ENCORE CAPITAL GROUP, INC. This Quarterly Report on Form 10-Q contains "forward-looking statements" relating toEncore Capital Group, Inc. ("Encore") and its subsidiaries (which we may collectively refer to as the "Company," "we," "our" or "us") within the meaning of the securities laws. The words "believe," "expect," "anticipate," "estimate," "project," "intend," "plan," "will," "may," and similar expressions often characterize forward-looking statements. These statements may include, but are not limited to, projections of collections, revenues, income or loss, estimates of capital expenditures, plans for future operations, products or services, financing needs or plans or the impacts of the COVID-19 pandemic, as well as assumptions relating to these matters. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we caution that these expectations or predictions may not prove to be correct or we may not achieve the financial results, savings, or other benefits anticipated in the forward-looking statements. These forward-looking statements are necessarily estimates reflecting the best judgment of our senior management and involve a number of risks and uncertainties, some of which may be beyond our control or cannot be predicted or quantified, that could cause actual results to differ materially from those suggested by the forward-looking statements. Many factors including, but not limited to, those set forth in our Annual Report on Form 10-K under "Part I, Item 1A-Risk Factors" and those set forth in "Part II, Item 1A, Risk Factors" of this Quarterly Report could cause our actual results, performance, achievements, or industry results to be very different from the results, performance, achievements or industry results expressed or implied by these forward-looking statements. Our business, financial condition, or results of operations could also be materially and adversely affected by other factors besides those listed. Forward-looking statements speak only as of the date the statements were made. We do not undertake any obligation to update or revise any forward-looking statements to reflect new information or future events, or for any other reason, even if experience or future events make it clear that any expected results expressed or implied by these forward-looking statements will not be realized. In addition, it is generally our policy not to make any specific projections as to future earnings, and we do not endorse projections regarding future performance that may be made by third parties.
Our Business
We are an international specialty finance company providing debt recovery solutions and other related services for consumers across a broad range of financial assets. We purchase portfolios of defaulted consumer receivables at deep discounts to face value and manage them by working with individuals as they repay their obligations and work toward financial recovery. Defaulted receivables are consumers' unpaid financial commitments to credit originators, including banks, credit unions, consumer finance companies and commercial retailers. Defaulted receivables may also include receivables subject to bankruptcy proceedings. We also provide debt servicing and other portfolio management services to credit originators for non-performing loans inEurope .Encore Capital Group, Inc. ("Encore") has three primary business units: MCM, which consists ofMidland Credit Management, Inc. and its subsidiaries and domestic affiliates; Cabot, which consists ofCabot Credit Management Limited ("CCM") and its subsidiaries and European affiliates, and LAAP, which is comprised of our investments and operations inLatin America andAsia-Pacific .
MCM (
Through MCM, we are a market leader in portfolio purchasing and recovery in
Cabot (Europe ) Through Cabot, we are one of the largest credit management services providers inEurope and a market leader in theUnited Kingdom . Cabot, in addition to its primary business of portfolio purchasing and recovery, also provides a range of debt servicing offerings such as early stage collections, business process outsourcing ("BPO"), and contingent collections, including throughWescot Credit Services Limited ("Wescot"), a leadingU.K. contingency debt collection and BPO services company.
LAAP (
We have purchased non-performing loans inMexico . Additionally, we have invested inEncore Asset Reconstruction Company ("EARC") inIndia . We previously owned non-performing loans inColombia andPeru (sold inAugust 2021 ) andBrazil (sold inApril 2020 ).
To date, operating results from LAAP have not been significant to our total
consolidated operating results. Our long-term growth strategy is focused on
continuing to invest in our core portfolio purchasing and recovery business in
22--------------------------------------------------------------------------------
Table of Contents Government Regulation MCM (United States ) As discussed in more detail under "Part I - Item 1 - Business - Government Regulation" contained in our Annual Report on Form 10-K, our operations inthe United States are subject to federal, state and municipal statutes, rules, regulations and ordinances that establish specific guidelines and procedures that debt purchasers and collectors must follow when collecting consumer accounts, including among others, specific guidelines and procedures for communicating with consumers and prohibitions on unfair, deceptive or abusive debt collection practices. Cabot (Europe ) As discussed in more detail under "Part I - Item 1 - Business - Government Regulation" contained in our Annual Report on Form 10-K, our operations inEurope are affected by foreign statutes, rules and regulations regarding debt collection and debt purchase activities. These statutes, rules, regulations, ordinances, guidelines and procedures are modified from time to time by the relevant authorities charged with their administration, which could affect the way we conduct our business.
Portfolio Purchasing and Recovery
MCM (
Inthe United States , the defaulted consumer receivable portfolios we purchase are primarily charged-off credit card debt portfolios. A small percentage of our capital deployment inthe United States is comprised of receivable portfolios subject to Chapter 13 and Chapter 7 bankruptcy proceedings. We purchase receivables based on robust, account-level valuation methods and employ proprietary statistical and behavioral models across ourU.S. operations. These methods and models allow us to value portfolios accurately (limiting the risk of overpaying), avoid buying portfolios that are incompatible with our methods or strategies and align the accounts we purchase with our business channels to maximize future collections. As a result, we have been able to realize significant returns from the receivables we acquire. We maintain strong relationships with many of the largest financial service providers inthe United States . Cabot (Europe ) InEurope , our purchased under-performing debt portfolios primarily consist of paying and non-paying consumer loan accounts. We also purchase: (1) portfolios that are in insolvency status, in particular, individual voluntary arrangements; and (2) non-performing secured mortgage portfolios and real estate assets previously securing mortgage portfolios. When we take possession of the underlying real estate assets or purchase real estate assets, we refer to those as real estate-owned assets, or REO assets. We purchase paying and non-paying receivable portfolios using a proprietary pricing model that utilizes account-level statistical and behavioral data. This model allows us to value portfolios accurately and quantify portfolio performance in order to maximize future collections. As a result, we have been able to realize significant returns from the assets we have acquired. We maintain strong relationships with many of the largest financial services providers in theUnited Kingdom and continue to expand in theUnited Kingdom and the rest ofEurope with our acquisitions of portfolios.
Purchases and Collections
Portfolio Pricing, Supply and Demand
MCM (
Issuers have continued to sell predominantly fresh portfolios. Fresh portfolios
are portfolios that are generally sold within six months of the consumer's
account being charged-off by the financial institution. Pricing in the first
quarter remained in line with the previous quarter. Issuers continue to sell
their volume in mostly forward flow arrangements that are often committed early
in the calendar year. We believe growth in lending and rising delinquency rates
will drive future supply increases.
We believe that smaller competitors continue to face difficulties in the
portfolio purchasing market because of the high cost to operate due to
regulatory pressure and because issuers are being more selective with buyers in
the marketplace. We believe this favors larger participants, like MCM, because
the larger market participants are better able to adapt to these pressures and
commit to larger forward flow agreements.
23--------------------------------------------------------------------------------
Table of Contents
Cabot (
TheU.K. market for charged-off portfolios has generally provided a relatively consistent pipeline of opportunities over the past few years, despite a historically low level of charge-off rates, as creditors have embedded debt sales as an integral part of their business models and consumer indebtedness has continued to grow since the financial crisis. An increasing amount of volume is sold in multi-year forward flow arrangements. The Spanish debt market continues to be one of the largest inEurope with significant debt sales activity, and an expectation of a significant amount of debt to be sold and serviced in the future. Additionally, financial institutions continue to experience both market and regulatory pressure to dispose of non-performing loans, which should continue to provide debt purchasing opportunities inSpain . Banks decreased portfolio sales at the beginning of the COVID-19 pandemic in order to focus on customers' needs. While we have seen a resumption of sales activity across many of our European markets, underlying default rates are generally low by historic levels, and sales levels are expected to fluctuate from quarter to quarter as banks seek to re-establish a more stable debt sales strategy. In general, supply remains below pre-pandemic levels while portfolio pricing has become more competitive across our European footprint.
Purchases by Geographic Location
The following table summarizes purchases by geographic location during the periods presented (in thousands):
Three Months Ended
March 31,
2022 2021
MCM (United States) $ 94,309 $ 92,352
Cabot (Europe) 75,196 77,826
Total purchases of receivable portfolios
During the three months endedMarch 31, 2022 , we invested$169.5 million to acquire receivable portfolios, with face values aggregating$1.2 billion , for an average purchase price of 14.4% of face value. The amount invested in receivable portfolios decreased$0.7 million , or 0.4%, compared with the$170.2 million invested during the three months endedMarch 31, 2021 , to acquire receivable portfolios with face values aggregating$1.3 billion , for an average purchase price of 12.8% of face value. Inthe United States , portfolio purchases increased slightly during the three months endedMarch 31, 2022 as compared to the corresponding period in the prior year. The majority of our deployments in theU.S. came from forward flow agreements, and the timing, contract duration, and volumes for each contract can fluctuate leading to variation when comparing to prior periods. Portfolio purchases in theU.S. are still lower than pre-pandemic levels as a result of a decrease in supply, which we believe is temporary. InEurope , portfolio purchases decreased slightly during the three months endedMarch 31, 2022 as compared to the corresponding period in the prior year. The decrease was attributable to the unfavorable impact from foreign currency translation, primarily by the strengthening of theU.S. dollar against the British Pound. Portfolio purchases inEurope are negatively impacted by a relatively limited supply of portfolios as compared to the pre-pandemic levels. The average purchase price, as a percentage of face value, varies from period to period depending on, among other factors, the quality of the accounts purchased and the length of time from charge-off to the time we purchase the portfolios.
During the three months ended
24--------------------------------------------------------------------------------
Table of Contents
Collections from Purchased Receivables by Channel and Geographic Location
We utilize three channels for the collection of our purchased receivables: call
center and digital collections; legal collections; and collection agencies. The
call center and digital collections channel consists of collections that result
from our call centers, direct mail program and online collections. The legal
collections channel consists of collections that result from our internal legal
channel or from our network of retained law firms. The collection agencies
channel consists of collections from third party collections agencies to whom we
pay a fee or commission. We utilize this channel to supplement capacity in our
internal call centers, to service accounts in regions where we do not have
collections operations or for accounts purchased where we maintain the
collection agency servicing relationship. The following table summarizes the
total collections by collection channel and geographic area during the periods
presented (in thousands):
Three Months Ended
March 31,
2022 2021
MCM (United States ):
Call center and digital collections $ 215,624 $ 267,984
Legal collections 154,500 164,332
Collection agencies 488 3,257
Subtotal 370,612 435,573
Cabot (Europe):
Call center and digital collections 54,453 70,551
Legal collections 52,513 49,065
Collection agencies 40,880 42,985
Subtotal 147,846 162,601
Other geographies: 956 8,287
Total collections from purchased receivables
Gross collections from purchased receivables decreased by
The decrease in collections from purchased receivables inthe United States compared to the three months endedMarch 31, 2021 , was primarily a result of an unusually high level of collections in the year ago period resulting from changes in consumer behavior during the COVID-19 pandemic. The decrease was also a result of lower purchasing volumes in recent periods due to the COVID-19 pandemic. The changes in consumer behavior that resulted from the impacts of the COVID-19 pandemic, while more prevalent a year ago, continued through the quarter. Even though we believe the pandemic-related drivers of this changed behavior are waning, in the first quarter we continued to see over-performance compared to our collections expectations. The decrease in collections from purchased receivables inEurope was primarily due to lower purchasing volumes in recent periods due to the COVID-19 pandemic and the unfavorable impact from foreign currency translation, primarily by the strengthening of theU.S. dollar against the British Pound. 25
--------------------------------------------------------------------------------
Table of Contents
Results of Operations
Results of operations, in dollars and as a percentage of total revenues, were as follows (in thousands, except percentages):
Three Months Ended
2022 2021
Revenues
Revenue from receivable portfolios$ 304,105 60.8 %$ 338,018 81.1 % Changes in recoveries 167,223 33.5 % 44,537 10.7 % Total debt purchasing revenue 471,328 94.3 % 382,555 91.8 % Servicing revenue 26,146 5.2 % 32,516 7.8 % Other revenues 2,208 0.5 % 1,766 0.4 % Total revenues 499,682 100.0 % 416,837 100.0 % Operating expenses Salaries and employee benefits 96,956 19.4 % 96,456 23.1 % Cost of legal collections 55,717 11.2 % 67,142 16.1 % General and administrative expenses 33,534 6.7 % 32,148 7.7 % Other operating expenses 27,027 5.4 % 28,441 6.8 % Collection agency commissions 9,605 1.9 % 12,824 3.1 % Depreciation and amortization 11,829 2.4 % 11,512 2.8 % Total operating expenses 234,668 47.0 % 248,523 59.6 % Income from operations 265,014 53.0 % 168,314 40.4 % Other expense Interest expense (34,633) (6.9) % (46,526) (11.2) % Other income (expense) 392 0.1 % (55) 0.0 % Total other expense (34,241) (6.8) % (46,581) (11.2) % Income before income taxes 230,773 46.2 % 121,733 29.2 % Provision for income taxes (55,024) (11.0) % (26,968) (6.5) % Net income 175,749 35.2 % 94,765 22.7 % Net income attributable to noncontrolling interest - - % (135) (0.1) %
Net income attributable to
$ 175,749 35.2 %$ 94,630 22.6 %
Comparison of Results of Operations
Revenues
Our revenues primarily include debt purchasing revenue, which is revenue recognized from engaging in debt purchasing and recovery activities. We apply our charge-off policy and fully write-off the amortized costs (i.e., face value net of noncredit discount) of the individual receivables we acquire immediately after purchasing the portfolio. We then record a negative allowance that represents the present value of all expected future recoveries for pools of receivables that share similar risk characteristics using a discounted cash flow approach, which is presented as "Investment in receivable portfolios, net" in our consolidated statements of financial condition. The discount rate is an effective interest rate (or "purchase EIR") established based on the purchase price of the portfolio and the expected future cash flows at the time of purchase.
Debt purchasing revenue includes two components:
(1) Revenue from receivable portfolios, which is the accretion of the discount on the negative allowance due to the passage of time (generally the portfolio balance multiplied by the EIR), and
(2) Changes in recoveries, which includes
(a) Recoveries above (below) forecast, which is the difference between (i)
actual cash collected/recovered during the current period and (ii) expected cash
recoveries for the current period, which generally represents over or under
performance for the period; and
26
--------------------------------------------------------------------------------
(b) Changes in expected future recoveries, which is the present value change
of expected future recoveries, where such change generally results from (i)
collections "pulled forward from" or "pushed out to" future periods (i.e.
amounts either collected early or expected to be collected later) and (ii)
magnitude and timing changes to estimates of expected future collections (which
can be increases or decreases).
Certain pools already fully recovered their cost basis and became zero basis
portfolios ("ZBA") prior to our adoption of CECL. We did not establish a
negative allowance for these pools as we elected the Transition Resource Group
for Credit Losses' practical expedient to retain the integrity of these legacy
pools. Similar to how we treated ZBA collections prior to the adoption of CECL,
all subsequent collections to the ZBA pools are recognized as ZBA revenue, which
is included in revenue from receivable portfolios in our consolidated statements
of income.
Servicing revenue consists primarily of fee-based income earned on accounts
collected on behalf of others, primarily credit originators. We earn fee-based
income by providing debt servicing (such as early stage collections, BPO,
contingent collections, trace services and litigation activities) to credit
originators for non-performing loans in
Other revenues primarily include revenues recognized from the sale of real estate assets that are acquired as a result of our investments in non-performing secured residential mortgage portfolios and real estate assets inEurope and LAAP. The following table summarizes revenues for the periods presented (in thousands, except percentages): Three Months Ended March 31, % Increase 2022 2021 $ Change (decrease)
Revenue recognized from portfolio basis
$ (29,133) (9.0) % ZBA revenue 8,984 13,764 (4,780) (34.7) % Revenue from receivable portfolios 304,105 338,018 (33,913) (10.0) % Recoveries above forecast 46,352 91,401 (45,049) (49.3) % Changes in expected future recoveries 120,871 (46,864) 167,735 357.9 % Changes in recoveries 167,223 44,537 122,686 275.5 % Debt purchasing revenue 471,328 382,555 88,773 23.2 % Servicing revenue 26,146 32,516 (6,370) (19.6) % Other revenues 2,208 1,766 442 25.0 % Total revenues$ 499,682 $ 416,837 $ 82,845 19.9 % Our operating results are impacted by foreign currency translation, which represents the effect of translating operating results where the functional currency is different than ourU.S. dollar reporting currency. The strengthening of theU.S. dollar relative to other foreign currencies has an unfavorable impact on our international revenues, and the weakening of theU.S. dollar relative to other foreign currencies has a favorable impact on our international revenues. Our revenues were unfavorably impacted by foreign currency translation, primarily by the strengthening of theU.S. dollar against the British Pound by 2.8% during the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 . The decreases in revenue recognized from portfolio basis during the three months endedMarch 31, 2022 as compared to the three months endedMarch 31, 2021 were primarily due to a lower portfolio basis (i.e., a lower investment in receivable balance) driven by a lower volume of purchases and negative changes in expected future recoveries in recent quarters.
As discussed above, ZBA revenue represents collections from our legacy ZBA pools. We expect our ZBA revenue to continue to decline as we collect on these legacy pools. We do not expect to have new ZBA pools in the future.
Recoveries above or below forecast represent over and under-performance in the reporting period. Collections during the three months endedMarch 31, 2022 significantly outperformed the projected cash flows. We believe the collection over-performance was a result of changes in consumer behavior and our liquidation improvement initiatives. When reassessing the forecasts of expected lifetime recoveries during the three months endedMarch 31, 2022 , management considered historical and current collection performance, and believes that for certain static pools sustained collections over-performance resulted in increased total expected recoveries. As a result, we have updated our forecast, resulting in a net increase of total estimated remaining collections which in turn, when discounted to present value, resulted in a 27 -------------------------------------------------------------------------------- positive change in expected future period recoveries of approximately$120.9 million during the three months endedMarch 31, 2022 . During the three months endedMarch 31, 2021 , we recorded approximately$46.9 million in negative change in expected future period recoveries. The following tables summarize collections from purchased receivables, revenue from receivable portfolios, end of period receivable balance and other related supplemental data, by year of purchase (in thousands, except percentages): Three Months Ended March 31, 2022 As of March 31, 2022 Revenue from Investment in Receivable Changes in Receivable Collections Portfolios Recoveries Portfolios Monthly EIR United States: ZBA$ 8,971 $ 8,971 $ - $ - - % 2011 5,327 3,901 1,535 1,628 88.6 % 2012 5,407 3,812 2,121 3,574 42.0 % 2013 12,639 12,072 518 9,902 40.5 % 2014 7,064 4,508 1,077 21,441 6.7 % 2015 7,347 4,180 (2,322) 31,052 3.9 % 2016 15,549 7,987 2,898 61,928 4.1 % 2017 26,169 14,503 9,174 89,641 5.5 % 2018 44,029 19,070 33,676 178,972 3.9 % 2019 76,960 33,420 62,112 319,745 3.8 % 2020 91,638 38,893 61,930 369,878 3.7 % 2021 65,474 44,241 (929) 358,537 3.9 % 2022 4,038 3,682 2,534 96,431 3.6 % Subtotal 370,612 199,240 174,324 1,542,729 4.4 % Europe: ZBA 13 13 - - - % 2013 19,465 16,971 (1,938) 167,707 3.2 % 2014 18,277 13,861 (1,267) 147,268 3.0 % 2015 11,770 8,567 (1,350) 113,730 2.4 % 2016(1) 10,800 8,561 (1,473) 100,499 2.8 % 2017 17,214 11,379 (2,332) 193,534 1.9 % 2018 17,478 11,289 (1,308) 232,240 1.6 % 2019 18,580 10,721 590 185,357 1.8 % 2020 13,224 7,882 2,600 112,863 2.3 % 2021 18,057 13,195 (1,353) 228,117 1.9 % 2022 2,968 2,426 730 73,854 1.9 % Subtotal 147,846 104,865 (7,101) 1,555,169 2.2 % Other geographies:(2) All vintages 956 - - 39,488 - % Subtotal 956 - - 39,488 - % Total$ 519,414 $ 304,105 $ 167,223 $ 3,137,386 3.3 % _______________________
(1)Portfolio balance includes non-accrual pool groups. The EIR presented is only for pool groups that accrete portfolio revenue.
(2)All portfolios are on non-accrual basis. Annual pool groups for other geographies have been aggregated for disclosure purposes.
28
--------------------------------------------------------------------------------
Three Months Ended March 31, 2021 As of March 31, 2021
Revenue from Investment in
Receivable Changes in Receivable
Collections Portfolios Recoveries Portfolios Monthly EIR
United States :
ZBA $ 12,501 $ 12,501 $ - $ - - %
2011 6,187 4,673 1,484 1,712 88.6 %
2012 6,306 5,011 993 3,735 42.0 %
2013 13,600 12,974 1,351 10,460 40.5 %
2014 9,475 6,671 (726) 30,417 6.7 %
2015 12,994 6,038 2,617 48,589 3.9 %
2016 26,378 11,181 7,020 89,806 4.0 %
2017 43,518 21,140 9,601 125,608 5.3 %
2018 68,358 29,587 10,694 238,022 3.8 %
2019 114,690 51,761 9,482 415,502 3.8 %
2020 113,142 54,252 21,108 457,785 3.7 %
2021 8,424 3,829 4,061 91,748 4.3 %
Subtotal 435,573 219,618 67,685 1,513,384 4.4 %
Europe:
ZBA 34 34 - - - %
2013 24,748 22,383 (13,588) 216,432 3.2 %
2014 22,477 17,590 (7,411) 185,531 3.1 %
2015 14,996 10,891 (5,407) 143,115 2.4 %
2016(1) 13,996 10,679 (939) 125,215 2.8 %
2017 23,146 14,584 (2,160) 249,313 1.8 %
2018 21,712 14,296 (3,007) 294,406 1.6 %
2019 23,979 13,443 1,438 234,835 1.8 %
2020 15,121 8,703 5,801 124,989 2.3 %
2021 2,392 2,013 864 76,456 1.9 %
Subtotal 162,601 114,616 (24,409) 1,650,292 2.2 %
Other geographies(1), (2):
All vintages 8,287 3,784 1,261 62,002 7.9 %
Subtotal 8,287 3,784 1,261 62,002 7.9 %
Total $ 606,461 $ 338,018 $ 44,537 $ 3,225,678 3.4 %
______________________
(1)Portfolio balance includes non-accrual pool groups. The EIR presented is only for pool groups that accrete portfolio revenue.
(2)Annual pool groups for other geographies have been aggregated for disclosure purposes.
Servicing revenues during the three months endedMarch 31, 2022 decreased as compared to servicing revenues during the three months endedMarch 31, 2021 . The decrease was primarily attributable to reduced service demand from BPO clients and the unfavorable impact of foreign currency translation, which was primarily the result of the strengthening of theU.S. dollar against the British Pound. Other revenues increased during the three months endedMarch 31, 2022 as compared to the three months endedMarch 31, 2021 , primarily driven by the increased sale of real estate assets, the increase was partially offset by the unfavorable impact of foreign currency translation, which was primarily the result of the strengthening of theU.S. dollar against the British Pound and Euro. 29
--------------------------------------------------------------------------------
Table of Contents
Operating Expenses
The following table summarizes operating expenses for the periods presented (in thousands, except percentages):
Three Months Ended
2022 2021 $ Change % Change
Salaries and employee benefits $ 96,956 $ 96,456 $ 500 0.5 %
Cost of legal collections 55,717 67,142 (11,425) (17.0) %
General and administrative expenses 33,534 32,148 1,386 4.3 %
Other operating expenses 27,027 28,441 (1,414) (5.0) %
Collection agency commissions 9,605 12,824 (3,219) (25.1) %
Depreciation and amortization 11,829 11,512 317 2.8 %
Total operating expenses $ 234,668 $ 248,523 $ (13,855) (5.6) %
Our operating results are impacted by foreign currency translation, which
represents the effect of translating operating results where the functional
currency is different than our U.S. dollar reporting currency. The strengthening
of the U.S. dollar relative to other foreign currencies has a favorable impact
on our international operating expenses, and the weakening of the U.S. dollar
relative to other foreign currencies has an unfavorable impact on our
international operating expenses. Our operating expenses were favorably impacted
by foreign currency translation, primarily by the strengthening of the U.S.
dollar against the British Pound by approximately 2.8% for the three months
ended March 31, 2022 as compared to the three months ended March 31, 2021 .
Operating expenses are explained in more detail as follows:
Salaries and Employee Benefits
Salaries and employee benefits increased slightly during the three months endedMarch 31, 2022 as compared to the three months endedMarch 31, 2021 . The increase was primarily due to the increase of stock-based compensation expense attributable to increased stock price in recent periods. The increase was partially offset by the favorable impact of foreign currency translation, primarily by the strengthening of theU.S. dollar against the British Pound.
Cost of Legal Collections
Cost of legal collections primarily includes contingent fees paid to our external network of attorneys and the cost of litigation. We pursue legal collections using a network of attorneys that specialize in collection matters and through our internal legal channel. Under the agreements with our contracted attorneys, we advance certain out-of-pocket court costs. Cost of legal collections does not include internal legal channel employee costs, which are included in salaries and employee benefits in our consolidated statements of income.
The following table summarizes our cost of legal collections during the periods presented (in thousands, except percentages):
Three Months Ended March 31,
2022 2021 $ Change % Change
Court costs $ 30,836 $ 41,682 $ (10,846) (26.0) %
Legal collection fees 24,881 25,460
(579) (2.3) %
Total cost of legal collections
Cost of legal collections decreased driven by decreased legal channel collections as compared to the same period in the prior year. The decrease was a result of decreased court costs due to fewer placements in the legal collection channel in the three months endedMarch 31, 2022 .
General and Administrative Expenses
The increase in general and administrative expense during the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 was primarily due to increased general and administrative expense associated with our return to the office initiatives. The increase was partially offset by the favorable impact of foreign currency translation, primarily by the strengthening of theU.S. dollar against the British Pound. 30
--------------------------------------------------------------------------------
Table of Contents
Other Operating Expenses
Other operating expenses decreased during the three months endedMarch 31, 2022 as compared to the three months endedMarch 31, 2021 , primarily due to reduced expenditures for temporary services and direct collection expenses and the favorable impact of foreign currency translation, primarily by the strengthening of theU.S. dollar against the British Pound.
Collection Agency Commissions
Collection agency commissions are commissions paid to third-party collection agencies. Collections through the collections agencies channel are predominately inEurope and vary from period to period depending on, among other things, the number of accounts placed with an agency versus accounts collected internally. Commission rates vary depending on, among other things, the amount of time that has passed since the charge-off of the accounts placed with an agency, the asset class, and the geographic location of the receivables. Generally, freshly charged-off accounts have a lower commission rate than accounts that have been charged off for a longer period of time, and commission rates for purchased bankruptcy portfolios are lower than the commission rates for charged-off credit card accounts. Depreciation and Amortization The increase in depreciation and amortization expense during the three months endedMarch 31, 2022 as compared to the three months endedMarch 31, 2021 was primarily related to the increase in computer software equipment offset by the favorable impact of foreign currency translation, primarily by the strengthening of theU.S. dollar against the British Pound.
Interest Expense
The following tables summarize our interest expense (in thousands, except
percentages):
Three Months Ended March 31,
2022 2021 $ Change % Change
Stated interest on debt obligations $ 30,437 $ 41,776 $ (11,339) (27.1) %
Amortization of debt issuance costs 3,851 4,397 (546) (12.4) %
Amortization of debt discount 345 353 (8) (2.3) %
Total interest expense $ 34,633 $ 46,526 $ (11,893) (25.6) %
The decrease in interest expense during the three months ended
•Lower average debt balances;
•Decreased interest rates as a result of various refinancing transactions in recent periods;
•The favorable impact of foreign currency translation, primarily by the
strengthening of the
Other Income (Expense)
Other income or expense consists primarily of foreign currency exchange gains or losses, interest income, and gains or losses recognized on certain transactions outside of our normal course of business. Other income was$0.4 million and other expense was$0.1 million during the three months endedMarch 31, 2022 and 2021, respectively. Provision for Income Taxes Provision for income taxes and effective tax rate are as follows for the periods presented ($ in thousands): Three Months Ended March 31, 2022 2021 Provision for income taxes$ 55,024 $ 26,968 Effective tax rate 23.8 % 22.2 % For the three months endedMarch 31, 2022 andMarch 31, 2021 , the difference between our effective tax rate and the federal statutory rate was primarily due to the proportion of income earned in higher tax rate jurisdictions compared to lower tax rate jurisdictions. 31
--------------------------------------------------------------------------------
Table of Contents
Non-GAAP Disclosure
In addition to the financial information prepared in conformity with Generally
Accepted Accounting Principles ("GAAP"), we provide historical non-GAAP
financial information. Management believes that the presentation of such
non-GAAP financial information is meaningful and useful in understanding the
activities and business metrics of our operations. Management believes that
these non-GAAP financial measures reflect an additional way of viewing aspects
of our business that, when viewed with our GAAP results, provide a more complete
understanding of factors and trends affecting our business.
Management believes that the presentation of these measures provides investors
with greater transparency and facilitates comparison of operating results across
a broad spectrum of companies with varying capital structures, compensation
strategies, derivative instruments, and amortization methods, which provide a
more complete understanding of our financial performance, competitive position,
and prospects for the future. Readers should consider the information in
addition to, but not instead of, our financial statements prepared in accordance
with GAAP. This non-GAAP financial information may be determined or calculated
differently by other companies, limiting the usefulness of these measures for
comparative purposes.
Adjusted EBITDA. Management utilizes adjusted EBITDA (defined as net income
before interest income and expense, taxes, depreciation and amortization,
stock-based compensation expenses, acquisition, integration and restructuring
related expenses, and other charges or gains that are not indicative of ongoing
operations), in the evaluation of our operating performance. Adjusted EBITDA for
the periods presented is as follows (in thousands):
Three Months Ended
March 31,
2022 2021
GAAP net income, as reported $ 175,749 $ 94,765
Adjustments:
Interest expense 34,633 46,526
Interest income (437) (474)
Provision for income taxes 55,024 26,968
Depreciation and amortization 11,829 11,512
Stock-based compensation expense 3,921 3,405
Acquisition, integration and restructuring related expenses(1) 679 -
Adjusted EBITDA $ 281,398 $ 182,702
Collections applied to principal balance(2) $ 53,567 $ 229,510
________________________
(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)Collections applied to principal balance is calculated in the table below:
Three Months Ended
March 31,
2022 2021
Collections applied to investment in receivable portfolios, net
$ 268,443 Less: Changes in recoveries (167,223) (44,537) REO proceeds applied to basis 5,481 5,604 Collections applied to principal balance$ 53,567
32--------------------------------------------------------------------------------
Table of Contents Supplemental Performance Data
The tables included in this supplemental performance data section include detail for purchases, collections and ERC by year of purchase.
Our collection expectations are based on account characteristics and economic variables. Additional adjustments are made to account for qualitative factors that may affect the payment behavior of our consumers and servicing related adjustments to ensure our collection expectations are aligned with our operations. We continue to refine our process of forecasting collections both domestically and internationally with a focus on operational enhancements. Our collection expectations vary between types of portfolio and geographic location. For example, in theU.K. , due to the higher concentration of payment plans, as compared to theU.S. and other locations inEurope , we expect to receive streams of collections over longer periods of time. As a result, past performance of pools in certain geographic locations or of certain types of portfolio are not necessarily a suitable indicator of future results in other locations or for other types of portfolio. The supplemental performance data presented in this section is impacted by foreign currency translation, which represents the effect of translating financial results where the functional currency of our foreign subsidiary is different than ourU.S. dollar reporting currency. For example, the strengthening of theU.S. dollar relative to other foreign currencies has an unfavorable reporting impact on our international purchases, collections, and ERC, and the weakening of theU.S. dollar relative to other foreign currencies has a favorable impact on our international purchases, collections, and ERC.
We utilize proprietary forecasting models to continuously evaluate the economic life of each pool.
33--------------------------------------------------------------------------------
Table of Contents
Cumulative Collections from Purchased Receivables to Purchase Price Multiple
The following table summarizes our receivable purchases, related gross collections, and cumulative collections money multiples (in thousands, except multiples): Year of Purchase Cumulative Collections throughMarch 31, 2022 Purchase Price(1) <2013 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Total(2) CCMM(3)United States : <2013$ 2,692,553 $ 4,931,172 $ 904,731 $ 650,989 $ 470,442 $ 320,000 $ 229,963 $ 170,377 $ 136,627 $ 104,898 $ 92,172 $ 19,685 $ 8,031,056 3.0 2013 551,865 - 230,051 397,646 298,068 203,386 147,503 107,399 84,665 64,436 59,859 12,659 1,605,672 2.9 2014 517,650 - - 144,178 307,814 216,357 142,147 94,929 69,059 47,628 34,896 7,064 1,064,072 2.1 2015 499,059 - - - 105,610 231,102 186,391 125,673 85,042 64,133 42,774 7,347 848,072 1.7 2016 553,138 - - - - 110,875 283,035 234,690 159,279 116,452 87,717 15,549 1,007,597 1.8 2017 528,009 - - - - - 111,902 315,853 255,048 193,328 144,243 26,169 1,046,543 2.0 2018 630,293 - - - - - - 175,042 351,696 308,302 228,919 44,029 1,107,988 1.8 2019 676,470 - - - - - - - 174,693 416,315 400,250 76,960 1,068,218 1.6 2020 538,824 - - - - - - - - 213,450 430,514 91,638 735,602 1.4 2021 406,033 - - - - - - - - - 120,354 65,474 185,828 0.5 2022 94,251 - - - - - - - - - - 4,038 4,038 - Subtotal 7,688,145 4,931,172 1,134,782 1,192,813 1,181,934 1,081,720 1,100,941 1,223,963 1,316,109 1,528,942 1,641,698 370,612 16,704,686 2.2Europe : 2013 619,079 - 134,259 249,307 212,129 165,610 146,993 132,663 113,228 93,203 93,907 19,465 1,360,764 2.2 2014 623,129 - - 135,549 198,127 156,665 137,806 129,033 105,337 84,255 84,169 18,277 1,049,218 1.7 2015 419,941 - - - 65,870 127,084 103,823 88,065 72,277 55,261 57,817 11,778 581,975 1.4 2016 258,218 - - - - 44,641 97,587 83,107 63,198 51,609 51,017 10,805 401,964 1.6 2017 461,571 - - - - - 68,111 152,926 118,794 87,549 86,107 17,214 530,701 1.1 2018 433,302 - - - - - - 49,383 118,266 78,846 80,629 17,478 344,602 0.8 2019 273,354 - - - - - - - 44,118 80,502 88,448 18,580 231,648 0.8 2020 116,899 - - - - - - - - 22,721 59,803 13,224 95,748 0.8 2021 255,788 - - - - - - - - - 43,082 18,057 61,139 0.2 2022 75,196 - - - - - - - - - - 2,968 2,968 - Subtotal 3,536,477 - 134,259 384,856 476,126 494,000 554,320 635,177 635,218 553,946 644,979 147,846 4,660,727 1.3
Other geographies(4):
All vintages 340,283 - 10,465 29,828 42,665 109,884 112,383 108,480 75,601 28,960 20,682 956 539,904 1.6 Subtotal 340,283 - 10,465 29,828 42,665 109,884 112,383 108,480 75,601 28,960 20,682 956 539,904 1.6 Total$ 11,564,905 $ 4,931,172 $ 1,279,506 $ 1,607,497 $ 1,700,725 $ 1,685,604 $ 1,767,644 $ 1,967,620 $ 2,026,928 $ 2,111,848 $ 2,307,359 $ 519,414 $ 21,905,317 1.9 ________________________
(1)Adjusted for Put-Backs and Recalls. Put-Backs ("Put-Backs") and recalls ("Recalls") represent ineligible accounts that are returned by us or recalled by the seller pursuant to specific guidelines as set forth in the respective purchase agreement.
(2)Cumulative collections from inception through
(3)Cumulative Collections Money Multiple ("CCMM") through
(4)Annual pool groups for other geographies have been aggregated for disclosure purposes.
34--------------------------------------------------------------------------------
Table of Contents
Total Estimated Collections from Purchased Receivables to Purchase Price Multiple
The following table summarizes our purchases, resulting historical gross collections, and estimated remaining gross collections from purchased receivables (in thousands, except multiples):
Estimated Total Estimated Gross
Historical Remaining Total Estimated Collections to
Purchase Price(1) Collections(2) Collections Gross Collections Purchase Price
United States :
<2012 $ 2,143,750 $ 6,725,007 $ 123,509 $ 6,848,516 3.2
2012 548,803 1,306,049 51,630 1,357,679 2.5
2013(3) 551,865 1,605,672 147,585 1,753,257 3.2
2014(3) 517,650 1,064,072 69,436 1,133,508 2.2
2015 499,059 848,072 69,660 917,732 1.8
2016 553,138 1,007,597 141,922 1,149,519 2.1
2017 528,009 1,046,543 244,975 1,291,518 2.4
2018 630,293 1,107,988 378,888 1,486,876 2.4
2019 676,470 1,068,218 684,890 1,753,108 2.6
2020 538,824 735,602 764,395 1,499,997 2.8
2021 406,033 185,828 806,212 992,040 2.4
2022 94,251 4,038 212,656 216,694 2.3
Subtotal 7,688,145 16,704,686 3,695,758 20,400,444 2.7
Europe:
2013(3) 619,079 1,360,764 654,201 2,014,965 3.3
2014(3) 623,129 1,049,218 498,160 1,547,378 2.5
2015(3) 419,941 581,975 317,684 899,659 2.1
2016 258,218 401,964 261,850 663,814 2.6
2017 461,571 530,701 427,751 958,452 2.1
2018 433,302 344,602 480,764 825,366 1.9
2019 273,354 231,648 396,755 628,403 2.3
2020 116,899 95,748 257,338 353,086 3.0
2021 255,788 61,139 498,383 559,522 2.2
2022 75,196 2,968 165,134 168,102 2.2
Subtotal 3,536,477 4,660,727 3,958,020 8,618,747 2.4
Other geographies(4):
All vintages 340,283 539,904 59,058 598,962 1.8
Subtotal 340,283 539,904 59,058 598,962 1.8
Total $ 11,564,905 $ 21,905,317 $ 7,712,836 $ 29,618,153 2.6
________________________
(1)Purchase price refers to the cash paid to a seller to acquire a portfolio
less Put-backs, Recalls, and other adjustments. Put-Backs and Recalls represent
ineligible accounts that are returned by us or recalled by the seller pursuant
to specific guidelines as set forth in the respective purchase agreement.
(2)Cumulative collections from inception through
(3)Includes portfolios acquired in connection with certain business combinations.
(4)Annual pool groups for other geographies have been aggregated for disclosure purposes.
35
--------------------------------------------------------------------------------
Table of Contents
Estimated Remaining Gross Collections by Year of Purchase
The following table summarizes our estimated remaining gross collections from purchased receivable portfolios and estimated future cash flows from real estate-owned assets (in thousands):
Estimated Remaining Gross Collections by Year of Purchase(1)
2022(3) 2023 2024 2025 2026 2027 2028 2029 2030 >2030 Total(2)
United States : <2012$ 31,723 $ 30,671 $ 21,215
12,826 12,114 8,420 5,896 4,129 2,892 2,026 1,420 996 911 51,630
2013(4) 35,087 33,671 23,852 16,910 11,989 8,501 6,028 4,275 3,031 4,241
147,585
2014(4) 16,638 16,238 11,060 7,777 5,486 3,871 2,733 1,930 1,364 2,339
69,436
2015 17,719 16,566 11,061 7,420 5,136 3,618 2,553 1,805 1,279 2,503
69,660
2016 36,329 34,343 22,687 15,188 10,198 7,064 4,960 3,498 2,472 5,183
141,922
2017 63,375 57,200 38,205 26,120 18,269 12,619 8,866 6,253 4,422 9,646
244,975
2018 104,964 96,621 61,103 40,074 26,403 17,345 11,151 7,470 4,912 8,845
378,888
2019 179,250 168,884 113,726 74,974 49,813 33,293 22,158 14,578 9,842 18,372
684,890
2020 208,631 190,306 125,886 83,418 54,035 35,432 23,337 15,309 9,957 18,084
764,395
2021 182,155 222,681 132,106 84,128 57,792 39,111 27,257 19,251 13,677 28,054
806,212
2022 43,110 56,315 39,591 23,528 15,599 10,872 7,292 5,133 3,636 7,580
212,656
Subtotal 931,807 935,610 608,912 399,984 268,789 181,330 122,739 83,515 56,938 106,134
3,695,758
2013(4) 58,236 71,942 65,964 60,047 54,824 49,551 44,756 40,977 36,995 170,909
654,201
2014(4) 49,982 59,866 54,007 48,242 42,222 36,860 33,013 29,447 26,756 117,765
498,160
2015(4) 33,144 40,219 34,821 30,733 27,937 23,633 20,949 18,459 16,583 71,206
317,684
2016 35,097 40,302 33,216 28,792 24,116 19,437 16,060 13,364 11,347 40,119
261,850
2017 53,157 62,020 51,838 43,549 37,006 31,913 26,774 23,008 19,778 78,708
427,751
2018 51,868 65,511 58,328 49,847 43,528 36,971 31,843 27,218 23,011 92,639
480,764
2019 51,534 59,249 50,739 42,567 35,352 28,405 23,681 20,100 17,089 68,039
396,755
2020 35,279 41,915 35,077 30,279 25,118 18,300 13,940 11,730 9,120 36,580
257,338
2021 59,446 75,643 63,230 53,244 45,527 38,715 33,290 28,132 22,917 78,239
498,383
2022 16,588 23,117 20,479 17,401 15,288 13,915 12,639 11,199 8,973 25,535
165,134
Subtotal 444,331 539,784 467,699 404,701 350,918 297,700 256,945 223,634 192,569 779,739 3,958,020 Other geographies(5): All vintages 7,370 9,227 8,218 6,908 4,386 2,505 2,278 2,278 2,278 13,610 59,058 Subtotal 7,370 9,227 8,218 6,908 4,386 2,505 2,278 2,278 2,278 13,610 59,058 Portfolio ERC 1,383,508 1,484,621 1,084,829 811,593 624,093 481,535 381,962 309,427 251,785 899,483 7,712,836 REO ERC(6) 12,019 31,774 27,610 10,590 1,644 1,014 1,753 685 14 1 87,104 Total ERC$ 1,395,527 $ 1,516,395 $ 1,112,439 $ 822,183 $ 625,737 $ 482,549 $ 383,715 $ 310,112 $ 251,799 $ 899,484 $ 7,799,940 ________________________ (1)As ofMarch 31, 2022 , ERC for Zero Basis Portfolios include approximately$75.1 million for purchased consumer and bankruptcy receivables inthe United States . ERC for Zero Basis Portfolios inEurope and other geographies was immaterial. ERC also includes approximately$59.1 million from cost recovery portfolios, primarily in other geographies.
(2)Represents the expected remaining gross cash collections over a 180-month
period. As of
84-Month ERC 120-Month ERC
United States $ 3,473,130 $ 3,635,692
Europe 2,822,065 3,386,164
Other geographies 41,461 48,294
Portfolio ERC 6,336,656 7,070,150
REO ERC 86,731 87,103
Total ERC $ 6,423,387 $ 7,157,253 (3)Amount for 2022 consists of nine months data from
(4)Includes portfolios acquired in connection with certain business combinations.
36--------------------------------------------------------------------------------
Table of Contents
(5)Annual pool groups for other geographies have been aggregated for disclosure purposes.
(6)Real estate-owned assets ERC includes approximately
Estimated Future Collections Applied to Investment in Receivable Portfolios
As of
United States Europe Other Geographies Total
2022(1) $ 373,755 $ 155,173 $ 7,343 $ 536,271
2023 406,265 193,119 8,324 607,708
2024 259,442 168,849 6,037 434,328
2025 165,657 146,881 4,941 317,479
2026 109,995 129,444 2,903 242,342
2027 73,255 107,414 1,652 182,321
2028 48,999 92,712 1,504 143,215
2029 33,288 82,210 1,504 117,002
2030 22,861 71,052 1,504 95,417
2031 15,842 65,390 1,504 82,736
2032 11,068 60,915 1,504 73,487
2033 7,982 59,723 768 68,473
2034 5,761 61,821 - 67,582
2035 4,444 66,017 - 70,461
2036 3,248 74,299 - 77,547
2037 867 20,150 - 21,017
Total $ 1,542,729 $ 1,555,169 $ 39,488 $ 3,137,386
________________________
(1)Amount for 2022 consists of nine months data from
Cash Efficiency Margin
Cash efficiency margin facilitates a comparison of cash receipts to operating expenses and enhances visibility into operating expense management. The following table summarizes our cash efficiency margin calculation for the periods indicated (in thousands, except for percentages):
Last Twelve Months Ended March 31,
2022 2021 Change
Collections $ 2,220,312 $ 2,191,030 1.3%
Servicing revenue $ 114,408 $ 118,954 (3.8)%
Cash receipts (A) $ 2,334,720 $ 2,309,984 1.1%
Operating expenses (B) $ 967,372 $ 974,482 (0.7)%
LTM Cash Efficiency Margin (A-B)/A 58.6 % 57.8 % +80 bps
37--------------------------------------------------------------------------------
Table of Contents
Purchases by Quarter
The following table summarizes the receivable portfolios we purchased by quarter, and the respective purchase prices and fair value (in thousands):
# of Purchase
Quarter Accounts Face Value Price
Q1 2020 943 $ 1,703,022 $ 214,113
Q2 2020 754 1,305,875 147,939
Q3 2020 735 1,782,733 170,131
Q4 2020 558 1,036,332 127,689
Q1 2021 749 1,328,865 170,178
Q2 2021 612 1,151,623 142,728
Q3 2021 767 1,403,794 168,188
Q4 2021 861 1,888,198 183,435
Q1 2022 652 1,176,749 169,505
Liquidity and Capital Resources
Liquidity
The following table summarizes our cash flow activities for the periods
presented (in thousands):
Three Months Ended March 31,
2022 2021
(Unaudited)
Net cash provided by operating activities $ 54,530 $ 69,119
Net cash provided by investing activities 37,090 95,267
Net cash used in financing activities (118,016) (160,110) Operating Cash Flows
Cash flows from operating activities represent the cash receipts and disbursements related to all of our activities other than investing and financing activities.
Net cash provided by operating activities was$54.5 million and$69.1 million during the three months endedMarch 31, 2022 and 2021, respectively. Operating cash flows are derived by adjusting net income for non-cash operating items such as depreciation and amortization, changes in recoveries, stock-based compensation charges, and changes in operating assets and liabilities which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in results of operations.
Investing Cash Flows
Cash flows relating to investing activities is primarily affected by receivable portfolio purchases offset by collection proceeds applied to the investment in receivable portfolios. Net cash provided by investing activities was$37.1 million and$95.3 million during the three months endedMarch 31, 2022 and 2021, respectively. Receivable portfolio purchases, net of put-backs, were$166.3 million and$167.0 million during the three months endedMarch 31, 2022 and 2021, respectively. Collection proceeds applied to the investment in receivable portfolios, were$215.3 million and$268.4 million during the three months endedMarch 31, 2022 and 2021, respectively.
Financing Cash Flows
Financing cash flows are generally affected by borrowings under our credit facilities and proceeds from various debt offerings, offset by repayments of amounts outstanding under our credit facilities and repayments of various notes.
38--------------------------------------------------------------------------------
Table of Contents
Net cash used in financing activities was$118.0 million and$160.1 million during the three months endedMarch 31, 2022 and 2021, respectively. Borrowings under our credit facilities were$328.3 million and$273.3 million during the three months endedMarch 31, 2022 and 2021, respectively. Repayments of amounts outstanding under our credit facilities were$180.6 million and$235.4 million during the three months endedMarch 31, 2022 and 2021, respectively. We paid$221.2 million and$161.0 million to settle our convertible senior notes using cash on hand and drawings under our Global Senior Facility during the three months endedMarch 31, 2022 and 2021, respectively.
Capital Resources
Historically, we have met our cash requirements by utilizing our cash flows from operations, cash collections from our investment in receivable portfolios, bank borrowings, debt offerings, and equity offerings. Depending on the capital markets, we consider additional financings to fund our operations and acquisitions. Our primary capital resources are cash collections from our investment in receivable portfolios and bank borrowings. From time to time, we may repurchase outstanding debt or equity and/or restructure or refinance debt obligations. Our primary cash requirements have included the purchase of receivable portfolios, entity acquisitions, operating expenses, the payment of interest and principal on borrowings, and the payment of income taxes.
We are in material compliance with all covenants under our financing
arrangements. See "Note 7: Borrowings" in the notes to our consolidated
financial statements for a further discussion of our debt. Available capacity
under our Global Senior Facility, after taking into account applicable debt
covenants, was
Our Board of Directors has approved a$300.0 million share repurchase program. Repurchases under this program are expected to be made from cash on hand and/or a drawing from our Global Senior Facility and may be made from time to time, subject to market conditions and other factors, in the open market, through private transactions, block transactions, or other methods as determined by our management and Board of Directors, and in accordance with market conditions, other corporate considerations, and applicable regulatory requirements. The program does not obligate us to acquire any particular amount of common stock, and it may be modified or suspended at our discretion. During the three months endedMarch 31, 2022 , we repurchased 399,522 shares of our common stock for approximately$25.6 million . Our practice is to retire the shares repurchased. Our cash and cash equivalents as ofMarch 31, 2022 consisted of$17.9 million held byU.S. -based entities and$142.3 million held by foreign entities. Most of our cash and cash equivalents held by foreign entities is indefinitely reinvested and may be subject to material tax effects if repatriated. However, we believe that our sources of cash and liquidity are sufficient to meet our business needs inthe United States and do not expect that we will need to repatriate the funds.
Included in cash and cash equivalents is cash that was collected on behalf of,
and remains payable to, third-party clients. The balance of cash held for
clients was
Cash from operations could also be affected by various risks and uncertainties, including, but not limited to, timing of cash collections from our consumers, and other risks detailed in our Risk Factors. However, we believe that we have sufficient liquidity to fund our operations for at least the next twelve months, given our expectation of continued positive cash flows from operations, cash collections from our investment in receivable portfolios, our cash and cash equivalents, our access to capital markets, and availability under our credit facilities. Our future cash needs will depend on our acquisitions of portfolios and businesses.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance withU.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions based on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Our actual results could differ from these estimates under different assumptions or conditions. Refer to "Critical Accounting Policies and Estimates" contained in Part II, Item 7 of our Annual Report on Form 10-K for the year endedDecember 31, 2021 for a complete discussion of our critical accounting policies and estimates. There have been no material changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year endedDecember 31, 2021 . 39
--------------------------------------------------------------------------------
Table of Contents
© Edgar Online, source
