• Encore sets new records for collections, revenues and profits for the year 
  • Record GAAP EPS from continuing operations of $4.06 in 2018, up 28%
  • Record Economic EPS from continuing operations of $4.98 in 2018, up 23%
  • 2018 global deployments of $1.13 billion, including a record $638 million in the U.S.

SAN DIEGO, Feb. 27, 2019 (GLOBE NEWSWIRE) -- Encore Capital Group, Inc. (NASDAQ: ECPG), an international specialty finance company, today reported consolidated financial results for the fourth quarter and full year ended December 31, 2018.

“2018 was a year of significant achievement for Encore, characterized by our accomplishment of key objectives and record results,” said Ashish Masih, Encore’s President and Chief Executive Officer. “In order to capitalize on the favorable purchasing environment in the U.S., we deployed more capital in the United States in 2018 than in any prior year. Through our operational innovation and increased productivity, global collections and revenues increased to record levels. As a result, this performance helped generate record profitability and was key to delivering on our expectation of at least 20% growth in earnings per share for the year.”

“2018 was also a transformational year for Encore, during which we completed the acquisition of the remaining interest in Cabot. This established Encore as a clear leader in the U.K. in both debt purchasing and servicing. In addition, we are driving synergies through the combination of our Spanish operations as well as best practice sharing between our U.S. and European operations in key competencies such as data analytics, decision science, digital collections, speech analytics, collections platforms, and consumer-focused call techniques.”

“We ended the year on a high note, with fourth quarter GAAP and adjusted earnings both reaching all-time high levels. In the U.S., collections grew 15% in the quarter, driven by strong growth in our U.S. call center and digital channel, where collections were up 25% compared to the fourth quarter of last year. In Europe, revenues were up 13% for the quarter.”

“Finally, in anticipation of another strong year of investing in U.S. portfolios, we have already secured approximately $480 million dollars in forward flow purchase commitments for 2019, and we expect to continue to grow deployments,” said Masih.

Financial Highlights for the Fourth Quarter of 2018:

  • Estimated remaining collections (ERC) increased $209 million compared to the prior year, to $7.2 billion.
  • Portfolio purchases were $247 million, compared to $301 million deployed in the fourth quarter of 2017.
  • Gross collections were $484 million, up 11% compared to $438 million in the fourth quarter of 2017.
  • Total revenues, adjusted by net allowances and allowance reversals, were $349 million, up 10% compared to $317 million in the fourth quarter of 2017.
  • Total operating expenses were $233 million, compared to $253 million in the fourth quarter of 2017. This decline was largely the result of several expenses incurred specifically in 2017 including expenses related to the withdrawn Cabot IPO and other acquisition and restructuring related costs. Adjusted operating expenses were $191 million, compared to $182 million in the fourth quarter of 2017.
  • Total interest expense increased to $57 million, compared to $52 million in the fourth quarter of 2017, principally as a result of higher interest rates and Cabot refinancing costs.
  • GAAP net income from continuing operations attributable to Encore was a record $47 million, or $1.50 per fully diluted share, compared to $13 million, or $0.48 per fully diluted share, in the fourth quarter of 2017.
  • Adjusted income from continuing operations attributable to Encore was a record $45 million, compared to $28 million in the fourth quarter of 2017.
  • Adjusted income from continuing operations attributable to Encore (also referred to as Economic EPS) was $1.45 per share, compared to $1.05 per share in the fourth quarter of 2017.
  • As of December 31, 2018, after taking into account borrowing base and applicable debt covenants, available capacity under Encore’s U.S. revolving credit facility was $177 million, and availability under Cabot’s revolving credit facility was £151 million (approximately $192 million). These figures do not include cash on the balance sheet.

Financial Highlights for the Full Year of 2018:

  • Portfolio purchases for the full year were $1.13 billion, including a record $638 million in the U.S. and $455 million in Europe, compared to $1.06 billion deployed overall in 2017.
  • Gross collections were a record $1.97 billion, up 11% compared to $1.77 billion in 2017.
  • Total revenues, adjusted by net allowances and allowance reversals, were a record $1.36 billion, up 15% compared to $1.19 billion in 2017.
  • Total operating expenses were $957 million, compared to $862 million in 2017. This increase was principally the result of variable costs associated with the large increase in collections, expenses associated with Wescot, which was acquired in November 2017, and the Cabot transaction. Adjusted operating expenses were $745 million, compared to $698 million in 2017.
  • Total interest expense was $240 million, compared to $204 million in 2017, principally as a result of higher interest rates and Cabot refinancing costs.
  • GAAP net income from continuing operations attributable to Encore was a record $116 million, or $4.06 per fully diluted share, compared to $83 million, or $3.16 per fully diluted share, in 2017.
  • Adjusted income from continuing operations attributable to Encore was a record $142 million, or $4.98 per fully diluted share (also referred to as Economic EPS), compared to $106 million, or $4.04 per share in 2017.

Conference Call and Webcast
The Company will host a conference call and slide presentation today, February 27, 2019, at 2:00 p.m. Pacific time / 5:00 p.m. Eastern time to discuss fourth quarter and full year results.

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

For those who cannot listen to the live broadcast, a telephonic replay will be available for seven days by dialing (800) 585-8367 or (404) 537-3406 and entering the conference number 3575827. A replay of the webcast will also be available shortly after the call on the Company's website.

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

About Encore Capital Group, Inc.
Encore Capital Group is an international specialty finance company that provides debt recovery solutions and other related services for consumers across a broad range of financial assets. Through its subsidiaries around the globe, Encore purchases portfolios of consumer receivables from major banks, credit unions, and utility providers.

Encore partners with individuals as they repay their debt obligations, helping them on the road to financial recovery and ultimately improving their economic well-being. Encore is the first and only company of its kind to operate with a Consumer Bill of Rights that provides industry-leading commitments to consumers. Headquartered in San Diego, Encore is a publicly traded NASDAQ Global Select company (ticker symbol: ECPG) and a component stock of the Russell 2000, the S&P Small Cap 600 and the Wilshire 4500. More information about the company can be found at http://www.encorecapital.com. More information about the Company's Cabot Credit Management subsidiary can be found at http://www.cabotcm.com. Information found on the company’s or Cabot’s website is not incorporated by reference.

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

Contact:
Bruce Thomas
Encore Capital Group, Inc.
Vice President, Investor Relations
(858) 309-6442
bruce.thomas@encorecapital.com

SOURCE: Encore Capital Group, Inc.

FINANCIAL TABLES FOLLOW

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

 December 31,
2018
 December 31,
2017
Assets   
Cash and cash equivalents$157,418  $212,139 
Investment in receivable portfolios, net3,137,893  2,890,613 
Deferred court costs, net95,918  79,963 
Property and equipment, net115,518  76,276 
Other assets257,002  302,728 
Goodwill868,126  928,993 
Total assets$4,631,875  $4,490,712 
Liabilities and Equity   
Liabilities:   
Accounts payable and accrued liabilities$287,945  $284,774 
Debt, net3,490,633  3,446,876 
Other liabilities33,609  35,151 
Total liabilities3,812,187  3,766,801 
Commitments and contingencies   
Redeemable noncontrolling interest  151,978 
Equity:   
Convertible preferred stock, $.01 par value, 5,000 shares authorized, no shares issued and outstanding   
Common stock, $.01 par value, 50,000 shares authorized, 30,884 shares and 25,801 shares issued and outstanding as of December 31, 2018 and December 31, 2017, respectively309  258 
Additional paid-in capital208,498  42,646 
Accumulated earnings720,189  616,314 
Accumulated other comprehensive loss(110,987) (77,356)
Total Encore Capital Group, Inc. stockholders’ equity818,009  581,862 
Noncontrolling interest1,679  (9,929)
Total equity819,688  571,933 
Total liabilities, redeemable equity and equity$4,631,875  $4,490,712 
        

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

 December 31,
2018
 December 31,
2017
Assets   
Cash and cash equivalents$448  $88,902 
Investment in receivable portfolios, net501,489  1,342,300 
Deferred court costs, net  26,482 
Property and equipment, net  23,138 
Other assets9,563  122,263 
Goodwill  724,054 
Liabilities   
Accounts payable and accrued liabilities$4,556  $151,208 
Debt, net445,837  2,014,202 
Other liabilities46  1,494 
      

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

 (Unaudited)
Three Months Ended
December 31,
 Year Ended
 December 31,
 2018 2017 2018 2017
Revenues       
Revenue from receivable portfolios$298,104  $276,104  $1,167,132  $1,053,373 
Other revenues40,616  30,666  153,425  92,429 
Total revenues338,720  306,770  1,320,557  1,145,802 
Allowance reversals on receivable portfolios, net10,001  10,711  41,473  41,236 
Total revenues, adjusted by net allowance reversals348,721  317,481  1,362,030  1,187,038 
Operating expenses       
Salaries and employee benefits93,211  94,446  369,064  315,742 
Cost of legal collections49,621  50,598  205,204  200,058 
General and administrative expenses35,189  55,330  158,352  158,080 
Other operating expenses31,456  28,689  134,934  104,938 
Collection agency commissions13,361  10,025  47,948  43,703 
Depreciation and amortization9,996  14,158  41,228  39,977 
Total operating expenses232,834  253,246  956,730  862,498 
Income from operations115,887  64,235  405,300  324,540 
Other (expense) income       
Interest expense(56,956) (51,692) (240,048) (204,161)
Other (expense) income(3,803) (1,157) (8,764) 10,847 
Total other expense(60,759) (52,849) (248,812) (193,314)
Income from continuing operations before income taxes55,128  11,386  156,488  131,226 
Provision for income taxes(9,095) (8,607) (46,752) (52,049)
Income from continuing operations46,033  2,779  109,736  79,177 
Loss from discontinued operations, net of tax      (199)
Net income46,033  2,779  109,736  78,978 
Net loss attributable to noncontrolling interest1,003  9,902  6,150  4,250 
Net income attributable to Encore Capital Group, Inc. stockholders$47,036  $12,681  $115,886  $83,228 
Amounts attributable to Encore Capital Group, Inc.:       
Income from continuing operations$47,036  $12,681  $115,886  $83,427 
Loss from discontinued operations, net of tax      (199)
Net income$47,036  $12,681  $115,886  $83,228 
Earnings per share attributable to Encore Capital Group, Inc.:       
Basic earnings (loss) per share from:       
Continuing operations$1.51  $0.49  $4.09  $3.21 
Discontinued operations$  $  $  $(0.01)
Net basic earnings per share$1.51  $0.49  $4.09  $3.20 
Diluted earnings (loss) per share from:       
Continuing operations$1.50  $0.48  $4.06  $3.16 
Discontinued operations$  $  $  $(0.01)
Net diluted earnings per share$1.50  $0.48  $4.06  $3.15 
Weighted average shares outstanding:       
Basic31,107  26,017  28,313  25,972 
Diluted31,270  26,405  28,572  26,405 
            

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

 Year Ended December 31,
 2018 2017 2016
Operating activities:     
Net income$109,736  $78,978  $16,817 
Adjustments to reconcile net income to net cash provided by operating activities:     
Loss from discontinued operations, net of income taxes  199  2,353 
Depreciation and amortization41,228  39,977  34,868 
Interest expense related to financing11,710     
Other non-cash expense, net20,744  39,591  30,623 
Stock-based compensation expense12,980  10,399  12,627 
Loss (gain) on derivative instruments, net10,789  (3,915) (7,816)
Deferred income taxes16,814  28,970  (52,905)
(Reversal of) provision for allowances on receivable portfolios, net(41,473) (41,236) 84,177 
Changes in operating assets and liabilities     
Deferred court costs and other assets(35,626) (4,101) (20,364)
Prepaid income tax and income taxes payable24,284  (26,699) 25,417 
Accounts payable, accrued liabilities and other liabilities15,605  1,655  2,439 
Net cash provided by operating activities from continuing operations186,791  123,818  128,236 
Net cash provided by operating activities from discontinued operations    2,096 
Net cash provided by operating activities186,791  123,818  130,332 
Investing activities:     
Cash paid for acquisitions, net of cash acquired  (96,390) (675)
Proceeds from divestiture of business, net of cash divested(1,877)   106,041 
Purchases of assets held for sale    (19,874)
Purchases of receivable portfolios, net of put-backs(1,131,095) (1,045,829) (907,413)
Collections applied to investment in receivable portfolios, net809,688  709,420  659,321 
Purchases of property and equipment(67,475) (28,126) (31,668)
(Payment of) proceeds from derivative instruments, net(18,302) 3,533  8,800 
Other, net11,545  5,261  1,994 
Net cash used in investing activities from continuing operations(397,516) (452,131) (183,474)
Net cash provided by investing activities from discontinued operations    14,685 
Net cash used in investing activities(397,516) (452,131) (168,789)
Financing activities:     
Payment of loan costs(11,576) (28,972) (32,338)
Payment related to debt financing(11,710)    
Proceeds from credit facilities942,186  1,434,480  586,016 
Repayment of credit facilities(571,144) (1,168,069) (615,857)
Proceeds from senior secured notes  325,000  442,610 
Repayment of senior secured notes(91,578) (204,241) (352,549)
Proceeds from issuance of convertible and exchangeable senior notes172,500  150,000   
Repayment of convertible senior notes  (125,407)  
Proceeds from other debt27,694  33,197  36,172 
Repayment of other debt(42,456) (8,910) (15,388)
Payment for the purchase of PECs and noncontrolling interest(234,101) (29,731) (4,842)
Payment of direct and incremental costs relating to Cabot Transaction(8,622)    
Other, net(4,816) 870  (571)
Net cash provided by financing activities166,377  378,217  43,253 
Net increase in cash and cash equivalents(44,348) 49,904  4,796 
Effect of exchange rate changes on cash and cash equivalents(10,373) 12,470  (8,624)
Cash and cash equivalents, beginning of period212,139  149,765  153,593 
Cash and cash equivalents, end of period$157,418  $212,139  $149,765 
Cash and cash equivalents of discontinued operations, end of period     
Cash and cash equivalents of continuing operations, end of period$157,418  $212,139  $149,765 
Supplemental disclosures of cash flow information:     
Cash paid for interest$198,797  $162,545  $147,899 
Cash paid for income taxes, net30,247  44,365  60,071 
Supplemental schedule of non-cash investing and financing activities:     
Stock consideration for the Cabot Transaction$180,559  $  $ 
Conversion of convertible senior notes  28,277   
Fixed assets acquired through capital lease3,283  3,577  55 
         

ENCORE CAPITAL GROUP, INC.
Supplemental Financial Information

Reconciliation of Adjusted Income Attributable to Encore to GAAP Net Income Attributable to Encore and Adjusted Operating Expenses Related to Portfolio Purchasing and Recovery Business to GAAP Total Operating Expenses
(In Thousands, Except Per Share amounts) (Unaudited)

 Three Months Ended December 31,
 2018 2017
 $ Per Diluted
Share—
Accounting
 Per Diluted
Share—
Economic
 $ Per Diluted
Share—
Accounting
 Per Diluted
Share—
Economic
GAAP net income from continuing operations attributable to Encore, as reported$47,036  $1.50  $1.50  $12,681  $0.48  $0.48 
Adjustments:           
Convertible and exchangeable notes non-cash interest and issuance cost amortization4,072  0.13  0.13  3,126  0.12  0.12 
Acquisition, integration and restructuring related expenses(1)(5,179) (0.17) (0.17) 11,911  0.45  0.45 
Amortization of certain acquired intangible assets(2)1,886  0.06  0.06  1,610  0.06  0.06 
Net gain on fair value adjustments to contingent considerations(3)(1,012) (0.03) (0.03) (49) 0.00  0.00 
Expenses related to withdrawn Cabot IPO(4)      15,339  0.58  0.58 
Adjustments attributable to noncontrolling interest(5)      (13,965) (0.53) (0.53)
Impact from tax reform(6)      1,182  0.05  0.05 
Income tax effect of the adjustments(7)(1,316) (0.04) (0.04) (4,183) (0.16) (0.16)
Adjusted income from continuing operations attributable to Encore$45,487  $1.45  $1.45  $27,652  $1.05  $1.05 

________________________

(1) Amount represents acquisition, integration and restructuring related expenses. We adjust for this amount because we believe these expenses are not indicative of ongoing operations; therefore, adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results.
(2) As we acquired debt solution service providers around the world, our acquired intangible assets, such as trade names and customer relationships, increased substantially. These intangible assets are valued at the time of the acquisition and amortized over their estimated lives. We believe that amortization of acquisition-related intangible assets, especially the amortization of an acquired company’s trade names and customer relationships, is the result of pre-acquisition activities. In addition, the amortization of these acquired intangibles is a non-cash static expense that is not affected by operations during any reporting period. As a result, the amortization of certain acquired intangible assets is excluded from our adjusted income from continuing operations attributable to Encore and adjusted income from continuing operations per share.
(3) Amount represents the 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.
(4) Amount represents expenses related to the proposed and later withdrawn initial public offering by Cabot in 2017. 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.
(5) Certain of the above pre-tax adjustments include expenses recognized by our partially-owned subsidiaries. This adjustment represents the portion of the non-GAAP adjustments that are attributable to noncontrolling interest.
(6) As a result of the U.S. Tax Cuts and Jobs Act (the “Tax Reform Act”), we incurred a net additional tax expense of approximately $1.2 million. We believe the Tax Reform Act related expenses are not indicative of our ongoing operations, therefore adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results.
(7) 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.
   


 Year Ended December 31,
 2018 2017
 $ Per Diluted
Share—
Accounting
and
Economic
 $ Per Diluted
Share—
Accounting
 Per Diluted
Share—
Economic
GAAP net income from continuing operations attributable to Encore, as reported$115,886  $4.06  $83,427  $3.16  $3.18 
Adjustments:         
Convertible and exchangeable notes non-cash interest and issuance cost amortization13,896  0.50  12,353  0.47  0.47 
Acquisition, integration and restructuring related expenses(1)11,506  0.40  16,628  0.63  0.63 
Loss on derivatives in connection with the Cabot Transaction(2)9,315  0.33       
Amortization of certain acquired intangible assets(3)8,337  0.29  3,561  0.13  0.14 
Expenses related to withdrawn Cabot IPO(4)2,984  0.10  15,339  0.58  0.58 
Settlement fees and related administrative expenses(5)         
Impact from tax reform(6)    1,182  0.05  0.05 
Adjustments attributable to noncontrolling interest(7)(5,022) (0.18) (15,720) (0.60) (0.60)
Net gain on fair value adjustments to contingent considerations(8)(5,664) (0.20) (2,822) (0.11) (0.11)
Income tax effect of the adjustments(9)(9,079) (0.32) (7,936) (0.30) (0.30)
Adjusted income from continuing operations attributable to Encore$142,159  $4.98  $106,012  $4.01  $4.04 

________________________

(1) Amount represents acquisition, integration and restructuring related expenses. We adjust for this amount because we believe these expenses are not indicative of ongoing operations; therefore, adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results.
(2) Amount represents the loss recognized on the forward contract we entered into in anticipation of the completion of the Cabot Transaction. We adjust for this amount because we believe the loss is not indicative of ongoing operations; therefore, adjusting for this loss enhances comparability to prior periods, anticipated future periods, and our competitors’ results.
(3) As we acquired debt solution service providers around the world, our acquired intangible assets, such as trade names and customer relationships, increased substantially. These intangible assets are valued at the time of the acquisition and amortized over their estimated lives. We believe that amortization of acquisition-related intangible assets, especially the amortization of an acquired company’s trade names and customer relationships, is the result of pre-acquisition activities. In addition, the amortization of these acquired intangibles is a non-cash static expense that is not affected by operations during any reporting period. As a result, the amortization of certain acquired intangible assets is excluded from our adjusted income from continuing operations attributable to Encore and adjusted income from continuing operations per share.
(4) Amount represents expenses related to the proposed and later withdrawn initial public offering by Cabot in 2017. 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.
(5) Amount represents litigation and government settlement fees and related administrative expenses for certain TCPA settlements. We believe these fees and expenses are not indicative of ongoing operations, therefore, adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results.
(6) As a result of the Tax Reform Act, we incurred a net additional tax expense of approximately $1.2 million during the year ended December 31, 2017. We believe the Tax Reform Act related expenses are not indicative of our ongoing operations, therefore adjusting for these expenses enhances comparability to prior periods, anticipated future periods, and our competitors’ results.
(7) Certain of the above pre-tax adjustments include expenses recognized by our partially-owned subsidiaries. This adjustment represents the portion of the non-GAAP adjustments that are attributable to noncontrolling interest.
(8) 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.
(9) 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.
   


 Three Months Ended December 31, Year Ended December 31,
2018 2017 2018 2017
GAAP total operating expenses, as reported$232,834  $253,246  $956,730  $862,498 
Adjustments:       
Operating expenses related to non-portfolio purchasing and recovery business(1)(45,069) (41,164) (193,715) (125,028)
Stock-based compensation expense(2,528) (3,358) (12,980) (10,399)
Acquisition, integration and restructuring related operating expenses(2)5,179  (11,911) (7,523) (16,628)
Expenses related to withdrawn Cabot IPO(3)  (15,339) (2,984) (15,339)
Net gain on fair value adjustments to contingent considerations(4)1,012  49  5,664  2,822 
Adjusted operating expenses related to portfolio purchasing and recovery business$191,428  $181,523  $745,192  $697,926 

________________________

(1) Operating expenses related to non-portfolio purchasing and recovery business include operating expenses from other operating segments that primarily engage in fee-based business, as well as corporate overhead not related to our portfolio purchasing and recovery business.
(2) Amount represents acquisition, integration and restructuring related 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) Amount represents expenses related to the proposed and later withdrawn initial public offering by Cabot in 2017. 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) 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.