Encore Capital Group Inc · NASDAQ:ECPG
Encore Capital — Non-Deal Roadshow (May 2019)
29 slides from Encore Capital's roadshow presentation, May 21, 2019
Slide 1: Encore Investor Meetings May/June 2019
ENCORE INVESTOR MEETINGS May/June 2019
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: Introduction to Encore; First Quarter 2019 Results
1) Introduction to Encore 2) First Quarter 2019 Results 2
Slide 4: Encore is the preeminent purchaser and servicer of non-performing consumer debt globally
ENCORE IS THE PREEMINENT PURCHASER AND SERVICER OF NON-PERFORMING CONSUMER DEBT GLOBALLY #1 in the US by $ collected • Highly analytical approach using #1 proprietary models and databases to steer portfolio pricing, channel selection, and campaigns #1 in the UK by £ collected #1 •Use of dynamic coll
Slide 5: Encore's primary business is the purchase and collection of charged-off consumer debt
ENCORE’S PRIMARY BUSINESS IS THE PURCHASE AND COLLECTION OF CHARGED-OFF CONSUMER DEBT Encore Engages consumers in collection activities Encore purchases and collects Issuers on charged-off debt Consumer- centric with a leading position sell approach charged-off in the U.S. and the Issuers of Debt is
Slide 6: Large datasets feed proprietary predictive models to drive account level collection strategies
OUR LARGE DATASETS FEED PROPRIETARY PREDICTIVE MODELS TO DRIVE OPTIMAL ACCOUNT LEVEL COLLECTION STRATEGIES Core competency in understanding the payer behavior Channel-specific models are of distressed consumers, influenced by consumers used to optimize operations, perceived willingness and ability t
Slide 7: Our strategy is to pursue the best opportunities for our capital
OUR STRATEGY IS TO PURSUE THE BEST OPPORTUNITIES FOR OUR CAPITAL… Prior • Prior to 2013, we were present only in the US where we led a substantial market consolidation, and we Only US to 2013 were subject to the US markets cyclicality and competitive dynamics • Expanded internationally 2013–2016 to
Slide 8: Continuing to invest in operational excellence, analytical advantages and innovation
…WHILE CONTINUING TO INVEST IN OPERATIONAL EXCELLENCE, ANALYTICAL ADVANTAGES AND INNOVATION… Innovation Analytics • Speech analytics • Machine learning • Behavioural science • Cloud based 5 Cost efficiency • Platform consolidation Digital • Resources in India and • Self-service options Costa Rica •
Slide 9: Optimizing our balance sheet to increase strategic and operational flexibility
…AND OPTIMIZING OUR BALANCE SHEET TO INCREASE STRATEGIC AND OPERATIONAL FLEXIBILITY Manage consolidated leverage Grow shareholder equity • Ensure we have ample capacity to invest • Increase strategic flexibility in the coming US growth opportunities • Increase access to capital • Focus on lowering l
Slide 10: Introduction to Encore; First Quarter 2019 Results
1) Introduction to Encore 2) First Quarter 2019 Results 9
Slide 11: First Quarter 2019 Highlights
FIRST QUARTER 2019 HIGHLIGHTS Estimated Remaining Global Collections Global Revenue1 Collections $514M $347M $7.3B up 5% up 6% up 3% Record Record GAAP EPS2 GAAP Net Income2 Economic EPS3 Adjusted Income3 $1.57 $49.3M $1.46 $45.9M up 89% up 126% up 49% up 78% Record Record Record Record 1) Total Rev
Slide 12: Adjusted EBITDA reflects our strong cash generation
OUR ADJUSTED EBITDA REFLECTS OUR STRONG CASH GENERATION Adjusted EBITDA + Collections applied to principal balance Encore Adjusted EBITDA(Trailing 12-Months) - Trailing 12-Months $1,250 $1,000 $750 $M $500 $250 $0 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q182Q183Q1
Slide 13: U.S. market continues to provide opportunities to purchase portfolios with attractive returns
U.S. MARKET CONTINUES TO PROVIDE OPPORTUNITIES TO PURCHASE PORTFOLIOS WITH ATTRACTIVE RETURNS According to the most recent data from the Federal Reserve, U.S. Revolving Consumer Debt reached another all-time high level in February 2019 According to data compiled by Bloomberg Intelligence, the U.
Slide 14: MCM (U.S.) collections grew 10% in Q1 2019 to a record $330 million
MCM (U.S.) COLLECTIONS FROM OUR DEBT PURCHASING BUSINESS GREW 10% IN Q1 2019 TO A RECORD $330 MILLION Encore’s U.S. Business Solid start to 2019 with Q1 U.S. MCM (U.S.) Collections by Channel deployments of $174M, consisting primarily of fresh paper Call Center & Digital Legal Collections Collecti
Slide 15: Continued innovation and consumer-centric approach driving strong performance gains
CONTINUED INNOVATION AND OUR CONSUMER-CENTRIC APPROACH ARE DRIVING STRONG PERFORMANCE GAINS MCM (U.S.) Collections Performance Payer Rate Cumulative Cash Liquidation Rate by Purchase Vintage by Purchase Vintage (first 12 months, indexed to 100) (first 12 months, indexed to 100) 144 Avg. of 2016-2018
Slide 16: Near-record unsecured consumer indebtedness in the U.K. expected to drive market opportunity
LIKE IN THE U.S., NEAR-RECORD UNSECURED CONSUMER INDEBTEDNESS IN THE U.K. EXPECTED TO DRIVE MEANINGFUL MARKET OPPORTUNITY UK Unsecured Consumer Lending and Total Charge-Off Rate Total Unsecured Lending (excluding Student Loans) (£M) Derived Total Unsecured Quarterly Charge-OffCharge-Offs Rate Lendin
Slide 17: Supply in the European market is attractive and growing
SUPPLY IN THE EUROPEAN MARKET IS ATTRACTIVE AND GROWING European Market In the U.K., we expect record consumer indebtedness will drive meaningful supply growth In the medium term, we are seeing early signs of increasing default rates We are also seeing evidence of banks selling their charged-o
Slide 18: Cabot provides leadership across the credit management product range
CABOT PROVIDES LEADERSHIP ACROSS THE CREDIT MANAGEMENT PRODUCT RANGE Debt Debt Collection Business Process Purchasing Agency Outsourcing Largest debt purchaser Top ranked DCA for Largest U.K. based in terms of U.K. financial 73% (by volume) of collections BPO services ERC portfolio we service for pr
Slide 19: Cabot delivered strong financial and operational performance in Q1 2019
CABOT DELIVERED STRONG FINANCIAL AND OPERATIONAL PERFORMANCE IN THE FIRST QUARTER OF 2019 Encore’s European Business European deployments totaled $84M in the first quarter and were concentrated primarily in the U.K. Collections from debt purchasing in Europe grew 6% in constant currency compared
Slide 20: CFPB issued a notice of proposed rulemaking on debt collection
IN EARLY MAY, THE CFPB ISSUED A NOTICE OF PROPOSED RULEMAKING (NPRM) ON DEBT COLLECTION The CFPB intends to make rules on industry practices for debt collection Gives the public and our industry a chance to provide feedback before the rules are final (effective 1 year after final rules are issue
Slide 21: Q1 2019 Summary and Outlook
Q1 2019 SUMMARY AND OUTLOOK 1. Record performance Record Encore earnings, global collections and ERC Record MCM (U.S.) collections with call center & digital collections up 15% 2. Strong leading indicators of future growth in charge-offs and supply Reflected in record levels of consumer indebt
Slide 22: Appendix
—= encore CAPITAL GROUP Appendix 21
Slide 23: 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, 2019 2018 Per Diluted Share Per Diluted Share $ – Accounting and $ – Accounting an
Slide 24: Reconciliation of Adjusted EBITDA
RECONCILIATION OF ADJUSTED EBITDA Reconciliation of Adjusted EBITDA to GAAP Net Income (Unaudited, In $ Thousands) Three Months Ended 09/30/13 12/31/13 03/31/14 06/30/14 09/30/14 12/31/14 03/31/15 06/30/15 GAAP net income (loss), as reported $ 21,064 $ 22,216 $ 18,830 $ 21,353 $ 30,138 $ 27,957 $ 29
Slide 25: Reconciliation of Adjusted EBITDA (continued)
RECONCILIATION OF ADJUSTED EBITDA (CONTINUED) Reconciliation of Adjusted EBITDA to GAAP Net Income (Unaudited, In $ Thousands) Three Months Ended 09/30/15 12/31/15 03/31/16 06/30/16 09/30/16 12/31/16 03/31/17 06/30/17 GAAP net income (loss), as reported $ (9,364) $ 1,596 $ 26,607 $ 30,833 $ (51,946)
Slide 26: Reconciliation of Adjusted EBITDA (continued)
RECONCILIATION OF ADJUSTED EBITDA (CONTINUED) Reconciliation of Adjusted EBITDA to GAAP Net Income (Unaudited, In $ Thousands) Three Months Ended 09/30/17 12/31/17 03/31/18 06/30/18 09/30/18 12/31/18 03/31/19 GAAP net income (loss), as reported $ 42,144 $ 2,779 $ 23,713 $ 26,974 $ 13,016 $ 46,033 $
Slide 27: Reconciliation of Adjusted Operating Expenses Related to Portfolio Purchasing and Recovery Business
RECONCILIATION OF ADJUSTED OPERATING EXPENSES RELATED TO PORTFOLIO PURCHASING AND RECOVERY BUSINESS Reconciliation of Adjusted Operating Expenses to GAAP Operating Expenses (Unaudited, In $ Thousands) Three Months Ended 6/30/17 9/30/17 12/31/17 3/31/18 6/30/18 9/30/18 12/31/18 03/31/19 GAAP total op
Slide 28: Impact of Fluctuations in Foreign Currency Exchange Rates
IMPACT OF FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES (Unaudited, in millions, except per share amounts) Encore Consolidated Cabot (Europe) Three Months Ended Constant Three Months Ended Constant As Reported As Reported 3/31/19 Currency 3/31/19 Currency Revenue $347 $358 Revenue $135 $145 Operat
Slide 29: Q1 2019 improvement in cost-to-collect reflects higher proportion of call center & digital collections
Q1 2019 IMPROVEMENT IN COST-TO-COLLECT PRIMARILY REFLECTS A HIGHER PROPORTION OF CALL CENTER & DIGITAL COLLECTIONS Overall Cost-to-Collect1 45% 41.5% 40.3% 39.6% 40% 37.5% 38.4% 38.5% 36.0% 36.4% Q1 2019 Q1 2018 35% Location CTC CTC 30% 25% United States 39.6% 43.6% 20% Europe 27.6% 27.4% 15% Other