What changed in this filing

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Item 9A. Controls and Procedures

2025-02-26 compared with 2024-02-21 · 388 added, 328 removed, 1180 unchanged (38% of the section changed)

9 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, 2024, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework.

Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2024.

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, 2024, as stated in its report below.

Changes in Internal Control over Financial Reporting

Other than new controls related to changes to the systems and processes used to forecast estimated future collections for our investment in receivable portfolios in the UK, 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, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

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February 26, 2025

Changes in Internal Control over Financial Reporting

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

On November 8, 2024 , 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.

common stock between February 26, 2024, and February 28, 2025, subject to certain conditions.

common stock between March 3, 2025 and February 27, 2026 , subject to certain conditions.

Item 9C—Disclosure Regarding Foreign Jurisdictions that Prevent Inspection

Item 10—Directors, Executive Officers and Corporate Governance

The information required by this item is incorporated by reference to our Proxy Statement for our 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2023.

We have adopted policies and procedures that govern the purchase, sale, or other dispositions of our securities by directors, officers and employees, other covered persons and the Company itself, that we believe are reasonably designed to promote compliance with insider trading laws, rules, and regulations and any applicable listing standards.

A copy of our Insider Trading Policy is filed with this Annual Report on Form 10-K as Exhibit 19.

The other information required by this item is incorporated by reference to our Proxy Statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2024.

Item 11—Executive Compensation

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Report of Independent Registered Public Accounting Firm

Consolidated Statements of Financial Condition at December 31, 202 3 and 20 22

Consolidated Statements of Operations for the years ended December 31, 202 3 , 202 2 and 20 21

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

Consolidated Statements of Cash Flows for the years ended December 31, 202 3 , 202 2 and 20 21

Consolidated Statements of Financial Condition

Consolidated Statements of Operations

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Statements of Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

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4.14 Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

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

Incorporated By Reference

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

000-26489 4.14

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

8-K 000-26489 4.1 11/23/2020

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

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

Incorporated By Reference

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

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000-26489 4.1

Indenture dated March 20, 2024 between Encore Capital Group, Inc., the subsidiary guarantors party thereto, GLAS Trust Company LLC as trustee and Truist Bank as security agent for Encore 2029 Notes

8-K 000-26489 4.1 3/21/2024

Indenture dated May 21, 2024 between Encore Capital Group, Inc., the subsidiary guarantors party thereto, GLAS Trust Company LLC as trustee and Truist Bank as security agent for Encore 2030 Notes

8-K 000-26489 4.1 5/21/2024

10.1+ Form of Indemnification Agreement

9 unchanged sentences

10-Q 000-26489 10.1 11/9/2016

Incorporated By Reference

Exhibit Number Exhibit Description Form File Number Exhibit Filing Date Filed or Furnished Herewith

10.11+ The Encore Capital Group, Inc.

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8-K 000-26489 10.6 6/20/2017

Incorporated By Reference

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.

16 unchanged sentences

10-K 000-26489 10.11.10 2/23/2023

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

000-26489 10.1 11/1/2023

F orm of Capped Call Confirmations for 2029 Convertible Notes

10.19 Amended and Restated Senior Facilities Agreement, dated October 1 7 , 202 4 , 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

8-K 000-26489 10.1 10/23/2024

Form of Capped Call Confirmations for 2029 Convertible Notes

000-26489 10.1 3/3/2023

International Assignment Agreement with John Yung dated July 31, 2023

10-Q 000-26489 10.1+ 8/7/2024

Insider Trading Policy

21 List of Subsidiaries

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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

Incorporated By Reference

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)

Encore Policy for Recovery of Erro neously Awarded Compensation

Encore Policy for Recovery of Erroneously Awarded Compensation

000-26489 97.1

Incorporated By Reference

Exhibit Number Exhibit Description Form File Number Exhibit Filing Date Filed or Furnished Herewith

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

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PCAOB ID # 243 )

Consolidated Statements of Financial Condition at December 31, 2023 and 2022

Consolidated Statements of Ope rations for the years ended December 31, 2023, 2022 and 2021

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

Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021

Consolidated Statements of Financial Condition

Consolidated Statements of Operations

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Statements of Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

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Estimate of Expected Future Recoveries on Purchased Credit Deteriorated Assets

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.

As described in Note 4 to the consolidated financial statements, the Company’s investment in receivable portfolios, net balance was approximately $3.8 billion at December 31, 2024 and the resulting changes in recoveries for the year ended December 31, 2024 was a decrease of $89.7 million.

As more fully described in Notes 1 and 4 to the consolidated financial statements, 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.

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The Company then re-forecasts the timing and amounts of expected future recoveries.

We identified the estimate of expected future recoveries on purchased credit deteriorated assets as a critical audit matter.

Specifically, management is required to make significant judgments and assumptions to estimate expected future recoveries.

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.

We identified management’s judgements and assumptions used in the determination of the estimate of expected future recoveries on purchased credit deteriorated assets as a critical audit matter.

Estimated future recoveries are based on historical experience, current conditions and reasonable and supportable forecasts.

Auditing such judgments and assumptions required a high degree of auditor judgment and an increased auditor effort, including the extent of specialized skills and knowledge needed.

The primary procedures we performed to address this critical audit matter included:

• 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.

• Testing the design and operating effectiveness of controls over management’s assessment of the reasonableness of inputs to 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.

• 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).

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(i) testing source data;

(ii) assessing external evidence, such as macroeconomic data;

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.

and (ii) 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.

• Utilizing personnel with specialized skill and knowledge in financial modeling to assist in assessing the appropriateness of certain assumptions, methodology used and the validity of the methods used to produce the model output of the new forecasting model.

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.

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.

As described in Note 15 to the consolidated financial statements, the Company’s goodwill balance was approximately $507.8 million at December 31, 2024, which was allocated between three reporting units, MCM, Cabot and LAAP.

Subsequent to the annual impairment assessment, the Company identified a triggering event during the fourth quarter of 2024, indicating the fair value of the goodwill at the Cabot reporting unit may be below its carrying value due to the significant reduction in the estimated future recoveries for the Company’s investment in receivable portfolios at Cabot.

As a result, the Company performed a quantitative goodwill impairment assessment for both the MCM and Cabot reporting units as of December 31, 2024.

This analysis 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.

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.

The income approach required significant management assumptions, such as assumptions used in the cash flow forecasts, the discount rate, and the terminal value.

Management determined that the fair value of the Cabot reporting unit was less than its carrying value and recorded an impairment charge of $100.6 million.

We identified the December 31, 2024 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.

The income approach required significant management assumptions, such as certain assumptions used in the cash flow forecasts, the discount rate, and the terminal value.

The market approach required significant management judgment in the selection of appropriate peer group companies and valuation multiples.

Auditing these elements involved a high degree of auditor judgment due to the nature and extent of audit effort, including the extent of specialized skill or knowledge needed.

Auditing such judgments and assumptions required a high degree of auditor judgment due to the nature and extent of auditor effort, including the extent of specialized skill and knowledge needed.

The primary procedures we performed to address this critical audit matter included:

• 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.

• 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:

• Recalculating the impairment charge to the Cabot reporting unit based on the difference between the fair value and carrying value of the goodwill.

• Testing the reconciliation of the fair value of the Company’s reporting units to the indicated market capitalization of the Company, as a whole.

• Utilizing personnel with specialized skill and knowledge in valuation to assist in:

(i) assessing the appropriateness of the fair value methodology;

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Goodwill impairment 100,600 238,200 —

Impairment of intangible assets 18,726 4,075 —

Impairment of assets 18,544 18,726 4,075

Total operating expenses 1,159,031 1,206,145 936,173

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Loss on extinguishment of debt ( 7,832 ) — —

Other income (expense) 5,078 2,123 ( 17,784 )

6,832 5,078 2,123

Total other expense ( 253,545 ) ( 196,799 ) ( 151,185 )

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$ ( 139,244 ) $ ( 206,492 ) $ 194,564

Net income attributable to noncontrolling interest — — ( 419 )

Net (loss) income attributable to Encore Capital Group, Inc.

$ ( 206,492 ) $ 194,564 $ 350,782

(Loss) income per share attributable to Encore Capital Group, Inc.:

Basic (loss) income per share from:

(Loss) income per share:

Basic $ ( 5.83 ) $ ( 8.72 ) $ 8.06

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$ ( 139,244 ) $ ( 206,492 ) $ 194,564

Other comprehensive (loss) income, net of tax:

Other comprehensive loss, net of tax:

Change in unrealized (loss) gain on derivative instruments:

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Change in foreign currency translation:

Unrealized gain (loss) on foreign currency translation

Unrealized (loss) gain on foreign currency translation

( 29,081 ) 15,376 ( 78,232 )

Income tax effect 720 ( 893 ) ( 3,014 )

Removal of other comprehensive loss in connection with divestiture — — 19,904

Unrealized gain (loss) on foreign currency translation, net of divestiture

Unrealized (loss) gain on foreign currency translation

( 24,935 ) 14,483 ( 81,246 )

Other comprehensive (loss) income, net of tax ( 25,104 ) ( 45,268 ) 15,265

Comprehensive (loss) income

Other comprehensive loss, net of tax

( 38,210 ) ( 25,104 ) ( 45,268 )

Comprehensive income attributable to noncontrolling interest:

Net income attributable to noncontrolling interest — — ( 419 )

Comprehensive income attributable to noncontrolling interest — — ( 419 )

Comprehensive (loss) income attributable to Encore Capital Group, Inc.

Comprehensive (loss) income

$ ( 177,454 ) $ ( 231,596 ) $ 149,296

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Comprehensive

(Loss) Income Noncontrolling

Interest Total

Balance as of December 31, 2021

Cumulative adjustment — — ( 40,372 ) 22,458 — — ( 17,914 )

Net income — — — 350,782 — 419 351,201

Other comprehensive loss, net of tax — — — — ( 4,639 ) — ( 4,639 )

Purchase of noncontrolling interest — — ( 2,669 ) — — ( 2,887 ) ( 5,556 )

Exercise of stock options and issuance of share-based awards, net of shares withheld for employee taxes 266 2 ( 5,537 ) — — — ( 5,535 )

Repurchase and retirement of common stock ( 7,070 ) ( 70 ) ( 200,192 ) ( 190,344 ) — — ( 390,606 )

Stock-based compensation — — 18,330 — — — 18,330

Removal of other comprehensive loss in connection with divestiture — — — — 19,904 — 19,904

Balance as of December 31, 2021 24,541 245 — 1,238,564 ( 53,548 ) — 1,185,261

24,541 $ 245 $ — $ 1,238,564 $ ( 53,548 ) $ 1,185,261

Net income — — — 194,564 — 194,564

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23,323 233 — 1,278,210 ( 98,816 ) 1,179,627

— — — ( 206,492 ) — ( 206,492 )

Other comprehensive loss, net of tax

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23,545 235 11,052 1,049,171 ( 123,920 ) 936,538

— — — ( 139,244 ) — ( 139,244 )

Other comprehensive loss, net of tax

— — — — ( 41,636 ) ( 41,636 )

Issuance of share-based awards, net of shares withheld for employee taxes

146 2 ( 5,767 ) — — ( 5,765 )

Stock-based compensation — — 14,012 — — 14,012

Other — — — — 3,426 3,426

Balance as of December 31, 2024

23,691 $ 237 $ 19,297 $ 909,927 $ ( 162,130 ) $ 767,331

See accompanying notes to consolidated financial statements

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Net (loss) income

Adjustments to reconcile net income to net cash provided by operating activities:

$ ( 139,244 ) $ ( 206,492 ) $ 194,564

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization 32,434 41,737 46,419

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Goodwill impairment 100,600 238,200 —

Impairment of intangible assets 18,726 4,075 —

Impairment of assets

18,544 18,726 4,075

Changes in recoveries 89,740 82,530 ( 93,145 )

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Other, net 8,924 ( 793 ) —

Net cash (used in) provided by investing activities ( 401,941 ) ( 130,235 ) 339,896

Net cash used in investing activities

( 440,430 ) ( 401,941 ) ( 130,235 )

Financing activities:

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Repayment of convertible senior notes — ( 212,480 ) ( 221,153 )

Payments to settle derivative instruments

( 40,038 ) — —

Repurchase and retirement of common stock — — ( 87,006 )

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Investment in receivable portfolios transferred to real estate owned $ 5,966 $ 7,957 $ 1,903

Property and equipment acquired through finance leases 234 3,273 2,664

See accompanying notes to consolidated financial statements

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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.

Reclassification

The Company made immaterial reclassifications to the prior year’s consolidated financial statements to conform to current year presentation.

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.

The Company made the same reclassification to its consolidated statements of cash flows accordingly.

The reclassifications have no effect on net income, total assets, or accumulated earnings as previously reported.

Recently Adopted Accounting Pronouncements

There were no recently adopted accounting pronouncements.

Recent Accounting Standards or Updates Not Yet Effective

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):

Recognition and Initial Measurement, which addresses the accounting by a joint venture for contributions received upon its formation (“ASU 2023-05”).

ASU 2023-05 requires joint ventures to measure all assets and liabilities upon formation at fair value.

This guidance will be applied prospectively to all joint venture formations with a formation date on or after January 1, 2025.

This amendment would only impact the Company upon adoption if, in the future, it entered into an applicable transaction.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements:

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”).

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.

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.

Early adoption is prohibited.

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.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

On January 1, 2024, the Company adopted Accounting Standard Update (“ASU”) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”).

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.

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.

This ASU will likely result in additional required disclosure when adopted.

The Company is currently evaluating the provisions of this ASU and the impact on its consolidated financial statements and related disclosures.

The ASU requires disclosure of the measure of segment performance, significant segment expenses, and segment assets that are regularly provided to the Chief Operating Decision Maker.

The ASU also includes amendments that expand other existing reportable segment disclosure.

The Company adopted ASU 2023-07 using the retrospective approach.

The Company expanded its segment reporting disclosure as a result of adopting this new accounting standard.

Recent Accounting Standards or Updates Not Yet Effective

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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The new standard is effective for annual periods beginning after December 15, 2024.

The Company does not expect a material impact on its consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses (“ASU 2024-03”).

ASU 2024-03 requires public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory;

employee compensation;

and depreciation, amortization and depletion expenses for each caption on the income statement where such expenses are included.

The new standard is effective for annual periods beginning after December 15, 2026.

The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024-04, Debt - Debt with Conversion and Other Options (Subtopic 470-20):

Induced Conversions of Convertible Debt Instruments which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion.

The new standard is effective for annual periods beginning after December 15, 2025.

The Company is currently evaluating the potential impact, but we do not expect the adoption of this guidance to have a material impact on our consolidated financial statements and related disclosures.

Use of Estimates

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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.

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.

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In the event that it is more likely than not that all or part of the deferred tax assets are determined not to be realizable in the future, the Company would establish or increase a valuation allowance in the period such determination is made, with a corresponding charge to earnings.

In the event the Company realizes deferred tax assets that were previously determined to be unrealizable, the Company would release or decrease the respective valuation allowance, with a corresponding positive adjustment to earnings.

In the event the Company realizes deferred tax assets that were previously determined to be unrealizable, the Company would release or

decrease the respective valuation allowance, with a corresponding positive adjustment to earnings.

The calculation of tax liabilities involves significant judgement in estimating the impact and timing of resolution of uncertainties in the application of complex tax laws.

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The Company determines stock-based compensation expense for all share-based payment awards based on the measurement date fair value.

The Company uses the Black-Scholes option-pricing model to determine the fair-value of stock option grants.

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.

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The Company designates derivative instruments as cash flow hedges or fair value hedges based on the intended use of the derivative.

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.

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.

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If in the event the hedged cash flow does not occur, or it becomes probable that it will not occur, the Company would reclassify the amount of any gain or loss on the related cash flow hedge to income or expense at that time.

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.

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.

The hedged cash flows will continue to be recorded in accumulated other comprehensive income or loss until the hedged cash flows occur or are no longer probable of occurring.

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.

Derivatives and Hedging Instruments” for further discussion.

The Company’s derivatives are not subject to any master netting or similar agreements and the Company does not offset the fair value of derivative contracts with the same counterparty in its financial statement disclosures.

No margin or collateral balances are deposited with or received from counterparties.

Concentration of Supply Risk

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Income or Loss Per Share

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.

Basic income or loss per share is calculated by dividing net income or loss by the weighted average number of shares of common stock outstanding during the period.

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.

The Company adopted ASU 2020-06 on January 1, 2021, using a modified retrospective approach.

Effective January 1, 2021, the dilutive effect of the Company’s convertible and exchangeable notes is calculated using the if-converted method.

Prior to the adoption, the dilutive effect of the convertible and exchangeable notes was calculated using the treasury stock method.

In September 2021, in accordance with the indenture for the convertible senior notes due in March 2022, the Company irrevocably elected cash settlement for these notes.

As a result, the convertible senior notes due in March 2022 were only dilutive prior to September 15, 2021.

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.

A reconciliation of shares used in calculating income or loss per basic and diluted shares follows (in thousands, except per share amounts) :

1 unchanged sentence

2024 2023 2022

Net (loss) income attributable to Encore Capital Group, Inc.

Net (loss) income

$ ( 139,244 ) $ ( 206,492 ) $ 194,564

7 unchanged sentences

$ ( 5.83 ) $ ( 8.72 ) $ 7.46

The Company had no employee stock options outstanding during the year ended December 31, 2024.

Anti-dilutive employee stock options outstanding were negligible during the years ended December 31, 2023, and 2022.

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Unobservable inputs, including inputs that reflect the reporting entity’s own assumptions.

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

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Interest rate cap contracts $ — $ 252 $ — $ 252

Cross-currency swap agreements — 361 — 361

Interest rate swap agreements — ( 18,360 ) — ( 18,360 )

Cross-currency swap agreements — ( 28,039 ) — ( 28,039 )

Fair Value Measurements as of December 31, 2023

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Cross-currency swap agreements — 361 — 361

Interest rate swap agreements — ( 22,510 ) — ( 22,510 )

Cross-currency swap agreements — ( 28,039 ) — ( 28,039 )

Derivative Contracts:

The Company uses derivative instruments to manage its exposure to fluctuations in interest rates and foreign currency exchange rates.

Fair values of these derivative instruments are estimated using industry standard valuation models.

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.

Fair values of these derivative instruments are estimated using models that 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:

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All of the Company’s contingent consideration obligations were fully resolved as of December 31, 2022.

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) :

Balance as of December 31, 2020 $ 2,957

Issuance of contingent consideration in connection with purchase of noncontrolling interest

Change in fair value of contingent consideration ( 388 )

Payment of contingent consideration ( 180 )

Effect of foreign currency translation ( 84 )

There were no new contingent liabilities resulted from mergers and acquisitions activities for the years ended December 31, 2024 and 2023.

The following table provides a roll-forward of the fair value of contingent consideration, for the year ended December 31, 2022 (in thousands) :

Balance as of December 31, 2021 $ 5,218

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Certain assets are measured at fair value on a nonrecurring basis.

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.

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 Identifiable Intangible Assets” for further details.

REO assets are classified as held for sale at the lower of their carrying value or fair value less cost to sell.

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December 31, 2024 December 31, 2023

Fair Value Level

Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value

Financial Assets

Investment in receivable portfolios, net $ 3,468,432 $ 3,515,651 $ 3,088,261 $ 3,242,506

Cash and cash equivalents

$ 199,865 $ 199,865 $ 158,364 $ 158,364

Investment in receivable portfolios, net Level 3

3,776,369 4,052,645 3,468,432 3,515,651

Other assets (2)

128,674 128,674 138,336 138,336

Financial Liabilities

Global senior secured revolving credit facility 816,880 816,880 661,738 661,738

Encore private placement notes 29,310 28,922 68,390 66,947

Senior secured notes (1)

Accounts payable and accrued liabilities Level 2

233,545 233,545 189,928 189,928

Exchangeable senior notes due September 2023 — — 172,500 205,227

Convertible senior notes due October 2025 100,000 136,403 100,000 130,556

Convertible senior notes due March 2029 230,000 226,794 — —

Cabot securitisation senior facility 324,646 324,646 423,522 423,522

Global senior secured revolving credit facility Level 2

865,365 865,365 816,880 816,880

Other borrowings 24,904 24,904 23,512 23,512

Encore private placement notes Level 2 — — 29,310 28,922

Senior secured notes (1)

Level 2 1,843,386 1,893,367 1,649,621 1,598,636

Convertible senior notes due October 2025 Level 2 100,000 129,100 100,000 136,403

Convertible senior notes due March 2029 Level 2 230,000 232,611 230,000 226,794

Cabot securitisation senior facility Level 2 319,137 319,137 324,646 324,646

Level 2 283,500 283,500 175,000 175,000

Other borrowings Level 2 64,904 64,904 24,904 24,904

Other liabilities (2)

Level 2 97,731 97,731 135,440 135,440

________________________

(1) Carrying amount represents historical cost, adjusted for any related debt discount or debt premium.

(1) Carrying amount represents historical cost, adjusted for any related debt discount.

(2) Only includes financial instruments not required to be carried at fair value.

Derivative instruments, which are required to be carried at fair value are excluded.

Investment in Receivable Portfolios:

The fair value of investment in receivable portfolios is measured using Level 3 inputs by discounting the estimated future cash flows generated by the Company’s proprietary forecasting models.

The fair value of investment in receivable portfolios is measured by discounting the estimated future cash flows generated by the Company’s proprietary forecasting models.

The key inputs include the estimated future gross cash flow, average cost to collect, and discount rate.

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The Company evaluates the use of these key inputs on an ongoing basis and refines the data as it continues to obtain better information from market participants in the debt recovery and purchasing business.

The Company’s convertible notes, exchangeable notes, senior secured notes and private placement notes are carried at historical cost, adjusted for the applicable debt discount.

The fair value estimate for the convertible and exchangeable notes incorporates quoted market prices using Level 2 inputs.

The fair value of the senior secured notes and private placement notes is estimated using widely accepted valuation techniques, including discounted cash flow analyses using available market information on discount and borrowing rates with similar terms, maturities, and credit ratings.

Accordingly, the Company used Level 2 inputs for these debt instrument fair value estimates.

The carrying value of the Company’s senior secured revolving credit facility, securitisation senior facility and U.S.

facility approximates fair value due to the use of current market rates that are repriced frequently.

The Company’s convertible notes, senior secured notes and private placement notes are carried at historical cost, adjusted for the applicable debt discount.

The fair value estimate for the convertible notes incorporates quoted market prices.

The fair value of the senior secured notes and private placement notes is estimated using discounted cash flow analyses based on available market information on discount and borrowing rates with similar terms, maturities, and credit ratings.

The carrying value of the Company’s senior secured revolving credit facility, securitisation senior facility, U.S.

facility and other borrowings approximates fair value due to the use of current market rates that are repriced frequently.

The Company’s cash and cash equivalents, certain other assets, accounts payable and accrued liabilities, and other liabilities approximate their fair values due to their short-term nature.

Derivatives and Hedging Instruments

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Interest rate cap contracts Other assets $ 252 Other assets $ 14,564

Interest rate swap agreements Other liabilities ( 22,510 ) — —

Interest rate swap agreements Other liabilities ( 18,360 ) Other liabilities ( 22,510 )

Cross-currency swap agreements — — Other assets 361

Cross-currency swap agreements Other liabilities ( 28,039 ) Other liabilities ( 36,918 )

Cross-currency swap agreements — — Other liabilities ( 28,039 )

Derivatives not designated as hedging instruments:

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The Company designates its interest rate swap and interest rate cap instruments as cash flow hedges at inception.

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.

The cross-currency swap agreements are accounted for as fair value hedges.

From time to time, 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.

The Company designates its cross-currency swap agreements as fair value hedges at inception.

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:

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Interest rate cap contracts

2024 Cap September 2024 September 2026 Cash flow hedge $ 319.1 million SONIA

Interest rate swap agreements

2023 Euro IR Swap October 2023 January 2028 Cash flow hedge $ 103.5 million 3-month EURIBOR

2024 Euro IR Swaps

June 2024 January 2028 Cash flow hedge $ 429.6 million 3-month EURIBOR

2023 SOFR IR Swaps

November 2023 October 2026 Cash flow hedge $ 150.0 million 1-month SOFR CME Term

As discussed in “Note 6:

Borrowings,” on October 15, 2024, the Company fully redeemed its Senior Secured Notes due October 2025 (the “Encore 2025 Notes”), and on November 15, 2024, the Company fully redeemed its Senior Secured Notes due February 2026 (the “Encore 2026 Notes”).

In connection with the early redemptions of the Encore 2025 Notes and the Encore 2026 Notes, the Company settled the corresponding 2020 Euro Swaps and the 2023 GBP Swaps on the respective loan redemption dates for approximately $ 40.0 million.

As a result of the early settlement, the Company reclassed the remaining OCI balance associated with these cross-currency swaps of approximately $ 0.1 million gain into interest expense during the fourth quarter of 2024.

December 31, 2023

Effective date Maturity Date Hedge Designation Notional Amount Receive Floating Rate Index

Interest rate cap contracts

2019 Cap January 2020 June 2024 Cash flow hedge $ 441.5 million 3-month EURIBOR

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(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.

December 31, 2022

Effective date Maturity Date Hedge Designation Notional Amount Receive Floating Rate Index

Interest rate cap contracts

2019 Cap January 2020 June 2024 Cash flow hedge $ 428.9 million 3-month EURIBOR

2021 Cap November 2021 September 2024 Cash flow hedge $ 423.5 million SONIA

Cross-currency swap agreements

2020 Euro Swaps September 2020 October 2025 Cash flow hedge

$ 375.3 million —

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.

The Company expects to reclassify approximately $ 6.7 million of derivative loss from OCI into earnings relating to its cash flow designated derivatives within the next 12 months.

This amount will vary due to fluctuations in benchmark interest rates.

The following table summarizes the effects of derivatives designated as hedging instruments in the Company’s consolidated financial statements (in thousands):

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Cross-currency swap agreements ( 17,460 ) 3,496 ( 27,617 ) Interest expense ( 3,062 ) ( 5,057 ) ( 7,601 )

Other income (expense)

Other (expense) income

( 8,902 ) 5,886 ( 22,394 )

Derivatives Not Designated as Hedging Instruments

In September 2023, the Company partially dedesignated the 2021 Cap.

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.

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.

Refer above for terms relating to the 2021 Cap.

From time to time, the Company enters into currency exchange forward contracts to reduce the effects of currency exchange rate fluctuations.

These derivative contracts generally mature within one to six months and are not designated as hedge instruments for accounting purposes.

The gains or losses on these unhedged derivative contracts are recognized in other income or expense based on the changes in fair value.

The Company did not have any derivatives that were not designated as hedging instruments as of December 31, 2024.

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) :

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2024 2023 2022

Foreign currency exchange contracts Other expense $ — $ — $ ( 20 )

Interest rate cap contracts Other expense ( 556 ) — —

Interest rate swap agreements Other expense — — ( 73 )

Interest rate cap contracts Other income (expense)

$ 267 $ ( 556 ) $ —

Investment in Receivable Portfolios, Net

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Put-backs and Recalls ( 15,593 ) ( 13,606 ) ( 9,938 )

Deconsolidation of receivable portfolios — — ( 9,352 )

Disposals and transfers to real estate owned ( 26,001 ) ( 7,957 ) ( 8,335 )

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2024 2023 2022

Recoveries (below) above forecast

Recoveries above (below) forecast

$ 78,202 $ ( 33,405 ) $ 29,253

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Recoveries above or below forecast represent over and under-performance in the reporting period, respectively.

Collections during the year ended December 31, 2023, under-performed the projected cash flows by approximately $ 33.4 million.

Collections during the year ended December 31, 2024, over-performed the projected cash flows by approximately $ 78.2 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.

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.

vintages, where the initial cash flow forecasts were established during a period marked by changed consumer behavior, which caused challenges in forecasting.

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.

During the fourth quarter of 2024, the Company deployed a new U.K.

forecasting model that develops expected future recoveries for investment in receivable portfolios at Cabot.

The new model update was primarily driven by recent changes at Cabot as it continues to acquire portfolios that have more dynamic characteristics and are better forecasted utilizing a model that processes data inputs at a more granular level.

As part of the new model development process, management updated certain model inputs driven by collection experience, operational performance and recent changes in collection strategies.

This new forecasting model was applied to all vintages, which resulted in a change in the estimate of expected future recoveries.

This change in accounting estimate reduced Cabot’s estimated remaining collections by $ 361.6 million, which when discounted to present value, resulted in a negative change in expected future recoveries of $ 75.3 million.

The change in accounting estimate negatively impacted the Company’s basic and diluted loss per share by $ 3.15 per share for the year ended December 31, 2024.

Additionally, the Company recognized approximately $ 22.2 million of negative changes in expected future recoveries resulting from the sale of its investment in receivable portfolios associated with the exit of its Italian debt purchasing and recovery business in November 2024, and approximately $ 7.8 million of negative changes in expected future recoveries resulting from the sale of certain secured mortgage portfolios in September 2024.

As a result of these significant changes in expected recoveries discussed above, and the changes driven by recurring reassessments of the expected future recoveries, the Company recorded a total net negative change in expected future recoveries of approximately $ 167.9 million during the year ended December 31, 2024.

Composition of Certain Financial Statement Items

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14,588 28,639

264,689 273,099

accumulated depreciation

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$ 80,597 $ 103,959

During the fourth quarter of 2024, as a result of a significant reduction in estimated future cash flows based on an internal forecast at its debt servicing business, the Company performed a recoverability test of certain fixed assets and concluded that the assets were not recoverable.

The Company subsequently conducted a fair value analysis of the fixed assets and recorded an impairment charge related to its computer systems of approximately $ 18.5 million for the year ended December 31, 2024.

Depreciation expense related to property and equipment was $ 32.4 million, $ 38.2 million, and $ 40.1 million during the years ended December 31, 2024, 2023, and 2022, respectively.

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2024 December 31,

Real estate owned $ 70,590 $ 68,242

Operating lease right-of-use assets $ 58,089 $ 67,019

Real estate owned 38,075 70,590

Prepaid expenses 35,564 32,910

Derivative instruments 17,311 36,807

Deferred tax assets 17,277 18,069

Service fee receivables 9,080 16,094

Income tax deposits 10,438 8,735

Identifiable intangible assets, net 48 22,112

Deferred tax assets 8,418 17,277

Other 74,506 96,725

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Senior secured notes 1,846,047 1,654,989

Convertible notes and exchangeable notes 330,000 272,500

Convertible senior notes

330,000 330,000

Cabot securitisation senior facility 319,137 324,646

283,500 175,000

Other 64,904 24,904

3 unchanged sentences

Total $ 3,672,762 $ 3,318,031

Encore is the parent of the restricted group for the Global Senior Facility, the Senior Secured Notes and the Encore Private Placement Notes, each of which is guaranteed by the same group of material Encore subsidiaries and secured by the same collateral, which represents substantially all of the assets of those subsidiaries.

Encore is the parent of the restricted group for the Global Senior Facility and the Senior Secured Notes, both of which are guaranteed by the same group of material Encore subsidiaries and secured by the same collateral, which represents substantially all of the assets of those subsidiaries.

Global Senior Secured Revolving Credit Facility

In September 2020, the Company entered into a multi-currency senior secured revolving credit facility agreement (as amended and restated, the “Global Senior Facility”).

In May 2023, the Company amended the Global Senior Facility to extend the termination date of the facility from September 2026 to September 2027.

In addition, the size of the facility was increased by $ 40.0 million to $ 1,180.0 million.

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.

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:

On October 17, 2024, the Company agreed to amend and restate the Global Senior Facility to, among other things, (1) upsize the facility by $ 92.0 million from $ 1,203.0 million to $ 1,295.0 million, (2) extend the termination date of the facility from September 2027 to September 2028 except for a $ 22.5 million tranche that will continue to terminate in September 2027, and (3) decrease the interest margin by 0.25 % from 2.50 % to 2.25 %.

The amendment was accounted for as a debt modification.

As of December 31, 2024, the Global Senior Facility included 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 2.25 %, plus in the case of Term SOFR borrowings, a credit adjustment spread of 0.10 %;

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The Global Senior Facility is secured by substantially all of the assets of the Company and the guarantors.

Pursuant to the terms of an intercreditor agreement entered into with respect to the relative positions of (1) the Global Senior Facility, any super priority hedging liabilities and the Encore Private Placement Notes (collectively, “Super Senior Liabilities”) and (2) the Senior Secured Notes, 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.

Pursuant to the terms of an intercreditor agreement entered into with respect to the relative positions of (1) the Global Senior Facility and any super priority hedging liabilities (collectively, “Super Senior Liabilities”) and (2) the Senior Secured Notes, 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.

As of December 31, 2024, the outstanding borrowings under the Global Senior Facility were $ 865.4 million.

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In August 2017, Encore entered into $ 325.0 million in senior secured notes with a group of insurance companies (the “Encore Private Placement Notes”).

As of December 31, 2023, $ 29.3 million of the Encore Private Placement Notes remained outstanding.

The Encore Private Placement Notes bear an annual interest rate of 5.625 %, mature in August 2024 and require quarterly principal payments of $ 9.8 million.

The covenants and material terms for the Encore Private Placement Notes are substantially similar to those for the Global Senior Facility.

The Encore Private Placement Notes bore an annual interest rate of 5.625 %.

The covenants and material terms for the Encore Private Placement Notes were substantially similar to those for the Global Senior Facility.

The Encore Private Placement Notes matured in August 2024.

Senior Secured Notes

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Encore 2028 Floating Rate Notes 533,167 568,448 EUR Jan 15, 2028 Jan 15, Apr 15, Jul 15, Oct 15 EURIBOR + 4.250 % (1)

Encore 2029 Notes

500,000 — USD Apr 1, 2029 Apr 1, Oct 1 9.250 %

Encore 2030 Notes

500,000 — USD May 15, 2030 May 15, Nov 15 8.500 %

$ 1,846,047 $ 1,654,989

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(1) Interest rate is based on three-month EURIBOR (subject to a 0 % floor) plus 4.250 % per annum, resets quarterly.

The Senior Secured Notes are secured by the same collateral as the Global Senior Facility and the Encore Private Placement Notes.

The guarantees provided in respect of the Senior Secured Notes are pari passu with each such guarantee given in respect of the Global Senior Facility and Encore Private Placement Notes.

The Senior Secured Notes are secured by the same collateral as the Global Senior Facility.

The guarantees provided in respect of the Senior Secured Notes are pari passu with each such guarantee given in respect of the Global Senior Facility.

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.

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 %.

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.

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.

The 2028 Floating Rate Notes had a weighted average interest rate of 7.96 % and 7.44 % for the years ended December 31, 2024 and 2023, respectively.

As discussed in “Note 3:

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The weighted average interest rate of the 2028 Floating Rate Notes including the effect of the hedging instruments was 6.36 % and 4.52 % for the years ended December 31, 2024 and 2023, 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 ):

In March 2024, the Company issued $ 500.0 million in aggregate principal amount of 9.250 % Senior Secured Notes due April 2029 at an issue price of 100.000 % (the “Encore 2029 Notes”).

Interest on the Encore 2029 Notes is payable semi-annually, in arrears, on April 1 and October 1 of each year, commencing on October 1, 2024.

The Company used the proceeds from this offering to pay down $ 493.0 million of the drawings under its Global Senior Facility and to pay certain transaction fees and expenses incurred in connection with the offering of the Encore 2029 Notes.

In May 2024, the Company issued $ 500.0 million in aggregate principal amount of 8.500 % Senior Secured Notes due May 2030 at an issue price of 100.000 % (the “Encore 2030 Notes”).

Interest on the Encore 2030 Notes is payable semi-annually, in arrears, on May 15 and November 15 of each year, commencing on November 15, 2024.

The Company used the proceeds from this offering to pay down $ 448.7 million of the drawings under its Global Senior Facility, pay certain transaction fees and expenses incurred in connection with the offering of the Encore 2030 Notes and for general corporate purposes.

Using drawings from its Global Senior Facility and cash on hand, the Company fully redeemed the Encore 2025 Notes at par on October 15, 2024, and fully redeemed the Encore 2026 Notes at par on November 15, 2024.

In connection with the early redemptions of the Encore 2025 Notes and Encore 2026 Notes, the Company also settled the corresponding 2020 Euro Swaps and 2023 GBP Swaps for approximately $ 40.0 million.

Refer to “Note 3:

Derivatives and Hedging Instruments” for further detail of the early settlements of the cross currency swap contracts.

In connection with the redemptions of the Encore 2025 and 2026 Notes, the Company wrote off the related unamortized debt discount and issuance costs and recognized a loss on extinguishment of debt of approximately $ 4.1 million during the year ended December 31, 2024.

Convertible Notes

The following table provides a summary of the principal balance, maturity date and interest rate for the Company’s convertible senior notes (the “Convertible Note”) ( $ in thousands ):

December 31, 2024 December 31, 2023 Maturity Date Interest Payment Dates

Interest Rate

2023 Exchangeable Notes $ — $ 172,500 Sep 1, 2023 Mar 1, Sep 1 4.500 %

2025 Convertible Notes $ 100,000 $ 100,000 Oct 1, 2025 Apr 1, Oct 1 3.250 %

2 unchanged sentences

$ 330,000 $ 330,000

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”).

Interest on the 2029 Convertible Notes is payable semi-annually.

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.

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.

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.

The remaining excess above the principal amount of the repurchased 2023 Exchangeable Notes was recognized in the Company’s stockholder’s equity.

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.

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.

On September 1, 2023, the remaining $ 17.7 million principal amount of the 2023 Exchangeable Notes matured.

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.

The excess above the principal amount represents the conversion spread and was recognized as a reduction in stockholder's equity.

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.

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 .

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.

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.

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 .

The cost of the capped call transactions was approximately $ 18.5 million.

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, 2024.

22 unchanged sentences

(3) Represents the premium the Company would have to pay assuming the Convertible Notes were converted on December 31, 2024 using a hypothetical share price based on the closing stock price on December 31, 2024.

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.

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.

Prior to the close of business on the business day immediately preceding their respective free conversion dates (listed above), holders may convert their Convertible Notes under certain circumstances set forth in the applicable indentures.

On or after their respective free conversion dates until the close of business on the second scheduled trading day immediately preceding their respective maturity dates, holders may convert their notes at any time.

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.

The Company’s convertible and exchangeable notes are carried as a single liability, which reflects the principal amount of the convertible and exchangeable notes.

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.

The Company’s convertible notes are carried as a single liability, which reflects the principal amount of the convertible notes.

Interest expense related to the Convertible Notes was approximately $ 12.5 million, $ 12.6 million, and $ 12.0 million for the years ended December 31, 2024, 2023, and 2022, respectively.

Cabot Securitisation Senior Facility

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.

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 %.

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.

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 %.

Prior to December 18, 2024, Cabot Securitisation UK Ltd (“Cabot Securitisation”), an indirect subsidiary of Encore, had a senior facility for a committed amount of £ 255.0 million (as amended, the “Cabot Securitisation Senior Facility”), which had a maturity date in September 2028.

Funds drawn under the Cabot Securitisation Senior Facility bore 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 %.

On December 18, 2024, the obligations under the Cabot Securitisation Senior Facility were paid off in full and the Cabot Securitisation Senior Facility was terminated.

On December 18, 2024, Cabot Securitisation entered into a new £ 255.0 million senior facility (the “2024 Cabot Securitisation Senior Facility”) with different lenders.

Funds drawn under the 2024 Cabot Securitisation Senior Facility bear interest at a rate per annum equal to SONIA plus a margin of 3.20 % plus, for periods after January 18, 2028, a step up margin ranging from zero to 1.00 %.

The 2024 Cabot Securitisation Senior Facility matures in January 2030.

In connection with the termination of the Cabot Securitisation Senior Facility, the Company wrote off related unamortized debt issuance costs and recognized a loss on extinguishment of debt of approximately $ 3.7 million during the year ended December 31, 2024.

As of December 31, 2024, the outstanding borrowings under the 2024 Cabot Securitisation Senior Facility were £ 255.0 million (approximately $ 319.1 million based on an exchange rate of $1.00 to £ 0.80 , the exchange rate as of December 31, 2024).

The obligations of Cabot Securitisation under the 2024 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 £ 324.1 million (approximately $ 405.6 million based on an exchange rate of $1.00 to £ 0.80 , the exchange rate as of December 31, 2024) as of December 31, 2024.

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.

The weighted average interest rate of the Cabot Securitisation Senior Facility or the Cabot Securitisation Senior Facility, as the case may be, was 8.32 % and 7.68 % for the years ended December 31, 2024 and 2023, respectively.

As discussed in “Note 3:

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.

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.

The weighted average interest rate of the Cabot Securitisation Senior Facility or the 2024 Cabot Securitisation Senior Facility, as the case may be, including the effect of the hedging instruments was 6.27 % and 5.41 % for the years ended December 31, 2024 and 2023, respectively.

Cabot Securitisation is a securitized financing vehicle and is a VIE for consolidation purposes.

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Financing Subsidiary”), entered into a facility for a committed amount of $ 175.0 million (the “U.S.

Facility matures in October 2026.

The Company amended its U.S.

Facility, effective September 17, 2024, to extend the maturity date from October 2026 to October 2027 and to increase the committed amount from $ 175.0 million to $ 300.0 million.

The amendment was accounted for as a debt modification.

Funds drawn under the U.S.

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The weighted average interest rate of the U.S.

Facility was 8.84 % for the year ended December 31, 2023.

Facility was 8.62 % and 8.84 % for the years ended December 31, 2024 and 2023, respectively.

As discussed in “Note 3:

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The weighted average interest rate of the U.S.

Facility including the effect of the hedging instruments was 8.25 % for the year ended December 31, 2023.

Facility including the effect of the hedging instruments was 7.93 % and 8.25 % for the years ended December 31, 2024 and 2023, respectively.

Facility is a securitized financing vehicle and is a VIE for consolidation purposes.

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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.

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.

During the year ended December 31, 2022, we repurchased 1,497,184 shares of our common stock for approximately $ 86.9 million under the share repurchase program.

We did not make any repurchases under the share repurchase program during the years ended December 31, 2024 or 2023.

The Company’s practice is to retire the shares repurchased.

On November 4, 2021, the Company commenced a modified “Dutch Auction” tender offer to purchase up to $ 300.0 million of shares of its common stock with a price range between $ 52.00 and $ 60.00 per share.

On December 9, 2021, the Company announced the final results of the tender offer.

Through the tender offer, the Company purchased 4,471,995 shares of common stock at a price of $ 60.00 per share, for a total cost of $ 268.3 million, excluding fees and expenses.

The shares purchased through the tender offer were immediately retired.

The Company records the excess of repurchase price over the par amount to additional paid-in capital, then to retained earnings once additional paid-in capital is reduced to zero.

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Balance at December 31, 2021

Other comprehensive loss before reclassification

$ 516 $ ( 54,064 ) $ ( 53,548 )

Other comprehensive income (loss) before reclassification 5,737 ( 78,232 ) ( 72,495 )

Reclassification 30,648 — 30,648

Removal of OCI in connection with divestiture — 19,904 19,904

Tax effect ( 407 ) ( 3,014 ) ( 3,421 )

Balance at December 31, 2022

Other comprehensive income (loss) before reclassification

36,494 ( 135,310 ) ( 98,816 )

Other comprehensive (loss) income before reclassification ( 41,508 ) 15,376 ( 26,132 )

Reclassification ( 2,970 ) — ( 2,970 )

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Balance at December 31, 2023

Other comprehensive (loss) income before reclassification

( 3,093 ) ( 120,827 ) ( 123,920 )

Other comprehensive loss before reclassification

( 25,167 ) ( 29,081 ) ( 54,248 )

Reclassification 11,540 — 11,540

— 3,426 3,426

Tax effect 352 720 1,072

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2017 Incentive Award Plan (the “2017 Plan”), which was then approved by the Company’s stockholders on June 15, 2017.

The 2017 Plan superseded the Company’s 2013 Incentive Compensation Plan (as amended, the “2013 Plan”), which had previously superseded the Company’s 2005 Stock Incentive Plan (“2005 Plan”).

Board members, employees, and consultants of Encore and its subsidiaries and affiliates are eligible to receive awards under the 2017 Plan.

Subject to certain adjustments, the Company may grant awards for an aggregate of 5,713,571 shares of the Company’s common stock under the 2017 Plan.

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.

If an 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.

The aggregate number of shares available for issuance under the 2017 Plan is 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.

When an award under the 2017 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 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.

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The actual tax benefit from stock-based compensation arrangements totaled $ 1.2 million, $ 1.8 million, and $ 4.2 million for the years ended December 31, 2024, 2023, and 2022, respectively.

The Company’s stock-based compensation arrangements are described below:

Stock Options

Under the 2005 Plan, option awards were generally granted with an exercise price equal to the market price of the Company’s stock at the date of issuance.

They generally vest over three to five years of continuous service, and have ten-year contractual terms.

Other than the Performance Options discussed below, no options have been awarded under the 2013 Plan or 2017 Plan.

There were no options granted during the years ended December 31, 2023, 2022, or 2021.

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.

All exercisable options have been exercised prior to December 31, 2022.

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.

Performance Stock Options

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.

A summary of the Company’s performance stock option activity as of December 31, 2023, and changes during the year then ended, are presented below:

Shares Weighted Average

Exercise Price Weighted

(in thousands)

Outstanding and exercisable as of December 31, 2022

79,949 $ 30.95

Exercised ( 79,949 ) $ 30.95

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.

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.

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

The Company’s 2017 Plan (and previously, the 2013 Plan and 2005 Plan), permits restricted stock units, restricted stock awards, performance stock units, and performance stock awards (collectively “stock awards”).

The fair value of non-vested shares with a service condition and/or a performance condition that affect vesting is equal to the closing sale price of the Company’s common stock on the grant date.

The Company’s current stock-based awards are primarily restricted stock units.

The fair value of restricted stock units with a service condition and/or a performance condition that affect vesting is equal to the closing sale price of the Company’s common stock on the grant date.

Compensation expense is recognized only for the awards that ultimately vest.

The Company has certain share awards that include market conditions that affect vesting.

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.

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.

The fair value of these shares is estimated using a lattice model.

For the majority of non-vested shares, shares are issued on the vesting dates net of the number of shares needed to satisfy minimal statutory tax withholding requirements.

For the majority of restricted stock units, shares are issued on the vesting dates net of the number of shares needed to satisfy minimal statutory tax withholding requirements.

The tax obligations are then paid by the Company on behalf of the employees.

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The number of shares presented is based on achieving the performance goals at target levels as defined in the stock award agreements.

As of December 31, 2023 and 2022, the maximum number of non-vested performance shares that could vest under the provisions of the agreements was 659,343 and 687,320 , respectively.

Unrecognized compensation expense related to non-vested shares as of December 31, 2023 was $ 13.7 million.

As of December 31, 2024 and 2023, the maximum number of shares that could vest if non-vested performance shares vested at maximum levels was 757,061 and 659,343 , respectively.

Unrecognized compensation expense related to restricted stock units as of December 31, 2024 was $ 16.2 million.

The weighted-average remaining expense period, based on the unamortized value of these outstanding non-vested shares, was approximately 1.5 years.

The fair value of restricted stock units and restricted stock awards vested for the years ended December 31, 2023, 2022, and 2021 was $ 15.7 million, $ 26.9 million, and $ 16.9 million, respectively.

The fair value of restricted stock units vested for the years ended December 31, 2024, 2023, and 2022 was $ 13.8 million, $ 15.7 million, and $ 26.9 million, respectively.

The weighted average grant date fair value for stock awards granted during the years ended December 31, 2024, 2023, and 2022 was $ 49.73 , $ 49.97 , and $ 60.45 , respectively.

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State provision ( 5.7 ) % ( 3.0 ) % 5.0 %

Foreign rate differential ( 2.8 ) % 0.6 % ( 0.3 ) %

Change in valuation allowance (1)

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2.6 % 2.9 % ( 2.7 ) %

Nondeductible compensation ( 1.2 ) % ( 0.6 ) % 0.4 %

Return to provision adjustments ( 1.3 ) % 0.6 % 0.6 %

Forfeit benefit due to merger/liquidations (4)

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________________________

(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.

In 2022, includes valuation allowance recorded on U.K.

(1) The change in valuation allowance during the year ended December 31, 2024 reflected certain foreign subsidiaries’ operating losses.

The change in valuation allowance during the year ended December 31, 2023 was primarily due to the forfeit of tax benefits on merger or liquidation of foreign subsidiaries that maintained full valuation allowances on their deferred tax assets.

The change in valuation allowance during the year ended December 31, 2022 included valuation allowance recorded on U.K.

deferred tax assets.

(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.

(2) During the years ended December 31, 2024 and 2023, the Company recorded a non-cash goodwill impairment charge of $ 100.6 million and $ 238.2 million at its Cabot reporting unit, respectively.

Refer to “Note 15:

Goodwill and Identified Intangible Assets” for further details.

(3) In 2023, represents a taxable gain recognized in a foreign subsidiary.

In 2022, represents deductible loss recognized in a foreign subsidiary that maintains a full valuation allowance on its deferred tax assets.

Accordingly, the deductible loss increased the valuation allowance and did not result in any tax benefit during the year ended December 31, 2022.

(4) Represents the forfeit of tax benefits on merger or liquidation of foreign subsidiaries that maintained full valuation allowances on their deferred tax assets.

Goodwill and Identifiable Intangible Assets” for further details.

(3) Represents taxable foreign currency movement recognized in a foreign subsidiary for the years ended December 31, 2024 and 2023.

For the year ended December 2022, the Company had deductible loss recognized in a foreign subsidiary that maintains a full valuation allowance on its deferred tax assets.

Accordingly, the deductible loss increased the valuation allowance and did not result in any tax benefit.

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

The Company’s subsidiary in Costa Rica is operating under a 100 % tax holiday through December 31, 2026.

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Difference in basis of depreciable and amortizable assets 4,353 1,957

Accrued interest expense

Other 6,437 5,303

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In accordance with authoritative guidance relating to income taxes, deferred taxes and liabilities are netted for each tax-paying component of the Company within a particular tax jurisdiction, and presented as a single amount in the statement of financial condition.

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.

As of December 31, 2024, certain of the Company’s foreign subsidiaries have net operating loss carry forwards of approximately $ 265.8 million, of which $ 28.4 million will begin to expire in 2026 and the remainder will carry forward indefinitely.

Certain of the Company’s domestic subsidiaries have state net operating losses, which will begin to expire in 2035.

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.

As of December 31, 2023, valuation allowances decreased by $ 11.6 million, as compared to December 31, 2022.

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.

As of December 31, 2024, valuation allowances increased by $ 29.2 million, as compared to December 31, 2023.

The change in valuation allowance is primarily related to current operating losses at certain foreign entities during the period.

A reconciliation of the beginning and ending amounts of unrecognized tax benefit is as follows (in thousands) :

Balance as of December 31, 2020 $ 6,781

Decrease related to prior year tax positions ( 2,034 )

Decrease related to expiration of statute of limitations ( 712 )

Increase related to prior year tax positions 261

Increase related to current year tax positions 251

Balance as of December 31, 2021 4,547

December 31, 2021 $ 4,547

Decrease related to prior year tax positions ( 1,296 )

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Increase related to current year tax positions 691

Balance as of December 31, 2022 3,988

December 31, 2022 $ 3,988

Increase related to prior year tax positions 2,302

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Decrease related to expiration of statute of limitations ( 69 )

December 31, 2023 $ 6,961

Decrease related to expiration of statute of limitations ( 1,044 )

Decrease related to prior year tax positions ( 38 )

Increase related to current year tax positions 483

Other ( 107 )

Balance as of December 31, 2024 $ 6,255

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As of December 31, 2024, 2023 and 2022, there was $ 6.6 million, $ 5.0 million and $ 2.5 million, respectively, of unrecognized tax benefit that if recognized, would result in a net tax benefit.

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.

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.

During the year ended December 31, 2024, the increase in the Company’s gross unrecognized tax benefit was primarily due to the release of a prior year position related to a domestic entity.

During the year ended December 31, 2023, the increase in the Company’s gross unrecognized tax benefit was primarily due to a prior year position related to a domestic entity.

During the year ended December 31, 2022, the decrease in the Company’s gross unrecognized tax benefit was primarily due 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.

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Classification December 31, 2024 December 31, 2023

Operating lease ROU assets Other assets $ 67,019 $ 70,074

Finance lease ROU assets Property and equipment, net 18,571 18,337

Operating lease ROU assets, net

Other assets $ 58,089 $ 67,019

Finance lease ROU assets, net

Property and equipment, net 1,023 2,689

Total lease ROU assets $ 59,112 $ 69,708

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In October 2020, the Company entered into a stipulated judgment (“Stipulated Judgment”) with the CFPB to resolve a subsequent lawsuit related to the 2015 Consent Order.

In connection with the Stipulated Judgment, the CFPB formally terminated the 2015 Consent Order.

Additionally, we are subject to ancillary state Attorney General investigations related to similar debt collection practices.

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The Company conducts business through several operating segments.

The Company’s Chief Operating Decision Maker relies on internal management reporting processes that provide segment revenue, segment operating income, and segment asset information in order to make financial decisions and allocate resources.

The Company determined its operating segments meet the aggregation criteria, and therefore, it has one reportable segment, portfolio purchasing and recovery, based on similarities among the operating units including economic characteristics, the nature of the services, the nature of the production process, customer types for their services, the methods used to provide their services and the nature of the regulatory environment.

The accounting policies applied to the segments are the same as those described in the summary of significant accounting policies.

The Company determined its operating segments meet the aggregation criteria, and therefore, it has one reportable segment, debt purchasing and recovery segment, based on similarities among the operating units including economic characteristics, the nature of the services, the nature of the production process, customer types for their services, the methods used to provide their services and the nature of the regulatory environment.

The Company’s Chief Operating Decision Maker, which is the Company’s chief executive officer, relies on internal management reporting processes that provide segment revenues, segment total operating expenses, segment operating income, and segment asset information in order to make financial decisions.

The measure of segment performance is segment operating income.

The Company’s Chief Operating Decision Maker assesses the segment’s performance and makes decisions about the allocation of capital resources to each segment accordingly.

Corporate and other unallocated represents corporate overhead and other items not allocated to any of the Company’s operating segments.

The following tables present the results of operations of the Company’s reportable segment for the years ended December 31, 2024, 2023, and 2022, respectively (in thousands) :

Year Ended December 31, 2024

Debt purchasing and recovery segment

Corporate and other unallocated Consolidated

Total revenues

$ 1,316,361 $ — $ 1,316,361

Total operating expenses (1)

( 1,101,055 ) ( 57,976 ) ( 1,159,031 )

Operating Income

215,306 157,330

Other segment items (2)

( 1,000 ) ( 1,000 )

Interest expenses (3)

( 252,545 ) ( 252,545 )

Provision for income taxes

( 43,029 ) ( 43,029 )

$ ( 139,244 )

_______________________

(1) Certain corporate activities that are not allocated to the debt purchasing and recovery segment are recorded under corporate and other unallocated.

During the year ended December 31, 2024, such non-allocated operating expenses primarily consisted of salaries and employee benefits of approximately $ 37.8 million for corporate employees and general and administrative expenses of approximately $ 19.3 million.

(2) The other segment items category includes other income, and loss on extinguishment of debt.

(3) The Company manages its available capital resources at the corporate level.

Interest expenses are not allocated to operating segments.

Year Ended December 31, 2023

Debt purchasing and recovery segment

Corporate and other unallocated Consolidated

Total revenue

$ 1,222,680 $ — $ 1,222,680

Total operating expenses (1)

( 1,148,161 ) ( 57,984 ) ( 1,206,145 )

Operating Income

74,519 16,535

Other segment items (2)

Interest expenses (3)

( 201,877 ) ( 201,877 )

Provision for income taxes

( 26,228 ) ( 26,228 )

$ ( 206,492 )

________________________

(1) Certain corporate activities that are not allocated to the debt purchasing and recovery segment are recorded under corporate and other unallocated.

During the year ended December 31, 2023, such non-allocated operating expenses primarily consisted of salaries and employee benefits of approximately $ 33.9 million for corporate employees and general and administrative expenses of approximately $ 22.9 million.

(2) The other segment items category includes other income.

(3) The Company manages its available capital resources at the corporate level.

Interest expenses are not allocated to operating segments.

Year Ended December 31, 2022

Debt purchasing and recovery segment

Corporate and other unallocated Consolidated

Total revenue

$ 1,398,347 $ — $ 1,398,347

Total operating expenses (1)

( 881,957 ) ( 54,216 ) ( 936,173 )

Operating Income

516,390 462,174

Other segment items (2)

Interest expenses (3)

( 153,308 ) ( 153,308 )

Provision for income taxes

( 116,425 ) ( 116,425 )

________________________

(1) Certain corporate activities that are not allocated to the debt purchasing and recovery segment are recorded under corporate and other unallocated.

During the year ended December 31, 2022, such non-allocated operating expenses primarily consisted of salaries and employee benefits of approximately $ 32.0 million for corporate employees and general and administrative expenses of approximately $ 21.3 million.

(2) The other segment items category includes other income.

(3) The Company manages its available capital resources at the corporate level.

Interest expenses are not allocated to operating segments.

The following tables present information about geographic areas in which the Company operates (in thousands) :

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Goodwill and Identifiable Intangible Assets

The Company’s goodwill is tested for impairment at the reporting unit level annually and in interim periods if certain events occur that indicate that the fair value of a reporting unit may be below its carrying value.

The Company’s goodwill is tested for impairment at the reporting unit level annually as of the first day of the fourth quarter and in interim periods if certain events occur that indicate that the fair value of a reporting unit may be below its carrying value.

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 .

The Company performs its annual goodwill impairment assessment as of the first day of the fourth quarter.

As of December 31, 2023, the Company had two reporting units, MCM and Cabot, that carried goodwill.

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.

The annual goodwill impairment analysis resulted in an impairment charge for the Cabot reporting unit of $ 238.2 million.

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.

As of December 31, 2024, the Company had three reporting units, MCM, Cabot, and LAAP, that carried goodwill.

The goodwill for the LAAP reporting unit was recently acquired in December 2024.

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.

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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.

Under the market approach, the Company uses both a Guideline Public Company Method and Guideline Merged & Acquired Company method to estimate the fair value of equity and the business enterprise value of a reporting unit.

The Guideline Public Company approach uses financial metrics from similar public traded companies to estimate fair value.

Under the market approach, the Company uses a Guideline Public Company Method and, when data is available, a Guideline Merged & Acquired Company method to estimate the fair value of equity and the business enterprise value of a reporting unit.

The Guideline Public Company approach uses financial metrics from similar publicly traded companies to estimate fair value.

The Guideline Merged and Acquired Company method calculates fair value by analyzing the actual prices paid for recent mergers and acquisitions in the industry.

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In addition, the Company compares the aggregate fair value of the reporting units to its overall market capitalization.

The Company’s prior annual goodwill impairment test resulted in a sufficient cushion for the Cabot reporting unit.

Additionally, the Company did not observe significant indicators of goodwill impairment triggers during its subsequent interim qualitative assessments.

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

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.

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.

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.

As a result, the Company recorded an impairment charge of its intangible assets of $ 18.7 million during the fourth quarter of 2023.

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.

The Company chose to proceed directly to performing quantitative tests for both MCM and Cabot reporting units for the annual goodwill impairment test on October 1, 2024, which did not result in any impairment charge for either of the two reporting units.

Subsequent to the annual impairment test on October 1, 2024, management identified goodwill impairment triggers in connection with the significant reduction in the estimated future recoveries for the Company’s investment in receivable portfolios at Cabot during the fourth quarter of 2024.

As a result, management conducted another quantitative test for goodwill impairment as of December 31, 2024.

This subsequent goodwill impairment analysis resulted in an impairment charge for the Cabot reporting unit of $ 100.6 million.

The decline in the fair value of the Cabot reporting unit below its carrying value primarily resulted from changes in expected future cash flows as compared to the Company’s previous financial forecasts, and to a lesser extent, a decline in market multiples.

After recording the goodwill impairment charge, the carrying value of our Cabot reporting unit was equal to its fair value as of December 31, 2024.

The fair value of the MCM reporting unit substantially exceeded its carrying value, as a result, there was no impairment of goodwill for the MCM reporting unit during the year ended

December 31, 2024.

The Company also conducted qualitative analysis on the goodwill carried at its LAAP reporting unit and concluded that no impairment existed as of December 31, 2024.

T he fair value of the Cabot reporting unit approximated its carrying value after recording the goodwill impairment charge.

Any subsequent significant unfavorable changes could result in the fair value being less than the carrying value at the Cabot reporting unit.

Management continues to evaluate and monitor all key factors impacting the carrying value of the Company’s recorded goodwill.

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.

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):

4 unchanged sentences

148,936 672,278 — 821,214

Goodwill impairment — ( 238,200 ) — ( 238,200 )

Effect of foreign currency translation — 23,461 — 23,461

1 unchanged sentence

148,936 457,539 — 606,475

Goodwill acquired (1)

— — 11,268 11,268

Goodwill impairment — ( 100,600 ) — ( 100,600 )

2 unchanged sentences

$ 148,936 $ 347,604 $ 11,268 $ 507,808

There was no accumulated goodwill impairment loss as of December 31, 2022 and 2021.

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) :

________________________

(1) The Company held an investment in Encore Asset Reconstruction Company (“EARC”) in India.

In December 2024, the Company paid $ 11.0 million in total considerations and completed a step up acquisition of EARC.

As a result, the Company recognized approximately $ 11.3 million of goodwill, which was not deductible for tax purposes.

This goodwill balance is included in the Company’s LAAP reporting unit.

The assets acquired and liabilities assumed resulting from the transaction were immaterial.

The accumulated goodwill impairment loss at the Cabot reporting unit was $ 338.8 million and $ 238.2 million as of December 31, 2024 and 2023, respectively.

There was no accumulated goodwill impairment loss as of December 31, 2022.

The Company’s acquired intangible assets only included trade names during the periods presented, the weighted-average useful lives of trade names at the time of acquisition were 7 years.

The following table summarizes the Company’s acquired intangible assets (in thousands) :

As of December 31, 2024 As of December 31, 2023

3 unchanged sentences

Amortization Net

Customer relationships $ — $ — $ — $ 45,498 $ ( 23,507 ) $ 21,991

Trade name and other 918 ( 870 ) 48 909 ( 788 ) 121

Total intangible assets

The weighted-average useful lives of intangible assets at the time of acquisition were as follows (in years) :

Weighted-Average

Customer relationships 10

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.

Estimated future amortization expense related to finite-lived intangible assets as of December 31, 2023 was negligible.

$ 918 $ ( 918 ) $ — $ 918 $ ( 870 ) $ 48

The Company recorded an impairment charge of its intangible assets of $ 18.7 million, and $ 4.1 million during the years ended December 31, 2023 and 2022, respectively.

The amortization expense for intangible assets subject to amortization was $ 3.6 million and $ 6.3 million during the years ended December 31, 2023 and 2022, respectively.

The amortization expense was negligible during the year ended December 31, 2024.

The Company had no intangible assets at December 31, 2024.

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.

What changed 10-K

Item 9A. Controls and Procedures