UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2020~~March 31, 2021 or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________to__________.

COMMISSION FILE NUMBER: 000-26489

ENCORE CAPITAL GROUP, INC.

(Exact name of registrant as specified in its charter)


Delaware			48-1090909
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification No.)

350 Camino De La Reina, Suite 100

San Diego, California 92108

(Address of principal executive offices, including zip code)

(877) 445 - 4581

(Registrant’s telephone number, including area code)

(Not Applicable)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 Par Value Per Share

ECPG

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class						Outstanding at ~~October 26, 2020~~April 28, 2021
Common Stock, $0.01 par value						~~31,344,685~~31,009,845 shares

Table of Contents

ENCORE CAPITAL GROUP, INC.

INDEX TO FORM 10-Q


			Page
PART I – FINANCIAL INFORMATION			3
Item 1— Consolidated Financial Statements (Unaudited)			3
Consolidated Statements of Financial Condition			3
Consolidated Statements of Operations			4
Consolidated Statements of Comprehensive Income (Loss)			5
Consolidated Statements of Equity			6
Consolidated Statements of Cash Flows			87
Notes to Consolidated Financial Statements			98
Note 1: Ownership, Description of Business, and Summary of Significant Accounting Policies			98
Note 2: Earnings (Loss) Per Share			129
Note 3: Fair Value Measurements			1210
Note 4: Derivatives and Hedging Instruments			1512
Note 5: Investment in Receivable Portfolios, Net			14
Note 6 : Other Assets			16
Note 7 : Borrowings			17
Note ~~6: Deferred Court Costs, Net~~8 : Variable Interest Entities			20
Note ~~7: Other Assets~~9 : Income Taxes			20
Note ~~8: Borrowings~~1 0 : Commitments and Contingencies			21
Note ~~9: Variable Interest Entities~~1 1 : Segment and Geographic Information			2521
Note ~~10: Income Taxes~~1			262
~~Note 11: Commitments and Contingencies~~			27
~~Note 12: Segment and Geographic Information~~			27
~~Note 13:~~: Goodwill and Identifiable Intangible Assets			2822
~~Note 14: Subsequent Event~~			29
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations			3023
Item 3 – Quantitative and Qualitative Disclosures About Market Risk			6143
Item 4 – Controls and Procedures			6143

PART II – OTHER INFORMATION			6244
Item 1 – Legal Proceedings			6244
Item 1A – Risk Factors			6244
Item ~~5 – Other Information~~2 - Unregistered Sales of Equity Securities and Use of Proceeds			6244

Item 6 – Exhibits			6245
SIGNATURES			6446

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1— Consolidated Financial Statements (Unaudited)

ENCORE CAPITAL GROUP, INC.

Consolidated Statements of Financial Condition

(In Thousands, Except Par Value Amounts)

(Unaudited)


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	169,983	$	192,335	Cash and cash equivalents	$	184,598	$	189,184
Investment in receivable portfolios, net	Investment in receivable portfolios, net	3,265,992		3,283,984		Investment in receivable portfolios, net	3,225,678		3,291,918
Deferred court costs, net		0		100,172
Property and equipment, net	Property and equipment, net	120,125		120,051		Property and equipment, net	124,586		127,297
Other assets	Other assets	309,296		329,223		Other assets	323,137		349,162
Goodwill	Goodwill	866,657		884,185		Goodwill	912,170		906,962
Total assets	Total assets	$	4,732,053	$	4,909,950	Total assets	$	4,770,169	$	4,864,523
Liabilities and Equity	Liabilities and Equity					Liabilities and Equity
Liabilities:	Liabilities:					Liabilities:
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	$	221,837	$	223,911	Accounts payable and accrued liabilities	$	189,529	$	215,920
Borrowings	Borrowings	3,252,101		3,513,197		Borrowings	3,151,928		3,281,634
Other liabilities	Other liabilities	130,859		147,436		Other liabilities	149,928		146,893
Total liabilities	Total liabilities	3,604,797		3,884,544		Total liabilities	3,491,385		3,644,447
Commitments and Contingencies (Note 11)
Commitments and Contingencies (Note 10)						Commitments and Contingencies (Note 10)	0		0
Equity:	Equity:					Equity:
Convertible preferred stock, $0.01 par value, 5,000 shares authorized, 0 shares issued and outstanding	Convertible preferred stock, $0.01 par value, 5,000 shares authorized, 0 shares issued and outstanding	0		0		Convertible preferred stock, $0.01 par value, 5,000 shares authorized, 0 shares issued and outstanding	0		0
Common stock, $0.01 par value, 75,000 shares authorized, 31,345 and 31,097 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		313		311
Common stock, $0.01 par value, 75,000 shares authorized, 31,010 and 31,345 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively						Common stock, $0.01 par value, 75,000 shares authorized, 31,010 and 31,345 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively	310		313
Additional paid-in capital	Additional paid-in capital	227,113		222,590		Additional paid-in capital	167,655		230,440
Accumulated earnings	Accumulated earnings	1,018,348		888,058		Accumulated earnings	1,172,756		1,055,668
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(121,098)		(88,766)		Accumulated other comprehensive loss	(64,541)		(68,813)
Total Encore Capital Group, Inc. stockholders’ equity	Total Encore Capital Group, Inc. stockholders’ equity	1,124,676		1,022,193		Total Encore Capital Group, Inc. stockholders’ equity	1,276,180		1,217,608
Noncontrolling interest	Noncontrolling interest	2,580		3,213		Noncontrolling interest	2,604		2,468
Total equity	Total equity	1,127,256		1,025,406		Total equity	1,278,784		1,220,076
Total liabilities and equity	Total liabilities and equity	$	4,732,053	$	4,909,950	Total liabilities and equity	$	4,770,169	$	4,864,523

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. See “Note 9:8: Variable Interest Entities” for additional information on the Company’s VIEs.


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	238	$	34	Cash and cash equivalents	$	559	$	2,223
Investment in receivable portfolios, net	Investment in receivable portfolios, net	528,481		539,596		Investment in receivable portfolios, net	536,177		553,621
Other assets	Other assets	4,773		4,759		Other assets	4,687		5,127
Liabilities	Liabilities					Liabilities
Borrowings	Borrowings	452,299		464,092		Borrowings	482,377		478,131
Other Liabilities						Other Liabilities	11		37

See accompanying notes to consolidated financial statements

Table of Contents

ENCORE CAPITAL GROUP, INC.

Consolidated Statements of Operations

(In Thousands, Except Per Share Amounts)

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Revenues	Revenues									Revenues
Revenue from receivable portfolios	Revenue from receivable portfolios	$	342,489	$	316,217	$	1,035,141	$	939,870	Revenue from receivable portfolios	$	338,018	$	357,365
Changes in expected current and future recoveries	Changes in expected current and future recoveries	30,451		0		(2,203)		0		Changes in expected current and future recoveries	44,537		(98,661)
Servicing revenue	Servicing revenue	29,787		31,060		82,417		97,399		Servicing revenue	32,516		28,680
Other revenues	Other revenues	949		144		3,435		673		Other revenues	1,766		1,697
Total revenues	Total revenues	403,676		347,421		1,118,790		1,037,942		Total revenues	416,837		289,081
Allowance reversals on receivable portfolios, net				8,515				11,945
Total revenues, adjusted by net allowances				355,936				1,049,887
Operating expenses	Operating expenses									Operating expenses
Salaries and employee benefits	Salaries and employee benefits	95,979		96,638		279,944		284,699		Salaries and employee benefits	96,456		93,098
Cost of legal collections	Cost of legal collections	60,383		48,971		164,018		149,446		Cost of legal collections	67,142		66,279
General and administrative expenses	General and administrative expenses	53,459		38,168		113,954		110,335		General and administrative expenses	32,148		31,877
Other operating expenses	Other operating expenses	28,088		25,753		83,527		84,913		Other operating expenses	28,441		27,164
Collection agency commissions	Collection agency commissions	12,703		17,343		36,562		46,905		Collection agency commissions	12,824		13,176
Depreciation and amortization	Depreciation and amortization	10,609		10,000		31,436		29,736		Depreciation and amortization	11,512		10,285
Goodwill impairment		0		10,718		0		10,718

Total operating expenses	Total operating expenses	261,221		247,591		709,441		716,752		Total operating expenses	248,523		241,879
Income from operations	Income from operations	142,455		108,345		409,349		333,135		Income from operations	168,314		47,202
Other expense
Other (expense) income										Other (expense) income
Interest expense	Interest expense	(67,962)		(54,365)		(172,951)		(173,245)		Interest expense	(46,526)		(54,662)
Other income (expense)		361		(11,546)		(1,211)		(15,766)

Other (expense) income										Other (expense) income	(55)		1,439
Total other expense	Total other expense	(67,601)		(65,911)		(174,162)		(189,011)		Total other expense	(46,581)		(53,223)
Income before income taxes		74,854		42,434		235,187		144,124
Income (loss) before income taxes										Income (loss) before income taxes	121,733		(6,021)
Provision for income taxes	Provision for income taxes	(19,747)		(3,021)		(59,875)		(18,447)		Provision for income taxes	(26,968)		(4,558)
Net income		55,107		39,413		175,312		125,677
Net income attributable to noncontrolling interest		(457)		(544)		(784)		(893)
Net income attributable to Encore Capital Group, Inc. stockholders		$	54,650	$	38,869	$	174,528	$	124,784
Net income (loss)										Net income (loss)	94,765		(10,579)
Net (income) loss attributable to noncontrolling interest										Net (income) loss attributable to noncontrolling interest	(135)		125
Net income (loss) attributable to Encore Capital Group, Inc. stockholders										Net income (loss) attributable to Encore Capital Group, Inc. stockholders	$	94,630	$	(10,454)

Earnings per share attributable to Encore Capital Group, Inc.:
Earnings (loss) per share attributable to Encore Capital Group, Inc.:										Earnings (loss) per share attributable to Encore Capital Group, Inc.:
Basic	Basic	$	1.74	$	1.24	$	5.56	$	3.99	Basic	$	3.01	$	(0.33)
Diluted	Diluted	$	1.72	$	1.23	$	5.51	$	3.97	Diluted	$	2.97	$	(0.33)

Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	31,484		31,338		31,402		31,242		Basic	31,469		31,308
Diluted	Diluted	31,826		31,657		31,672		31,459		Diluted	31,832		31,308

See accompanying notes to consolidated financial statements

Table of Contents

ENCORE CAPITAL GROUP, INC.

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited, In Thousands)

Three Months Ended
September 30, Nine Months Ended
September 30,
2020 2019 2020 2019
Net income $ 55,107 $ 39,413 $ 175,312 $ 125,677
Other comprehensive income (loss), net of tax:
Change in unrealized gain (loss) on derivative instruments:
Unrealized gain (loss) on derivative instruments 118 (799) (3,985) (6,561)
Income tax effect 7 169 1,120 1,190
Unrealized gain (loss) on derivative instruments, net of tax 125 (630) (2,865) (5,371)
Change in foreign currency translation:
Unrealized gain (loss) on foreign currency translation 30,982 (31,864) (32,088) (33,129)
Removal of other comprehensive loss in connection with divestiture 0 3,814 2,632 3,814
Unrealized gain (loss) on foreign currency translation, net of divestiture 30,982 (28,050) (29,456) (29,315)
Other comprehensive income (loss), net of tax: 31,107 (28,680) (32,321) (34,686)
Comprehensive income 86,214 10,733 142,991 90,991
Comprehensive loss (income) attributable to noncontrolling interest:
Net income attributable to noncontrolling interest (457) (544) (784) (893)
Unrealized gain on foreign currency translation (15) (51) (11) (485)
Comprehensive income attributable to noncontrolling interest: (472) (595) (795) (1,378)
Comprehensive income attributable to Encore Capital Group, Inc. stockholders $ 85,742 $ 10,138 $ 142,196 $ 89,613


	Three Months Ended March 31,
	2021		2020
Net income (loss)	$	94,765	$	(10,579)
Other comprehensive income (loss), net of tax:
Change in unrealized gain (loss) on derivative instruments:
Unrealized gain (loss) on derivative instruments	1,761		(5,051)
Income tax effect	(378)		1,497
Unrealized gain (loss) on derivative instruments, net of tax	1,383		(3,554)
Change in foreign currency translation:
Unrealized gain (loss) on foreign currency translation	2,890		(61,038)


Other comprehensive income (loss), net of tax:	4,273		(64,592)
Comprehensive income (loss)	99,038		(75,171)
Comprehensive (income) loss attributable to noncontrolling interest:
Net (income) loss attributable to noncontrolling interest	(135)		125
Unrealized (gain) loss on foreign currency translation	(1)		3
Comprehensive (income) loss attributable to noncontrolling interest:	(136)		128
Comprehensive income (loss) attributable to Encore Capital Group, Inc. stockholders	$	98,902	$	(75,043)

See accompanying notes to consolidated financial statements

Table of Contents

ENCORE CAPITAL GROUP, INC.

Consolidated Statements of Equity

(Unaudited, In Thousands)


		Three Months Ended September 30, 2020														Three Months Ended March 31, 2021
		Common Stock			Additional Paid-In Capital		Accumulated Earnings		Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interest		Total Equity			Common Stock			Additional Paid-In Capital		Accumulated Earnings		Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interest		Total Equity
		Shares	Par													Shares	Par
Balance as of June 30, 2020		31,288	$	313	$	227,030	$	963,698	$	(152,190)	$	3,536	$	1,042,387
Balance as of December 31, 2020															Balance as of December 31, 2020	31,345	$	313	$	230,440	$	1,055,668	$	(68,813)	$	2,468	$	1,220,076
Cumulative adjustment															Cumulative adjustment	—	—		(40,372)		22,458		—		—		(17,914)
Net income	Net income	—	—		—		54,650		—		457		55,107		Net income	—	—		—		94,630		—		135		94,765
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—	—		—		—		31,092		15		31,107		Other comprehensive income, net of tax	—	—		—		—		4,272		1		4,273
Purchase of noncontrolling interest		—	—		(2,196)		—		—		(1,428)		(3,624)
Issuance of share-based awards, net of shares withheld for employee taxes		57	0		(1,605)		—		—		—		(1,605)

Exercise of stock options and issuance of share-based awards, net of shares withheld for employee taxes															Exercise of stock options and issuance of share-based awards, net of shares withheld for employee taxes	183	2		(5,433)		—		—		—		(5,431)
Repurchase of common stock															Repurchase of common stock	(518)	(5)		(20,385)		—		—		—		(20,390)
Stock-based compensation	Stock-based compensation	—	—		3,884		—		—		—		3,884		Stock-based compensation	—	—		3,405		—		—		—		3,405
Balance as of September 30, 2020		31,345	$	313	$	227,113	$	1,018,348	$	(121,098)	$	2,580	$	1,127,256
Balance as of March 31, 2021															Balance as of March 31, 2021	31,010	$	310	$	167,655	$	1,172,756	$	(64,541)	$	2,604	$	1,278,784

Three Months Ended September 30, 2019
Common Stock Additional Paid-In Capital Accumulated Earnings Accumulated Other Comprehensive (Loss) Income Noncontrolling Interest Total Equity
Shares Par
Balance as of June 30, 2019 30,980 $ 310 $ 211,508 $ 806,104 $ (117,427) $ 2,462 $ 902,957
Net income — — — 38,869 — 544 39,413
Other comprehensive (loss) income, net of tax — — — — (32,545) 51 (32,494)
Exercise of stock options and issuance of share-based awards, net of shares withheld for employee taxes 79 1 (2,267) — — — (2,266)
Stock-based compensation — — 4,005 — — — 4,005
Issuance of exchangeable notes — — 6,776 — — — 6,776
Exchangeable notes hedge transactions — — 1,792 — — — 1,792
Other — — — — 3,814 — 3,814
Balance as of September 30, 2019 31,059 $ 311 $ 221,814 $ 844,973 $ (146,158) $ 3,057 $ 923,997

Nine Months Ended September 30, 2020
Common Stock Additional Paid-In Capital Accumulated Earnings Accumulated Other Comprehensive (Loss) Income Noncontrolling Interest Total Equity
Shares Par
Balance as of December 31, 2019 31,097 $ 311 $ 222,590 $ 888,058 $ (88,766) $ 3,213 $ 1,025,406
Cumulative adjustment — — — (44,238) — — (44,238)
Net income — — — 174,528 — 784 175,312
Other comprehensive (loss) income, net of tax — — — — (34,964) 11 (34,953)
Purchase of noncontrolling interest — — (2,196) — — (1,428) (3,624)
Issuance of share-based awards, net of shares withheld for employee taxes 248 2 (6,470) — — — (6,468)
Stock-based compensation — — 13,189 — — — 13,189
Other — — — — 2,632 — 2,632
Balance as of September 30, 2020 31,345 $ 313 $ 227,113 $ 1,018,348 $ (121,098) $ 2,580 $ 1,127,256

~~Table of Contents~~

Nine Months Ended September 30, 2019
Common Stock Additional Paid-In Capital Accumulated Earnings Accumulated Other Comprehensive (Loss) Income Noncontrolling Interest Total Equity
Shares Par
Balance as of December 31, 2018 30,884 $ 309 $ 208,498 $ 720,189 $ (110,987) $ 1,679 $ 819,688
Net income — — — 124,784 — 893 125,677
Other comprehensive (loss) income, net of tax — — — — (38,985) 485 (38,500)
Exercise of stock options and issuance of share-based awards, net of shares withheld for employee taxes 175 2 (3,696) — — — (3,694)
Stock-based compensation — — 9,412 — — — 9,412
Issuance of exchangeable notes — — 6,776 — — — 6,776
Exchangeable notes hedge transactions — — 1,792 — — — 1,792
Other — — (968) — 3,814 — 2,846
Balance as of September 30, 2019 31,059 $ 311 $ 221,814 $ 844,973 $ (146,158) $ 3,057 $ 923,997


	Three Months Ended March 31, 2020
	Common Stock			Additional Paid-In Capital		Accumulated Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total Equity
	Shares	Par
Balance as of December 31, 2019	31,097	$	311	$	222,590	$	888,058	$	(88,766)	$	3,213	$	1,025,406
Cumulative adjustment	—	—		—		(44,238)		—		—		(44,238)
Net loss	—	—		—		(10,454)		—		(125)		(10,579)
Other comprehensive loss, net of tax	—	—		—		—		(64,589)		(3)		(64,592)
Issuance of share-based awards, net of shares withheld for employee taxes	137	1		(4,714)		—		—		—		(4,713)
Stock-based compensation	—	—		4,527		—		—		—		4,527



Balance as of March 31, 2020	31,234	$	312	$	222,403	$	833,366	$	(153,355)	$	3,085	$	905,811

See accompanying notes to consolidated financial statements

Table of Contents

ENCORE CAPITAL GROUP, INC.

Consolidated Statements of Cash Flows

(Unaudited, In Thousands)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019			2021		2020
Operating activities:	Operating activities:					Operating activities:
Net income		$	175,312	$	125,677
Net income (loss)						Net income (loss)	$	94,765	$	(10,579)
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	31,436		29,736		Depreciation and amortization	11,512		10,285
Expense related to financing		19,791		3,496

Other non-cash interest expense, net	Other non-cash interest expense, net	22,725		24,049		Other non-cash interest expense, net	4,749		5,909
Stock-based compensation expense	Stock-based compensation expense	13,189		9,412		Stock-based compensation expense	3,405		4,527
Deferred income taxes	Deferred income taxes	(15,070)		5,012		Deferred income taxes	(3,302)		(12,030)
Goodwill impairment		0		10,718

Changes in expected current and future recoveries	Changes in expected current and future recoveries	2,203		0		Changes in expected current and future recoveries	(44,537)		98,661
Allowance reversals on receivable portfolios, net		0		(11,945)
Other, net	Other, net	24,469		20,218		Other, net	4,931		2,161
Changes in operating assets and liabilities	Changes in operating assets and liabilities					Changes in operating assets and liabilities
Deferred court costs and other assets		14,267		45,415
Other assets						Other assets	(3,816)		3,377
Prepaid income tax and income taxes payable	Prepaid income tax and income taxes payable	(11,226)		(21,240)		Prepaid income tax and income taxes payable	28,627		14,970
Accounts payable, accrued liabilities and other liabilities	Accounts payable, accrued liabilities and other liabilities	(27,114)		(43,602)		Accounts payable, accrued liabilities and other liabilities	(27,215)		(46,476)
Net cash provided by operating activities	Net cash provided by operating activities	249,982		196,946		Net cash provided by operating activities	69,119		70,805
Investing activities:	Investing activities:					Investing activities:
Purchases of receivable portfolios, net of put-backs	Purchases of receivable portfolios, net of put-backs	(517,959)		(757,101)		Purchases of receivable portfolios, net of put-backs	(167,025)		(209,045)
Collections applied to investment in receivable portfolios, net	Collections applied to investment in receivable portfolios, net	540,101		588,259		Collections applied to investment in receivable portfolios, net	268,443		169,914
Purchases of property and equipment		(22,658)		(30,712)

Other, net	Other, net	8,091		1,596		Other, net	(6,151)		(4,124)
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	7,575		(197,958)		Net cash provided by (used in) investing activities	95,267		(43,255)
Financing activities:	Financing activities:					Financing activities:
Payment of loan and debt refinancing costs		(48,676)		(8,777)

Proceeds from credit facilities	Proceeds from credit facilities	1,695,914		481,105		Proceeds from credit facilities	273,293		171,880
Repayment of credit facilities	Repayment of credit facilities	(2,051,764)		(440,992)		Repayment of credit facilities	(235,399)		(167,221)
Proceeds from senior secured notes		410,820		460,512

Repayment of senior secured notes	Repayment of senior secured notes	(152,430)		(460,455)		Repayment of senior secured notes	(9,770)		(16,250)
Proceeds from issuance of convertible and exchangeable senior notes		0		100,000

Repayment of convertible senior notes	Repayment of convertible senior notes	(89,355)		(84,600)		Repayment of convertible senior notes	(161,000)		0
Repurchase of common stock						Repurchase of common stock	(20,390)		0
Other, net	Other, net	(32,400)		(15,480)		Other, net	(6,844)		(10,171)
Net cash (used in) provided by financing activities		(267,891)		31,313
Net (decrease) increase in cash and cash equivalents		(10,334)		30,301
Net cash used in financing activities						Net cash used in financing activities	(160,110)		(21,762)
Net increase in cash and cash equivalents						Net increase in cash and cash equivalents	4,276		5,788
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(12,018)		(1,042)		Effect of exchange rate changes on cash and cash equivalents	(8,862)		(9,924)
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	192,335		157,418		Cash and cash equivalents, beginning of period	189,184		192,335
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	169,983	$	186,677	Cash and cash equivalents, end of period	$	184,598	$	188,199

Supplemental disclosure of cash information:	Supplemental disclosure of cash information:					Supplemental disclosure of cash information:
Cash paid for interest	Cash paid for interest	$	148,059	$	131,873	Cash paid for interest	$	37,258	$	60,495
Cash paid for taxes, net of refunds	Cash paid for taxes, net of refunds	87,154		31,419		Cash paid for taxes, net of refunds	813		766

See accompanying notes to consolidated financial statements

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ENCORE CAPITAL GROUP, INC.

Notes to Consolidated Financial Statements (Unaudited)

Note 1: Ownership, Description of Business, and Summary of Significant Accounting Policies

Encore Capital Group, Inc. (“Encore”), through its subsidiaries (collectively with Encore, the “Company”), is an international specialty finance company providing debt recovery solutions and other related services for consumers across a broad range of financial assets. The Company purchases portfolios of defaulted consumer receivables at deep discounts to face value and manages them by working with individuals as they repay their obligations and work toward financial recovery. Defaulted receivables are consumers’ unpaid financial ~~commitments~~obligations to credit originators, including banks, credit unions, consumer finance companies and commercial retailers. Defaulted receivables may also include receivables subject to bankruptcy proceedings. The Company also provides debt servicing and other portfolio management services to credit originators for non-performing loans.

Through Midland Credit Management, Inc. and its domestic affiliates (collectively, “MCM”), the Company is a market leader in portfolio purchasing and recovery in the United States. Through Cabot Credit Management Limited (“CCM”) and its subsidiaries and European affiliates (collectively, “Cabot”), the Company is one of the largest credit management services providers in Europe and a market leader in the United Kingdom and Ireland. These are the Company’s primary operations.

The Company also has investments and operations in Latin America and Asia-Pacific, which the Company refers to as “LAAP.” ~~In August 2019, the Company completed the sale of Baycorp, which represented the Company’s investments and operations in Australia and New Zealand.~~

COVID-19

On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a global pandemic, which continues to spread throughout the United States and around the world. The COVID-19 outbreak and resulting containment measures implemented by governments around the world, as well as increased business uncertainty, have impacted the Company. The circumstances around the COVID-19 pandemic ~~are~~continue to rapidly ~~evolving~~evolve and will continue to impact the Company’s business and its estimation of expected recoveries in future periods. The Company will continue to closely monitor the COVID-19 situation and update its assumptions accordingly.

Financial Statement Preparation and Presentation

The accompanying interim consolidated financial statements have been prepared by the Company, without audit, in accordance with the instructions to the Quarterly Report on Form 10-Q, and Rule 10-01 of Regulation S-X promulgated by the United States Securities and Exchange Commission (the “SEC”) and, therefore, do not include all information and footnotes necessary for a fair presentation of its consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”).

In the opinion of management, the unaudited financial information for the interim periods presented reflects all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the Company’s consolidated financial statements. These consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019.~~2020. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in the Company’s financial statements and the accompanying notes. The inputs into the judgments and estimates consider the economic implications of the COVID-19 pandemic on the Company’s critical and significant accounting estimates. Actual results could materially differ from those estimates.

Basis of Consolidation

The consolidated financial statements have been prepared in conformity with ~~GAAP~~accounting principles generally accepted in the United States of America (“GAAP”) and reflect the accounts and operations of the Company and those of its subsidiaries in which the Company has a controlling financial interest. The Company also consolidates variable interest entities for which it is the primary beneficiary. The primary beneficiary has both ~~(1)~~(a) the power to direct the activities of the VIE that most significantly affect the entity’s economic performance, and ~~(2)~~(b) either the obligation to absorb losses or the right to receive benefits. Refer to “Note 9:8: Variable Interest Entities”, for further details. All intercompany transactions and balances have been eliminated in consolidation.

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Translation of Foreign Currencies

The financial statements of certain of the Company’s foreign subsidiaries are measured using their local currency as the functional currency. Assets and liabilities of foreign operations are translated into U.S. dollars using period-end exchange rates, and revenues and expenses are translated into U.S. dollars using average exchange rates in effect during each period. The resulting translation adjustments are recorded as a component of other comprehensive income or loss. Equity accounts are translated at historical rates, except for the change in retained earnings during the year which is the result of the income statement translation process. Intercompany transaction gains or losses at each period end arising from subsequent measurement of balances for which settlement is not planned or anticipated in the foreseeable future are included as translation adjustments and recorded within other comprehensive income or loss. 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.

~~Reclassifications~~

~~Certain immaterial reclassifications have been made to the consolidated financial statements to conform to the current year’s presentation.~~

Recently Adopted Accounting ~~Pronouncement~~Guidance

On January 1, ~~2020,~~2021, the Company adopted the new accounting standard for Financial Instruments - Credit Losses (“CECL”). CECL introduces a new impairment approach for credit loss recognition based on current expected lifetime losses rather than incurred losses. CECL applies to all financial assets carried at amortized costs, including the Company’s investment in receivable portfolios, which are defined as purchased credit deteriorated (“PCD”) financial assets under CECL. The adoption of CECL represents a significant change from the previous U.S. GAAP guidance relating to purchased credit impaired assets and resulted in changes to the Company’s accounting for its investment in receivable portfolios and the related income from the receivable portfolios.

As part of the adoption of CECL, the Company changed its accounting methodology for its court costs spent in its legal collection channel effective January 1, 2020. Previously, the Company capitalized its upfront court costs spent in its consolidated financial statements (“Deferred Court Costs”) and provided a reserve for those costs that it believed would ultimately be uncollectible. Effective January 1, 2020, the Company expenses all of its court costs as incurred. All expected cash flows, including all the expected collections from the legal channel, are included in the measurement of the negative allowance, or investment in receivable portfolios, at a discounted value. Upon transition, an adjustment was made to retained earnings to reflect the net change from an undiscounted to discounted value prior to writing-off uncollectible receivables and establishing a balance for discounted value of future recoveries of amounts expected to be collected.

The Company has not adjusted prior period comparative information and will continue to disclose prior period financial information in accordance with the previous accounting guidance. The following table summarizes the cumulative effects of adopting the ~~CECL guidance~~ ~~on the Company’s consolidated statements of financial condition at January 1, 2020 (in thousands~~):

Balance as of December 31, 2019 Adjustment Opening Balance as of January 1, 2020
Assets
Investment in receivable portfolios, net $ 3,283,984 $ 44,166 $ 3,328,150
Deferred court costs, net 100,172 (100,172) 0
Liabilities
Other liabilities (for deferred tax liabilities) 147,436 (11,768) 135,668
Equity
Accumulated earnings 888,058 (44,238) 843,820

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~~Recent Accounting Pronouncements Not Yet Effective~~

~~In August 2020, the Financial Accounting Standards Board (“FASB”) issued~~ Accounting Standards Update (“ASU”) No. 2020-06, Debt — Debt with Conversion and Other Options (“Subtopic 470-20”) and Derivatives and Hedging — Contracts in Entity’s Own Equity (“Subtopic 815-40”): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). The Company adopted ASU 2020-06 using the modified-retrospective approach, by recording a net cumulative-effect adjustment to equity of approximately $17.9 million.

The ASU simplifies the accounting for convertible instruments by removing certain models in Subtopic 470-20 and revises the guidance in Subtopic 815-40 to simplify the accounting for contracts in an entity’s own equity. The ASU also amends the guidance to improve the consistency of earnings per share calculations, which requires the if-converted method be used for convertible instruments. ASU 2020-06 is effective for reporting periods beginning after December 15, 2021 with early adoption permitted for reporting periods beginning after December 15, 2020. The amendment is to be adopted through either a modified retrospective or fully retrospective method of transition.

Under ASU 2020-06, the Company’s convertible and exchangeable notes ~~will~~are no longer be bifurcated to a debt component and an equity component, instead, they ~~will be~~are carried as a single ~~liability.~~liability which reflects the principal amount of the convertible and exchangeable notes. The interest expense recognized on the convertible and exchangeable notes ~~will be~~are based on coupon rates, rather than higher effective interest rates. As a result, the Company ~~will recognize~~recognizes lower interest ~~expense.~~expense after the adoption. Additionally, effective January 1, 2021, the Company uses if-converted method ~~will not substantially change the~~in calculating dilutive effect of its convertible and exchangeable notes for ~~convertible instruments that require net share settlement, only in-the-money shares~~earnings per share.

The Company has not adjusted prior period comparative information and will ~~be included~~continue to disclose prior period financial information in accordance with the ~~dilutive effect. Based~~previous accounting guidance. The following table summarizes the cumulative effects of adopting the new guidance on the ~~preliminary assessment, the Company believes that ASU 2020-06 will have a significant impact on its~~Company’s consolidated statements of financial ~~statements and is~~ condition at January 1, 2021 (in ~~the process of determining the adoption approach and whether or not to early adopt.~~thousands):

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate (e.g., LIBOR) reform if certain criteria are met, for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The ASU is effective as of March 12, 2020 through December 31, 2022. We will evaluate transactions or contract modifications occurring as a result of reference rate reform and determine whether to apply the optional guidance on an ongoing basis. The ASU is currently not expected to have a material impact on our consolidated financial statements.


	Balance as of December 31, 2020		Adjustment		Opening Balance as of January 1, 2021
Liabilities
Convertible notes and exchangeable notes	$	583,500	$	0	$	583,500
Debt discount	(19,364)		19,364		0
Other liabilities (for deferred tax liabilities)	146,893		(1,450)		145,443
Equity
Additional paid-in capital	230,440		(40,372)		190,068
Accumulated earnings	1,055,668		22,458		1,078,126

With the exception of the updated ~~standards~~standard discussed above, there have been no recent accounting pronouncements or changes in accounting pronouncements during the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, as compared to the recent accounting pronouncements described in our Annual Report, that have significance, or potential significance, to the Company’s consolidated financial statements.

~~Accounting Policy Update~~

~~As a result of the adoption of CECL, the Company revised its following accounting policies effective January 1, 2020:~~

~~Investment in Receivable Portfolios~~

The Company purchases portfolios of loans that have experienced significant deterioration of credit quality since origination from banks and other financial institutions. These financial assets are defined as PCD assets under CECL. Under the PCD accounting model, the purchased assets are grossed-up to their face value with an offsetting allowance and noncredit discount allocated to the individual receivables as the unit of account is at the individual loan level. Since each loan is deeply delinquent and deemed uncollectible at the individual loan level, the Company applies its charge-off policy and fully writes-off the amortized costs (~~i.e.~~, face value net of noncredit discount) of the individual receivables immediately after purchasing the portfolio. The Company then records 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 ultimately equals the amount paid for a portfolio purchase and presented as “Investment in receivable portfolios, net” in the Company’s consolidated statements of financial condition. The discount rate is an effective interest rate (or “purchase EIR”) based on the purchase price of the portfolio and the expected future cash flows at the time of purchase. The amount of the negative allowance (~~i.e.,~~ ~~investment in receivable portfolios) will not exceed the total amortized cost basis of the loans written-off.~~

Receivable portfolio purchases are aggregated into pools based on similar risk characteristics. Examples of risk characteristics include financial asset type, collateral type, size, interest rate, date of origination, term, and geographic location. The Company’s static pools are typically grouped into credit card, purchased consumer bankruptcy, and mortgage portfolios. The Company further groups these static pools by geographic location. Once a pool is established, the portfolios will remain in the designated pool unless the underlying risk characteristics change. The purchase EIR of a pool will not change over the life of the pool even if expected future cash flows change.

Revenue is recognized for each static pool over the economic life of the pool. The Company makes significant assumptions in determining the economic life of a pool, including the reasonable and supportable economic forecast period based on asset type and geography, which considers the availability of forward-looking scenarios and their respective time horizons. In general, the Company forecasts recoveries over one or two years prior to reverting to historical averages at an

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estimate-level over the remaining life using various methodologies depending on the asset type and geography. The speed at which forecasts revert varies based on the spread between the forecast period and historical data. In addition, estimated recoveries include a qualitative component. The Company continues to evaluate the reasonable economic life of a pool and reversion method annually. Revenue primarily includes two components: (1) accretion of the discount on the negative allowance due to the passage of time, and (2) changes in expected cash flows, which includes (a) the current period variances between actual cash collected and expected cash recoveries and (b) the present value change of expected future recoveries.

The Company measures expected future recoveries based on historical experience, current conditions, and reasonable and supportable forecasts. Factors that may change the expected future recoveries may include both internal as well as external factors. Internal factors include operational performance, such as capacity and the productivity of our collection staff. External factors that may have an impact on our collections include new laws or regulations, new interpretations of existing laws or regulations, and macroeconomic conditions.

The Company elected not to maintain its previously formed pool groups with amortized costs at transition. Certain pools already fully recovered their cost basis and became zero basis portfolios (“ZBA”) prior to the transition. The Company did not establish a negative allowance from ZBA pools as the Company elected the Transition Resource Group for Credit Losses’ practical expedient to retain the integrity of its legacy pools. All subsequent collections to the ZBA pools are recognized as ZBA revenue, which is included in revenue from receivable portfolios in the Company’s consolidated statements of operations. See “Note 5: Investment in Receivable Portfolios, Net” for further discussion of investment in receivable portfolios.

~~Deferred Court Costs~~

The Company pursues legal collections using a network of attorneys that specialize in collection matters and through its internal legal channel. The Company generally pursues collections through legal means only when it believes a consumer has sufficient assets to repay their indebtedness but has, to date, been unwilling to pay. In order to pursue legal collections, the Company is required to pay certain upfront costs to the applicable courts that are recoverable from the consumer. Effective January 1, 2020, the Company expenses all of its court costs as incurred and no longer capitalizes such costs as Deferred Court Costs. All expected cash flows, including all the expected collections from the legal channel, are included in the measurement of the negative allowance, or investment in receivable portfolios, at a discounted value.

Note 2: Earnings (Loss) Per Share

Basic earnings per share is calculated by dividing net earnings attributable to Encore by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is calculated based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares during the ~~period using the treasury stock method.~~period. Dilutive potential common shares include outstanding stock options, non-vested share awards, and the dilutive effect of the convertible and exchangeable senior notes, if applicable.

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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 are 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. Since all of the Company’s 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. The Company did not have any dilutive effect from its convertible and exchangeable notes during the three months ended March 31, 2021 or 2020.

In computing the diluted net loss per share for the three months ended March 31, 2020, dilutive potential common shares were excluded from the diluted loss per share calculation because of their anti-dilutive effect.

On August 12, 2015, the Company’s Board of Directors approved a $50.0 million share repurchase program. On May 5, 2021, the Company announced that the Board of Directors had approved an increase in the size of the repurchase program from $50.0 million to $300.0 million (an increase of $250.0 million). Repurchases under this program are expected to be made with cash on hand 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 the Company’s management and Board of Directors, and in accordance with market conditions, other corporate considerations, and applicable regulatory requirements. 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. During the three months ended March 31, 2021, the Company repurchased 517,860 shares of our common stock for approximately $20.4 million, or $39.37 per share. The Company’s practice is to retire the shares repurchased.

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


		Three Months Ended September 30,			Nine Months Ended September 30,				Three Months Ended March 31,
			2020		2019		2020			2019			2021		2020
Net income attributable to Encore Capital Group, Inc. stockholders			$	54,650	$	38,869	$	174,528		$	124,784
Net income (loss) attributable to Encore Capital Group, Inc. stockholders												Net income (loss) attributable to Encore Capital Group, Inc. stockholders	$	94,630	$	(10,454)

Total weighted-average basic shares outstanding	Total weighted-average basic shares outstanding		31,484		31,338		31,402			31,242		Total weighted-average basic shares outstanding	31,469		31,308
Dilutive effect of stock-based awards	Dilutive effect of stock-based awards		342		319		270			217		Dilutive effect of stock-based awards	363		0

Total weighted-average dilutive shares outstanding	Total weighted-average dilutive shares outstanding		31,826		31,657		31,672			31,459		Total weighted-average dilutive shares outstanding	31,832		31,308

Basic earnings per share			$	1.74	$	1.24	$	5.56		$	3.99
Diluted earnings per share			$	1.72	$	1.23	$	5.51		$	3.97
Basic earnings (loss) per share												Basic earnings (loss) per share	$	3.01	$	(0.33)
Diluted earnings (loss) per share												Diluted earnings (loss) per share	$	2.97	$	(0.33)

Anti-dilutive employee stock options outstanding were approximately 13,000 ~~and 64,000~~ during the three ~~and nine~~ months ended ~~September 30, 2020, respectively. Anti-dilutive employee stock options outstanding were approximately 13,000~~March 31, 2021 and ~~81,000 during the three and nine months ended September 30, 2019, respectively.~~2020.

Note 3: Fair Value Measurements

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Fair value is defined as the price that would be received upon sale of an asset or the price paid to transfer a liability, in an orderly transaction between market participants at the measurement date (i.e., the “exit price”). The Company uses a fair value hierarchy that prioritizes the inputs used in valuation techniques to measure fair value into three broad levels. The following is a brief description of each level:

•Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

•Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

•Level 3: Unobservable inputs, including inputs that reflect the reporting entity’s own assumptions.

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Financial Instruments Required To Be Carried At Fair Value

Financial assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):


		Fair Value Measurements as of September 30, 2020									Fair Value Measurements as of March 31, 2021
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets	Assets									Assets

Interest rate cap contracts	Interest rate cap contracts	$	0	$	854	$	0	$	854	Interest rate cap contracts	$	0	$	854	$	0	$	854
Liabilities	Liabilities									Liabilities
Interest rate swap agreements	Interest rate swap agreements	0		(6,625)		0		(6,625)		Interest rate swap agreements	0		(3,847)		0		(3,847)
Cross-currency swap agreements	Cross-currency swap agreements	0		(6,686)		0		(6,686)		Cross-currency swap agreements	0		(5,340)		0		(5,340)
Contingent consideration	Contingent consideration	0		0		(2,655)		(2,655)		Contingent consideration	0		0		(2,927)		(2,927)


		Fair Value Measurements as of December 31, 2019									Fair Value Measurements as of December 31, 2020
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets	Assets									Assets
Foreign currency exchange contracts		$	0	$	1,473	$	0	$	1,473
Cross-currency swap agreements										Cross-currency swap agreements	$	0	$	11,578	$	0	$	11,578
Interest rate cap contracts	Interest rate cap contracts	0		2,460		0		2,460		Interest rate cap contracts	0		659		0		659
Liabilities	Liabilities									Liabilities

Interest rate swap agreements	Interest rate swap agreements	0		(9,116)		0		(9,116)		Interest rate swap agreements	0		(5,232)		0		(5,232)
Contingent consideration	Contingent consideration	0		0		(66)		(66)		Contingent consideration	0		0		(2,957)		(2,957)

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.

Contingent Consideration:

The Company carries certain contingent liabilities resulting from its mergers and acquisition activities. Certain sellers of the Company’s acquired entities could earn additional earn-out payments in cash based on the entities’ subsequent operating performance. The Company recorded the acquisition date fair values of these contingent liabilities, based on the likelihood of contingent earn-out payments, as part of the consideration transferred. The earn-out payments are subsequently remeasured to fair value at each reporting date based on actual and forecasted operating performance.

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The following table provides a roll-forward of the fair value of contingent consideration for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and year ended December 31, ~~2019~~2020 (in thousands):


	Amount
~~Balance as of December 31, 2018~~	$	~~6,198~~
~~Change in fair value of contingent consideration~~	~~(2,300)~~
~~Payment of contingent consideration~~	~~(3,686)~~
~~Effect of foreign currency translation~~	~~(146)~~
Balance as of December 31, 2019	$	66
Issuance of contingent consideration in connection with acquisition	~~2,653~~2,848
Payment of contingent consideration	(88)
Effect of foreign currency translation	131
Balance as of December 31, 2020	2,957


Payment of contingent consideration	~~(35)~~(56)
Effect of foreign currency translation	~~(29)~~26
Balance as of ~~September 30, 2020~~March 31, 2021	$	~~2,655~~2,927

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Non-Recurring Fair Value Measurement:

Certain assets are measured at fair value on a nonrecurring basis. These assets include real estate-owned assets classified as held for sale at the lower of their carrying value or fair value less cost to sell. The fair value of the assets held for sale and estimated selling expenses were determined at the time of initial recognition using Level 3 measurements. The fair value estimate of ~~the~~these assets ~~held for sale~~ was approximately ~~$40.7~~$40.1 million and ~~$46.7~~$42.2 million as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

Financial Instruments Not Required To Be Carried At Fair Value

The table below summarizes fair value estimates for the Company's financial instruments that are not required to be carried at fair value. The total of the fair value calculations presented does not represent, and should not be construed to represent, the underlying value of the Company.

The carrying amounts in the following table are included in the consolidated statements of financial condition as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (in thousands):


		September 30, 2020				December 31, 2019					March 31, 2021				December 31, 2020
		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value			Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets	Financial Assets									Financial Assets
Investment in receivable portfolios, net	Investment in receivable portfolios, net	$	3,265,992	$	3,729,831	$	3,283,984	$	3,464,050	Investment in receivable portfolios, net	$	3,225,678	$	3,615,300	$	3,291,918	$	3,705,672
Deferred court costs		0		0		100,172		100,172
Financial Liabilities	Financial Liabilities									Financial Liabilities
Convertible notes and exchangeable notes(1)	Convertible notes and exchangeable notes(1)	561,714		625,410		642,547		693,708		Convertible notes and exchangeable notes(1)	422,500		481,126		564,136		622,081
Senior secured notes(2)	Senior secured notes(2)	1,536,351		1,547,920		1,127,435		1,170,945		Senior secured notes(2)	1,613,557		1,683,277		1,642,058		1,684,729

_______________________

(1)~~Carrying amount represents~~Prior to January 1, 2021, under the ~~portion of~~previous accounting standard, the convertible and exchangeable notes ~~classified~~included a debt discount. The carrying amount as ~~debt, while estimated fair value pertains to~~of December 31, 2020 represented the ~~face~~principal amount of the ~~notes.~~notes, net of the debt discount.

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

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 key inputs include the estimated future gross cash flow, average cost to collect, and discount rate. The determination of such inputs requires significant judgment, including assessing the assumed market participant’s cost structure, its determination of whether to include fixed costs in its valuation, its collection strategies, and determining the appropriate weighted average cost of capital. 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.

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~~Deferred Court Costs:~~

Effective January 1, 2020, the Company no longer carries Deferred Court Costs as a result of its change in accounting policy. The fair value estimate for Deferred Court Costs as of December 31, 2019 involved Level 3 inputs as there was little observable market data available and management was required to use significant judgment in its estimates.

Borrowings:

The Company’s convertible notes, exchangeable notes and senior secured notes are carried at historical cost, adjusted for the 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 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 agreement approximates fair value due to the short-term nature of the interest rate period. The Company’s borrowings also include private placement notes, a securitisation senior facility and finance lease liabilities for which the carrying value approximates respective fair value.

Note 4: Derivatives and Hedging Instruments

The Company may periodically enter into derivative financial instruments to manage risks related to interest rates and foreign currency. ~~Certain~~

Table of ~~the Company’s derivative financial instruments qualify for hedge accounting treatment under the authoritative guidance for derivatives and hedging.~~Contents

The following table summarizes the fair value of derivative instruments as included in the Company’s consolidated statements of financial condition (in thousands):

September 30, 2020

December 31, 2019

March 31, 2021

December 31, 2020

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivatives designated as hedging instruments:

Interest rate cap contracts

Other assets

854

Other assets

2,460

Interest rate cap contracts

Other assets

854

Other assets

659

Foreign currency exchange contracts

Other assets

443

Interest rate swap agreements

Other liabilities

(6,625)

Other liabilities

(9,116)

Interest rate swap agreements

Other liabilities

(3,847)

Other liabilities

(5,232)

Cross-currency swap agreements

Other liabilities

(6,686)

Other liabilities

Cross-currency swap agreements

Other liabilities

(5,340)

Other assets

11,578

Derivatives not designated as hedging instruments:

Foreign currency exchange contracts

Other assets

1,030

Derivatives Designated as Hedging Instruments

The Company has operations in foreign countries which expose the Company to foreign currency exchange rate fluctuations due to transactions denominated in foreign currencies. To mitigate a portion of this risk, the Company may enter into derivative financial instruments, principally foreign currency forward contracts with financial counterparties. The Company adjusts the level and use of derivatives as soon as practicable after learning that an exposure has changed and reviews all exposures and derivative positions on an ongoing basis.

The Company held certain foreign currency forward contracts designated as cash flow hedging instruments that matured in June 2020. As of September 30, 2020, the Company had 0 outstanding forward contracts that were designated as cash flow hedging instruments. NaN gains or losses were reclassified from other comprehensive income into earnings as a result of forecasted transactions that failed to occur during the nine months ended September 30, 2020 and 2019.

The Company may periodically enter into interest rate swap agreements to reduce its exposure to fluctuations in interest rates on variable interest rate debt and their impact on earnings and cash flows. Under the swap agreements, the Company receives floating interest rate payments and makes interest payments based on fixed interest rates. The Company designates its interest rate swap instruments as cash flow hedges. Previously, the Company held 4 interest rate swap agreements that hedged the risk of USD-LIBOR interest rate fluctuations for the Encore revolving credit facility and term loan facility. As part of the financing transactions completed in September 2020, the Company settled 2 of the interest rate swap agreements. As of ~~September 30, 2020,~~March 31, 2021, there were 2 interest rate swap agreements outstanding with a total notional amount of ~~$200.2~~$191.3 million. The Company expects to reclassify approximately ~~$9.1~~$6.4 million of net derivative loss from OCI into earnings relating to interest rate swaps within the next 12 months.

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In connection with the financing transactions discussed above, the Company entered into cross-currency swap agreements, which are used to manage foreign currency exchange risk by converting fixed-rate Euro-denominated borrowings including periodic interest payments and the payment of principal at maturity to fixed-rate USD debt and are accounted for as cash flow hedges. As of ~~September 30, 2020,~~March 31, 2021, there were 4 cross-currency swap agreements outstanding with a total notional amount of €350.0 million (approximately ~~$410.4 million)~~$410.5 million based on an exchange rate of $1.00 to €0.85, the exchange rate as of March 31, 2021). The Company expects to reclassify approximately $4.6 million of net derivative loss from OCI into earnings relating to cross-currency swaps within the next 12 months.

Previously, the Company held 2 interest rate cap contracts (the “2018 Caps”) that hedged the risk of GBP-LIBOR interest rate fluctuations for the Cabot Securitisation Senior Facility interest payments. In February 2020, the Company settled the 2018 Caps and ceased the hedge relationship, which resulted in the reclassification of the associated other comprehensive loss balance to interest expense for approximately $2.5 million during the first quarter of 2020.

As of ~~September 30, 2020,~~March 31, 2021, the Company held 2 interest rate cap contracts with a notional amount of approximately ~~$921.3~~$951.5 million that are used to manage its risk related to interest rate fluctuations on the Company’s variable interest rate bearing debt. The interest rate cap hedging the fluctuations in three-month EURIBOR ~~for the Cabot 2024 Floating Rate Notes~~floating rate debt (“2019 Cap”) has a notional amount of €400.0 million (approximately ~~$469.0 million)~~$469.1 million based on an exchange rate of $1.00 to €0.85, the exchange rate as of March 31, 2021) and matures in 2024. The interest rate cap hedging the fluctuations in sterling overnight index average (“SONIA”) ~~for the Cabot Securitisation UK Ltd senior facility agreement~~bearing debt (“2020 Cap”) has a notional amount of £350.0 million (approximately ~~$452.3 million)~~$482.4 million based on an exchange rate of $1.00 to £0.73, the exchange rate as of March 31, 2021) and matures in 2023. The 2019 Cap is structured as a series of European call options (“Caplets”) such that if exercised, the Company will receive a payment equal to 3-months EURIBOR on a notional amount equal to the hedged notional amount net of a fixed strike price. The 2020 Cap is also structured as a series of Caplets such that if exercised, the Company will receive a payment equal to SONIA on a notional amount equal to the hedged notional amount net of a fixed strike price. Each interest rate reset date, the Company will elect to exercise the Caplet or let it expire. The potential cash flows from each Caplet are expected to offset any variability in the cash flows of the interest payments to the extent SONIA or EURIBOR exceeds the strike price of the Caplets. The Company expects the hedge relationships to be highly effective and designates the 2019 Cap and 2020 Cap as cash flow hedge instruments. The Company expects to reclassify approximately ~~$0.4~~$0.6 million of net derivative loss from OCI into earnings relating to interest rate caps within the next 12 months.

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The following tables summarize the effects of derivatives in cash flow hedging relationships designated as hedging instruments in the Company’s consolidated financial statements (in thousands):

Derivatives Designated as Hedging Instruments Gain (Loss) Recognized in OCI Location of Gain (Loss) Reclassified from OCI into Income Gain (Loss) Reclassified from OCI into Income
Three Months Ended September 30, Three Months Ended September 30,
2020 2019 2020 2019
Foreign currency exchange contracts $ 0 $ (323) Salaries and employee benefits $ 0 $ 198
Foreign currency exchange contracts 0 (48) General and administrative expenses 0 27
Interest rate swap agreements (140) (800) Interest expense (2,458) (742)
Interest rate cap contracts (624) (145) Interest expense (103) 0
Cross-currency swap agreements (6,779) 0 Interest expense / Other income (expense) (5,100) 0

Derivatives Designated as Hedging Instruments Gain (Loss) Recognized in OCI Location of Gain (Loss) Reclassified from OCI into Income Gain (Loss) Reclassified from OCI into Income
Nine Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Foreign currency exchange contracts $ (341) $ 1,068 Salaries and employee benefits $ 49 $ 183
Foreign currency exchange contracts (44) (57) General and administrative expenses 11 (44)
Interest rate swap agreements (7,405) (7,182) Interest expense (5,558) (1,606)
Interest rate cap contracts (2,755) (1,857) Interest expense (2,741) 0
Cross-currency swap agreements (6,779) 0 Interest expense / Other income (expense) (5,100) 0

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Derivatives Designated as Hedging Instruments	Gain (Loss) Recognized in OCI				Location of Gain (Loss) Reclassified from OCI into Income (Loss)	Gain (Loss) Reclassified from OCI into Income (Loss)
	Three Months Ended March 31,					Three Months Ended March 31,
	2021		2020			2021		2020
Foreign currency exchange contracts	$	0	$	(389)	Salaries and employee benefits	$	0	$	127
Foreign currency exchange contracts	0		(45)		General and administrative expenses	0		17
Interest rate swap agreements	(11)		(6,707)		Interest expense	(2,271)		(1,088)
Interest rate cap contracts	195		(1,396)		Interest expense	(107)		(2,542)
Cross-currency swap agreements	(18,329)		0		Interest expense / Other (expense) income	(17,528)		0

Derivatives Not Designated as Hedging Instruments

The Company enters into currency exchange forward contracts to reduce the effects of currency exchange rate fluctuations between the British Pound and Euro. These derivative contracts generally mature within one to three months and are not designated as hedge instruments for accounting purposes. The Company continues to monitor the level of exposure of the foreign currency exchange risk and may enter into additional short-term forward contracts on an ongoing basis. The gains or losses on these derivative contracts are recognized in other income or expense based on the changes in fair value. As of ~~September 30, 2020,~~March 31, 2021, the Company had 0 outstanding currency exchange forward contracts that were not designated as cash flow hedging instruments.

The following table summarizes the effects of derivatives in cash flow hedging relationships not designated as hedging instruments in the Company’s consolidated statements of operations (in thousands):


			Amount of Gain (Loss) Recognized in Income										Amount of Gain (Loss) Recognized in Income (Loss)
			Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended March 31,
Derivatives Not Designated as Hedging Instruments	Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivative	2020		2019		2020		2019		Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivative	2021		2020
Foreign currency exchange contracts	Foreign currency exchange contracts	Other income (expense)	$	(407)	$	(436)	$	3,564	$	(263)	Foreign currency exchange contracts	Other (expense) income	$	0	$	1,943

Note 5: Investment in Receivable Portfolios, Net

~~As discussed in “Note 1: Ownership, Description~~The Company’s purchased portfolios of ~~Business,~~loans are grossed-up to their face value with an offsetting allowance and ~~Summary~~noncredit discount allocated to the individual receivables as the unit of ~~Significant Accounting Policies”, effective January 1, 2020,~~account is at the individual loan level. Since each loan is deeply delinquent and deemed uncollectible at the individual loan level, the Company ~~accounts~~applies its charge-off policy and fully writes-off the amortized costs (i.e., face value net of noncredit discount) of the individual receivables immediately after purchasing the portfolio. The Company then records a negative allowance that represents the present value of all expected future recoveries for ~~its investment~~pools of receivables that share similar risk characteristics using a discounted cash flow approach, which ultimately equals the amount paid for a portfolio purchase and presented as “Investment in receivable portfolios, ~~as PCD assets under CECL~~net” in the Company’s consolidated statements of financial condition. The discount rate is an effective interest rate (or “purchase EIR”) based on the purchase price of the portfolio and ~~changed its accounting policy for reimbursable court costs. As~~the expected future cash flows at the time of purchase.

Receivable portfolio purchases are aggregated into pools based on similar risk characteristics. Examples of risk characteristics include financial asset type, collateral type, size, interest rate, date of origination, term, and geographic location. The Company’s static pools are typically grouped into credit card, purchased consumer bankruptcy, and mortgage portfolios. The Company further groups these static pools by geographic location. Once a ~~result,~~pool is established, the ~~Company wrote-off~~portfolios will remain in the ~~previous Deferred Court Costs balance that represented an undiscounted value of recoverable historic spend as a result~~designated pool unless the underlying risk characteristics change. The purchase EIR of a ~~loss-rate methodology,~~pool will not change over the life of the pool even if expected future cash flows change.

Revenue is recognized for each static pool over the economic life of the pool. Revenue primarily includes two components: (1) accretion of the discount on the negative allowance due to the passage of time, and ~~established a discounted~~(2) changes in expected

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cash flows, which includes (a) the current period variances between actual cash collected and expected cash recoveries and (b) the present value change of expected future recoveries.

The Company measures expected future recoveries based on historical experience, current conditions, and reasonable and supportable forecasts. Factors that may change the expected future recoveries may include both internal as well as external factors. Internal factors include operational performance, such as capacity and the productivity of ~~these reimbursable court costs, which is included in the beginning balance~~our collection staff. External factors that may have an impact on our collections include new laws or regulations, new interpretations of ~~the investment in receivable portfolios.~~

~~The table below illustrates the Company’s transition approach for its investment in receivable portfolios as of January 1, 2020 (in thousands~~):


	~~Amount~~
~~Investment in receivable portfolios prior to transition~~	$	~~3,283,984~~
~~Initial transitioned deferred court costs~~	~~44,166~~
	~~3,328,150~~
~~Allowance for credit losses~~	~~79,028,043~~
~~Amortized cost~~	~~82,356,193~~
~~Noncredit discount~~	~~132,533,142~~
~~Face value~~	~~214,889,335~~
~~Write-off of amortized cost~~	~~(82,356,193)~~
~~Write-off of noncredit discount~~	~~(132,533,142)~~
~~Negative allowance~~	~~3,328,150~~
~~Initial negative allowance from transition~~	$	~~3,328,150~~

existing laws or regulations, and macroeconomic conditions.

The table below provides the detail on the establishment of negative allowance for expected recoveries of portfolios purchased during the periods presented (in thousands):

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							Three Months Ended March 31,
		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2020			2021		2020
Purchase price	Purchase price	$	170,131	$	532,183	Purchase price	$	170,178	$	214,113
Allowance for credit losses	Allowance for credit losses	507,907		1,400,525		Allowance for credit losses	374,575		521,194
Amortized cost	Amortized cost	678,038		1,932,708		Amortized cost	544,753		735,307
Noncredit discount	Noncredit discount	1,104,695		2,858,922		Noncredit discount	784,112		967,715
Face value	Face value	1,782,733		4,791,630		Face value	1,328,865		1,703,022
Write-off of amortized cost	Write-off of amortized cost	(678,038)		(1,932,708)		Write-off of amortized cost	(544,753)		(735,307)
Write-off of noncredit discount	Write-off of noncredit discount	(1,104,695)		(2,858,922)		Write-off of noncredit discount	(784,112)		(967,715)
Negative allowance	Negative allowance	170,131		532,183		Negative allowance	170,178		214,113
Negative allowance for expected recoveries - current period purchases	Negative allowance for expected recoveries - current period purchases	$	170,131	$	532,183	Negative allowance for expected recoveries - current period purchases	$	170,178	$	214,113

The following table summarizes the changes in the balance of the investment in receivable portfolios during the periods presented (in thousands):

Three Months Ended
September 30, Nine Months Ended
September 30,
2020 2019 2020 2019
Balance, beginning of period $ 3,201,241 $ 3,224,568 $ 3,328,150 $ 3,137,893
Purchases of receivable portfolios 170,131 259,910 532,183 764,942
Deconsolidation of receivable portfolios(1)
0 (51,935) (2,822) (51,935)
Put-backs and Recalls (2,830) (2,746) (14,224) (7,841)
Disposals and transfers to assets held for sale (3,560) (1,765) (6,273) (7,681)
Cash collections (539,748) (499,395) (1,575,242) (1,528,129)
Revenue from receivable portfolios 342,489 316,217 1,035,141 939,870
Changes in expected current period recoveries 78,268 0 197,155 0
Changes in expected future period recoveries (47,817) 0 (199,358) 0
Portfolios allowance reversal, net 0 8,515 0 11,945
Foreign currency adjustments 67,818 (65,202) (28,718) (70,897)
Balance, end of period $ 3,265,992 $ 3,188,167 $ 3,265,992 $ 3,188,167
Revenue as a percentage of collections 63.5 % 63.3 % 65.7 % 61.5 %

~~_______________________~~


	Three Months Ended March 31,
	2021		2020
Balance, beginning of period	$	3,291,918	$	3,328,150
Purchases of receivable portfolios	170,178		214,113

Put-backs and Recalls	(3,153)		(5,068)
Disposals and transfers to assets held for sale	(1,665)		(1,531)
Cash collections	(606,461)		(527,279)
Revenue from receivable portfolios	338,018		357,365
Changes in expected current period recoveries	91,401		10,315
Changes in expected future period recoveries	(46,864)		(108,976)
Foreign currency adjustments	(7,694)		(101,071)
Balance, end of period	$	3,225,678	$	3,166,018

~~(1)~~Deconsolidation of receivable portfolios as a result of the Company’s divestiture of its investment in Brazil for the nine months ended September 30, 2020 and as a result of the Baycorp Transaction for the three and nine months ended September 30, 2019.

Changes in expected current period recoveries represent over and under-performance in the reporting period. Collections during the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 significantly outperformed the projected cash flows. The Company believes the collection over-performance was ~~largely~~a result of its sustained improvements in portfolio collections driven by change in consumer behavior during the COVID-19 pandemic and our liquidation improvement initiatives. The over-performance was also driven by higher collections as compared to the reduced near-term expected recoveries as a result of adjustments made to the projected cash flow forecast during ~~the first quarter of~~ 2020 associated with the COVID-19 pandemic. ~~The over-performance was also a result of sustained improvements in portfolio collections driven by liquidation improvement initiatives.~~

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While the Company now has additional information with respect to the impact on collections of the COVID-19 pandemic, the future outlook remains uncertain, and will continue to evolve depending on future developments, including the duration and spread of the pandemic and related actions taken by governments. When reassessing the future forecasts of expected lifetime recoveries during ~~the~~ three months ended ~~September 30, 2020,~~March 31, 2021, management considered historical and current collection performance, as well as the uncertainty in economic forecasts in the geographies in which we operate, and believes that ~~the operational disruption as a result~~while some of the ~~COVID-19 pandemic has,~~collection over-performance resulted in increased total expected recoveries for certain pool groups, the ~~near term, been resolved through~~majority of the over-performance was a ~~combination of social distancing~~shift forward in ~~the workplace and working remotely. However,~~timing rather than an increase in total estimated remaining collections. Additionally, the macroeconomic driven consumer distress has improved; although it is still present and will likely ~~continue to~~ impact the Company’s collections performance in the near future. As a result of a combination of the above, the Company has updated its forecast, resulting in a net reduction of total estimated remaining collections which in turn, when discounted to present value, resulted in a provision for credit loss adjustment of approximately ~~$47.8 million and $199.4~~$46.9 million during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021. During the three months ended March 31, 2020, ~~respectively.~~the Company recorded approximately $109.0 million in provision for credit loss adjustment due to significant uncertainty of the COVID-19 pandemic at that time. The circumstances around this pandemic ~~are evolving~~continue to rapidly evolve, and will continue to impact the Company’s business and its estimation of expected recoveries in future periods. The Company will continue to closely monitor the COVID-19 situation and update its assumptions accordingly.

Accretable yield represented the amount of revenue on purchased receivable portfolios the Company expected to recognize over the remaining life of its existing portfolios. The following table summarizes the change in accretable yield under the previous accounting guidance during the periods presented ~~(in thousands)~~:


~~Balance as of December 31, 2018~~	$	~~4,026,206~~
~~Revenue from receivable portfolios~~	~~(311,158)~~
~~Allowance reversals on receivable portfolios, net~~	~~(1,367)~~
~~Additions on existing portfolios, net~~	~~38,313~~
~~Additions for current purchases~~	~~285,637~~
~~Effect of foreign currency translation~~	~~26,461~~
~~Balance as of March 31, 2019~~	~~4,064,092~~
~~Revenue from receivable portfolios~~	~~(312,495)~~
~~Allowance reversals on receivable portfolios, net~~	~~(2,063)~~
~~Additions on existing portfolios, net~~	~~145,359~~
~~Additions for current purchases~~	~~277,556~~
~~Effect of foreign currency translation~~	~~(46,526)~~
~~Balance as of June 30, 2019~~	~~4,125,923~~
~~Revenue from receivable portfolios~~	~~(316,217)~~
~~Allowance reversals on receivable portfolios, net~~	~~(8,515)~~
~~Additions on existing portfolios, net~~	~~93,527~~
~~Additions for current purchases~~	~~288,547~~
~~Effect of foreign currency translation~~	~~(73,810)~~
~~Balance as of September 30, 2019~~	$	~~4,109,455~~

~~The following table summarizes the change in the valuation allowance for investment in receivable portfolios as accounted for under the previous accounting guidance during the periods presented~~ ~~(in thousands)~~:

Three Months Ended
September 30, 2019 Nine Months Ended
September 30, 2019
Balance as of beginning of period $ 57,204 $ 60,631
Provision for portfolio allowances 1,120 4,835
Reversal of prior allowances (9,635) (16,780)
Baycorp Transaction (1,036) (1,036)
Effect of foreign currency translation (554) (551)
Balance as of end of period $ 47,099 $ 47,099

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Note 6: ~~Deferred Court Costs, Net~~

As discussed in “Note 1: Ownership, Description of Business, and Summary of Significant Accounting Policies”, effective January 1, 2020 and as part of the adoption of CECL, the Company changed its method of accounting for court costs spent in its legal collection channel. The Company now expenses all of its court costs as incurred and includes all expected recoveries, including the recoveries from the legal channel, in the measurement of the investment in receivable portfolios at a discounted value. As a result, the Company no longer carries Deferred Court Costs.

~~Net deferred court costs under the previous accounting method consisted of the following as of the date presented~~ ~~(in thousands)~~:


	~~December 31, 2019~~
~~Court costs advanced~~	$	~~891,207~~
~~Court costs recovered~~	~~(369,043)~~
~~Court costs reserve~~	~~(421,992)~~
~~Deferred court costs, net~~	$	~~100,172~~

~~A roll-forward of the Company’s court cost reserve as accounted for under the previous accounting method is as follows~~ ~~(in thousands)~~:

Three Months Ended
September 30, 2019 Nine Months Ended
September 30, 2019
Balance as of beginning of period $ (408,312) $ (396,460)
Provision for court costs (20,866) (60,214)
Charge-offs 13,679 40,934
Effect of foreign currency translation 2,113 2,354
Balance as of end of period $ (413,386) $ (413,386)

~~Note 7:~~ Other Assets

Other assets consist of the following (in thousands):


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Operating lease right-of-use assets	Operating lease right-of-use assets	$	72,587	$	75,254	Operating lease right-of-use assets	$	69,426	$	72,164
Identifiable intangible assets, net	Identifiable intangible assets, net	44,617		51,371		Identifiable intangible assets, net	42,991		45,012
Assets held for sale		40,740		46,717
Real estate owned						Real estate owned	40,059		42,173
Deferred tax assets	Deferred tax assets	31,689		24,134		Deferred tax assets	33,834		33,202
Service fee receivables	Service fee receivables	26,434		27,705		Service fee receivables	30,718		26,539
Income tax deposit		19,254		5,822
Prepaid expenses	Prepaid expenses	19,149		22,272		Prepaid expenses	26,497		26,717
Equity method investments						Equity method investments	17,302		10,155
Other financial receivables	Other financial receivables	14,529		17,308		Other financial receivables	12,036		12,238
Income tax deposits						Income tax deposits	8,272		35,853
Other	Other	40,297		58,640		Other	42,002		45,109
Total	Total	$	309,296	$	329,223	Total	$	323,137	$	349,162

2016

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Note 8:7: Borrowings

The Company is in compliance in all material respects with all covenants under its financing arrangements as of ~~September 30, 2020.~~March 31, 2021. The components of the Company’s consolidated borrowings were as follows (in thousands):


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Global senior secured revolving credit facility	Global senior secured revolving credit facility	$	585,227	$	0	Global senior secured revolving credit facility	$	520,505	$	481,007
Encore revolving credit facility		0		492,000
Encore term loan facility		0		171,677

Encore private placement notes	Encore private placement notes	156,320		308,750		Encore private placement notes	136,780		146,550
Senior secured notes	Senior secured notes	1,542,205		1,129,039		Senior secured notes	1,622,407		1,651,619
Convertible notes and exchangeable notes	Convertible notes and exchangeable notes	583,500		672,855		Convertible notes and exchangeable notes	422,500		583,500
Cabot senior revolving credit facility		0		285,749

Cabot securitisation senior facility	Cabot securitisation senior facility	452,299		464,092		Cabot securitisation senior facility	482,377		478,131
Other	Other	30,574		54,151		Other	24,921		24,398
Finance lease liabilities	Finance lease liabilities	8,487		8,121		Finance lease liabilities	9,953		8,288
		3,358,612		3,586,434			3,219,443		3,373,493
Less: debt discount and issuance costs, net of amortization	Less: debt discount and issuance costs, net of amortization	(106,511)		(73,237)		Less: debt discount and issuance costs, net of amortization	(67,515)		(91,859)
Total	Total	$	3,252,101	$	3,513,197	Total	$	3,151,928	$	3,281,634

~~In September 2020 the Company entered into various transactions, agreements and amendments related to its borrowings including (collectively, the “Financing Transactions”):~~

•~~an amended multi-currency revolving credit facility that formerly supported only Cabot that now supports the operations of all operating units;~~

•~~an issuance of €350.0 million (approximately $410.8 million) in 4.875% senior secured notes due 2025; and~~

•~~an amendment to the terms of the existing Senior Secured Notes (defined below).~~

~~Following the Financing Transactions,~~ Encore is the parent of the restricted group for the Global Senior Facility, the Senior Secured Notes and the Private Placement Notes, each of which is ~~now~~ 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.

In connection with the Financing Transactions, Encore repaid and terminated the Encore Senior Secured Credit Facilities (defined below) and prepaid a portion of its Encore Private Placement Notes (defined below). The total fees paid to the lenders and third-party costs incurred relating to the Financing Transactions were approximately $49.7 million, a portion of which were capitalized as debt issuance costs. Additionally, certain of the unamortized debt issuance costs prior to the Financing Transaction were written-off. The Company recorded a pre-tax expense of approximately $24.6 million (approximately $18.9 million net of tax) relating to the Financing Transactions, $17.7 million of which was included in interest expense and $6.9 million was included in general and administrative expense in the Company’s consolidated statements of operations during the three and nine months ended September 30, 2020.

Global Senior Secured Revolving Credit Facility

~~The~~In September 2020, the Company ~~has~~ entered into a multi-currency senior secured revolving credit facility agreement (as amended and restated, the “Global Senior Facility”). In previous periods, the Company referred to this facility as the Cabot Credit Facility. As of ~~September 30, 2020,~~March 31, 2021, the Global Senior Facility provided for a total committed facility of $1,050.0 million that matures in September 2024 and included the following key provisions:

•Interest at LIBOR (or EURIBOR for any loan drawn in euro) plus 2.50% per annum, with a LIBOR (or EURIBOR) floor of 0.75%;

•A restrictive covenant that limits the LTV Ratio (defined in the Global Senior Facility) to 0.75 in the event that the Global Senior Facility is more than 20% utilized;

•A restrictive covenant that limits the SSRCF LTV Ratio (defined in the Global Senior Facility) to 0.275;

•A restrictive covenant that requires the Company to maintain a Fixed Charge Coverage Ratio (as defined in the Global Senior Facility) of at least 2.0;

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•Additional restrictions and covenants which limit, among other things, the payment of dividends and the incurrence of additional indebtedness and liens; and

•Standard events of default which, upon occurrence, may permit the lenders to terminate the Global Senior Facility and declare all amounts outstanding to be immediately due and payable.

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.

As of ~~September 30, 2020,~~March 31, 2021, the outstanding borrowings under the Global Senior Facility were ~~$585.2~~$520.5 million. ~~Since the completion of the Financing Transactions, the~~The weighted average interest rate of the Global Senior Facility was 3.25%. for the three months ended March 31, 2021. The weighted average interest rate of the previous Cabot Credit Facility was ~~3.06% and 3.30%~~3.55% for the three ~~and nine~~ months ended ~~September 30, 2020, respectively, and 3.71% and 3.47% for the three and nine months ended September 30, 2019, respectively.~~March 31, 2020. The weighted average interest rate of the previous Encore ~~Revolving Credit Facility~~revolving credit facility was ~~3.63% and 3.90%~~4.58% for the three ~~and nine~~ months ended ~~September 30, 2020, respectively, and 5.25% and 5.40% for the three and nine months ended September 30, 2019, respectively.~~March 31, 2020. Available capacity under the Global Senior Facility was ~~$464.8~~approximately $529.5 million as of ~~September 30, 2020.~~March 31, 2021.

~~Encore Revolving Credit Facility and Term Loan Facility~~

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The Company had a revolving credit facility (the “Revolving Credit Facility”) and term loan facility (the “Term Loan Facility,” and together with the Revolving Credit Facility, the “Encore Senior Secured Credit Facilities”) pursuant to a Third Amended and Restated Credit Agreement dated December 20, 2016 (as amended, the “Restated Credit Agreement”) that was previously used to support the Company’s domestic operations. In connection with the Financing Transactions on September 24, 2020, the Company repaid the Encore Senior Secured Credit Facilities and terminated the Restated Credit Agreement.

~~Encore~~ Private Placement Notes

In August 2017, Encore entered into $325.0 million in senior secured notes with a group of insurance companies (the ~~“Encore Private~~“Private Placement Notes”). ~~In September 2020, as part~~As of ~~the Financing Transactions, the Company prepaid approximately $103.7~~March 31, 2021, $136.8 million of the ~~Encore Private Placement Notes and made a $10.4 million make-whole payment to the holders of notes that were prepaid. As of September 30, 2020, $156.3 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.

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Senior Secured Notes

The following table provides a summary of the Senior Secured Notes ($ in thousands):


		September 30, 2020		December 31, 2019		Maturity Date	Interest Rate			March 31, 2021		December 31, 2020		Maturity Date	Interest Payment Dates	Interest Rate
Cabot 2023 Notes	Cabot 2023 Notes	$	662,836	$	680,118	Oct 1, 2023	7.500	%	Cabot 2023 Notes	$	311,779	$	309,034	Oct 1, 2023	Apr 1, Oct 1	7.500	%
Cabot 2024 Floating Rate Notes		468,997		448,921		Jun 1, 2024	EURIBOR +6.375%

Encore 2025 Notes	Encore 2025 Notes	410,372		0		Oct 15, 2025	4.875	%	Encore 2025 Notes	410,466		426,752		Oct 15, 2025	Apr 15, Oct 15	4.875	%
Encore 2026 Notes									Encore 2026 Notes	413,466		409,827		Feb 15, 2026	Feb 15, Aug 15	5.375	%
Encore 2028 Floating Rate Notes									Encore 2028 Floating Rate Notes	486,696		506,006		Jan 15, 2028	Jan 15, Apr 15, Jul 15, Oct 15	EURIBOR +4.250%(1)
		$	1,542,205	$	1,129,039					$	1,622,407	$	1,651,619

Cabot Financial (Luxembourg) S.A. (“Cabot Financial”) has issued £512.9 million (approximately $651.3 million) in aggregate principal amount of 7.500% Senior Secured Notes due 2023 (the “Cabot 2023 Notes”). _______________________

(1)Interest rate is based on ~~the Cabot 2023 Notes is payable semi-annually, in arrears, on April 1 and October 1 of each year.~~

Cabot Financial (Luxembourg) II S.A. (“Cabot Financial II”), an indirect subsidiary of Encore, has issued €400.0 million (approximately $452.0 million) in aggregate principal amount of Senior Secured Floating Rate Notes due 2024 (the “Cabot 2024 Floating Rate Notes”). The Cabot 2024 Floating Rate Notes bear interest at a ~~rate equal to the sum of (i) three-month~~three-months EURIBOR (subject to a 0% floor) plus ~~(ii) 6.375%, reset~~4.250% per annum, resets quarterly. ~~Interest is payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year.~~

In September 2020, Encore issued €350.0 million (approximately $410.8 million) in aggregate principal amount of 4.875% Senior Secured Notes due 2025 at an issue price of 98.889% (the “Encore 2025 Notes” and together with the Cabot 2023 Notes and the Cabot 2024 Floating Rate Notes, the “Senior Secured Notes”). Interest on the Encore 2025 Notes is payable semi-annually, in arrears, on April 15 and October 15 of each year, commencing on April 15, 2021.

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. Subject to the intercreditor agreement described above under “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.

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):


		September 30, 2020		December 31, 2019		Maturity Date	Interest Rate			March 31, 2021		December 31, 2020		Maturity Date	Interest Payment Dates	Interest Rate
2020 Convertible Notes(1)		$	0	$	89,355	Jul 1, 2020	3.000	%
2021 Convertible Notes		161,000		161,000		Mar 15, 2021	2.875	%
2021 Convertible Notes(1)									2021 Convertible Notes(1)	$	0	$	161,000	Mar 15, 2021	Mar 15, Sep 15	2.875	%
2022 Convertible Notes	2022 Convertible Notes	150,000		150,000		Mar 15, 2022	3.250	%	2022 Convertible Notes	150,000		150,000		Mar 15, 2022	Mar 15, Sep 15	3.250	%
2023 Exchangeable Notes	2023 Exchangeable Notes	172,500		172,500		Sep 1, 2023	4.500	%	2023 Exchangeable Notes	172,500		172,500		Sep 1, 2023	Mar 1, Sep 1	4.500	%
2025 Convertible Notes	2025 Convertible Notes	100,000		100,000		Oct 1, 2025	3.250	%	2025 Convertible Notes	100,000		100,000		Oct 1, 2025	Apr 1, Oct 1	3.250	%
		$	583,500	$	672,855					$	422,500	$	583,500

_______________________

(1)The ~~2020~~2021 Convertible Notes matured on ~~July 1, 2020~~March 15, 2021 and the Company repaid the outstanding principal in cash.

The Exchangeable Notes were issued by Encore Capital Europe Finance Limited (“Encore Finance”), a 100% owned finance subsidiary of Encore, and are fully and unconditionally guaranteed by Encore. Unless otherwise indicated in connection with a particular offering of debt securities, Encore will fully and unconditionally guarantee any debt securities issued by Encore Finance. Amounts related to Encore Finance are included in the consolidated financial statements of Encore subsequent to April 30, 2018, the date of the incorporation of Encore Finance.

Prior to the close of business on the business day immediately preceding their respective free conversion or exchange date (listed below), holders may convert or exchange their Convertible Notes or Exchangeable Notes under certain circumstances set forth in the applicable indentures. On or after their respective free conversion or exchange dates until the close of business on the second scheduled trading day immediately preceding their respective maturity date, holders may convert or exchange their

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notes at any time. Certain key terms related to the convertible and exchangeable features as of ~~September 30, 2020~~March 31, 2021 are listed below:

2021 Convertible Notes 2022 Convertible Notes 2023 Exchangeable Notes 2025 Convertible Notes
Initial conversion or exchange price $ 59.39 $ 45.57 $ 44.62 $ 40.00
Closing stock price at date of issuance $ 47.51 $ 35.05 $ 36.45 $ 32.00
Closing stock price date Mar 5, 2014 Feb 27, 2017 Jul 20, 2018 Sep 4, 2019
Conversion or exchange rate (shares per $1,000 principal amount) 16.8386 21.9467 22.4090 25.0000
Free conversion or exchange date Sep 15, 2020 Sep 15, 2021 Mar 1, 2023 Jul 1, 2025

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	2022 Convertible Notes			2023 Exchangeable Notes			2025 Convertible Notes
Initial conversion or exchange price	$	45.57		$	44.62		$	40.00
Closing stock price at date of issuance	$	35.05		$	36.45		$	32.00
Closing stock price date	Feb 27, 2017			Jul 20, 2018			Sep 4, 2019
Conversion or exchange rate (shares per $1,000 principal amount)	21.9467			22.4090			25.0000
Free conversion or exchange date	Sep 15, 2021			Mar 1, 2023			Jul 1, 2025
Stated interest rate	3.250		%	4.500		%	3.250		%

In the event of conversion or exchange, holders of the Company’s Convertible Notes or Exchangeable Notes will receive cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. The Company’s current intent is to settle conversions and exchanges through combination settlement with a minimum specified dollar amount of $1,000 per $1,000 principal amount of notes (i.e., convertible or exchangeable into cash up to the aggregate principal amount, and shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election and subject to certain restrictions contained in each of the indentures governing the Convertible Notes and Exchangeable Notes, for the remainder). As a result, only the conversion or exchange spread is included in the diluted earnings per share calculation, if dilutive. Under such method, the settlement of the conversion or exchange spread has a dilutive effect when, during any quarter, the average share price of the Company’s common stock exceeds the initial conversion or exchange prices listed in the above table.

~~On October 29, 2020, the Company entered into supplemental indentures for the Convertible Notes and Exchangeable Notes so that in~~ the event of conversion or exchange, the notes are convertible or exchangeable into cash up to the aggregate principal amount of the notes and the excess conversion premium, if any, may be settled in cash or shares of the Company’s common stock at the Company’s election and subject to certain restrictions contained in each of the indentures governing the Convertible Notes and Exchangeable Notes. ~~Refer~~

As discussed in “Note 1: Ownership, Description of Business, and Summary of Significant Accounting Policies,” the Company adopted ASU 2020-06 on January 1, 2021 using a modified-retrospective approach. The Company’s convertible and exchangeable notes are no longer bifurcated to ~~“Item 5: Other Information” for additional details of these supplemental indentures.~~

~~The~~a debt component and ~~equity components, the issuance costs related to the~~an equity component, instead, they are carried as a single liability, which reflects the ~~stated interest rate, and the effective interest rate for each~~principal amount of the ~~Convertible Notes~~convertible and ~~Exchangeable Notes at the time of the original offering are listed below~~ ~~(in thousands, except percentages)~~:

2021 Convertible Notes 2022 Convertible Notes 2023 Exchangeable Notes 2025 Convertible Notes
Debt component $ 143,645 $ 137,266 $ 157,971 $ 91,024
Equity component $ 17,355 $ 12,734 $ 14,009 $ 8,976
Equity issuance cost $ 581 $ 398 $ 0 $ 224
Stated interest rate 2.875 % 3.250 % 4.500 % 3.250 %
Effective interest rate 4.700 % 5.200 % 6.500 % 5.000 %

exchangeable notes. The ~~balances of the liability and equity components of all the Convertible Notes and Exchangeable Notes outstanding were as follows~~ ~~(in thousands)~~:

September 30,
2020 December 31,
2019
Liability component—principal amount $ 583,500 $ 672,855
Unamortized debt discount (21,786) (30,308)
Liability component—net carrying amount $ 561,714 $ 642,547
Equity component $ 53,074 $ 83,127

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~~The debt discount is being amortized into~~ interest expense ~~over~~recognized on the ~~remaining life of the Convertible Notes~~convertible and ~~Exchangeable Notes using the~~exchangeable notes is based on coupon rates, rather than higher effective interest rates. The Company has not adjusted prior period comparative information and will continue to disclose prior period financial information in accordance with the previous accounting guidance.

Interest expense related to the Convertible Notes and Exchangeable Notes during the periods presented was as follows (in thousands):


		Three Months Ended September 30,			Nine Months Ended September 30,				Three Months Ended March 31,
			2020		2019		2020			2019			2021		2020
Interest expense—stated coupon rate	Interest expense—stated coupon rate		$	5,130	$	6,754	$	16,728		$	17,662	Interest expense—stated coupon rate	$	4,923	$	5,799
Interest expense—amortization of debt discount	Interest expense—amortization of debt discount		2,382		3,405		8,521			9,770		Interest expense—amortization of debt discount	0		3,044
Interest expense—Convertible Notes and Exchangeable Notes	Interest expense—Convertible Notes and Exchangeable Notes		$	7,512	$	10,159	$	25,249		$	27,432	Interest expense—Convertible Notes and Exchangeable Notes	$	4,923	$	8,843

Hedge Transactions

In order to reduce the risk related to the potential dilution and/or the potential cash payments the Company may be required to make in the event that the market price of the Company’s common stock becomes greater than the ~~conversion or~~ exchange prices of the ~~Convertible Notes and the~~2023 Exchangeable Notes, the Company maintains a hedge program that increases the effective ~~conversion or~~ exchange price for the ~~2021 Convertible Notes and the~~2023 Exchangeable Notes. The Company did not hedge the 2022 Convertible Notes or the 2025 Convertible Notes.

The details of the hedge program are listed below (in thousands, except conversion or exchange price):

2021 Convertible Notes 2023 Exchangeable Notes
Cost of the hedge transaction(s) $ 19,545 $ 17,785
Initial conversion or exchange price $ 59.39 $ 44.62
Effective conversion or exchange price $ 83.14 $ 62.48


	2023 Exchangeable Notes
Cost of the hedge transaction(s)	$	17,785
Initial exchange price	$	44.62
Effective exchange price	$	62.48

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Cabot Securitisation Senior Facility

Cabot Securitisation UK Ltd (“Cabot Securitisation”), an indirect subsidiary of Encore, has a senior facility for a committed amount of £350.0 million (as amended, the “Cabot Securitisation Senior Facility”). The Cabot Securitisation Senior Facility matures in March 2025. Funds drawn under the Cabot Securitisation Senior Facility bear interest at a rate per annum equal to SONIA plus a margin of 3.06% plus, for periods after March 15, 2023, a step-up margin ranging from 0 to 1.00%.

As of ~~September 30, 2020,~~March 31, 2021, the outstanding borrowings under the Cabot Securitisation Senior Facility were £350.0 million (approximately ~~$452.3 million)~~$482.4 million based on an exchange rate of $1.00 to £0.73, the exchange rate as of March 31, 2021). The obligations of Cabot Securitisation under the Cabot Securitisation Senior Facility are secured by first ranking security interests over all of Cabot Securitisation’s property, assets and rights (including receivables purchased from Cabot Financial UK from time to time), the book value of which was approximately ~~£401.2~~£381.9 million (approximately ~~$518.5 million)~~$526.4 million based on an exchange rate of $1.00 to £0.73, the exchange rate as of ~~September 30, 2020.~~March 31, 2021) as of March 31, 2021. The weighted average interest rate was ~~3.12%~~3.11% and ~~3.28%~~3.52% for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 3.75% and 3.74% for the three and nine months ended September 30, 2019.~~respectively.

Cabot Securitisation is a securitized financing vehicle and is a VIE for consolidation purposes. Refer to “Note 9:8: Variable Interest Entities” for further details.

Note 9:8: Variable Interest Entities

A VIE is defined as a legal entity whose equity owners do not have sufficient equity at risk, or, as a group, the holders of the equity investment at risk lack any of the following three characteristics: decision-making rights, the obligation to absorb expected losses, or the right to receive expected residual returns of the entity. The primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and the obligation to absorb expected losses or the right to receive benefits from the entity that could potentially be significant to the VIE. The Company consolidates VIEs when it is the primary beneficiary.

As of ~~September 30, 2020,~~March 31, 2021, the Company’s VIEs include certain securitized financing vehicles and other immaterial special purpose entities that were created to purchase receivable portfolios in certain geographies. The Company is the primary beneficiary of these VIEs. The Company has the power to direct the activities of the VIEs which includes but is not limited to the ability to exercise discretion in the servicing of the financial assets. The Company evaluates its relationships with its VIEs on an ongoing basis to ensure that it continues to be the primary beneficiary.

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Most assets recognized as a result of consolidating these VIEs do not represent additional assets that could be used to satisfy claims against the Company’s general assets. Conversely, liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets; rather, they represent claims against the specific assets of the VIE.

Note ~~10:~~9: Income Taxes

The ~~Company recorded income~~Company's effective tax ~~expense of $19.7 million and $3.0 million during~~rate for the three months ended ~~September 30,~~March 31, 2021 was 22.2%. For the three months ended March 31, 2020, ~~and 2019, respectively, and income~~the Company recorded tax expense on a pre-tax loss resulting in a negative tax rate of ~~$59.9 million and $18.4 million during~~75.7%. The difference between the ~~nine months ended September 30, 2020 and 2019, respectively.~~

~~The~~ effective tax ~~rates~~rate and the 21% federal statutory rate in 2020 was primarily due to a change in valuation allowance over consolidated pre-tax loss for the ~~respective periods are shown below:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2020 2019 2020 2019
Federal provision 21.0 % 21.0 % 21.0 % 21.0 %
State provision 2.7 % 5.3 % 3.0 % 3.7 %
Tax benefit relating to Baycorp Transaction 0 % (29.1) % 0 % (8.6) %
Tax effect of CFPB settlement fees(1)
4.2 % 0 % 1.3 % 0 %
Audit assessment 0 % 8.9 % 0 % 2.6 %
Change in valuation allowance(2)
2.0 % 1.9 % 2.2 % 2.1 %
Tax benefit from divestiture of foreign investment 0 % 0 % (1.3) % 0 %
Change in tax accounting method 0 % 0 % 0 % (6.3) %
Tax rate change (3.5) % 0 % (1.1) % 0 %
Other 0 % (0.9) % 0.4 % (1.7) %
Effective tax rate 26.4 % 7.1 % 25.5 % 12.8 %

~~________________________~~

~~(1)Non-deductible expense for tax purposes, refer to “Note 14: Subsequent Event.”~~

~~(2)Attributable to losses incurred at certain foreign subsidiaries with cumulative operating losses for tax purposes.~~

period, recognized in the period under the discrete method. The Company utilized the discrete ~~effective tax rate~~ method ~~(“discrete method”)~~ for recording income taxes for the three and nine months ended September 30, 2020. The Company believes the use of the discrete method is more appropriate than the application of the estimated annual effective tax rate (“AETR”) methodduring 2020 due to uncertainty in estimating annual pre-tax earnings, primarily due to the ~~ongoing~~ COVID-19 pandemic. The Company ~~will re-evaluate~~re-evaluated the ~~use~~methodology in calculating income taxes and returned to using the estimated annual effective tax rate method during the three months ended March 31, 2021.

Each interim period is considered an integral part of the ~~discrete method each quarter until it~~annual period and tax expense or benefit is ~~deemed appropriate to return~~measured using an estimated annual effective income tax rate. The estimated annual effective tax rate for the full year is applied to the ~~AETR method.~~respective interim period, taking into account year-to-date amounts and projected amounts for the year. Since the Company operates in foreign countries with varying tax rates, the Company's quarterly effective tax rate is dependent on the level of income or loss from international operations in the reporting period.

The ~~Company’s~~Company's subsidiary in Costa Rica is operating under a 100% tax holiday through December 31, 2026. The impact of the tax holiday in Costa Rica for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ was immaterial.

The Company ~~had gross unrecognized~~is subject to income taxes in the U.S. and foreign jurisdictions. Significant judgement is required in evaluating uncertain tax ~~benefits, inclusive of penalties~~positions and ~~interest, of $8.2 million as of September 30, 2020. These unrecognized tax benefits, if recognized, would result in a net tax benefit of $7.6 million as of September 30, 2020.~~determining our provision for income taxes. There ~~was~~has been no material change into the Company’s total gross unrecognized tax benefits from December 31, ~~2019.~~2020.

The Company has not provided for applicable income or withholding taxes on the undistributed earnings from continuing operations for certain of its subsidiaries operating outside of the United States. Undistributed net income of these subsidiaries as of September 30, 2020 was approximately $180.5 million. Such undistributed earnings are considered permanently reinvested. The Company does not provide deferred taxes on translation adjustments on unremitted earnings under the indefinite reversal exemption. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practical due to the complexities of a hypothetical calculation. Subsidiaries operating outside of the United States for which the Company does not consider under the indefinite reversal exemption have no material undistributed earnings or outside basis differences and therefore no U.S. taxes have been provided.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law in response to the COVID-19 pandemic. The CARES Act contains several corporate income tax provisions, including modifications to the limitation on business interest expense and net operating loss regulations, and provides for a payment delay

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of employer payroll taxes and income taxes. The CARES Act did not have a material impact on the Company’s effective tax rate or income tax provision for the three and nine months ended September 30, 2020.

~~The UK Finance Act 2020 received Royal Assent in the United Kingdom on July 22, 2020, changing the corporate income tax rate from the previously enacted 17% to 19% effective on April 1, 2020.~~

Note ~~11:~~10: Commitments and Contingencies

Litigation and Regulatory

The Company is involved in disputes, legal actions, regulatory investigations, inquiries, and other actions from time to time in the ordinary course of business. The Company, along with others in its industry, is routinely subject to legal actions based on the Fair Debt Collection Practices Act (“FDCPA”), comparable state statutes, the Telephone Consumer Protection Act (“TCPA”), state and federal unfair competition statutes, and common law causes of action. The violations of law investigated or alleged in these actions often include claims that the Company lacks specified licenses to conduct its business, attempts to collect debts on which the statute of limitations has run, has made inaccurate or unsupported assertions of fact in support of its collection actions and/or has acted improperly in connection with its efforts to contact consumers. Such litigation and regulatory actions could involve potential compensatory or punitive damage claims, fines, sanctions, injunctive relief, or changes in business practices. Many continue on for some length of time and involve substantial investigation, litigation, negotiation, and other expense and effort before a result is achieved, and during the process the Company often cannot determine the substance or timing of any eventual outcome.

In September 2015, the Company entered into a consent order (the “2015 Consent Order”) with the Consumer Financial Protection Bureau (the “CFPB”) in which the Company settled allegations arising from its practices between 2011 and 2015. On September 8, 2020, a suit captioned BureauAs of Consumer Financial Protection v. Encore Capital Group, Inc. et al. was filed in the United States District Court for the Southern District of California. In the suit, the CFPB alleged that the Company did not perfectly adhere to certain operational provisions of the 2015 Consent Order, leading to alleged violations of federal consumer financial law. On October 15, 2020, the parties entered into a stipulated judgment (“Stipulated Judgment”) to resolve the lawsuit. The Company recorded an after-tax charge of $15.0 million for the three and nine months ended September 30, 2020 as a result of the Stipulated Judgment. Refer to “Note 14: Subsequent Event” for further details regarding the Stipulated Judgment.

~~Other than as discussed above, as of September 30, 2020,~~March 31, 2021, there were no material developments in any of the legal proceedings disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019.~~2020.

In certain legal proceedings, the Company may have recourse to insurance or third-party contractual indemnities to cover all or portions of its litigation expenses, judgments, or settlements. The Company records loss contingencies in its financial statements only for matters in which losses are probable and can be reasonably estimated. Where a range of loss can be reasonably estimated with no best estimate in the range, the Company records the minimum estimated liability. The Company continuously assesses the potential liability related to its pending litigation and regulatory matters and revises its estimates when additional information becomes available. The Company’s legal costs are recorded to expense as incurred. As of ~~September 30, 2020, other than the charge recorded for the Stipulated Judgement,~~March 31, 2021, the Company has 0 material reserves for legal matters.

Purchase Commitments

In the normal course of business, the Company enters into forward flow purchase agreements. A forward flow purchase agreement is a commitment to purchase receivables over a duration that is typically three to twelve months, but can be longer, generally with a specifically defined volume range, frequency, and pricing. Typically, these forward flow contracts have provisions that allow for early termination or price re-negotiation should the underlying quality of the portfolio deteriorate over time or if any particular month’s delivery is materially different than the original portfolio used to price the forward flow contract. Certain of these forward flow purchase agreements ~~and other purchase commitment agreements.~~ may also have termination clauses, whereby the agreements can be canceled by either party upon providing a certain specified amount of notice.

As of ~~September 30, 2020,~~March 31, 2021, the Company had entered into forward flow purchase agreements tofor the purchase ~~receivable portfolios~~of nonperforming loans with ~~a face value of approximately $2.0 billion for a~~an estimated minimum aggregate purchase price of approximately ~~$259.1~~$224.0 million. The Company expects actual purchases under these forward flow purchase agreements to be significantly greater than the estimated minimum aggregate purchase price.

Note ~~12:~~11: Segment and Geographic Information

The Company conducts business through several operating segments that have similar economic and other qualitative characteristics and have been aggregated in accordance with authoritative guidance into 1 reportable segment, portfolio purchasing and recovery. Since the Company operates in ~~one~~1 reportable segment, all required segment information can be found in the consolidated financial statements.

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The Company has operations in the United States, Europe and other foreign countries. The following table presents the Company’s total revenues by geographic area in which the Company operates (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Total revenues(1):	Total revenues(1):									Total revenues(1):
United States	United States	$	256,212	$	211,193	$	751,197	$	599,953	United States	$	287,787	$	208,218
International	International									International
Europe(2)	Europe(2)	142,495		130,868		353,950		397,063		Europe(2)	123,902		75,965
Other geographies	Other geographies	4,969		13,875		13,643		52,871		Other geographies	5,148		4,898
		147,464		144,743		367,593		449,934			129,050		80,863
Total	Total	$	403,676	$	355,936	$	1,118,790	$	1,049,887	Total	$	416,837	$	289,081

________________________

(1)~~Total revenues for periods in 2019 are adjusted by net allowances.~~ Total revenues are attributed to countries based on consumer location.

(2)Based on the financial information that is used to produce the general-purpose financial statements, providing further geographic information is impracticable.

Note ~~13:~~12: Goodwill and Identifiable Intangible Assets

~~Goodwill~~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. 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~~ testing date for the reporting units that are included in the fourth quarter of each year. During the impairment testing in 2019, both of the Company’s 2 reporting units had fair values substantially in excess of their carrying values. In addition to the annual impairment test, the Companyportfolio purchasing and recovery reportable segment is ~~required to assess whether a triggering event has occurred which would require interim impairment testing. During~~October 1st. There have been no events or circumstances during the three months ended ~~September 30, 2020,~~March 31, 2021 that have required the Company ~~updated its consideration~~to perform an interim assessment of ~~the current and expected future economic and market conditions surrounding the COVID-19 pandemic and its impact on each of the~~goodwill carried at these reporting units. Additionally, the Company assessed the current market capitalization, forecasts and the amount of headroom in the 2019 impairment test. The Company determined that there were no impairment indicators for either of the reporting units as of September 30, 2020. Therefore, an interim quantitative impairment test was not performed.

Management continues to evaluate and monitor all key factors impacting the carrying value of the Company’s recorded goodwill and long-lived assets. 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 reporting units included in its portfolio purchasing and recovery segment. The following table summarizes the activity in the Company’s goodwill balance (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Balance, beginning of period $ 838,024 $ 865,527 $ 884,185 $ 868,126
Goodwill impairment 0 (10,718) 0 (10,718)
Effect of foreign currency translation 28,633 (23,260) (17,528) (25,859)
Balance, end of period $ 866,657 $ 831,549 $ 866,657 $ 831,549

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	Three Months Ended March 31,
	2021		2020
Balance, beginning of period	$	906,962	$	884,185

Effect of foreign currency translation	5,208		(44,884)
Balance, end of period	$	912,170	$	839,301

The Company’s acquired intangible assets are summarized as follows (in thousands):


		As of September 30, 2020						As of December 31, 2019							As of March 31, 2021						As of December 31, 2020
		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount			Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	Customer relationships	$	63,388	$	(19,801)	$	43,587	$	67,897	$	(18,191)	$	49,706	Customer relationships	$	68,385	$	(26,174)	$	42,211	$	66,796	$	(22,714)	$	44,082
Developed technologies	Developed technologies	4,487		(4,125)		362		4,734		(4,124)		610		Developed technologies	2,643		(2,449)		194		5,048		(4,760)		288
Trade name and other	Trade name and other	5,437		(4,769)		668		6,299		(5,244)		1,055		Trade name and other	1,586		(1,000)		586		6,644		(6,002)		642
Total intangible assets	Total intangible assets	$	73,312	$	(28,695)	$	44,617	$	78,930	$	(27,559)	$	51,371	Total intangible assets	$	72,614	$	(29,623)	$	42,991	$	78,488	$	(33,476)	$	45,012

~~Note 14: Subsequent Event~~

On October 15, 2020, the parties entered into a stipulated judgment (“Stipulated Judgment”) to resolve the lawsuit. The Stipulated Judgment includes obligations on the Company to, among other things: (1) continue to follow a narrow subset of the operational requirements contained in the 2015 Consent Order, all of which have long been part of the Company’s routine practices; (2) pay a $15.0 million civil monetary penalty; and (3) provide redress of approximately $9,000 to 14 affected consumers, which is in addition to approximately $70,000 of redress that the Company had previously voluntarily provided. Under the Stipulated Judgment, the Company neither admits nor denies the allegations in the CFPB’s suit. In connection with the Stipulated Judgment the CFPB has formally terminated the 2015 Consent Order.

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Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains “forward-looking statements” relating to Encore 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.

Encore Capital Group, Inc. (“Encore”) has three primary business units: MCM, which consists of Midland Credit Management, Inc. and its subsidiaries and domestic affiliates; Cabot, which consists of Cabot Credit Management Limited (“CCM”) and its subsidiaries and European affiliates, and LAAP, which is comprised of our investments and operations in Latin America and Asia-Pacific.

MCM (United States)

Through MCM we are a market leader in portfolio purchasing and recovery in the United States, including Puerto Rico.

Cabot (Europe)

Through Cabot we are one of the largest credit management services providers in Europe and a market leader in the United Kingdom and Ireland. 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 through Wescot Credit Services Limited (“Wescot”), a leading U.K. contingency debt collection and BPO services company.

LAAP (Latin America and Asia-Pacific)

We have purchased non-performing loans in Colombia, Peru, Mexico and Brazil (which was sold in April 2020). Additionally, we have invested in Encore Asset Reconstruction Company (“EARC”) in India.

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 the United States and United Kingdom and strengthening and developing our business in the rest of Europe.

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Recent Developments

In March 2020, the World Health Organization declared the outbreak of the novel coronavirus (“COVID-19”) a pandemic, which has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns (including court closures in certain jurisdictions). While we are unable to accurately predict the full impact that COVID-19 will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures, our compliance with these measures has impacted our day-to-day operations and could disrupt our business and operations for an indefinite period of time. Through a combination of work-from-home and social distancing, we remain fully operational in all the markets we serve. As a result of the COVID-19 pandemic and the resulting containment measures, we have observed, among other things: a decrease in supply in the U.S. driven mainly by a decrease in charge-off rates; a decrease in supply in Europe, which we believe is driven by both a decrease in charge-off rates and decreased sales as the banks focus on their customers’ needs; and impacts to the legal collections process, which negatively affected legal collections beginning in late March 2020 and could continue to affect legal collections and related costs depending on the duration and severity of the COVID-19 pandemic and the resulting containment measures.

Government Regulation

There have been various governmental actions taken, or proposed, in response to the COVID-19 pandemic, such as limiting debt collections efforts and encouraging or requiring extensions, modifications or forbearance, with respect to certain loans and fees. In addition, in certain jurisdictions courts have closed and/or government actions have affected the litigation process. Government actions have not been consistent across jurisdictions and the efficacy and ultimate effect of such actions is not known. We continue to monitor federal, state and international regulatory developments in relation to the COVID-19 pandemic and their potential impact on our operations.

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 U.S. debt purchasing business and collection activities 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.

In September 2015, we entered into a consent order (the “2015 Consent Order”) with the Consumer Financial Protection Bureau (the “CFPB”) in which we settled allegations arising from our practices between 2011 and 2015. On September 8, 2020, ~~the CFPB filed a suit alleging that we violated the 2015 Consent Order.~~ ~~In the suit, the CFPB alleged that we did not perfectly adhere to certain operational provisions of the 2015 Consent Order, leading to alleged violations of federal consumer financial law.~~

On October 15, 2020, the parties entered into a stipulated judgment (“Stipulated Judgment”) to resolve the lawsuit. The Stipulated Judgment includes obligations on us to, among other things: (1) continue to follow a narrow subset of the operational requirements contained in the 2015 Consent Order, all of which have long been part of our routine practices; (2) pay a $15.0 million civil monetary penalty; and (3) provide redress of approximately $9,000 to 14 affected consumers, which is in addition to approximately $70,000 of redress that we had previously voluntarily provided. Under the Stipulated Judgment, we neither admit nor deny the allegations in the CFPB’s suit. In connection with the Stipulated Judgment, the CFPB has formally terminated the 2015 Consent Order.

~~We recorded an after-tax charge of $15.0 million for the three and nine months ended September 30, 2020 as a result of the Stipulated Judgment.~~

On October 30, 2020, the CFPB issued final rules in the form of a new Regulation F to implement the Fair Debt Collection Practices Act, which rules restate and clarify prohibitions on harassment and abuse, false or misleading representations, and unfair practices by debt collectors when collecting consumer debt. The rules included provisions related to, among other things, the use of newer technologies (text, voicemail and email) to communicate with consumers and limits relating to telephonic communications. On December 18, 2020, the CFPB also issued an additional debt collection final rule focused on consumer disclosures. This final rule amends Regulation F to provide additional requirements regarding validation information and disclosures provided at the outset of debt collection communications, prohibit suits and threats of suits regarding time-barred debt, and identify actions that must be taken before a debt collector may report information about a debt to consumer reporting agencies. The rules ~~will~~are scheduled to become effective ~~one year after publication in~~on November 30, 2021; however the ~~Federal Register.~~CFPB is proposing to extend the effective date to January 29, 2022. Based on our preliminary assessment of the rules, we believe that the new rules will not have a material incremental effect on our operations. ~~The CFPB also announced that it intends to issue an additional debt collection final rule focused on consumer disclosures in December 2020.~~

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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 in Europe 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 (United States)

In the United States, the defaulted consumer receivable portfolios we purchase are primarily charged-off credit card debt portfolios. A small percentage of our capital deployment in the United States comprises 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 our U.S. operations. These methods and models allow us to value portfolios accurately (and limit 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 in the United States.

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Cabot (Europe)

In Europe, 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 the United Kingdom and continue to expand in the United Kingdom and the rest of Europe with our acquisitions of portfolios and other credit management services providers.

Purchases and Collections

Portfolio Pricing, Supply and Demand

MCM (United States)

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 ~~third~~first quarter remained ~~favorable.~~in line with previous periods. Issuers continued to sell their volume in mostly forward flow arrangements that are often committed early in the calendar year. We are closely monitoring the impacts of the COVID-19 pandemic on pricing and supply. We have observed a ~~slight~~ decrease in supply as a result of the COVID-19 pandemic, but expect ~~an increase in~~ supply ~~in the second half of 2021.~~to ultimately increase.

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, such as ~~Encore,~~us, because the larger market participants are better able to adapt to these pressures and commit to larger forward flow agreements.

Cabot (Europe)

The U.K. market for charged-off portfolios has generally provided a relatively consistent pipeline of opportunities over the past few years, despite an ongoing historic 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.

The Spanish debt market continues to be one of the largest in Europe with significant debt sales activity, and an expectation of a significant amount of debt to be sold and ~~serviced. In particular, we anticipate strong debt purchasing and servicing opportunities~~serviced in the ~~secured and small and medium enterprise asset classes given the backlog of non-performing debt that has accumulated in these sectors.~~future. Additionally, financial

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institutions continue to experience both market and regulatory pressure to dispose of non-performing loans, which should ~~further increase~~continue to provide debt purchasing opportunities in Spain.

Across all of our European markets, we are closely monitoring the impacts of the COVID-19 pandemic on pricing and supply of portfolios to purchase. Due to the COVID-19 pandemic, banks ~~have~~ decreased portfolio sales during 2020 in order to focus on customers’ needs. AsWhile we have seen a ~~result, we expect~~resumption of sales activity across many of our European markets in 2021, 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 ~~lower level~~more stable debt sales strategy.

Table of ~~supply available for purchase in the near-term.~~Contents

Purchases by Geographic Location

The following table summarizes the geographic locations of receivable portfolios purchased during the periods presented (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
MCM (United States)	MCM (United States)	$	141,066	$	173,214	$	451,141	$	527,318	MCM (United States)	$	92,352	$	185,252
Cabot (Europe)	Cabot (Europe)	29,065		85,201		81,042		226,047		Cabot (Europe)	77,826		28,861
Other geographies		—		1,495		—		11,577

Total purchases of receivable portfolios	Total purchases of receivable portfolios	$	170,131	$	259,910	$	532,183	$	764,942	Total purchases of receivable portfolios	$	170,178	$	214,113

During the three months ended ~~September 30, 2020,~~March 31, 2021, we invested ~~$170.1~~$170.2 million to acquire receivable portfolios, with face values aggregating ~~$1.8~~$1.3 billion, for an average purchase price of ~~9.5%~~12.8% of face value. The amount invested in receivable portfolios decreased ~~$89.8~~$43.9 million, or ~~34.6%~~20.5%, compared with the ~~$259.9~~$214.1 million invested during the three months ended ~~September 30, 2019,~~March 31, 2020, to acquire receivable portfolios with face values aggregating ~~$5.3~~$1.7 billion, for an average purchase price of ~~4.9% of face value.~~

During the nine months ended September 30, 2020, we invested $532.2 million to acquire receivable portfolios, with face values aggregating $4.8 billion, for an average purchase price of 11.1% of face value. The amount invested in receivable portfolios decreased $232.8 million, or 30.4%, compared with the $764.9 million invested during the nine months ended September 30, 2019, to acquire receivable portfolios with face values aggregating $9.4 billion, for an average purchase price of 8.2%12.6% of face value.

In the United States, purchases of receivable portfolios decreased during the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 as compared to the corresponding ~~periods~~period in the prior year. The majority of our purchases in the U.S. are in forward flow agreements, and the timing, contract duration, and volumes for each contract can fluctuate leading to variation when comparing to prior periods. The decrease in purchases in the U.S. ~~resulted from~~is a result of a decrease in supply ~~and our cautious approach to purchasing at the beginning of the COVID-19 pandemic when the potential impacts were relatively unknown.~~which we believe is temporary.

In Europe, purchases of receivable portfolios ~~decreased~~increased during the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 as compared to the corresponding periods in the prior year. The ~~decreases were~~increase was primarily the result of a relatively limited supply of portfolios and a continuation of our selective purchasing process in conjunction with a plan to reduce European debt leverage during the three ~~and nine~~ months ended ~~September 30, 2020 and a heightened return expectation as a result of greater uncertainty relating~~March 31, 2020. The increase was also attributable to the ~~future~~favorable impact from foreign currency translation, primarily by the weakening of the ~~COVID-19 pandemic.~~U.S. dollar against the British Pounds.

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 ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ we also invested ~~$0.2~~$2.4 million and ~~$8.2 million in REO assets, respectively. During the nine months ended September 30, 2020 and 2019, we invested $1.5 million and $21.1~~$1.2 million in REO assets, respectively.

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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 collection agencies that we utilize when we believe they can liquidate better or less expensively than we can or to supplement capacity in our internal call centers. The collection agencies channel also includes collections on accounts purchased where we maintain the collection agency servicing until the accounts can be placed in our internal collection channels. The following table summarizes the total collections ~~from receivable portfolios~~ by collection channel and geographic area during the periods presented (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
MCM (United States):	MCM (United States):									MCM (United States):
Call center and digital collections	Call center and digital collections	$	246,689	$	187,500	$	709,780	$	557,135	Call center and digital collections	$	267,984	$	214,238
Legal collections	Legal collections	139,473		141,269		431,096		428,296		Legal collections	164,332		158,026
Collection agencies	Collection agencies	4,699		2,459		10,766		8,682		Collection agencies	3,257		2,465
Subtotal	Subtotal	390,861		331,228		1,151,642		994,113		Subtotal	435,573		374,729
Cabot (Europe):	Cabot (Europe):									Cabot (Europe):
Call center and digital collections	Call center and digital collections	65,182		64,492		182,206		192,832		Call center and digital collections	70,551		63,789
Legal collections	Legal collections	40,171		45,276		115,107		145,285		Legal collections	49,065		42,900
Collection agencies	Collection agencies	36,120		40,452		104,634		131,162		Collection agencies	42,985		37,414
Subtotal	Subtotal	141,473		150,220		401,947		469,279		Subtotal	162,601		144,103
Other geographies:	Other geographies:									Other geographies:
Call center and digital collections		—		5,383		—		25,620
Legal collections		—		744		—		3,541

Collection agencies	Collection agencies	7,414		11,820		21,653		35,576		Collection agencies	8,287		8,447
Subtotal	Subtotal	7,414		17,947		21,653		64,737		Subtotal	8,287		8,447
Total collections from purchased receivables	Total collections from purchased receivables	$	539,748	$	499,395	$	1,575,242	$	1,528,129	Total collections from purchased receivables	$	606,461	$	527,279

Gross collections from purchased receivables increased by ~~$40.4~~$79.2 million, or ~~8.1%~~15.0%, to ~~$539.7~~$606.5 million during the three months ended ~~September 30, 2020,~~March 31, 2021, from ~~$499.4~~$527.3 million during the three months ended September 30, 2019. Gross collections from purchased receivables increased by $47.1 million, or 3.1%, to $1,575.2 million during the nine months ended September 30, 2020, from $1,528.1 million during the nine months ended September 30, 2019.March 31, 2020.

Gross collections from receivable portfolios in the United States increased ~~significantly~~significantly. The increase was primarily driven by change in ~~both periods presented.~~consumer behavior during the COVID-19 pandemic and our continued effort in improving liquidation. We are increasingly being called upon by our consumers to assist them with their financial recovery through inbound calls and online digital interaction. The ~~increases were~~large volume of consumer contact resulted in significant increase in collections and improved our operating efficiency.

The increase in collections from purchased receivables in Europe was primarily due to the acquisition of portfolios with higher returns in recent periods and the increase in our collection capacity, and our continued effort in improving liquidation. Our consumer centric collection approach and our capacity buildup are driving a higher proportion of call center and digital collections compared to legal collections infavorable impact from foreign currency translation, primarily by the ~~United States.~~

~~The decreases in collections from purchased receivables in Europe were primarily due to the impacts~~weakening of the ~~COVID-19 pandemic. We anticipate a material portion of~~U.S. dollar against the ~~reduced collections in 2020 will be recovered in future years.~~

~~The decreases in collections from purchased receivables in other geographies were primarily due to the sale of our wholly-owned subsidiary Baycorp in August 2019.~~British Pounds.

The COVID-19 pandemic and the resulting containment measures, including impacts to the legal collections process, negatively affected legal collections beginning in late March 2020 and could continue to affect legal collections and related costs depending on the duration and severity of the COVID-19 pandemic and the resulting containment measures. We are closely monitoring the impacts of the COVID-19 pandemic on collections and cost-to-collect.

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Results of Operations

Results of operations, in dollars and as a percentage of total revenues, adjusted by net allowances, were as follows (in (in thousands, except ~~percentages~~percentages)):

Three Months Ended September 30,
2020 2019
Revenues
Revenue from receivable portfolios $ 342,489 84.8 % $ 316,217 88.8 %
Changes in expected current and future recoveries 30,451 7.6 % — — %
Servicing revenue 29,787 7.4 % 31,060 8.7 %
Other revenues 949 0.2 % 144 0.1 %
Total revenues 403,676 100.0 % 347,421 97.6 %
Allowance reversals on receivable portfolios, net 8,515 2.4 %
Total revenues, adjusted by net allowances 355,936 100.0 %
Operating expenses
Salaries and employee benefits 95,979 23.8 % 96,638 27.2 %
Cost of legal collections 60,383 15.0 % 48,971 13.8 %
General and administrative expenses 53,459 13.2 % 38,168 10.7 %
Other operating expenses 28,088 7.0 % 25,753 7.2 %
Collection agency commissions 12,703 3.1 % 17,343 4.9 %
Depreciation and amortization 10,609 2.6 % 10,000 2.8 %
Goodwill impairment — — % 10,718 3.0 %
Total operating expenses 261,221 64.7 % 247,591 69.6 %
Income from operations 142,455 35.3 % 108,345 30.4 %
Other expense
Interest expense (67,962) (16.8) % (54,365) (15.3) %
Other income (expense) 361 0.1 % (11,546) (3.2) %
Total other expense (67,601) (16.7) % (65,911) (18.5) %
Income before income taxes 74,854 18.6 % 42,434 11.9 %
Provision for income taxes (19,747) (4.9) % (3,021) (0.8) %
Net income 55,107 13.7 % 39,413 11.1 %
Net income attributable to noncontrolling interest (457) (0.1) % (544) (0.2) %
Net income attributable to Encore Capital Group, Inc. stockholders $ 54,650 13.6 % $ 38,869 10.9 %

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		Nine Months Ended September 30,									Three Months Ended March 31,
		2020				2019					2021				2020
Revenues	Revenues									Revenues
Revenue from receivable portfolios	Revenue from receivable portfolios	$	1,035,141	92.5	%	$	939,870	89.5	%	Revenue from receivable portfolios	$	338,018	81.1	%	$	357,365	123.6	%
Changes in expected current and future recoveries	Changes in expected current and future recoveries	(2,203)		(0.2)	%	—		—	%	Changes in expected current and future recoveries	44,537		10.7	%	(98,661)		(34.1)	%
Servicing revenue	Servicing revenue	82,417		7.4	%	97,399		9.3	%	Servicing revenue	32,516		7.8	%	28,680		9.9	%
Other revenues	Other revenues	3,435		0.3	%	673		0.1	%	Other revenues	1,766		0.4	%	1,697		0.6	%
Total revenues	Total revenues	1,118,790		100.0	%	1,037,942		98.9	%	Total revenues	416,837		100.0	%	289,081		100.0	%
Allowance reversals on receivable portfolios, net						11,945		1.1	%
Total revenues, adjusted by net allowances						1,049,887		100.0	%

Operating expenses	Operating expenses									Operating expenses
Salaries and employee benefits	Salaries and employee benefits	279,944		25.0	%	284,699		27.1	%	Salaries and employee benefits	96,456		23.1	%	93,098		32.2	%
Cost of legal collections	Cost of legal collections	164,018		14.7	%	149,446		14.2	%	Cost of legal collections	67,142		16.1	%	66,279		22.9	%
General and administrative expenses	General and administrative expenses	113,954		10.2	%	110,335		10.5	%	General and administrative expenses	32,148		7.7	%	31,877		11.0	%
Other operating expenses	Other operating expenses	83,527		7.5	%	84,913		8.1	%	Other operating expenses	28,441		6.8	%	27,164		9.4	%
Collection agency commissions	Collection agency commissions	36,562		3.3	%	46,905		4.5	%	Collection agency commissions	12,824		3.1	%	13,176		4.6	%
Depreciation and amortization	Depreciation and amortization	31,436		2.8	%	29,736		2.9	%	Depreciation and amortization	11,512		2.8	%	10,285		3.6	%
Goodwill impairment		—		—	%	10,718		1.0	%

Total operating expenses	Total operating expenses	709,441		63.5	%	716,752		68.3	%	Total operating expenses	248,523		59.6	%	241,879		83.7	%
Income from operations	Income from operations	409,349		36.5	%	333,135		31.7	%	Income from operations	168,314		40.4	%	47,202		16.3	%
Other expense
Other (expense) income										Other (expense) income
Interest expense	Interest expense	(172,951)		(15.5)	%	(173,245)		(16.5)	%	Interest expense	(46,526)		(11.2)	%	(54,662)		(18.9)	%
Other expense		(1,211)		(0.1)	%	(15,766)		(1.5)	%

Other (expense) income										Other (expense) income	(55)		0.0	%	1,439		0.5	%
Total other expense	Total other expense	(174,162)		(15.6)	%	(189,011)		(18.0)	%	Total other expense	(46,581)		(11.2)	%	(53,223)		(18.4)	%
Income before income taxes		235,187		20.9	%	144,124		13.7	%
Income (loss) before income taxes										Income (loss) before income taxes	121,733		29.2	%	(6,021)		(2.1)	%
Provision for income taxes	Provision for income taxes	(59,875)		(5.4)	%	(18,447)		(1.7)	%	Provision for income taxes	(26,968)		(6.5)	%	(4,558)		(1.6)	%
Net income		175,312		15.5	%	125,677		12.0	%
Net income attributable to noncontrolling interest		(784)		(0.1)	%	(893)		(0.1)	%
Net income attributable to Encore Capital Group, Inc. stockholders		$	174,528	15.4	%	$	124,784	11.9	%
Net income (loss)										Net income (loss)	94,765		22.7	%	(10,579)		(3.7)	%
Net (income) loss attributable to noncontrolling interest										Net (income) loss attributable to noncontrolling interest	(135)		(0.1)	%	125		0.1	%
Net income (loss) attributable to Encore Capital Group, Inc. stockholders										Net income (loss) attributable to Encore Capital Group, Inc. stockholders	$	94,630	22.6	%	$	(10,454)	(3.6)	%

Comparison of Results of Operations

Revenues

Our revenues primarily include revenue recognized from engaging in debt purchasing and recovery activities. Effective January 1, 2020, we adopted the CECL accounting standard. Under CECL, 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. Revenue generated by such activities primarily includes two components: (1) the accretion of the discount on the negative allowance due to the passage of time, which is included in “Revenue from receivable portfolios” and (2) changes in expected cash flows, which includes (a) the current period variances between actual cash collected and expected cash recoveries and (b) the present value change of expected future recoveries, and is presented in our consolidated statements of operations as “Changes in expected current and future recoveries.”

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

3628

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 operations.

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.

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 in Europe and LAAP. Other revenues ~~also~~may include gains recognized on transfers of financial assets.

Under the previous accounting standard for purchased credit deteriorated assets, we incurred allowance charges when actual cash flows from our receivable portfolios underperformed compared to our expectations or when there was a change in the timing of cash flows. We also recorded allowance reversals on pool groups that had historic allowance reserves when actual cash flows from these receivable portfolios outperformed our expectations.

~~We have not adjusted prior period comparative information and will continue to disclose prior period financial information in accordance with the previous accounting guidance.~~ The following table summarizes revenues for the periods presented (in thousands, except percentages):

Three Months Ended September 30,
2020 2019 $ Change % Change
Revenue recognized from portfolio basis $ 329,106 $ 300,048 $ 29,058 9.7 %
ZBA revenue 13,383 16,169 (2,786) (17.2) %
Revenue from receivable portfolios 342,489 316,217 26,272 8.3 %
Changes in expected current period recoveries 78,268
Changes in expected future period recoveries (47,817)
Changes in expected current and future recoveries 30,451
Servicing revenue 29,787 31,060 (1,273) (4.1) %
Other revenues 949 144 805 559.0 %
Total revenues $ 403,676 $ 347,421 $ 56,255 16.2 %
Allowance reversals on receivable portfolios, net(1)
8,515
Total revenues, adjusted by net allowances $ 355,936

~~________________________~~

~~(1)Amount includes $2.0 million of allowance reversals for zero-basis portfolios.~~


	Three Months Ended March 31,
	2021		2020		$ Change		% Change
Revenue recognized from portfolio basis	$	324,254	$	340,815	$	(16,561)	(4.9)	%
ZBA revenue	13,764		16,550		(2,786)		(16.8)	%
Revenue from receivable portfolios	338,018		357,365		(19,347)		(5.4)	%

Changes in expected current period recoveries	91,401		10,315		81,086		786.1	%
Changes in expected future period recoveries	(46,864)		(108,976)		62,112		(57.0)	%
Changes in expected current and future recoveries	44,537		(98,661)		143,198		(145.1)	%

Servicing revenue	32,516		28,680		3,836		13.4	%
Other revenues	1,766		1,697		69		4.1	%
Total revenues	$	416,837	$	289,081	$	127,756	44.2	%

Nine Months Ended September 30,
2020 2019 $ Change % Change
Revenue recognized from portfolio basis $ 991,614 $ 870,865 $ 120,749 13.9 %
ZBA revenue 43,527 69,005 (25,478) (36.9) %
Revenue from receivable portfolios 1,035,141 939,870 95,271 10.1 %
Changes in expected current period recoveries 197,155
Changes in expected future period recoveries (199,358)
Changes in expected current and future recoveries (2,203)
Servicing revenue 82,417 97,399 (14,982) (15.4) %
Other revenues 3,435 673 2,762 410.4 %
Total revenues $ 1,118,790 $ 1,037,942 $ 80,848 7.8 %
Allowance reversals on receivable portfolios, net(1)
11,945
Total revenues, adjusted by net allowances $ 1,049,887

~~________________________~~

~~(1)Amount includes $6.6 million of allowance reversals for zero-basis portfolios.~~

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 an unfavorable impact on our international revenues, and the weakening of the U.S. dollar relative to other foreign currencies has a favorable impact on our international revenues. Our revenues were favorably impacted by foreign currency translation, primarily by the weakening of the U.S. dollar against the British Pound by ~~4.6%~~7.2% during the three months ended ~~September 30, 2020~~March 31, 2021 compared to the three months ended ~~September 30, 2019. The foreign currency translation effect on our revenues for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 was negligible.~~March 31, 2020.

The ~~increases~~decrease in revenue recognized from portfolio basis during the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 as compared to the three ~~and nine~~ months ended ~~September 30, 2019 were~~March 31, 2020 was primarily due to lower portfolio basis driven by higher ~~expected total future cash flows resulting from a change~~collections and lower volume of purchases in the expected economic life of static pool groups based on a lifetime expected recovery model upon the adoption of CECL which led to increased EIR, and increased expected total future cash flows resulting from a change in our accounting policy for court costs. Under our new accounting policy, all future expected cash flows, including the expected total recoveries in our legal channel, are included in the initial curve in the establishment of negative allowance, which in turn, increased the EIR.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. ~~Since our forecast period is on a rolling 15 year basis after the adoption of CECL, we do not expect to have new ZBA pools in the future.~~

Under CECL, changes in expected current period recoveries represent over and under-performance in the reporting period. Collections during the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 significantly outperformed the projected cash flows. We believe the collection over-performance was ~~largely~~a result of our sustained improvements in portfolio collections driven by change in consumer behavior during the COVID-19 pandemic and our liquidation improvement initiatives. The over-performance was also driven by higher collections as compared to the reduced near-term expected recoveries as a result of adjustments made to our projected cash flow forecast during ~~the first quarter of~~ 2020 associated with the COVID-19 pandemic. ~~The over-performance was also a result of our sustained improvements in portfolio collections driven by liquidation improvement initiatives.~~

While we now have additional information with respect to the impact on collections of the COVID-19 pandemic, the future outlook remains uncertain, and will continue to evolve depending on future developments, including the duration and spread of the pandemic and related actions taken by governments. When reassessing the future forecasts of expected lifetime recoveries during the three months ended ~~September 30, 2020,~~March 31, 2021, management considered historical and current collection performance, as well as the uncertainty in economic forecasts in the geographies in which we operate, and believes that ~~the operational disruption as a result~~while some of the ~~COVID-19 pandemic has,~~collection over-performance resulted in increased total expected recoveries for certain pool groups, the ~~near term, been resolved through~~majority of the over-performance was a ~~combination of social distancing~~shift forward in ~~the workplace and working remotely. However,~~timing rather than an increase in total estimated remaining collections. Additionally, the macroeconomic driven consumer distress has improved; although it is still present and will likely ~~continue to~~ impact our collections performance in the near future. As a result of a combination of the above, we have updated our forecast, resulting in

a net reduction of total estimated remaining collections which in turn, when discounted to present value, resulted in a provision for credit loss adjustment of approximately ~~$47.8 million and $199.4~~$46.9 million during the three ~~and nine~~ months ended ~~September 30, 2020, respectively.~~March 31, 2021. The circumstances around this pandemic are evolving rapidly and will continue to impact our business and our estimation of expected recoveries in future periods. We will continue to closely monitor the COVID-19 situation and update our assumptions accordingly. During the three months ended March 31, 2020, we recorded approximately $109.0 million in provision for credit loss adjustment due to significant uncertainty of the COVID-19 pandemic at that time.

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, 2021						As of March 31, 2021
	Collections		Revenue from Receivable Portfolios		Changes in Expected Current and Future Recoveries		Investment in Receivable 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	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:
ZBA	1,229		1,229		—		—		—	%
2014(1)	1,252		396		141		44,413		98.2	%
2015(1)	1,192		542		368		3,076		96.7	%
2016	635		305		144		1,261		6.7	%
2017(1)	2,269		750		306		9,128		6.2	%
2018	1,640		535		292		3,958		3.7	%
2019	70		27		10		166		4.6	%


Subtotal	8,287		3,784		1,261		62,002		7.9	%
Total	$	606,461	$	338,018	$	44,537	$	3,225,678	3.4	%

Three Months Ended September 30, 2020 As of September 30, 2020
Collections Revenue from Receivable Portfolios Changes in Expected Current and Future Recoveries Investment in Receivable Portfolios Monthly EIR
United States:
ZBA $ 12,145 $ 12,148 $ — $ — — %
2011 6,026 5,275 673 2,027 88.6 %
2012 6,245 5,894 196 4,552 42.0 %
2013 15,028 14,050 718 11,361 40.5 %
2014 11,368 8,334 (1,443) 37,728 6.7 %
2015 15,362 7,465 1,585 59,920 3.9 %
2016 27,343 13,517 2,270 109,636 3.9 %
2017 45,696 24,441 9,872 149,478 5.2 %
2018 73,473 36,907 2,871 297,062 3.8 %
2019 108,410 64,583 (9,618) 522,303 3.8 %
2020 69,765 37,347 18,752 422,572 3.6 %
Subtotal 390,861 229,961 25,876 1,616,639 4.3 %
Europe:
ZBA 42 41 — — — %
2013 24,113 21,588 671 221,977 3.2 %
2014 21,414 17,301 1,189 191,851 3.1 %
2015 13,595 10,745 476 147,919 2.4 %
2016 13,531 10,748 1,629 129,015 2.6 %
2017 21,729 14,891 (689) 259,394 1.8 %
2018 19,341 14,707 (1,577) 309,543 1.6 %
2019 20,682 13,569 (1,557) 239,346 1.8 %
2020 7,026 4,713 3,172 82,980 2.4 %
Subtotal 141,473 108,303 3,314 1,582,025 2.3 %
Other geographies:
ZBA 1,182 1,194 — — — %
2014(1)
922 399 241 45,043 101.7 %
2015(1)
1,054 597 305 3,395 96.7 %
2016 608 390 109 1,626 7.1 %
2017(1)
1,993 925 336 10,933 6.2 %
2018 1,587 686 261 5,922 3.7 %
2019 68 34 9 409 4.6 %
2020 — — — — — %
Subtotal 7,414 4,225 1,261 67,328 7.9 %
Total $ 539,748 $ 342,489 $ 30,451 $ 3,265,992 3.4 %

________________________

(1)Portfolio balance includes non-accrual pool groups. The EIR presented is only for pool groups that accrete portfolio revenue.

Three Months Ended September 30, 2019 As of September 30, 2019
Collections Revenue from Receivable Portfolios Net Reversal (Portfolio Allowance) Unamortized Balances Monthly EIR
United States:
ZBA $ 16,333 $ 14,301 $ 2,045 $ — — %
2011 8,310 9,264 — 2,907 77.2 %
2012 9,072 8,392 — 6,692 33.5 %
2013 20,387 17,559 — 15,844 33.3 %
2014 16,358 10,422 1,717 53,863 6.0 %
2015 20,305 8,728 4,636 88,511 3.0 %
2016 37,609 16,817 — 163,481 3.2 %
2017 59,238 31,909 — 219,053 4.5 %
2018 86,185 47,839 (196) 450,300 3.3 %
2019 57,431 37,680 — 491,560 3.2 %
Subtotal 331,228 202,911 8,202 1,492,211 4.1 %
Europe:
ZBA 73 72 — — — %
2013 26,530 20,858 — 221,599 3.1 %
2014 25,112 17,701 29 200,040 2.9 %
2015 18,042 11,273 450 154,572 2.3 %
2016 13,957 10,214 — 139,951 2.5 %
2017 27,412 15,558 — 292,257 1.7 %
2018 24,413 17,188 (888) 380,162 1.5 %
2019 14,681 9,287 — 208,934 1.8 %
Subtotal 150,220 102,151 (409) 1,597,515 2.1 %
Other geographies:
ZBA 1,777 1,796 — — — %
2014 1,492 942 — 60,827 80.8 %
2015 3,714 2,804 267 7,295 13.7 %
2016 2,757 1,640 455 4,998 4.9 %
2017 3,652 1,827 — 16,169 5.2 %
2018 3,369 1,673 — 8,792 3.1 %
2019 1,186 473 — 360 3.2 %
Subtotal 17,947 11,155 722 98,441 6.0 %
Total $ 499,395 $ 316,217 $ 8,515 $ 3,188,167 3.1 %


		Nine Months Ended September 30, 2020						As of September 30, 2020					Three Months Ended March 31, 2020						As of March 31, 2020
		Collections		Revenue from Receivable Portfolios		Changes in Expected Current and Future Recoveries		Investment in Receivable Portfolios		Monthly EIR			Collections		Revenue from Receivable Portfolios		Changes in Expected Current and Future Recoveries		Investment in Receivable Portfolios		Monthly EIR
United States:	United States:											United States:
ZBA	ZBA	$	40,202	$	40,215	$	—	$	—	—	%	ZBA	$	15,274	$	15,274	$	—	$	—	—	%
2011	2011	19,494		17,398		1,444		2,027		88.6	%	2011	7,249		6,865		(215)		2,021		88.6	%
2012	2012	21,377		19,518		338		4,552		42.0	%	2012	8,495		7,664		(480)		4,795		42.0	%
2013	2013	48,854		46,166		(986)		11,361		40.5	%	2013	17,687		18,136		(3,984)		11,564		40.5	%
2014	2014	37,795		27,302		(3,056)		37,728		6.7	%	2014	14,591		10,089		(2,026)		44,820		6.7	%
2015	2015	51,856		25,068		2,821		59,920		3.9	%	2015	18,302		9,309		(1,079)		73,901		3.8	%
2016	2016	93,103		45,161		4,786		109,636		3.9	%	2016	33,377		16,785		(2,412)		133,941		3.8	%
2017	2017	154,198		82,417		17,595		149,478		5.2	%	2017	55,435		30,850		(1,103)		178,176		5.2	%
2018	2018	243,439		124,467		(4,204)		297,062		3.8	%	2018	89,418		46,938		(15,629)		362,553		3.8	%
2019	2019	313,152		205,004		(2,749)		522,303		3.8	%	2019	102,534		72,048		(2,104)		601,892		3.8	%
2020	2020	128,172		69,143		32,567		422,572		3.6	%	2020	12,367		8,175		(5,010)		176,543		3.6	%
Subtotal	Subtotal	1,151,642		701,859		48,556		1,616,639		4.3	%	Subtotal	374,729		242,133		(34,042)		1,590,206		4.4	%
Europe:	Europe:											Europe:
ZBA	ZBA	142		141		—		—		—	%	ZBA	58		58		—		—		—	%
2013	2013	69,322		64,334		(6,317)		221,977		3.2	%	2013	25,259		22,262		(6,306)		215,495		3.2	%
2014	2014	62,882		51,799		(1,179)		191,851		3.1	%	2014	23,271		17,887		(4,972)		186,139		3.0	%
2015	2015	40,451		32,138		1,416		147,919		2.4	%	2015	15,173		11,189		(2,096)		143,275		2.4	%
2016	2016	37,144		32,096		(7,235)		129,015		2.6	%	2016	13,102		11,259		(11,028)		122,994		2.8	%
2017	2017	64,225		45,071		(10,603)		259,394		1.8	%	2017	23,494		15,696		(9,692)		260,314		1.9	%
2018	2018	59,452		44,562		(24,395)		309,543		1.6	%	2018	22,658		15,662		(22,493)		305,824		1.6	%
2019	2019	57,277		41,017		(8,139)		239,346		1.8	%	2019	20,106		14,292		(7,633)		240,124		1.8	%
2020	2020	11,052		8,724		4,746		82,980		2.4	%	2020	982		1,400		249		28,086		2.6	%
Subtotal	Subtotal	401,947		319,882		(51,706)		1,582,025		2.3	%	Subtotal	144,103		109,705		(63,971)		1,502,251		2.3	%
Other geographies:	Other geographies:											Other geographies:
ZBA	ZBA	3,162		3,171		—		—		—	%	ZBA	1,218		1,218		—		—		—	%
2014(1)	2014(1)	3,445		1,262		270		45,043		101.7	%	2014 (1)	1,174		545		(19)		47,819		100.2	%
2015~~(1)~~	2015~~(1)~~	3,559		2,027		525		3,395		96.7	%	2015~~(1)~~	1,557		941		76		4,544		17.1	%
2016	2016	2,025		1,474		(100)		1,626		7.1	%	2016	971		686		(249)		3,391		5.1	%
2017(1)		5,082		3,008		52		10,933		6.2	%
2017												2017	1,875		1,140		(323)		11,586		6.1	%
2018	2018	4,201		2,348		205		5,922		3.7	%	2018	1,580		955		(120)		5,986		3.7	%
2019	2019	179		110		(5)		409		4.6	%	2019	72		42		(13)		235		4.6	%
2020		—		—		—		—		—	%

Subtotal	Subtotal	21,653		13,400		947		67,328		7.9	%	Subtotal	8,447		5,527		(648)		73,561		67.7	%
Total	Total	$	1,575,242	$	1,035,141	$	(2,203)	$	3,265,992	3.4	%	Total	$	527,279	$	357,365	$	(98,661)	$	3,166,018	3.4	%

________________________

(1)Portfolio balance includes non-accrual pool groups. The EIR presented is only for pool groups that accrete portfolio revenue.

The increase in servicing revenues during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020 was primarily attributable to the favorable impact of foreign currency translation, which was primarily the result of the weakening of the U.S. dollar against the British Pound.

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Nine Months Ended September 30, 2019 As of September 30, 2019
Collections Revenue from Receivable Portfolios Net Reversal (Portfolio Allowance) Unamortized Balances Monthly EIR
United States:
ZBA $ 68,127 $ 61,518 $ 6,630 $ — — %
2011 14,186 13,925 304 2,907 77.2 %
2012 23,552 20,018 273 6,692 33.5 %
2013 65,132 55,298 (52) 15,844 33.3 %
2014 54,569 31,766 3,247 53,863 6.0 %
2015 68,045 27,925 4,636 88,511 3.0 %
2016 127,311 56,240 (896) 163,481 3.2 %
2017 203,288 101,421 — 219,053 4.5 %
2018 269,545 152,323 (196) 450,300 3.3 %
2019 100,358 65,552 — 491,560 3.2 %
Subtotal 994,113 585,986 13,946 1,492,211 4.1 %
Europe:
ZBA 265 266 — — — %
2013 85,001 66,525 — 221,599 3.1 %
2014 80,303 55,567 (145) 200,040 2.9 %
2015 55,456 32,964 267 154,572 2.3 %
2016 47,175 32,116 (29) 139,951 2.5 %
2017 89,966 49,503 — 292,257 1.7 %
2018 85,015 54,332 (888) 380,162 1.5 %
2019 26,098 17,525 — 208,934 1.8 %
Subtotal 469,279 308,798 (795) 1,597,515 2.1 %
Other geographies:
ZBA 7,202 7,221 — — — %
2014 3,316 5,803 — 60,827 80.8 %
2015 14,448 10,881 267 7,295 13.7 %
2016 10,663 5,598 (606) 4,998 4.9 %
2017 12,822 7,192 — 16,169 5.2 %
2018 13,176 7,110 (867) 8,792 3.1 %
2019 3,110 1,281 — 360 3.2 %
Subtotal 64,737 45,086 (1,206) 98,441 6.0 %
Total $ 1,528,129 $ 939,870 $ 11,945 $ 3,188,167 3.1 %

~~The decreases in servicing~~Other revenues increased during the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 as compared to the three ~~and nine~~ months ended ~~September 30, 2019 were~~March 31, 2020, primarily ~~attributable to the sale of Baycorp in August 2019. Through Baycorp, we earned servicing revenues through August 2019. The decreases were also~~ driven ~~by the COVID-19 pandemic. The decrease during the three months ended September 30, 2020 as compared to the corresponding period in the prior year was partially offset~~ by the favorable impact of foreign currency translation, which was primarily the result of the weakening of the U.S. dollar against the British Pound.

The increases in other revenues during the three and nine months ended September 30, 2020 as compared to the three and nine months ended September 30, 2019 were due to increased gains recognized upon sale of real estate assets that are acquired as a result of our investments in non-performing secured residential mortgage portfolios in Europe and LAAP.

Operating Expenses

The following table summarizes operating expenses for the periods presented (in thousands, except percentages):

~~Table of Contents~~

Three Months Ended September 30,
2020 2019 $ Change % Change
Salaries and employee benefits $ 95,979 $ 96,638 $ (659) (0.7) %
Cost of legal collections 60,383 48,971 11,412 23.3 %
General and administrative expenses 53,459 38,168 15,291 40.1 %
Other operating expenses 28,088 25,753 2,335 9.1 %
Collection agency commissions 12,703 17,343 (4,640) (26.8) %
Depreciation and amortization 10,609 10,000 609 6.1 %
Goodwill impairment — 10,718 (10,718) (100.0) %
Total operating expenses $ 261,221 $ 247,591 $ 13,630 5.5 %


		Nine Months Ended September 30,									Three Months Ended March 31,
		2020		2019		$ Change		% Change			2021		2020		$ Change		% Change
Salaries and employee benefits	Salaries and employee benefits	$	279,944	$	284,699	$	(4,755)	(1.7)	%	Salaries and employee benefits	$	96,456	$	93,098	$	3,358	3.6	%
Cost of legal collections	Cost of legal collections	164,018		149,446		14,572		9.8	%	Cost of legal collections	67,142		66,279		863		1.3	%
General and administrative expenses	General and administrative expenses	113,954		110,335		3,619		3.3	%	General and administrative expenses	32,148		31,877		271		0.9	%
Other operating expenses	Other operating expenses	83,527		84,913		(1,386)		(1.6)	%	Other operating expenses	28,441		27,164		1,277		4.7	%
Collection agency commissions	Collection agency commissions	36,562		46,905		(10,343)		(22.1)	%	Collection agency commissions	12,824		13,176		(352)		(2.7)	%
Depreciation and amortization	Depreciation and amortization	31,436		29,736		1,700		5.7	%	Depreciation and amortization	11,512		10,285		1,227		11.9	%
Goodwill impairment		—		10,718		(10,718)		(100.0)	%
Total operating expenses	Total operating expenses	$	709,441	$	716,752	$	(7,311)	(1.0)	%	Total operating expenses	$	248,523	$	241,879	$	6,644	2.7	%

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 unfavorably impacted by foreign currency translation, primarily by the weakening of the U.S. dollar against the British Pound by ~~4.6%~~approximately 7.2% for the three months ended ~~September 30, 2020~~March 31, 2021 as compared to the three months ended ~~September 30, 2019, the foreign currency translation effect on our operating expenses for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 was negligible.~~March 31, 2020.

Operating expenses are explained in more detail as follows:

Salaries and Employee Benefits

The ~~decrease~~increase in salaries and employee benefits ~~during the three months ended September 30, 2020 compared to the three months ended September 30, 2019~~ was primarily due to the following reasons:

•~~Decrease~~Increase in ~~headcount in other geographies as a result of the sale of Baycorp in August 2019;~~overall headcount;

•The unfavorable impact of foreign currency translation, primarily by the weakening of the U.S. dollar against the British Pound during the three months ended ~~September 30, 2020~~March 31, 2021 compared to the three months ended ~~September 30, 2019.~~

~~The decrease in salaries and employee benefits during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 was primarily due to the following reasons:~~

•~~Decrease in headcount in other geographies as a result of the sale of Baycorp in August 2019;~~March 31, 2020;

•Partially offset by ~~increased stock~~reduced stock-based compensation ~~for~~expense as compared to the ~~nine months ended September 30, 2020~~same period in the prior year, due to ~~adjustments to estimated vesting~~acceleration of certain ~~performance-based awards.~~equity grants and true-up adjustment for certain performance awards recognized in the prior year.

~~Table of Contents~~

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. Effective January 1, 2020, we no longer capitalize upfront court costs and recognize a portion of court costs as expense based on a loss-rate methodology, but rather, we expense all court costs as incurred. 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 operations.

The following table summarizes our cost of legal collections ~~for~~during the periods presented (in thousands, except percentages):


		Three Months Ended September 30,									Three Months Ended March 31,
		2020		2019		$ Change		% Change			2021		2020		$ Change		% Change
Court costs	Court costs	$	38,500	$	22,471	$	16,029	71.3	%	Court costs	$	41,682	$	41,355	$	327	0.8	%
Legal collection fees	Legal collection fees	21,883		26,500		(4,617)		(17.4)	%	Legal collection fees	25,460		24,924		536		2.2	%
Total cost of legal collections	Total cost of legal collections	$	60,383	$	48,971	$	11,412	23.3	%	Total cost of legal collections	$	67,142	$	66,279	$	863	1.3	%

Table of Contents

Nine Months Ended September 30,
2020 2019 $ Change % Change
Court costs $ 96,202 $ 67,285 $ 28,917 43.0 %
Legal collection fees 67,816 82,161 (14,345) (17.5) %
Total cost of legal collections $ 164,018 $ 149,446 $ 14,572 9.8 %
Cost of legal collections slightly increased driven by increased legal channel collections. Beginning in late March of 2020, our legal collection channel spending reduced substantially due to court closures in certain jurisdictions as a result of the COVID-19 pandemic, the legal collection channel spending has gradually increased and are now back to historical levels.

General and Administrative Expenses

The increase in ~~cost of legal collections during the three months ended September 30, 2020 compared to the three months ended September 30, 2019~~general and administrative expense was primarily due to the following reasons:

•~~No longer capitalizing upfront court costs but rather expensing all court costs~~Increased information technology related expense as ~~incurred;~~we continue to invest in network security under the current work-from-home environment due to the COVID-19 pandemic;

•Partially offset by ~~lower court cost spending due to court closures in certain jurisdictions.~~

~~The increase in cost of legal collections during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 was primarily due to the following reasons:~~

•~~No longer capitalizing upfront court costs but rather expensing all court costs as incurred;~~

•~~Partially offset by lower court cost spending due to court closures in certain jurisdictions.~~

~~General and Administrative Expenses~~

The increases in general and administrative expense during the three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019 were primarily due to the following reasons:

•~~A charge of $15.0 million relating to our settlement with the CFPB;~~

•~~Certain third-party costs of approximately $6.9 million incurred relating to various financing transactions completed in September 2020;~~

•~~The increases were partially offset by~~ reduced travel and facilities ~~expenses, and consulting fees and lower general and administrative expenses due to the sale of Baycorp in August 2019.~~expenses.

Other Operating Expenses

The increase in other operating expenses ~~during the three months ended September 30, 2020 compared to the three months ended September 30, 2019~~ was primarily due to the following reasons:

•Increased postage and printing expenses primarily at our domestic ~~operations;~~operations driven by increased interactions with consumers via mail;

•The unfavorable impact of foreign currency translation, primarily by the weakening of the U.S. dollar against the British Pound.

~~Table of Contents~~

~~The decrease in other operating expenses during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 was primarily due to the following reasons:~~

•~~Lower collection expenses primarily due to the sale of Baycorp in August 2019;~~

•~~Reduced expenditures for bank charges;~~

•The decrease was partially offset by the increase in other operating expenses during the three months ended September 30, 2020 as compared to the corresponding period in the prior year as described above.

Collection Agency Commissions

Collection agency commissions are commissions paid to third-party collection agencies. Collections through the collections agencies channel are predominately in Europe and Latin America and vary from period to period depending on, among other things, the number of accounts placed with an agency versus accounts collected internally. ~~Commissions, as a percentage of collections in this channel also~~Commission rates vary ~~from period to period~~ 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.

The decreases in collections agency commissions during the three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019 were primarily due to the decrease in agency collections in Europe and other geographies.

Depreciation and Amortization

The ~~increases~~increase in depreciation and amortization expense ~~during the three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019 were~~was primarily due to the following reasons:

•Increased depreciation expense primarily incurred at our U.S. facilities;

~~Goodwill Impairment~~

In August 2019, we completed the sale of Baycorp. The Baycorp transaction resulted in a goodwill impairment charge of $10.7 million and an additional loss on sale of $12.5 million during the three and nine months ended September 30, 2019.

Interest Expense

The following tables summarize our interest expense (in thousands, except percentages):


		Three Months Ended September 30,									Three Months Ended March 31,
		2020		2019		$ Change		% Change			2021		2020		$ Change		% Change
Stated interest on debt obligations	Stated interest on debt obligations	$	44,484	$	48,413	$	(3,929)	(8.1)	%	Stated interest on debt obligations	$	41,776	$	48,755	$	(6,979)	(14.3)	%
Amortization of debt issuance costs	Amortization of debt issuance costs	10,610		2,466		8,144		330.3	%	Amortization of debt issuance costs	4,397		2,778		1,619		58.3	%
Amortization of debt discount	Amortization of debt discount	2,490		3,486		(996)		(28.6)	%	Amortization of debt discount	353		3,129		(2,776)		(88.7)	%
Other interest expense		10,378		—		10,378		100.0	%
Total interest expense	Total interest expense	$	67,962	$	54,365	$	13,597	25.0	%	Total interest expense	$	46,526	$	54,662	$	(8,136)	(14.9)	%

In September 2020, we entered into various transactions, agreements and amendments ~~(collectively, the “Financing Transactions”)~~ related to our borrowings and completed the implementation of our new global funding structure. In November and December 2020, we completed two offerings of senior secured notes, partially redeemed our Cabot senior secured notes due in 2023 and fully redeemed our Cabot floating rate notes due 2024. These refinancing transactions successfully reduced the interest rates on our outstanding borrowings.

The ~~increase~~decrease in interest expense during the three months ended ~~September 30, 2020~~March 31, 2021 compared to the three months ended ~~September 30, 2019~~March 31, 2020 was primarily due to the following reasons:

•~~$7.3 million of unamortized debt issuance costs were written-off primarily as a result of the Financing Transactions completed in September 2020;~~

•$10.4 million of other interest expense relating to the payment of a make-whole provision in September 2020 in connection with the prepayment of the Encore Private Placement Notes as part of the Financing Transactions;

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•~~The~~Lower average debt balances;

•Decreased interest rates as a result of various refinancing transactions;

•Effective January 1, 2021, we adopted a new accounting standard for our convertible and exchangeable notes and now recognize interest expense at the stated coupon rate of interest, rather than the higher effective interest rate;

•Partially offset by the unfavorable impact of foreign currency translation, primarily by the weakening of the U.S. dollar against the British ~~Pound;~~

•~~Partially offset by~~Pound and increased amortization of loan fees and other loan costs as a ~~decrease in London Interbank Offered Rate (“LIBOR”) which resulted in decreased interest expense for the revolving credit facilities that reference LIBOR.~~

Nine Months Ended September 30,
2020 2019 $ Change % Change
Stated interest on debt obligations $ 137,366 $ 145,297 $ (7,931) (5.5) %
Amortization of debt issuance costs 16,405 17,731 (1,326) (7.5) %
Amortization of debt discount 8,802 10,217 (1,415) (13.8) %
Other interest expense 10,378 — 10,378 100.0 %
Total interest expense $ 172,951 $ 173,245 $ (294) (0.2) %

~~The decrease in interest expense during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 was primarily due to the following reasons:~~

•~~$9.0 million~~result of ~~Euro-denominated bond refinancing fees incurred during the nine months ended September 30, 2019;~~

•~~A decrease in LIBOR which resulted in decreased interest expense for the revolving credit facilities that reference LIBOR;~~

•~~The decrease was partially offset by increased upfront costs incurred in September 2020 relating to the Financing Transactions, including the write-off of $7.3 million of unamortized~~higher capitalized debt issuance ~~costs and the payment of $10.4 million make-whole provision in connection with the prepayment of the Encore Private Placement Notes.~~costs.

Other (Expense) 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 expense was $0.1 million and other income was ~~$0.4~~$1.4 million during the three months ended ~~September 30, 2020 and other expense was $11.5 million during the~~ three months ended ~~September 30, 2019. Other expense was $1.2 million during the nine months ended September 30,~~March 31, 2021 and 2020, ~~and $15.8 million during the nine months ended September 30, 2019.~~respectively.

Other income recognized during the three months ended September 30, 2020 primarily represented income generated from our EARC operations partially offset by foreign currency exchange losses. Other expense recognized during the nine months ended September 30,March 31, 2020 primarily included ~~a loss of $4.8 million as a result of~~ the ~~divestiture of our investment in Brazil. This loss was partially offset by other income from~~ fair value changes for currency exchange forward contracts which were not designated as hedge instruments for accounting purposes. ~~Other expense recognized during the three and nine months ended September 30, 2019 primarily included the loss recognized on the Baycorp transaction of $12.5 million.~~

Provision for Income Taxes

~~We recorded~~Provision for income taxes and effective tax ~~expense of $19.7 million and $3.0 million during~~rate are as follows for the periods presented ($in thousands):


	Three Months Ended March 31,
	2021			2020
Provision for income taxes	$	26,968		$	4,558
Effective tax rate	22.2		%	(75.7)		%

For the three months ended ~~September 30,~~March 31, 2020, ~~and 2019, respectively, and income tax expense of $59.9 million and $18.4 million during~~ the ~~nine months ended September 30, 2020 and 2019, respectively.~~

~~The~~difference between our effective tax ~~rates~~rate and the 21% federal statutory rate was primarily due to a change in valuation allowance over consolidated pre-tax loss for the ~~respective periods are shown below:~~

~~Table of Contents~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2020 2019 2020 2019
Federal provision 21.0 % 21.0 % 21.0 % 21.0 %
State provision 2.7 % 5.3 % 3.0 % 3.7 %
Tax benefit relating to Baycorp Transaction — % (29.1) % — % (8.6) %
Tax effect of CFPB settlement fees(1)
4.2 % — % 1.3 % — %
Audit assessment — % 8.9 % — % 2.6 %
Change in valuation allowance(2)
2.0 % 1.9 % 2.2 % 2.1 %
Tax benefit from divestiture of foreign investment — % — % (1.3) % — %
Change in tax accounting method — % — % — % (6.3) %
Tax rate change (3.5) % — % (1.1) % — %
Other — % (0.9) % 0.4 % (1.7) %
Effective tax rate 26.4 % 7.1 % 25.5 % 12.8 %

~~________________________~~

~~(1)Non-deductible expense for tax purposes, refer to “Note 14: Subsequent Event.”~~

~~(2)Attributable to losses incurred at certain foreign subsidiaries with cumulative operating losses for tax purposes.~~

period, recognized in the period under the discrete method. We utilized the discrete ~~effective tax rate~~ method ~~(“discrete method”)~~ for recording income taxes for the three and nine months ended September 30, 2020. We believe the use of the discrete method is more appropriate than the application of the estimated annual effective tax rate (“AETR”) methodduring 2020 due to uncertainty in estimating annual pre-tax earnings primarily due to the ~~ongoing~~ COVID-19 pandemic. We ~~will re-evaluate~~re-evaluated the ~~use of the discrete method each quarter until it is deemed appropriate to~~methodology in calculating income taxes and return to using the ~~AETR method.~~

~~Our income~~estimated annual effective tax expense includes deferred income taxes arising from temporary differences between the financial reporting and tax bases of assets and liabilities, and net operating losses. We regularly evaluate the realizability of our deferred income tax assets and assess the need for a valuation allowance, including considerations of whether it is more likely than not that the deferred income tax assets will be realized. The assessment of realizability requires significant judgement and our projections of future taxable income required to fully realize the recorded amount of deferred tax assets reflect numerous assumptions about our operating business and investments, and are subject to change as conditions change specific to our operating business, investments or general economic conditions. Adverse changes in certain jurisdictions could result in the need to record or increase the valuation allowance, resulting in a charge against earnings in the respective period.

~~Our subsidiary in Costa Rica is operating under a 100% tax holiday through December 31, 2026. The impact of the tax holiday in Costa Rica for~~rate method during the three ~~and nine~~ months ended ~~September 30, 2020 and 2019, was immaterial.~~March 31, 2021.

We had gross unrecognized tax benefits, inclusive of penalties and interest, of $8.2 million as of September 30, 2020. These unrecognized tax benefits, if recognized, would result in a net tax benefit of $7.6 million as of September 30, 2020. There was no material change in gross unrecognized tax benefits from December 31, 2019.

We have not provided for applicable income or withholding taxes on the undistributed earnings for certain of its subsidiaries operating outside of the United States. Undistributed net income of these subsidiaries as of September 30, 2020 was approximately $180.5 million. Such undistributed earnings are considered permanently reinvested. We do not provide for deferred taxes on translation adjustments on unremitted earnings under the indefinite reversal exemption. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practical due to the complexities of a hypothetical calculation. Subsidiaries operating outside of the United States for which we do not consider under the indefinite reversal exemption have no material undistributed earnings or outside basis differences and therefore no U.S. taxes have been provided.

~~The UK Finance Act 2020 received Royal Assent in the United Kingdom on July 22, 2020, changing the corporate income tax rate from the previously enacted 17% to 19% effective on April 1, 2020.~~

~~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, and 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 Earnings Per Share.~~ Management uses non-GAAP adjusted net income and adjusted earnings per share attributable to Encore to assess operating performance and to highlight trends in our business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. Adjusted net income attributable to Encore excludes non-cash interest and issuance cost amortization relating to our convertible notes and exchangeable notes, acquisition, integration and restructuring related expenses, amortization of certain acquired intangible assets and other charges or gains that are not indicative of ongoing operations.

The following table provides a reconciliation between net income and diluted earnings per share attributable to Encore calculated in accordance with GAAP, to adjusted net income and adjusted earnings per share attributable to Encore, respectively ~~(in thousands, except per share data):~~

Three Months Ended September 30,
2020 2019
$ Per Diluted Share $ Per Diluted Share
GAAP net income attributable to Encore, as reported $ 54,650 $ 1.72 $ 38,869 $ 1.23
Adjustments:
CFPB settlement fees(1)
15,009 0.47 — —
Convertible notes and exchangeable notes non-cash interest and issuance cost amortization 3,180 0.10 3,531 0.11
Acquisition, integration and restructuring related expenses(2)
(23) 0.00 3,819 0.12
Amortization of certain acquired intangible assets(3)
1,773 0.06 1,644 0.05
Loss on Baycorp Transaction(4)
— — 12,489 0.39
Goodwill impairment(4)
— — 10,718 0.34
Net gain on fair value adjustments to contingent consideration(5)
— — (101) 0.00
Income tax effect of above non-GAAP adjustments and certain discrete tax items(6)
(1,052) (0.04) (19,069) (0.60)
Adjusted net income attributable to Encore $ 73,537 $ 2.31 $ 51,900 $ 1.64

~~________________________~~

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~~(1)~~Amount represents a charge resulting from the Stipulated Judgment with the CFPB. We adjust for this amount because we believe it is not indicative of ongoing operations; therefore, adjusting for it enhances comparability to prior periods, anticipated future periods, and our competitors’ results.

~~(2)~~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.

~~(3)~~We have acquired intangible assets, such as trade names and customer relationships, as a result of our acquisition of debt solution service providers. 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 attributable to Encore and adjusted earnings per share.

~~(4)~~The Baycorp Transaction resulted in a goodwill impairment charge of $10.7 million and a loss on sale of $12.5 million during the three months ended September 30, 2019. We believe the goodwill impairment charge and the loss on sale are not indicative of ongoing operations, therefore adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results.

~~(5)~~Amount represents the net gain recognized as a result of fair value adjustments to contingent considerations that were established for our acquisitions of debt solution service providers in Europe. We have adjusted for this amount because we do not believe this is indicative of ongoing operations. Refer to the Contingent Consideration section of “Note 3: Fair Value Measurements” in the notes to our consolidated financial statements for further details.

~~(6)~~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.

Nine Months Ended September 30,
2020 2019
$ Per Diluted Share $ Per Diluted Share
GAAP net income attributable to Encore, as reported $ 174,528 $ 5.51 $ 124,784 $ 3.97
Adjustments:
CFPB settlement fees(1)
15,009 0.47 — —
Convertible notes and exchangeable notes non-cash interest and issuance cost amortization 11,205 0.35 11,571 0.37
Acquisition, integration and restructuring related expenses(2)
4,940 0.16 6,345 0.20
Amortization of certain acquired intangible assets(3)
5,207 0.16 5,358 0.17
Loss on Baycorp Transaction(4)
— — 12,489 0.40
Goodwill impairment(4)
— — 10,718 0.34
Net gain on fair value adjustments to contingent consideration(5)
— — (2,300) (0.07)
Income tax effect of above non-GAAP adjustments and certain discrete tax items(6)
(6,399) (0.19) (21,840) (0.69)
Change in tax accounting method(7)
— — (9,070) (0.29)
Adjusted net income attributable to Encore $ 204,490 $ 6.46 $ 138,055 $ 4.40

~~________________________~~

~~(1)~~Amount represents a charge resulting from the Stipulated Judgment with the CFPB. We have adjusted for this amount because we believe it is not indicative of ongoing operations; therefore, adjusting for it enhances comparability to prior periods, anticipated future periods, and our competitors’ results.

~~Table of Contents~~

~~(7)Amount represents the benefit from the tax accounting method change related to revenue reporting. We adjust for certain discrete tax items that are not indicative of our ongoing operations.~~

Adjusted EBITDA. Management utilizes adjusted EBITDA (defined as net income before ~~discontinued operations,~~ 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 September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
GAAP net income, as reported	GAAP net income, as reported	$	55,107	$	39,413	$	175,312	$	125,677	GAAP net income, as reported	$	94,765	$	(10,579)
Adjustments:	Adjustments:									Adjustments:
Interest expense	Interest expense	67,962		54,365		172,951		173,245		Interest expense	46,526		54,662
Interest income	Interest income	(394)		(590)		(1,953)		(2,850)		Interest income	(474)		(1,000)
Provision for income taxes	Provision for income taxes	19,747		3,021		59,875		18,447		Provision for income taxes	26,968		4,558
Depreciation and amortization	Depreciation and amortization	10,609		10,000		31,436		29,736		Depreciation and amortization	11,512		10,285
CFPB settlement fees (1)		15,009		—		15,009		—

Stock-based compensation expense	Stock-based compensation expense	3,884		4,005		13,189		9,412		Stock-based compensation expense	3,405		4,527
Acquisition, integration and restructuring related expenses~~(2)~~(1)	Acquisition, integration and restructuring related expenses~~(2)~~(1)	(23)		3,819		4,940		6,345		Acquisition, integration and restructuring related expenses~~(2)~~(1)	—		187
Loss on Baycorp Transaction(3)		—		12,489		—		12,489
Goodwill impairment(3)		—		10,718		—		10,718
Net gain on fair value adjustments to contingent consideration(4)		—		(101)		—		(2,300)

Adjusted EBITDA	Adjusted EBITDA	$	171,901	$	137,139	$	470,759	$	380,919	Adjusted EBITDA	$	182,702	$	62,640
Collections applied to principal balance(5)		$	172,406	$	174,663	$	547,902	$	576,314
Collections applied to principal balance(2)										Collections applied to principal balance(2)	$	229,510	$	268,575

________________________

(1)Amount represents a charge resulting from the Stipulated Judgment with the CFPB. We have adjusted for this amount because we believe it is not indicative of ongoing operations; therefore, adjusting for it enhances comparability to prior periods, anticipated future periods, and our competitors’ results.

~~(3)~~The Baycorp Transaction resulted in a goodwill impairment charge of $10.7 million and a loss on sale of $12.5 million during the three and nine months ended September 30, 2019. We believe the goodwill impairment charge and the loss on sale are not indicative of ongoing operations, therefore adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results.

~~(4)~~(2)Amount represents the gain recognized as a result of fair value adjustments to contingent considerations that were established for our acquisitions of debt solution service providers in Europe. We have adjusted for this amount because we do not believe this is indicative of ongoing operations. Refer to the Contingent Consideration section of “Note 3: Fair Value Measurements” in the notes to our consolidated financial statements for further details.

~~(5)~~For periods prior to January 1, 2020, amount represents (a) gross collections from receivable portfolios less the sum of (b) revenue from receivable portfolios and (c) allowance charges or allowance reversals on receivable portfolios. For periods subsequent to January 1, 2020 amount represents (a) gross collections from receivable portfolios less the sum of (b) revenue from receivable portfolios and (c) changes in expected recoveries. For consistency with the Company debt covenant reporting, for periods subsequent to June 30, 2020, the collections applied to principal balance also includes proceeds applied to basis from sales of REO assets and related activities; prior period amounts have not been adjusted to reflect this change as such amounts were immaterial.

~~Table of Contents~~

Adjusted Operating Expenses. Management utilizes adjusted operating expenses in order to facilitate a comparison of approximate costs to cash collections for our portfolio purchasing and recovery business. Adjusted operating expenses for our portfolio purchasing and recovery business are calculated by starting with GAAP total operating expenses and backing out operating expenses related to non-portfolio purchasing and recovery business, acquisition, integration and restructuring related operating expenses, stock-based compensation expense, settlement fees and related administrative expenses and other charges or gains that are not indicative of ongoing operations. Adjusted operating expenses related to our portfolio purchasing and recovery business for the periods presented are as follows (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
GAAP total operating expenses, as reported	GAAP total operating expenses, as reported	$	261,221	$	247,591	$	709,441	$	716,752	GAAP total operating expenses, as reported	$	248,523	$	241,879
Adjustments:	Adjustments:									Adjustments:
Operating expenses related to non-portfolio purchasing and recovery business(1)	Operating expenses related to non-portfolio purchasing and recovery business(1)	(54,001)		(42,503)		(137,876)		(130,817)		Operating expenses related to non-portfolio purchasing and recovery business(1)	(42,653)		(41,489)
CFPB settlement fees (2)		(15,009)		—		(15,009)		—

Stock-based compensation expense	Stock-based compensation expense	(3,884)		(4,005)		(13,189)		(9,412)		Stock-based compensation expense	(3,405)		(4,527)
Acquisition, integration and restructuring related expenses~~(3)~~(2)	Acquisition, integration and restructuring related expenses~~(3)~~(2)	23		(3,819)		(132)		(6,345)		Acquisition, integration and restructuring related expenses~~(3)~~(2)	—		(187)
Goodwill impairment(4)		—		(10,718)		—		(10,718)
Net gain on fair value adjustments to contingent consideration(5)		—		101		—		2,300

Adjusted operating expenses related to portfolio purchasing and recovery business	Adjusted operating expenses related to portfolio purchasing and recovery business	$	188,350	$	186,647	$	543,235	$	561,760	Adjusted operating expenses related to portfolio purchasing and recovery business	$	202,465	$	195,676

________________________

(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 a charge resulting from the Stipulated Judgment with the CFPB. We have adjusted for this amount because we believe it is not indicative of ongoing operations; therefore, adjusting for it enhances comparability to prior periods, anticipated future periods, and our competitors’ results.

~~(3)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.

~~(4)~~The Baycorp Transaction resulted in a goodwill impairment charge of $10.7 million that is included in operating expenses during the three and nine months ended September 30, 2019. We believe the goodwill impairment charge is not indicative of ongoing operations, therefore, adjusting for the expense enhances comparability to prior periods, anticipated future periods, and our competitors’ results.

~~(5)~~Amount represents the gain recognized as a result of fair value adjustments to contingent considerations that were established for our acquisitions of debt solution service providers in Europe. We have adjusted for this amount because we do not believe this is indicative of ongoing operations. Refer to the Contingent Consideration section of “Note 3: Fair Value Measurements” in the notes to our consolidated financial statements for further details.

5235

Table of Contents

Cost per Dollar Collected

We utilize adjusted operating expenses in order to facilitate a comparison of approximate costs to cash collections from purchased receivables for our portfolio purchasing and recovery business. The following table summarizes our cost per dollar collected (defined as adjusted operating expenses as a percentage of collections from purchased receivables) by geographic location during the periods presented:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
United States	United States	36.9	%	39.8	%	36.1	%	39.5	%	United States	34.5	%	39.5	%
Europe	Europe	28.1	%	29.0	%	28.7	%	28.5	%	Europe	29.4	%	29.9	%
Other geographies	Other geographies	55.6	%	63.5	%	55.5	%	54.6	%	Other geographies	52.1	%	52.6	%
Overall cost per dollar collected	Overall cost per dollar collected	34.9	%	37.4	%	34.5	%	36.8	%	Overall cost per dollar collected	33.4	%	37.1	%

As discussed in the “Accounting Policy Update” section in “Note 1: Ownership, Description of Business, and Summary of Significant Accounting Policies” of the notes to the consolidated financial statements, effective January 1, 2020, we expense all court costs as incurred and no longer capitalize such costs as Deferred Court Costs based on a loss-rate methodology. This accounting policy change increased the cost-to-collect metric as compared to prior periods because the court costs expense recognized in prior periods only represented costs we did not expect to recover. The accounting policy change has no impact on the amount of court cost payments incurred.

~~Despite the increase in expense due to the accounting policy change discussed above, cost-to-collect~~Cost-to-collect decreased during the periods presented, due to a combination of (1) continued improvement in operational efficiencies in the collection process and (2) a large reduction in legal channel spending due to court closures in certain jurisdictions as a result of the COVID-19 pandemic, the legal channel spending has gradually increased as compared to the previous two quarters but is still lower than historical levels and (3) collection mix shifting towards non-legal collection, which has a lower cost-to-collect. Collections from other geographies continue to decline as we continue to focus on the U.S. and European markets. Cost-to-collect in LAAP is expected to stay at an elevated level and will continue to fluctuate over time.

Over time, we expect our cost-to-collect to remain competitive, but also to fluctuate from quarter to quarter based on seasonality, product mix, acquisitions, foreign exchange rates, the cost of new operating initiatives, and the changing regulatory and legislative environment.

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 the U.K., due to the higher concentration of payment plans, as compared to the U.S. and other locations in Europe, 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 our U.S. dollar reporting currency. For example, the strengthening of the U.S. dollar relative to other foreign currencies has an unfavorable reporting impact on our international purchases, collections, and ERC, and the weakening of the U.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.

Table of Contents

Cumulative Collections from Purchased Receivables to Purchase Price Multiple

The following table summarizes our receivable purchases and related gross collections by year of purchase (in thousands, except multiples):


Year of Purchase	Year of Purchase	Purchase Price(1)		Cumulative Collections through September 30, 2020																									Year of Purchase			Purchase Price(1)				Cumulative Collections through March 31, 2021
				<2011		2011		2012		2013		2014		2015		2016		2017		2018			2019				2020									Total(2)					Multiple(3)		<2012					2012					2013					2014					2015					2016					2017					2018					2019					2020			2021			Total(2)			Multiple(3)
United States:	United States:																					United States:
<2011		$	1,760,989	$	3,222,155	$	637,415	$	458,336	$	328,076	$	236,557	$	180,622	$	129,676	$	99,169	$	80,397		$	65,855			$	39,953		$	5,478,211			3.1
2011		383,796		—		123,596		301,949		226,521		155,180		112,906		77,257		56,287		41,148			33,445				19,617			1,147,906				3.0
<2012																						<2012			$	2,143,800				$	3,983,166			$	760,285			$	554,597				$	391,737				$	293,528				$	206,933				$	155,456				$	121,545				$	99,300				$	77,101				$	17,651				$	6,661,299				3.1
2012	2012	548,812		—		—		187,721		350,134		259,252		176,914		113,067		74,507		48,832			37,327				21,434			1,269,188				2.3		2012				548,808					—					187,721					350,134					259,252					176,914					113,067					74,507					48,832					37,327				27,797			6,344			1,281,895			2.3
2013	2013	551,896		—		—		—		230,051		397,646		298,068		203,386		147,503		107,399			84,665				48,923			1,517,641				2.7		2013				551,894					—					—					230,051					397,646					298,068					203,386					147,503					107,399					84,665				64,436			14,599			1,547,753			2.8
2014	2014	517,702		—		—		—		—		144,178		307,814		216,357		142,147		94,929			69,059				37,795			1,012,279				2.0		2014				517,677					—					—					—					144,178					307,814					216,357					142,147					94,929					69,059				47,628			9,475			1,031,587			2.0
2015	2015	499,285		—		—		—		—		—		105,610		231,102		186,391		125,673			85,042				51,856			785,674				1.6		2015				499,226					—					—					—					—					105,610					231,102					186,391					125,673					85,042				64,133			12,994			810,945			1.6
2016	2016	553,391		—		—		—		—		—		—		110,875		283,035		234,690			159,279				93,103			880,982				1.6		2016				553,284					—					—					—					—					—					110,875					283,035					234,690					159,279				116,452			26,378			930,709			1.7
2017	2017	528,443		—		—		—		—		—		—		—		111,902		315,853			255,048				154,198			837,001				1.6		2017				528,314					—					—					—					—					—					—					111,902					315,853					255,048				193,328			43,518			919,649			1.7
2018	2018	630,864		—		—		—		—		—		—		—		—		175,042			351,696				243,439			770,177				1.2		2018				630,704					—					—					—					—					—					—					—					175,042					351,696				308,302			68,358			903,398			1.4
2019	2019	677,539		—		—		—		—		—		—		—		—		—			174,693				313,152			487,845				0.7		2019				677,176					—					—					—					—					—					—					—					—					174,693				416,315			114,690			705,698			1.0
2020	2020	449,089		—		—		—		—		—		—		—		—		—			—				128,172			128,172				0.3		2020				539,553					—					—					—					—					—					—					—					—					—				213,450			113,142			326,592			0.6
2021																						2021			92,282				—				—				—					—					—					—					—					—					—					—					8,424					8,424					0.1
Subtotal	Subtotal	7,101,806		3,222,155		761,011		948,006		1,134,782		1,192,813		1,181,934		1,081,720		1,100,941		1,223,963			1,316,109				1,151,642			14,315,076				2.0		Subtotal				7,282,718					3,983,166					948,006					1,134,782					1,192,813					1,181,934					1,081,720					1,100,941					1,223,963					1,316,109				1,528,942			435,573			15,127,949			2.1
Europe:	Europe:																																			Europe:
2013	2013	619,079		—		—		—		134,259		249,307		212,129		165,610		146,993		132,663			113,228				69,322			1,223,511				2.0		2013				619,079					—					—					134,259					249,307					212,129					165,610					146,993					132,663					113,228				93,203			24,748			1,272,140			2.1
2014	2014	623,129		—		—		—		—		135,549		198,127		156,665		137,806		129,033			105,337				62,882			925,399				1.5		2014				623,129					—					—					—					135,549					198,127					156,665					137,806					129,033					105,337				84,255			22,477			969,249			1.6
2015	2015	419,941		—		—		—		—		—		65,870		127,084		103,823		88,065			72,277				40,580			497,699				1.2		2015				419,941					—					—					—					—					65,870					127,084					103,823					88,065					72,277				55,261			15,016			527,396			1.3
2016	2016	258,218		—		—		—		—		—		—		44,641		97,587		83,107			63,198				37,157			325,690				1.3		2016				258,218					—					—					—					—					—					44,641					97,587					83,107					63,198				51,609			14,010			354,152			1.4
2017	2017	461,571		—		—		—		—		—		—		—		68,111		152,926			118,794				64,225			404,056				0.9		2017				461,571					—					—					—					—					—					—					68,111					152,926					118,794				87,549			23,146			450,526			1.0
2018	2018	433,302		—		—		—		—		—		—		—		—		49,383			118,266				59,452			227,101				0.5		2018				433,302					—					—					—					—					—					—					—					49,383					118,266				78,846			21,712			268,207			0.6
2019	2019	273,354		—		—		—		—		—		—		—		—		—			44,118				57,277			101,395				0.4		2019				273,354					—					—					—					—					—					—					—					—					44,118				80,502			23,979			148,599			0.5
2020	2020	81,041		—		—		—		—		—		—		—		—		—			—				11,052			11,052				0.1		2020				116,899					—					—					—					—					—					—					—					—					—				22,721			15,121			37,842			0.3
2021																						2021			77,826				—				—				—					—					—					—					—					—					—					—					2,392					2,392					—
Subtotal	Subtotal	3,169,635		—		—		—		134,259		384,856		476,126		494,000		554,320		635,177			635,218				401,947			3,715,903				1.2		Subtotal				3,283,319					—					—					134,259					384,856					476,126					494,000					554,320					635,177					635,218				553,946			162,601			4,030,503			1.2
Other geographies:	Other geographies:																																			Other geographies:
2012	2012	6,721		—		—		—		3,848		2,561		1,208		542		551		422			390				215			9,737				1.4		2012				6,721					—					—					3,848					2,561					1,208					542					551					422					390				294			95			9,911			1.5
2013	2013	29,568		—		—		—		6,617		17,615		10,334		4,606		3,339		2,468			1,573				745			47,297				1.6		2013				29,568					—					—					6,617					17,615					10,334					4,606					3,339					2,468					1,573				1,042			297			47,891			1.6
2014	2014	86,989		—		—		—		—		9,652		16,062		18,403		9,813		7,991			6,472				3,787			72,180				0.8		2014				86,989					—					—					—					9,652					16,062					18,403					9,813					7,991					6,472				4,300			1,391			74,084			0.9
2015	2015	83,198		—		—		—		—		—		15,061		57,064		43,499		32,622			17,499				3,559			169,304				2.0		2015				83,198					—					—					—					—					15,061					57,064					43,499					32,622					17,499				4,688			1,192			171,625			2.1
2016	2016	64,450		—		—		—		—		—		—		29,269		39,710		28,992			16,078				3,885			117,934				1.8		2016				64,450					—					—					—					—					—					29,269					39,710					28,992					16,078				5,196			1,333			120,578			1.9
2017	2017	49,670		—		—		—		—		—		—		—		15,471		23,075			15,383				5,082			59,011				1.2		2017				49,670					—					—					—					—					—					—					15,471					23,075					15,383				7,303			2,269			63,501			1.3
2018	2018	26,371		—		—		—		—		—		—		—		—		12,910			15,008				4,201			32,119				1.2		2018				26,371					—					—					—					—					—					—					—					12,910					15,008				5,892			1,640			35,450			1.3
2019	2019	2,668		—		—		—		—		—		—		—		—		—			3,198				179			3,377				1.3		2019				2,668					—					—					—					—					—					—					—					—					3,198				245			70			3,513			1.3
2020		—		—		—		—		—		—		—		—		—		—			—				—			—				—

Subtotal	Subtotal	349,635		—		—		—		10,465		29,828		42,665		109,884		112,383		108,480			75,601				21,653			510,959				1.5		Subtotal				349,635					—					—					10,465					29,828					42,665					109,884					112,383					108,480					75,601				28,960			8,287			526,553			1.5
Total	Total	$	10,621,076	$	3,222,155	$	761,011	$	948,006	$	1,279,506	$	1,607,497	$	1,700,725	$	1,685,604	$	1,767,644	$	1,967,620		$	2,026,928			$	1,575,242		$	18,541,938			1.7		Total				$	10,915,672				$	3,983,166				$	948,006				$	1,279,506				$	1,607,497				$	1,700,725				$	1,685,604				$	1,767,644				$	1,967,620				$	2,026,928			$	2,111,848		$	606,461		$	19,685,005		1.8

________________________

(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 ~~September 30, 2020,~~March 31, 2021, excluding collections on behalf of others.

(3)Cumulative Collections Multiple (“Multiple”) through ~~September 30, 2020~~March 31, 2021 refers to collections as a multiple of purchase price.

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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, by year of purchase (in thousands, except multiples):


		Purchase Price(1)		Historical Collections(2)		Estimated Remaining Collections		Total Estimated Gross Collections		Total Estimated Gross Collections to Purchase Price		Purchase Price(1)		Historical Collections(2)		Estimated Remaining Collections		Total Estimated Gross Collections		Total Estimated Gross Collections to Purchase Price
United States:	United States:										United States:
<2011	<2011	$	1,760,989	$	5,478,211	$	121,918	$	5,600,129	3.2	<2011	$	1,760,006	$	5,501,203	$	105,360	$	5,606,563	3.2
2011	2011	383,796		1,147,906		60,593		1,208,499		3.1	2011	383,794		1,160,096		51,789		1,211,885		3.2
2012	2012	548,812		1,269,188		67,941		1,337,129		2.4	2012	548,808		1,281,895		56,219		1,338,114		2.4
2013(3)	2013(3)	551,896		1,517,641		192,744		1,710,385		3.1	2013(3)	551,894		1,547,753		159,200		1,706,953		3.1
2014(3)	2014(3)	517,702		1,012,279		123,269		1,135,548		2.2	2014(3)	517,677		1,031,587		98,327		1,129,914		2.2
2015	2015	499,285		785,674		133,411		919,085		1.8	2015	499,226		810,945		109,999		920,944		1.8
2016	2016	553,391		880,982		246,922		1,127,904		2.0	2016	553,284		930,709		204,119		1,134,828		2.1
2017	2017	528,443		837,001		395,466		1,232,467		2.3	2017	528,314		919,649		332,635		1,252,284		2.4
2018	2018	630,864		770,177		627,656		1,397,833		2.2	2018	630,704		903,398		502,810		1,406,208		2.2
2019	2019	677,539		487,845		1,097,746		1,585,591		2.3	2019	677,176		705,698		891,534		1,597,232		2.4
2020	2020	449,089		128,172		964,006		1,092,178		2.4	2020	539,553		326,592		1,002,765		1,329,357		2.5
2021											2021	92,282		8,424		223,227		231,651		2.5
Subtotal	Subtotal	7,101,806		14,315,076		4,031,672		18,346,748		2.6	Subtotal	7,282,718		15,127,949		3,737,984		18,865,933		2.6
Europe:	Europe:										Europe:
2013(3)	2013(3)	619,079		1,223,511		883,363		2,106,874		3.4	2013(3)	619,079		1,272,140		865,462		2,137,602		3.5
2014(3)	2014(3)	623,129		925,399		660,771		1,586,170		2.5	2014(3)	623,129		969,249		642,939		1,612,188		2.6
2015(3)	2015(3)	419,941		497,699		423,782		921,481		2.2	2015(3)	419,941		527,396		413,504		940,900		2.2
2016	2016	258,218		325,690		331,604		657,294		2.5	2016	258,218		354,152		319,524		673,676		2.6
2017	2017	461,571		404,056		579,509		983,565		2.1	2017	461,571		450,526		558,605		1,009,131		2.2
2018	2018	433,302		227,101		624,762		851,863		2.0	2018	433,302		268,207		610,538		878,745		2.0
2019	2019	273,354		101,395		518,846		620,241		2.3	2019	273,354		148,599		502,757		651,356		2.4
2020	2020	81,041		11,052		207,477		218,529		2.7	2020	116,899		37,842		302,226		340,068		2.9
2021											2021	77,826		2,392		175,991		178,383		2.3
Subtotal	Subtotal	3,169,635		3,715,903		4,230,114		7,946,017		2.5	Subtotal	3,283,319		4,030,503		4,391,546		8,422,049		2.6
Other geographies:	Other geographies:										Other geographies:
2012	2012	6,721		9,737		219		9,956		1.5	2012	6,721		9,911		63		9,974		1.5
2013	2013	29,568		47,297		1,267		48,564		1.6	2013	29,568		47,891		774		48,665		1.6
2014	2014	86,989		72,180		51,215		123,395		1.4	2014	86,989		74,084		50,516		124,600		1.4
2015	2015	83,198		169,304		17,108		186,412		2.2	2015	83,198		171,625		13,321		184,946		2.2
2016	2016	64,450		117,934		6,740		124,674		1.9	2016	64,450		120,578		4,289		124,867		1.9
2017	2017	49,670		59,011		29,653		88,664		1.8	2017	49,670		63,501		26,781		90,282		1.8
2018	2018	26,371		32,119		10,503		42,622		1.6	2018	26,371		35,450		7,664		43,114		1.6
2019	2019	2,668		3,377		440		3,817		1.4	2019	2,668		3,513		323		3,836		1.4
2020		—		—		—		—		—

Subtotal	Subtotal	349,635		510,959		117,145		628,104		1.8	Subtotal	349,635		526,553		103,731		630,284		1.8
Total	Total	$	10,621,076	$	18,541,938	$	8,378,931	$	26,920,869	2.5	Total	$	10,915,672	$	19,685,005	$	8,233,261	$	27,918,266	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 ~~September 30, 2020,~~March 31, 2021, excluding collections on behalf of others.

(3)Includes portfolios acquired in connection with certain business combinations.

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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 by year of purchase (in thousands):


		Estimated Remaining Gross Collections by Year of Purchase(1)																									Estimated Remaining Gross Collections by Year of Purchase(1)
		2020(3)		2021		2022		2023		2024		2025		2026		2027		2028		>2028		Total(2)					2021(3)			2022			2023			2024			2025			2026			2027			2028			2029			>2029			Total(2)
United States:	United States:																							United States:
<2011	<2011	$	10,630	$	35,010	$	25,248	$	17,528	$	12,132	$	8,265	$	5,577	$	3,701	$	2,286	$	1,541	$	121,918		<2011		$	26,212		$	26,102		$	18,170		$	12,578		$	8,578		$	5,814		$	3,861		$	2,385		$	1,260		$	400		$	105,360
2011	2011	5,278		16,568		11,875		8,325		5,861		4,133		2,920		2,068		1,468		2,097		60,593			2011		12,457			12,168			8,473			5,928			4,171			2,944			2,080			1,474			1,047			1,047			51,789
2012	2012	5,909		18,687		13,089		9,247		6,505		4,585		3,237		2,291		1,626		2,765		67,941			2012		13,437			12,995			9,133			6,406			4,510			3,181			2,249			1,596			1,136			1,576			56,219
2013(4)	2013(4)	13,957		51,436		37,540		26,539		18,778		13,317		9,449		6,706		4,761		10,261		192,744			2013(4)		37,028			36,243			25,680			18,191			12,903			9,156			6,498			4,614			3,277			5,610			159,200
2014(4)	2014(4)	10,400		34,372		24,137		16,553		11,318		7,964		5,635		3,992		2,831		6,067		123,269			2014(4)		23,588			22,761			15,677			10,805			7,630			5,402			3,829			2,717			1,931			3,987			98,327
2015	2015	12,273		39,128		26,762		17,867		11,936		7,831		5,358		3,774		2,664		5,818		133,411			2015		27,168			26,079			18,006			12,193			8,121			5,575			3,933			2,781			1,971			4,172			109,999
2016	2016	23,162		74,494		46,516		31,484		21,991		15,223		10,441		7,298		5,133		11,180		246,922			2016		53,665			47,533			31,980			21,983			15,104			10,293			7,195			5,067			3,576			7,723			204,119
2017	2017	35,858		119,171		79,757		50,338		33,716		23,283		16,254		11,415		8,071		17,603		395,466			2017		88,721			78,385			49,933			35,497			24,340			16,930			11,827			8,352			5,889			12,761			332,635
2018	2018	61,932		192,762		132,071		84,943		53,478		35,161		23,203		15,315		10,016		18,775		627,656			2018		137,797			125,833			81,381			54,057			35,510			23,418			15,449			10,112			6,730			12,523			502,810
2019	2019	109,314		354,853		210,468		131,837		89,240		60,901		42,730		30,774		22,034		45,595		1,097,746			2019		246,003			209,162			134,096			93,610			63,905			44,357			31,261			21,994			15,234			31,912			891,534
2020	2020	61,376		248,475		244,161		139,955		85,258		57,486		38,887		27,360		19,531		41,517		964,006			2020		222,665			280,072			163,837			106,095			71,412			48,451			34,062			24,314			17,327			34,530			1,002,765
2021																								2021		45,237			60,671			41,106			24,362			16,147			11,131			7,554			5,313			3,761			7,945			223,227
Subtotal	Subtotal	350,089		1,184,956		851,624		534,616		350,213		238,149		163,691		114,694		80,421		163,219		4,031,672			Subtotal		933,978			938,004			597,472			401,705			272,331			186,652			129,798			90,719			63,139			124,186			3,737,984
Europe:	Europe:																								Europe:
2013(4)	2013(4)	24,105		95,517		92,781		87,795		80,626		73,626		66,225		59,637		53,578		249,473		883,363			2013(4)		70,401			91,831			88,191			82,241			75,011			68,559			61,460			55,275			49,680			222,813			865,462
2014(4)	2014(4)	20,924		81,176		74,759		67,819		62,415		55,483		47,451		41,601		37,470		171,673		660,771			2014(4)		60,729			74,390			69,269			63,117			56,840			48,712			43,025			38,018			34,305			154,534			642,939
2015(4)	2015(4)	15,274		53,301		47,339		43,312		39,408		35,331		31,222		26,728		23,397		108,470		423,782			2015(4)		39,471			48,472			44,854			40,580			36,778			32,232			27,720			24,603			22,134			96,660			413,504
2016	2016	12,917		57,057		51,900		37,940		32,016		27,564		22,747		18,671		15,774		55,018		331,604			2016		44,969			51,726			39,178			32,325			28,688			24,039			19,958			16,698			14,291			47,652			319,524
2017	2017	22,335		87,038		80,082		67,643		57,548		48,193		40,033		34,490		28,522		113,625		579,509			2017		62,593			79,825			69,366			58,865			50,329			42,446			36,620			30,472			26,128			101,961			558,605
2018	2018	21,190		93,126		82,561		71,266		61,883		53,506		45,836		38,945		32,410		124,039		624,762			2018		62,749			82,001			74,626			65,036			57,067			49,158			41,453			35,629			30,312			112,507			610,538
2019	2019	19,555		80,356		72,906		62,447		52,403		42,971		35,135		29,679		25,374		98,020		518,846			2019		62,358			75,770			64,237			55,012			45,847			37,406			30,879			26,291			21,933			83,024			502,757
2020	2020	4,839		31,237		31,239		25,955		21,720		17,754		14,777		12,064		10,159		37,733		207,477			2020		34,809			46,700			42,482			34,029			27,257			23,904			19,361			16,099			13,306			44,279			302,226
2021																								2021		17,842			24,467			21,842			18,550			15,895			13,844			12,226			10,718			8,884			31,723			175,991
Subtotal	Subtotal	141,139		578,808		533,567		464,177		408,019		354,428		303,426		261,815		226,684		958,051		4,230,114			Subtotal		455,921			575,182			514,045			449,755			393,712			340,300			292,702			253,803			220,973			895,153			4,391,546
Other geographies:	Other geographies:																								Other geographies:
2012	2012	43		118		58		—		—		—		—		—		—		—		219			2012		46			17			—			—			—			—			—			—			—			—			63
2013	2013	177		546		357		187		—		—		—		—		—		—		1,267			2013		338			282			154			—			—			—			—			—			—			—			774
2014	2014	2,108		9,592		7,718		6,917		5,889		4,443		2,610		1,486		1,352		9,100		51,215			2014		7,463			8,166			7,350			6,342			4,803			2,822			1,606			1,462			1,462			9,040			50,516
2015	2015	907		3,224		2,747		2,515		1,743		1,156		854		748		647		2,567		17,108			2015		2,149			2,202			2,197			1,627			1,136			761			637			534			449			1,629			13,321
2016	2016	989		3,046		1,613		573		255		169		95		—		—		—		6,740			2016		1,972			1,325			500			243			158			91			—			—			—			—			4,289
2017	2017	2,097		7,220		5,105		3,742		2,086		1,847		1,383		793		696		4,684		29,653			2017		5,195			5,085			3,773			2,241			1,987			1,489			854			752			752			4,653			26,781
2018	2018	1,107		3,576		2,305		1,619		860		461		301		197		77		—		10,503			2018		2,353			1,959			1,368			898			483			315			207			81			—			—			7,664
2019	2019	51		165		100		67		48		9		—		—		—		—		440			2019		113			90			60			50			10			—			—			—			—			—			323
2020		—		—		—		—		—		—		—		—		—		—		—

Subtotal	Subtotal	7,479		27,487		20,003		15,620		10,881		8,085		5,243		3,224		2,772		16,351		117,145			Subtotal		19,629			19,126			15,402			11,401			8,577			5,478			3,304			2,829			2,663			15,322			103,731
Portfolio ERC	Portfolio ERC	498,707		1,791,251		1,405,194		1,014,413		769,113		600,662		472,360		379,733		309,877		1,137,621		8,378,931			Portfolio ERC		1,409,528			1,532,312			1,126,919			862,861			674,620			532,430			425,804			347,351			286,775			1,034,661			8,233,261
REO ERC(5)	REO ERC(5)	8,774		35,262		19,370		8,676		7,056		1,614		56		—		—		—		80,808			REO ERC(5)		20,586			26,884			17,796			7,970			1,988			68			11			76			283			—			75,662
Total ERC	Total ERC	$	507,481	$	1,826,513	$	1,424,564	$	1,023,089	$	776,169	$	602,276	$	472,416	$	379,733	$	309,877	$	1,137,621	$	8,459,739		Total ERC		$	1,430,114		$	1,559,196		$	1,144,715		$	870,831		$	676,608		$	532,498		$	425,815		$	347,427		$	287,058		$	1,034,661		$	8,308,923

________________________

(1)As of ~~September 30, 2020,~~March 31, 2021, ERC for Zero Basis Portfolios include approximately ~~$121.9~~$105.4 million for purchased consumer and bankruptcy receivables in the United States. ERC for Zero Basis Portfolios in Europe and other geographies was immaterial. ERC also includes approximately $76.1 million from cost recovery portfolios, primarily in other geographies.

(2)Represents the expected remaining gross cash collections over a 180-month period. As of ~~September 30, 2020,~~March 31, 2021, ERC for 84-month and 120-month periods were:

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		84-Month ERC		120-Month ERC			84-Month ERC		120-Month ERC
United States	United States	$	3,763,006	$	3,954,550	United States	$	3,485,857	$	3,666,276
Europe	Europe	2,982,780		3,599,914		Europe	3,088,406		3,733,609
Other geographies	Other geographies	97,284		105,273		Other geographies	83,645		91,634
Portfolio ERC	Portfolio ERC	$	6,843,070	$	7,659,737	Portfolio ERC	6,657,908		7,491,519
REO ERC	REO ERC	$	80,808	$	80,808	REO ERC	75,304		75,662
Total ERC	Total ERC	$	6,923,878	$	7,740,545	Total ERC	$	6,733,212	$	7,567,181

(3)Amount for ~~2020~~2021 consists of ~~three~~nine months data from ~~October~~April 1, ~~2020~~2021 to December 31, ~~2020.~~2021.

(4)Includes portfolios acquired in connection with certain business combinations.

(5)Real estate-owned assets ERC includes approximately ~~$78.6~~$74.0 million and ~~$2.2~~$1.7 million of estimated future cash flows for Europe and Other Geographies, respectively.

Estimated Future Collections Applied to Principal

As of ~~September 30, 2020,~~March 31, 2021, we had ~~$3.3~~$3.2 billion in investment in receivable portfolios. The estimated future collections applied to the investment in receivable portfolios net balance is as follows (in thousands):


Years Ending December 31,	Years Ending December 31,	United States		Europe		Other Geographies		Total		Years Ending December 31,	United States		Europe		Other Geographies		Total
2020(1)		$	130,037	$	33,414	$	4,523	$	167,974
2021		471,409		177,744		16,298		665,451
2021(1)										2021(1)	$	370,692	$	138,034	$	12,997	$	521,723
2022	2022	370,544		182,097		13,333		565,974		2022	402,587		187,848		13,286		603,721
2023	2023	218,436		158,642		8,430		385,508		2023	242,472		175,413		10,088		427,973
2024	2024	135,474		142,795		6,217		284,486		2024	158,932		155,195		6,675		320,802
2025	2025	89,819		125,640		4,867		220,326		2025	105,328		138,573		5,233		249,134
2026	2026	60,288		106,883		2,889		170,060		2026	70,715		120,586		3,104		194,405
2027	2027	42,228		92,423		1,641		136,292		2027	48,851		103,157		1,767		153,775
2028	2028	29,924		80,764		1,419		112,107		2028	34,319		90,071		1,532		125,922
2029	2029	20,966		71,514		1,352		93,832		2029	24,064		80,059		1,462		105,585
2030	2030	14,815		66,342		1,352		82,509		2030	17,016		72,111		1,462		90,589
2031	2031	10,674		63,481		1,352		75,507		2031	12,198		68,219		1,462		81,879
2032	2032	7,922		64,564		1,352		73,838		2032	8,977		67,798		1,462		78,237
2033	2033	6,280		69,072		1,352		76,704		2033	7,035		70,246		1,462		78,743
2034	2034	5,572		76,283		951		82,806		2034	5,828		74,719		10		80,557
2035	2035	2,251		70,367		—		72,618		2035	3,660		84,216		—		87,876
2036										2036	710		24,047		—		24,757
Total	Total	$	1,616,639	$	1,582,025	$	67,328	$	3,265,992	Total	$	1,513,384	$	1,650,292	$	62,002	$	3,225,678

________________________

(1)Amount for ~~2020~~2021 consists of ~~three~~nine months data from ~~October~~April 1, ~~2020~~2021 to December 31, ~~2020.~~2021.

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Purchases by Quarter

The following table summarizes the receivable portfolios we purchased by quarter, and the respective purchase prices and fair value ((in ~~thousands~~thousands)):


Quarter	Quarter	# of Accounts	Face Value		Purchase Price		Quarter	# of Accounts	Face Value		Purchase Price
Q1 2018		973	$	1,799,804	$	276,762
Q2 2018		1,031	2,870,456		359,580
Q3 2018		706	1,559,241		248,691
Q4 2018		766	2,272,113		246,865
Q1 2019	Q1 2019	854	1,732,977		262,335		Q1 2019	854	$	1,732,977	$	262,335
Q2 2019	Q2 2019	778	2,307,711		242,697		Q2 2019	778	2,307,711		242,697
Q3 2019	Q3 2019	1,255	5,313,092		259,910		Q3 2019	1,255	5,313,092		259,910
Q4 2019	Q4 2019	803	2,241,628		234,916		Q4 2019	803	2,241,628		234,916
Q1 2020	Q1 2020	943	1,703,022		214,113		Q1 2020	943	1,703,022		214,113
Q2 2020	Q2 2020	754	1,305,875		147,939		Q2 2020	754	1,305,875		147,939
Q3 2020	Q3 2020	735	1,782,733		170,131		Q3 2020	735	1,782,733		170,131
Q4 2020							Q4 2020	558	1,036,332		127,689
Q1 2021							Q1 2021	749	1,328,865		170,178

Liquidity and Capital Resources

Liquidity

The following table summarizes our cash flow activities for the periods presented (in thousands):


		Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019			2021		2020
		(Unaudited)					(Unaudited)
Net cash provided by operating activities	Net cash provided by operating activities	$	249,982	$	196,946	Net cash provided by operating activities	$	69,119	$	70,805
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	7,575		(197,958)		Net cash provided by (used in) investing activities	95,267		(43,255)
Net cash (used in) provided by financing activities		(267,891)		31,313
Net cash used in financing activities						Net cash used in financing activities	(160,110)		(21,762)

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 $69.1 million and $70.8 million during the three months ended March 31, 2021 and 2020, respectively. Operating cash flows are derived by adjusting net income for non-cash operating items such as depreciation and amortization, changes in expected recoveries, ~~allowance charges and~~ 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.

Net cash provided by operating activities increased $53.0 million for the nine months ended September 30, 2020 as compared to the prior period, mainly driven by a significant increase in net income, changes in expected recoveries compared to the prior year net allowance reversals, and the change in prepaid income tax and income taxes payable.

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Investing Cash Flows

Cash flow relating to investing activities is primarily affected by receivable portfolio purchases offset by collection proceeds applied to the principal of our receivable portfolios.

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Net cash provided by investing activities was ~~$7.6~~$95.3 million ~~during~~for the ~~nine~~three months ended ~~September 30, 2020 as compared to net~~March 31, 2021. Net cash used in investing activities ~~of $198.0~~was $43.3 million ~~for~~during the ~~nine~~three months ended ~~September 30, 2019, mainly driven~~March 31, 2020. Cash provided by ~~reduced purchasing volume.~~or used in investing activities is primarily affected by receivable portfolio purchases offset by collection proceeds applied to the principal of our receivable portfolios. Receivable portfolio purchases, net of put-backs, were ~~$518.0~~$167.0 million and ~~$757.1~~$209.0 million during the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. Collection proceeds applied to the principal of our receivable portfolios, net, were ~~$540.1~~$268.4 million and ~~$588.3~~$169.9 million during the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively.

Financing Cash Flows

Net cash used in financing activities was ~~$267.9~~$160.1 million and $21.8 million during the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and net cash provided by financing activities was $31.3 million during the nine months ended September 30, 2019.~~respectively. 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. ~~Proceeds from~~Borrowings under our credit facilities were ~~$1,695.9~~$273.3 million and ~~$481.1~~$171.9 million during the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. Repayments of amounts outstanding under our credit facilities were ~~$2,051.8~~$235.4 million and ~~$441.0~~$167.2 million during the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. ~~Proceeds from the issuance~~We paid $161.0 million of convertible senior ~~secured~~ notes were $410.8 million and $460.5 million during the nine months ended September 30, 2020 and 2019, respectively. Repayments of senior secured notes were $152.4 million and $460.5 million during the nine months ended September 30, 2020 and 2019, respectively.that matured on March 15, 2021 using cash on hand.

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. 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.

Currently, all of our portfolio purchases are funded with cash from operations, cash collections from our investment in receivable portfolios, and our bank borrowings.

~~In September 2020, we entered into various transactions, agreements and amendments related to our borrowings including (collectively, the “Financing Transactions”):~~

•an amended multi-currency revolving credit facility the “Global Senior Facility” that formerly supported only Cabot that now supports the operations of all operating units. The Global Senior Facility provides for a total committed facility of $1,050.0 million that matures in September 2024. Available capacity under the Global Senior Facility was $464.8 million as of September 30, 2020;

•~~an issuance of €350.0 million (approximately $410.8 million) in 4.875% senior secured notes due 2025; and~~

•an amendment to the terms of our existing senior secured notes originally issued by affiliates of Cabot to, among other things, add Encore and its material subsidiaries as guarantors and have Encore become the parent of the restricted group.

As part of the Financing Transactions, we prepaid $103.7 million of Encore’s senior secured notes with a group of insurance companies and made a $10.4 million make-whole payment to the holders of notes that were prepaid. As of September 30, 2020, $156.3 million of the notes remained outstanding.

~~Additionally, we paid $89.4 million of convertible senior notes that matured on July 1, 2020 using cash on hand.~~

We are in material compliance with all covenants under our financing arrangements. See “Note 8:7: Borrowings” in the notes to our consolidated financial statements for a further discussion of our debt.

On August 12, 2015, our Board of Directors approved a $50.0 million share repurchase program. On May 5, 2021, we announced that the Board of Directors had approved an increase in the size of the repurchase program from $50.0 million to $300.0 million (an increase of $250.0 million). Repurchases under this program are expected to be made with cash on hand 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 any time at our discretion. During the three months ended March 31, 2021, we repurchased 517,860 shares of our common stock for approximately $20.4 million, or $39.37 per share. Our practice is to retire the shares repurchased.

In May 2021, we terminated our at-the-market equity offering program (the “ATM Program”) pursuant to which we could issue and sell shares of Encore’s common stock having an aggregate offering price of $50.0 million.

Our cash and cash equivalents as of ~~September 30, 2020~~March 31, 2021 consisted of ~~$39.8~~$34.6 million held by U.S.-based entities and ~~$130.2~~$150.0 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 U.S. sources of cash and liquidity are sufficient to meet our business needs in the United ~~States.~~

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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 ~~$20.4~~$23.0 million as of ~~September 30, 2020.~~March 31, 2021.

Cash from operations could also be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic, including 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.

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Item 3 – Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Rates. As of ~~September 30, 2020,~~March 31, 2021, there had not been a material change in any of the foreign currency risk information disclosed in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019.~~2020.

Interest Rates. As of ~~September 30, 2020,~~March 31, 2021, there had not been a material change in the interest rate risk information disclosed in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019.~~2020.

Item 4 – Controls and Procedures

Attached as exhibits to this Form 10-Q are the certifications required by Rule 13a-14 of the Securities Exchange Act of 1934, as amended. This section includes information concerning the controls and controls evaluation referred to in the certifications.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”) and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and accordingly, management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on their most recent evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act are effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

Except as noted below there were no changes in our internal control over financial reporting that occurred during the quarter ended ~~September 30, 2020~~March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

On January 1, 2020, we adopted the new accounting standard for Financial Instruments - Credit Losses (“CECL”). As a result, we implemented changes to policies, processes, systems, and controls over estimating the allowance for credit losses.

We have not experienced any material impact to our internal controls over financial reporting due to the COVID-19 pandemic even though many of our employees are working remotely. We are continually monitoring and assessing the impact of the COVID-19 pandemic on our internal controls to minimize the impact on their design and operating effectiveness.

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PART II – OTHER INFORMATION

Item 1 – Legal Proceedings

Information with respect to this item may be found in “Note ~~11,~~10: Commitments and Contingencies,” to the consolidated financial statements.

Item 1A – Risk Factors

~~Except for the revised risk factor set forth below, there~~There is no material change in the information reported under “Part I-Item 1A-Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020.

Item 2 - Unregistered Sales of Equity Securities and ~~“Part II-Item 1A-Risk Factors” in our Quarterly Report on Form 10-Q for~~Use of Proceeds

Issuer Repurchases of Equity Securities

The following table presents information with respect to purchases of common stock of the ~~quarters~~Company during the three months ended March 31, ~~2020 and June 30, 2020.~~

We are subject to ongoing risks of regulatory investigations and litigation, including individual and class action lawsuits, under consumer credit, consumer protection, theft, privacy, collections, and other laws, and we may be subject to awards of substantial damages or be required to make other expenditures or change our business practices as a result.

We operate in an extremely litigious climate and currently are, and may in the future be, named as defendants in litigation, including individual and class action lawsuits under consumer credit, consumer protection, theft, privacy, data security, automated dialing equipment, debt collections, and other laws. Many of these cases present novel issues on which there is no clear legal precedent, which increases the difficulty in predicting both the potential outcomes and costs of defending these cases. We are subject to ongoing risks of regulatory investigations, inquiries, litigation, and other actions2021, by the ~~CFPB, FTC, FCA, state Attorneys General, Central Bank~~Company or an “affiliated purchaser” of ~~Ireland or other governmental bodies relating~~the Company, as defined in Rule 10b-18(a)(3) under the Exchange Act:


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)(2)	Maximum Number of Shares (or Approximate Dollar Value) That May Yet Be Purchased Under the Publicly Announced Plans or Programs(1)
January 1, 2021 to January 31, 2021	—	$	—	—	$	50,000,000
February 1, 2021 to February 28, 2021	11,142	$	32.41	11,142	$	49,638,834
March 1, 2021 to March 31, 2021	506,718	$	39.53	506,718	$	29,610,273
Total	517,860	$	39.37	517,860	$	29,610,273

________________________

(1)On August 12, 2015, we publicly announced that our Board of Directors had authorized a stock repurchase program for the Company to purchase $50.0 million of our ~~activities. For example, on September 8, 2020,~~Company’s common stock. On May 5, 2021, we publicly announced that our Board of Directors had authorized a $250.0 million increase to the ~~CFPB filed a suit alleging that Encore and certain~~stock repurchase program, which increased the size of ~~its US subsidiaries had violated their consent order (the “Consent Order”) with~~ the ~~CFPB~~program from $50.0 million to $300.0 million.

(2)This column discloses the number of shares purchased pursuant to which we previously settled allegations arising from its practices between 2011 and 2015. These litigation and regulatory actions involve potential compensatory or punitive damage claims, fines, costs, sanctions, civil monetary penalties, consumer restitution, or injunctive relief, as well as other formsthe program during the indicated time periods.

Table of relief, that could require us to pay damages, make other expenditures or result in changes to our business practices. Any changes to our business practices could result in lower collections, increased cost to collect or reductions in estimated remaining collections. Actual losses incurred by us in connection with judgments or settlements of these matters may be more than our associated reserves. Further, defending lawsuits and responding to governmental inquiries or investigations, regardless of their merit, could be costly and divert management’s attention from the operation of our business. All of these factors could have an adverse effect on our business, financial condition and operating results.Contents

~~Item 5 – Other Information~~

On October 29, 2020, we entered into supplemental indentures for the Convertible Notes and Exchangeable Notes so that in the event of conversion or exchange, the notes are convertible or exchangeable into cash up to the aggregate principal amount of the notes and the excess conversion premium, if any, may be settled in cash or shares of the Company’s common stock at the Company’s election and subject to certain restrictions contained in each of the indentures governing the Convertible Notes and Exchangeable Notes. Copies of the supplemental indentures are attached as exhibits to this report and are incorporated herein by reference (and this description is qualified in its entirety by reference to such documents).

Item 6 – Exhibits


Number						Description
3.1.1						Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Amendment No. 2 to the Company’s Registration Statement on Form S-1/A filed on June 14, 1999, File No. 333-77483)

3.1.2						Certificate of Amendment to the Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on April 4, 2002, File No. 000-26489)

3.1.3						Second Certificate of Amendment to the Certificate of Incorporation (incorporated by reference to Exhibit 3.1.3 to the Company’s Quarterly Report on Form 10-Q filed on August 7, 2019)

3.3						Bylaws, as amended through February 8, 2011 (incorporated by reference to Exhibit 3.3 to the Company’s Annual Report on Form 10-K filed on February 14, 2011)
~~4.1~~						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 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on September 24, 2020)

~~4.2.1~~						~~First Supplemental Indenture dated September 7, 2020 to Indenture dated October 6, 2016(incorporated by reference to Exhibit~~ ~~4.3~~ ~~to the Company’s Current Report on Form 8-K filed on~~ ~~September~~24 ~~, 2020)~~

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~~4.2.2~~						~~Second Supplemental Indenture dated September 24, 2020 to Indenture dated October 6, 2016(incorporated by reference to Exhibit 4.~~5 ~~to the Company’s Current Report on Form 8-K filed on September 24, 2020)~~

~~4.3.1~~						~~First Supplemental Indenture dated September 7, 2020 to Indenture dated June 14, 2019(incorporated by reference to Exhibit 4.~~2 ~~to the Company’s Current Report on Form 8-K filed on September 24, 2020)~~

~~4.3.2~~						~~Second Supplemental Indenture dated September 24, 2020 to Indenture dated June 14, 2019(incorporated by reference to Exhibit 4.~~4 ~~to the Company’s Current Report on Form 8-K filed on September 24, 2020)~~

~~4.4~~						Second Supplemental Indenture, dated October 29, 2020, to the Indenture, dated as of March 11, 2014, by and among Encore Capital Group, Inc., Midland Credit Management, Inc., as guarantor, and MUFG Union Bank, N.A., as trustee ~~(filed herewith)~~

~~4.5~~						First Supplemental Indenture, dated October 29, 2020, to the Indenture, dated as of March 3, 2017, by and among Encore Capital Group, Inc., Midland Credit Management, Inc., as guarantor, and MUFG Union Bank, N.A., as trustee (filed herewith)

~~4.6~~						Second Supplemental Indenture, dated October 29, 2020, to the Indenture, dated as of July 20, 2018, by and among Encore Capital Europe Finance Limited, Encore Capital Group, Inc., as guarantor, and MUFG Union Bank, N.A., as trustee (filed herewith)

~~4.7~~						First Supplemental Indenture, dated October 29, 2020, to the Indenture, dated as of September 9, 2019, by and among Encore Capital Group, Inc., Midland Credit Management, Inc., as guarantor, and MUFG Union Bank, N.A., as trustee (filed herewith)

~~10.1~~						Amendment No. 5 to Third Amended and Restated Credit Agreement, dated July 9, 2020, by and among Encore Capital Group, Inc., the several banks and other financial institutions and lenders from time to time party thereto and listed on the signature pages thereof, and Truist Bank, as administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 13, 2020)

~~10.2~~						Amended and Restated Senior Facilities Agreement, dated September 1, 2020, 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 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 1, 2020)

~~10.3~~						Fourth Amended and Restated Senior Secured Note Purchase Agreement (including the forms of the Notes), dated as of September 1, 2020, by and among Encore Capital Group, Inc. and the purchasers named therein (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 1, 2020)

31.1						Certification of the Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

31.2						Certification of the Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed 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)

101.INS						XBRL Instance Document - The instance document does not appear in the interactive data file because XBRL tags are embedded within the inline XBRL document. (filed herewith)

101.SCH						XBRL Taxonomy Extension Schema Document (filed herewith)

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith)

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document (filed herewith)

101.LAB						XBRL Taxonomy Extension Label Linkbase Document (filed herewith)

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith)

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			ENCORE CAPITAL GROUP, INC.

			By:						/s/ Jonathan C. Clark
									Jonathan C. Clark
									Executive Vice President,
									Chief Financial Officer and Treasurer

									/s/ Peter Reck
									Peter Reck
									Vice President,
									Chief Accounting Officer

Date: ~~November 2, 2020~~May 5, 2021

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	Three Months Ended September 30, 2019
	Common Stock			Additional Paid-In Capital		Accumulated Earnings		Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interest		Total Equity
	Shares	Par
Balance as of June 30, 2019	30,980	$	310	$	211,508	$	806,104	$	(117,427)	$	2,462	$	902,957
Net income	—	—		—		38,869		—		544		39,413
Other comprehensive (loss) income, net of tax	—	—		—		—		(32,545)		51		(32,494)
Exercise of stock options and issuance of share-based awards, net of shares withheld for employee taxes	79	1		(2,267)		—		—		—		(2,266)
Stock-based compensation	—	—		4,005		—		—		—		4,005
Issuance of exchangeable notes	—	—		6,776		—		—		—		6,776
Exchangeable notes hedge transactions	—	—		1,792		—		—		—		1,792
Other	—	—		—		—		3,814		—		3,814
Balance as of September 30, 2019	31,059	$	311	$	221,814	$	844,973	$	(146,158)	$	3,057	$	923,997


	Nine Months Ended September 30, 2019
	Common Stock			Additional Paid-In Capital		Accumulated Earnings		Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interest		Total Equity
	Shares	Par
Balance as of December 31, 2018	30,884	$	309	$	208,498	$	720,189	$	(110,987)	$	1,679	$	819,688
Net income	—	—		—		124,784		—		893		125,677
Other comprehensive (loss) income, net of tax	—	—		—		—		(38,985)		485		(38,500)
Exercise of stock options and issuance of share-based awards, net of shares withheld for employee taxes	175	2		(3,696)		—		—		—		(3,694)
Stock-based compensation	—	—		9,412		—		—		—		9,412
Issuance of exchangeable notes	—	—		6,776		—		—		—		6,776
Exchangeable notes hedge transactions	—	—		1,792		—		—		—		1,792
Other	—	—		(968)		—		3,814		—		2,846
Balance as of September 30, 2019	31,059	$	311	$	221,814	$	844,973	$	(146,158)	$	3,057	$	923,997


	Balance as of December 31, 2019		Adjustment		Opening Balance as of January 1, 2020
Assets
Investment in receivable portfolios, net	$	3,283,984	$	44,166	$	3,328,150
Deferred court costs, net	100,172		(100,172)		0
Liabilities
Other liabilities (for deferred tax liabilities)	147,436		(11,768)		135,668
Equity
Accumulated earnings	888,058		(44,238)		843,820


	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Balance as of beginning of period	$	57,204	$	60,631
Provision for portfolio allowances	1,120		4,835
Reversal of prior allowances	(9,635)		(16,780)

Baycorp Transaction	(1,036)		(1,036)
Effect of foreign currency translation	(554)		(551)
Balance as of end of period	$	47,099	$	47,099


	September 30, 2020		December 31, 2019
Liability component—principal amount	$	583,500	$	672,855
Unamortized debt discount	(21,786)		(30,308)
Liability component—net carrying amount	$	561,714	$	642,547
Equity component	$	53,074	$	83,127


	Three Months Ended September 30, 2019						As of September 30, 2019
	Collections		Revenue from Receivable Portfolios		Net Reversal (Portfolio Allowance)		Unamortized Balances		Monthly EIR
United States:
ZBA	$	16,333	$	14,301	$	2,045	$	—	—	%
2011	8,310		9,264		—		2,907		77.2	%
2012	9,072		8,392		—		6,692		33.5	%
2013	20,387		17,559		—		15,844		33.3	%
2014	16,358		10,422		1,717		53,863		6.0	%
2015	20,305		8,728		4,636		88,511		3.0	%
2016	37,609		16,817		—		163,481		3.2	%
2017	59,238		31,909		—		219,053		4.5	%
2018	86,185		47,839		(196)		450,300		3.3	%
2019	57,431		37,680		—		491,560		3.2	%
Subtotal	331,228		202,911		8,202		1,492,211		4.1	%
Europe:
ZBA	73		72		—		—		—	%
2013	26,530		20,858		—		221,599		3.1	%
2014	25,112		17,701		29		200,040		2.9	%
2015	18,042		11,273		450		154,572		2.3	%
2016	13,957		10,214		—		139,951		2.5	%
2017	27,412		15,558		—		292,257		1.7	%
2018	24,413		17,188		(888)		380,162		1.5	%
2019	14,681		9,287		—		208,934		1.8	%
Subtotal	150,220		102,151		(409)		1,597,515		2.1	%
Other geographies:
ZBA	1,777		1,796		—		—		—	%
2014	1,492		942		—		60,827		80.8	%
2015	3,714		2,804		267		7,295		13.7	%
2016	2,757		1,640		455		4,998		4.9	%
2017	3,652		1,827		—		16,169		5.2	%
2018	3,369		1,673		—		8,792		3.1	%
2019	1,186		473		—		360		3.2	%
Subtotal	17,947		11,155		722		98,441		6.0	%
Total	$	499,395	$	316,217	$	8,515	$	3,188,167	3.1	%