Encore Capital Group Inc · NASDAQ:ECPG
Encore Capital — Q4 2015 Earnings Presentation
29 slides from Encore Capital's earnings presentation, Feb 24, 2016
Slide 1: Encore Capital Group, Inc. Q4 2015 Earnings Call
Encore Capital Group, Inc. Q4 2015 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
PROPRIETARY 3 ENCORE UPDATE Revenues, profits and deployments have all grown substantially over the past three years While earnings growth over the period has been strong, compression in ROIC has occurred Going forward, we will focus less on large platform acquisitions EPS and ROIC should ri
Slide 4: Encore Delivered Economic EPS Growth of 12% in the Fourth Quarter
PROPRIETARY 4 ENCORE DELIVERED ECONOMIC EPS GROWTH OF 12% IN THE FOURTH QUARTER Economic EPS** $1.31 GAAP Loss per Share* ($0.04) GAAP Net Loss* ($1) million Adjusted Income** $34 million Estimated Remaining Collections of $5.7 billion * Attributable to Encore ** Please refer to appendix for reconci
Slide 5: Encore Delivered Economic EPS Growth of 14% in 2015
PROPRIETARY 5 ENCORE DELIVERED ECONOMIC EPS GROWTH OF 14% IN 2015 Economic EPS** $5.15 GAAP EPS* $1.69 GAAP Net Income* $45 million Adjusted Income** $134 million Estimated Remaining Collections of $5.7 billion * From continuing operations attributable to Encore ** Please refer to appendix for recon
Slide 6: Q4 and 2015 Deployments Reflect a Diverse Global Business
PROPRIETARY 6 Q4 AND 2015 DEPLOYMENTS REFLECT A DIVERSE GLOBAL BUSINESS Q4-2015 Deployments 2015 Deployments $M United States $200 Europe $69 Other $76 Total $1,243 Total $345 United States $726 Europe $424 Other $94 Includes $52M for Propel tax liens Includes $220M for Propel tax liens
Slide 7: Cabot Update
PROPRIETARY 7 Increased revenues 23% in Q4 of 2015 compared to Q4 of 2014 Increased revenues 22% in 2015 compared to 2014 Increased collections 14% in Q4 of 2015 compared to Q4 of 2014 Increased collections 18% in 2015 compared to 2014 Deployed $400 million of capital in 2015 ERC at the
Slide 8: Propel Sale Transaction
PROPRIETARY 8 Propel is a good business that has grown assets, revenues and profits as part of Encore With our expansion into new global markets and improving returns in the U.S., Encore now has more attractive opportunities to deploy capital at higher returns to improve overall ROIC Achieving
Slide 9: The Divestiture of Propel Reduces Encore's Leverage
PROPRIETARY 9 THE DIVESTITURE OF PROPEL REDUCES ENCORE’S LEVERAGE Debt and Debt Ratios1 at December 31, 2015 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, With Propel With Cabot, Without Pro
Slide 10: Detailed Financial Discussion
10 Detailed Financial Discussion
Slide 11: Q4 Collections Reflect Steady Execution and Growth
PROPRIETARY 11 Q4 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 4 2 0 1 5 Q1 Q2 Q3 Q4 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 12: 2015 Collections Reflect Solid Growth Outside of the United States
PROPRIETARY 12 2015 COLLECTIONS REFLECT SOLID GROWTH OUTSIDE OF THE UNITED STATES Collections by Geography 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2012 2013 2014 2015 United States Europe Other 948 1,280 1,607 $M 1,701
Slide 13: Solid Collections Growth Led to Improved Cash Flows
PROPRIETARY SOLID COLLECTIONS GROWTH LED TO IMPROVED CASH FLOWS 13 * Please refer to Appendix for reconciliation of Adjusted EBITDA to GAAP $M Quarterly Adjusted EBITDA* Annual Adjusted EBITDA* 250 266 256 277 252 268 241 248 0 50 100 150 200 250 300 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
Slide 14: Quarterly Revenue Growth Driven by Strong Performance Abroad
PROPRIETARY OUR QUARTERLY REVENUE GROWTH WAS DRIVEN BY STRONG PERFORMANCE ABROAD 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 4 2 0 1 5 Q1 Q2 Q3 Q4 United States Europe Other $M 298 286 290 288 277 254 269 273
Slide 15: 2015 Revenue Growth Driven by Expansion Outside the United States
PROPRIETARY OUR REVENUE GROWTH IN 2015 WAS DRIVEN LARGELY BY OUR EXPANSION OUTSIDE THE UNITED STATES Revenue by Geography 15 $M 0 200 400 600 800 1,000 1,200 2012 2013 2014 2015 United States Europe Other $M 557 773 1,073 1,162
Slide 16: Cost-to-Collect Remains Stable
PROPRIETARY COST-TO-COLLECT REMAINS STABLE, EVEN AS WE CONTINUE TO INVEST IN COMPLIANCE AND OPPORTUNITIES TO IMPROVE NPV 16 Overall Cost-to-Collect* 38% 39% 38% 38% 39% 39% 40% 41% 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 4 2 0 1 5 Q1 Q2 Q3 Q4 ⃰ Cost-to-Collect = Adjuste
Slide 17: Our ERC Grew Over $500 Million in the Last Year
PROPRIETARY 17 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 2012 2013 2014 2015 United States Europe Other 1,967 3,990 5,203 $M 5,711
Slide 18: Encore Delivered Economic EPS of $1.31 in Q4
PROPRIETARY ENCORE DELIVERED ECONOMIC EPS OF $1.31 IN Q4 18 * Please refer to Appendix for reconciliation of Adjusted EPS / Economic EPS measurements to GAAP $1.20 $1.30 $1.31 $0.07 $0.07 ($0.10) $0.10 $0.30 $0.50 $0.70 $0.90 $1.10 $1.30 Net loss per diluted share attributable to Encore Goodwill imp
Slide 19: Encore Delivered Record Economic EPS of $5.15 in 2015
PROPRIETARY ENCORE DELIVERED RECORD ECONOMIC EPS OF $5.15 IN 2015 19 * Please refer to Appendix for reconciliation of Adjusted EPS / Economic EPS measurements to GAAP $1.69 $0.30 $5.02 $5.15 $1.60 $0.26 $1.17 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 Net income per diluted share attributable to Enco
Slide 20: Summary and Outlook
PROPRIETARY SUMMARY AND OUTLOOK Solid Start to 2016 • We have already secured $270 million in forward flow commitments for the U.S. market in 2016 Expansion Markets Are Healthy • Our businesses in our expansion markets, especially in Latin America, are demonstrating attractive after-tax IRR’s Higher
Slide 21: Q&A
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Slide 22: Appendix
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Slide 23: Non-GAAP Financial Measures
PROPRIETARY 23 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 24: Reconciliation of Adjusted Income and Economic / Adjusted EPS (Q4)
PROPRIETARY 24 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 December 31, 2015 2014 $ Per Diluted Share – Accounting Per Diluted Share – E
Slide 25: Reconciliation of Adjusted Income and Economic / Adjusted EPS (Full Year)
PROPRIETARY 25 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), Twelve Months Ended December 31, 2015 2014 $ Per Diluted Share – Accounting Per Diluted Share –
Slide 26: Reconciliation of Adjusted EBITDA to GAAP Net Income (Quarterly)
PROPRIETARY Reconciliation of Adjusted EBITDA to GAAP Net Income (Unaudited, In $ Thousands) Three Months Ended 3/31/14 6/30/14 9/30/14 12/31/14 3/31/15 6/30/15 9/30/15 12/31/15 GAAP net income, as reported $ 18,830 $ 21,353 $ 30,138 $ 27,957 $ 29,967 $ 25,185 ($ 9,364) $ 1,596 Loss from discontinue
Slide 27: Reconciliation of Adjusted EBITDA to GAAP Net Income (Annual)
PROPRIETARY Reconciliation of Adjusted EBITDA to GAAP Net Income (Unaudited, In $ Thousands) Twelve Months Ended 12/31/12 12/31/13 12/31/14 12/31/15 GAAP net income, as reported $ 69,477 $ 73,740 $ 98,278 $ 47,384 Loss from discontinued operations, net of tax 9,094 1,740 1,612 --- Interest expense 2
Slide 28: 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 3/31/14 6/30/14 9/30/14 12/31/14 3/31/15 6/30/15 9/30/15 12/31/15 GAAP total operating expenses, as reported $ 185,472 $ 1
Slide 29: 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 12/31/15 As Reported Constant Currency Revenue $ 297,757 $ 307,045 Operating expenses $ 259,984 $ 266,542 Net income attributable to Encore $ (988) $ 173 Adjus