Encore Capital Group Inc · NASDAQ:ECPG
Encore Capital — Raymond James 35th Annual Institutional Investors Conference (March 2014)
32 slides from Encore Capital's conference presentation, Mar 4, 2014
Slide 1: Raymond James 35th Annual Institutional Investors Conference
Exhibit 99.1 RAYMOND JAMES 35TH ANNUAL INSTITUTIONAL INVESTORS CONFERENCE March 4, 2014 Exhibit 99.1
Slide 2: Cautionary Note About Forward-Looking Statements
CAUTIONARY that Private growth. involve performance Securities update include, these Securities risks, Forand all the forward-looking oruncertainties Exchange “forward-looking achievements words NOTE Litigation “will,” ABOUT Commission, and Reform statements. expressed “may,” other FORWARD-LOOKING s
Slide 3: Encore is a leading player in the consumer debt purchasing and recovery industry
ENCORE receivables collected 3-4 performance. 5-6 7-8 inISflows 5,250 the A See LEADING Portfolio over Reconciliation employees a multi-year last PLAYER worldwide twelve of time Adjusted months IN THE Illustrative horizon Purchase EBITDA CONSUMER 1 incash 5Price to American collections GAAP $4.0 DEB
Slide 4: Our growth has come with significant geographic diversification
WITH OUR Malling, Technology UKSite GROWTH CallCall Center Center HAS SiteSite Marlin COMEPhoenix, Stratford-upon-Avon, SIGNIFICANT AZ Costa Rica GEOGRAPHIC New UK Delhi, Warren,India DIVERSIFICATION MI Worthing, Propel Refinancia UK Headquarters Call SanCenter Antonio, /Call Call TXCenter Center Co
Slide 5: Encore provides an essential service with a principled approach
ENCORE frame off” pointby of recover issuer contact PROVIDES on financially incentives day Consumer A PRINCIPLED • •Attempt Consumer 181toofcollect is cycle AND • Maximizes exchanges during ESSENTIAL Pressure repayment of • SERVICE Tailor Partnership Outcome solutions Contingency initial confused to
Slide 6: Encore has delivered a track record of strong, sustainable financial results
ENCORE fundamentals of economic percentages operating share HAS for performance. GAAP cash from DELIVERED collections, EPS2 continuing See Adjusted A Reconciliation Adjusted TRACK operations. Economic RECORD EBITDA, See ofEPS3 Adjusted Reconciliation OF and .driving STRONG, EPS EBITDA signify profit
Slide 7: Market-leading investments have enabled us to gain scale and position for sustained growth
MARKET Remaining 500 0 0 2008 LEADING Collections 2009 2010INVESTMENTS in2011 core2012 receivables 2013HAVE 2008 ($M)2009 ENABLED ($M)2010 1,205 2011 US 4,500 TO 2012 1,200 GAIN 2013 3,990 SCALE PROPRIETARY 4,000 AND 1,000 POSITION 3,500 7 800OURSELVES 3,000 2,500 600 FOR562 SUSTAINED 1,967 2,000 GR
Slide 8: We believe that our current estimate of remaining collections is conservative
WE BELIEVE Collections 4,500 THAT 3,000 OUR Initial CURRENT Projections ESTIMATE 1,500 0 2001 OF 2002 REMAINING 2003 2004COLLECTIONS 2005 2006 2007IS 2008 CONSERVATIVE 2009 2010 2011Cumulative 2012 2013 Collections—initial Note: Cabot collections expectation are excluded vs. actual PROPRIETARY ($M)
Slide 9: We have delivered industry-leading total shareholder return over the past five years
1Assumes WE 1 S&P Year HAVE SmallCap 3 Years $100 DELIVERED 5600 is Years invested 200Encore Russell INDUSTRY at the Capital: 2000 beginning NASDAQ 64% LEADING 29% of calendar 100 47% TOTAL Financial 700 year S&P SHAREHOLDER 2009. 100 SmallCap 0 2008 600: 2009 RETURN 41% 201018% 2011 OVER 21% 2012 E
Slide 10: We are well positioned to maintain our momentum and continue delivering top quartile TSR
WE ARE Free Sustained modeling capital Cash • Consumer WELL operations success Flow, PE POSITIONED atCredit Multiple •borrowing Uniquely deployment Expansion capacity scalable TO MAINTAIN Research 1intelligence opportunities 2 3 4 Superior Institute OUR centers and MOMENTUM Management Operational ca
Slide 11: Our superior, account level analytics enables us to accurately predict collections and costs
OUR SUPERIOR, transactions Principal ACCOUNT not fully recovered LEVEL ANALYTICS Principal recovered, ENABLES but not US all TOTotal ACCURATELY profitable deals PREDICT servicing COLLECTIONS costs Note: Count AND based COSTS on actual Deal Accuracy results plus Since forecast 2000PROPRIETARY 1,377 (
Slide 12: We have the industry-leading cost platform, driven by continuing operational improvements
WE HAVE specialization Cost / dollarTHE collected. in call INDUSTRY centers See Reconciliation 51.5 LEADING Scaling COST Indian of Adjusted PLATFORM, call center Operating 50.2DRIVEN 47.6 CostInternal to BY GAAP CONTINUING Legal Totalinvestments Operating OPERATIONAL Expenses 43.7 42.0 at 40.0 theIM
Slide 13: Efficient capital stewardship is critical to Encore's success
EFFICIENT in spaces core •receivables Recognize CAPITAL business thereSTEWARDSHIP are•times Maintain whenoperational best IS CRITICAL Returnflexibility of capital TO ENCORE’S with investment a rangeSUCCESS is of to core return asset Deployment cash classes to shareholders • Prudent priorities invest
Slide 14: We have a strong ability to quickly raise capital, supported by our estimated remaining collections
WEconvertible Net net PROPRIETARY Debt HAVE ($M) A STRONG 5,000 debt 14 less 1 Net ABILITY cash Debt (includes Gross TO QUICKLY Cabot ERC 4,000 debtRAISE except Gross ERC CAPITAL for preferred less Cost WHICH equity to Collect IS certificates SUPPORTED and Taxes2 and excludes 3,000 BY OUR2,000 Prope
Slide 15: Our ability to raise additional capital allows us to pursue growth in adjacent spaces
OUR300 debt core Core to debt ABILITY todebt fund includes facilities new TOtheopportunities. RAISE credit CoreADDITIONAL debt facility 1,000 maximize plus—No accordion CAPITAL flexibility impactPROPRIETARY on ALLOWS for ability futuretogrowth US purchase TO 15 Total PURSUE core debt USSUPPLEMENTAL
Slide 16: Our focus on TSR drives our growth strategy
OUR FOCUS 2013—and (IVA)—2014 growth PROPRIETARY Marlin—2014 Propel ON TSR2013 DRIVES 16TX Propel—2012 competitor—2013 OUR GROWTH (UK) EAF—2012 Cabot STRATEGY Marlin Refinancia –Grow 2014 our Refinancia (Credit core cards, business Thispoint- strategy Diversify Grove positions into (UK)—2014 new us
Slide 17: When we acquire from our competitors, we believe we can leverage our platform to realize substantial synergy value
WHEN WE consumer collectionsinsight 3ACQUIRE Industry and analytics: consolidation: FROM OUR MoreIncreased COMPETITORS, focused segmentation market share WE and reduces BELIEVE targeting, competition WEresulting CANandLEVERAGE instabilizes better collections purchase OUR PLATFORM 2prices Lowerand co
Slide 18: We have a strong track record acquiring large portfolios from other debt purchasers
WE HAVE purchase expectations: in A 2013 $199M STRONG 2005Initial 2012 TRACKexpectations: ($M)RECORD ($M) ($M) $113M ACQUIRING 300Initial 200 150Expectations: LARGE Collections PORTFOLIOS $132M to date:0Collections 0 0FROM 2005 2007 OTHER to date: 2009$240M DEBT 2011 2013 PURCHASERS Collections Jun-
Slide 19: We have made significant progress executing our plans for Propel
WE direct market to other HAVE mailing consolidation states MADE 3Existing • Exploring SIGNIFICANT 2 •80% Lobbying alternative of the Texas to PROGRESS introduce taxmarket lien •• •Purchased EXECUTING Successfully Started outbound taxworked lien OUR in calling PLANS ten withNew with NewFOR models ex
Slide 20: Resulting in growth in the size of our portfolio while maintaining an exceptionally low risk profile
RESULTING •100 Less 0 2010 than 1% 2011 IN foreclosure 2012 GROWTH 2013rate Texas IN•THE 13-15% portfolio SIZEtypical OF characteristics OUR interest PORTFOLIO rate • $8,600 • ZeroWHILE average losses PROPRIETARY MAINTAINING balance • $227,000 20ANaverage EXCEPTIONALLY property valueLOW • 8-year RIS
Slide 21: Last year, we began our geographic diversification with Cabot, a leading purchaser of debt in the U.K.
LAST •2012 contributed Ł8.6BMarket YEAR, face-value $0.36 leader WEtoBEGAN of in Encore’s debt U.K.acquired debt OUR economic management GEOGRAPHIC for Ł779M EPS inOct-2012 •2H2013 Statutory DIVERSIFICATION –Lowell Sep-2013 ERC 121 of Ł1,050M •0 Over 50WITH 10014•150 years 3.8M CABOT, Deployed of cu
Slide 22: Cabot and Encore have several opportunities for synergies
CABOT inbound/outbound) Leveraging insights upside well can facilitate be and done) over from AND call large analytics the and center credit purchases ENCORE long Investment through •bureau term and Latewith HAVE collector •stage While and one insecuritizations speech secondary platform (post SEVERA
Slide 23: We enhanced this investment through the acquisition of Marlin
WE ENHANCED Portfolio Ł264M balance growth with with ofRationale Ł4,800 complementary a totalNo THIS To face additional date, book INVESTMENT portfolio niches from investment utilizing PROPRIETARY Expected THROUGH Valuable companies’ ERC lift 23 talent THE Fully balance ACQUISITION pool financed int
Slide 24: The transaction presents substantial synergy opportunities
THE TRANSACTION expected practice back-book Further operational Encore’s PRESENTS India efficiencies operations SUBSTANTIAL Marlin’s Combined non-litigation SYNERGY front-book back-book OPPORTUNITIES Opportunity Encore, for Cabot increased Cabot’s andnon-paying Enhanced Marlin’s Application ability
Slide 25: We have agreed to acquire an interest in Grove Capital
WE HAVE arrangements Encore’s management transactions 13AGREED bankruptcy inand (“IVAs”) expands master TO and in in annual ACQUIRE Spain the bankruptcy U.S. target andbusiness other Aofreceivables 68% more thedevelopment, INTEREST U.K. than in $50 insolvency theproposal IN UK account GROVE Capital
Slide 26: In late 2013, we closed the acquisition of a 51% interest in Refinancia
IN LATE leading Investment driven Commitment buyer Q4, Benefits WE of non-performing CLOSED Refinancia To Extendable THEhas loans ACQUISITION Business deep in:relationships 2013 Decision-making Capital OF Awith 2013 51%leading Refinancia INTEREST Consumer banks2013 Rights in INthe REFINANCIA, Capita
Slide 27: Refinancia is Encore's entry into Latin American markets
REFINANCIA (Colombia, reengineering options card offered at the Peru) inFactoring Advances Banked IS Improvements ENCORE’S clients of in merchant Decision Colombia ENTRY in call Guarantee payment center INTO with plans risk default LATIN payment ofstrategies credit in AMERICAN their plans Credit NPL
Slide 28: Encore's long-term prospects continue to be favorable
ENCORE’S Diversification asset PROPRIETARY improved LONG-TERM A results 28 culture ourofability constant PROSPECTS to to Strong enhance CONTINUE liquidity ERC andTO classes, Additional BE FAVORABLE positioned asset classes forOperating take Weadvantage are an Results international collections Liquid
Slide 29: Appendix
APPENDIX = Ves Score PROPRIETARY
Slide 30: Reconciliation of Adjusted EBITDA
RECONCILIATION 9/30/09 discontinued Provision applied 1,261 9/30/12 operations, 10,418 receivable 1,905 173,501 ACG operations. 1,049 2,084 11,660 to 12/31/09 12/31/12 231,371 for principal portfolios net 1,761 3,001 operations, income 12,846 of205,959 PROPRIETARY 3/31/10 3/31/13 tax 1,446 5,364 on8
Slide 31: Reconciliation of Adjusted Net Income and Adjusted EPS
RECONCILIATION amounts), operations Acquisition related approximately and 2 PROPRIETARY Excludes warrant other Full 77,039 net related transactions expenses, 595,000 Year loss 31$legal attributable 2013 2.94 OFnet shares ADJUSTED and $2012 of 3.01 advisory tax issuable Per to 78,571 2,198 non-contro
Slide 32: Reconciliation of Adjusted Operating Expenses
RECONCILIATION 2012 based Acquisition 199,967 2013 compensation 232,180 GAAP related 263,942 total legal expense OFoperating ADJUSTED and 319,871 advisory (4,287) expenses, 379,348 (3,564) OPERATING fees — 500,154 as(4,384) ——(4,263) reported PROPRIETARY EXPENSES (6,010) 201,849 (20,236) (7,709) 216