Encore Capital Group Inc · NASDAQ:ECPG
Encore Capital — Q2 2015 Earnings Presentation
26 slides from Encore Capital's earnings presentation, Aug 10, 2015
Slide 1: Encore Capital Group, Inc. Q2 2015 Earnings Call
Encore Capital Group, Inc. Q2 2015 EARNINGS CALL
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 Economic Earnings
PROPRIETARY 3 ENCORE DELIVERED RECORD ECONOMIC EARNINGS Economic EPS** $1.27 GAAP EPS* $1.03 GAAP Net Income* $28 million Adjusted Income** $33 million Estimated Remaining Collections of $5.7 billion * Attributable to Encore ** Please refer to Appendix for reconciliation of Economic EPS, Adjusted EB
Slide 4: Q2 Deployments Reflect a Diverse Global Business
PROPRIETARY 4 Q2 DEPLOYMENTS REFLECT A DIVERSE GLOBAL BUSINESS Q2 2015 Deployments $M United States $214 Europe $290 Latin America $1 Total $505
Slide 5: We Are On-Track to Meet Our 2015 US Core Deployment Target
PROPRIETARY WE ARE ON-TRACK TO MEET OUR 2015 US CORE DEPLOYMENT TARGET 5 US Core Deployment 2015e vs. Historical 526 554562 0 200 400 600 2012 Expected Deployed or committed 2015e 500–600 2014 2013 Our deployment target in the US core market remains consistent with prior years at $500M - $600M / yea
Slide 6: Record Collections in Q2 Driven by International Business Growth
PROPRIETARY 6 RECORD COLLECTIONS IN Q2 WERE DRIVEN PRIMARILY BY THE GROWTH OF OUR INTERNATIONAL BUSINESS Collections by Geography - 100 200 300 400 500 2 0 1 3 2 0 1 4 2 0 1 3 2 0 1 4 2 0 1 4 2 0 1 5 2 0 1 4 2 0 1 5 Q3 Q4 Q1 Q2 United States Europe Latin America 397 437 380 351 425 409 407 394 $M
Slide 7: Strong Collections Led to Improved Cash Flows
PROPRIETARY STRONG COLLECTIONS LED TO IMPROVED CASH FLOWS 7 * Please refer to Appendix for reconciliation of Adjusted EBITDA to GAAP $M Adjusted Quarterly EBITDA* Adjusted EBITDA -Trailing Twelve Months 231 252 206 241 250 266 256 277 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 4
Slide 8: Cabot Update
PROPRIETARY 8 Increased revenues 15% during the second quarter of 2015 compared to the second quarter of 2014 Increased collections 17% during the second quarter of 2015 compared to the second quarter of 2014 Deployed $283 million during the second quarter of 2015 Cabot contributed $0.29 of
Slide 9: The DLC Acquisition Is Important for Cabot and Encore
PROPRIETARY THE DLC ACQUISITION IS IMPORTANT FOR CABOT AND ENCORE Attractive Portfolio • Scale opportunity to acquire £288 ($437) million of ERC • dlc allows Cabot to deliver on its 2015 purchasing plan and consolidate overlapping debt contingency operations • dlc is a profitable and debt-free busin
Slide 10: Detailed Financial Discussion
10 Detailed Financial Discussion
Slide 11: Q2 Deployments Represent Our Largest Single Quarter in Almost Two Years
PROPRIETARY 11 Q2 DEPLOYMENTS REPRESENT OUR LARGEST SINGLE QUARTER IN ALMOST TWO YEARS Deployments by Quarter $M 0 100 200 300 400 500 600 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 United States Europe Latin America $505 $336 $275 $179 $328 ACF Portfolio $105 dlc Portfolio $216
Slide 12: Collections in Q2 Reached an All-Time Record
PROPRIETARY 12 COLLECTIONS IN Q2 REACHED AN ALL-TIME RECORD DRIVEN BY OUR INTERNATIONAL BUSINESS Collections by Geography - 100.000 200.000 300.000 400.000 500.000 2 0 1 3 2 0 1 4 2 0 1 3 2 0 1 4 2 0 1 4 2 0 1 5 2 0 1 4 2 0 1 5 Q3 Q4 Q1 Q2 Collection Sites Legal Collections Collection Agencies $M -
Slide 13: We Also Delivered Record Revenues in Q2
PROPRIETARY WE ALSO DELIVERED RECORD REVENUES IN Q2 Revenue by Geography 13 - 50.0 100.0 150.0 200.0 250.0 300.0 2 0 1 3 2 0 1 4 2 0 1 3 2 0 1 4 2 0 1 4 2 0 1 5 2 0 1 4 2 0 1 5 Q3 Q4 Q1 Q2 United States Europe Latin America $M 254 269 236 237 286 290 273 277
Slide 14: Cost to Collect Reflects a Shift Toward Lower Cost International Collections
PROPRIETARY COST TO COLLECT REFLECTS A SHIFT TOWARD LOWER COST INTERNATIONAL COLLECTIONS 14 Overall Cost to Collect* 40% 39% 42% 40% 38% 39% 38% 38% 0% 10% 20% 30% 40% 50% 2 0 1 3 2 0 1 4 2 0 1 3 2 0 1 4 2 0 1 4 2 0 1 5 2 0 1 4 2 0 1 5 Q3 Q4 Q1 Q2 ⃰ Cost to Collect = Adjusted Operating Expenses / Do
Slide 15: We Continue to Drive Significant Value Through Our Legal Channel
PROPRIETARY WE CONTINUE TO DRIVE SIGNIFICANT VALUE THROUGH OUR LEGAL CHANNEL US Legal Collections (10) 10 30 50 70 90 110 130 150 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 $M US Legal Cost to Collect 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 20
Slide 16: Our ERC Has Reached an All-Time High
PROPRIETARY Estimated Remaining Collections $M 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Acquired dlc* $437 16 OUR ERC HAS REACHED AN ALL-TIME HIGH * ERC at time of acquisition Acquired AACC* $952 Acquired Cabot* $1,445 Acquir
Slide 17: Cabot Contributed $0.29 to Encore's Q2 Economic EPS
PROPRIETARY CABOT CONTRIBUTED $0.29 TO ENCORE’S Q2 ECONOMIC EPS In 000’s except per share amounts Janus Encore Europe Holdings EEH Consolidated Total revenues $ 84,613 - $ 84,613 Total operating expenses (48,421) - (48,421) Income from operations $ 36,192 - $ 36,192 Non-PEC interest expense (26,436)
Slide 18: Encore Delivered Record Economic EPS of $1.27 in Q2
PROPRIETARY ENCORE DELIVERED RECORD ECONOMIC EPS OF $1.27 IN Q2 18 * Please refer to Appendix for reconciliation of Adjusted EPS / Economic EPS measurements to GAAP $1.03 $1.23 $1.27 $0.06 $0.14 Net income per diluted share attributable to Encore Net non-cash interest and issuance cost amortization,
Slide 19: We Completed Our Most Recently Authorized Share Buyback Program During Q2
PROPRIETARY WE COMPLETED OUR MOST RECENTLY AUTHORIZED SHARE BUYBACK PROGRAM DURING Q2 Encore share repurchases 2012-Present Price per share1 1. Weighted average repurchase price for the period 19 $26.50 $42.04 $39.54 60 40 20 0 Total Share Repurchase ($M) 2015 2014 17 2012/2013 50 Number of shares (
Slide 20: Summary and Outlook
PROPRIETARY SUMMARY AND OUTLOOK Strong Financial Track-Record • Delivered Economic EPS of $1.27, up 15% Adaptable To Evolving Markets • On track to deploy capital globally, across all asset classes, within target range of $1.2 billion to $1.4 billion in 2015 Excellent US Competitive Position • On tr
Slide 21: Q&A
= encore i “CAPITAL GROUP — Q&A
Slide 22: Appendix
= encore “CAPITAL GROUP —_ Appendix
Slide 23: Non-GAAP Financial Measures
PROPRIETARY 23 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 24: Reconciliation of Adjusted Income and Economic / Adjusted EPS
PROPRIETARY 24 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, 2015 2014 $ Per Diluted Share – Accounting Per Diluted Share – Econo
Slide 25: Reconciliation of Adjusted EBITDA to GAAP Net Income
PROPRIETARY Reconciliation of Adjusted EBITDA to GAAP Net Income (Unaudited, In $ Thousands) Three Months Ended 9/30/13 12/31/13 3/31/14 6/30/14 9/30/14 12/31/14 3/31/15 6/30/15 GAAP net income, as reported $ 21,064 $ 22,216 $ 18,830 $ 21,353 $ 30,138 $ 27,957 $ 29,967 $ 25,185 (Gain) loss from disc
Slide 26: 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 9/30/13 12/31/13 3/31/14 6/30/14 9/30/14 12/31/14 3/31/15 6/30/15 GAAP total operating expenses, as reported $ 174,429 $ 1