ECPG - Earnings call transcript Q4 2018 | Encore Capital Group, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Encore's Fourth Quarter and Full Year 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Vice President of Investor Relations, Bruce Thomas. Mr. Thomas, you may begin.

Bruce Thomas

Operator. you, Thank welcome earnings and Capital fourth Group's Good to XXXX call. quarter afternoon Encore questions. on happy are subsidiary make Vice and With President call Cabot Jon phone, the me today will CEO the the take Executive Financial and we'll of Jonathan then UK Ken Chief and Stannard, and Management, Ashish today, Officer; Clark, in and prepared Executive our your remarks President Credit Officer; be by based Chief our Masih, Ashish

we a this otherwise call fourth Before have or noted, full XXXX comparisons the will the between Unless we housekeeping items. XXXX year and and begin, few between quarter XXXX made conference quarter the of the XXXX. fourth full on of be year

will uncertainties. forward-looking risks potential discussion from discussion to risks our refer materially differ detailed uncertainties. include Actual could forward-looking filings subject and statements. these Please of and SEC to statements In addition, a results for today's

call, abbreviations During this rounding sake of and the for we will use brevity.

be also measures. are most comparable earnings discussing financial will on X-K We the earlier presentation, measures in our Form today. GAAP included was Reconciliations directly filed financial to which non-GAAP

a also available replay our of call Executive to this be Chief Officer. the let turn call conference that, for me our of reminder, Ashish will the and website, over Investors following made section also we the President conclusion this on where Masih, post As remarks will prepared call. our With

Ashish Masih

was position in very the of industry, Thanks, is achievement call. results record the for for debt results. accomplishment strong and performance good in characterized year. our the objectives particularly of and States Bruce, everyone. financial a announced time key significant conference Today, fourth Encore markets. and for by year afternoon, Encore, United improving a our XXXX a for our you good reflects for Thank buying This quarter joining full key the and

record purchasing US on favorable the time, commitment in interest generate per our earnings This Through environment, collections an capital share operational levels productivity the market to was returns. increased capitalize more profitability levels. of least record forward deployment acquisition and aggressive financial July, States XXX% United year. our increased helped for XX% innovation Cabot that prior In the we drove in Cabot Credit quarter global key XXXX. strong expectation the Accordingly, XXXX plan our and our than deployed this to in ownership record results. benefit expectation of the began fourth flow the delivering our our strong remaining to performance in completed contributing for with first of performance includes would and our we year in to full revenues As support order Management. of In of at any growth on

an business; Turning XXXX now in level collections perspective, million operations $XXX increased in ever. from US to highest to the or US our XX% the

For collections the XXXX. XX% to in of the compared grew by US QX quarter

collections. improved Our higher call and compared and center collections a centric collections legal of proportion to digital and to approach consumer productivity driving

result, to XXXX. center QX US XX% call were up digital XXXX were year collections compared a versus of XX% As up and the quarter the also for and for

our to online platform digital drive collections in investments collections Our continue growth.

to returns. million, for XXXX higher deployments the analytics to deployment and have the market debt increased We $XXX capital has grow commitments for now. dominate good expect in and purchase in investing best continues US the speech In to supply XXXX we portfolios, The us and of million already of in conditions $XXX market year initiatives year in prior other our continue comprise during we use purchasing addition, very purchases to the paper virtually In purchasing and Encore year US make was our other productivity US all by a of flow reflecting time a secured than from strong any favorable based forward provide anticipation scale. year. the opportunities technology attractive XX% some been increase in our favorable to perspective. approximately another deployments. and Fresh of for

portfolios Importantly, a better market for much we believe that yet buying to come. is

been In high in credit susceptible work, correlation the card of that's an an a Federal unemployment revolving rate. which off credit the having credit When of in of are people bills US in increase Reserve trouble there XXXX figures rate credit $X.XX are reached to US paying charge comprised off fact, their to charge the trillion. recently between rates. has more all-time largely of and and December more released cards Historically, the card is population has out the the leading strong

as unemployment lending. the debt, increased multiples even increase We more the unemployment in attractive for our supply rise begins have the not last this expect combined that for over two record the industry. Based yet we will charge off lead purchasing at to opportunities and cycle further that lows with in despite we levels. for best to believe are purchase However, increased level is instead off but fact typical, previous this Encore. an We unemployment US. When rise, historically credit purchasing come years, expect rates on remains opportunities by this growth in has driven price cycles, the of by revolving believe been to charge

improve an continue marketplace sheets attractive market, European fourth quarter pressure, the across the off Due we the the regulatory by at business charged receivables. win to returns. in opportunities balance supervisory active to to continuing and setting saw Europe with to Turning banks

long-term in continue servicers, management in of driving and banks leadership focus portion result, increased the in Wescot levels and significant opportunities the also for such as a a outsource credit to particularly UK US, a has platform significant to servicing more as the growth rise in future. pipeline to default on in look growing from record indebtedness a as anticipate UK a us to Europe, their provides are Similar we to the of increasing consumer synergies leading We seeing transaction. and Cabot experience we rates needs. the

US and key platforms and collections various Our decision analytics, consumer such analytics, techniques. competencies teams digital are science focused as collaborating in collections, call in speech UK

Our previously purchasing managed as servicing a business and Spain being leveraging now consumer in and under single operations separate expertise leadership, and SME in combined debt. the one

Collections XX% $XXX of continuing the servicing were European Wescot inclusion XX% Turning XXXX. XXXX, now business aided deployed from were majority by we a European revenues to up in revenues, debt XXXX the annual strong, growth buying a of the purchasing in results, compared the year up purchases Overall in total portfolio in XXXX, million UK. this to trend. multiyear in for European

on opportunities to contracts, allows servicing into on as to previous post growing providing step Our as are in charge our without off remaining a us take interest. back arrangements. consolidated servicing us well deployment interest minority of pre banks account capabilities the work the and from Cabot broad range consider and a The of with BPO having acquisition to perspective

the and selective proportion result on focus markets, of we this change plan in time, capital service and considering we in higher At XXXX, to being in more operational grow most in a efficiency. in our while returns the market deploying As after our a attractive same purchasing portfolios US Europe. key on in cash our the flows plan of differences across

actions leverage. these contribute expect all Cabot's will of to We reducing

improve leverage XXXX that Encore's of We consolidated also as expect plan. this in will result slightly a

Before the I businesses. a spend over to I'd other Jon, hand on to call Encore's like moment

markets volumes investments and the on market returns, our and markets priorities returns. closely You these may investments businesses as years headwinds us allowed R&D made capital created several evolve. We pressure number markets. all when evaluate deploy recall corporate the of Those that at US monitor past in and to a over progress international the we our higher of and

divested result a in interest and in Columbia Peru. As in December, we Refinancia platform our

in share Although returns this growth conditions we developed that Furthermore, its have the was believe and making future we business more US of a market this comparatively market region, attractive. significant US limited. recovered market

our footprint I'd hand like Jon over financial divesting to in more With Refinancia call us to our operational markets. the that, for reduced and our after of review better Our results. returns core allows detailed sharpen a focus to

Jonathan Clark

Thank you, Ashish.

capital Before fourth was net per income partial periods Keep earned were from in transaction that or XXXX. in XXX% Baycorp adjust required and the indicated for our financial we showing Refinancia we of quarter Cabot Cabot, before Cabot to by US of million statements. $XX in we In our for GAAP, continuing will quarter I would the were therefore that completed I mind the debt share. generation. you in cash operations with remind account to for detail, as results like the balance record GAAP compares was Where per or the $X.XX as a owners of collections $X.XX results go the enables fourth record numbers pleased This interests. into financial non-controlling July Encore a and such business. an debt, of only fourth principal collections, share to Encore's applied Adjusted is portfolios, year of generation $X.XX XXXX. important in $XX fourth when million We million for or in expanding $XX to $XX.X valuable return million reducing the the share I'm the innovation. cash of share, highlight and believe EBITDA activities continued strong quarter per to $X.XX income adjusted per combined a measure purchasing of or quarter This to capacity ago. investing compared to also number

level all $XXX European in to in totaled card Global the year fourth we in and million at to fresh the of the million in EBITDA US during in in compared total US has total capacity adjusted compares QX paper. of given in to XXXX. Cabot the fourth represented deployments business quarter, during This deployments off the $XXX deployments of the million us same increased $XXX $XXX credit $XXX achieve of of time $XXX Our the XXXX. added transaction. collections year ago. US deployed quarter, a million past record quarter of the million We in to the in over quarter the QX, a fourth which portfolios US the deployments compared completed flexibility same charged that million deployments

$XXX Global collections European For $X.XX to million to $XXX in deployments $X.XX million to of $XXX XX% the compared year totaled US $XXX XXXX. of in increase million the compared $XXX grew quarter, to deployments in deployments XX%, in million XXXX, of billion We million US compared XXXX. compared ago. fourth total to a in record or in million billion, a $XXX total full XXXX, $XXX XXXX. during deployed million an the year

manager year call consumer and were center improved centric approach last to up benefits due collections domestic to compared account Our the of QX and XX% digital productivity. of collections our

million grew Global XX% in strong XXXX last basis XXXX XX% full primarily adjusted initiatives year XXXX to quarter the a billion. by operational QX additional performance allowance compared allowance $XXX compared reflected and in European to reported We from by improvement the the the X% innovation allowances collections ago. which and compared revenue growing European by of the increasing compared Cabot. we Revenue million and better a XX% period of million growth quarter well to record by were net the billion revenues in primarily the to billion operational of $XXX liquidation global to up in reversals record a same Europe, servicing $X.XX primarily revenue our US collected a fourth revenues collections improvements. $X.XX year $XXX $X.XX as as XXXX. On in compared adjusted grew collections our from also QX revenues the net as totals from In to by grew Europe allowances X% prior quarter, quarter fourth compared $X.XX billion, and to million, our reversals fourth in collections, XXXX driven for same XXXX grew driven result in reversals $XXX to up XX% allowances were year, collections in Wescot. performance at allowance a and adjusted net in year.

operations EPS share. impact ERC in December $X.XX. quarter, GAAP Our $X.XX economic totaled of million the XXXX. the applying continuing $X.XX After income end earnings the $X.XX. of to minus pre-tax fourth of was effect, $X.X was quarter The end compared the In up $XXX fully non-GAAP tax the recorded also per end share per diluted we and the of December, up with we adjustments billion at from our

the of acquisition fourth net income, GAAP a results. income was quarter. of our of settlement in the adjusted EPS result but a prior which our We to from than quarter included larger did related calculation GAAP was economic Our principally Cabot's favorable in results, the as in our our not exclude not shares in any adjusted DLC,

all For the that year, we majority The were our operations There certain results. continuing items year Encore's the of in fully these was full share of and adjustments also remaining per $X.XX of adjustments acquisition affected adjusted are diluted and XXXX the the earnings diluted $X.XX. economic from After recorded XXXX GAAP was also with fully income per non-GAAP making our applying associated interest Cabot. $X.XX tax share. EPS effect for

we've included throughout our to share was over Of information about our that XXXX. per the course to clarity, used pertinent share With I'd Ashish. For calculate it that like turn to back in appendix earnings count

Ashish Masih

capital Jon. remains favorable. cash capitalize the Encore's and of and we We in to as earnings fourth on this for quarter, collections, In excited and earnings operational a for prospects. to you, portfolios as the amount I'm market reported performance the Thank In about opportunity. with financial XXXX purchasing pleased for summary, revenues very US, purchase records global well debt record And deployed the record our for year.

XX% In for ownership was from driving a results and purchasing continue transaction. up XXXX. from debt year. included transformational Cabot addition, which we a to increased year grew also and synergies full and year of digital revenues Collections the the Wescot we in for call collections XXX% during to focus the were of center our which on XX% for grew European XX% Encore, XXXX year

to purchasing further forward we Looking business. we Europe, and collections in in to to our from XXXX, capitalized expect servicing debt continue grow plan grow

US a to of advantage to in higher current During high the markets take deployments returns. XXXX, occur of expect the capital our we proportion

Importantly, returns off positioned in to card better the even well accelerate. with we once to charge portfolios credit are begins purchase growth rates

open Operator, answer questions. happy please lines have. Now, we'd for be the to that any may questions up you

Operator

thank first Hagen KBW. Eric you. Yes, Instructions] [Operator question Our of comes from

with proceed question. your may You

Eric Hagen

the of in capital it relates your Cabot's generate follow leverage as more you guess, it that debt on shared opening you comments Have to, to consider what restructuring make for company? considered mentioned a in the your Great, model very Cabot would of maybe you sort guys thank I any well. up much. A commingled I would as that a order true with

Jonathan Clark

even this that Hi, Cabot. pre Yes. is we've been Yeah, of of Jon. actually Eric, contemplating closing acquisition the

as As early you we're there's all will making understand quite would that a to it's I is make bases, team tuned to I'm restructuring, a say of model - kind how to you we're that wouldn't we happen, have phrase afraid everyone have I'm it's I stay how and plays think out. that good borrowing can And that to ERC we the I that of but on if out. have but just it shared play a with, to but agreement commingled evolved going too some But way it think see complicated. hope, into more and will, and if progress, in certainly

Eric Hagen

you strength The nonetheless. how call color for do legal centers acquisitions the to US expect helpful are the that's year, well, in the and of expecting out? versus shake you that Okay, guys mix

Ashish Masih

Ashish. this Eric, is

digital of buying, multi-channel notice we acquisitions growing call the through to supplemented a to strategy portfolio collections center and in has the portfolios that - have mostly investments been a part time our we're which call with with approach. the resolve digital in mix of that's provides they're consumers over share that in now center debts concerted and work and terms the and and the fresh US of you So

the capacity or call will but if to over But the number. call model that paper approach that and to in have that important we we legal call on center in and still to else expect we we as centric a should our Now there approach be, channel center to legal is books said, very that impact continue as and mix continue example, older consumer caveat are And slowly on invest would digital type that other that tick - continue in depends the depends on are changes mix that add just for bit increase can continue done of as balances we past if new we and time. to to collections and a would buy. by, it's comment proportion. to if only that well books that impacted push the this and be up or digital nothing factors I continue different purchase slowly

Eric Hagen

That's Ashish. housekeeping One has Thanks, me since item closed last the it. helpful. how for Got shares Cabot many Flowers acquisition sold July? just, J.C. in

Ashish Masih

has that expired early as sometime in aware not We're Their January. lockup any have sold shares. they of

their aware decision sales want to they point. sell to want not date to we're is and So any and it at do what of when this they

Eric Hagen

you. thank Great,

Operator

David our And comes next from you. question of Securities. Scharf Thank JMP

with your proceed may You question

David Scharf

Hi, good taking for questions. my Thanks afternoon.

Europe focus the in Ashish, a on bit available little potential notwithstanding year Cabot and about building deliberate portfolio on to the of there is at should be focus I'm out it market returns more in lightning we a a the thinking European on Cabot? outlook or on wondering off this of as purchasing commentary wanted deleveraging the more reflection liquidity. of you're first seeing

Ashish Masih

Thanks for Stannard to as in phone the so call. way record, just for let And also Ken the on the the the question jump David. is from appropriate I by him will UK,

strong Europe benchmarking returns are because example next platform. but we the the and scorecards returns to UK in legal And and our to historically even are returns So to and and forth, more for of people the in analytics due others. size stronger higher scale to as so at we've UK, we're operations, than data the in UK just characterize question, UK competitive achieve able player and against the twice achieve and are much of compared times our for able strong returns they're us and we studies your done to in see lower, differentiated very we

capital keep good and Europe other UK see and deploying in as we'll we returns well. parts of So

balance You and as more correctly I'll part of at anything. change Ken also on there's just you some of let margin jump if or time players strategy it's after of that may are And a Cabot doing deliberate characterized Europe UK as of well deleveraging that and this that slightly in heard. in to the have the the Jon as

Jonathan Clark

the their expect conditions have Cabot way all that of the can high have do efficiencies large you in David game there over London pressure, our to think yield we leverage, I the Cabot, add in the ensures capitalized want improve market but bit believe it's we that of reducing as think you and today our and a which Ken, to zero that growing a help business certainly will, think of with such assume want fund one and way in right. would goal I'll folks a Yeah, servicing in changed leverage a peers we're Wescot some turn the think that over it it's emphasize would Ken. focusing industry opposed a less to we right, sum order to Cabot, I in right. you likely to improve I anything and have leverage, if I because to that reduce i.e. I returns would a and And players, I as whole increasing that growing expect

Kenneth Stannard

certainly building nothing working the and there. combination returns. of all, down leverage you I gradually much deploying over manage on our We capitalized at time continued efficiencies business, it it's intend to a and to think said add as high

David Scharf

territory where deleveraging Europe of pace Europe year about the the out think it this closed we in Jonathan, in in kind as in collection would be below combined out ERC it growth and purchasing. should safe XXXX for that Cabot assuming the close Got expectation and with of XXXX? we

Jonathan Clark

tell. to hard little a That's

into what I'm that cetera, think a goes will that of there's - at so good know right, as lot multiples et I'm not sure prognosticator. that buy cetera, I et you a

Ashish Masih

we forth. that's expect sure result purchasing again that's our plan so a collections collections in But what so and We of be to for XXXX be Europe and expect in do ERC Anna in purchasing will forth so. and depends and than higher XXXX, on so our

Kenneth Stannard

delever, absolutely required grow we it's still just I out in can delever more reduce not quite ERC to add, ERC to still want Jon order So moderately significantly. to and

David Scharf

whether it, in to when the course. the the of just I'm forward Got the indirectly agencies, this Is for shifting the a with work Obviously curious with. about question. among I looking working answers commentary sell finally runs to fee last aware flow year you any mean, with of maybe the the outsource the magnitude all there curious, one opportunity extent the outsourcing, some But their more? of change they're market are have any question, speculation XX issuers more others. the arrangements or its in about the of you house highlighted how I'm I US handful recovery compete you change? behavior the appreciate and in charge outsourcing you mix versus issuers which maybe dealing to of card issuers the forward you to selling large to Are a more of with card and fresh partially kind collection offs, that

Ashish Masih

have David, they're we debt sales strategies a looking months for working it's see and sales, over terms we charge in What and XX that later for for capacity example. pattern, and as they six ebbs sell all post of through have assets at they in keeps of issuers different much constantly a time have they whether zero write toward the is, characterize largely changing as always we and mix months off would to channel. make a internal to to going we right. law agencies that call have fresh - issuers flows and six And don't and off they firms, and that so right. employees sure internal enforced which sort some Generally and charge nothing capacity charge and see know a off

the come well. quarterly to use evaluating I back you sales, this they each can have that at as of agencies, time and don't tell returns that's goals there's keeps let's they except kind say they to if to but So issuer predominant get pattern no if try

of have things law through is those than your which that clearly So and a different have you channel a mix you and debt the that way. have then bear when very in impacts sold working when you're you sales losses firms portfolio agencies an expense it's line to a through different very

draw keep as at stage seen those. evaluating So cycle in the of look I that they the you pattern this economic on can any now. haven't you credit that right cycle and we're

David Scharf

thank this one you. there in actually wanted the I it, fourth to the timing topic last throughout there, and earnings Got And apologize of season all on quarter news big is both one surrounding get just I kind calls the refund as refunds. magnitude obviously or been Based of coming side, what year-over-year conservative thinking QX historically. should then in you're collection to the that growth, is seasonal, more saying lighter than are since about be of rate US the little industry it's a maybe a collection on extent the kind collection so we refunds a tax

Ashish Masih

that's question. Yeah, a very pertinent

were I whatnot. consistent say withholding again after couple changes, and the catch legal, put - that still up digital the of the early the strong wrong very - but settlement of last tax can refunds this collections, impact refund it withhold year channels, some early weeks, slightly able delayed that our first given agencies say think little all in observed to don't would maybe So but agencies so make of tell, reduce perhaps on a be federal collections with big any and the the on to call I just a collections. perhaps that's I weeks a also center, our it to to softness but be overall it's trend we in debt that in well so of found say would as started it's minimal And we the X% or but softness if have some And and more in asked, too would year year's. would be rates, possible I be or X%, would of two tax again, very reports collections you as out bit would overall is I people prior we

David Scharf

Thank it. Got very you much.

Ashish Masih

welcome. You're

Operator

Hugh next our Research from Buckingham Group. And you. Miller Thank question comes of

may You question. your with proceed

Hugh Miller

taking for questions. thanks Hi, my

much focus more it capital some starting a just give are some Europe plans in as regard parts Just more selective and shifting And expectations as then returns for you to to shifts relative to peers have with sense the secured the Europe in being XXXX? focusing of more had there, you a [indiscernible] seems and allocation guys color in off well on indicated them bit but bit XXXX, isn't which you deployment. assets, had may provided one some their like of a Cabot. also Can as seeing be you're of a forward other in of bit given for the us a UK your with are to seeing, as some And what XXXX Europe? willing issue flows of

Ashish Masih

things least we're felt it industry, the in purchasing returns that's been the of we it the The players planning could terms expect in the other of in have US a to that and be well at get to hasn't In down flows and as also and in similar, slowing times industry what multiples yet, somewhat of but perhaps impact in get of buyers past used terms better. returns, that, banks that to and the forward we've at seen reality. are like the while the as it kind takes new and

to seen. the that sees yet every and think I purchasing and So also that would let day given there he provide to some provide out be in in outcome building that any market happens kind color. color Ken And I additional is of

Kenneth Stannard

in seen has there's alluding pricing that Ashish. the competitive in mean license that in the the thank I UK, there reduction acquisition balance in reflected have improved you for improved demand should activity in I Yeah, that UK. you that think our bodes returns. and of have question. certainly competitor activity. the to can results, Hugh our space banking to curtail is its large the future to in going given been homeland Thanks The unsecured We you're a ours MPL think in very in but signals the to demand going that early and are some of particular tell of I competitor, which it clearly yet or - That the seen supply of terms be some the haven't well for in bidding a

we'll the will as come year. that at rest able saying, through in stage. the to days was be Ashish and it's hopefully But that this see So of early continue

Hugh Miller

Definitely helpful thank you. there, color

and was liked Some manage to that delever bit. sense without think sheet maintain of I of in see of course leverage targeting Europe, you understand down But on being active to? your in certainly Cabot over to the a so ratios kind is the and leverage of I the kind you you of down kind wondering indicated delever have of - that of that purchasing peers there the about that to. talk that still terms balance over sort can Cabot's maybe you now the still is growth year you indicated obviously might to try get a can magnitude they're where time, of you've where

Jonathan Clark

share think but at point, any targets, specific not to I this we're Yeah, prepared stay tuned.

Hugh Miller

think and in you've talked you forward deployment what the where terms in of for as US But sense where seen last - now, relative then the some for stand credit. growth expenditures about in XXXX? And in we US understandable. of you have a the rough you flows US maybe in think in capital opportunities the just certainly me, revolving about the of capital in with think we as XXXX about of that the Okay, overall deployment your market to relative you XXXX terms do about XXXX

Ashish Masih

this and you said we proportionally be more year. would US the to point, for And have remarks XXXX have in locked I in is I number the as which forward given in terms for my expect deployment we XXXX. do than expect of year million to higher the $XXX at So shift already that flows

Hugh Miller

Okay, thank you very much.

Ashish Masih

Sure.

Operator

Mark question of Our Instructions] [Operator Hughes you. Thank SunTrust. comes next from

proceed your may You question. with

Mark Hughes

for any rate Thank that? outlook The you. on afternoon. us can XXXX, Good thoughts tax give you

Jonathan Clark

XXs. Yeah, low expect I it mid I would to Mark would - to

Mark Hughes

that is quarter, right? to the Am and it okay. What you Mid right the XX%, I was roughly proposed XXs, low think - number XX%, for I fourth adjusted on

Jonathan Clark

Correct.

Mark Hughes

clearly the a you a Okay, interest down bit, rate little forward quarter, a this around is bouncing on has this basis? run been Yeah, reasonable go sequentially think was expense

Jonathan Clark

had QX be a rate, you to a that. and as quarter of to if kind Yeah, run pick wouldn't use normalize

Mark Hughes

likewise, then costs as thoughts with to collections next the going look Very digital, any costs, and centers clearly at those year, flat? good we are the the you're and legal having be success call

Ashish Masih

and placement we As of be very of said, kind in legal but in we major away placements mix we're are we slowly no there's continuing keep our steady lumpiness. pretty and legal, impact expect or steady the the it terms and processing I so material are of grow anything would internal that changing costs from to won't legal, to

Europe just it's legal can legal US in a the and I in just than portfolios if continental of and certain it may think mix Now the collections it legal in doing expenses. to expenses expect certain to or we the I'd Europe, types but Europe, things we proportion not and been higher I portfolios come around, this steady mix that of past including said happened of that has different enter of that year range we the often a I in based - buying fairly be purchasing could expense so. a collections be on we or US. point legal give expenses At as and wider may up said, proportion incur for kind that buy because much market classes to outlook of otherwise, of we last the what do we've can end legal low don't legal. the buy change change UK portfolios that higher asset There's have That you and

Mark Hughes

question. good, one on Very follow

your hit about XXXX share growth growth earnings per rate? for You XX% in XXXX, target of terms earnings or care EPS thoughts any to venture target growth

Ashish Masih

point, a no, question bit. let Mark. just up back good It's me so little a At this

ahead, in deployments at look Encore As strong growing collections and a position is in manner. healthy solid a very I in And look results I at delivered had We markets. and in look the past, key in record US Europe really our as US we we as and XXXX.

it in we're platforms, through Cabot bulk other of leading strong we and competitors where outperforms is collections it in to where innovation improved liquidation markets. segment. fresh US So UK, in our When demonstrating growth the both the deploy particularly we and comes are capital, debt differentiated we've in

XXXX. don't not So be been less platforms And done I in deploy XXXX. and we where of do XXXX the guidance impact And in in Europe, compared look situations been at US been to in not that guidance and and going in in point expect typically we of repeat, terms rare a for we've earnings, to this what overall we have look it's when there provide compared in deliver terms on earnings we at we provide to able in I at our any to but complexity normal deploy we're able to XXXX. deployment, just so of to expect has course, to that, lot to do more rare

Mark Hughes

this, portfolios know And as if the then attractive still you but are compared the the this you steady a in the attractive? but one ago, earlier quarter, in final or year gotten time more question, to say returns returns bought on relatively addressed don't about US they've year I or as fourth think you

Ashish Masih

returns steady than type I earlier year. in similar and say of would the

Mark Hughes

you. thank good, Very

Ashish Masih

You're welcome.

Operator

Hogan Thank William you. our Company. Blair comes And question from Brian next of &

your with proceed may You question.

Brian Hogan

Yeah, good afternoon.

quarter in stable, the forward, First decline? the the up was question refinancing interest what there drove going follow is guess, a sequential question, a runway to good on expense I be or

Jonathan Clark

right. looking be Well, 'XX up, between to essential we to need Q-on-Q 'XX

Brian Hogan

Yeah, quarter-to-quarter, yeah.

Jonathan Clark

that for may and bond - expense. some associated duration be with yield and key and - Cabot associated you that was Well, high remaining costs there in result take as one effectively a up bonds fees an those some in interest with aware The rolled Quarter-to-quarter. bought into ended exchanged so or we refinancing. extra are put being of there them longer that in was up we may million which not did X QX

Brian Hogan

In XQ, yeah?

Jonathan Clark

right. XQ, In

Brian Hogan

is - over the more going how that be involved in capital Europe - that business that to or that the is you acquisitions drive or what's growth? rate to growth expect like of Alright, through business do organic relationship

Ashish Masih

want you take question? that to Ken,

Kenneth Stannard

Yeah, sure.

vast majority growth. will organic So the be

who lot some of additional banks strong both outsourcing But of also banks will and the the want have UK specifically of in their through encourages likes pressures quite compliance sensitive preparing be across as pipeline that But demand regulatory capabilities. So operations to for markets. we're collections further the capabilities. to potential coming industry have a outsource looking Wescot the leading economic to means seeing the to downsides

ramp can. need collections the they to they if So capabilities up

of in So certainly the additional an implement a and roll bit done demand sometimes little time moment we're growth for unprecedented a business. things opportunities, but out phases, for to well take are which seeing in that at servicing to these bodes and

Brian Hogan

does that business? purchasing And cannibalize your

Kenneth Stannard

- it it's question. good collection. early because doesn't But it stage because the No, very doesn't

really debt So this pre-charge off, to space the which opposed the post charge is of in off is where as sold. gets most

Brian Hogan

All Anything you the in taken right, commented probably here been actions any as that's the any United in you, that Europe you're proposals, regulatory States, seeing? environment and on well. concerns that

Ashish Masih

OCC still on And those dead past standards their the say, kind what audits. care very they us banks, very at change, have banks that a regulates material would as buyers, in guides the no pass Banks asset sales agency we regulatory expect that and all basis. I've of the is and has that audit really high we regular US have all. changed is three not we from the and One I relationships. described they about. in the Brian, environment part And

still is that there. So

deep wide So that the and from view. point moat of is

able the of that kind more more decision use in the side. for terms third And predictive has much things hoping the that's August we by we as the is technology, to the ago, into FCC start movement had to US, several comments nature being and comments, quarters think going provided on hoping have which happened United collection and But something the categorization waiting of And would XXst we're some random being September emails they there kind help It's a and a industry that or industry that's do mentioned XX%, if was second report timeline front, to the just on to would, Encore that would in actually so the dialers see. dialing would We're dialer guidance taken outlined ago, has potential of semiannual that back TCPA, or process. for so into will us, is provide going at goes we XX%, published, future happen. the we a to away. the consent debt notice in happen. easily, may use when for near consumers that and split XX%, in that help much technology of The are been let those, uses based century. least on we which different at still effect. the years kind provided FCC of remind before CFPB front rulemaking the technology timeline, March a almost are us. the said charge, there that's the rulemaking texting, the received director point auto who's like a very at new you order Secondly, that so that's see and bringing to place should feedback numbers of those rules It's we of advanced month because our proposed we're FCC course you, supposed anything of And wait will forth take dial positive about CFPB several it that when is in we so States and numbers on deadline to which already it already of then and March a is was rules weeks things me to in happen, least as on use of provide that may terms was next we've their XXXX of in regulated two be

of other but the and NPOs we in regulatory And dial are again the shed them we a the sales. to Central from issuers that European front, that's Bank bad European in to classes Europe, years their where But Europe promoting a know, continue those we waiting and and to loans Europe, while authorities US were and banks should them. debt on we and asset And the additional of come UK you the are regulatory mortgage FCA seems UK as anything in that to been be large SME, are So if three for push color. have banks think front. lot and In a that compliant any things environment for or that big ago. the And regulating and we've let on with and in those UK, first we different in licensed very few loans or all on I'll play new are the the sold FCA stable consumer, jump broad, the there's and by the with anything fairly to industry is buyer Ken categories. our be through,

Kenneth Stannard

that increase is color additional what FCA Ashish, first the really on compliance is customer say UK so pipeline service - just the is one UK the I'd conduct really on Yeah, service, what on side. as on driving

manage or don't banks to have they the rely about have solve operations, issues conduct wanting the so as to that sort are some have can outsource to their So on Wescot they us. through worry us they us and conduct just to their of in

the UK, customer a what's in active. happen. more of story but outside to So interests the leader our as we're the encouraging the that's of but regulators momentum those in like get that slower for businesses. in It's it's conduct helping momentum We'd to a see more that space to

seeing as sheets us. those rule So providing the years quite impacting a in across of to alluding banks creating Europe, loans The what really the regulation Europe a creditors, to, XXX% after banking need specific we're selling more is movement is be in was is perspective for April to organizations from the the unsecured Ashish non-performing that that two space. fact new of XXXX, lot balance

to unsecured those of do those downs right have they're significant XXXX, going to assets. So if take they assets not sell by April

many banks before. now haven't So considering they where why that's are selling assets

that's on side. sales debt momentum So creating the good

Brian Hogan

consumer impact on you're thoughts wouldn't thoughts Brexit material dealing Brexit? then, be there, of with, impact staying your the Europe your there'd given in on the your think Alright, any are business I on what but

Kenneth Stannard

banks no the us see form as because Very what obviously minimal more considerably well, though impact good who come happen question potentially appetite answer that full of so impaired But amount, as and insightful, countries you've performing political to very the own will at GBRXX a your space is the due place probably reduced first happens. of regularly Brexit is very in of bigger I in certainly Having and Union to loans the as we'll impact European on mine those a lot probability a to will where the month the pressure less those already who or those their environment paying in a no the moment got middle got have are be are a customers customers that, behalf, feels partial amongst recession good payments, less allow customers has paying scenario. that a under have already so imagine already. said Brexit guess as see your in would the reflected see

Brian Hogan

your me one and for thoughts progress your CECL plans the implementation and there? on is last for Great impact accounting then one and of

Jonathan Clark

met the meeting. information exposure of that in preseason, the in discuss, to actually earlier we best other things, meeting the for among the from evaluating process Yeah, still the today draft we're and

don't our industry model CECL a CECL. address this far at not really but anything this we've before, clear at accounting point. - evaluating impact the time share we've As I so team implementation, exactly That will is to noted established our project team have and planning policy else how is CECL management to developing and

Brian Hogan

your Alright, for time. thanks

Jonathan Clark

Thanks, Brian.

Operator

from next question of Thank Dodd you. Raymond James. And Robert our comes

proceed your may question. with You

Robert Dodd

Hi, guys. I've got two clarification questions.

so You very which February tech down, far, average the mean, you addressed you if far. seasonality have fund you down obviously, had and said so I we US impact the XX%, clarify, it's refined the stays mid modest Can just is in season, fact relatively that the that the point? collections, tax of still X% early X% for of kind on season at to you safer tax or expect only this indicative effect XX% negative would that we're whole

Ashish Masih

think you question. Robert, the answered I

two kind season, early very of are the We recent tax is this even week or a which in early especially trend, perhaps. more in

are our it get garnishments payments later. it initial lot of not it may is anyway analyzing we'll little money But legal And be get we to sure I'm even whatnot. processes, that you analysis makes - are a So and we liquidation of also and impacted long-term a from maybe trend. then because because have stays if bit other people the team's it's sources expect the couple in points in not still percentage a see maybe

recent slightly So same all one data to weeks give at early refund tax that two any very we're seeing way impact time. lower the of too this or of

Robert Dodd

consumer hard could plan consumer, obviously, of that second that. operationally be of Got impacted Brexit and plans in you that, out maybe to on your on for cope crashes zone, there follow it, Brexit, is kind mean, any but other to the issues out one, on turns drops UK rather less the European or depending out? the or I that I with it how than does doesn't data got place the protection a example, what operational to could or appreciate think back And up contingency it what it do obviously if then you have don't to the

Ashish Masih

Ken, take that can you one?

Kenneth Stannard

absolutely can I that. take

So yeah, a question. good

our the are So two plan. you in mentioned exactly things that

warehouses the across how planned be is data so would we've to would that we we how do data was do that that data UK and into central and personalized Europe is the protection, jurisdictions stop do moving the So one that new moment would a data already we some we relatively between at eventuality, quickly on so the border able move on the across rapidly. be,

have we prepared. a modeled, points and adequately perspective, would got able additional expect to to in to with would and for plans exactly expect we've additional if should that the that so have side and good we be from be we operational had volume the On we coming call volume cope collections we

Robert Dodd

got Okay, I it. you. appreciate it. Thank

Operator

comes you. our question Jenny And next Rowan Thank John of Scott. from Montgomery

proceed question. with may your You

John Rowan

is that be may was from, in credit prior what The guys. G&A gaming mentioned settlement afternoon in for that a it? line P&L DLC, now the is which the Good on you

Jonathan Clark

Give second. me one

Ashish Masih

second a Give there, John. us

John Rowan

next my to go just I'll in question much bucket? is left the Cabot reversal Okay. How then. impairment

Ashish Masih

In less well. bucket John. the Jon, than that the impairment, impairment, it's I'll refine impairment European $XX Cabot impairment as - It's million on bucket European

John Rowan

reversed, to correct? less That's be

Jonathan Clark

$XX is approximately What's Yeah. million. left today

John Rowan

Okay and then -

Ashish Masih

I allowance And was it is what's as reversed, that but an left think [indiscernible] taken.

John Rowan

and said that's trying non-controlling you you if remember mistaken, refinancing, then just earlier the call - I'm forward. - that mean if to does in you I'm divested that out if zeros piece interest Okay that the not going that and remaining comes

Ashish Masih

So that through. coming was

portfolios, the management we go through in have will XXX% small not company the very platforms, France interest. management small. owned, do example, that away. very that and that still would through the non-controlling So other But interest is also non-controlling come It's for coming not company, was so

Jonathan Clark

to tax it, $X.X number that question, very, after million. earlier very impact Okay, be And G&A it there John, was and through and to pre-tax was does no answer your of small. it come tax,

John Rowan

for it Thank that's you. Alright, me.

Jonathan Clark

Thanks, John.

Operator

our comes you. And Thank next question Oppenheimer of Gabriele Dominick & from Company.

You may your question. proceed with

Dominick Gabriele

rate in and and original can questions. tough how expectations good different evening, now talked Brexit breakage for versus cash way. your over my just slightly previously just given everybody. higher pre-Brexit impact about taking in is Hi, a changed environment time the Thanks talk We now Is breakage there collections? maybe about just you that your versus the rate just

Ashish Masih

Ken?

Kenneth Stannard

I can that. take Yeah,

back running last explaining stable rates worth Brexit and think just stepping unaffected for So of by caused I some a portfolio and time the uncertainty this we years by low the how at prospected we've been it's breakage very couple been over now the have. and it's probably just

regularly break period a That in arrangements of have so We a XXX,XXX quite over three payment, order breakage over are rate that number as the of who in those month is X%. small below customers paying GBRXX. the

stable based the it and and their an is extremely of of have income and for because individual assessment So to very those at payments each to set level be we way And on stable one buffer those customers have designed book. expenditure. back every an affordable very we is a

the X% X%, go we have we and unemployment had this in experience exactly to is accordingly. worsening where a we UK if into in and back will jumped the what from scenario, respond So crisis the impact monitor

those very customers fact small payments XXXX, we If already the UK saw doubling sort you low mini a a XXXX, at of population own their of set because for been from a at in look affordable have that back in are the very and levels unemployment impact levels recession. of that of

ERC Brexit. very mean higher doesn't But to impact an case additional anticipate offset to think and don't going manageable our scenario be the from overall it and be it's some we by of service the fresh flow debt ideal from our business So sales. going returns worst positives to into it's we

Dominick Gabriele

Great, for thank quarters. up half the so and quarterly of few usually more versus quarter talk to Thank purchases much. amount current quarter towards you so the a maybe it in more, one XXXX what a little just just expect you is about Can the it this much. back then was and equipment of in that the And basis. do you that was previous drove revert property on you than

Jonathan Clark

systems help time, a over you're had we capacity It's we also us meant lot spiked as collections. were of that investing Dominick. our in expand facilities. We're up with expanding Hi, because to especially which our aware,

we in which you we're to is after or to level experienced year the than initially, which a not like now two revert higher we've therefore expected level we and to will as another CapEx guarantee a going growth get So perhaps was but more we quite PP&E CapEx had I past. down have as would and lower CapEx so were

and there's it, right, you then So but part you've as expenditure seen the the, in of out but of we depreciation there's know, terms if CapEx it you of peaked. will,

Dominick Gabriele

much. Great, thanks so

Operator

questions time. further at this now to Mr. turn call like for you. I back showing further over I'm Thank remarks. not Masih, And would any any the to

Ashish Masih

the That we Thank today. to to time May. in and call for the you. XXXX concludes you. Thanks our Thank quarter join forward first taking providing results us look for

Operator

wonderful participating you in you This thank you. program today's disconnect. and a gentlemen, Ladies conference. all Thank and today's day. for Everyone may does conclude have

Encore Capital (ECPG) 27 Feb 192018 Q4 Earnings call transcript