Encore Capital Group Inc · NASDAQ:ECPG
Encore Capital — Investor Presentation (January 2011)
34 slides from Encore Capital's investor presentation, Jan 12, 2011
Slide 1: Celebrating Five Years in India: An Update on Our Strategy to Drive Growth and Shareholder Value
Exhibit 99.1 Celebrating Five Years in India: An Update on Our Strategy to Drive Growth and Shareholder Value January 12, 2011
Slide 2: Cautionary Note About Forward-Looking Statements
2 CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS The statements in this presentation that are not historical facts, including, most importantly, those statements preceded by, or that include, the words “may,” “believe,” “projects,” “expects,” “anticipates” or the negation thereof, or similar expre
Slide 3: Agenda
3 AGENDA • Discuss our rationale for choosing India • Highlight our business continuity plans and risk mitigation strategies for our India operations • Describe Encore’s success in India and discuss how our Indian operations can continue to positively contribute to the Company's future • Provide an
Slide 4: Our India Operation Drives Significant Value
4 We believe that we are the only company in our industry with a successful late stage collection platform in India India now represents half of our call center collections and we expect this contribution to continue to increase, both on an absolute and a relative basis Beyond collections, our India
Slide 5: The Success of Our India Expansion Has Fundamentally Changed Encore's Cost Structure
5 THE SUCCESS OF OUR INDIA EXPANSION HAS FUNDAMENTALLY CHANGED ENCORE’S COST STRUCTURE Collection sites’ direct cost per dollar collected (%)
Slide 6: India Work Teams Perform at Levels Consistent With Domestic Sites
6 Cash average comparison between India and U.S. collectors, using a specific collection team for comparison THIS IS A RESULT OF OUR ABILITY TO CREATE WORK TEAMS IN INDIA THAT PERFORM AT LEVELS CONSISTENT WITH OUR DOMESTIC SITES (%) ILLUSTRATION
Slide 7: Decision to Establish Offshore Operations in Early 2005
7 % on a dollar of face WE MADE THE DECISION TO ESTABLISH OFFSHORE OPERATIONS IN EARLY 2005, AS INDUSTRY PRICING WAS INCREASING • We expected the high cost environment to persist for some time due to the significant influx of capital • We were convinced that a successful offshore facility would give
Slide 8: Delhi National Capital Region Became the Location of Choice
8 THE DELHI NATIONAL CAPITAL REGION BECAME THE LOCATION OF CHOICE BECAUSE OF A COMBINATION OF FACTORS Highly qualified skill pool (4 million English speaking residents & 2.2 million new college graduates across India every year) 50-75% cost reduction compared to U.S. Entrepreneurial culture Signific
Slide 9: Validated This Decision by Exploring Numerous Alternatives
9 WE HAVE VALIDATED THIS DECISION SEVERAL TIMES DURING THE LAST 5 YEARS BY EXPLORING NUMEROUS ALTERNATIVES, NEAR AND FAR Relative Competitiveness Index (not industry or function specific) 100.0 97.8 94.3 92.6 91.4 90.1 89.1 87.9 87.7 86.4 86.2 84.4 81.0 80.0 75.8 74.6 74.1 73.6 73.3 72.8 71.1 71.1 7
Slide 10: Success Did Not Come Easily and Will Be Difficult to Replicate
College graduates with strong career and family aspirations Establishing brand identity takes time Work between 5:00pm and 3:00am Collecting unpaid consumer receivables 10 Overcome concerns about job stability and career growth We have not terminated a single U.S. position to move them to India duri
Slide 11: Agenda
11 AGENDA • Discuss our rationale for choosing India • Highlight our business continuity plans and risk mitigation strategies for our India operations • Provide an overview of the Business Process Outsourcing sector • Describe Encore’s success in India and discuss how our Indian operations can conti
Slide 12: The ITES Industry Began More Than 30 Years Ago
12 Many of those early ventures led to negative stereotyping of Indian workers’ accents Special Economic Zones create incentives to attract new foreign investors , followed by the advent of rd party BPOs and significant off-shoring by large IT companies like IBM, Dell, HP The National Association of
Slide 13: Industry Has Grown to Almost Six Percent of India's GDP
13 Source: NASSCOM ($ Billions, % of GDP) Indian Information Technology Enabled Services (ITES) industry growth (2004-2009) THE INDUSTRY HAS GROWN DRAMATICALLY AND NOW ACCOUNTS FOR ALMOST SIX PERCENT OF INDIA’S GROSS DOMESTIC PRODUCT
Slide 14: BPO Sector Revenue Increased 400% to Almost $15 Billion
14 Source: NASSCOM ($ Billions) Indian BPO sector growth (2004-2009) WITHIN THE INFORMATION TECHNOLOGY ENABLED SERVICES INDUSTRY, THE BPO SECTOR’S REVENUE HAS INCREASED 400% TO ALMOST $15 BILLION
Slide 15: BPO Sector Serves Many Industries and Countries
15 Source: NASSCOM THE BPO SECTOR PROVIDES SERVICES TO MANY INDUSTRIES AND COUNTRIES, WITH MORE THAN 60% BEING PROVIDED TO THE UNITED STATES Indian BPO sector by industry (%) Indian BPO sector by geography (%)
Slide 16: Agenda
16 AGENDA • Discuss our rationale for choosing India • Highlight our business continuity plans and risk mitigation strategies for our India operations • Provide an overview of the Business Process Outsourcing sector • Describe Encore’s success in India and discuss how our Indian operations can conti
Slide 17: First Few Years Marked by Constant Trial and Error
17 THE FIRST FEW YEARS WERE MARKED BY CONSTANT TRIAL AND ERROR, WITH SUCCESS COMING TOWARD THE END OF YEAR TWO 2005 Journey begins 35 employees 2007 First taste of success • Shifted to higher balance accounts drives strong performance • Started competing with U.S. on paper of similar balance and age
Slide 18: Success Fueled Rapid Expansion of People and Functions
18 THAT SUCCESS FUELED A PERIOD OF RAPID EXPANSION OF PEOPLE AND FUNCTIONS 2008 Accelerating confidence and trust • Successfully ramped up hiring without compromising performance • New work groups established • Meaningfully reduced attrition 463 employees 2009 Expansion of influence and impact • Sig
Slide 19: India Site Increased Output by 1,000%
19 India collections growth THE INDIA SITE HAS INCREASED ITS OUTPUT BY 1,000% AND IS NOW EXPECTED TO CONTRIBUTE 50% OR MORE OF ENCORE’S CALL CENTER COLLECTIONS IN 2011 (% of total AM headcount) India AM* headcount as percentage of total 909E Total India AM headcount: ($ Millions) * Note: AM stands f
Slide 20: Reduced Internal Direct Cost-to-Collect by 58% Over Four Years
20 THIS GROWTH HAS ENABLED US TO REDUCE OUR INTERNAL, DIRECT COST- TO-COLLECT BY 58% OVER THE LAST 4 YEARS Variable cost to collect * (%) * Represents salaries, variable compensation and employee benefits
Slide 21: Scale in Our New Building Drives Cost Savings
21 ORIGINAL SITE CURRENT SITE* Available capacity Occupied capacity THE SCALE WE HAVE ACHIEVED IN OUR NEW BUILDING IS DRIVING MUCH OF THE COST SAVINGS, WHILE PROVIDING ROOM FOR EXPANSION 1213 * Estimate as of last working day of the year
Slide 22: Maintained Cost per Collection Employee During Wage Expansion
22 IN THE PROCESS, WE MAINTAINED OUR COST PER COLLECTION EMPLOYEE DURING A PERIOD OF WAGE EXPANSION IN INDIA * Cost per FTE is a monthly figure which includes all India site costs
Slide 23: Demographic Conditions Will Accommodate Future Expansion
23 Delhi National Capital Region Population 21,000,000 Proficient in English 4,000,000 Employable / willing to work in BPOs 600,000 Employed in international BPOs 211,000 India site collector headcount budgeted Dec 2010 900+ Source: NASSCOM DEMOGRAPHIC AND MACROECONOMIC CONDITIONS WILL EASILY ACCOMM
Slide 24: Corporate Culture Designed to Attract and Retain Top Talent
24 Pay for Performance Growth & Development Employee Engagement Employee Wellness • Variable compensation plans foster a meritocracy and provide significant incentives • Top performers earn 3 to 4 times the India BPO sector average • Cultural events held frequently to build camaraderie between emplo
Slide 25: Social Responsibility Initiatives Have Helped Build Brand Equity
25 AND OUR SOCIAL RESPONSIBILITY INITIATIVES HAVE HELPED BUILD BRAND EQUITY IN THE COMMUNITY WE INTEGRATE OUR COMMUNITY OUTREACH PROGRAM IN ALL OUR ENGAGEMENT EFFORTS EDUCATION IS ONE SOCIAL CAUSE WE SUPPORT AS AN ORGANIZATION
Slide 26: Hiring Practices and Employee Engagement
26 Account Manager hiring: Employee referrals (%) 2009 India Engagement Scores (Internal) (%) * MEU represents the ‘Most Engaged Units’ for clients of Kenexa, our external provider of industry employee survey data THE SUCCESS OF THESE INVESTMENTS CAN BE SEEN IN OUR EVOLVING HIRING PRACTICES & THE LE
Slide 27: Skills Nurtured Through Structured Learning and Development
27 Honing Refining On-the-job training in a focused learning environment Ongoing job skill training • 6 months of concentrated development • Needs based “capsule” training to enhance performance though skill development • Integrated approach for learning reinforcement with Quality and Operations tea
Slide 28: Stable Workforce Important as Collectors Take a Year to Reach Potential
28 LEVERAGING SKILL 1- 3 Months 4- 6 Months 7 -15 Months 15+ Months Tenure ONBOARDING SKILL DEVELOPING SKILL LOWER COLLECTABILITY HIGHER COLLECTABILITY ILLUSTRATION MAINTAINING A STABLE WORKFORCE IS IMPORTANT, BECAUSE IT TAKES ABOUT A YEAR FOR A COLLECTOR TO REACH THEIR FULL POTENTIAL After approxim
Slide 29: 2010 Personnel Investment Should Begin Paying Dividends in 2011
29 OUR INVESTMENT IN PERSONNEL IN 2010 SHOULD BEGIN PAYING SIGNIFICANT DIVIDENDS IN 2011 Encore India Account Manager headcount and indicative cash average Headcount (number); Cash average (indicative) Source : Encore Capital Group
Slide 30: We Place a Significant Emphasis on Compliance
30 WE PLACE A SIGNIFICANT EMPHASIS ON COMPLIANCE
Slide 31: Agenda
31 AGENDA • Discuss our rationale for choosing India • Highlight our business continuity plans and risk mitigation strategies for our India operations • Provide an overview of the Business Process Outsourcing sector • Describe Encore’s success in India and discuss how our Indian operations can conti
Slide 32: Systematic Risk Management Strategy
32 WE HAVE A SYSTEMATIC RISK MANAGEMENT STRATEGY COMPLIANCE AND REPORTING CURRENCY RISK INDIA SITE RISK MANAGEMENT STRATEGY DATA MANAGEMENT ENVIRONMENTAL THREATS
Slide 33: Sophisticated Framework Around Each Area of Risk
33 WITH A SOPHISTICATED FRAMEWORK AROUND EACH AREA OF RISK • All consumer data resides in U.S. • Stringent controls around access to data • Zero tolerance policy on violations Consumer data security • Systematic hedging program Currency fluctuations • Segregation of duties / SOX controls • Periodic
Slide 34: Summary
34 We believe that we are the only company in our industry with a successful late stage collection platform in India India now represents half of our call center collections and we expect this contribution to continue to increase, both on an absolute and a relative basis Beyond collections, our Indi
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