Encore Capital Group Inc · NASDAQ:ECPG
Encore Capital — Q2 2018 Earnings Presentation
26 slides from Encore Capital's earnings presentation, Aug 8, 2018
Slide 1: Encore Capital Group, Inc. Q2 2018 Earnings Call
Exhibit 99.1 Encore Capital Group, Inc. Q2 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: Encore Highlights
ENCORE HIGHLIGHTS In Q2 2018 we set records for portfolio purchases, collections, revenues, and ERC We completed the Cabot acquisition, transforming Encore into a clear leader in the U.S. and the U.K., the world’s two largest markets for our industry Proprietary and Confidential 3
Slide 4: Encore's Second Quarter 2018 Performance Set Several New Company Records
ENCORE’S SECOND QUARTER 2018 PERFORMANCE SET SEVERAL NEW COMPANY RECORDS Debt Estimated Deployments Purchasing Revenues Remaining Collections Collections $360M $496M $350M $7.2B Up 46% Up 11% Up 20% Up 15% from Q2 2017 from Q2 2017 from Q2 2017 from Q2 2017 2nd consecutive 5th consecutive Record lev
Slide 5: Encore's Second Quarter 2018 GAAP EPS Was $1.00
ENCORE’S SECOND QUARTER 2018 GAAP EPS WAS $1.00 GAAP EPS1 GAAP Net Income1 Economic EPS2 Adjusted Income2 $1.00 $26.3M $1.33 $35.1M 1) From continuing operations attributable to Encore 2) Please refer to Appendix for reconciliation of Economic EPS and Adjusted Income to GAAP 5
Slide 6: Adjusted EBITDA Over the Last 12 Months Achieved a New Record Level
OUR ADJUSTED EBITDA OVER THE LAST 12 MONTHS HAS ACHIEVED A NEW RECORD LEVEL, AN INDICATION OF OUR STRONG CASH GENERATION (in $000’s) Adjusted EBITDA + Collections applied to principal balance Encore Adjusted EBITDATrailing 12 --MonthsTrailing 12-Months $1,200,000 $1,000,000 $800,000 $600,000 $400,00
Slide 7: Cabot Is a Market Leader and Strong Performer 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 Compelling Geographic Ireland, with operations in Spain, Portugal and Footprint France and further growth opportunities in Europe Consumer unsecured, mortgages, REO, Dive
Slide 8: Completion of the Cabot Acquisition Is a Transformational Event
THE COMPLETION OF THE CABOT ACQUISITION IS 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 acr
Slide 9: U.S. Market for Debt Purchasing Remains Strong
U.S. MARKET FOR DEBT PURCHASING REMAINS STRONG U.S. Market 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 May 2018 Pricing environment remains favorable Encore’s U.S. Business Q2 was a
Slide 10: Detailed Financial Discussion
Detailed Financial Discussion 10
Slide 11: Worldwide Deployments in Q2 Were Up 46% Compared to Q2 2017
WORLDWIDE DEPLOYMENTS IN Q2 WERE UP 46% COMPARED TO Q2 2017, A NEW RECORD IN A NON-ACQUISITION QUARTER Q2 2018 Deployments $M Europe United $147 States $203 Other $10 Total $360 11
Slide 12: Record Collections in the Second Quarter Were Up 11%
RECORD COLLECTIONS IN THE SECOND 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 496 500 489 496 500 489 443 438 441 446 443 438 441 446 407 397 407 3
Slide 13: Q2 Revenue Growth of 20% Reflects Improved Collections and Servicing Revenue
Q2 REVENUE GROWTH OF 20% REFLECTS IMPROVED COLLECTIONS AND ADDITIONAL SERVICING REVENUE Revenue by Geography $M 400 350 350 327 307 317 291 300 271 272 250 179 200 150 100 50 0 -50 2016 2017 2016 2017 2017 2018 2017 2018 Q3 Q4 Q1 Q2 United States Europe Other 13
Slide 14: Estimated Remaining Collections Grew $960 Million in the Last 12 Months
ESTIMATED REMAINING COLLECTIONS GREW $960 MILLION IN THE LAST 12 MONTHS, TO A RECORD $7.2 BILLION Total Estimated Remaining Collections 7,216 $M 7,000 6,256 6,000 5,684 5,537 4,899 5,000 4,000 3,000 2,000 1,000 0 June 2014 June 2015 June 2016 June 2017 June 2018 United States Europe Other 14
Slide 15: Encore Delivered GAAP EPS of $1.00 and Economic EPS of $1.33 in Q2 2018
ENCORE DELIVERED GAAP EPS OF $1.00 AND ECONOMIC EPS OF $1.33 IN THE SECOND QUARTER OF 2018 Three Months Ended June 30, 2018 $1.75 $0.25 ($0.09) ($0.18) $1.50 $0.09 $1.33 $1.33 $0.14 $1.25 $0.12 $1.00 $1.00 No $0.75 shares deducted in $0.50 Q2 2018 $0.25 $0.00 Net income per Convertible notes Acquisi
Slide 16: Summary and 2018 Expectations
SUMMARY AND 2018 EXPECTATIONS Encore’s Q2 2018 results include records for portfolio purchases, collections, revenues, and ERC We completed the acquisition of Cabot, transforming Encore into a clear leader in the U.S. and the U.K., the world’s two largest markets for our industry U.S. market f
Slide 17: Q&A
APITAL GROW = Q&A — encore
Slide 18: Appendix
APITAL GROW — encore 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 June 30, 2018 2017 Per Diluted Per Diluted Per Diluted Per Diluted $ Share – Share – $ Share
Slide 21: Reconciliation of Adjusted EBITDA
RECONCILIATION OF ADJUSTED EBITDA Reconciliation of Adjusted EBITDA to GAAP Net Income (Unaudited, In $ Thousands) Three Months Ended 12/31/12 03/31/13 06/30/13 09/30/13 12/31/13 03/31/14 06/30/14 09/30/14 GAAP net income (loss), as reported $ 20,167 $ 19,448 $ 11,012 $ 21,064 $ 22,216 $ 18,830 $ 21
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 12/31/14 03/31/15 06/30/15 09/30/15 12/31/15 03/31/16 06/30/16 09/30/16 GAAP net income (loss), as reported $ 27,957 $ 29,967 $ 25,185 $ (9,364) $ 1,596 $
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 12/31/16 03/31/17 06/30/17 09/30/17 12/31/17 03/31/18 06/30/18 GAAP net income (loss), as reported $ 11,323 $ 14,979 $ 19,076 $ 42,144 $ 2,779 $ 23,713 $
Slide 24: 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 9/30/16 12/31/16 3/31/17 6/30/17 9/30/17 12/31/17 3/31/18 6/30/18 GAAP total operating expenses, as reported $ 200,597 $ 183,939 $ 196
Slide 25: Impact of Fluctuations in Foreign Currency Exchange Rates
IMPACT OF FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES (Unaudited, In Millions, except per share amounts) Constant Three Months Ended 6/30/18 As Reported Currency Revenue, adjusted by net allowances $ 350 $ 341 Operating expenses $ 246 $ 241 Net income* $ 26 $ 26 Adjusted net income* $ 35 $ 34 GA
Slide 26: Encore's Q2 2018 Cost-to-Collect Was 37.5% Compared to 40.3% in Q2 2017
ENCORE’S Q2 2018 COST-TO-COLLECT WAS 37.5% COMPARED TO 40.3% IN Q2 2017 Overall Cost-to-Collect1 45% 2 41.1% 41.5% 40.3% 40% 38.4% 38.4% 37.8% 38.5% 37.5% 35% Q2 2018 Q2 2017 Location 30% CTC CTC 25% United States 40.8% 44.5% 20% Europe 29.1% 29.7% 15% 10% Other 46.7% 48.1% 5% Encore total 37.5% 40.