Encore Capital Group Inc · NASDAQ:ECPG
Encore Capital — Investor Presentation (February 2005)
22 slides from Encore Capital's investor presentation, Feb 1, 2005
Slide 1: Business Update
Business Update 1 NASDAQ: ECPG
Slide 2: Cautionary Note About Forward-Looking Statements
Certain Statements in This Presentation Constitute “Forward-looking Statements” Within the Meaning of the Private Securities Litigation Reform Act of 1995. Such Statements Involve Risks, Uncertainties and Other Factors Which May Cause Actual Results, Performance or Achievements of the Company and It
Slide 3: Encore Capital
50 year old purchaser and manager of consumer receivables portfolios Unique business model Excellent financial and operating results Strong drivers for growth 3 E NCORE C APITAL
Slide 4: Investment Highlights
Growth Industry High barriers to long-term success Demonstrated ability to buy right and collect well Process company focused on debt collection Innovations and analysis Multiple collection channels reduces need to acquire new portfolios & increase outbound collection staff New lower cost financing
Slide 5: Compelling Fundamentals
Source: Federal Reserve Board, December 7, 2004 $ in billions Non-mortgage consumer debt and charge-off rates Traditional consumer debt continues to grow Other types of consumer receivables are beginning to be sold Automobile deficiencies Telecom Utilities Medical Health club 5 C OMPELLING F UNDAMEN
Slide 6: Business Drivers
Buy Right Collect Well Manage Expenses Challenge Everything Demand Professional and Ethical Behavior 6 B USINESS D RIVERS
Slide 7: Business Model
This is how we make money… Years 0 1 2 3 >3 Total Investment ($100) Collections $114 $74 $51 $31 $270 Cumulative Multiple of Costs Collected 1.1x 1.9x 2.4x 2.7x Total Operating Expense @40% ($46) ($30) ($20) ($12) ($108) Net cash flow stream ($100) $68 $44 $31 $19 $162 Net IRR 29% 7 Representative D
Slide 8: Actual Results vs. Model
Our returns are better than targeted 36 months 24 months 12 months 6 months 97 $3.8 Billion $1.2 Billion $6.9 Billion $ 8.5 Billion Total Face Value 41 171 205 # of Portfolios Multiple of Purchase Price Collected * Through September 30, 2004 8 A CTUAL R ESULTS V S . M ODEL
Slide 9: Competitive Advantages
Consumer level analytics Multiple collection strategies Proprietary and dynamic account management software 9 C OMPETITIVE A DVANTAGES
Slide 10: Buy Right
Account level valuation provides several competitive advantages Note: All purchases since mid-2000 through 9/30/04. Month Since Charge - off Face Value ($ in Billions) % of Total Face Purch. 0 - 6 $ 2.1 21% 7 - 12 $ 1.0 10% 13 - 18 $ 2.0 20% 19 - 24 $ 0.8 8% 25 - 36 $ 1.9 19% 37+ $ 2.2 22% Total $ 1
Slide 11: Purchases by Quarter
Millions ns by Quarter $70.0 $60.0 $50.0 $40.0 $20.0 $20.0 $10.0 $0.0 01 01 01 Of 02 02 02 02 OF OF 03 02 OF oF OF
Slide 12: Collect Well - Unique Liquidation Strategies
Continuous innovation is driving our collection growth 12 C OLLECT W ELL - U NIQUE L IQUIDATION S TRATEGIES
Slide 13: Collect Well - Results
Collection innovation drives our performance improvement ($ in Thousands) (Employees) 13 C OLLECT W ELL - R ESULTS
Slide 14: Strong Financial Results & Momentum
*Excludes one-time items. 14 S TRONG F INANCIAL R ESULTS & M OMENTUM
Slide 15: Strong Financial Results & Momentum
*Pretax Income excludes one-time benefit and charges. The real earnings power not yet realized 15 S TRONG F INANCIAL R ESULTS & M OMENTUM
Slide 16: Strong Financial Results & Momentum - Balance Sheet Improvement
16 S TRONG F INANCIAL R ESULTS & M OMENTUM - B ALANCE S HEET I MPROVEMENT
Slide 17: Competitive Comparison: Monthly Collections per Employee
Our Average Monthly Collections per Employee are very favorable. ECPG 1 Monthly Collections per Avg. Total Employees $181,301 2004 YTD Gross Collections (in thousands) 737 Average # of Total Employees 1 Data from 10-Q filings for the period ending September 30, 2004 (9-month period). 17 $27,300 C OM
Slide 18: Competitive Comparison: Annualized Portfolio Turnover
Strong Collections and Judicious Portfolio Buys Create Strong Turnover ECPG 1 Annualized Portfolio Turnover $241,735 Annualized Gross Collections (in thousands) $166,695 Total Inventory (in thousands) $76,328 Annualized Purchases (in thousands) $90,367 Portfolio BOY (in thousands) 1 Data from 10-Q f
Slide 19: Competitive Comparison: Amortizing Our Portfolio Quickly
$334,400 Implied Gross Collections to Realize Book Value (in thousands) $20,144 Avg. Monthly Collections 2004 (in thousands) ECPG 1 Months Remaining to Amortize Book 27% YTD Amortization Rate $90,367 Portfolio January 1, 2004 (in thousands) 1 Data from 10-Q filings for the period ending September 30
Slide 20: Competitive Comparison: Recent Vintages Consistently Strong
Recent Vintages Are Consistently Strong Ratio of Total Collections to Purchase Price by Year of Origin 1 Data from 10-Q filings for the period ending September 30, 2004 (9-month period). 20 C OMPETITIVE C OMPARISON
Slide 21: Management Team
Former CFO of Stellcom, Inc.; Former EVP and CFO of Telespectrum Worldwide Inc.; Former Partner of M&A Services at Deloitte and Touche Paul Grinberg SVP Finance Former Director of Service Strategy at Gateway, Inc. Anna Hansen SVP Collection Operations Former VP of Decision Science for Associates Hom
Slide 22: Future Prospects
Growth Opportunities Innovations and analysis Significant reduction in effective interest rate driven by new financing Strong cash position for acquisitions Continued penetration of alternative asset classes Challenges Higher prices for purchased receivables Implementation of SOP 2003-03 Managing SO
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