AP NEWS

Encore Capital Group Announces Third Quarter 2018 Financial Results

November 7, 2018

-- Completion of the Cabot transaction creates largest global debt purchaser -- Encore sets new records for collections and estimated remaining collections -- GAAP EPS from continuing operations of $0.69 per share -- Non-GAAP Economic EPS from continuing operations of $1.19 per share

SAN DIEGO, Nov. 07, 2018 (GLOBE NEWSWIRE) -- Capital Group, Inc. (NASDAQ: ECPG), an international specialty finance company providing debt recovery solutions for consumers across a broad range of assets, today reported consolidated financial results for the third quarter ended September 30, 2018.

“Encore had a strong quarter as we recorded our third consecutive quarter of record global cash collections and reached an all-time high for estimated remaining collections,” said Ashish Masih, President and Chief Executive Officer. “Robust collections continue to be driven by our ongoing focus on operational innovation and the collections capacity that we have steadily added over the past several quarters in the U.S. In addition, global portfolio purchases totaled $249 million and included $123 million of deployments in the United States, a level that keeps us on track to deploy more capital in the U.S. in 2018 than in any other prior year. This solid performance was impacted by the charges incurred in the third quarter associated with the completion of the acquisition of Cabot and certain one-time tax items associated with one of our smaller international businesses, causing a higher than normal tax rate which further impacted our results.”

“The acquisition of Cabot strengthens our global business and establishes us as a clear leader in both the United States and in the United Kingdom, the world’s two most important markets for our industry. We are the global leader in debt purchasing when measured by estimated remaining collections. We expect Cabot’s debt purchasing and servicing platforms will strengthen our long-term leadership and growth in Europe through both its geographic and product diversity, as well as its broad servicing capabilities,” said Masih.

Key Financial Metrics for the Third Quarter of 2018:

-- Estimated remaining collections (ERC) increased 10% compared to the same period of the prior year, to a record $7.2 billion. -- Portfolio purchases were $249 million, including $123 million in the U.S. and $115 million in Europe, compared to $292 million deployed overall in the same period a year ago. -- Gross collections increased 13% to a record $499 million, compared to $443 million in the same period of the prior year. -- Total revenues, adjusted by net allowances, increased 10% to $337 million, compared to $307 million in the third quarter of 2017. -- Total operating expenses were $239 million, compared to $203 million in the same period of the prior year. Incremental operating expenses in the third quarter of 2018 included expenses related to the completion of the Cabot acquisition in the quarter, in addition to expenses associated with Wescot, acquired by Encore’s Cabot subsidiary during the fourth quarter of 2017. -- Adjusted operating expenses, which represent the expenses related to our portfolio purchasing and recovery business, increased 6% to $180 million, compared to $170 million in the same period of the prior year. -- Total interest expense increased to $65.1 million, compared to $52.8 million in the same period of the prior year, principally as a result of costs related to a Cabot refinancing, Encore’s purchase of the remaining interest in Cabot, higher average debt balances related to larger investments in receivables, and increases in the cost of short-term borrowing. -- GAAP net income attributable to Encore was $20.7 million, or $0.69 per fully diluted share, as compared to $28.2 million, or $1.05 per fully diluted share in the same period a year ago. -- Adjusted income attributable to Encore was $35.8 million, compared to $30.7 million in the third quarter of 2017. Adjusted income attributable to Encore per share (also referred to as Economic EPS) was $1.19, compared to $1.17 in the same period of the prior year. -- As of September 30, 2018, after taking into account borrowing base and applicable debt covenants, available capacity under Encore’s U.S. revolving credit facility, was $178 million and availability under Cabot’s revolving credit facility was £77 million (approximately $100 million). These figures do not include cash on the balance sheet.

Conference Call and Webcast

Encore will host a conference call and slide presentation today, November 7, 2018, at 2:00 p.m. Pacific / 5:00 p.m. Eastern time, to present and discuss third quarter results.

Members of the public are invited to access the live webcast via the Internet by logging on at the Investor Relations page of Encore’s website at www.encorecapital.com. To access the live, listen-only telephone conference portion, please dial (855) 541-0982 or (704) 288-0606.

For those who cannot listen to the live broadcast, a telephonic replay will be available for seven days by dialing (800) 585-8367 or (404) 537-3406 and entering the conference number 9439619. A replay of the webcast will also be available shortly after the call on the Company’s website.

Non-GAAP Financial Measures

This news release includes certain financial measures that exclude the impact of certain items and therefore have not been calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company has included adjusted income attributable to Encore and adjusted income attributable to Encore per share (also referred to as economic EPS when adjusted for certain shares associated with our convertible notes that will not be issued but are reflected in the fully diluted share count for accounting purposes) because management uses this measure to assess operating performance, in order to highlight trends in the Company’s business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. The Company has included information concerning adjusted operating expenses in order to facilitate a comparison of approximate cash costs to cash collections for the portfolio purchasing and recovery business in the periods presented. Adjusted income attributable to Encore, adjusted income attributable to Encore per share/economic EPS, and adjusted operating expenses have not been prepared in accordance with GAAP. These non-GAAP financial measures should not be considered as alternatives to, or more meaningful than, net income, net income per share, and total operating expenses as indicators of the Company’s operating performance. Further, these non-GAAP financial measures, as presented by the Company, may not be comparable to similarly titled measures reported by other companies. The Company has attached to this news release a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

About Encore Capital Group, Inc.

Encore Capital Group is an international specialty finance company that provides debt recovery solutions for consumers across a broad range of assets. Through its subsidiaries including Midland Credit Management, Inc. (United States), Cabot Credit Management (Europe), Refinancia (Latin America), Baycorp (Australasia) and Encore Asset Reconstruction Company (India), Encore purchases or services portfolios of consumer receivables from major banks, credit unions, and utility providers. Encore partners with individuals as they repay their debt obligations, helping them on the road to financial recovery and ultimately improving their economic well-being.

Headquartered in San Diego, Encore is a publicly traded NASDAQ Global Select company (ticker symbol: ECPG) and a component stock of the Russell 2000, the S&P Small Cap 600 and the Wilshire 4500. More information about Encore can be found at www.encorecapital.com. More information about Cabot Credit Management can be found at www.cabotcm.com. Information found on Encore’s or its subsidiaries’ websites are not incorporated by reference.

Forward Looking Statements

The statements in this press release that are not historical facts, including, most importantly, those statements preceded by, or that include, the words “will,” “may,” “believe,” “projects,” “expects,” “anticipates” or the negation thereof, or similar expressions, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). These statements may include, but are not limited to, statements regarding our future operating results, performance, business plans or prospects. For all “forward-looking statements,” the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act. Such forward-looking statements involve risks, uncertainties and other factors which may cause actual results, performance or achievements of the Company and its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors are discussed in the reports filed by the Company with the Securities and Exchange Commission, including the most recent reports on Forms 10-K and 10-Q, as they may be amended from time to time. The Company disclaims any intent or obligation to update these forward-looking statements.

Contact:

Bruce ThomasVice President, Investor RelationsEncore Capital Group, Inc.(858) 309-6442 bruce.thomas@encorecapital.com

FINANCIAL TABLES FOLLOW

ENCORE CAPITAL GROUP, INC.Condensed Consolidated Statements of Financial Condition(In Thousands, Except Par Value Amounts)(Unaudited)

September 30, December 31, 2018 2017 ------------- ------------- Assets Cash and cash equivalents $ 204,649 $ 212,139 Investment in receivable portfolios, net 3,109,116 2,890,613 Deferred court costs, net 94,017 79,963 Property and equipment, net 96,429 76,276 Other assets 244,602 302,728 Goodwill 898,591 928,993 Total assets $ 4,647,404 $ 4,490,712 - --------- - - --------- - Liabilities and Equity Liabilities: Accounts payable and accrued liabilities $ 274,213 $ 284,774 Debt, net 3,561,467 3,446,876 Other liabilities 33,279 35,151 Total liabilities 3,868,959 3,766,801 ----------- - ----------- - Commitments and contingencies Redeemable noncontrolling interest 1,231 151,978 Equity: Convertible preferred stock, $.01 par value, 5,000 shares authorized, no shares — — issued and outstanding Common stock, $.01 par value, 50,000 shares authorized, 30,852 shares and 25,801 shares issued and outstanding as of September 30, 2018 and December 31, 2017, 309 258 respectively Additional paid-in capital 207,985 42,646 Accumulated earnings 673,153 616,314 Accumulated other comprehensive loss (103,394 ) (77,356 ) ----------- - ----------- - Total Encore Capital Group, Inc. stockholders’ equity 778,053 581,862 Noncontrolling interest (839 ) (9,929 ) ----------- - ----------- - Total equity 777,214 571,933 ----------- - ----------- - Total liabilities, redeemable equity and equity $ 4,647,404 $ 4,490,712 - --------- - - --------- -

The following table presents certain assets and liabilities of consolidated variable interest entities (“VIEs”) included in the consolidated statements of financial condition above. Most assets in the table below include those assets that can only be used to settle obligations of consolidated VIEs. The liabilities exclude amounts where creditors or beneficial interest holders have recourse to the general credit of the Company.

Septembe December r 30, 31, 2018 2017 ------- --------- Assets Cash and cash equivalents $ 471 $ 88,902 Investment in receivable portfolios, net 444,503 1,342,300 Deferred court costs, net — 26,482 Property and equipment, net — 23,138 Other assets 8,212 122,263 Goodwill — 724,054 Liabilities Accounts payable and accrued liabilities $ 3,514 $ 151,208 Debt, net 390,690 2,014,202 Other liabilities — 1,494

ENCORE CAPITAL GROUP, INC.Condensed Consolidated Statements of Operations(In Thousands, Except Per Share Amounts)(Unaudited)

Three Months Ended September 30, 2018 2017 ----------- ----------- Revenues Revenue from receivable portfolios $ 295,357 $ 264,024 Other revenues 37,388 23,111 Total revenues 332,745 287,135 Allowance reversals on receivable portfolios, net 4,029 19,564 Total revenues, adjusted by net allowances 336,774 306,699 --------- - --------- - Operating expenses Salaries and employee benefits 95,634 77,232 Cost of legal collections 50,473 48,094 Other operating expenses 30,691 25,859 Collection agency commissions 10,682 10,622 General and administrative expenses 41,893 32,500 Depreciation and amortization 9,873 8,522 Total operating expenses 239,246 202,829 --------- - --------- - Income from operations 97,528 103,870 --------- - --------- - Other (expense) income Interest expense (65,094 ) (52,755 ) Other (expense) income (2,539 ) 8,873 --------- - --------- - Total other expense (67,633 ) (43,882 ) --------- - --------- - Income from operations before income taxes 29,895 59,988 Provision for income taxes (16,879 ) (17,844 ) --------- - --------- - Net income 13,016 42,144 --------- - --------- - Net loss (income) attributable to noncontrolling interest 7,709 (13,950 ) --------- - --------- - Net income $ 20,725 $ 28,194 - ------- - - ------- - Earnings (loss) per share attributable to Encore Capital Group, Inc.: Basic $ 0.69 $ 1.08 Diluted $ 0.69 $ 1.05 Weighted average shares outstanding: Basic 29,867 26,011 Diluted 30,121 26,736

ENCORE CAPITAL GROUP, INC.Condensed Consolidated Statements of Cash Flows(Unaudited, In Thousands)

Nine Months Ended September 30, 2018 2017 ----------- ----------- Operating activities: Net income $ 63,703 $ 76,199 Adjustments to reconcile net income to net cash provided by operating activities: Loss from discontinued operations, net of income taxes — 199 Depreciation and amortization 31,232 25,819 Other non-cash expense, net 30,453 24,768 Stock-based compensation expense 10,452 7,041 Loss (gain) on derivative instruments, net 10,648 (2,714 ) Deferred income taxes 18,733 (5,396 ) Allowance reversals on receivable portfolios, net (31,472 ) (30,525 ) Other, net (9,690 ) 330 Changes in operating assets and liabilities Deferred court costs and other assets (19,537 ) (20,094 ) Prepaid income tax and income taxes payable 21,419 15,565 Accounts payable, accrued liabilities and other liabilities (5,919 ) (9,501 ) --------- - --------- - Net cash provided by operating activities 120,022 81,691 --------- - --------- - Investing activities: Cash paid for acquisitions, net of cash acquired — (5,623 ) Purchases of receivable portfolios, net of put-backs (881,789 ) (739,478 ) Collections applied to investment in receivable portfolios, net 615,010 549,544 Purchases of property and equipment (37,436 ) (20,518 ) (Payment) proceeds from derivative instruments, net (28,656 ) 6,140 Other, net 6,800 2,155 Net cash used in investing activities (326,071 ) (207,780 ) --------- - --------- - Financing activities: Payment of loan costs (6,440 ) (19,910 ) Proceeds from credit facilities 766,471 928,141 Repayment of credit facilities (465,666 ) (972,453 ) Proceeds from senior secured notes — 325,000 Repayment of senior secured notes (1,029 ) (203,212 ) Proceeds from issuance of convertible senior notes 172,500 150,000 Repayment of convertible senior notes — (60,406 ) Proceeds from convertible hedge instruments — 5,580 Proceeds from other debt 9,090 8,318 Repayment of other debt (23,450 ) (4,309 ) Payment for the purchase of PECs and noncontrolling interest (234,101 ) — Payment of direct and incremental costs relating to Cabot Transaction (8,622 ) — Other, net (3,826 ) (1,440 ) --------- - --------- - Net cash provided by financing activities 204,927 155,309 --------- - --------- - Net (decrease) increase in cash and cash equivalents (1,122 ) 29,220 Effect of exchange rate changes on cash and cash equivalents (6,368 ) 9,261 Cash and cash equivalents, beginning of period 212,139 149,765 Cash and cash equivalents, end of period $ 204,649 $ 188,246 - ------- - - ------- -

ENCORE CAPITAL GROUP, INC.Supplemental Financial InformationReconciliation of Adjusted Income Attributable to Encore to GAAP Net Income Attributable to Encore and Adjusted Operating Expenses Related to Portfolio Purchasing and Recovery Business to GAAP Total Operating Expenses(In Thousands, Except Per Share amounts) (Unaudited)

Three Months Ended September 30, 2018 2017 Per Per Diluted Diluted Per $ Share— $ Share— Diluted Accountin Accountin Share— g and g Economic Economic ---------- -------- ---------- -------- -------- GAAP net income from continuing operations attributable $ 20,725 $ 0.69 $ 28,194 $ 1.05 $ 1.07 to Encore, as reported Adjustments: Convertible notes and exchangeable notes non-cash 3,719 0.12 3,135 0.12 0.12 interest and issuance cost amortization Acquisition, integration and restructuring related 12,458 0.41 342 0.01 0.01 expenses(1) Amortization of certain acquired intangible assets(2) 1,947 0.07 803 0.03 0.03 Loss on derivatives in connection with the Cabot 2,737 0.09 — — — Transaction(3) Income tax effect of above non-GAAP adjustments and (2,335 ) (0.08 ) (1,321 ) (0.04 ) (0.04 ) certain discrete tax items(4) Adjustments attributable to noncontrolling interest(5) (3,474 ) (0.11 ) (461 ) (0.02 ) (0.02 ) Adjusted income attributable to Encore $ 35,777 $ 1.19 $ 30,692 $ 1.15 $ 1.17 - ------ - - ---- - - ------ - - ---- - - ---- -

____________________

1. Amount represents acquisition, integration and restructuring related expenses. We adjust for this amount because we believe these expenses are not indicative of ongoing operations; therefore adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results. 2. As we continue to acquire debt solution service providers around the world, the acquired intangible assets, such as trade names and customer relationships, have grown substantially. These intangible assets are valued at the time of the acquisition and amortized over their estimated lives. We believe that amortization of acquisition-related intangible assets, especially the amortization of an acquired company’s trade names and customer relationships, is the result of pre-acquisition activities. In addition, the amortization of these acquired intangibles is a non-cash static expense that is not affected by operations during any reporting period. As a result, the amortization of certain acquired intangible assets is excluded from our adjusted income from continuing operations attributable to Encore and adjusted income from continuing operations per share. 3. Amount represents the loss recognized on the forward contract we entered into in anticipation of the completion of the Cabot Transaction. We adjust for this amount because we believe the loss is not indicative of ongoing operations; therefore adjusting for this loss enhances comparability to prior periods, anticipated future periods, and our competitors’ results. 4. Amount represents the total income tax effect of the adjustments, which is generally calculated based on the applicable marginal tax rate of the jurisdiction in which the portion of the adjustment occurred. Additionally, we adjust for certain discrete tax items that are not indicative of our ongoing operations. 5. Certain of the above pre-tax adjustments include expenses recognized by our partially-owned subsidiaries. This adjustment represents the portion of the non-GAAP adjustments that are attributable to noncontrolling interest.

Three Months Ended September 30, 2018 2017 ----------- ----------- GAAP total operating expenses, as reported $ 239,246 $ 202,829 Adjustments: Operating expenses related to non-portfolio purchasing and recovery business(1) (45,980 ) (28,934 ) Acquisition, integration and restructuring related expenses(2) (8,475 ) (342 ) Stock-based compensation expense (5,007 ) (3,531 ) Adjusted operating expenses related to portfolio purchasing and recovery business $ 179,784 $ 170,022 - ------- - - ------- -

________________________

1. Operating expenses related to non-portfolio purchasing and recovery business include operating expenses from other operating segments that primarily engage in fee-based business, as well as corporate overhead not related to our portfolio purchasing and recovery business. 2. Amount represents acquisition, integration and restructuring related operating expenses (excluding amounts already included in stock-based compensation expense). We adjust for this amount because we believe these expenses are not indicative of ongoing operations; therefore adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results.

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