Encore Capital Group Inc · NASDAQ:ECPG
Encore Capital — Q4 2017 Earnings Presentation
28 slides from Encore Capital's earnings presentation, Feb 21, 2018
Slide 1: Encore Capital Group, Inc. Q4 2017 Earnings Call
Encore Capital Group, Inc. Q4 2017 EARNINGS CALL Exhibit 99.1
Slide 2: Cautionary Note About Forward-Looking Statements
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 thereof, or simil
Slide 3: Encore Update
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Slide 4: U.S. Market Continues on Path Toward Long-Term Growth
4 U.S. MARKET CONTINUES ON PATH TOWARD LONG-TERM GROWTH After growing more than 15% in 2016, supply in the U.S. grew more than 20% in 2017 – on track for continued growth in 2018 and beyond Federal Reserve reports revolving credit in the U.S. reached another all-time high in December 2017 Bank
Slide 5: Cabot Credit Management Delivered Solid Financial Results in 2017
5 OUR CABOT CREDIT MANAGEMENT SUBSIDIARY DELIVERED SOLID FINANCIAL RESULTS IN 2017 Cabot deployed ~$88M of capital in new portfolio purchases in Q4 and ~$420M in 2017 Cabot’s liquidation improvement initiatives continue to drive better sustained collections performance Sustained collections ov
Slide 6: Committed to Improving Consumer Experience, Compliance and Risk Management
6 WE REMAIN COMMITTED TO IMPROVING THE CONSUMER EXPERIENCE AS WELL AS STRINGENT COMPLIANCE & RISK MANAGEMENT PRINCIPLES Issuers remain focused on managing their reputational risk through consistency in consumer interaction standards Encore garners consistent accolades for superior issuer audit p
Slide 7: Detailed Financial Discussion
7 Detailed Financial Discussion
Slide 8: Encore's Fourth Quarter 2017 GAAP EPS Was $0.48
8 ENCORE’S FOURTH QUARTER 2017 GAAP EPS WAS $0.48 $1.05 Economic EPS2 GAAP EPS1 $0.48 GAAP Net Income1 $12.7 million Adjusted Income2 $27.7 million Estimated Remaining Collections of $7.0 billion 1) From continuing operations attributable to Encore 2) Please refer to Appendix for reconciliation of E
Slide 9: Encore's Full-Year 2017 GAAP EPS Was $3.16
9 ENCORE’S FULL-YEAR 2017 GAAP EPS WAS $3.16 $4.04 Economic EPS2 GAAP EPS1 $3.16 GAAP Net Income1 $83.4 million Adjusted Income2 $106.0 million Estimated Remaining Collections of $7.0 billion Collections $1.8 billion 1) From continuing operations attributable to Encore 2) Please refer to Appendix fo
Slide 10: 2017 Deployments Reflect a Balanced Year of U.S. and International Purchasing
United States $536 Europe $464 Other $58 10 2017 DEPLOYMENTS REFLECT A BALANCED YEAR OF U.S. AND INTERNATIONAL PORTFOLIO PURCHASING Q4-2017 Deployments 2017 Deployments $M Total $1,058 Total $301 United States $170 Europe $110 Other $22
Slide 11: Fourth Quarter Collections Reflect Growth in the U.S. and Europe
11 FOURTH QUARTER COLLECTIONS REFLECT GROWTH IN THE U.S. AND IN EUROPE COMPARED TO A YEAR AGO Collections by Geography 0 100 200 300 400 500 2 0 1 6 2 0 1 7 2 0 1 6 2 0 1 7 2 0 1 6 2 0 1 7 2 0 1 6 2 0 1 7 Q1 Q2 Q3 Q4 Collection Sites Legal Collections Collection Agencies $M 0 100 200 300 400 500 2 0
Slide 12: Annual Global Collections Reached an All-Time High in 2017
12 ENCORE’S ANNUAL GLOBAL COLLECTIONS REACHED AN ALL-TIME HIGH IN 2017 Collections by Geography 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2013 2014 2015 2016 2017 United States Europe Other 1,768 1,280 1,607 $M 1,701 1,686
Slide 13: Q4 Revenue Reflects Our Growth in Europe
Q4 REVENUE REFLECTS OUR GROWTH IN EUROPE Revenue by Geography 13 -50 0 50 100 150 200 250 300 350 2 0 1 6 2 0 1 7 2 0 1 6 2 0 1 7 2 0 1 6 2 0 1 7 2 0 1 6 2 0 1 7 Q1 Q2 Q3 Q4 United States Europe Other $M 289 291 307 317 272 289 179 271
Slide 14: 2017 Worldwide Revenue Reflects Past Portfolio Allowances and Growth in Europe
2017 WORLDWIDE REVENUE REFLECTS THE IMPACTS OF PAST PORTFOLIO ALLOWANCES AND REVERSALS AS WELL AS OUR GROWTH IN EUROPE Revenue by Geography 14 $M 0 200 400 600 800 1,000 1,200 2013 2014 2015 2016 2017 United States Europe Other $M 1,187 756 1,043 1,130 1,029
Slide 15: Estimated Remaining Collections Grew $1.1 Billion in 2017
15 ESTIMATED REMAINING COLLECTIONS GREW $1.1 BILLION IN 2017 TO SET A NEW ENCORE ALL-TIME HIGH Total Estimated Remaining Collections 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 2013 2014 2015 2016 2017 United States Europe Other 6,955 3,990 5,203 $M 5,711 5,840
Slide 16: GAAP EPS of $0.48 and Economic EPS of $1.05 in Q4 2017
ENCORE DELIVERED GAAP EPS OF $0.48 AND ECONOMIC EPS OF $1.05 IN THE FOURTH QUARTER OF 2017 Three Months Ended December 31, 2017 16 • Please refer to Appendix for reconciliation of Adjusted EPS / Economic EPS measurements to GAAP. • In total, $1.05 Economic EPS includes $0.40 of adjustments to Cabot’
Slide 17: GAAP EPS of $3.16 and Economic EPS of $4.04 in 2017
ENCORE DELIVERED GAAP EPS OF $3.16 AND ECONOMIC EPS OF $4.04 IN 2017 Year Ended December 31, 2017 17 * Please refer to Appendix for reconciliation of Adjusted EPS / Economic EPS measurements to GAAP $3.16 $0.58 $0.13 $0.05 ($0.11) ($0.30) ($0.60) $4.01 $4.04 $0.47 $0.63 $0.00 $1.00 $2.00 $3.00 $4.00
Slide 18: Leverage Ratio Impacted by Consolidation of Cabot's Debt
18 ENCORE’S LEVERAGE RATIO IS SIGNIFICANTLY IMPACTED BY THE CONSOLIDATION OF CABOT’S DEBT ON OUR BALANCE SHEET Debt and Debt Ratios1 Although we fully consolidate Cabot’s debt on our balance sheet, Cabot’s debt is non-recourse to Encore Encore With Cabot at 12/31/17 Without Cabot at 12/31/17 Total D
Slide 19: Summary and 2018 Expectations
19 SUMMARY AND 2018 EXPECTATIONS The U.S. market remains strong Forward flow commitments for 2018 have already surpassed our total deployments in the U.S. during 2017 Cabot had a record year for capital deployment for 2017 We plan to invest, including the savings from changes in our tax rate
Slide 20: Q&A
= encore i “CAPITAL GROUP — Q&A
Slide 21: Appendix
= encore “CAPITAL GROUP —_ Appendix
Slide 22: Non-GAAP Financial Measures
22 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 EBI
Slide 23: Reconciliation of Adjusted Income and Economic / Adjusted EPS (Q4)
23 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 December 31, 2017 2016 $ Per Diluted Share – Accounting Per Diluted Share – Economic $ Pe
Slide 24: Reconciliation of Adjusted Income and Economic / Adjusted EPS (Full Year)
24 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), Twelve Months Ended December 31, 2017 2016 $ Per Diluted Share – Accounting Per Diluted Share – Economic $ P
Slide 25: Reconciliation of Adjusted EBITDA to GAAP Net Income
Reconciliation of Adjusted EBITDA to GAAP Net Income (Unaudited, In $ Thousands) Twelve Months Ended 12/31/17 12/31/16 12/31/15 GAAP net income, as reported $ 78,978 $ 16,817 $ 47,384 Adjustments: Loss (income) from discontinued operations, net of tax 199 2,353 23,387 Interest expense 204,161 198,36
Slide 26: Reconciliation of Adjusted Operating Expenses to GAAP Operating Expenses
Reconciliation of Adjusted Operating Expenses to GAAP Operating Expenses (Unaudited, In $ Thousands) Three Months Ended RECONCILIATION OF ADJUSTED OPERATING EXPENSES 3/31/16 6/30/16 9/30/16 12/31/16 3/31/17 6/30/17 9/30/17 12/31/17 GAAP total operating expenses, as reported $ 205,513 $ 197,695 $ 200
Slide 27: Impact of Fluctuations in Foreign Currency Exchange Rates
(Unaudited, In Millions, except per share amounts) IMPACT OF FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES Three Months Ended 12/31/17 As Reported Constant Currency Revenue $ 317 $ 309 Operating expenses $ 253 $ 246 Net income* $ 13 $ 13 Adjusted net income* $ 28 $ 27 GAAP EPS* $ 0.48 $ 0.48 Econo
Slide 28: 2017 Cost-to-Collect Reflects Return of Legal Placements
2017 COST-TO-COLLECT REFLECTS THE RETURN OF LEGAL PLACEMENTS AFTER PRIOR DELAYS AND MANY MORE ACCOUNTS 28 Overall Cost-to-Collect1 37.7% 37.8% 36.9% 40.3% 41.1% 38.4% 38.4% 41.5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 2 0 1 6 2 0 1 7 2 0 1 6 2 0 1 7 2 0 1 6 2 0 1 7 2 0 1 6 2 0 1 7 Q1 Q2 Q3 Q4 1. Cost