Encore Capital Group Inc · NASDAQ:ECPG
Encore Capital — Q2 2017 Earnings Presentation
23 slides from Encore Capital's earnings presentation, Aug 3, 2017
Slide 1: Encore Capital Group, Inc. Q2 2017 Earnings Call
Encore Capital Group, Inc. Q2 2017 EARNINGS CALL
Slide 2: Cautionary Note About Forward-Looking Statements
CAUTIONARY NOTE ABOUT FORWARD- LOOKING STATEMENTS The statements in this presentation that are not achievements of the Company and its subsidiaries historical facts, including, most importantly, those to be materially different from any future results, statements preceded by, or that include, the wo
Slide 3: Encore Update
eee ee ee ee eee ENCORE UPDATE \ = encore Better Solutions. Better Life.
Slide 4: U.S. Market Continues to Demonstrate Favorable Dynamics for Our Business
U.S. MARKET CONTINUES TO DEMONSTRATE FAVORABLE DYNAMICS FOR OUR BUSINESS Supply improved in the second quarter Banks continue to build their loan loss provisions Issuers report delinquency and net charge-off rates continue to increase We expect supply will continue to grow Pricing remains
Slide 5: Recent Purchases of More Accounts and Capacity Expansion Reflect Our Adaptability
OUR RECENT PURCHASES OF SIGNIFICANTLY MORE ACCOUNTS AND ASSOCIATED CAPACITY EXPANSION REFLECT OUR ADAPTABILITY Deploying capital more efficiently leads to acquiring more accounts and the need for more collections capacity We are willing to absorb this near-term expense in order to drive higher I
Slide 6: Cabot Has Established Itself as the Leading Debt Buyer in the United Kingdom
CABOT HAS ESTABLISHED ITSELF AS THE LEADING DEBT BUYER IN THE UNITED KINGDOM Cabot had a strong purchasing quarter in Europe, deploying over $90 million at solid returns Cabot’s liquidation initiatives are driving sustained collections improvement on many of its portfolios across a number of vin
Slide 7: Encore's Leverage Ratio Impacted by Consolidation of Cabot's Debt
ENCORE’S LEVERAGE RATIO IS SIGNIFICANTLY IMPACTED BY THE CONSOLIDATION OF CABOT’S DEBT ON OUR BALANCE SHEET Debt and Debt Ratios1 With Cabot Without Cabot Encore at 06/30/17 at 06/30/17 Total Debt $2.734 B $1.297 B Total Debt / (Adjusted EBITDA + Collections 2.65x 1.87x applied to principal balance)
Slide 8: Detailed Financial Discussion
Detailed Financial Discussion 8
Slide 9: Encore Had a Solid Second Quarter
ENCORE HAD A SOLID SECOND QUARTER GAAP EPS1 GAAP Net Income1 Economic EPS2 Adjusted Income2 $0.77 $20.3 $0.88 $22.9 million million Collections $446 million Estimated Remaining Collections of $6.3 billion 1) From continuing operations attributable to Encore 2) Please refer to Appendix for reconcilia
Slide 10: Worldwide Deployments in Q2 Were Up 6%
WORLDWIDE DEPLOYMENTS IN Q2 WERE UP 6% COMPARED TO THE SAME QUARTER A YEAR AGO Q2 2017 Deployments $M Europe $92 Other $22 United States $132 Total $246 10
Slide 11: Worldwide Collections Were Up 3% Compared to Q2 2016
WORLDWIDE COLLECTIONS WERE UP 3% COMPARED TO Q2 2016 AND WERE UP 6% IN CONSTANT CURRENCY Collections by Geography Collections by Channel Collection Sites Legal Collections Collection Agencies $M United States Europe Other $M 500 500 448 441 434 446 448 441 434 446 422 407 417 397 422 407 417 397 400
Slide 12: Q2 Revenue in the U.S. Grew 5% Compared to Q2 2016
Q2 REVENUE IN THE U.S. GREW 5% COMPARED TO Q2 2016 Revenue by Geography $M 350 300 279 291 289 289 291 271 272 250 200 179 150 100 50 0 -50 2015 2016 2015 2016 2016 2017 2016 2017 Q3 Q4 Q1 Q2 United States Europe Other 12
Slide 13: ERC at the End of Q2 Represents Our Highest Level to Date
ERC AT THE END OF Q2 REPRESENTS OUR HIGHEST LEVEL TO DATE Total Estimated Remaining Collections $M 6,256 6,000 5,684 5,537 4,899 5,000 4,000 3,000 2,741 2,000 1,000 0 June 2013 June 2014 June 2015 June 2016 June 2017 United States Europe Other 13
Slide 14: Encore Delivered GAAP EPS of $0.77 and Economic EPS of $0.88
ENCORE DELIVERED GAAP EPS OF $0.77 AND ECONOMIC EPS OF $0.88 IN THE SECOND QUARTER OF 2017 $1.20 $0.13 $0.02 ($0.10) $1.00 ($0.04) $0.12 ($0.03) $0.87 $0.88 $0.77 $0.80 $0.60 0.2M shares deducted $0.40 in Q2 2017 $0.20 $0.00 Net income per Convertible notes Acquisition, Amortization of Gain on rever
Slide 15: Summary
SUMMARY Q2 was a solid quarter of financial and operational performance Supply continues to rise and prices remain favorable in the U.S. Improved pricing and better liquidations drove YTD core purchase price multiple to 2.0x through Q2 We’ve secured more than $425 million in commitments for
Slide 16: Q&A
Elle Better Solutions. Better Life. Q&A 16
Slide 17: Appendix
Elle Better Solutions. Better Life. Appendix 17
Slide 18: Non-GAAP Financial Measures
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 Adjusted EBITDA
Slide 19: Reconciliation of Adjusted Income and Economic / Adjusted EPS
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 June 30, 2017 2016 Per Diluted Per Diluted Per Diluted Per Diluted $ Share – Share – $ Share
Slide 20: Reconciliation of Adjusted EBITDA
RECONCILIATION OF ADJUSTED EBITDA Reconciliation of Adjusted EBITDA to GAAP Net Income (Unaudited, In $ Thousands) Three Months Ended 9/30/16 12/31/16 3/31/17 6/30/17 GAAP net income, as reported $ (51,946) $ 11,323 $ 14,979 $ 19,076 Adjustments: (Income) loss from discontinued operations, net of ta
Slide 21: Reconciliation of Adjusted Operating Expenses
RECONCILIATION OF ADJUSTED OPERATING EXPENSES Reconciliation of Adjusted Operating Expenses to GAAP Operating Expenses (Unaudited, In $ Thousands) Three Months Ended 9/30/15 12/31/15 3/31/16 6/30/16 9/30/16 12/31/16 3/31/17 6/30/17 GAAP total operating expenses, as reported $ 248,185 $ 206,271 $ 205
Slide 22: Impact of Fluctuations in Foreign Currency Exchange Rates
IMPACT OF FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES (Unaudited, In Millions, except per share amounts) Three Months Ended Constant As Reported 6/30/17 Currency Revenue $ 291 $ 302 Operating expenses $ 210 $ 216 Net income* $ 20 $ 21 Adjusted net income* $ 23 $ 24 GAAP EPS* $ 0.77 $ 0.80 Econom
Slide 23: Cost-to-Collect Reflects Higher Legal Spending in the U.S.
COST-TO-COLLECT REFLECTS HIGHER LEGAL SPENDING IN THE U.S. PARTIALLY OFFSET BY LOWER COSTS IN EUROPE Overall Cost-to-Collect1 45% 2 41.1% 41.5% 40.3% 40% 39.2% 38.4% 37.7% 37.8% 36.9% 35% Q2 2017 Q2 2016 Location 30% CTC CTC 25% United States 44.5% 39.0% 20% Europe 29.7% 31.1% 15% 10% Other 48.1% 42