Encore Capital Group Inc · NASDAQ:ECPG
Encore Capital — Q4 2014 Earnings Presentation
31 slides from Encore Capital's earnings presentation, Feb 26, 2015
Slide 1: Encore Capital Group, Inc. Q4 2014 Earnings Call
Encore Capital Group, Inc. Q4 2014 EARNINGS CALL Exhibit 99.1
Slide 2: Cautionary Note About Forward-Looking Statements
PROPRIETARY 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 “will,” “may,” “believe,” “projects,” “expects,” “anticipates” or the negation there
Slide 3: Our 2014 Acquisitions Have Added Significant Value to Our Growing Platform
PROPRIETARY OUR 2014 ACQUISITIONS HAVE ADDED SIGNIFICANT VALUE TO OUR GROWING PLATFORM 3 2013 2014 2015 2014 2015 2016 2017+ Earnings Contribution* 2 0 1 4 * For illustrative purposes.
Slide 4: With Our Growth Has Come Significant Geographic Diversification
PROPRIETARY WITH OUR GROWTH HAS COME SIGNIFICANT GEOGRAPHIC DIVERSIFICATION West Malling, UKH Costa Rica New Delhi, India London, UK Worthing, UK Dublin, Ireland Encore India St. Cloud, MN San Antonio, TX Warren, MI San Diego, CA 4 Phoenix, AZ Colombia and Peru Roanoke, VA
Slide 5: Encore Delivered Strong Quarterly Earnings Per Share
PROPRIETARY 5 ENCORE DELIVERED STRONG QUARTERLY EARNINGS PER SHARE Economic EPS** $1.17 GAAP EPS* $1.04 GAAP Net Income* $28 million Adjusted Income** $31 million Estimated Remaining Collections of $5.2 billion * Attributable to Encore ** Please refer to appendix for reconciliation of Economic EPS,
Slide 6: Encore Delivered Record Annual Earnings Per Share
PROPRIETARY 6 ENCORE DELIVERED RECORD ANNUAL EARNINGS PER SHARE Economic EPS** $4.52 GAAP EPS* $3.83 GAAP Net Income* $105 million Adjusted Income** $119 million Estimated Remaining Collections of $5.2 billion * From continuing operations attributable to Encore ** Please refer to appendix for reconc
Slide 7: Q4 and 2014 Deployments Reflect a Diverse Global Business
PROPRIETARY 7 Q4 AND 2014 DEPLOYMENTS REFLECT A DIVERSE GLOBAL BUSINESS Q4-2014 Deployments 2014 Deployments $M United States $101 Europe $113 Latin America $61 Total $1,426 Total $275 United States $700 Europe $632 Latin America $93
Slide 8: We Are Now a Leader in Several Markets
PROPRIETARY WE ARE NOW A LEADER IN SEVERAL MARKETS 8 Current Market Conditions US Core Market • Pricing remains challenging • Supply unchanged from Q4 2014 to Q1 2015 • Two large issuers remain on the sidelines UK IVA* Market and Spain • IVA supply strengthened entering the new year • Good availabil
Slide 9: Cabot Delivered Solid Performance in 2014
PROPRIETARY CABOT DELIVERED SOLID PERFORMANCE IN 2014 9 Cabot Update Cabot deployed $565 million in new portfolio purchases, including Marlin’s portfolio ERC grew 52% to $2.3 billion from $1.5 billion Cabot contributed $0.87 of Economic EPS to Encore India continues to deliver on collection
Slide 10: Propel Continues to Grow and Contribute to Encore
PROPRIETARY PROPEL CONTINUES TO GROW AND CONTRIBUTE TO ENCORE Tax Lien Receivables Total Revenue 0 10 20 30 2012 2013 2014 Operating Income 0 5 10 15 2012 2013 2014 10 Property tax lien receivables grew 22% in 2014 Expanded operations from 9 states to 22 states during 2014 Operating income doubles $
Slide 11: Detailed Financial Discussion
11 Detailed Financial Discussion
Slide 12: Q4 Collections Reflect Steady Execution and Growth
PROPRIETARY 12 Q4 COLLECTIONS REFLECT STEADY EXECUTION AND GROWTH Collections by Geography 0 100 200 300 400 500 2 0 1 3 2 0 1 4 2 0 1 3 2 0 1 4 2 0 1 3 2 0 1 4 2 0 1 3 2 0 1 4 Q1 Q2 Q3 Q4 Collection Sites Legal Collections Collection Agencies $M 0 100 200 300 400 500 2 0 1 3 2 0 1 4 2 0 1 3 2 0 1 4
Slide 13: Successfully Diversifying Business, Solid Collections Growth Outside the US
PROPRIETARY 13 WE ARE SUCCESSFULLY DIVERSIFYING OUR BUSINESS, WITH SOLID COLLECTIONS GROWTH OUTSIDE OF THE UNITED STATES Collections by Geography 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2012 2013 2014 United States Europe Latin America $948 $1,280 $1,607 $M
Slide 14: 39% Annual Revenue Growth Driven by Expansion Outside the US
PROPRIETARY OUR 39% ANNUAL REVENUE GROWTH WAS DRIVEN LARGELY BY OUR EXPANSION OUTSIDE THE UNITED STATES Revenue by Geography 14 $M 0 200 400 600 800 1,000 1,200 2012 2013 2014 United States Europe Latin America $M $557 $773 $1,073
Slide 15: Quarterly Revenue Growth Also Driven by Strong Performance Abroad
PROPRIETARY OUR QUARTERLY REVENUE GROWTH WAS ALSO DRIVEN BY STRONG PERFORMANCE ABROAD Revenue by Geography 15 0 50 100 150 200 250 300 2 0 1 3 2 0 1 4 2 0 1 3 2 0 1 4 2 0 1 3 2 0 1 4 2 0 1 3 2 0 1 4 Q1 Q2 Q3 Q4 United States Europe Latin America $M 237 145 156 236 277 254 269 273
Slide 16: Cost-to-Collect Remains Stable Despite Compliance Investment
PROPRIETARY COST-TO-COLLECT REMAINS STABLE, EVEN AS WE CONTINUE TO INVEST IN COMPLIANCE 16 Overall Cost-to-Collect* 36% 38% 38% 38% 40% 39% 42% 40% 30% 35% 40% 45% 2 0 1 3 2 0 1 4 2 0 1 3 2 0 1 4 2 0 1 3 2 0 1 4 2 0 1 3 2 0 1 4 Q1 Q2 Q3 Q4 ⃰ Cost-to-Collect = Adjusted operating expenses / dollars co
Slide 17: We Continue to Drive Significant Value Through Our Legal Channel
PROPRIETARY WE CONTINUE TO DRIVE SIGNIFICANT VALUE THROUGH OUR LEGAL CHANNEL Legal Collections – United States 430 469 494 19 96 117 0 100 200 300 400 500 2012 2013 2014 $M Legal Cost-to-Collect – United States 38% 36% 36% 87% 47% 39% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2012 2013 2014 17 Leg
Slide 18: Strong Collections Growth Led to Improved Cash Flows
PROPRIETARY STRONG COLLECTIONS GROWTH LED TO IMPROVED CASH FLOWS 18 * Please refer to Appendix for reconciliation of Adjusted EBITDA to GAAP $M Quarterly Adjusted EBITDA* Adjusted EBITDA - Trailing Twelve Months 174 250 172 256 231 252 206 241 0 50 100 150 200 250 300 2 0 1 3 2 0 1 4 2 0 1 3 2 0 1 4
Slide 19: Our ERC Continues to Grow
PROPRIETARY Estimated Remaining Collections $M 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 19 OUR ERC CONTINUES TO GROW * ERC at time of acquisition Acquired AACC* $952 Acquired Cabot* $1,445 Acquired Marlin* $607 Acquired Atlantic* $27
Slide 20: Cabot Contributed $0.87 to Encore's 2014 Economic EPS
PROPRIETARY CABOT CONTRIBUTED $0.87 TO ENCORE’S 2014 ECONOMIC EPS In 000’s except per share amounts Janus Encore Europe Holdings EEH Consolidated Revenue / other income $ 286,630 - $ 286,630 Total Expenses (150,349) - (150,349) EBITDA $ 136,281 - $ 136,281 Non-PEC Interest Expense (96,426) - (96,426
Slide 21: Encore Delivered Strong Economic EPS of $1.17 in Q4
PROPRIETARY ENCORE DELIVERED STRONG ECONOMIC EPS OF $1.17 IN Q4 21 * Please refer to Appendix for reconciliation of Adjusted EPS / Economic EPS measurements to GAAP $1.04 $1.12 $1.17 $0.06 $0.02 GAAP Net income per diluted share attributable to Encore Net non-cash interest and issuance cost amortiza
Slide 22: Encore Delivered Record Economic EPS in 2014 of $4.52
PROPRIETARY ENCORE DELIVERED RECORD ECONOMIC EPS IN 2014 OF $4.52 $3.83 ($0.08) $4.34 $4.52 $0.23 $0.36 GAAP Net income per diluted share attributable to Encore Net non-cash interest and issuance cost amortization, net of tax Acquisition and integration related fees, net of tax Effect of net tax cre
Slide 23: Compliance Program Expected to Provide Competitive Advantage
PROPRIETARY 23 WE EXPECT OUR COMPLIANCE PROGRAM TO PROVIDE A COMPETITIVE ADVANTAGE AS INDUSTRY REGULATION INCREASES Location 2009 2012 2014 Legal US India 14 0 22 0 34 8 Enterprise Risk Management, Vendor Audits & Compliance Management US India 3 0 7 0 30 4 Consumer Support Services US Costa Rica In
Slide 24: Encore's Long-Term Prospects Remain Favorable
PROPRIETARY 24 ENCORE’S LONG-TERM PROSPECTS REMAIN FAVORABLE Operating Results & Deployment A culture of constant improvement drives improved results Liquidity & Capital Access Strong liquidity and access to capital enhance our ability to take advantage of consolidating markets and new opportunities
Slide 25: Appendix
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Slide 26: Non-GAAP Financial Measures
PROPRIETARY 26 NON-GAAP FINANCIAL MEASURES This presentation 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 information concerning
Slide 27: Reconciliation of Adjusted Income and Economic / Adjusted EPS (Q4)
PROPRIETARY 27 RECONCILIATION OF ADJUSTED INCOME AND ECONOMIC / ADJUSTED EPS Reconciliation of Adjusted Income and Economic / Adjusted EPS to GAAP EPS (Unaudited, In Thousands, except per share amounts), Three Months Ended December 31, 2014 2013 $ Per Diluted Share – Accounting Per Diluted Share – E
Slide 28: Reconciliation of Adjusted Income and Economic / Adjusted EPS (Twelve Months)
PROPRIETARY 28 RECONCILIATION OF ADJUSTED INCOME AND ECONOMIC / ADJUSTED EPS Reconciliation of Adjusted Income and Economic / Adjusted EPS to GAAP EPS (Unaudited, In Thousands, except per share amounts), Twelve Months Ended December 31, 2014 2013 $ Per Diluted Share – Accounting Per Diluted Share –
Slide 29: Reconciliation of Adjusted EBITDA to GAAP Net Income
PROPRIETARY Reconciliation of Adjusted EBITDA to GAAP Net Income (Unaudited, In $ Thousands) Three Months Ended 6/30/12 9/30/12 12/31/12 3/31/13 6/30/13 9/30/13 12/31/13 3/31/14 6/30/14 9/30/14 12/31/14 GAAP net income, as reported $ 16,596 $ 21,308 $ 20,167 $ 19,448 $ 11,012 $ 21,064 $ 22,216 $ 18,
Slide 30: Reconciliation of Adjusted Operating Expenses to GAAP Operating Expenses
PROPRIETARY Reconciliation of Adjusted Operating Expenses to GAAP Operating Expenses (Unaudited, In $ Thousands) Three Months Ended RECONCILIATION OF ADJUSTED OPERATING EXPENSES 3/31/13 6/30/13 9/30/13 12/31/13 3/31/14 6/30/14 9/30/14 12/31/14 GAAP total operating expenses, as reported $ 105,872 $ 1
Slide 31: Encore Capital Group, Inc. Q4 2014 Earnings Call
Encore Capital Group, Inc. Q4 2014 EARNINGS CALL