Encore Capital Group Inc · NASDAQ:ECPG
Encore Capital — Q1 2018 Earnings Presentation
23 slides from Encore Capital's earnings presentation, May 8, 2018
Slide 1: Cabot Transaction & Q1 2018 Earnings Call
Exhibit 99.1 Encore Capital Group, Inc. CABOT TRANSACTION & Q1 2018 EARNINGS CALL
Slide 2: Cautionary Note About Forward-Looking Statements
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS The statements in this presentation that are not achievements of the Company and its subsidiaries historical facts, including, most importantly, those to be materially different from any future results, statements preceded by, or that include, the wor
Slide 3: Conference Call Agenda
CONFERENCE CALL AGENDA Discussion of Cabot transaction Q1 2018 Earnings summary and update to prior earnings growth outlook Proprietary and Confidential 3
Slide 4: Acquisition of the Remainder of Cabot Solidifies Encore's Global Strategic Position
THE ACQUISITION OF THE REMAINDER OF CABOT SOLIDIFIES ENCORE’S GLOBAL STRATEGIC POSITION Strengthens our position in the growing European market with clear opportunity to further expand Strategically Continued benefits from diversification across geographies and products Aligned Encore retains
Slide 5: Transaction Summary
TRANSACTION SUMMARY Purchase: Remaining PECs and common shares of Cabot Total Cabot equity value: ~£620M Consideration Encore shares: 5M Encore common shares Cash: £175.5M (~$238.2M) Approvals: HSR Expected closing: Within 90 days Financing: Committed financing in place Proprietary a
Slide 6: Cabot Is a Market Leader and Strong Performer with Considerable Growth Potential
CABOT IS A MARKET LEADER AND STRONG PERFORMER WITH CONSIDERABLE GROWTH POTENTIAL Compelling Geographic Cabot is the industry leader in the U.K. and Ireland, with solid operations in Footprint Spain, Portugal and France and further growth opportunities in Europe Consumer unsecured, mortgages, REO
Slide 7: Encore's Growth Strategy Focused on Domestic and International Opportunities
ENCORE’S GROWTH STRATEGY IS FOCUSED ON BOTH DOMESTIC AND INTERNATIONAL OPPORTUNITIES Continue to invest Strengthen and in and grow core develop Encore’s businesses in the international United States businesses Focus on liquidation and Our global reach and expense management, scale provide significan
Slide 8: U.S. Market Continues on Path Toward Long-Term Growth
U.S. MARKET CONTINUES ON PATH TOWARD LONG-TERM GROWTH Supply in the U.S. on track for continued growth in 2018 and beyond Federal Reserve reports revolving credit in the U.S. reached another all-time high in February 2018 Banks’ charge-off rates and loan loss allowances continue to rise Pric
Slide 9: Detailed Financial Discussion
Detailed Financial Discussion 9
Slide 10: Encore's First Quarter 2018 GAAP EPS Was $0.83
ENCORE’S FIRST QUARTER 2018 GAAP EPS WAS $0.83 GAAP EPS1 GAAP Net Income1 Economic EPS2 Adjusted Income2 $21.8 $25.8 $0.83 million $0.98 million Collections $489 million Estimated Remaining Collections of $7.1 billion 1) From continuing operations attributable to Encore 2) Please refer to Appendix f
Slide 11: Worldwide Deployments in Q1 Were Up 27%
WORLDWIDE DEPLOYMENTS IN Q1 WERE UP 27% COMPARED TO THE SAME QUARTER A YEAR AGO Q1 2018 Deployments $M Europe $87 United States $179 Other $10 Total $277 11
Slide 12: Record Collections in the First Quarter Were Up 11%
RECORD COLLECTIONS IN THE FIRST QUARTER WERE UP 11%, REFLECTING GROWTH IN THE U.S. AND EUROPE Collections by Geography Collections by Channel Collection Sites Legal Collections Collection Agencies $M United States Europe Other $M 489 489 500 500 434446 443 438 441 434 446 443 438 441 407 397 407 397
Slide 13: Q1 Revenue Reflects Our Growth in Europe
Q1 REVENUE REFLECTS OUR GROWTH IN EUROPE Revenue by Geography $M 350 327 307 317 289 291 300 271 272 250 200 179 150 100 50 0 -50 2016 2017 2016 2017 2016 2017 2017 2018 Q2 Q3 Q4 Q1 United States Europe Other 13
Slide 14: Estimated Remaining Collections Grew $1.2 Billion in Last 12 Months
ESTIMATED REMAINING COLLECTIONS GREW $1.2 BILLION IN THE LAST 12 MONTHS TO SET A NEW ENCORE ALL-TIME HIGH Total Estimated Remaining Collections 7,077 $M 7,000 5,849 6,000 5,665 5,080 5,000 4,758 4,000 3,000 2,000 1,000 0 March 2014 March 2015 March 2016 March 2017 March 2018 United States Europe Oth
Slide 15: Encore Delivered GAAP EPS of $0.83 and Economic EPS of $0.98
ENCORE DELIVERED GAAP EPS OF $0.83 AND ECONOMIC EPS OF $0.98 IN THE FIRST QUARTER OF 2018 Three Months Ended March 31, 2018 $1.25 $0.08 ($0.09) $0.11 ($0.03) ($0.06) $0.02 $0.98 $0.98 $1.00 $0.12 $0.83 $0.75 No shares $0.50 deducted in Q1 2018 $0.25 $0.00 Net income per Convertible Acquisition, Expe
Slide 16: Summary and Improved 2018 Expectations
SUMMARY AND IMPROVED 2018 EXPECTATIONS In Q1, we recorded record global cash collections and our ERC established another all-time high level U.S. market supply remains strong and pricing remains favorable We deployed $179M in the U.S. at better returns than a year ago Acquisition of the rema
Slide 17: Q&A
—=- encore TCAPITAL GROUP Q&A
Slide 18: Appendix
—=- encore “CAPITAL GROUP Appendix
Slide 19: Non-GAAP Financial Measures
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 Adjusted EBITDA
Slide 20: Reconciliation of Adjusted Income and Economic / Adjusted EPS
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 March 31, 2018 2017 Per Diluted Per Diluted Per Diluted Per Diluted $ Share – Share – $ Shar
Slide 21: Reconciliation of Adjusted Operating Expenses
RECONCILIATION OF ADJUSTED OPERATING EXPENSES Reconciliation of Adjusted Operating Expenses to GAAP Operating Expenses (Unaudited, In $ Thousands) Three Months Ended 6/30/16 9/30/16 12/31/16 3/31/17 6/30/17 9/30/17 12/31/17 3/31/18 GAAP total operating expenses, as reported $ 197,695 $ 200,597 $ 183
Slide 22: Impact of Fluctuations in Foreign Currency Exchange Rates
IMPACT OF FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES (Unaudited, In Millions, except per share amounts) Three Months Ended Constant As Reported 3/31/18 Currency Revenue $ 327 $ 311 Operating expenses $ 238 $ 229 Net income* $ 22 $ 21 Adjusted net income* $ 26 $ 25 GAAP EPS* $ 0.83 $ 0.80 Econom
Slide 23: Q1 Cost-to-Collect Reflects Accelerated Legal Spending & Investments
Q1 COST-TO-COLLECT REFLECTS ACCELERATED LEGAL SPENDING & INVESTMENTS TO INCREASE COLLECTIONS CAPACITY IN THE U.S. Overall Cost-to-Collect1 45% 2 40.3% 41.1% 41.5% 40% 38.4% 38.4% 38.5% 36.9% 37.8% 35% Q1 2018 Q1 2017 Location 30% CTC CTC 25% United States 43.6% 40.6% 20% Europe 27.4% 28.5% 15% 10% O