid expenses 32,910 30,376
−Removed: Identifiable intangible assets, net 22,112 36,320
−Removed: Income tax deposits 18,259 19,315
+Added: Derivative instruments 17,311 36,807
Deferred tax assets 17,277 18,069
Service fee receivables 9,080 16,094
+Added: Income tax deposits 8,735 18,259
+Added: Identifiable intangible assets, net 48 22,112
Other 70,286 61,040
16 unchanged sentences
In September 2020, the Company entered into a multi-currency senior secured revolving credit facility agreement (as amended and restated, the “Global Senior Facility”).
−Removed: On March 29, 2022, the Company amended and restated the Global Senior Facility to, among other things (1) upsize the facility by $ 90.0 million to $ 1.14 billion, (2) extend the termination date of the facility from September 2025 to September 2026, and (3) transition from LIBOR to Term SOFR for U.S.
−Removed: dollar borrowings.
−Removed: As of December 31, 2022, the Global Senior Facility provided for a total committed facility of $ 1.14 billion that matures in September 2026 and includes the following key provisions:
+Added: In May 2023, the Company amended the Global Senior Facility to extend the termination date of the facility from September 2026 to September 2027.
+Added: In addition, the size of the facility was increased by $ 40.0 million to $ 1,180.0 million.
+Added: On October 30, 2023, pursuant to the terms of the Global Senior Facility the Company further increased the size of the Company’s Global Senior Facility by $ 23.0 million to $ 1,203.0 million.
+Added: As of December 31, 2023, the Global Senior Facility provided for a total committed facility of $ 1,203.0 million that matures in September 2027 and includes the following key provisions:
• Interest at Term SOFR (or EURIBOR for any loan drawn in Euro or a rate based on SONIA for any loan drawn in British Pound), with a Term SOFR (or EURIBOR or SONIA) floor of 0.00 %, plus a margin of 2.50 %, plus in the case of Term SOFR borrowings, a credit adjustment spread of 0.10 %;
28 unchanged sentences
Subject to the intercreditor agreement described above under the section “Global Senior Secured Revolving Credit Facility,” Super Senior Liabilities that are secured by assets that also secure the Senior Secured Notes will receive priority with respect to any proceeds received upon any enforcement action over any such assets.
+Added: On October 16, 2023, the Company issued an additional € 100.0 million (approximately $ 110.4 million based on an exchange rate of $1.00 to € 0.91 , the exchange rate as of December 31, 2023) aggregate principal amount of Encore 2028 Floating Rate Notes at an issue price of 99.01 %.
+Added: The Company used the proceeds from this offering to repay drawings under its Global Senior Facility and to pay certain transaction fees and expenses incurred in connection with the offering of the notes.
+Added: The weighted average interest rate of the 2028 Floating Rate Notes was 7.44 % and 4.54 % for the years ended December 31, 2023 and 2022, respectively.
+Added: As discussed in “Note 3:
+Added: Derivatives and Hedging Instruments,” the Company uses interest rate derivative contracts to manage its risk related to the interest rate fluctuation in its variable interest rate bearing debt.
+Added: The weighted average interest rate of the 2028 Floating Rate Notes including the effect of the hedging instruments was 4.52 % and 4.26 % for the years ended December 31, 2023 and 2022, respectively.
Convertible Notes and Exchangeable Notes
The following table provides a summary of the principal balance, maturity date and interest rate for the Company’s convertible and exchangeable senior notes (the “Convertible Notes” or “Exchangeable Notes,” as applicable) ( $ in thousands ):
−Removed: December 31, 2022 December 31, 2021 Maturity Date Interest Rate
−Removed: 2022 Convertible Notes $ — $ 150,000 Mar 15, 2022 3.250 %
−Removed: 2023 Exchangeable Notes 172,500 172,500 Sep 1, 2023 4.500 %
−Removed: 2025 Convertible Notes 100,000 100,000 Oct 1, 2025 3.250 %
+Added: December 31, 2023 December 31, 2022 Maturity Date Interest Payment Dates
+Added: Interest Rate
+Added: 2023 Exchangeable Notes $ — $ 172,500 Sep 1, 2023 Mar 1, Sep 1 4.500 %
+Added: 2025 Convertible Notes 100,000 100,000 Oct 1, 2025 Apr 1, Oct 1 3.250 %
+Added: 2029 Convertible Notes
+Added: 230,000 — Mar 15, 2029 Mar 15, Sep 15 4.000 %
$ 330,000 $ 272,500
−Removed: On March 15, 2022, the Company’s $ 150.0 million 2022 Convertible Notes matured.
−Removed: The 2022 Convertible Notes had a conversion price of $ 45.33 .
−Removed: In September 2021, in accordance with the indenture for the 2022 Convertible Notes, the Company irrevocably elected “combination settlement” with a specified dollar amount equal to $1,750 per $1,000 principal amount of the 2022 Convertible Notes.
−Removed: In March 2022, the Company settled the conversion of the 2022 Convertible Notes entirely in cash for $ 221.2 million, of which $ 71.2 million (the excess above the principal amount) represents the conversion spread and was recognized in the Company’s stockholder’s equity.
−Removed: No gain or loss was recognized as a result of the conversion of the 2022 Convertible Notes in the Company’s consolidated statements of income for the year ended December 31, 2022.
−Removed: The Exchangeable Notes were issued by Encore Capital Europe Finance Limited (“Encore Finance”), a 100 % owned finance subsidiary of Encore, and are fully and unconditionally guaranteed by Encore.
−Removed: Unless otherwise indicated in connection with a particular offering of debt securities, Encore will fully and unconditionally guarantee any debt securities issued by Encore Finance.
−Removed: Amounts related to Encore Finance are included in the consolidated financial statements of Encore subsequent to April 30, 2018, the date of incorporation of Encore Finance.
−Removed: In order to reduce the risk related to the potential dilution and/or the potential cash payments the Company may be required to make in the event that the market price of the Company’s common stock becomes greater than the conversion or
−Removed: exchange prices of the Convertible Notes and the Exchangeable Notes, the Company may enter into hedge programs that increase the effective conversion or exchange price for the Convertible Notes and the Exchangeable Notes.
−Removed: As of December 31, 2022, the Company had one hedge program that increases the effective exchange price for the 2023 Exchangeable Notes.
−Removed: The hedge instrument has been determined to be indexed to the Company’s own stock and meets the criteria for equity classification.
−Removed: The Company recorded the cost of the hedge instrument as a reduction in additional paid-in capital, and does not recognize subsequent changes in fair value of this financial instrument in its consolidated financial statement.
−Removed: The Company did not hedge the 2022 Convertible Notes or the 2025 Convertible Notes.
−Removed: Certain key terms related to the convertible and exchangeable features as of December 31, 2022 are listed below ($ in thousands, except conversion or exchange price) :
−Removed: 2023 Exchangeable Notes 2025 Convertible Notes
−Removed: Initial conversion or exchange price $ 44.62 $ 40.00
+Added: In March 2023, Encore issued $ 230.0 million aggregate principal amount of 4.00 % convertible senior notes that mature on March 15, 2029 in a private placement transaction (the “2029 Convertible Notes”).
+Added: Interest on the 2029 Convertible Notes is payable semi-annually.
+Added: The Company used a portion of the net proceeds from the issuance of the 2029 Convertible Notes to repurchase, in separate privately negotiated transactions, approximately $ 154.8 million aggregate principal amount of its 2023 Exchangeable Notes for approximately $ 192.5 million.
+Added: The repurchase met the criteria for an induced conversion and accordingly, the Company recognized expense of $ 2.7 million, representing the fair value of the consideration paid to certain holders of the 2023 Exchangeable Notes in excess of the fair value which they were otherwise entitled to receive pursuant to the existing conversion terms on the respective settlement dates.
+Added: The amount is included in Other income (expense), net, in the Company’s condensed consolidated statements of operations during the year ended December 31, 2023.
+Added: The remaining excess above the principal amount of the repurchased 2023 Exchangeable Notes was recognized in the Company’s stockholder’s equity.
+Added: Additionally, in March 2023, the Company received proceeds of approximately $ 28.5 million from the unwind of the capped call options associated with the repurchased portion of the 2023 Exchangeable Notes.
+Added: Since the capped call options were determined to be equity instruments, the partial unwind of the capped call options was recorded as an increase in stockholder’s equity in the consolidated statements of financial condition as of December 31, 2023.
+Added: On September 1, 2023, the remaining $ 17.7 million principal amount of the 2023 Exchangeable Notes matured.
+Added: The Company settled in cash for approximately $ 20.1 million both the outstanding 2023 Exchangeable Notes and the $ 2.4 million excess ab ove the principal amount.
+Added: The excess above the principal amount represents the conversion spread and was recognized as a reduction in stockholder's equity.
+Added: Concurrent with the settlement, the Company received $ 2.4 million from its capped call options associated with the conversion of the remaining 2023 Exchangeable Notes.
+Added: The proceeds from the exercise of the capped call options were recorded as an increase in stockholder's equity in the Company’s consolidated statement of financial condition as of December 31, 2023 .
+Added: As a result, no gain or loss was recognized as a result of the final settlement of the 2023 Exchangeable Notes in the Company's consolidated statement of operations for the year ended December 31, 2023.
+Added: In order to reduce the risk related to the potential dilution and/or the potential cash payments the Company may be required to make in the event that the market price of the Company’s common stock becomes greater than the conversion prices of the Convertible Notes, the Company may enter into hedge programs that increase the effective conversion price for the Convertible Notes.
+Added: In connection with the issuance of the 2029 Convertible Notes, the Company entered into privately negotiated capped call transactions that effectively raised the conversion price of the 2029 Convertible Notes from $ 65.89 to $ 82.69 .
+Added: The cost of the capped call transactions was approximately $ 18.5 million.
+Added: These hedging instruments have been determined to be indexed to the Company’s own stock and meet the criteria for equity classification and therefore the cost was included as a reduction to stockholder’s equity in the consolidated statement of financial condition as of December 31, 2023.
+Added: Subsequent changes in fair value of these financial instruments are not recognized in the Company’s consolidated financial statements.
+Added: The Company did not hedge the 2025 Convertible Notes.
+Added: Certain key terms related to the convertible features as of December 31, 2023 are listed below ($ in thousands, except conversion or exchange price) :
+Added: 2025 Convertible Notes 2029 Convertible Notes
+Added: Initial conversion price
+Added: $ 40.00 $ 65.89
Closing stock price at date of issuance $ 32.00 $ 51.68
−Removed: Closing stock price date Jul 20, 2018 Sep 4, 2019
−Removed: Initial conversion or exchange rate (shares per $1,000 principal amount) 22.4090 25.0000
−Removed: Adjusted conversion or exchange rate (shares per $1,000 principal amount) 22.5264 25.1310
−Removed: Adjusted conversion or exchange price (1)
+Added: Closing stock price date Sep 4, 2019 Feb 28, 2023
+Added: Initial conversion rate (shares per $1,000 principal amount)
25.0000 15.1763
−Removed: Adjusted effective conversion or exchange price (2)
+Added: Adjusted conversion rate (shares per $1,000 principal amount)
25.1310 15.1763
−Removed: Excess of if-converted value compared to principal (3)
+Added: Adjusted conversion price (1)
$ 39.79 $ 65.89
−Removed: Conversion or exchange date Mar 1, 2023 Jul 1, 2025
+Added: Adjusted effective conversion price (2)
$ 39.79 $ 82.69
−Removed: (1) Pursuant to the indentures for the Company’s Convertible Notes and Exchangeable Notes, the conversion and exchange rates were adjusted upon the completion of the Company’s tender offer in December 2021.
−Removed: (2) The Company maintains a hedge program that increases the effective exchange price for the 2023 Exchangeable Notes to $ 62.13 .
−Removed: (3) Represents the premium the Company would have to pay assuming the Convertible Notes and Exchangeable Notes were converted or exchanged on December 31, 2022 using a hypothetical share price based on the closing stock price on December 31, 2022.
−Removed: The premium of the 2023 Exchangeable Notes would have been reduced to zero with the existing hedge program.
−Removed: Prior to the close of business on the business day immediately preceding their respective free conversion or exchange date (listed above), holders may convert or exchange their Convertible Notes or Exchangeable Notes under certain circumstances set forth in the applicable indentures.
−Removed: On or after their respective free conversion or exchange dates until the close of business on the second scheduled trading day immediately preceding their respective maturity date, holders may convert or exchange their notes at any time.
−Removed: In the event of conversion or exchange, the 2025 Convertible Notes and the 2023 Exchangeable Notes are convertible or exchangeable into cash up to the aggregate principal amount of the notes and the excess conversion premium, if any, may be settled in cash or shares of the Company’s common stock at the Company’s election and subject to certain restrictions contained in each of the indentures governing the Convertible Notes and Exchangeable Notes.
−Removed: As discussed in “Note 1:
−Removed: Ownership, Description of Business, and Summary of Significant Accounting Policies,” the Company adopted ASU 2020-06 on January 1, 2021 using a modified-retrospective approach.
−Removed: The Company’s convertible and exchangeable notes are no longer bifurcated into a debt component and an equity component, instead, they are carried as a single liability, which reflects the principal amount of the convertible and exchangeable notes.
−Removed: The interest expense recognized on the convertible and exchangeable notes is based on coupon rates, rather than higher effective interest rates.
−Removed: The Company has not adjusted comparative information for the year ended December 31, 2020.
−Removed: Interest expense related to the Convertible Notes and Exchangeable Notes was as follows during the periods presented (in thousands) :
−Removed: Year ended December 31,
+Added: Excess of if-converted value compared to principal (3)
+Added: Conversion date
+Added: Jul 1, 2025 Dec 15, 2028
______________________
−Removed: Interest expense—stated coupon rate $ 12,001 $ 16,839 $ 21,857
−Removed: Interest expense—amortization of debt discount — — 10,945
−Removed: Interest expense—Convertible Notes and Exchangeable Notes $ 12,001 $ 16,839 $ 32,802
+Added: (1) Pursuant to the indenture for the Company’s 2025 Convertible Notes, the conversion rate for the 2025 Convertible Notes was adjusted upon the completion of the Company’s tender offer in December 2021.
+Added: (2) As discussed above, the Company maintains a hedge program that increases the effective conversion price for the 2029 Convertible Notes to $ 82.69 .
+Added: (3) Represents the premium the Company would have to pay assuming the Convertible Notes were converted on December 31, 2023 using a hypothetical share price based on the closing stock price on December 31, 2023.
+Added: Prior to the close of business on the business day immediately preceding their respective free conversion date (listed above), holders may convert their Convertible Notes under certain circumstances set forth in the applicable indentures.
+Added: On or after their respective free conversion dates until the close of business on the second scheduled trading day immediately preceding their respective maturity date, holders may convert their notes at any time.
+Added: In the event of conversion, the Convertible Notes are convertible into cash up to the aggregate principal amount of the notes and the excess conversion premium, if any, may be settled in cash or shares of the Company’s common stock at the Company’s election and subject to certain restrictions contained in each of the indentures governing the Convertible Notes.
+Added: The Company’s convertible and exchangeable notes are carried as a single liability, which reflects the principal amount of the convertible and exchangeable notes.
+Added: Interest expense related to the Convertible Notes and Exchangeable Notes was approximately $ 12.6 million, $ 12.0 million, and $ 16.8 million for the years ended December 31, 2023, 2022, and 2021, respectively.
Cabot Securitisation Senior Facility
−Removed: Cabot Securitisation UK Ltd (“Cabot Securitisation”), an indirect subsidiary of Encore, has a senior facility for a committed amount of £ 350.0 million (as amended, the “Cabot Securitisation Senior Facility”).
−Removed: The Cabot Securitisation Senior Facility matures in September 2026.
−Removed: Funds drawn under the Cabot Securitisation Senior Facility bear interest at a rate per annum equal to SONIA plus a margin of 3.00 % plus, for periods after September 18, 2024, a step-up margin ranging from zero to 1.00 %.
+Added: Prior to November 20, 2023, Cabot Securitisation UK Ltd (“Cabot Securitisation”), an indirect subsidiary of Encore, had a senior facility for a committed amount of £ 350.0 million (as amended, the “Cabot Securitisation Senior Facility”), which would mature in September 2026.
+Added: Prior to November 20, 2023, funds drawn under the Cabot Securitisation Senior Facility beared interest at a rate per annum equal to SONIA plus a margin of 3.00 % plus, for periods after September 18, 2024, a step-up margin ranging from zero to 1.00 %.
+Added: The Company amended its Cabot Securitisation Senior Facility, effective November 20, 2023, to extend the maturity date from September 2026 to September 2028 and reduce the committed amount from £ 350.0 million to £ 255.0 million.
+Added: Effective November 20, 2023, funds drawn under the Cabot Securitisation Senior Facility bear interest at a rate per annum equal to SONIA plus a margin of 3.20 % plus, for periods after September 18, 2026, a step up margin ranging from zero to 1.00 %.
As of December 31, 2023, the outstanding borrowings under the Cabot Securitisation Senior Facility were £ 255.0 million (approximately $ 324.6 million based on an exchange rate of $1.00 to £ 0.79 , the exchange rate as of December 31, 2023).
The obligations of Cabot Securitisation under the Cabot Securitisation Senior Facility are secured by first ranking security interests over all of Cabot Securitisation’s property, assets and rights (including receivables purchased from Cabot Financial UK from time to time), the book value of which was approximately £ 324.6 million (approximately $ 413.2 million based on an exchange rate of $1.00 to £ 0.79 , the exchange rate as of December 31, 2023) as of December 31, 2023.
−Removed: The weighted average interest rate was 4.33 % and 3.11 % for the years ended December 31, 2022 and 2021, respectively.
+Added: The weighted average interest rate of the Cabot Securitisation Senior Facility was 7.68 % and 4.49 % for the years ended December 31, 2023 and 2022, respectively.
+Added: As discussed in “Note 3:
+Added: Derivatives and Hedging Instruments,” the Company uses interest rate derivative contracts to manage its risk related to the interest rate fluctuation in its variable interest rate bearing debt.
+Added: The weighted average interest rate of the Cabot Securitisation Senior Facility including the effect of the hedging instruments was 5.41 % and 4.33 % for the years ended December 31, 2023 and 2022, respectively.
Cabot Securitisation is a securitized financing vehicle and is a VIE for consolidation purposes.
1 unchanged sentence
Variable Interest Entities” for further details.
+Added: In October 2023, an indirect subsidiary of Encore (“U.S.
+Added: Financing Subsidiary”), entered into a facility for a committed amount of $ 175.0 million (the “U.S.
+Added: Facility matures in October 2026.
+Added: Funds drawn under the U.S.
+Added: Facility bear interest at a rate per annum equal to Term SOFR plus a margin of 3.5 %.
+Added: As of December 31, 2023, the outstanding borrowings under the U.S.
+Added: Facility were $ 175.0 million.
+Added: The obligations under the U.S.
+Added: Facility are secured by first ranking security interests over all of U.S.
+Added: Financing Subsidiary’s assets and rights.
+Added: As of December 31, 2023, this included receivables acquired from MCM, the book value of which was approximately $ 302.8 million.
+Added: The weighted average interest rate of the U.S.
+Added: Facility was 8.84 % for the year ended December 31, 2023.
+Added: As discussed in “Note 3:
+Added: Derivatives and Hedging Instruments,” the Company uses interest rate derivative contracts to manage its risk related to the interest rate fluctuation in its variable interest rate bearing debt.
+Added: The weighted average interest rate of the U.S.
+Added: Facility including the effect of the hedging instruments was 8.25 % for the year ended December 31, 2023.
+Added: Facility is a securitized financing vehicle and is a VIE for consolidation purposes.
+Added: Refer to “Note 7:
+Added: Variable Interest Entities” for further details.
Finance Lease Liabilities
26 unchanged sentences
The program does not obligate the Company to acquire any particular amount of common stock, and it may be modified or suspended at any time at the Company’s discretion.
+Added: There were no shares repurchased during the year ended December 2023.
During the years ended December 2022 and 2021, the Company repurchased 1,497,184 and 2,598,034 shares of its common stock for approximately $ 86.9 million and $ 121.2 million, respectively.
11 unchanged sentences
Other comprehensive loss before reclassification
+Added: ( 31,709 ) ( 15,309 ) ( 47,018 )
Reclassification 44,544 — 44,544
2 unchanged sentences
Balance at December 31, 2021 516 ( 54,064 ) ( 53,548 )
−Removed: Other comprehensive loss before reclassification ( 31,709 ) ( 15,309 ) ( 47,018 )
+Added: Other comprehensive income (loss) before reclassification
+Added: 5,737 ( 78,232 ) ( 72,495 )
Reclassification 30,648 — 30,648
−Removed: Removal of OCI in connection with divestiture — 19,904 19,904
Tax effect ( 407 ) ( 3,014 ) ( 3,421 )
Balance at December 31, 2022 36,494 ( 135,310 ) ( 98,816 )
−Removed: Other comprehensive loss before reclassification 5,737 ( 78,232 ) ( 72,495 )
+Added: Other comprehensive (loss) income before reclassification
+Added: ( 41,508 ) 15,376 ( 26,132 )
Reclassification ( 2,970 ) — ( 2,970 )
1 unchanged sentence
Balance at December 31, 2023
+Added: $ ( 3,093 ) $ ( 120,827 ) $ ( 123,920 )
Stock-Based Compensation
5 unchanged sentences
The aggregate number of shares available for issuance under the 2017 Plan will be reduced by 2.12 shares for each share delivered in settlement of any full value award and by one share for each share delivered in settlement of any stock option or stock appreciation right.
−Removed: award under the 2017 Plan or the 2013 Plan expires, lapses or is terminated, exchanged for cash, surrendered, repurchased, canceled without having been fully exercised or forfeited, the unused shares covered by such award will again become or again be available for award grants under the 2017 Plan.
+Added: If an award under the 2017 Plan or the 2013 Plan expires, lapses or is terminated, exchanged for cash, surrendered, repurchased,
+Added: canceled without having been fully exercised or forfeited, the unused shares covered by such award will again become or again be available for award grants under the 2017 Plan.
Shares available under the 2017 Plan will be increased by 2.12 shares for each share subject to a full value award and by one share for each share subject to a stock option or a stock appreciation right, in each case, that become or again be available for issuance pursuant to the foregoing share counting provisions.
8 unchanged sentences
There were no options granted during the years ended December 31, 2023, 2022, or 2021.
−Removed: As of December 31, 2022, all outstanding stock options have been fully vested and all related compensation expense has been fully recognized.
−Removed: A summary of the Company’s stock option activity as of December 31, 2022, and changes during the year then ended, are presented below:
−Removed: Weighted Average
−Removed: Exercise Price Weighted
−Removed: (in thousands)
−Removed: Outstanding as of December 31, 2021 4,166 $ 22.17
−Removed: Exercised ( 4,166 ) $ 22.17
−Removed: Outstanding as of December 31, 2022 — $ — — $ —
−Removed: Exercisable as of December 31, 2022 — $ — — $ —
−Removed: The total intrinsic value of options exercised during the years ended December 31, 2022, and 2021, was $ 0.2 million and $ 0.2 million, respectively.
+Added: All outstanding stock options previously granted under the 2005 plan have been fully vested and all related compensation expense has been fully recognized prior to December 31, 2022.
+Added: All exercisable options have been exercised prior to December 31, 2022.
+Added: The total intrinsic value of options exercised was $ 0.2 million during both years ended December 31, 2022 and 2021.
Cash received from option exercise under all share-based payment arrangements during the years ended December 31, 2022 and 2021 was negligible.
−Removed: There were no stock options exercised during the year ended December 31, 2020.
Performance Stock Options
−Removed: Under the 2017 Plan and the 2013 Plan, the Company granted performance stock options, with an exercise price equal to the closing price of the Company’s stock at the date of issuance, that vest in equal annual installments over a three year service period but only if, within four years from the date of grant, the 20 trading day average of the closing price of the Company’s stock (subject to dividend-related adjustments) exceeds a target equal to a 25 % increase from the closing price on the date of grant.
+Added: Under the 2017 Plan and the 2013 Plan, the Company granted performance stock options, with an exercise price equal to the closing price of the Company’s stock at the date of issuance, that vest in equal annual installments over a three year service period but only if, within four years from the date of grant, the 20 trading day average of the closing price of the Company’s stock (subject to dividend-related adjustments) exceeded a target equal to a 25 % increase from the closing price on the date of grant.
These performance options have a seven-year contractual life.
3 unchanged sentences
(in thousands)
−Removed: Outstanding as of December 31, 2021 100,614 $ 30.95
+Added: Outstanding and exercisable as of December 31, 2022
+Added: 79,949 $ 30.95
Exercised ( 79,949 ) $ 30.95
−Removed: Outstanding as of December 31, 2022 79,949 $ 30.95 1.19 $ 1,358
−Removed: Vested as of December 31, 2022 79,949 $ 30.95 1.19 $ 1,358
−Removed: Exercisable as of December 31, 2022 79,949 $ 30.95 1.19 $ 1,358
+Added: Outstanding and exercisable as of December 31, 2023
As of December 31, 2023, all related compensation expense has been fully recognized.
No performance stock options were granted during the years ended December 31, 2023, 2022, and 2021.
−Removed: The total intrinsic value of performance options exercised during the year ended December 31, 2022 and 2021, was $ 0.6 million and $ 1.1 million, respectively.
−Removed: Cash received from performance option exercise during the years ended December 31, 2022 and 2021 was $ 0.6 million and $ 1.6 million, respectively.
−Removed: There were no performance stock options exercised during the year ended December 31, 2020.
+Added: The total intrinsic value of performance options exercised during the year ended December 31, 2023, 2022, and 2021 was $ 1.3 million, $ 0.6 million, and $ 1.1 million, respectively.
+Added: Cash received from performance option exercise during the years ended December 31, 2023, 2022, and 2021 was $ 1.7 million, $ 0.6 million, and $ 1.6 million, respectively.
Non-Vested Shares
3 unchanged sentences
The Company has certain share awards that include market conditions that affect vesting.
−Removed: These shares vest based on the Company’s three-year relative total stockholder return compared to the other companies in the S&P SmallCap 600 Financial Sector Index as of the date of grant.
+Added: These shares vest based on the Company’s three-year relative total stockholder return compared to the other companies in the S&P SmallCap 600 Financial Sector Index
+Added: as of the date of grant.
The fair value of these shares is estimated using a lattice model.
16 unchanged sentences
The weighted average grant date fair value for stock awards granted during the years ended December 31, 2023, 2022, and 2021 was $ 49.97 , $ 60.45 , and $ 42.09 , respectively.
−Removed: Income before provision for income taxes consisted of the following (in thousands) :
+Added: Income or loss before provision for income taxes consisted of the following (in thousands) :
Year Ended December 31,
2 unchanged sentences
Foreign ( 241,620 ) ( 20,020 ) 45,934
−Removed: Total income before provision for income taxes $ 310,989 $ 436,541 $ 282,898
+Added: Total (loss) income before provision for income taxes
+Added: $ ( 180,264 ) $ 310,989 $ 436,541
The provision for income tax consisted of the following (in thousands) :
17 unchanged sentences
State provision ( 3.0 ) % 5.0 % 2.3 %
−Removed: Foreign rate differential (1)
+Added: Change in valuation allowance (1)
7.3 % 13.2 % ( 2.3 ) %
−Removed: Change in tax rate (2)
+Added: Goodwill impairment (2)
( 28.3 ) % — % — %
−Removed: Change in valuation allowance (3)
+Added: Taxable gain (deductible loss) in foreign jurisdiction (3)
2.9 % ( 2.7 ) % — %
−Removed: Non-deductible CFPB settlement fees — % — % 1.1 %
−Removed: Deductible loss in foreign jurisdiction (4)
+Added: Forfeit benefit due to merger/liquidations (4)
( 14.7 ) % — % — %
−Removed: Other 1.2 % 0.8 % 0.1 %
+Added: 0.3 % 0.9 % ( 1.5 ) %
Effective rate ( 14.5 ) % 37.4 % 19.5 %
________________________
−Removed: (1) Relates primarily to lower tax rates on income or loss attributable to international operations.
−Removed: (2) In 2021 and 2020, includes impact of U.K.
−Removed: tax rate increases.
−Removed: (3) Includes valuation allowance recorded on U.K.
+Added: (1) In 2023, includes reduction in valuation allowance due to the forfeit of tax benefits on merger or liquidation of foreign subsidiaries that maintained full valuation allowances on their deferred tax assets.
+Added: In 2022, includes valuation allowance recorded on U.K.
deferred tax assets.
−Removed: (4) This represents a deductible loss recognized in a foreign subsidiary that maintains a full valuation allowance on its deferred tax assets.
−Removed: Accordingly, this deductible loss increased the valuation allowance and did not result in any tax benefit during the year ended December 31, 2022.
+Added: (2) During the fourth quarter of 2023, the Company recorded a non-cash goodwill impairment charge of $ 238.2 million at the Cabot reporting unit.
+Added: Refer to “Note 15:
+Added: Goodwill and Identified Intangible Assets” for further details.
+Added: (3) In 2023, represents a taxable gain recognized in a foreign subsidiary.
+Added: In 2022, represents deductible loss recognized in a foreign subsidiary that maintains a full valuation allowance on its deferred tax assets.
+Added: Accordingly, the deductible loss increased the valuation allowance and did not result in any tax benefit during the year ended December 31, 2022.
+Added: (4) Represents the forfeit of tax benefits on merger or liquidation of foreign subsidiaries that maintained full valuation allowances on their deferred tax assets.
The Company’s subsidiary in Costa Rica is operating under a 100 % tax holiday through December 31, 2026.
4 unchanged sentences
The Company does not provide deferred taxes on translation adjustments of unremitted earnings under the indefinite reinvestment exemption.
−Removed: Determination of the amount of unrecognized deferred tax liability related to these earnings is not
−Removed: practical due to the complexities of a hypothetical calculation.
+Added: Determination of the amount of unrecognized deferred tax liability related to these earnings is not practical due to the complexities of a hypothetical calculation.
Subsidiaries operating outside of the United States for which the Company does not consider under the indefinite reinvestment exemption have no material undistributed earnings or outside basis differences and therefore no U.S.
7 unchanged sentences
Accrued expenses 9,048 10,800
+Added: Difference in basis of bond and loan costs
Difference in basis of receivable portfolio 22,070 23,751
Stock-based compensation 3,916 4,960
−Removed: Right-of-use asset — 23
Difference in basis of depreciable and amortizable assets 1,957 2,057
19 unchanged sentences
As of December 31, 2023, certain of the Company’s foreign subsidiaries have net operating loss carry forwards of approximately $ 197.6 million, which will begin to expire in 2024.
−Removed: Certain of the Company’s domestic subsidiaries have state net operating losses with an indefinite carryover period.
−Removed: As of December 31, 2022, valuation allowances increased by $ 30.7 million, as compared to December 31, 2021.
−Removed: The increase in valuation allowance is primarily related to U.K.
−Removed: deferred tax assets.
−Removed: These deferred tax assets include revenue recognition differences between statutory reporting and US GAAP reporting.
−Removed: In evaluating all positive and negative evidence available to determine whether all or some portion of the deferred tax assets will be realized, significant judgement is required and the weight of all available evidence must be considered.
−Removed: A significant piece of objective negative evidence evaluated was the U.K.
−Removed: loss before income taxes for the three-year period ended December 31, 2022.
−Removed: Objective evidence limits the ability to consider subjective evidence, such as projections for future earnings growth.
−Removed: The Company will continue to evaluate the realizability of deferred tax assets each quarter based on all available positive and negative evidence, including current and cumulative earnings, forecasts of future profitability, statutory carryback and carryforward periods and tax planning strategies.
−Removed: In a period when positive evidence supports a conclusion that a valuation allowance is no longer needed, a tax benefit will be recorded.
+Added: Certain of the Company’s domestic subsidiaries have state net operating losses, which will begin to expire in 2035.
+Added: Valuation allowances are recorded against deferred tax assets, including certain net operating losses recorded as deferred tax assets, if the Company believes it is more likely than not that some or all of the deferred tax assets will not be realized.
+Added: As of December 31, 2023, valuation allowances decreased by $ 11.6 million, as compared to December 31, 2022.
+Added: The decrease in valuation allowance is primarily related to the forfeit of tax benefits on merger or liquidation of foreign subsidiaries that maintained full valuation allowances on their deferred tax assets.
A reconciliation of the beginning and ending amounts of unrecognized tax benefit is as follows (in thousands) :
1 unchanged sentence
Decrease related to prior year tax positions ( 2,034 )
−Removed: Increases related to prior year tax positions 6
−Removed: Increases related to current year tax positions 574
Decrease related to expiration of statute of limitations ( 712 )
−Removed: Decreases related to settlements with taxing authorities ( 272 )
−Removed: Balance as of December 31, 2020 6,781
−Removed: Decrease related to prior year tax positions ( 2,034 )
−Removed: Decrease related to expiration of statute of limitations ( 712 )
Increase related to prior year tax positions 261
7 unchanged sentences
Balance as of December 31, 2022 3,988
+Added: Increase related to prior year tax positions 2,302
+Added: Increase related to current year tax positions 649
+Added: Decrease related to expiration of statute of limitations ( 69 )
+Added: Balance as of December 31, 2023 $ 6,961
The Company had gross unrecognized tax benefits, inclusive of penalties and interest, of $ 8.2 million, $ 4.9 million and $ 4.6 million as of December 31, 2023, 2022, and 2021 respectively.
As of December 31, 2023, 2022 and 2021, there was $ 5.0 million, $ 2.5 million and $ 1.6 million, respectively, of unrecognized tax benefit that if recognized, would result in a net tax benefit.
−Removed: During the year ended December 31, 2022, the decrease in the Company's gross unrecognized tax benefit was primarily due to the release of a prior year position related to a foreign entity.
−Removed: During the year ended December 31, 2021, the decrease in the Company's gross unrecognized tax benefit was primarily related to the release of a prior year position related to a foreign entity.
−Removed: During the year ended December 31, 2020, the decrease in the Company's gross unrecognized tax benefit was primarily related to the expiration of state statute of limitations.
+Added: During the year ended December 31, 2023, the increase in the Company's gross unrecognized tax benefit was primarily due a prior year position related to a domestic entity.
+Added: During the years ended December 31, 2022 and 2021, the decreases in the Company's gross unrecognized tax benefit were primarily due to the release of prior year positions related to foreign entities.
The Company believes that an adequate provision has been made for any adjustments that may result from tax examinations.
1 unchanged sentence
The Company recognizes interest and penalties related to income tax as a component of the provision for income taxes.
−Removed: The Company recognized a benefit of $ 0.4 million, expense of $ 0.1 million and expense of $ 0.2 million in net interest and penalties during the years ended December 31, 2022, 2021 and 2020, respectively.
+Added: Interest and penalties expensed during the years ended December 31, 2023, 2022 and 2021 were immaterial .
Interest and penalties accrued as of December 31, 2023, 2022 and 2021 were immaterial .
2 unchanged sentences
The Company is subject to examination of its income tax returns by various taxing authorities, and the timing of the resolution of income tax examinations cannot be predicted with certainty.
−Removed: In general, the Company is subject to examination for tax years after 2017 for the U.S.
−Removed: federal jurisdiction, after 2018 for U.S state jurisdictions, and after 2017 in major foreign jurisdictions.
+Added: In general, the Company is subject to examination for tax years after December 31, 2019 for the U.S.
+Added: federal jurisdiction, after December 31, 2019 for U.S state jurisdictions, and after December 31, 2018 in major foreign jurisdictions.
The Company's management regularly assesses the likelihood of adverse outcomes resulting from examinations, if any, to determine the adequacy of the Company's provision for income taxes.
11 unchanged sentences
________________________
−Removed: (1) Operating lease expenses are included in general and administrative expenses in the Company’s consolidated statements of income.
+Added: (1) Operating lease expenses are included in general and administrative expenses in the Company’s consolidated statements of operations.
Costs include short-term and variable lease components which were not material for the periods presented.
63 unchanged sentences
Employee Savings and Retirement Plan
−Removed: The Company has a 401(k) Savings Plan that qualifies as deferred salary arrangements under Section 401(k) of the Internal Revenue Code.
+Added: The Company has a 401(k) Savings Plan in the U.S.
+Added: that qualifies as deferred salary arrangements under Section 401(k) of the Internal Revenue Code.
Under the 401(k) Plan, matching contributions are based upon the amount of the employees’ contributions subject to certain limitations.
−Removed: The Company recognized expense of approximately $ 2.8 million, $ 2.8 million, and $ 2.9 million for the years ended December 31, 2022, 2021, and 2020, respectively, in salaries and employee benefits in its consolidated statements of income.
+Added: The Company also has defined contribution plans for eligible employees in other countries.
+Added: The Company recognized expense of approximately $ 6.8 million, $ 2.8 million, and $ 2.8 million for the years ended December 31, 2023, 2022 , and 2021, respectively, in salaries and employee benefits in its consolidated statements of operations.
Encore’s Certificate of Incorporation and indemnification agreements between the Company and its officers and directors provide that the Company will indemnify and hold harmless its officers and directors for certain events or occurrences arising as a result of the officer or director serving in such capacity.
37 unchanged sentences
Determining the number of reporting units and the fair value of a reporting unit requires the Company to make judgments and involves the use of significant estimates and assumptions .
−Removed: The Company performs its annual goodwill impairment assessment as of October 1.
−Removed: When reviewing goodwill for impairment, the Company first performs a qualitative test to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.
−Removed: In performing its qualitative test, the Company considers various qualitative factors including, but not limited to economic environment, business climate, market capitalization, operating performance and competition.
−Removed: If after performing the qualitative test, the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the Company must perform a quantitative goodwill impairment test.
−Removed: Instead of performing a qualitative test, the Company may also just proceed directly to performing a quantitative test.
−Removed: A quantitative impairment test is performed by estimating the fair value of the reporting unit and comparing it to its carrying value.
−Removed: If the carrying value of a reporting unit exceeds its fair value, the Company would record an impairment charge equal to the excess of the carrying value of the reporting unit over its fair value.
+Added: The Company performs its annual goodwill impairment assessment as of the first day of the fourth quarter.
+Added: As of December 31, 2023, the Company had two reporting units, MCM and Cabot, that carried goodwill.
+Added: When performing its annual goodwill impairment assessment during the fourth quarter of 2023, the Company chose to proceed directly to performing quantitative tests for both reporting units.
+Added: The annual goodwill impairment analysis resulted in an impairment charge for the Cabot reporting unit of $ 238.2 million.
+Added: The fair value of the MCM reporting unit substantially exceeded its carrying value on the assessment date, as a result, there was no impairment of goodwill for the MCM reporting unit during the year ended December 31, 2023.
The Company applies various valuation techniques to estimate the fair value of each reporting unit when performing a quantitative impairment test, including the income approach and the market approach.
2 unchanged sentences
The cash flow projections are based on five-year financial forecasts developed by management that include purchasing volume, collections forecasts, capital spending trends, and cost assumptions to support anticipated growth, which are updated annually and reviewed by management.
−Removed: Annual estimated cash flows and a terminal value are then discounted to their present value at an appropriate discount rate to obtain an indication of fair value.
−Removed: The discount rate utilized reflects estimates of required rates of return for investments that are seen as similar to an investment in the reporting unit.
+Added: The value of the net cash flows beyond the fifth year (the “Terminal Year”) is determined by applying a market multiple to the projected estimated remaining collections.
+Added: Annual estimated cash flows and a Terminal Year value are then discounted to their present value at an appropriate discount rate to obtain an indication of fair value.
+Added: The Company bases the discount rate on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the reporting unit’s ability to execute on the projected cash flows.
Because DCF analyses are based on management’s long-term financial projections and require significant estimates and judgments, the market approach is conducted in addition to the income approach in estimating the fair value of a reporting unit.
2 unchanged sentences
The Guideline Merged and Acquired Company method calculates fair value by analyzing the actual prices paid for recent mergers and acquisitions in the industry.
+Added: The fair value estimate of the Company’s reporting units was derived primarily from the income approach, and to a lesser extent, the market approach as described above.
The Company believes that the current methodology used in determining the fair value at its reporting units represent its best estimates.
In addition, the Company compares the aggregate fair value of the reporting units to its overall market capitalization.
−Removed: As of October 1, 2022, the Company had two reporting units, MCM and Cabot, that carried goodwill.
−Removed: Instead of performing qualitative tests, the Company chose to proceed directly to performing quantitative tests for both reporting units at October 1, 2022, and determined that no goodwill impairment existed at these two reporting units.
−Removed: No indicators of impairment noted between the assessment date and December 31, 2022.
+Added: The Company’s prior annual goodwill impairment test resulted in a sufficient cushion for the Cabot reporting unit.
+Added: Additionally, the Company did not observe significant indicators of goodwill impairment triggers during its subsequent interim qualitative assessments.
+Added: During the fourth quarter of 2023, management completed its annual update of the five-year financial forecast at the Cabot reporting unit, resulting in a revised forecast due to a combination of (1) the continuation of lower than expected levels of outstanding unsecured consumer borrowings and charge-off rates in Europe, (2) the continuation of portfolio pricing that management believes does not fully reflect the higher cost of capital, and (3) management allocating capital to the
+Added: higher-return US market instead of the Cabot markets, which all impact the expected purchasing volume and related collections forecasts at the Cabot reporting unit.
+Added: The decline in the fair value of the Cabot reporting unit below its carrying value resulted from changes in expected future cash flows as compared to the Company’s prior year financial forecasts, decline in market multiples, as well as an increase in the cost of capital.
+Added: In conjunction with the quantitative goodwill impairment test, the Company tested the recoverability of long-lived assets and other assets of the Cabot reporting unit and concluded that the intangible assets carried at Cabot’s debt servicing business were fully impaired.
+Added: As a result, the Company recorded an impairment charge of its intangible assets of $ 18.7 million during the fourth quarter of 2023.
+Added: The Company recorded an impairment charge of $ 4.1 million for its definite-lived intangible assets during the year ended December 31, 2022.
Management continues to evaluate and monitor all key factors impacting the carrying value of the Company’s recorded goodwill and intangible assets.
−Removed: Adverse changes in the Company’s actual or expected operating results, market capitalization,
−Removed: business climate, economic factors or other negative events that may be outside the control of management could result in a material non-cash impairment charge in the future.
−Removed: The Company’s goodwill is attributable to reporting units included in its portfolio purchasing and recovery segment.
+Added: Adverse changes in the Company’s actual or expected operating results, market capitalization, business climate, economic factors or other negative events that may be outside the control of management could result in a material non-cash impairment charge in the future.
+Added: The Company’s goodwill is attributable to the MCM and Cabot reporting units included in its portfolio purchasing and recovery segment.
The following table summarizes the activity in the Company’s goodwill balance (in thousands):
−Removed: Year Ended December 31,
+Added: Balance as of December 31, 2020
$ 148,936 $ 758,026 $ 906,962
−Removed: Balance as of beginning of period:
+Added: Effect of foreign currency translation — ( 9,167 ) ( 9,167 )
+Added: Balance as of December 31, 2021
148,936 748,859 897,795
Effect of foreign currency translation — ( 76,581 ) ( 76,581 )
−Removed: Balance as of end of period:
+Added: Balance as of December 31, 2022
148,936 672,278 821,214
+Added: Goodwill impairment — ( 238,200 ) ( 238,200 )
+Added: Effect of foreign currency translation — 23,461 23,461
+Added: Balance as of December 31, 2023
+Added: $ 148,936 $ 457,539 $ 606,475
+Added: There was no accumulated goodwill impairment loss as of December 31, 2022 and 2021.
+Added: The accumulated goodwill impairment loss at the Cabot reporting unit was $ 238.2 million as of December 31, 2023.
The Company’s acquired intangible assets are summarized as follows (in thousands) :
5 unchanged sentences
Customer relationships $ — $ — $ — $ 45,498 $ ( 23,507 ) $ 21,991
−Removed: Developed technologies — — — 2,549 ( 2,530 ) 19
Trade name and other 918 ( 870 ) 48 909 ( 788 ) 121
3 unchanged sentences
Customer relationships 10
−Removed: Developed technologies 5
Trade name and other 7
The amortization expense for intangible assets subject to amortization was $ 3.6 million, $ 6.3 million, and $ 7.9 million during the years ended December 31, 2023, 2022, and 2021, respectively.
−Removed: Estimated future amortization expense related to finite-lived intangible assets as of December 31, 2022 is as follows ( in thousands ):
−Removed: Total $ 22,112
+Added: Estimated future amortization expense related to finite-lived intangible assets as of December 31, 2023 was negligible.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.