Encore Capital Group Inc · NASDAQ:ECPG
Encore Capital — Q1 2016 Earnings Presentation
25 slides from Encore Capital's earnings presentation, May 10, 2016
Slide 1: Encore Capital Group, Inc. Q1 2016 Earnings Call
Encore Capital Group, Inc. Q1 2016 EARNINGS CALL Exhibit 99.1
Slide 2: Cautionary Note About Forward-Looking Statements
PROPRIETARY 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 there
Slide 3: Encore Update
TT ENCORE UPDATE encore PROPRIETARY 3
Slide 4: U.S. Supply Remains Stable, Encore Well Positioned When Market Supply Improves
PROPRIETARY 4 U.S. SUPPLY REMAINS STABLE, ENCORE WELL POSITIONED WHEN MARKET SUPPLY IMPROVES Domestic pricing environment is showing early signs of improvement We’re making continued progress on our consumer-centric liquidation programs Emphasis on strategic cost management is reducing our exp
Slide 5: Our European Business Continues to Grow Through Portfolio Purchases in Spain
PROPRIETARY 5 OUR EUROPEAN BUSINESS CONTINUES TO GROW THROUGH PORTFOLIO PURCHASES IN SPAIN Cabot is the first large debt buyer to achieve Financial Conduct Authority (FCA) authorization We continue to seek the highest returns for our capital, leading to recent purchases in Spain and France Inn
Slide 6: We're Taking a Measured Approach to Expanding Our Latin American Presence
PROPRIETARY 6 WE’RE TAKING A MEASURED APPROACH TO EXPANDING OUR LATIN AMERICAN PRESENCE We remain optimistic about our prospects in Latin America, but are taking our time to make prudent investments Projected after-tax returns from our R&D investments remain solid Refinancia is demonstrating s
Slide 7: We Continue to Develop and Grow Our Platforms for the Future
PROPRIETARY 7 WE CONTINUE TO DEVELOP AND GROW OUR PLATFORMS FOR THE FUTURE Our acquisition of Baycorp provides a beachhead for future opportunities in Australia and New Zealand Our EARC in India has received approval from the Foreign Investment Promotion Board and is now coordinating with the Re
Slide 8: The Divestiture of Propel Reduced Encore's Leverage
PROPRIETARY 8 THE DIVESTITURE OF PROPEL REDUCED ENCORE’S LEVERAGE Debt and Debt Ratios1 Although we fully consolidate Cabot’s debt on our balance sheet, their debt is non-recourse to Encore, despite our 43% economic interest Encore With Cabot and Propel at 12/31/152 With Cabot at 3/31/163 Without Ca
Slide 9: Detailed Financial Discussion
9 Detailed Financial Discussion
Slide 10: Encore Delivered Economic EPS Growth of 13% in the First Quarter
PROPRIETARY 10 ENCORE DELIVERED ECONOMIC EPS GROWTH OF 13% IN THE FIRST QUARTER Economic EPS** $1.31 GAAP EPS* $1.12 GAAP Net Income* $29 million Adjusted Income** $34 million Estimated Remaining Collections of $5.7 billion * From Continuing Operations Attributable to Encore ** Please refer to appen
Slide 11: Q1 Deployments Reflect a Modestly Improving Domestic Purchasing Environment
PROPRIETARY 11 Q1 DEPLOYMENTS REFLECT A MODESTLY IMPROVING DOMESTIC PURCHASING ENVIRONMENT Q1-2016 Deployments $M United States $142 Europe $93 Other $21 Total $257
Slide 12: Q1 Collections Reflect Steady Execution and Growth
PROPRIETARY 12 Q1 COLLECTIONS REFLECT STEADY EXECUTION AND GROWTH Collections by Geography 0 100 200 300 400 500 2 0 1 4 2 0 1 5 2 0 1 4 2 0 1 5 2 0 1 4 2 0 1 5 2 0 1 5 2 0 1 6 Q2 Q3 Q4 Q1 Collection Sites Legal Collections Collection Agencies $M 0 100 200 300 400 500 2 0 1 4 2 0 1 5 2 0 1 4 2 0 1 5
Slide 13: Lower Costs Led to Improved Cash Flows
PROPRIETARY LOWER COSTS LED TO IMPROVED CASH FLOWS 13 * Please refer to Appendix for reconciliation of Adjusted EBITDA to GAAP $M Quarterly Adjusted EBITDA* TTM Adjusted EBITDA* 253 274 247 264 238 246 263 287 0 50 100 150 200 250 300 350 2 0 1 4 2 0 1 5 2 0 1 4 2 0 1 5 2 0 1 4 2 0 1 5 2 0 1 5 2 0 1
Slide 14: Our Quarterly Revenue Growth Was Driven by Our International Business
PROPRIETARY OUR QUARTERLY REVENUE GROWTH WAS DRIVEN BY OUR INTERNATIONAL BUSINESS Revenue by Geography 14 0 50 100 150 200 250 300 350 2 0 1 4 2 0 1 5 2 0 1 4 2 0 1 5 2 0 1 4 2 0 1 5 2 0 1 5 2 0 1 6 Q2 Q3 Q4 Q1 United States Europe Other $M 289 283 279 291 278 262 265 268
Slide 15: Cost-to-Collect Declined Through Improved Liquidation Programs and Strategic Cost Management
PROPRIETARY COST-TO-COLLECT DECLINED THROUGH IMPROVED LIQUIDATION PROGRAMS AND STRATEGIC COST MANAGEMENT 15 Overall Cost-to-Collect* 38% 38% 39% 39% 40% 42% 39% 38% 30% 35% 40% 45% 2 0 1 4 2 0 1 5 2 0 1 4 2 0 1 5 2 0 1 4 2 0 1 5 2 0 1 5 2 0 1 6 Q2 Q3 Q4 Q1 ⃰ Cost-to-Collect = Adjusted operating expe
Slide 16: Our ERC Grew Over $500 Million in the Last Year
PROPRIETARY 16 OUR ERC GREW OVER $500 MILLION IN THE LAST YEAR Total Estimated Remaining Collections 0 1,000 2,000 3,000 4,000 5,000 6,000 Mar 2013 Mar 2014 Mar 2015 Mar 2016 United States Europe Other 1,911 4,758 5,080 $M 5,665
Slide 17: Encore Delivered Economic EPS of $1.31 in Q1
PROPRIETARY ENCORE DELIVERED ECONOMIC EPS OF $1.31 IN Q1 17 * Please refer to Appendix for reconciliation of Adjusted EPS / Economic EPS measurements to GAAP $1.12 $0.07 $1.31 $1.31 $0.07 $0.05 Net income per diluted share from continuing operations attributable to Encore Convertible notes non- cash
Slide 18: Summary
PROPRIETARY SUMMARY U.S. Market • We have already secured $330 million in purchases and forward flow commitments for the U.S. market in 2016 • Pricing in the U.S. showing early signs of modest improvement Attractive IRR’s • Our businesses in our expansion markets, especially in Latin America, are de
Slide 19: Q&A
= encore i “CAPITAL GROUP — Q&A
Slide 20: Appendix
= encore “CAPITAL GROUP —_ Appendix
Slide 21: Non-GAAP Financial Measures
PROPRIETARY 21 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
Slide 22: Reconciliation of Adjusted Income and Economic / Adjusted EPS
PROPRIETARY 22 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, 2016 2015 $ Per Diluted Share – Accounting Per Diluted Share – Econ
Slide 23: Reconciliation of Adjusted EBITDA to GAAP Net Income
PROPRIETARY Reconciliation of Adjusted EBITDA to GAAP Net Income (Unaudited, In $ Thousands) Three Months Ended 6/30/14 9/30/14 12/31/14 3/31/15 6/30/15 9/30/15 12/31/15 3/31/16 GAAP net income, as reported $ 21,353 $ 30,138 $ 27,957 $ 29,967 $ 25,185 ($ 9,364) $ 1,596 $ 26,607 (Income) loss from di
Slide 24: Reconciliation of Adjusted Operating Expenses to GAAP Operating Expenses
PROPRIETARY Reconciliation of Adjusted Operating Expenses to GAAP Operating Expenses (Unaudited, In $ Thousands) Three Months Ended RECONCILIATION OF ADJUSTED OPERATING EXPENSES 6/30/14 9/30/14 12/31/14 3/31/15 6/30/15 9/30/15 12/31/15 3/31/16 GAAP total operating expenses, as reported $ 185,703 $ 1
Slide 25: Impact of Fluctuations in Foreign Currency Exchange Rates
PROPRIETARY (Unaudited, In Thousands, except per share amounts) IMPACT OF FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES Three Months Ended 3/31/16 As Reported Constant Currency Revenue $ 289,017 $ 298,329 Operating expenses $ 205,513 $ 211,551 Net income* $ 28,876 $ 29,702 Adjusted net income* $ 3