Encore Capital 8K Cautionary Note About Forward-looking Statements | ECPG 2 Nov 09

Encore Capital Group

Investor Presentation

November 2009

Leveraging Intellectual Capital

Exhibit 99.1

Encore Capital Group

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

This presentation contains forward-looking statements within the meaning of the

Private Securities Litigation Reform Act of 1995 (the “Reform Act”). The words

“believe,”

“expect,”

“anticipate,”

“estimate,”

“project,”

or the negation thereof or similar

expressions constitute forward-looking statements within the meaning of the Reform

Act. These statements may include, but are not limited to, projections of revenues,

income or loss, estimates of capital expenditures, plans for future operations,

products or services, and financing needs or plans, as well as assumptions relating to

these

matters.

Such

statements

involve

risks,

uncertainties

and

other

factors

that

may cause actual results, performance or achievements of the Company and its

subsidiaries

materially

different

from

any

future

results,

performance

achievements expressed or implied by such forward-looking statements. For a

discussion of these factors, we refer you to the Company's reports filed with the

Securities and Exchange Commission, including its Annual Report on Form 10-K for

the year ended December 31, 2008 and its Quarterly Report on Form 10-Q for the

quarter ended September 30, 2009. In light of the significant uncertainties inherent in

the forward-looking statements included herein, the inclusion of such information

should not be regarded as a representation by the Company or by any other person

or entity that the objectives and plans of the Company will be achieved. For all

forward-looking statements, the Company claims the protection of the safe-harbor for

forward-looking statements contained in the Reform Act.

FORWARD-LOOKING STATEMENTS

Encore Capital Group

INVESTMENT HIGHLIGHTS

•

Increasing supply combined with decreasing demand is creating an

opportunity for well capitalized companies

•

Sophisticated

analytics,

differentiated

servicing

strategies

and

our

high

performing, low cost site in India enable us to generate superior returns

in today’s challenging economic times

•

Disciplined purchasing strategy allowed us to succeed over the past

few years without entering the then dramatically overpriced “fresh”

portfolio market

•

Demonstrated history of generating strong cash flows

•

Strategically positioned to take advantage of significant near-term

growth prospects

Encore Capital Group

AGENDA

•

Company snapshot and industry overview

•

Current environment and key operating metrics

•

Operational competitive advantages

•

Additional financial information

Encore Capital Group

ENCORE IS A LEADING PLAYER IN THE DEBT RECOVERY INDUSTRY

Distressed consumer debt

purchasing

(95% of revenue)

•Purchase and collection of

charged-off consumer

receivables (primarily credit

card)

•Robust

business

model

emphasizing consumer

intelligence and operational

specialization

•Invested

~$1.4B

acquire

receivables with a face value

of ~$45B

•Acquired

>25MM

consumer

accounts since inception

Bankruptcy servicing

(5% of revenue)

•Process

secured

consumer

bankruptcy accounts for

leading auto lenders and

other financial institutions

•Proprietary

software

dedicated to bankruptcy

servicing

•Operational

platform

that

integrates lenders, trustees,

and consumers

Encore Capital Group

WE OPERATE IN FIVE DIFFERENT SITES ACROSS THE U.S. AND INDIA

San Diego,

•

Headquarters

•

Call center

site

St Cloud,

•

Call center site

Arlington, TX

•

Bankruptcy servicing

Phoenix, AZ

Delhi, India

Defaulted consumer debt purchasing

Bankruptcy servicing business

•

Call center site

•

Call center site

Encore Capital Group

OUR LONG-TERM FINANCIAL MODEL IS NOT BASED ON MONTHLY CASH

PAYMENTS AND GIVES THE CONSUMER TIME TO RECOVER

CONSUMER

Opens unsecured

credit line,

credit card or

consumer loan

Consumer either

cannot or will not

make payments

ISSUER

Delinquency cycle

(days 30-180)

Attempt

rehabilitation and

escalate

consequences

Consumer is

“charged-off”

by issuer on

day 181

Issuer offers to

sell unsecured,

charged-off

debt to Encore

ENCORE

Price portfolio using

industry-leading models

Based on consumer

behavior at the account level

Focused on willingness and

ability-to-pay

Create liquidation

strategy and set goals

Effort sloping through

empirical and statistical

modeling

Collect debt through the application of

unique collections platforms and unrivaled

collection professionals (84 month window)

Legal

Outsourcing

Call Centers

Direct Mail

Collection Agency

Outsourcing

Sales channel

No/Low effort

Encore Capital Group

AT THE PEAK OF THE COLLECTION CYCLE, WE WILL GENERATE

PAYMENTS FROM FEWER THAN 1% OF OUR ACCOUNTS PER MONTH

Portfolio Face Amount

$15,000,000

Average Balance

$3,000

Number of Accounts

5,000

Purchase Factor

$0.05

Purchase Price

$750,000

Projected Return (2.7x)

$2,025,000

Only requires 20% payers, at a 67.5% settlement rate, to achieve

expected returns over a seven year period. This equates to:

–

Year 1: ~ 7.0% (350 consumers)

–

Year 2: ~ 5.5% (270 consumers)

–

Year 3: ~ 4.5% (220 consumers)

–

Year 4: ~ 2.0% (100 consumers)

–

Years 5+: ~1.0% (60 consumers)

ILLUSTRATIVE

Encore Capital Group

THE INDUSTRY HAS GONE THROUGH SEVERAL DISTINCT STAGES

OVER THE LAST 10 YEARS

100

150

200

250

300

Demand

Supply

•

Issuers are relatively naïve

about the value of consumer

debt

•

Modest demand for delinquent

consumer paper leads to low

prices

An emerging

market

2001

2003

•

Issuers improve their delinquent credit card

valuation methods

•

The number of buyers increases dramatically

as private equity enters and small players

borrow and invest heavily for growth

•

Buyers

fall

prey

the

“winner’s

curse”

they price portfolios well outside reasonable

collection expectations

Overconfidence and

irrational pricing

2005

2007

•

As credit markets close,

buyers are unable to fund

new and existing contracts

•

Consumer charge-off rates at

all-time highs

Significant

opportunity

2009

Encore Capital Group

Several competitors are now

known to have overpaid for

portfolios and are in financial

distress or have exited the

industry

Between 2005 and 2007, we

remained disciplined and avoided

high priced portfolios that did not

meet internal hurdle rates

In late 2005, we

established call

center in India

We believe it is the only

successful late-stage

collections platform in India,

at 1/3

the

cost

the

U.S.

Legal collections

represented nearly 50%

of the $400 million in total

collections for 2008 with

improved net liquidation

We have maintained

our analytic leadership

position, and have

strengthened it, with

novel models and

technologies

Credit markets effectively

closed following Lehman

collapse

September

2008

Beginning in 2006, we

started accelerating

legal collections

In July 2008, we raised

$105 million of

additional capital

In 2008, we built

and implemented

industry’s first

known ability-to-

pay (Capability)

model

WE ARE WELL POSITIONED TODAY BECAUSE OF KEY STRATEGIC

DECISIONS MADE DURING THE PERIOD OF OVERCONFIDENCE AND

IRRATIONAL PRICING

Encore Capital Group

* See Reconciliation of Adjusted EBITDA to GAAP Net Income at the end of the presentation

2009 Q3 Actual

2008 Q3 Actual

Adjusted

Q3 YOY Growth

Variance

$125,710

$27,933

29%

$97,777

Collections

$80,386

$14,013

21%

$66,373

Revenue

$70,023

$22,773

48%

$47,250

Adjusted EBITDA*

$9,004

$5,976

197%

$3,028

Net Income

$77,734

$11,627

18%

$66,107

Purchases

$0.37

$0.24

185%

$0.13

EPS, FD

($000s, except EPS and ratios)

OUR THIRD QUARTER RESULTS REFLECT THE CONTINUED IMPACT OF

THESE DECISIONS

Encore Capital Group

AGENDA

•

Company snapshot and industry overview

•

Current environment and key operating metrics

•

Operational competitive advantages

•

Additional financial information

Encore Capital Group

•

Charge-offs are at 10.7% as of September 2009, near August 2009’s highest levels, with an expected peak of

12% in early 2010

•

The 19 largest domestic banks are expected to charge-off $82.4 billion of credit card debt by the end of 2010

•

Some analysts believe that unemployment above 10% could lead to higher charge-off rates and up to $200

billion in losses across the whole industry by 2010

•

fresh

purchase

rates

between

$0.06

and

$0.07

face

value,

potential

overall

spend

$12

$14

billion,

while

current

demand

closer

billion

Moody’s Credit Card Charge-off Index

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

WE ARE OPERATING IN A PERIOD OF UNPRECEDENTED SUPPLY

Encore Capital Group

Reduction in

demand for

delinquent

credit card

assets

Large

purchasing

mistakes

force

key players to the sidelines (Asta)

Bigger players exiting the market

(Arrow, IDT), a trend we expect

will continue through 2010

Access

capital

remains

tight

across

the industry; constraining purchasing

(CarVal

West, AACC, NCO)

Shutdown of the secondary market

puts

pressure

resellers’

models,

leading to further buying restraint

AND AN EQUALLY DRAMATIC REDUCTION IN DEMAND

Encore Capital Group

4.25%

4.50%

5.25%

9.75%

12.50%

12.55%

9.00%

6.50%

2001

2002

2003

2004

2005

2006

2007

2008

2009

Fresh

credit

card

portfolio

prices

–

top

issuer

(% on a dollar of face)

EXAMPLE

THESE SUPPLY AND DEMAND DYNAMICS HAVE DRIVEN PRICING

TO 5-YEAR LOWS

Encore Capital Group

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

100

120

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

THE GENERAL PERCEPTION IS THAT COLLECTIONS ARE PROBABLY

DECLINING ALONG WITH PRICES, DUE TO ECONOMIC CONDITIONS

High mortgage defaults

Near all-time high unemployment rate

Low consumer sentiment

Volatile consumer price index

Source: Wall Street Journal, Loan Performance, University of Michigan, U.S. Bureau of Labor Statistics

Encore Capital Group

IN CONTRAST, OUR PERFORMANCE HAS GENERALLY REMAINED

CONSISTENT

Metric

Recent trend

•

Payer rates

•

Slightly upward

•

Average payment size

•

Stable

•

Single vs. multi-payers

•

More payment plans

•

Broken payer rates

•

Mild improvement

•

Settlement rates

•

Steady

Encore Capital Group

MOST NOTABLY, OUR PAYER RATES ARE NOT DECLINING RELATIVE TO

SEASONAL PATTERNS

Overall payer rate for all active inventory

(Percent)

Encore Capital Group

$47.9

$66.1

$52.5

$55.9

$82.0

$77.7

2008

Quarterly Purchases for 2008 and 2009

($ millions)

GIVEN OUR STRONG RETURNS, WE ARE ABLE TO PURCHASE

PORTFOLIOS AT AN INCREASING RATE

2009

Encore Capital Group

AGENDA

•

Company snapshot and industry overview

•

Current environment and key operating metrics

•

Operational competitive advantages

•

Additional financial information

Encore Capital Group

OUR STRONG PERFORMANCE IS THE RESULT OF OUR DIFFERENTIATED

OPERATING PLATFORM

Highly analytic and

sophisticated methods for

understanding and predicting

consumer payment behavior

First-mover, offshore collection

strategy that provides

significant cost advantages

Leading legal collection

platform with expanded

portfolio penetration and

improved liquidation

Exceptionally stable,

productive and tenured

call center professionals

Encore’s

unique

collection

strategy

Encore Capital Group

OUR ANALYTIC INSIGHT ALLOWS US TO MATCH OUR COLLECTION

TACTICS TO THE INDIVIDUAL CONSUMER’S PAYER BEHAVIOR

Willingness to pay

Is the debtor willing to resolve the debt on fair terms?

Minimal discounts and direct to

legal

Minimal discounts, collect

mainly through mail and

outbound calls

Minimal to no effort

Significant discounts, smaller payments and

longer payment plans through call center and

mail

Pre-legal collections

and litigation

collections

Moderate discounts, use of payment plans

and creative communications through call

center and mail

Encore Capital Group

Core competency in understanding the

payer behavior of distressed consumers

Account

sales

Monitoring

Legal

Outsourcing

Legal effort

model with

Capability

Call

Centers

Call effort

model with

Capability

Direct

Mail

Letter effort

model with

Capability

Collection

Agency

Outsourcing

Agency effort

model with

Capability

Collections operations

that optimize effort and

profitability

Cross-channel

coordination

and optimization

Consumer

behavior

research

Market data

and insight

Portfolio

valuation

Pre-purchase

model

Continuous feedback between

operations and valuation

OUR TEAM OF STATISTICIANS HAS BUILT MODELS THAT OPTIMIZE OUR

PURCHASING AND COLLECTION STRATEGIES

Encore Capital Group

WE HAVE SEVERAL OPERATIONAL MODELS THAT PREDICT CONSUMERS’

WILLINGNESS TO PAY

Encore Capital Group -Confidential

IN ADDITION, OUR CALL PRIORITIZATION MODEL SIGNIFICANTLY

ENHANCES OUR COLLECTION RESULTS

Encore dialer model score bands

$0.08

$0.10

$0.14

$0.17

$0.23

$0.55

$0.07

$0.05

$0.07

$0.11

$0.19

$0.42

1-150

151-300

301-500

501-800

801-1500

1500+

Random calling (2005)

Model-sloped calling (2007)

Average amount collected per call

($)

•

Average improvement: 50%

•

Enables allocation of effort based on unit

yield to optimize call center variable costs

Encore Capital Group -

Confidential

ANOTHER EXAMPLE OF OUR INVESTMENT IN ANALYTICS IS OUR

PROPRIETARY MAIL RESPONSE MODEL

Collections per letter mailed

Random

mail

selection

Prioritization

using Encore

direct mail

effort sloping

model

$2.90

$5.60

= 93%

Mail

response

score

Number of

letters mailed

Measures of

credit quality

Geography

Amount owed

When is debt

being

collected?

($)

Encore Capital Group

OUR NEW LEGAL MODEL HAS RESULTED IN FEWER LAWSUITS BUT HAS

NOT REDUCED LEGAL COLLECTIONS

49.8

55.6

Q3 08

Q3 09

Legal collections and costs as a percentage of collections

51.0%

46.9%

($ millions)

Encore Capital Group

INNOVATION IN THE LEGAL CHANNEL IS IMPORTANT BECAUSE IT

CONTINUES TO BE OUR LARGEST SOURCE OF COLLECTIONS

Legal collections as a percentage of gross collections

20%

30%

48%

2003

2005

2007

YTD 2009

Encore Capital Group

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Month

WHICH IS THE RESULT OF OUR ABILITY TO IDENTIFY CONSUMERS WHO

DO NOT FIT THE TRADITIONAL LEGAL SELECTION MODEL

Cumulative liquidation for a specific type of “unwilling consumer”

Historical “unwilling consumers”

accounts

performance

Lower credit quality performance

Higher credit quality performance

3.8%

23.5%

15.3%

Encore Capital Group

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

ANOTHER AREA OF FOCUS HAS BEEN OUR DEVELOPMENT OF A

SUCCESSFUL LATE STAGE COLLECTION CALL CENTER IN INDIA

Gross collections (India)

($ millions)

Encore Capital Group

AND WE JUST MOVED INTO A NEW INDIA FACILITY, WHICH GIVES US THE

ABILITY TO INCREASE HEADCOUNT TO OVER 1,100 COLLECTORS

Encore Capital Group

$25

$26

$38

$45

2006

2007

2008

2009 YTD

DOMESTICALLY, OUR COLLECTOR OUTPUT HAS DRAMATICALLY

INCREASED

Average monthly collections per active domestic collector

($ thousands)

Encore Capital Group

16.8%

12.6%

Q3 08

Q3 09

THIS IMPROVED OUTPUT COMES AT A SIGNIFICANTLY LOWER COST

Collection sites direct cost per dollar collected

Note: This dramatic decrease cannot be seen in our overall results due to the costs associated with the growth of our Legal Outsourcing channel

Encore Capital Group

OUR INDUSTRY IS UNDER AN INCREASING AMOUNT OF SCRUTINY

WHICH, WHILE TIME CONSUMING, MAY INCREASE BARRIERS TO ENTRY

•

Engaged in active lobbying efforts and working with trade organizations both to support a

balanced agenda and to better inform legislators

•

Attending hearings held by the FTC that focus on the use of the legal channel

Proposed legislation, mostly at the state level, aims to increase disclosure, limit

statutes and expand licensing requirements

•

In response, we are shifting purchasing to fresher paper

–

Longer periods of time before the statute expires

–

Linked directly with the issuer

Individual states are increasing requirements for pursuing litigation and obtaining

default judgments

Increased attention from the FTC and State Attorneys General

•

Extensive focus on compliance

–

Partnered with the Better Business Bureau (BBB) to review our practices

–

Maintain automated call monitoring software and quality assurance teams

–

Dedicated in-house team of lawyers and compliance specialists

Encore Capital Group

AGENDA

•

Company snapshot and industry overview

•

Current environment and key operating metrics

•

Operational competitive advantages

•

Additional financial information

Encore Capital Group

WE HAVE DEMONSTRATED A TRACK RECORD OF COLLECTION

GROWTH

Quarterly gross collections

($ millions)

125.7

59.9

83.9

75.8

85.6

97.8

Encore Capital Group

AND A SIGNIFICANT POSITIVE TREND IN OPERATING CASH FLOW

Adjusted EBITDA* by quarter

($ millions)

* See Reconciliation of Adjusted EBITDA to GAAP Net Income at the end of the presentation

$70.0

$48.0

$42.4

$36.4

$51.9

$45.6

$46.1

$39.0

$43.5

$58.5

$53.0

$47.3

$49.3

$63.8

$64.7

Q1 06

Q2 06

Q3 06

Q4 06

Q1 07

Q2 07

Q3 07

Q4 07

Q1 08

Q2 08

Q3 08

Q408

Q1 09

Q2 09

Q3 09

Encore Capital Group

Cumulative Collections through September 30, 2009

Year

Purchase

Price

<2003

2003

2004

2005

2006

2007

2008

2009

Total

CCM

2003

195,661

$331,683

$126,730

$105,982

$74,843

$54,248

$24,055

$12,880

$6,507

$736,928

3.8

2003

88,505

59,038

86,958

69,932

55,131

26,653

13,897

6,375

317,984

3.6

2004

101,330

39,400

79,845

54,832

34,625

19,116

8,964

236,782

2.3

2005

192,591

66,491

129,809

109,078

67,346

34,259

406,983

2.1

2006

141,973

42,354

92,265

70,743

36,406

241,768

1.7

2007

204,318

68,048

145,272

89,091

302,411

1.5

2008

227,991

69,049

128,905

197,954

0.9

2009

215,015

52,523

0.2

Total

$1,367,384

$331,683

$185,768

$232,340

$291,111

$336,374

$354,724

$398,303

$363,030

$2,493,333

1.8

THE BUSINESS MODEL LAYERS IN CONSISTENT MULTI-PERIOD

GROWTH

Encore Capital Group

$757

$892

$1,063

$1,188

Y/E 2006

Y/E 2007

Y/E 2008

Q3 2009

Estimated remaining gross collections

($ millions)

THIS LEADS TO AN INCREASE IN OUR RESERVOIR OF FUTURE VALUE

Encore Capital Group

MOREOVER, WE BELIEVE OUR INITIAL FORECASTS ARE CONSERVATIVE

Cumulative collections (initial expectation vs. actual)

($ millions, Jan 01 –

Sept 09)

$250

$500

$750

$1,000

$1,250

$1,500

$1,750

$2,000

$2,250

$2,500

Actual cash

collections

Original

projections

Encore Capital Group

WHILE THERE IS VARIABILITY AT THE POOL GROUP LEVEL, IN

AGGREGATE OUR FORECASTS ARE HIGHLY ACCURATE

Collections vs. forecast

80.0%

90.0%

100.0%

110.0%

120.0%

Q1 07

Q2 07

Q3 07

Q4 07

Q1 08

Q2 08

Q3 08

Q4 08

Q1 09

Q2 09

Q3 09

Forecast

Variance

($ millions)

2007

2008

2009 YTD

Forecast

$348.1

$401.1

$346.4

Actual

$355.2

$398.6

$363.3

Variance

(1%)

Encore Capital Group

($ millions)

Cash flow leverage ratio

Debt

Trailing 4-quarter adjusted EBITDA

Debt/Adj. EBITDA [Maximum 1.75x]

Minimum net worth

Total stockholders' equity

Minimum net worth

Excess room

Interest coverage ratio

Trailing 4-quarter EBIT

Trailing 4-quarter consolidated interest expense

EBIT/Interest expense [Minimum 2.0x]

2007

272.4

172.8

1.58

171.5

136.7

34.8

51.8

18.0

2.9

2008

311.3

211.1

1.47

195.9

146.2

49.7

47.2

15.6

3.0

*Not adjusted for APB 14-1, prior to 2009

Q3 09

324.4

250.3

1.30

231.9

158.5

73.3

57.3

16.4

3.5

WE ARE WELL WITHIN OUR FINANCIAL COVENANTS AND HAVE AMPLE

ROOM TO GROW THE BUSINESS

Encore Capital Group

AND WE ARE ACTIVELY WORKING ON THE REFINANCING OF OUR

CREDIT FACILITY, WHICH MATURES IN MAY 2010

•

With the recent improvement in the credit markets, we have been

proactive in our renewal discussions

•

Our

goal

expand

the

size

our

facility

above

the

current

$335

million,

order

take

advantage

significant

opportunities

the

purchasing market

•

We are confident that we will be able to refinance the facility prior to

its maturity in May 2010, if not sooner

•

We are also investigating additional sources of financing to provide

the most flexibility for the company

Encore Capital Group

INVESTMENT HIGHLIGHTS

•

Increasing supply combined with decreasing demand is creating

opportunity for well capitalized companies

•

Sophisticated analytics, differentiated servicing strategies and

our high

performing, low cost site in India enable us to generate superior returns

in today’s challenging economic times

•

Disciplined purchasing strategy allowed us to succeed over the past

few years without entering the then dramatically overpriced “fresh”

portfolio market

•

Demonstrated history of generating strong cash flows

•

Strategically positioned to take advantage of significant near-term

growth prospects

Encore Capital Group

Reconciliation of Adjusted EBITDA to GAAP Net Income

(Unaudited, In Thousands)

Three Months Ended

Note: The

periods

3/31/06

through

12/31/08

have

been

adjusted

reflect

the

retrospective

application

APB

14-1;

with

the

filing

our

Form10-Q

7/30/09, adjustments were made to this table for net income, interest expense and provision for income taxes.

3/31/06

6/30/06

9/30/06

12/31/06

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

GAAP net income, as reported

4,078

6,870

4,574

5,952

4,991

(1,515)

4,568

4,187

6,751

6,162

3,028

(2,095)

8,997

6,641

9,004

Interest expense

4,274

4,155

3,994

4,367

4,042

4,506

4,840

5,260

5,200

4,831

5,140

5,401

4,273

3,958

3,970

Contingent interest expense

4,687

4,235

3,824

5,774

3,235

888

Pay-off of future contingent interest

11,733

Provision for income taxes

2,801

5,288

3,249

4,098

3,437

(1,031)

1,315

2,777

4,509

4,225

2,408

(1,442)

5,973

4,166

5,948

Depreciation and amortization

960

968

964

1,002

869

840

833

810

722

766

674

652

623

620

652

Amount applied to principal on receivable portfolios

29,867

19,398

18,340

29,421

28,259

29,452

26,114

29,498

40,212

35,785

35,140

46,364

42,851

48,303

49,188

Stock-based compensation expense

1,381

1,464

1,490

1,334

801

1,204

1,281

1,001

1,094

1,228

860

382

1,080

994

1,261

Adjusted EBITDA

48,048

42,378

36,435

51,948

45,634

46,077

38,951

43,533

58,488

52,997

47,250

49,262

63,797

64,682

70,023

Encore Capital (ECPG) 8-KCautionary Note About Forward-looking Statements