Encore Capital Group Inc · NASDAQ:ECPG
Encore Capital — Q3 2014 Earnings Presentation
24 slides from Encore Capital's earnings presentation, Nov 6, 2014
Slide 1: Encore Capital Group, Inc. Q3 2014 Earnings Call
Encore Capital Group, Inc. Q3 2014 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 wor
Slide 3: Encore Delivered Record Quarterly Earnings Per Share
ENCORE DELIVERED RECORD QUARTERLY EARNINGS PER SHARE GAAP EPS* Economic EPS** Collections $407 million $1.11 $1.17 Adjusted EBITDA** GAAP Net Income* Adjusted Income** $252 million $30 $31 Cost to Collect*** million million 38.9% Estimated Remaining Collections of $5.1 billion * Attributable to Enco
Slide 4: Q3 Deployments Reflect a Diverse Global Business
Q3 DEPLOYMENTS REFLECT A DIVERSE GLOBAL BUSINESS Q3-2014 Deployments $M Cabot $93 Propel Refinancia $36 $16 Grove $16 Core US Core US (Atlantic) Purchasing $105 $69 Total $336 PROPRIETARY 4
Slide 5: Our Diversification Allows Us to Operate in Several Distinct Markets
OUR DIVERSIFICATION ALLOWS US TO OPERATE IN SEVERAL DISTINCT MARKETS Current Market Conditions US Core Market UK Core Market • Pricing remains steady, even • Pricing remains competitive, but moderating in some instances rational • Supply moderate in Q4 • Supply seasonally stronger in back • Two larg
Slide 6: Our Growth Strategy Is Tailored to Address the Evolving Dynamics of Our Markets
OUR GROWTH STRATEGY IS TAILORED TO ADDRESS THE EVOLVING DYNAMICS OF OUR MARKETS Encore Growth Strategy 1 2 3 Explore Business Continue to Invest Expand Into New Model Adjacencies and In Core Businesses Geographies Expansion • Core Business • Existing • M&A opportunities in – Core cards direct – Cabo
Slide 7: We Have Continued to Lead the Consolidation of Our Industry in the U.S.
WE HAVE CONTINUED TO LEAD THE CONSOLIDATION OF OUR INDUSTRY IN THE U.S. Attractive consolidation target Satisfies a significant portion of our purchasing target for 2014 Expands market for future capital deployment Investment Rationale • ACF specializes in high balance, recently charged-off (“
Slide 8: Cabot Remains a Solid Contributor to Overall Earnings - Marlin Integration on Track
CABOT REMAINS A SOLID CONTRIBUTOR TO OVERALL EARNINGS - MARLIN INTEGRATION REMAINS ON TRACK Cabot’s Economic EPS Impact Cabot Update $ 0.25 0.21 0.21 Cabot deployed $503 million in new 0.20 0.19 portfolio purchases, including Marlin, 0.18 0.17 in the first three quarters of 2014 0.15 Cabot’s ERC
Slide 9: Propel Continues to Grow and Contribute to Encore
PROPEL CONTINUES TO GROW AND CONTRIBUTE TO ENCORE $276 million in Now operating in 22 Operating income property tax lien states, up from 11 continues to grow receivables states 6 months ago Tax Note Receivables Total Revenue Operating Income $M $M $M 300 10 4 250 8 3 200 6 150 2 4 100 1 50 2 0 0 0 Q
Slide 10: Detailed Financial Discussion
Detailed Financial Discussion 10
Slide 11: Q3 Collections Reflect Steady Execution and Growth
Q3 COLLECTIONS REFLECT STEADY EXECUTION AND GROWTH Collections by Geography Collections by Channel USA UK Latin America Collection Sites Legal Collections Collection Agencies $M $M 500 500 409 407 409 407 400 397 400 397 380 380 351 351 300 270 278 300 270 278 230 230 200 200 100 100 0 0 2012 2013 2
Slide 12: Strong Collections and Geographic Diversification Led to Solid Revenue Growth
STRONG COLLECTIONS AND OUR GEOGRAPHIC DIVERSIFICATION STRATEGY LED TO SOLID REVENUE GROWTH Revenue From Business Lines Revenue Recognition* $M 300 Q3 2014 Q3 2013 Channel 269 273 Rev Rec Rev Rec 254 250 237 236 Europe 67.6% 61.1% 200 United States 58.0% 58.0% 156 Encore 60.4% 58.6% 150 144 145 100 5
Slide 13: Cost to Collect Remains Stable, Even as We Invest in Compliance
COST TO COLLECT REMAINS STABLE, EVEN AS WE CONTINUE TO INVEST IN COMPLIANCE Q3 2014 Q3 2013 Overall Cost to Collect* Channel CTC CTC Europe 30.3% 27.2% 45% 43% US Legal 36.3% 39.6% 42% US Core sites 7.2% 8.4% 40% Encore 38.9% 39.7% 40% 39% 38% 38% 38% 36% 35% 30% 2012 2013 2013 2014 2013 2014 2013 2
Slide 14: We Continue to Drive Significant Value Through Our Legal Channel
WE CONTINUE TO DRIVE SIGNIFICANT VALUE THROUGH OUR LEGAL CHANNEL US Legal Collections US Legal Cost to Collect $M 140 80.0% 126 119 70.0% 120 60.0% 100 50.0% 46.8% 80 39.3% 40.0% 37.4% 35.6% 60 30.0% 40 35 28 20.0% 20 10.0% 0 0.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2013 2013 2013 2013 2014 20
Slide 15: Collections Growth Led to Improved Cash Flows
COLLECTIONS GROWTH LED TO IMPROVED CASH FLOWS Adjusted Quarterly EBITDA* Adjusted EBITDA Trailing Twelve Months $M $M $M 300 1,200 256 252 250 250 1,000 943 963 231 859 206 200 800 784 174 172 713 608 633 150 600 577 135 100 400 50 200 0 0 2012 2013 2013 2014 2013 2014 2013 2014 Q4 2012 Q1 2013 Q2 2
Slide 16: Our ERC Continues to Grow
OUR ERC CONTINUES TO GROW Estimated Remaining Collections $M 7,000 Acquired Atlantic* 6,000 Acquired $275 Marlin* Acquired Cabot* $607 $5,128 5,000 $1,445 Acquired $4,022 4,000 AACC* $952 3,000 2,000 1,000 0 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 * ERC at time of acquisition
Slide 17: Encore Delivered Record Economic EPS in Q3 of $1.17
ENCORE DELIVERED RECORD ECONOMIC EPS IN Q3 OF $1.17 $0.04 $0.06 $1.17 $1.13 $1.11 ($0.08) Less ~1.0M shares which are reflected in GAAP EPS, but will not be issued Net income per diluted Net non-cash interest Acquisition and Effect of net tax credits Adjusted income per Adjusted Income share attribu
Slide 18: Encore's Long-Term Prospects Remain Favorable
ENCORE’S LONG-TERM PROSPECTS REMAIN FAVORABLE Geographic & Operating Results Liquidity & Solid Cash Flows Asset Class & Deployment Capital Access Diversification A culture of constant Strong liquidity and Additional asset classes We are an international improvement drives access to capital enhance a
Slide 19: Appendix
—- encore CAPITAL GROUP Appendix 19
Slide 20: 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 21: 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 September 30, 2014 2013 Per Diluted Per Diluted Per Diluted Per Diluted $ Share – Share – $
Slide 22: Reconciliation of Adjusted EBITDA
RECONCILIATION OF ADJUSTED EBITDA Reconciliation of Adjusted EBITDA to GAAP Net Income (Unaudited, In $ Thousands) Three Months Ended 9/30/12 12/31/12 3/31/13 6/30/13 9/30/13 12/31/13 3/31/14 6/30/14 9/30/14 GAAP net income, as reported 21,308 20,167 19,448 11,012 21,064 22,216 18,830 21,353 30,138
Slide 23: 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 12/31/12 3/31/13 6/30/13 9/30/13 12/31/13 3/31/14 6/30/14 9/30/14 GAAP total operating expenses, 103,872 105,872 126,238 174,429 168,4
Slide 24: Encore Capital Group, Inc.
Encore Capital Group, Inc. Q3 2014 EARNINGS CALL