Receivable Portfolios, Net

3 Months Ended

Mar. 31, 2026

The Company’s purchased portfolios of loans 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 “Receivable portfolios, net” in the Company’s condensed 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., 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. Debt purchasing revenue includes two components:

(1) Portfolio revenue, which is the accretion of the discount on the negative allowance due to the passage of time (generally the receivable portfolio balance multiplied by the EIR) and also includes all revenue from zero basis portfolio (“ZBA”) collections, and

(2) Changes in recoveries, which includes

(a) Recoveries above or below forecast, which is the difference between (i) actual cash collected/recovered during the current period and (ii) expected cash recoveries for the current period, which generally represents over or under performance for the period; and

(b) Changes in expected future recoveries, which is the present value change of expected future recoveries, where such change generally results from (i) collections “pulled forward from” or “pushed out to” future periods (i.e. amounts either collected early or expected to be collected later) and (ii) magnitude and timing changes to estimates of expected future collections (which can be increases or decreases).

The Company measures expected future recoveries based on historical experience, current conditions, reasonable and supportable forecasts, and other quantitative and qualitative factors. 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 the Company’s collection staff. External factors that may have an impact on the Company’s collections include new laws or regulations, new interpretations of existing laws or regulations, and macroeconomic conditions.

Receivable portfolios, net consists of the following as of the dates presented (in thousands):



	March 31, 2026		December 31, 2025
Amortized cost	$	—	$	—
Negative allowance for expected recoveries	4,437,415		4,371,532
Balance, end of period	$	4,437,415	$	4,371,532

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


	Three Months Ended March 31,
	2026		2025
Balance, beginning of period	$	4,371,532	$	3,776,369
Negative allowance for expected recoveries - portfolio purchases(1)	362,841		367,851
Collections applied to receivable portfolios, net(2)	(328,395)		(259,589)
Changes in recoveries(3)	62,740		21,464
Put-backs and recalls	(3,378)		(5,139)

Disposals and transfers to real estate owned	(1,020)		(1,040)
Foreign currency translation adjustments	(26,905)		52,615
Balance, end of period	$	4,437,415	$	3,952,531

_______________________

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


	Three Months Ended March 31,
	2026		2025
Purchase price	$	362,841	$	367,851
Allowance for credit losses	951,644		954,659
Amortized cost	1,314,485		1,322,510
Noncredit discount	1,755,822		1,659,266
Face value	3,070,307		2,981,776
Write-off of amortized cost	(1,314,485)		(1,322,510)
Write-off of noncredit discount	(1,755,822)		(1,659,266)
Negative allowance	362,841		367,851
Negative allowance for expected recoveries - portfolio purchases	$	362,841	$	367,851

(2)Collections applied to receivable portfolios, net, is calculated as follows during the periods presented:


	Three Months Ended March 31,
	2026		2025
Cash Collections	$	718,414	$	604,807
Less - amounts classified to portfolio revenue	(390,019)		(345,218)
Collections applied to receivable portfolios, net	$	328,395	$	259,589

(3)Changes in recoveries is calculated as follows during the periods presented, where recoveries include cash collections, put-backs and recalls, and other cash-based adjustments:


	Three Months Ended March 31,
	2026		2025
Recoveries above forecast	$	46,044	$	26,952
Changes in expected future recoveries	16,696		(5,488)
Changes in recoveries	$	62,740	$	21,464

Recoveries above or below forecast represent over and under-performance in the reporting period, respectively. Collections during the three months ended March 31, 2026 over-performed the forecasted collections by $46.0 million, primarily driven by collections over-performance in the U.S. resulting from enhanced collections strategies. Collections during the three months ended March 31, 2025 over-performed the forecasted collections by $27.0 million.

Changes in expected future recoveries are reassessed each quarter; the Company considers, among other factors, historical and current collection performance, changes in consumer behavior, and the macroeconomic environment when updating the forecasts of expected lifetime recoveries. The significant recoveries above forecast during the three months ended March 31, 2026 were carefully evaluated. Management concluded that the recoveries above forecast were primarily current period collections over-performance and did not represent any material shift in timing of the collections. Additionally, the sustained over-performance in recent quarters led to increases in forecasted future recoveries for recently acquired vintages. As a result, the Company recorded a net positive change of $16.7 million in expected future recoveries during the three months ended March 31, 2026. During the three months ended March 31, 2025, the Company recorded a net negative change of $5.5 million in expected future recoveries