Slide 1: Slide 1
Slide 2: Cautionary Note About Forward-Looking Statements
2 CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS 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 negatio
Slide 3: Investment Highlights
3 INVESTMENT HIGHLIGHTS • Favorable supply and demand dynamics have existed since 2008, with a few credible, large buyers • Strong performance is expected to continue • Operational and financial leverage is increasing, largely due to the success of our operating center in India • Analytic insights i
Slide 4: Encore Is a Leading Player in the Consumer Debt Buying and Recovery Industry
4 Call Center / Technology Site Call Center Site Ascension Call Center Site Headquarters/ Call Center Site ENCORE IS A LEADING PLAYER IN THE CONSUMER DEBT BUYING AND RECOVERY INDUSTRY Revenue Composition As of June 30, 2011 Global Capabilities Debt Purchasing & Collections Bankruptcy Servicing • Pur
Slide 5: Strategic Decisions Made Over the Past Decade
5 2001 2003 2005 2007 2011 2009 2002 2004 2006 2008 2010 STRATEGIC DECISIONS MADE OVER THE PAST DECADE DEMONSTRATE OUR ABILITY TO FORESEE, AND ADAPT TO, CHANGES • Hired first statisticians • Created first and second generation forecasting models • Created 1 generation operational models (mail channe
Slide 6: These Decisions Are Driving Strong Results
6 THESE DECISIONS ARE DRIVING STRONG RESULTS 2010 2009 YOY Growth Annual Variance $604,609 $116,817 24% $487,792 Collections $381,308 $64,889 21% $316,419 Revenue $346,656 $82,051 31% $264,605 Adjusted EBITDA* $361,957 $105,325 41% $256,632 Purchases $1.95 $0.58 42% $1.37 EPS ($000s, except EPS and
Slide 7: We Have Significantly Increased Both Operating Cash Flow and Cash Collections
7 WE HAVE SIGNIFICANTLY INCREASED BOTH OPERATING CASH FLOW (ADJUSTED EBITDA) AND CASH COLLECTIONS ($ millions) * Adjusted EBITDA is a non-GAAP number. The Company considers Adjusted EBITDA to be a meaningful indicator of operating performance and uses it as a measure to assess the operating performa
Slide 8: While Enhancing the Future Value of the Company
8 WHILE ENHANCING THE FUTURE VALUE OF THE COMPANY Annual Estimated Remaining Gross Collection (ERC) and Total Debt ($ millions, at end of period) $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 2006 2007 2008 2009 2010 Q2 2011 ERC Total Debt
Slide 9: We Believe Our Current Estimate of Remaining Collections Is Conservative
9 WE BELIEVE THAT OUR CURRENT ESTIMATE OF REMAINING COLLECTIONS IS CONSERVATIVE GIVEN OUR HISTORY Cumulative collections (initial expectation vs. actual) ($ millions, March – June 11) Actual cash collections Initial projections $- $250 $500 $750 $1,000 $1,250 $1,500 $1,750 $2,000 $2,250 $2,500 $2,75
Slide 10: Market Dynamics Continue to Be in Our Favor, While Regulatory Environment Remains Challenging
10 MARKET DYNAMICS CONTINUE TO BE IN OUR FAVOR, WHILE THE REGULATORY ENVIRONMENT REMAINS CHALLENGING Charge-offs remain elevated Consumer credit continues to experience losses at near record levels Supply more closely managed by the issuers Demand increasing, albeit slowly Few players with access to
Slide 11: Our Consumers Have Shown That They Are Resilient
11 OUR CONSUMERS HAVE SHOWN THAT THEY ARE RESILIENT DESPITE THE MACROECONOMIC ENVIRONMENT Overall payer rate for all active inventory 2008 0.8% 0.9% 1.0% 1.1% 1.2% 1.3% 1.4% 1.5% 1.6% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2009 2010 2011
Slide 12: We Have Been Able to Accelerate Our Ability to Help Consumers Move Toward Financial Recovery
12 AS A RESULT, WE HAVE BEEN ABLE TO ACCELERATE OUR ABILITY TO HELP CONSUMERS MOVE TOWARD FINANCIAL RECOVERY C onsumers with whom we have partnered to retire their debt (cumul ative)
Slide 13: Industry-First Consumer Bill of Rights
13 WE HAVE TAKEN A LEADERSHIP STANCE BY OUTLINING OUR CORE PRINCIPLES IN AN INDUSTRY-FIRST CONSUMER BILL OF RIGHTS Clearly states what our consumers should expect during the collection process Gives consumers concrete assurances about our conduct No interest once payments are established if maintain
Slide 14: Our Operational Success Is Based Upon Four Strategic Priorities
14 OUR OPERATIONAL SUCCESS IS BASED UPON FOUR STRATEGIC PRIORITIES ENCORE’S STRATEGIC PILLARS ANALYTIC STRENGTH COST LEADERSHIP CONSUMER INTELLIGENCE PRINCIPLED INTENT
Slide 15: Our Analytic Reach Extends from Pre-Purchase Throughout Our Entire Ownership Period
15 OUR ANALYTIC REACH EXTENDS FROM PRE-PURCHASE THROUGHOUT OUR ENTIRE OWNERSHIP PERIOD No effort Legal Outsourcing Legal effort model with Capability Call Centers Call effort model with Capability Direct Mail Letter effort model with Capability Agency effort model with Capability Collections operati
Slide 16: We Have Fundamentally Changed the Cost Structure of the Company
16 WE HAVE FUNDAMENTALLY CHANGED THE COST STRUCTURE OF THE COMPANY OVER THE PAST FOUR YEARS… Variable cost to collect * (%) * Represents salaries, variable compensation and employee benefits
Slide 17: Driven by Analytics and Our India Center
17 DRIVEN BY OUR ANALYTICS AND OUR INDIA CENTER, WITH THE LATTER PRODUCING HALF OF CALL CENTER COLLECTIONS Collections from all call centers ($ millions) $126 $157 $186 $268 Percent of Total: 10% 19% 30% 44% ~$340 50%
Slide 18: Summary
18 SUMMARY • Strong performance is expected to continue • Analytic insights inform our valuation and operating strategies and allow for a closer partnership with consumers • Favorable supply and demand dynamics have existed since 2008, with a few credible, large buyers • Operational and financial le
Slide 19: Appendix: Reconciliation of Adjusted EBITDA
19 APPENDIX: RECONCILIATION OF ADJUSTED EBITDA Reconciliation of Adjusted EBITDA to GAAP Net Income (Unaudited, In Thousands) Three Months Ended Note: The periods 3/31/07 through 12/31/08 have been adjusted to reflect the retrospective application of ASC 470-20 3/31/07 6/30/07 9/30/07 12/31/07 3/31/