Encore Capital Group Inc · NASDAQ:ECPG
Encore Capital — Q3 2015 Earnings Presentation
24 slides from Encore Capital's earnings presentation, Nov 5, 2015
Slide 1: Encore Capital Group, Inc. Q3 2015 Earnings Call
Encore Capital Group, Inc. Q3 2015 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 Economic Earnings
PROPRIETARY 3 ENCORE DELIVERED RECORD ECONOMIC EARNINGS Economic EPS** $1.34 GAAP EPS* ($0.43) GAAP Net Income* ($11) million Adjusted Income** $34 million Estimated Remaining Collections of $5.7 billion * Attributable to Encore ** Please refer to Appendix for reconciliation of Economic EPS, Adjuste
Slide 4: Our Capital Deployment in the U.S. Reflects Our Substantial Domestic Market Share
PROPRIETARY 4 OUR CAPITAL DEPLOYMENT IN THE U.S. REFLECTS OUR SUBSTANTIAL DOMESTIC MARKET SHARE Q3 2015 Deployments $M United States $160 Europe $42 Latin America $13 Total $215
Slide 5: We Remain On-Track to Meet Our 2015 US Core Deployment Target
PROPRIETARY WE REMAIN 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 /
Slide 6: Accounts Outside the U.S. Now Generate Approximately One-Third of Collections
PROPRIETARY 6 ACCOUNTS OUTSIDE THE U.S. NOW GENERATE APPROXIMATELY ONE-THIRD OF OUR COLLECTIONS Collections by Geography - 100 200 300 400 500 2 0 1 3 2 0 1 4 2 0 1 4 2 0 1 5 2 0 1 4 2 0 1 5 2 0 1 4 2 0 1 5 Q4 Q1 Q2 Q3 United States Europe Latin America 409 422 351 397 437 407 394 425 $M
Slide 7: Solid Collections Continue to Drive Improved Cash Flows
PROPRIETARY SOLID COLLECTIONS CONTINUE TO DRIVE IMPROVED CASH FLOWS 7 * Please refer to Appendix for reconciliation of Adjusted EBITDA to GAAP $M Adjusted Quarterly EBITDA* Adjusted EBITDA -Trailing Twelve Months 206 241 250 266 256 277 252 268 0 50 100 150 200 250 300 2 0 1 3 2 0 1 4 2 0 1 4 2 0 1
Slide 8: Cabot Continues to Improve Its Position as Leader in U.K. Debt Recovery Market
PROPRIETARY 8 Increased revenues 22% during the third quarter of 2015 compared to the third quarter of 2014 Increased collections 20% during the third quarter of 2015 compared to the third quarter of 2014 Deployed $335 million through the first three quarters of 2015 Cabot contributed $0.30
Slide 9: Encore Acquired Baycorp to Enter Attractive Markets in Australia and New Zealand
PROPRIETARY ENCORE ACQUIRED BAYCORP TO ENTER ATTRACTIVE MARKETS IN AUSTRALIA AND NEW ZEALAND Strong Markets • Australian credit market growing at > 4% annually • Australian deployments ~$330 million per year • New Zealand credit market growing at >7% annually 9 Future Vision • Promising opportunitie
Slide 10: Encore's Settlement with the CFPB Provides Certainty and Clarity
PROPRIETARY ENCORE’S SETTLEMENT WITH THE CFPB PROVIDES CERTAINTY AND CLARITY TO FUTURE OPERATIONS 10 • Reaching this settlement and removing the associated uncertainty was in the best interest of our stakeholders and the industry • In Q3, Encore took a one-time, after-tax charge of $43 million that
Slide 11: Detailed Financial Discussion
11 Detailed Financial Discussion
Slide 12: Collections Channel Concentration Increasingly Influenced by International Business
PROPRIETARY 12 OUR COLLECTIONS CHANNEL CONCENTRATION IS INCREASINGLY INFLUENCED BY OUR INTERNATIONAL BUSINESS Collections by Channel - 100 200 300 400 500 2 0 1 3 2 0 1 4 2 0 1 4 2 0 1 5 2 0 1 4 2 0 1 5 2 0 1 4 2 0 1 5 Q4 Q1 Q2 Q3 Collections Sites Legal Collections Collection Agencies 409 422 351 3
Slide 13: Q3 International Revenues Grew 30% Compared to Q3 of 2014
PROPRIETARY Q3 INTERNATIONAL REVENUES GREW 30% COMPARED TO Q3 OF 2014 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 4 2 0 1 5 2 0 1 4 2 0 1 5 2 0 1 4 2 0 1 5 Q4 Q1 Q2 Q3 United States Europe Latin America $M 269 273 237 254 290 288 277 286
Slide 14: Overall Cost to Collect Reflects a Modest Shift Toward Legal Collections in Europe
PROPRIETARY OVERALL COST TO COLLECT REFLECTS A MODEST SHIFT TOWARD LEGAL COLLECTIONS IN EUROPE 14 Overall Cost to Collect* 42% 40% 38% 39% 38% 38% 39% 39% 0% 10% 20% 30% 40% 50% 2 0 1 3 2 0 1 4 2 0 1 4 2 0 1 5 2 0 1 4 2 0 1 5 2 0 1 4 2 0 1 5 Q4 Q1 Q2 Q3 ⃰ Cost to Collect = Adjusted Operating Expense
Slide 15: Our International ERC Has Grown 23% in the Last Year
PROPRIETARY Total Estimated Remaining Collections $M 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Acquired dlc* $437 15 OUR INTERNATIONAL ERC HAS GROWN 23% IN THE LAST YEAR * ERC at time of acquisition Acquired Cabot* $1,445 Acqu
Slide 16: Cabot Contributed $0.30 to Encore's Q3 Economic EPS
PROPRIETARY CABOT CONTRIBUTED $0.30 TO ENCORE’S Q3 ECONOMIC EPS In 000’s except per share amounts Janus Encore Europe Holdings EEH Consolidated Total revenues $ 92,641 - $ 92,641 Total operating expenses (47,203) - (47,203) Income from operations $ 45,438 - $ 45,438 Non-PEC interest expense (27,564)
Slide 17: Encore Delivered Record Economic EPS of $1.34 in Q3
PROPRIETARY ENCORE DELIVERED RECORD ECONOMIC EPS OF $1.34 IN Q3 17 * Please refer to Appendix for reconciliation of Adjusted EPS / Economic EPS measurements to GAAP ($0.43) $0.04 $1.30 $1.34 $1.61 $0.07 $0.01 ($0.50) ($0.25) $0.00 $0.25 $0.50 $0.75 $1.00 $1.25 $1.50 Net income per diluted share attr
Slide 18: Summary and Outlook
PROPRIETARY SUMMARY AND OUTLOOK Strong Financial Track-Record • Delivered Economic EPS of $1.34 in Q3, 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 •
Slide 19: Q&A
= encore i “CAPITAL GROUP — Q&A
Slide 20: Appendix
= encore “CAPITAL GROUP —_ Appendix
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 September 30, 2015 2014 $ Per Diluted Share – Accounting Per Diluted Share –
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 12/31/13 3/31/14 6/30/14 9/30/14 12/31/14 3/31/15 6/30/15 9/30/15 GAAP net income, as reported $ 22,216 $ 18,830 $ 21,353 $ 30,138 $ 27,957 $ 29,967 $ 25,185 ($ 9,364) (Gain) loss from dis
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 12/31/13 3/31/14 6/30/14 9/30/14 12/31/14 3/31/15 6/30/15 9/30/15 GAAP total operating expenses, as reported $ 168,466 $ 1