Encore Capital Group Inc · NASDAQ:ECPG
Encore Capital — Q2 2017 Earnings Presentation
23 slides from Encore Capital's earnings presentation, Aug 3, 2017
Slide 1: Encore Capital Group Q2 2017 Earnings Call
Encore Capital Group, Inc. Q2 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 simi
Slide 3: Encore Update
eee ENCORE UPDATE <—=- encore
Slide 4: U.S. Market Continues to Demonstrate Favorable Dynamics for Our Business
4 U.S. MARKET CONTINUES TO DEMONSTRATE FAVORABLE DYNAMICS FOR OUR BUSINESS Supply improved in the second quarter Banks continue to build their loan loss provisions Issuers report delinquency and net charge-off rates continue to increase We expect supply will continue to grow Pricing remain
Slide 5: Recent Purchases and Capacity Expansion Reflect Our Adaptability
5 OUR RECENT PURCHASES OF SIGNIFICANTLY MORE ACCOUNTS AND ASSOCIATED CAPACITY EXPANSION REFLECT OUR ADAPTABILITY Deploying capital more efficiently leads to acquiring more accounts and the need for more collections capacity We are willing to absorb this near-term expense in order to drive higher
Slide 6: Cabot Has Established Itself as the Leading Debt Buyer in the UK
6 CABOT HAS ESTABLISHED ITSELF AS THE LEADING DEBT BUYER IN THE UNITED KINGDOM Cabot had a strong purchasing quarter in Europe, deploying over $90 million at solid returns Cabot’s liquidation initiatives are driving sustained collections improvement on many of its portfolios across a number of v
Slide 7: Encore's Leverage Ratio Impacted by Consolidation of Cabot's Debt
7 ENCORE’S LEVERAGE RATIO IS SIGNIFICANTLY IMPACTED BY THE CONSOLIDATION OF CABOT’S DEBT ON OUR BALANCE SHEET Debt and Debt Ratios1 Upon consummation of a Cabot IPO, we intend to deconsolidate Cabot from Encore’s financial statements Encore With Cabot at 06/30/17 Without Cabot at 06/30/17 Total Debt
Slide 8: Detailed Financial Discussion
8 Detailed Financial Discussion
Slide 9: Encore Had a Solid Second Quarter
9 ENCORE HAD A SOLID SECOND QUARTER $0.88 Economic EPS2 GAAP EPS1 $0.77 GAAP Net Income1 $20.3 million Adjusted Income2 $22.9 million Estimated Remaining Collections of $6.3 billion 1) From continuing operations attributable to Encore 2) Please refer to Appendix for reconciliation of Economic EPS an
Slide 10: Worldwide Deployments in Q2 Were Up 6%
10 WORLDWIDE DEPLOYMENTS IN Q2 WERE UP 6% COMPARED TO THE SAME QUARTER A YEAR AGO Q2 2017 Deployments $M United States $132 Europe $92 Other $22 Total $246
Slide 11: Worldwide Collections Were Up 3% Compared to Q2 2016
11 WORLDWIDE COLLECTIONS WERE UP 3% COMPARED TO Q2 2016 AND WERE UP 6% IN CONSTANT CURRENCY Collections by Geography 0 100 200 300 400 500 2 0 1 5 2 0 1 6 2 0 1 5 2 0 1 6 2 0 1 6 2 0 1 7 2 0 1 6 2 0 1 7 Q3 Q4 Q1 Q2 Collection Sites Legal Collections Collection Agencies $M 0 100 200 300 400 500 2 0 1
Slide 12: Q2 Revenue in the U.S. Grew 5%
Q2 REVENUE IN THE U.S. GREW 5% COMPARED TO Q2 2016 Revenue by Geography 12 -50 0 50 100 150 200 250 300 350 2 0 1 5 2 0 1 6 2 0 1 5 2 0 1 6 2 0 1 6 2 0 1 7 2 0 1 6 2 0 1 7 Q3 Q4 Q1 Q2 United States Europe Other $M 289 291 279 291 272 289 179 271
Slide 13: ERC at End of Q2 Represents Our Highest Level to Date
13 ERC AT THE END OF Q2 REPRESENTS OUR HIGHEST LEVEL TO DATE Total Estimated Remaining Collections 0 1,000 2,000 3,000 4,000 5,000 6,000 June 2013 June 2014 June 2015 June 2016 June 2017 United States Europe Other 2,741 4,899 5,684 $M 5,537 6,256
Slide 14: GAAP EPS of $0.77 and Economic EPS of $0.88 in Q2 2017
ENCORE DELIVERED GAAP EPS OF $0.77 AND ECONOMIC EPS OF $0.88 IN THE SECOND QUARTER OF 2017 14 * Please refer to Appendix for reconciliation of Adjusted EPS / Economic EPS measurements to GAAP $0.77 $0.02 ($0.10) ($0.04) ($0.03) $0.87 $0.88 $0.12 $0.13 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 Net in
Slide 15: Summary
SUMMARY 15 Q2 was a solid quarter of financial and operational performance Supply continues to rise and prices remain favorable in the U.S. Improved pricing and better liquidations drove YTD core purchase price multiple to 2.0x through Q2 We’ve secured more than $425 million in commitments f
Slide 16: Encore Capital Group - Better Solutions. Better Life.
\= encore CAPITAL GROUP Better Solutions. Better Life.
Slide 17: Appendix
\= encore CAPITAL GROUP Better Solutions. Better Life. Appendix
Slide 18: Non-GAAP Financial Measures
18 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 19: Reconciliation of Adjusted Income and Economic / Adjusted EPS
19 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, 2017 2016 $ Per Diluted Share – Accounting Per Diluted Share – Economic $ Per Di
Slide 20: Reconciliation of Adjusted EBITDA to GAAP Net Income
Reconciliation of Adjusted EBITDA to GAAP Net Income (Unaudited, In $ Thousands) Three Months Ended 9/30/16 12/31/16 3/31/17 6/30/17 GAAP net income, as reported $ (51,946) $ 11,323 $ 14,979 $ 19,076 Adjustments: (Income) loss from discontinued operations, net of tax --- (829) 199 --- Interest expen
Slide 21: 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 9/30/15 12/31/15 3/31/16 6/30/16 9/30/16 12/31/16 3/31/17 6/30/17 GAAP total operating expenses, as reported $ 248,185 $ 206,271 $ 205
Slide 22: 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 6/30/17 As Reported Constant Currency Revenue $ 291 $ 302 Operating expenses $ 210 $ 216 Net income* $ 20 $ 21 Adjusted net income* $ 23 $ 24 GAAP EPS* $ 0.77 $ 0.80 Econom
Slide 23: Cost-to-Collect Reflects Higher Legal Spending in the U.S.
COST-TO-COLLECT REFLECTS HIGHER LEGAL SPENDING IN THE U.S. PARTIALLY OFFSET BY LOWER COSTS IN EUROPE 23 Overall Cost-to-Collect1 39.2% 41.1% 41.5% 38.4% 37.7% 37.8% 36.9% 40.3% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 2 0 1 5 2 0 1 6 2 0 1 5 2 0 1 6 2 0 1 6 2 0 1 7 2 0 1 6 2 0 1 7 Q3 Q4 Q1 Q2 1. Cost-t