Encore Capital Group Inc · NASDAQ:ECPG
Encore Capital — Q1 2015 Earnings Presentation
26 slides from Encore Capital's earnings presentation, May 7, 2015
Slide 1: Encore Capital Group, Inc. Q1 2015 Earnings Call
Encore Capital Group, Inc. Q1 2015 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 Delivered Record Economic Earnings
ENCORE DELIVERED RECORD ECONOMIC EARNINGS GAAP EPS* Economic EPS** Collections $425 million $1.08 $1.23 Adjusted EBITDA** GAAP Net Income* Adjusted Income** $266 million $29 $32 Cost to Collect*** million million 38.8% Estimated Remaining Collections of $5.1 billion * Attributable to Encore ** Pleas
Slide 4: Collections in Q1 Reached an All-Time Record Driven by Consumer-Focused Programs
COLLECTIONS IN Q1 REACHED AN ALL-TIME RECORD DRIVEN BY CONSUMER-FOCUSED PROGRAMS… Collections by Channel Collection Sites Legal Collections Collection Agencies $M 500 409 425 407 394 397 400 380 351 300 278 200 100 0 2013 2014 2013 2014 2013 2014 2014 2015 Q2 Q3 Q4 Q1 PROPRIETARY 4
Slide 5: Our Strategies Are Driving Higher Liquidation
LAST YEAR WE SHOWED YOU THAT OUR STRATEGIES ARE DRIVING HIGHER LIQUIDATION Indexed vintage year liquidation rate1 150 131 100 2009 2012 2016F 1. Of like portfolios and time periods, covering first 12-months of collections after purchase. PROPRIETARY 5
Slide 6: One Additional Year of Performance Demonstrates Power of Continuing Improvement
ONE ADDITIONAL YEAR OF PERFORMANCE DEMONSTRATES THE POWER OF CONTINUING IMPROVEMENT Indexed vintage year liquidation rate1 2009 Vintage 2012 Vintage 250 239 $63 200 improvement 176 $31 131 150 improvement 100 100 50 0 0 12 24 1. Of like portfolios and time periods, covering first 24-months of collec
Slide 7: Collections in Q1 Reached an All-Time Record Also Driven by Europe
COLLECTIONS IN Q1 REACHED AN ALL-TIME RECORD ALSO DRIVEN BY EUROPE Collections by Geography $M United States Europe Latin America 500 409 425 407 394 397 400 380 351 300 278 200 100 0 2013 2014 2013 2014 2013 2014 2014 2015 Q2 Q3 Q4 Q1 PROPRIETARY 7
Slide 8: Strong Collections Led to Improved Cash Flows
STRONG COLLECTIONS LED TO IMPROVED CASH FLOWS Adjusted Quarterly EBITDA* Adjusted EBITDA -Trailing Twelve Months $M $M $M 300 1,200 266 256 252 241 250 999 1,015 250 1,000 943 963 231 859 206 200 800 784 172 713 633 150 600 100 400 50 200 0 0 2013 2014 2013 2014 2013 2014 2014 2015 Q2 2013 Q3 2013 Q
Slide 9: Reducing Debt and Growing EBITDA, Improving Leverage
WE’RE BOTH REDUCING OUR DEBT AND GROWING OUR EBITDA, RESULTING IN IMPROVED DEBT LEVERAGE Total Debt Total Debt/Adjusted EBITDA* $M 2,850 3.2 3.1 2,800 2,791 2,774 3.0 3.04 2,750 2,716 2.9 2,700 2,691 2.90 2.88 2.8 2,650 2.78 2,612 2.7 2,600 2.6 2.65 2,550 2.5 2,500 2.4 Q1 2014 Q2 2014 Q3 2014 Q4 201
Slide 10: Cabot Is Well Positioned to Benefit from UK Debt Purchase Market Growth
CABOT IS WELL POSITIONED TO BENEFIT FROM CONTINUED GROWTH IN THE UK DEBT PURCHASE MARKET Cabot Update Increased collections 21% compared to Q1 2014 Increased revolving credit facility from ₤85M to ₤195M Cabot contributed $0.28 of Economic EPS to Encore earnings in Q1 PROPRIETARY 10
Slide 11: After Acquiring Atlantic, Encore Is Well Positioned for US Fresh Paper
AFTER ACQUIRING ATLANTIC, ENCORE IS WELL POSITIONED FOR THE US MARKET’S CONCENTRATION OF FRESH PAPER Atlantic Update Encore acquired Atlantic Credit & Finance in 2014 to become better positioned to compete in the market for high-balance, fresh paper Encore is absorbing and internally incorporati
Slide 12: Detailed Financial Discussion
Detailed Financial Discussion 12
Slide 13: Q1 Deployments Reflect Commitment to Deploy Capital Prudently
Q1 DEPLOYMENTS REFLECT OUR COMMITMENT TO DEPLOY CAPITAL PRUDENTLY Deployments by Quarter $M 400 350 $328 $336 300 ACF $275 Portfolio 250 $105 200 $179 150 100 50 0 Q2 2014 Q3 2014 Q4 2014 Q1 2015 United States Europe Latin America PROPRIETARY 13
Slide 14: Collections in Q1 Record Driven by Consumer-Focused Programs and Europe
COLLECTIONS IN Q1 REACHED AN ALL-TIME RECORD DRIVEN BY CONSUMER-FOCUSED PROGRAMS AND EUROPE Collections by Geography Collections by Channel Collection Sites Legal Collections Collection Agencies $M United States Europe Latin America $M 500 500 425 425 409 407 397 409 407 394 397 400 380 394 400 380
Slide 15: We Also Delivered Record Revenues in Q1
WE ALSO DELIVERED RECORD REVENUES IN Q1 Revenue by Geography $M 300 277 286 269 273 254 250 236 237 200 156 150 100 50 0 2013 2014 2013 2014 2013 2014 2014 2015 Q2 Q3 Q4 Q1 United States Europe Latin America PROPRIETARY 15
Slide 16: Cost to Collect Reflects Atlantic Absorption and Higher Legal Collections
COST TO COLLECT REFLECTS OUR ABSORPTION OF THE ATLANTIC ACQUISITION AND A HIGHER SHARE OF LEGAL COLLECTIONS Overall Cost to Collect* Q1 2015 Q1 2014 Channel CTC CTC 50% Europe 33.2% 28.9% 42% 40% 39% 40% United States 40.9% 40.2% 40% 38% 38% 38% 39% Latin America 29.0% 32.1% 30% Encore 38.8% 37.7% 2
Slide 17: We Continue to Drive Significant Value Through Our Legal Channel
WE CONTINUE TO DRIVE SIGNIFICANT VALUE THROUGH OUR LEGAL CHANNEL US Legal Collections US Legal Cost to Collect $M 140 60.0% 130 120 120 50.0% 36.1% 35.3% 100 40.0% 38.9% 38.4% 80 30.0% 60 20.0% 40 31 29 10.0% 20 - 0.0% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2013 2013 2013 2014 2014 2014 201
Slide 18: Our ERC Has Grown 7% During the Past Year
OUR ERC HAS GROWN 7% DURING THE PAST YEAR Estimated Remaining Collections $M 7,000 Acquired Acquired 6,000 Marlin* Atlantic* $607 $275 Acquired $5,080 5,000 Cabot* $4,758 $1,445 4,000 Acquired AACC* $952 3,000 2,000 1,000 0 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 * ERC at tim
Slide 19: Cabot Contributed $0.28 to Encore's Q1 Economic EPS
CABOT CONTRIBUTED $0.28 TO ENCORE’S Q1 ECONOMIC EPS Q1 2015 Operating Performance of Janus Cabot’s Economic EPS Holdings and Encore Europe Contribution Encore In 000’s except per share amounts Janus Europe EEH $ Consolidated Holdings 0.30 0.28 Total revenues $ 79,777 - $ 79,777 0.26 Total operating
Slide 20: Encore Delivered Record Economic EPS of $1.23 in Q1
ENCORE DELIVERED RECORD ECONOMIC EPS OF $1.23 IN Q1 $1.23 $0.05 $1.19 $0.06 $1.08 Less ~900K shares which are reflected in GAAP EPS, but will not be issued Net income per diluted share Net non-cash interest and Acquisition, integration and Adjusted income per diluted Adjusted Income Attributable att
Slide 21: Q&A
—- encore CAPITAL GROUP Q&A 21
Slide 22: Appendix
—- encore CAPITAL GROUP Appendix 22
Slide 23: 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 24: 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, 2015 2014 Per Diluted Per Diluted Per Diluted Per Diluted $ Share – Share – $ Shar
Slide 25: Reconciliation of Adjusted EBITDA
RECONCILIATION OF ADJUSTED EBITDA Reconciliation of Adjusted EBITDA to GAAP Net Income (Unaudited, In $ Thousands) Three Months Ended 3/31/13 6/30/13 9/30/13 12/31/13 3/31/14 6/30/14 9/30/14 12/31/14 3/31/15 GAAP net income, as reported $ 19,448 $ 11,012 $ 21,064 $ 22,216 $ 18,830 $ 21,353 $ 30,138
Slide 26: 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 6/30/13 9/30/13 12/31/13 3/31/14 6/30/14 9/30/14 12/31/14 3/31/15 GAAP total operating expenses, $ 126,238 $ 174,429 $ 168,466 $ 185,4