2014

Encore Capital Group Announces Record First Quarter 2013 Financial Results And Expanded Credit Facility Earnings per share from continuing operations on a GAAP and Adjusted Basis increased 14% and 23%, respectively, to $0.80 and $0.86; Quarterly Gross Collections Increased 17% to $270.2 million

SAN DIEGO, May 9, 2013 /PRNewswire/ -- Encore Capital Group, Inc. (Nasdaq: ECPG), a leader in consumer debt buying and recovery, today announced consolidated financial results for the first quarter ended March 31, 2013.

"Encore delivered strong first quarter financial results with record collections, earnings and Adjusted EBITDA," said Brandon Black, Encore's Chief Executive Officer. "Our operating margin also continued to expand, as our cost-to-collect ratio declined to an all-time low of 36.5 percent. We have positioned our operations for the integration of Asset Acceptance, and are confident in the value that this acquisition will deliver for shareholders. Upon closing in June, we will have almost $3 billion in estimated remaining collections (ERC). In addition to the $59 million we deployed in the first quarter on purchases, after closing, we will have the benefit of managing the $27 million that Asset Acceptance deployed in the first quarter. Our continued strong financial and operating performance is the direct result of the hard work and dedication of the entire Encore team."

As part of the Company's growth plans, Encore also announced the expansion of its existing credit facility, led by SunTrust Robinson Humphrey and Bank of America, by $217.5 million to $812.5 million, with an additional $162.5 million available to draw under its accordion, bringing the total facility to $975 million. "The expansion to our facility will provide us with the access to capital necessary to continue our growth strategy.  We appreciate the confidence that our lenders have shown by increasing their commitments, as well as the entrance of a number of new lenders to our facility.  With the additional commitments, on a pro forma basis at March 31, 2013, we had over $475 million of availability under our facility," said Paul Grinberg, Encore's Chief Financial Officer.

First Quarter 2013 Highlights:

  • Gross collections from the portfolio purchasing and recovery business were $270.2 million, a 17% increase over the $231.0 million in the same period of the prior year.
  • Investment in receivable portfolios in the portfolio purchasing and recovery business was $58.8 million, to purchase $1.6 billion in face value of debt, compared to $130.5 million, to purchase $2.9 billion in face value of debt in the same period of the prior year.
  • Revenue from receivable portfolios in the portfolio purchasing and recovery business, net of allowance adjustments, was $140.7 million, an 11% increase over the $126.4 million in the same period of the prior year. Revenue recognized on receivable portfolios, as a percentage of portfolio collections, excluding the effects of net portfolio allowances, decreased to approximately 52% from 55% in the same period of the prior year.
  • Total operating expenses were $105.9 million, including $3.0 million for Propel, a 16% increase over the $91.4 million in the same period of the prior year. Cost per dollar collected for the portfolio purchasing and recovery business decreased to 36.5% compared to 38.4% in the same period of the prior year.
  • Adjusted EBITDA, defined as net income before interest, taxes, depreciation and amortization, stock-based compensation expense, portfolio amortization, and acquisition related expenses, was $174.5 million, a 21% increase over the $143.9 million in the same period of the prior year.
  • Total interest expense for the portfolio purchasing and recovery business was $6.9 million, compared to $5.5 million in the same period of the prior year. Included in this is incremental, non-cash interest expense incurred by the Company as a result of the convertible note offering in late 2013. Cash interest expense was $5.5 million and $5.0 million for the three months ended March 31, 2013 and 2012, respectively.
  • Net income increased to $19.4 million from $11.4 million in the same period last year. Similarly, diluted earnings per share increased to $0.80 from $0.44.
  • Earnings per share from continuing operations, excluding non-cash interest and issuance cost amortization, and acquisition related expenses incurred during the quarter, net of tax, was $0.86, a 23% increase over $0.70 in the same period of the prior year.
  • Total stockholders' equity per share was $17.49 as of March 31, 2013, an 11% increase over $15.71 as of December 31, 2012.

Conference Call and Webcast

The Company will hold a conference call and webcast today at 2:00 p.m. Pacific time / 5:00 p.m. Eastern time to discuss first quarter results. During the conference call, the Company will refer to slides which will be available via webcast and then for download at the Investor Relations page at www.encorecapital.com.

Members of the public are invited to listen to the event via a listen-only telephone conference call line or the Internet. To access the live telephone conference call line, please (877) 860-0730 or (408) 940-3818. To access the live webcast via the Internet, log on at the Investor Relations page of the Company's website at www.encorecapital.com.

For those who cannot listen to the live broadcast, a telephone replay will be available for seven days by dialing (404) 537-3406 and using conference ID 58549498. A replay of the conference call will also be available shortly after the call on the Company's website.

Non-GAAP Financial Measures

The Company has included information concerning non-GAAP financial measures, including adjusted income from continuing operations per share, because management believes that investors regularly rely on non-GAAP adjusted income from continuing operations and adjusted income from continuing operations per share, to assess operating performance, in order to highlight trends in the Company's business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. The Company has also included information concerning adjusted EBITDA, because management utilizes this information, which is materially similar to a financial measure contained in covenants used in the Company's credit agreement, in the evaluation of its operations and believes that this measure is a useful indicator of the Company's ability to generate cash collections in excess of operating expenses through the liquidation of its receivable portfolios. Additionally, the Company has included information related to adjusted operating expenses for the portfolio purchasing and recovery business, in order to facilitate a comparison of approximate cash costs to cash collections for the portfolio purchasing and recovery business in the periods presented.  These non-GAAP financial measures should not be considered as alternatives to, or more meaningful than, income from continuing operations, net income and total operating expenses as indicators of the Company's operating performance. Further, these non-GAAP financial measures, as presented by the Company, may not be comparable to similarly titled measures reported by other companies. The Company has included a reconciliation of adjusted income from continuing operations per share to reported income from continuing operations under GAAP, a reconciliation of adjusted EBITDA to reported net income under GAAP, and a reconciliation of adjusted operating expenses for the portfolio purchasing and recovery business to the GAAP measure total operating expenses in the attached financial tables.

About Encore Capital Group, Inc.

Encore Capital Group is a leading provider of debt management and recovery solutions for consumers and property owners across a broad range of assets. Through its subsidiaries, Encore Capital Group purchases portfolios of consumer receivables from major banks, credit unions, and utility providers, and partners with individuals as they repay their obligations and work toward financial recovery. Through its Propel Financial Services, LLC subsidiary, Encore Capital Group assists property owners who are delinquent on their property taxes by structuring affordable monthly payment plans.

Headquartered in San Diego, Encore Capital Group is a publicly traded NASDAQ Global Select company (ticker symbol: ECPG) and a component stock of the Russell 2000, the S&P SmallCap 600, and the Wilshire 4500. More information about Encore Capital Group can be found at www.encorecapital.com  Encore Capital Group's website, and the information contained therein, is not incorporated into and is not a part of this press release.

Forward Looking Statements

The statements in this press release that are not historical facts, including, most importantly, those statements preceded by, or that include, the words "may," "believe," "projects," "expects," "anticipates" or the negation thereof, or similar expressions, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). These statements may include, but are not limited to, statements regarding our litigation, future operating results, performance, business plans or prospects, including our ability to consummate the Asset Acceptance acquisition. For all "forward-looking statements," the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act. Such forward-looking statements involve risks, uncertainties and other factors which may cause actual results, performance or achievements of the Company and its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors are discussed in the reports filed by the Company with the Securities and Exchange Commission, including the most recent reports on Forms 10-K, 10-Q and 8-K, each as it may be amended from time to time. The Company disclaims any intent or obligation to update these forward-looking statements.

Contact:

Encore Capital Group, Inc.

Paul Grinberg (858) 309-6904
paul.grinberg@encorecapital.com

Adam Sragovicz (858) 309-9509
adam.sragovicz@encorecapitalgroup.com

 

FINANCIAL TABLES FOLLOW


 

 

 

ENCORE CAPITAL GROUP, INC.


Condensed Consolidated Statements of Financial Condition

(In Thousands, Except Par Value Amounts)

(Unaudited)






March 31,
2013


December 31,
2012

Assets




Cash and cash equivalents

$      29,904


$      17,510

Investment in receivable portfolios, net

801,525


873,119

Deferred court costs, net

35,448


35,407

Property tax payment agreements receivable, net

153,580


135,100

Interest receivable

4,621


4,042

Property and equipment, net

24,389


23,223

Other assets

31,113


27,006

Goodwill

51,437


55,446

Identifiable intangible assets, net

462


487





          Total assets

$ 1,132,479


$ 1,171,340





Liabilities and stockholders' equity




Liabilities:




Accounts payable and accrued liabilities

$      42,120


$      45,450

Income tax payable

7,236


3,080

Deferred tax liabilities, net

8,443


8,236

Debt

646,011


706,036

Other liabilities

1,738


2,722





Total liabilities

705,548


765,524





Commitments and contingencies




Stockholders' equity:




Convertible preferred stock, $.01 par value, 5,000 shares authorized, no shares issued and outstanding


Common stock, $.01 par value, 50,000 shares authorized, 23,336 shares and 23,191 shares issued and outstanding as of March 31, 2013 and December 31, 2012, respectively

233


232

Additional paid-in capital

89,189


88,029

Accumulated earnings

338,777


319,329

Accumulated other comprehensive loss

(1,268)


(1,774)





Total stockholders' equity

426,931


405,816





Total liabilities and stockholders' equity

$ 1,132,479


$ 1,171,340





 

 

 

ENCORE CAPITAL GROUP, INC.


Condensed Consolidated Statements of Comprehensive Income

(In Thousands, Except Per Share Amounts)

(Unaudited)



Three Months Ended
March 31,


2013


2012

Revenues




          Revenue from receivable portfolios, net

$    140,683


$    126,405

          Tax lien transfer




                   Interest income

4,715


                   Interest expense

(1,113)






          Net interest income

3,602






                             Total revenues

144,285


126,405





Operating expenses




          Salaries and employee benefits

28,832


22,304

          Cost of legal collections

42,258


38,635

          Other operating expenses

13,265


11,598

          Collection agency commissions

3,329


3,959

          General and administrative expenses

16,342


13,658

          Depreciation and amortization

1,846


1,240





                            Total operating expenses

105,872


91,394





Income from operations

38,413


35,011





Other (expense) income




          Interest expense

(6,854)


(5,515)

          Other income

460


272





                   Total other expense

(6,394)


(5,243)





Income from continuing operations before income taxes

32,019


29,768

Provision for income taxes

(12,571)


(11,660)





Income from continuing operations

19,448


18,108

Loss from discontinued operations, net of tax


(6,702)





Net income

$      19,448


$      11,406





Weighted average shares outstanding:




          Basic

23,446


24,779

          Diluted

24,414


25,740

Basic earnings (loss) per share from:




          Continuing operations

$           0.83


$           0.73

          Discontinued operations

$           0.00


$          (0.27)





          Net basic earnings per share

$           0.83


$           0.46





Diluted earnings (loss) per share from:




          Continuing operations

$           0.80


$           0.70

          Discontinued operations

$           0.00


$          (0.26)





          Net diluted earnings per share

$           0.80


$           0.44





Other comprehensive gain (loss):




          Unrealized gain on derivative instruments, net of tax

620


682

          Unrealized loss on foreign currency translation, net of tax

(114)






Other comprehensive gain, net of tax

506


682





Comprehensive income

$      19,954


$      12,088





 

 

 


ENCORE CAPITAL GROUP, INC.


Condensed Consolidated Statements of Cash Flows

(Unaudited, In Thousands)



Three Months Ended
March 31,


2013


2012

Operating activities:




Net income

$     19,448


$     11,406

Adjustments to reconcile net income to net cash provided by operating activities




Depreciation and amortization

1,846


1,363

Impairment charge for goodwill and identifiable intangible assets


10,349

Amortization of loan costs and premium on property tax payment agreements receivable

1,517


466

Stock-based compensation expense

3,001


2,266

Income tax provision in excess of income tax payments

207


623

Excess tax benefit from stock-based payment arrangements

(983)


(1,067)

(Reversal) provision for allowances on receivable portfolios, net

(1,006)


373

Changes in operating assets and liabilities




Other assets

(1,630)


(326)

Deferred court costs

(41)


(1,333)

Prepaid income tax and income taxes payable

4,314


2,130

Accounts payable, accrued liabilities and other liabilities

(2,980)


853





Net cash provided by operating activities

23,693


27,103





Investing activities:




Purchases of receivable portfolios

(58,771)


(130,463)

Collections applied to investment in receivable portfolios, net

130,493


104,230

Proceeds from put-backs of receivable portfolios

878


734

Originations of property tax payment agreements receivable

(27,446)


Collections applied to property tax payment agreements receivable, net

11,812


Purchases of property and equipment

(2,315)


(1,555)





Net cash provided by (used in) investing activities

54,651


(27,054)





Financing activities:




Payment of loan costs

(2,340)


Repayment of senior secured notes

(2,500)


Proceeds from revolving credit facilities

33,741


43,500

Repayment of revolving credit facilities

(91,800)


(34,500)

Repurchase of common stock

(729)


Proceeds from exercise of stock options

846


1,061

Taxes paid related to net share settlement of equity awards

(2,872)


(2,093)

Excess tax benefit from stock-based payment arrangements

983


1,067

Repayment of capital lease obligations

(1,279)


(1,685)





Net cash (used in) provided by financing activities

(65,950)


7,350





Net increase in cash and cash equivalents

12,394


7,399

Cash and cash equivalents, beginning of period

17,510


8,047





Cash and cash equivalents, end of period

$     29,904


$     15,446





Supplemental disclosures of cash flow information:




Cash paid for interest

$       5,485


$       5,119

Cash paid for income taxes

7,520


4,075

Supplemental schedule of non-cash investing and financing activities:




Fixed assets acquired through capital lease

674


1,564

 

ENCORE CAPITAL GROUP, INC.


Supplemental Financial Information
Reconciliation of Adjusted Income From Continuing Operations to GAAP Net Income From Continuing Operations, Adjusted EBITDA to GAAP Net Income, and Adjusted Operating Expenses For The Portfolio Purchasing And Recovery Business to GAAP Total Operating Expenses

(In Thousands, Except Per Share amounts) (Unaudited)



Three Months Ended March 31, 


2013

2012


$


Per
Diluted
Share


$


Per
Diluted
Share

GAAP net income from continuing operations, as reported     

$    19,448


$     0.80


$ 18,108


$     0.70

Adjustments:








Convertible notes non-cash interest and issuance cost amortization, net of tax

673


$     0.03



Acquisition related expenses, net of tax

775


$     0.03











Adjusted income from continuing operations

$    20,896


$     0.86


$ 18,108


$     0.70












Three Months Ended
March 31,


2013


2012

GAAP net income, as reported

$ 19,448


$ 11,406

Adjustments:




Loss from discontinued operations, net of tax


6,702

Interest expense

6,854


5,515

Provision for income taxes

12,571


11,660

Depreciation and amortization

1,846


1,240

Amount applied to principal on receivable portfolios

129,487


104,603

Stock-based compensation expense

3,001


2,266

Acquisition related expenses

1,276


489





Adjusted EBITDA

$174,483


$143,881










Three Months Ended
March 31,


2013


2012

GAAP total operating expenses, as reported

$           105,872


$          91,394

Adjustments:




Stock-based compensation expense

(3,001)


(2,266)

Tax lien transfer segment operating expenses

(3,022)


Acquisition related expenses

(1,276)


(489)





Adjusted operating expenses for the portfolio purchasing and recovery business

$98,573


$88,639






March 31,
2013


December 31,
2012

Stockholders' equity

$           426,931


$           405,816

Diluted shares outstanding

24,414


25,836





Stockholders' equity per share

$17.49


$15.71

 

SOURCE Encore Capital Group, Inc.



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