Encore Capital Group Inc · NASDAQ:ECPG
Encore Capital — Non-Deal Roadshow (November 2018)
23 slides from Encore Capital's roadshow presentation, Nov 26, 2018
Slide 1: Encore Investor Non-Deal Road Show November 2018
Exhibit 99.1 ENCORE INVESTOR NON-DEAL ROAD SHOW November 2018
Slide 2: Safe Harbor
SAFE HARBOR 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 thereof, or similar expressions, constitute “forward-loo
Slide 3: Recent Encore Highlights
RECENT ENCORE HIGHLIGHTS We set new global records for collections and ERC in Q3 2018 We completed the Cabot acquisition in July, transforming Encore into a clear leader in the U.S. and the U.K., the world’s two most important markets for our industry Proprietary and Confidential 2
Slide 4: Q3 2018 was a strong quarter in which we set several new collections records
Q3 2018 WAS A STRONG QUARTER FOR ENCORE IN WHICH WE SET SEVERAL NEW COLLECTIONS RECORDS Estimated Global Debt U.S. Debt U.S. Call Center Remaining Purchasing Purchasing Debt Purchasing Collections Collections Collections Collections $7.2B $499M $318M $171M Up 10% Up 13% Up 18% Up 33% from Q3 2017 fr
Slide 5: Our Adjusted EBITDA reflects our strong cash generation
OUR ADJUSTED EBITDA REFLECTS OUR STRONG CASH GENERATION (in $000’s) Adjusted EBITDA + Collections applied to principal balance (Trailing 12-Months, in $M) Adjusted EBITDA - TTM Collections applied to principal balance - TTM 1,200 1,000 800 600 400 200 0 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1
Slide 6: Over $1 trillion of U.S. revolving debt, expected to drive $40-45 billion in charge-offs
IN SEPTEMBER 2018, THE FEDERAL RESERVE REPORTED >$1 TRILLION OF U.S. REVOLVING DEBT, EXPECTED TO DRIVE $40-45 BILLION IN CHARGE-OFFS Total U.S. Revolving Debt Outstanding $1.0T1 U.S. Credit Card Estimated Gross Charge-Off Rate 4.2%2 Approximate Revolving Debt Charged-Off Annually $40B-$45B Issuers O
Slide 7: U.S. revolving credit outstandings are at a historically high level
U.S. REVOLVING CREDIT OUTSTANDINGS ARE AT A HISTORICALLY HIGH LEVEL U.S. Revolving Credit Outstanding1 1200 1000 800 $B 600 400 Initial 200 Projections 0 1985Q1 1985Q4 1986Q3 1987Q2 1988Q1 1988Q4 1989Q3 1990Q2 1991Q1 1991Q4 1992Q3 1993Q2 1994Q1 1994Q4 1995Q3 1996Q2 1997Q1 1997Q4 1998Q3 1999Q2 2000Q1
Slide 8: Strong correlation between U.S. credit card charge-off rate and unemployment rate
THERE IS STRONG CORRELATION BETWEEN THE U.S. CREDIT CARD CHARGE-OFF RATE AND THE U.S. UNEMPLOYMENT RATE U.S. Unemployment Rate1 vs. U.S. Credit Card Net Charge-Off Rate2 12 U.S. Unemployment Rate U.S. Credit Card Net Charge-Off Rate 10 8 % 6 4 2 Charge-off rate has been rising despite the continued
Slide 9: We expect to deploy more than $600M in the U.S. in 2018
WE EXPECT TO DEPLOY MORE THAN $600M IN THE U.S. IN 2018, A HIGHER LEVEL THAN ANY OTHER YEAR IN OUR HISTORY Encore’s U.S. Business Pricing environment remains favorable and provides attractive returns Encore U.S. Cumulative Deployments The sale of fresh paper continues to dominate U.S. supply 201
Slide 10: Driving operational efficiencies and reducing costs
WE CONTINUE TO FOCUS ON DRIVING OPERATIONAL EFFICIENCIES AND REDUCING COSTS Encore Overall Cost to Collect1 50% 47.6% 45% 43.7% 42.2% 40.0% 40% 39.1% 39.2% 39.5% 38.6% 38.5% 37.3% 35% 30% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD2 1) Cost to Collect, also known as Cost Per Dollar Collect
Slide 11: Estimated remaining collections grew $653 million in the last 12 months
ESTIMATED REMAINING COLLECTIONS GREW $653 MILLION IN THE LAST 12 MONTHS, TO A RECORD $7.2 BILLION Encore Total Estimated Remaining Collections $M 7,221 United States Europe Other 7,000 6,568 6,000 5,654 5,733 5,128 5,000 4,000 3,000 2,000 1,000 0 September 2014 September 2015 September 2016 Septembe
Slide 12: Track record of cash collections that exceed initial projections
WE HAVE A TRACK RECORD OF CASH COLLECTIONS THAT EXCEED OUR INITIAL PROJECTIONS Encore Cumulative Collections - U.S. Core through FY2017 $M 10,000 8,000 Actual Cumulative Cash Collections 6,000 4,000 Cumulative Initial 2,000 Projections 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20
Slide 13: Our issuer certification program is a key differentiator in the U.S. market
OUR ISSUER CERTIFICATION PROGRAM IS A KEY DIFFERENTIATOR IN THE U.S. MARKET We average roughly 35 issuer audits and due diligence exercises per year The certifications received through these audits are a prerequisite for purchasing debt from issuers Encore has achieved certification from all m
Slide 14: Completion of the Cabot acquisition was a transformational event
THE COMPLETION OF THE CABOT ACQUISITION WAS A TRANSFORMATIONAL EVENT, SOLIDIFYING OUR GLOBAL STRATEGIC POSITION Strategically Aligned Strengthens our position in the growing, attractive European market with a clear opportunity to further expand Provides continued benefits from diversification ac
Slide 15: Cabot is a market leader with considerable growth potential
CABOT IS A MARKET LEADER AND STRONG PERFORMER WITH CONSIDERABLE GROWTH POTENTIAL Cabot is the industry leader in the U.K. and Ireland with additional operations and portfolios in Spain & France Compelling Geographic Portfolios and further growth opportunities in select and Asset Footprint Europe
Slide 16: In Europe, an active market with many opportunities
IN EUROPE, WE’RE SEEING AN ACTIVE MARKET WITH MANY EXCITING OPPORTUNITIES TO WIN BUSINESS AT ATTRACTIVE RETURNS European Market Q3 was characterized by strong deal flow in the U.K. and in several other European countries Following record portfolio sales in 2017, banks continue to clean up their
Slide 17: Cabot continues to deliver solid financial and operational performance
CABOT CONTINUES TO DELIVER SOLID FINANCIAL AND OPERATIONAL PERFORMANCE Encore’s European Business We deployed $115M of capital in new portfolio purchases in Q3 with the majority in the U.K. Our servicing capabilities are providing us with growth opportunities as we work with a broad range of ban
Slide 18: Summary of Q3 2018 results and 2018 expectations
SUMMARY OF Q3 2018 RESULTS AND 2018 EXPECTATIONS Encore’s Q3 2018 results included records for cash collections and ERC We believe we are in the very early stages of an expanding U.S. market for debt purchasing Our increased capacity and high-performing collections operation position us well t
Slide 19: Encore is a market leader in the debt purchasing and recovery industry
ENCORE IS A MARKET LEADER IN THE DEBT PURCHASING AND RECOVERY INDUSTRY Extensive investment in data analytics and behavioral science 1 underpins our collections predictability and pricing accuracy Our high-performing operations enable us to innovate and 2 refine collection strategies to improve liqu
Slide 20: Appendix
\=—- encore 4 CAPITAL GROUP Cee Appendix 19
Slide 21: Reconciliation of Adjusted EBITDA
RECONCILIATION OF ADJUSTED EBITDA Reconciliation of Adjusted EBITDA to GAAP Net Income (Unaudited, In $ Thousands) Three Months Ended 03/31/13 06/30/13 09/30/13 12/31/13 03/31/14 06/30/14 09/30/14 12/31/14 GAAP net income (loss), as reported $ 19,448 $ 11,012 $ 21,064 $ 22,216 $ 18,830 $ 21,353 $ 30
Slide 22: Reconciliation of Adjusted EBITDA (continued)
RECONCILIATION OF ADJUSTED EBITDA (CONTINUED) Reconciliation of Adjusted EBITDA to GAAP Net Income (Unaudited, In $ Thousands) Three Months Ended 03/31/15 06/30/15 09/30/15 12/31/15 03/31/16 06/30/16 09/30/16 12/31/16 GAAP net income (loss), as reported $ 29,967 $ 25,185 $ (9,364) $ 1,596 $ 26,607 $
Slide 23: Reconciliation of Adjusted EBITDA (continued)
RECONCILIATION OF ADJUSTED EBITDA (CONTINUED) Reconciliation of Adjusted EBITDA to GAAP Net Income (Unaudited, In $ Thousands) Three Months Ended 03/31/17 06/30/17 09/30/17 12/31/17 03/31/18 06/30/18 09/30/18 GAAP net income (loss), as reported $ 14,979 $ 19,076 $ 42,144 $ 2,779 $ 23,713 $ 26,974 $
Encore Capital Group — Non-Deal Roadshow (November 2018) on 6ix