Encore Capital Group Inc · NASDAQ:ECPG
Encore Capital — JMP Securities Research Conference 2012
23 slides from Encore Capital's conference presentation, May 14, 2012
Slide 1: Encore Capital Group – JMP Securities Research Conference
Exhibit 99.1 ENCORE CAPITAL GROUP JMP Securities Research Conference May 14, 2012 PROPRIETARY
Slide 2: Cautionary Note About Forward-Looking Statements
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 similar
Slide 3: Investment Highlights
INVESTMENT HIGHLIGHTS • Operating results continue to be strong and surpass our internal projections • Significant purchases in late 2011 and early 2012 will drive growth throughout this year and into 2013 • Exiting the underperforming bankruptcy servicing business • Recently completed the acquisiti
Slide 4: Encore Is a Leading Player in the Consumer Debt Buying and Recovery Industry
ENCORE IS A LEADING PLAYER IN THE CONSUMER DEBT BUYING AND RECOVERY INDUSTRY Receivable Portfolio Composition Global Capabilities Pro forma as of March 31, 2012 Debt Purchasing & Collections Debt Purchasing & Collections Tax Lien Purchasing • Purchase and collection of charged-off unsecured consumer
Slide 5: We Have Significantly Increased Operating Cash Flow and Cash Collections
WE HAVE SIGNIFICANTLY INCREASED OPERATING CASH FLOW (ADJUSTED EBITDA) AND CASH COLLECTIONS Adjusted EBITDA* and gross collections by year ($M) 850 Gross collections 750 Adjusted EBITDA 650 24% CAGR 550 450 28% 350 CAGR 250 150 2007 2008 2009 2010 2011 Q1 2012 TTM * Adjusted EBITDA is a non-GAAP numb
Slide 6: While Fundamentally Changing the Cost Structure of the Company
WHILE FUNDAMENTALLY CHANGING THE COST STRUCTURE OF THE COMPANY Annual, overall cost-to-collect (%) 51.5 50.2 47.6 43.7 42.2 41.6 2007 2008 2009 2010 2011 Q1 2012 TTM PROPRIETARY 6
Slide 7: Driven Primarily by the Growth of Our India Operations Center
DRIVEN PRIMARILY BY THE GROWTH OF OUR INDIA OPERATIONS CENTER Collections from all call centers ($M) U.S. 336 India 268 186 157 126 110 2007 2008 2009 2010 2011 Q1 2012 Percent 10% 19% 30% 44% 50% 54% of Total: PROPRIETARY 7
Slide 8: Strong Collections and Improving Cost Structure Have Contributed to Increased Purchases
THE STRONG COLLECTIONS AND IMPROVING COST STRUCTURE HAVE CONTRIBUTED TO OUR ABILITY TO INCREASE PURCHASES Quarterly purchases ($M) 250 (Est.) 200 150 100 50 0 Q1 Q1 Q1 Q1 2009 2010 2011 2012 PROPRIETARY 8
Slide 9: Our Flexible Operating Platform Adjusts to Different Types of Portfolios
OUR FLEXIBLE OPERATING PLATFORM ADJUSTS TO DIFFERENT TYPES OF PORTFOLIOS, ALLOWING US TO MAXIMIZE RETURNS Historical purchase mix by year ($M) PROPRIETARY 9
Slide 10: And Build Value for the Future
AND BUILD VALUE FOR THE FUTURE Annual estimated remaining gross collection (ERC) and total debt ($M, End of period) 2,000 1,800 ERC 1,724 1,600 Total Debt 1,400 1,338 1,200 1,000 800 600 385 398 400 200 0 2006 2007 2008 2009 2010 2011 Q1 2012 PROPRIETARY 10
Slide 11: Purchasing Accuracy and Analytic Operating Model Outperform Peers
PURCHASING ACCURACY AND OUR ANALYTIC OPERATING MODEL HAVE LED US TO CONSISTENTLY OUTPERFORM OUR PEERS Cumulative actual collection multiples by vintage year as of March 31, 2012 (Total Collections / Purchase Price) 2.50x ECPG Peer 1 2.00x Peer 2 1.50x 1.00x 0.50x 0.00x 2005 2006 2007 2008 2009 2010
Slide 12: Our Business Model Provides the Consumer With Time to Recover
OUR BUSINESS MODEL IS CRITICALLY IMPORTANT, AS IT PROVIDES THE CONSUMER WITH TIME TO RECOVER ORIGINAL CONTINGENCY COLLECTION CREDITOR AGENCY Time frame • Charge-off threshold • Four-to-six month • Consumer has 84 months extends a maximum of collection cycle to recover financially 6 months Transactio
Slide 13: We Have Positioned Ourselves to Address Regulatory Challenges
WE HAVE POSITIONED OURSELVES TO ADDRESS REGULATORY CHALLENGES AS THEY EMERGE Consumer Revamped our consumer relations process and introduced Alignment a Consumer Bill of Rights Regulatory Met with leadership of the CFPB and the staff of key federal Outreach and state legislators Hired a government r
Slide 14: Transitioning Our Bankruptcy Business to a New, More Natural Owner
WE ARE IN THE PROCESS OF TRANSITIONING OUR BANKRUPTCY BUSINESS TO A NEW, MORE NATURAL OWNER Buyer has focused IT and ACG has not Business bankruptcy been, and requires a expertise, and would not Bankruptcy significant currently serves be, material volumes technology large, financial New, to Encore h
Slide 15: Extensive Search Led Us to the Property Tax Lien Space
AN EXTENSIVE SEARCH FOR COMPLIMENTARY OPPORTUNITIES LED US TO THE PROPERTY TAX LIEN SPACE Encore’s • Consumer intelligence platform focused on strengths financially stressed consumers and recovery • Industry-leading asset valuation methodology • Low-cost operational platform dedicated to Geography b
Slide 16: Acquisition Expands Our Ability to Partner With Financially Stressed Consumers
THIS ACQUISITION EXPANDS UPON OUR ABILITY TO PARTNER WITH FINANCIALLY STRESSED CONSUMERS Financial Municipal Institutions Governments Payment for Payment for residential consumer debt and commercial obligations property tax obligations Leading provider of responsible debt management and recovery sol
Slide 17: Portfolio Purchases and the Propel Acquisition Will Generate Ongoing Value
THE LARGE VOLUME OF PORTFOLIO PURCHASES AND THE PROPEL ACQUISITION WILL GENERATE SIGNIFICANT, ONGOING VALUE Nine portfolio purchases from one seller Propel acquisition Price • > $100 million • $187 million Source • Cash on hand and current • $160 million syndicated lending $555.5 million syndicated
Slide 18: While We Remain Well Within Our Covenant Limits
WHILE WE REMAIN WELL WITHIN OUR COVENANT LIMITS Covenant analysis (Encore actuals for 2010 and 2011, Pro forma includes Encore with May 2012 competitor portfolio purchases and Propel Financial Services) ($M) Pro forma* 2010 2011 Q1 2012 TTM Cash flow leverage ratio Debt 385.3 389.0 715.5 Trailing 4-
Slide 19: In June, We Will Provide Additional Detail on These Transactions
IN JUNE, WE WILL PROVIDE ADDITIONAL DETAIL ON THESE TRANSACTIONS AND OUR GROWTH STRATEGY Please join us on June 6th , 2012 for our Annual Investor Day meeting in New York During the meeting we will discuss our evolving operational and financial strategy, in addition to providing new details about: •
Slide 20: Summary
SUMMARY • Operating results continue to be strong and surpass our internal projections • Significant purchases in late 2011 and early 2012 will drive growth throughout this year and into 2013 • Exiting the underperforming bankruptcy servicing business • Recently completed the acquisition of the mark
Slide 21: Appendix
APPENDIX <= encore CAPITAL GROUF PROPRIETARY 21
Slide 22: Appendix A: Cumulative Collections by Portfolio Vintage
APPENDIX A: CUMULATIVE COLLECTIONS BY PORTFOLIO VINTAGE Cumulative Collections through March 31, 2012 (000’s) Year of Purchase Purchase < 2006 2006 2007 2008 2009 2010 2011 2012 Total CCM Price < 2005 $385,471 $974,411 $164,211 $85,333 $45,893 $27,708 $19,986 $15,180 $3,006 $1,335,728 3.5 2005 192,5
Slide 23: Appendix B: Reconciliation of Adjusted EBITDA
APPENDIX B: RECONCILIATION OF ADJUSTED EBITDA Reconciliation of Adjusted EBITDA to GAAP Net Income (Unaudited, In Thousands) Three Months Ended 3/31/07 6/30/07 9/30/07 12/31/07 3/31/08 6/30/08 9/30/08 12/31/08 3/31/09 6/30/09 9/30/09 12/31/09 GAAP net income, as reported 4,991 (1,515) 4,568 4,187 6,
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