Encore Capital Group Inc · NASDAQ:ECPG
Encore Capital — Q2 2014 Earnings Presentation
25 slides from Encore Capital's earnings presentation, Aug 7, 2014
Slide 1: Encore Capital Group, Inc. Q2 2014 Earnings Call
Encore Capital Group, Inc. Q2 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: Encore Delivered Record Quarterly Earnings Per Share
PROPRIETARY 3 ENCORE DELIVERED RECORD QUARTERLY EARNINGS PER SHARE Economic EPS** $1.10 GAAP EPS* $0.86 GAAP Net Income* $24 million Adjusted Income** $29 million Estimated Remaining Collections of $4.9 billion * Attributable to Encore ** Please refer to Appendix for reconciliation of Economic EPS,
Slide 4: Q2 Deployments Were Driven by Core Purchasing in the U.S. and Propel
PROPRIETARY 4 Q2 DEPLOYMENTS WERE DRIVEN BY CORE PURCHASING IN THE U.S. AND PROPEL Q2-2014 Deployments $M Refinancia $4 Propel $102 Core US Purchasing $162 Cabot $59 Total $328
Slide 5: Historically We Have Anticipated and Adapted to Market Changes
PROPRIETARY Lower Volume & Regulatory Pressure Attractive Opportunities Overconfidence & Irrational Pricing An Emerging Market 5 HISTORICALLY WE HAVE ANTICIPATED AND ADAPTED TO MARKET CHANGES WITH STRATEGIC DECISIONS – THIS TIME IS NO DIFFERENT • Established our center in India • Activity-level cost
Slide 6: Our Current Growth Strategy Is Tailored to Address Our Market's Evolving Dynamics
PROPRIETARY OUR CURRENT GROWTH STRATEGY IS TAILORED TO ADDRESS OUR MARKET'S EVOLVING DYNAMICS 6 Current Growth Strategy • International – India – Europe – Latin America – Australia – Others • New debt verticals – Government – Medical – Others Invest In Attractive Adjacencies: International and Other
Slide 7: We Have Continued to Lead the Consolidation of Our Industry in the U.S.
PROPRIETARY Investment Rationale Attractive Consolidation Partner Additional ERC Expanded Market for Future Capital Deployment • ACF specializes in high balance, fresh paper • Strong liquidation rates result from specialized approach and experienced staff • Long-standing relationship provides famili
Slide 8: Cabot Remains a Solid Contributor to Overall Earnings
PROPRIETARY Cabot’s Economic EPS Impact CABOT REMAINS A SOLID CONTRIBUTOR TO OVERALL EARNINGS - MARLIN INTEGRATION REMAINS ON TRACK 8 Cabot Update 0.17 0.18 0.21 0.19 0.00 0.05 0.10 0.15 0.20 0.25 Q3 2013 Q4 2013 Q1 2014 Q2 2014 $ Cabot deployed $410 million in new portfolio purchases in the first
Slide 9: Propel Continues to Grow and Contribute to Encore
PROPRIETARY PROPEL CONTINUES TO GROW AND CONTRIBUTE TO ENCORE Capital Deployed Total Revenue 0 2 4 6 8 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Operating Income 0 1 2 3 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 9 $179 million of capital deployed in the last 12 months Operating in 22 sta
Slide 10: Detailed Financial Discussion
10 Detailed Financial Discussion
Slide 11: Q2 Collections Reflect Steady Execution and Growth of Cabot
PROPRIETARY 11 Q2 COLLECTIONS REFLECT STEADY EXECUTION AND GROWTH OF CABOT Collections Summary 117 104 127 117 157 140 188 192 111 113 122 134 154 155 159 168 18 14 21 28 69 56 50 49 0 100 200 300 400 500 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Collection Sites Legal Collecti
Slide 12: Strong Collections Led to Solid Revenue Growth
PROPRIETARY STRONG COLLECTIONS LED TO SOLID REVENUE GROWTH Revenue From Business Lines 12 $- $50 $100 $150 $200 $250 $300 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Core US Cabot Propel Refinancia Grove $M 145 144 145 156 236 237 254 269 Channel Q2 2014 Rev Rec Q2 2013 Rev Rec C
Slide 13: Cost to Collect Remains Stable, Even as We Invest in Compliance
PROPRIETARY COST TO COLLECT REMAINS STABLE, EVEN AS WE CONTINUE TO INVEST IN COMPLIANCE 13 Overall Cost to Collect* 40% 43% 36% 38% 40% 42% 38% 38% 30% 35% 40% 45% Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 ⃰ Cost to Collect is Adjusted Operating Expenses / Dollar collected. See
Slide 14: Our Cost to Collect in Legal Outsourcing and Internal Legal Remains Well-Controlled
PROPRIETARY OUR COST TO COLLECT IN LEGAL OUTSOURCING AND INTERNAL LEGAL REMAINS WELL-CONTROLLED Legal Outsourcing Cost to Collect 0% 10% 20% 30% 40% 50% Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Legal Outsourcing Collections 80 100 120 140 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 201
Slide 15: Collections Growth Led to Improved Cash Flows
PROPRIETARY COLLECTIONS GROWTH LED TO IMPROVED CASH FLOWS 15 151 135 174 172 231 206 250 256 0 50 100 150 200 250 300 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 * Please refer to Appendix for reconciliation of Adjusted EBITDA to GAAP Adjusted EBITDA* $M
Slide 16: Estimated Remaining Collections
PROPRIETARY Estimated Remaining Collections $M 1,890 1,967 1,911 1,789 2,577 3,990 4,151 4,899 952 1,445 607 0 1,000 2,000 3,000 4,000 5,000 6,000 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 16 OUR ERC REFLECTS THE VALUE OF PORTFOLIOS WE HAVE ALREADY ACQUIRED Encore Asset Accepta
Slide 17: Encore Delivered Record Economic EPS in Q2 of $1.10
PROPRIETARY ENCORE DELIVERED RECORD ECONOMIC EPS IN Q2 OF $1.10 $0.86 $1.06 $1.10 $0.06 $0.14 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 Adjusted income per diluted share at
Slide 18: We Have Returned Capital to Shareholders Through Share Repurchases
PROPRIETARY WE HAVE RETURNED CAPITAL TO SHAREHOLDERS THROUGH SHARE REPURCHASES Encore share repurchases in 2014 Price per Share*: $42 * Weighted average repurchase price for the period Looking Forward • Repurchases to cover employee equity grant dilution • Opportunistic repurchases • Subject to mark
Slide 19: Encore's Long-Term Prospects Remain Favorable
PROPRIETARY 19 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 20: Appendix
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Slide 21: Non-GAAP Financial Measures
PROPRIETARY 21 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 22: Reconciliation of Adjusted Income and Economic / Adjusted EPS
PROPRIETARY 22 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 June 30, 2014 2013 $ Per Diluted Share – Accounting Per Diluted Share – Econo
Slide 23: 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 GAAP net income, as reported 16,596 21,308 20,167 19,448 11,012 21,064 22,216 18,830 21,353 (Gain) loss from disco
Slide 24: 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 9/30/12 12/31/12 3/31/13 6/30/13 9/30/13 12/31/13 3/31/14 6/30/14 GAAP total operating expenses, as reported 103,621 103,8
Slide 25: Encore Capital Group, Inc. Q2 2014 Earnings Call
Encore Capital Group, Inc. Q2 2014 EARNINGS CALL