Encore Capital Group Inc · NASDAQ:ECPG

Encore Capital — Q3 2014 Earnings Presentation

24 slides from Encore Capital's earnings presentation, Nov 6, 2014

  1. Slide 1: Encore Capital Group, Inc. Q3 2014 Earnings Call

    Encore Capital Group, Inc. Q3 2014 EARNINGS CALL Exhibit 99.1

  2. 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

  3. Slide 3: Encore Delivered Record Quarterly Earnings Per Share

    PROPRIETARY 3 ENCORE DELIVERED RECORD QUARTERLY EARNINGS PER SHARE Economic EPS** $1.17 GAAP EPS* $1.11 GAAP Net Income* $30 million Adjusted Income** $31 million Estimated Remaining Collections of $5.1 billion * Attributable to Encore ** Please refer to Appendix for reconciliation of Economic EPS,

  4. Slide 4: Q3 Deployments Reflect a Diverse Global Business

    PROPRIETARY 4 Q3 DEPLOYMENTS REFLECT A DIVERSE GLOBAL BUSINESS Q3-2014 Deployments $M Core US Purchasing $69 Core US (Atlantic) $105 Propel $36 Cabot $93 Refinancia $16 Grove $16 Total $336

  5. Slide 5: Our Diversification Allows Us to Operate in Several Distinct Markets

    PROPRIETARY OUR DIVERSIFICATION ALLOWS US TO OPERATE IN SEVERAL DISTINCT MARKETS 5 Current Market Conditions US Core Market • Pricing remains steady, even moderating in some instances • Supply moderate in Q4 • Two large issuers remain on the sidelines UK IVA* Market and Spain • IVA supply traditiona

  6. Slide 6: Our Growth Strategy Is Tailored to Address the Evolving Dynamics of Our Markets

    PROPRIETARY OUR GROWTH STRATEGY IS TAILORED TO ADDRESS THE EVOLVING DYNAMICS OF OUR MARKETS 6 Encore Growth Strategy • Existing – Cabot/Marlin – Grove – Refinancia • New – India – Europe – Latin America – Australia – Others Expand Into New Geographies 2 • M&A opportunities in related spaces – Tax Li

  7. Slide 7: We Have Continued to Lead the Consolidation of Our Industry in the U.S.

    PROPRIETARY Investment Rationale Attractive Consolidation Partner Additional ERC Expanded Market for Future Capital Deployment • ACF specializes in high balance, recently charged-off (“fresh”) paper • Strong liquidation rates result from specialized approach and experienced staff • Long-standing rel

  8. Slide 8: Cabot Remains a Solid Contributor to Overall Earnings - Marlin Integration on Track

    PROPRIETARY Cabot’s Economic EPS Impact CABOT REMAINS A SOLID CONTRIBUTOR TO OVERALL EARNINGS - MARLIN INTEGRATION REMAINS ON TRACK 8 Cabot Update 0.17 0.18 0.21 0.19 0.21 0.00 0.05 0.10 0.15 0.20 0.25 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 $  Cabot deployed $503 million in new portfolio purchases

  9. Slide 9: Propel Continues to Grow and Contribute to Encore

    PROPRIETARY PROPEL CONTINUES TO GROW AND CONTRIBUTE TO ENCORE Tax Note Receivables Total Revenue 0 2 4 6 8 10 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Operating Income 0 1 2 3 4 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 9 $276 million in property tax lien receivables Now operating in

  10. Slide 10: Detailed Financial Discussion

    10 Detailed Financial Discussion

  11. Slide 11: Q3 Collections Reflect Steady Execution and Growth

    PROPRIETARY 11 Q3 COLLECTIONS REFLECT STEADY EXECUTION AND GROWTH Collections by Geography 0 100 200 300 400 500 2 0 1 2 2 0 1 3 2 0 1 3 2 0 1 4 2 0 1 3 2 0 1 4 2 0 1 3 2 0 1 4 Q4 Q1 Q2 Q3 Collection Sites Legal Collections Collection Agencies $M 0 100 200 300 400 500 2 0 1 2 2 0 1 3 2 0 1 3 2 0 1 4

  12. Slide 12: Strong Collections and Geographic Diversification Led to Solid Revenue Growth

    PROPRIETARY STRONG COLLECTIONS AND OUR GEOGRAPHIC DIVERSIFICATION STRATEGY LED TO SOLID REVENUE GROWTH Revenue From Business Lines 12 0 50 100 150 200 250 300 2 0 1 2 2 0 1 3 2 0 1 3 2 0 1 4 2 0 1 3 2 0 1 4 2 0 1 3 2 0 1 4 Q4 Q1 Q2 Q3 Core US Cabot Propel Refinancia Grove $M 144 145 156 236 237 254

  13. Slide 13: Cost to Collect Remains Stable, Even as We Invest in Compliance

    PROPRIETARY COST TO COLLECT REMAINS STABLE, EVEN AS WE CONTINUE TO INVEST IN COMPLIANCE 13 Overall Cost to Collect* 43% 42% 36% 38% 38% 38% 40% 39% 30% 35% 40% 45% 2 0 1 2 2 0 1 3 2 0 1 3 2 0 1 4 2 0 1 3 2 0 1 4 2 0 1 3 2 0 1 4 Q4 Q1 Q2 Q3 ⃰ Cost to Collect is Adjusted Operating Expenses / Dollar co

  14. Slide 14: We Continue to Drive Significant Value Through Our Legal Channel

    PROPRIETARY WE CONTINUE TO DRIVE SIGNIFICANT VALUE THROUGH OUR LEGAL CHANNEL US Legal Collections 0 20 40 60 80 100 120 140 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 $M US Legal Cost to Collect 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014

  15. Slide 15: Collections Growth Led to Improved Cash Flows

    PROPRIETARY COLLECTIONS GROWTH LED TO IMPROVED CASH FLOWS 15 * Please refer to Appendix for reconciliation of Adjusted EBITDA to GAAP $M Adjusted Quarterly EBITDA* Adjusted EBITDA Trailing Twelve Months 135 206 174 250 172 256 231 252 0 50 100 150 200 250 300 2 0 1 2 2 0 1 3 2 0 1 3 2 0 1 4 2 0 1 3

  16. Slide 16: Our ERC Continues to Grow

    PROPRIETARY Estimated Remaining Collections $M 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 16 OUR ERC CONTINUES TO GROW * ERC at time of acquisition Acquired AACC* $952 Acquired Cabot* $1,445 Acquired Marlin* $607 Acquired Atlantic* $27

  17. Slide 17: Encore Delivered Record Economic EPS in Q3 of $1.17

    PROPRIETARY ENCORE DELIVERED RECORD ECONOMIC EPS IN Q3 OF $1.17 $1.11 ($0.08) $1.13 $1.17 $0.06 $0.04 Net income per diluted share attributable to Encore Net non-cash interest and issuance cost amortization, net of tax Acquisition and integration related fees, net of tax Effect of net tax credits ap

  18. Slide 18: Encore's Long-Term Prospects Remain Favorable

    PROPRIETARY 18 ENCORE’S LONG-TERM PROSPECTS REMAIN FAVORABLE Operating Results & Deployment A culture of constant improvement drives improved results Liquidity & Capital Access Strong liquidity and access to capital enhance our ability to take advantage of consolidating markets and new opportunities

  19. Slide 19: Appendix

    (=~ encore Wane CAPITAL crour Appendix

  20. Slide 20: Non-GAAP Financial Measures

    PROPRIETARY 20 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

  21. Slide 21: Reconciliation of Adjusted Income and Economic / Adjusted EPS

    PROPRIETARY 21 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, 2014 2013 $ Per Diluted Share – Accounting Per Diluted Share –

  22. Slide 22: Reconciliation of Adjusted EBITDA to GAAP Net Income

    PROPRIETARY Reconciliation of Adjusted EBITDA to GAAP Net Income (Unaudited, In $ Thousands) Three Months Ended 9/30/12 12/31/12 3/31/13 6/30/13 9/30/13 12/31/13 3/31/14 6/30/14 9/30/14 GAAP net income, as reported 21,308 20,167 19,448 11,012 21,064 22,216 18,830 21,353 30,138 (Gain) loss from disco

  23. Slide 23: 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 12/31/12 3/31/13 6/30/13 9/30/13 12/31/13 3/31/14 6/30/14 9/30/14 GAAP total operating expenses, as reported 103,872 105,8

  24. Slide 24: Encore Capital Group, Inc. Q3 2014 Earnings Call

    Encore Capital Group, Inc. Q3 2014 EARNINGS CALL

Encore Capital Group — Q3 2014 Earnings Presentation on 6ix