Encore Capital Group Inc · NASDAQ:ECPG
Encore Capital — Investor Presentation (January 2006)
24 slides from Encore Capital's investor presentation, Jan 31, 2006
Slide 1: Leveraging Intellectual Capital
Leveraging Intellectual Capital Exhibit 99.1
Slide 2: Cautionary Note About Forward-Looking Statements
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS Certain statements in this presentation constitute “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve risks, uncertainties and other factors which may cause actual results,
Slide 3: Background
Background Public company since 1999 Leadership change in May 2000 – Since then, we have invested over $450 million to acquire receivables with a face value of more than $15.7 billion Core business is the purchasing and collecting of charged-off consumer receivables at deep discounts Recently acquir
Slide 4: Strategic Vision
Strategic Vision Leverage analytics to build the leading company in the distressed consumer space – Continuously improve our differentiated analytical capabilities utilized for both acquiring and managing portfolios Continue to grow the profitable core business of purchasing unsecured defaulted cons
Slide 5: The Distressed Consumer Debt Industry
The Distressed Consumer Debt Industry
Slide 6: Industry Dynamics
Industry Dynamics Highly fragmented industry with more than 6,500 players (95% of them have less than $8mm in revenue) – Few large, sophisticated competitors – Most buyers tend to specialize in a particular asset class, delinquency range and / or geographic location – Most buyers have limited analyt
Slide 7: Catalysts for Growth
Catalysts for Growth $1,174 $1,743 $2,239 $2,786 2005E 2010E Consumer Debt Other Drivers ($ billions) Source: Historical data from Federal Reserve; forecasted data from Global Insight Increase in the minimum payment to 4% from 2% Ripple effect after repricing of adjustable rate mortgages Increase in
Slide 8: & Encore Capital Group, Inc.
& Encore Capital Group, Inc.
Slide 9: Encore's Differentiated Approach to Business
Buy Right Collect Well Strategic Growth Demand Professional and Ethical Behavior Manage Expenses Encore’s Differentiated Approach to Business Consumer level analytics Multiple collection strategies Strong management team Focus on innovation
Slide 10: Goal is to Buy Right
Goal is to Buy Right Account level analytics allow us to effectively target broad purchase distribution – Provides ability to create positively selected deals – Enables us to buy accounts from competitors – Applies to alternative paper types Strong relationships with nation’s largest credit grantors
Slide 11: Use Analytical Approach to Collections
Proprietary account allocation software Legal outsourcing collections Third-party agency outsourcing Call center collections Mailing collections Account sales to third-parties Consumer analysis Use Analytical Approach to Collections Encore’s collection systems Continuous feedback Monitor / no curren
Slide 12: Which Leads to Strong Collections Growth
$33.8 $35.8 $38.6 $40.3 $47.1 $46.7 $49.1 $47.7 $64.0 $57.4 $59.9 $53.4 $65.9 $70.4 $83.9 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Which Leads to Strong Collections Growth Gross Collections ($ millions)
Slide 13: Collection Growth Driven By Innovation, not Replication
General outbound calling New channels Collection Growth Driven By Innovation, not Replication Total Collections by Channel Type 18.5% 52.3% 81.5% 47.7% 15.0% 25.0% 35.0% 45.0% 55.0% 65.0% 75.0% 85.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 (% of total collections)
Slide 14: Leads to Collections Efficiency
$19.8 $21.4 $23.1 $22.5 $25.0 $23.2 $23.0 $22.3 $27.4 $25.2 $27.3 $26.9 $31.3 $33.4 $37.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Leads to Collections Efficiency Growth fueled through innovation rather than headcount Monthly collection dollars per employee ($ thousands) ¹ ¹ Excludes sale of por
Slide 15: Versus our Peers, We Collect More
Versus our Peers, We Collect More Peer 1 Encore Capital Cumulative Collections as a % of Purchase Price 2001 Vintage 266% 206% 121% 36% 354% 294% 193% 79% 0% 50% 100% 150% 200% 250% 300% 350% 400% Year 1 Year 2 Year 3 Year 4 90% 30% 100% 39% 16% 26% 0% 20% 40% 60% 80% 100% 120% Year 1 Year 2 342% 28
Slide 16: Promote Professional and Ethical Behavior
Encore call center collector hiring and retention process 20% 76% Q3 2005 YTD Experienced collectors retention rate Significant focus is placed on hiring and retaining experienced collectors Promote Professional and Ethical Behavior Hiring – Behavioral test – Background checks Training – 6 months of
Slide 17: Strategic Steps to Diversify in Complementary Areas and Enhance our Growth Potential
Strategic Steps to Diversify in Complementary Areas and Enhance our Growth Potential Auto Secured loans Student loans Telecom Utilities Other asset classes / consumer types Future Areas of Opportunity Penetration into secured bankruptcy servicing through Ascension acquisition Organic expansion into
Slide 18: Ascension Provides Entry into Growing Bankruptcy Servicing Opportunity
Ascension Provides Entry into Growing Bankruptcy Servicing Opportunity ¹ Assuming all secured bankruptcy accounts are outsourced Acquired in August 2005 – Located in Arlington, Texas – 197 employees – 2004 revenue of $12.3 million Leading position in the largely untapped bankruptcy servicing market
Slide 19: Establishment of our Medical Debt Group Provides Entry into Growing Healthcare Opportunity
Establishment of our Medical Debt Group Provides Entry into Growing Healthcare Opportunity Source: Nilson reports, company websites, internal analysis, press releases Bad debt in statute ($ billions, 2005E) Bad debt sold - ($ billions) $1 $39 Healthcare debt Credit card debt Healthcare debt (publicl
Slide 20: & Encore Capital Group, Inc.
& Encore Capital Group, Inc.
Slide 21: Strong Financial Results
$0.2 $0.5 $1.6 $1.5 $3.8 $3.3 $3.1 $4.4 $6.0 $5.6 $5.9 $5.7 $7.5 $8.1 $7.8 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 $18.2 $20.1 $24.4 $27.6 $28.1 $28.4 $29.5 $31.5 $42.4 $43.6 $46.5 $46.0 $50.5 $53.8 $59.2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Strong Financial Results * Excludes one-time
Slide 22: Strong Balance Sheet
Q3 2005 $19.5 $71.4 $96.0 $111.1 Q3 2005 Strong Balance Sheet Stockholders’ Equity Total Debt $47.7 $41.2 $66.6 $184.7 Q3 2005 ($ millions) ($ millions) 0.6x 0.7x 1.7x 2.4x Total debt / equity
Slide 23: Access to Capital
Current Facility Initiated: June 7, 2005 JPMorgan $35.0 Bank of America 30.0 Bank of Scotland 30.0 California Bank & Trust 25.0 Guaranty Bank 20.0 Citibank 15.0 First Bank 15.0 Standard Federal Bank 15.0 Bank Leumi USA 10.0 Manufacturers Bank 5.0 Total $200.0¹ Previous Facility Initiated: June 30, 2
Slide 24: Investment Highlights
Investment Highlights Experienced management team Recent acquisitions diversify asset and revenue base while enhancing growth Attractive business model in a changing industry dynamic Differentiated analytical acquisition and collections approach Track record of generating superior financial returns
Encore Capital Group — Investor Presentation (January 2006) on 6ix