Encore Capital Group Inc · NASDAQ:ECPG

Encore Capital — Investor Presentation (May 2011)

20 slides from Encore Capital's investor presentation, May 11, 2011

  1. Slide 1: Encore Capital Group Investor Presentation

    Encore Capital Group Investor Presentation May 11, 2011

  2. Slide 2: Cautionary Note About Forward-Looking Statements

    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 negation

  3. Slide 3: Investment Highlights

    INVESTMENT HIGHLIGHTS • Favorable supply and demand dynamics have existed since 2008, with a few credible, large buyers • Analytic insights inform our valuation and operating strategies and allow for a closer partnership with consumers • Operational and financial leverage is increasing, largely due

  4. Slide 4: Encore Is a Leading Player in the Consumer Debt Buying and Recovery Industry

    ENCORE IS A LEADING PLAYER IN THE CONSUMER DEBT BUYING AND RECOVERY INDUSTRY Revenue Composition Global Capabilities As of March 31, 2011 Debt Purchasing & Collections Bankruptcy Servicing Debt Purchasing & Collections • Purchase and collection of charged-off unsecured consumer receivables 95% (prim

  5. Slide 5: Strategic Decisions Made Over the Past Decade Demonstrate Our Ability to Foresee and Adapt

    STRATEGIC DECISIONS MADE OVER THE PAST DECADE DEMONSTRATE OUR ABILITY TO FORESEE, AND ADAPT TO, CHANGES Emerging Market Overconfidence and Attractive Opportunity Irrational Pricing Supply Demand 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 • Hired first statisticians • In late 2005, we est

  6. Slide 6: These Decisions Are Driving Strong Results

    THESE DECISIONS ARE DRIVING STRONG RESULTS YOY Growth ($000s, except EPS and ratios) Q1 10 Q1 11 2009 2010 Annual Variance Collections $141,267 $191,073 $487,792 $604,609 $116,817 24% Revenue $87,338 $110,303 $316,419 $381,308 $64,889 21% Adjusted EBITDA* $82,588 $116,400 $264,605 $346,656 $82,051 3

  7. Slide 7: Significantly Increased Operating Cash Flow and Cash Collections

    WE HAVE SIGNIFICANTLY INCREASED BOTH OPERATING CASH FLOW (ADJUSTED EBITDA) AND CASH COLLECTIONS Adjusted EBITDA* and Gross Collections by year ($ millions) Gross Collections Adjusted EBITDA $650 $550 $450 $350 $250 $150 2007 2008 2009 2010 LTM** * Adjusted EBITDA is a non-GAAP number. The Company co

  8. Slide 8: While Enhancing the Future Value of the Company

    WHILE ENHANCING THE FUTURE VALUE OF THE COMPANY Annual Estimated Remaining Gross Collection (ERC) and Total Debt ($ millions, at end of period) $1,600 ERC $1,400 Net Debt $1,200 $1,000 $800 $600 $400 $200 $0 2006 2007 2008 2009 2010 Q1 2011 8

  9. Slide 9: Current Estimate of Remaining Collections Is Conservative Given Our History

    WE BELIEVE THAT OUR CURRENT ESTIMATE OF REMAINING COLLECTIONS IS CONSERVATIVE GIVEN OUR HISTORY Cumulative collections (initial expectation vs. actual) ($ millions, March 01 – March 11) $3,500 $3,250 $3,000 $2,750 $2,500 Actual cash collections $2,250 $2,000 $1,750 $1,500 $1,250 $1,000 Initial proje

  10. Slide 10: Market Dynamics Continue in Our Favor, Regulatory Environment Remains Challenging

    MARKET DYNAMICS CONTINUE TO BE IN OUR FAVOR, WHILE THE REGULATORY ENVIRONMENT REMAINS CHALLENGING Charge-offs Demand Consumer Significant remain increasing, albeit performance regulatory and elevated slowly remains predictable legislative scrutiny Consumer Few players with Our models continue Both i

  11. Slide 11: Our Consumers Have Shown They Are Resilient Despite the Macroeconomic Environment

    OUR CONSUMERS HAVE SHOWN THAT THEY ARE RESILIENT DESPITE THE MACROECONOMIC ENVIRONMENT Overall payer rate for all active inventory 2008 1.70% 2009 1.60% 2010 2011 1.50% 1.40% 1.30% 1.20% 1.10% 1.00% 0.90% 0.80% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 11

  12. Slide 12: Help Consumers Move Toward Financial Recovery

    - 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 2,000,000 Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 Q2 2002 Q3 2002 Q4 2002 Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 200

  13. Slide 13: Leadership Stance: Industry-First Consumer Bill of Rights

    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 maint

  14. Slide 14: Encore's Strategic Pillars

    OUR OPERATIONAL SUCCESS IS BASED UPON FOUR STRATEGIC PRIORITIES ANALYTIC STRENGTH ENCORE’S PRINCIPLED CONSUMER STRATEGIC INTENT INTELLIGENCE PILLARS COST LEADERSHIP 14

  15. Slide 15: Analytic Insights Match Collection Approach to Consumer Payment Behavior

    OUR ANALYTIC INSIGHTS ALLOW US TO MATCH OUR COLLECTION APPROACH TO THE INDIVIDUAL CONSUMER’S PAYMENT BEHAVIOR Willingness to pay Is the debtor willing to resolve the debt on fair terms? HIGH LOW HIGH Our attempts to contact or Strong partnership work with consumers are opportunities with willing typ

  16. Slide 16: Our Analytic Reach Extends From Pre-Purchase Throughout Ownership Period

    OUR ANALYTIC REACH EXTENDS FROM PRE-PURCHASE THROUGHOUT OUR ENTIRE OWNERSHIP PERIOD Core competency in understanding the Collections operations that payer behavior of distressed consumers optimize effort and profitability Legal effort Legal model with Capability Outsourcing Call effort Call model wi

  17. Slide 17: We Have Fundamentally Changed the Cost Structure of the Company

    WE HAVE FUNDAMENTALLY CHANGED THE COST STRUCTURE OF THE COMPANY OVER THE PAST FOUR YEARS… Variable cost to collect * (%) Global Call Centers (LHS) India Call Center (LHS)* Total CTC (RHS) 25 54 51.5 50.2 20 50 47.6 15 46 43.7 10 42 40.0 5 38 2007 2008 2009 2010 Q1 2011 * Represents salaries, variabl

  18. Slide 18: Driven by Analytics and Our India Center

    DRIVEN BY OUR ANALYTICS AND OUR INDIA CENTER, WITH THE LATTER PRODUCING HALF OF CALL CENTER COLLECTIONS Collections from all call centers ($ millions) India U.S. ~$340 $268 $186 $157 $126 2007 2008 2009 2010 2011E Percent 10% 19% 30% 44% 50% of Total: 18

  19. Slide 19: Summary

    SUMMARY • Favorable supply and demand dynamics have existed since 2008, with a few credible, large buyers • Analytic insights inform our valuation and operating strategies and allow for a closer partnership with consumers • Operational and financial leverage is increasing, largely due to the success

  20. Slide 20: Appendix: Reconciliation of Adjusted EBITDA

    APPENDIX: RECONCILIATION OF ADJUSTED EBITDA Reconciliation of Adjusted EBITDA to GAAP Net Income (Unaudited, In Thousands) Three Months Ended 3/31/07 6/30/07 9/30/07 12/31/07 3/31/08 6/30/08 9/30/08 12/31/08 3/31/09 6/30/09 9/30/09 12/31/09 3/31/10 6/30/10 9/30/10 12/31/10 3/31/11 GAAP net income, a

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