ECPG - Earnings call transcript Q2 2019 | Encore Capital Group, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, ladies and gentlemen, and welcome to the Encore Capital Group's Q2 2019 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference call is being recorded.

I would now like to turn the call over to your host, Mr. Bruce Thomas, Vice President of Investor Relations. ahead. go Please

Bruce Thomas

Executive Good Ken Second Operator. our welcome Encore Credit Officer; and to today President Executive Thank Chief Management. the and XXXX afternoon, CEO Earnings Group's Financial Chief President our Quarter Ashish by on Jonathan Call. Capital Clark, are Vice phone, you, and Masih, and Officer; Stannard, With call Cabot me of

we Jon make questions. prepared will then be will and your happy and Ashish today, take to remarks

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

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

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

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

reminder, this conference the following made on conclusion remarks replay our our call. a section this post also will of of also for where Investors available website, the be prepared we call will As

Masih, me call let turn With that, and over our to the Chief Ashish President Officer. Executive

Ashish Masih

and key continues business have a number second of our across XXXX. quarter performance, good for financial joining pleased announced the for report achieved measures. our strong Thank that again Bruce, afternoon, Thanks, you results and Encore I everyone. results earnings of call. record financial Today its to we am

flexibility. debt maturities the second improved in to in our took our also important extend we steps Additionally, Europe, which financial quarter

call. more in the topics detail We will these in address later

a million. global $X.X million XX%, ever U.S. our the in purchasing the of a $XXX Global quarter. Regarding At second Within a quarter, our billion. have million, to $XXX $XXX single had that in to collections financial worldwide revenues debt our revenues collected grew the the most QX. we end record ERC total, in from performance record were grown were business quarter,

strong In compares adjusted efforts these or net in share quarter, offset somewhat was Encore quarter both by per $XX year share. $XX compared This share and income million in ago. GAAP earned million $X with our to Despite income the $XX in or $XX per was quarter of second QX expenses, second $X.XX GAAP the $X.XX financial year. the a the which per our $X.XX our results, associated cost million, to per in or impacted refinancing Europe. performance Adjusted last same share, million,

We end QX last to by principal of June end and improved from divided applied the total of the at generate continued of significant believe Over adjusted amounts measure X.Xx at strong X.Xx our debt, reflects by X.Xx as is applied important at balance, reduce capital to and our for ratio return in we quarter level to EBITDA, time, second portfolios investing to EBITDA EBITDA returns us with portfolios enabled principal increased strong collect of own. and Currently, purchasing business. Accordingly, providing additional capacity adjusted collections collections leverage. strong balance, in our innovation. our the the expanding adjusted purchase of of cash our business. plus to generation our performance to at generation combined cash cash We business is when of collections portfolios, XX, grow has on to from the an year. capital our we QX The us

operation. we've improvements At and an thanks portfolios same environment purchasing to collections to for continued reduce the working initiatives some returns, throughout improved time, have been to designed business, our We strength time to drive and on global leverage at analytical attractive costs. purchase been our strong in our efficiency

a Put at collections that clearly, portfolios for are now higher we have more derived favorable. now those U.S. several returns. of majority are from point our with looking it we after been years. in considerably turned time we The forward Importantly, purchased market the have

Our by XX-month performance operating deployments present of we to in success operate. possible markets margin, reflected the in is strong our improving This on a basis. is which made performance in in which best level trailing selecting part in

the two increasing recall, our you we most are our we the important As and the may markets have U.S. believe been emphasis which U.K., in on industry.

in a and to factors. in early markets, two MCM we platforms nonperforming key established as loans supply We stages of which the believe have in number significant the these of are Cabot of due leading growth

in and important, record most indebtedness. of First, levels consumers accumulated possibly both have markets

this will moment. in more explore in a We point detail

number the large whom banks servicers debt conduct business. qualified reduced of they the with and have buyers Second,

In after comprises sooner purchase the means a vast of which sales, have U.S. majority charge-off. become market, debt paper portfolios debt more available to fresh

eventually in Additionally off receivables. several the expect their issuers selling ago, longer years to return market to who we those left term, charged the

in growth few expect as to be supply by a NPL U.K. We catalysts the in driven other well. market

for First, fully NPL NPLs reduce requiring down the has write Bank Prudential tougher balances, to unsecured established after years. three with European backstop banks Central rules their to banks

Cabot. Second, for collections banks BPO are management to looking performance, needs continue creating debt opportunities as opportunities credit seek and purchasing outsource as improve to the well to

estimates loan led the impairment Third, Banking in The beginning for recognition accelerated of increase which point a this losses. into loss to of at provisions. went XXXX, alone X% IFRS X, that Authority European effect calls has

XXXX, U.K. markets. our appears since paint present particular, these the U.S. for similarly and an been and in the together, the picture compelling be believe In opportunities attractive both we Taken of future drivers most to highlighting is growth it we've driver business. early one

continues markets. to billion, loans. U.K., levels, all-time reached Similarly, recent U.S., high data, of indebtedness student Bank the report record risen $X published which GBP in unsecured In according Reserve's the most that has cards, XXX in credit of trillion grow, Federal lending over recent all-time credit of to comprised to England's most mid-XXXX. reaching high exceeding outstanding, the in total the Consumer has an excluding levels both indicated largely revolving is

of the in charge-off charge-offs in U.K., a Against though markets. the these the indebtedness stable returns. record U.S. U.S. continues expected in rates key with of to the levels capital backdrop the both opportunities low pricing, drive purchasing debt deploy levels provide and Even attractive remain market supply and at to of in near strong unprecedented favorable are markets, to us

market, In the by their debt aims U.K., their the purchasing we being each improved of efforts. leverage competitor more reduce pricing selective in are respective seeing first signs the conditions to as in

expect indicate Looking forward, the they that loan coming increase to issuers U.S., to in continue losses quarters. in

cycles, that opportunities we've expect buying for we to on attractive and and better believe the even Encore. the is market rise this outlined we for U.S. purchasing today, purchase the an factors a lead even more to As a result previous of price in and this portfolios yet will Based further in other multiples U.K. credit come

to U.S. quarter, turn for quarters fresh MCM, primarily strongest Let's paper, quarter which was the $XXX of U.S. our now second the in of deployed the one business. the performance second We in consisting our U.S. ever in million purchasing

quarter to MCM was million, second X% of compared we growing expected. and collections a $XXX than were XXXX, record stronger the

higher a digital approach consumer-centric to collections. to and of drive collections Our center call proportion continue productivity, improved and

initiatives the to year improve ago. are were mentioned digital have center cost meaningful to call period compared MCM MCM, as and efficiency, in our operating leverage our impact result, And having collect. I our and a helped XX% up reduce earlier, and a improve collections on business quarter second to to As costs and a same our the reduce

Turning Europe. now to

in million, a the $XX our product higher QX totaled and business XXX compared X% in Our debt in quarter portfolio period second constant currency, purchases ago. from points basis that year. are same year last European the Collections purchasing returns to grew than

business was to $XX.X performance to allowance of in year, period same the a mind ERC European billion in constant of year of up European is that comparing in end to included in second our compared When quarter QX $X.X this year of results helpful keep last the our last million ago QX reversals. X% the it Our the year. currency European

result we collect. a as to focus being leverage debt includes our higher maintain purchases. also cost in more which the on reduction improved performance, and to selective debt This leverage of is our in Cabot's continues lower portfolio collections improve operating

our the U.K. in believe FCA's are of we that to area benefit and of well-positioned evolution leadership market current from we regulation through ongoing customer treatment, focus Finally, in the

With financial like our call Jon to to that, results. I'd of the for hand over a review detailed more

Jonathan Clark

you, Thank Ashish.

a card we As refer will reminder U.S. history of of million million the QX to credit or of $XXX the our QX becomes deployments MCM. Credit U.S. quarter Notably, QX, quarters more fresh of $XXX and which of represented of investors, second business brand XXXX deployed Ashish name, compared second to mentioned in in total QX as in all deployments to MCM paper. remarks nature Midland This issuers in his MCM in the of almost were in our $XXX directly million the largest of purchasing and totaled $XXX quarter by during portfolios until our 'XX. to compares from second of two its XXXX. business. XXXX of U.S. charged-off Management, Global a million opening simply, it

deployments $XX same high the unusually the an a totaled million compared year to European $XXX during ago. million in quarter quarter second

the second leverage and growing due collections were last Global improved in plan same debt our deployments to currency collections $XXX XX% approach quarter $XXX also to to collections and million. were up ago, in business time. the terms. QX decreased record in due X% in consumer-centric benefits from X% our constant currency our of a Call purchasing in compared to digital QX, the constant when terms compared year the more center were in period purchasing $XXX to growing to in quarter, X% year, MCM compared last of million addition, a European Collections selective million In when process grew X% productivity. Cabot's related collections Europe to year. and reduce over a for U.S. second to MCM the up

in $XXX less the but X% X% in quarter and as constant in MCM million the compared $XXX were currency terms, second by adjusted same In In quarter, ago. the revenues year down allowance adjusted Global second X% up were of net reversals net in were a terms. million by $XX.X the record XX% in million XXXX, $XXX currency revenues net adjusted were than primarily by in constant quarter allowances approximately second million $XXX result to were compared QX the U.S., a year a up down ago. allowances, allowances million a revenues of to quarter, of recorded Europe, QX

consolidated to debt of terms. currency constant total past June over Notably, Our the we June, compared at the ERC grown was up X% the level XXXX, end of in while $XXX have up billion ERC $X.X end flat. keeping million year, and our

successfully During profile we our the XXX financial due quarter, senior our increased flexibility. with in bond in replaced This a offering new EUR has XXXX. XXXX, million notes maturity secured Cabot's due extended and

GAAP the was second Two and adjustments also of with tax non-GAAP our quarter, per fully and applying in items recorded In our earnings EPS share. deserve effect, we regard the $X.XX $X.XX diluted economic share the per our second earnings mentioning quarter. adjusted EPS income $X.XX. to After was

million First, $X charge, share included a and the economic both our refinancing I $X.XX headwind per a resulted mentioned totals. in a EPS which in moment GAAP drove ago pretax

conditions estimated. future mortgage have accrual would cost timing transferred Second, cost had $X.X currently political reasonably been million economic transferred not to to These of Mexico, due approximately our in Mexico they the collections changing recovery. be generated basis have of to cannot revenue, we as and portfolios recovery, from portfolios the

to the this from an our GAAP rest expect be and cost EPS ongoing both of per As Mexico to totals. recovery, economic will we impact in but portfolios through the the be the improving business share headwind to performance. able will $X.XX was result, impact transfer due operational the of a our Encore's earnings quarter There to earn

that, I'd With to to over back like it Ashish. turn

Ashish Masih

I'm Jon. be second and our excited financial pleased to quarter, you, prospects. very in Thank summary, about with In continue performance the I Encore's and operational

XX% ERC and and record collections reported quarter in second ago. the In record and collections revenues QX center the global we a to for year collections digital in highs. First, up new and call reported as the all-time reached MCM U.S., second we quarter, were the compared results cash

in U.S. Secondly, the a the and on is of attractive associated with indicator a of set capital continued platforms our markets. returns performance strong focus in our the improved operating of our our representing Europe, strong refined improving most geographies, and margin more allocating

supply well both to robust U.K., platforms these that Cabot Third, MCM increases we markets us two leading in U.S. core capitalize and in the are expect their in large, positions on and which the markets. the in

in has markets. the the of indication U.S. finally, record and indebtedness increases in U.K. and future our with Fourth, charge-offs both strong supply reached in levels, two important consumer and looking most ahead,

remains while are the looking and market in U.K. As to Europe or portfolios credit a project result, their U.S. servicing. sell large increasingly favorable, issuers and outsource the

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

Operator

Instructions]. [Operator

SunTrust. Our first question of comes line Mark from Hughes the from

Mark Hughes

economic the about Is be it? that adding EPS, costs to would $X.XX? So Jonathan, the think the back way refi

Jonathan Clark

That's the it, about way to think yes.

Mark Hughes

Okay.

supply Ashish, about supply. early in what the pricing, both dynamic kind here You the terms about in increase of in QX? and you talk you of talk Could QX recent saw in and

Ashish Masih

are want, I and would getting they at returns. and would say I good it's and solid getting capital in banks say pricing we the which equilibrium Hughes, Mark the supply the dynamic a pretty are the is pricing stable.

happening moderating and So in let would say, of as on he it's in longer, you their show returns U.K. as of Early the And but have U.K. the their in over most that in their is deployments. jump clearly stable deploying pricing optimal players and Europe, markets. couple the I'll capital or I well. U.S. to And particularly improving. everybody and is from been is it's deleverage if reduce on additional. as up actions Ken to know, last starting the line indicated dynamics, in in has anything even him quarters the indications, U.K., most intentions

Kenneth Stannard

Yes.

what repeat Ashish was to saying. Just

defaults most accelerate certainly are some more and say are would supply the But being is seeking improving in are competitors potential And in advance sales. very as of increasing I returns steady. trying delever banks the to So many selective. to fact, of

movement So an where little of at moment supply dynamic demand. bit I think is supply got on we've upward bit pressure and a a on little the of upward a less

pricing. So really it's for healthy

Mark Hughes

expenses And a pretty then basis in just Is even sequential Anything and one you it? expenses final is down operating more more of quarter The could on a Anything little a G&A sustainable? talk clearly But quarter. was And year-over-year; This time-ish that? last level meaningfully. expenses, striking. this question. down dynamic one sharply year-over-year, nonrecurring? likewise this about

Ashish Masih

a That's question, Yes. Mark. good

answer a I'll So it ways. of in couple

cost First is expenses, improving are on collect any a we focus overhead keeping as to G&A, the strong as channel. well

there's one-time that included. But a that quarter in also if dollars correct couple time. had Refinancia you $XX that to a of not compare million increase closer time, second to amount, at a small million, is we that's or in observation company And the million your So sense. year a the that year this ago, expense ago, $X owned not that's Refinancia

flat picture expenses helps. is So expenses bigger on that while But are collections growing comparison the keeping we significantly.

internal are each MCM, litigation, control doing on tranches keeping CTC a litigation CTC. we're coming the have you in overhead collections grow at But that improvement So in our flat, and decreasing, online, just is we a we are in keep is that seeing improvement. firms Then expenses. as and for on the example, showing have in by expenses G&A, and law commission channel, lower scale

we overall I overhead and strategy So the we through both the efforts like well on that's functions. Cabot in And direction and conscious that are areas and MCM G&A headed, that as as the cost in very have.

Operator

Securities. the from Our line Scharf next David JMP from comes of question

David Scharf

margins on follow as on in up weigh to wanted last question. the I well, maybe

cost-cutting seems going which a shift. trying call center, to like generally a of margin how less mix resulting the is about versus As just I'm legal, we the pickup is trends much the from more think expand, going for forward, much sense get Ashish, shift It how margin just coming much provide is from mean shift mix margin I is mix that's pickup continue whether that going if versus of to tailwind forward. that expected and channel. margin to and the higher more to

Ashish Masih

David, of very a It's so part you mix the deliberate correct have. is shift a observation strategy.

down and really we be way. started we increased we've by as call over so channel, on digital more and fresh centric call collections the the centers, center consumer from purchasing years collections the more our and double to So more our and

low basis, digital marginal a with has the channel centers. to on It's collect. So call very cost combined

quarter, we and back earlier the showed liquidation presentation, as you our last more. if go coming to So showed we

So continuing because earlier, collect cost collect from we is and collect as mix to portfolio it improve. the we same of more to shift the that

So I more. believe a it could bit continue for

We But are mix that the very and that focused keeps the portion. legal now, of all to coming -- paper of course, going be will on increasing digital the down call And assumes market center expect will as strategies the share stays on over forth. is change mix do front be business. can that U.S. and issuers go similar, continued that which fresh constant, and if they heavily improvement the and on back time, steady I

David Scharf

been shifting helpful. pickup. No, it. to other one questions; Got a it's It's Europe. tremendous Two

-- to fundamentals get maybe we be like XX, over in realize not heard lumpy is supply leverage relatively quarter's of suggesting of try that a or months, of reduce But tension, objectives, think a to to quarter-to-quarter. from we it's heard bit seems but in pricing. about As going volumes XX we pullback capital a effect commentary standpoint, Cabot. part of, I I stable that as at competing there's it effort maybe kind thought management ratios volumes the next some an reflected the something in actually at deliberate that sort us to the the picking purchase Yet I

Ken's backdrops there's you Because volumes sort seeing how at what, about purchase modeling we timeframe Or senior ratio. let's the sure certain a and two and says, you should reengage. the the frame on typical should forward? he lower can going extended, than deal if sort got fundamentals reenter influence of of leverage if know maybe which new improving think be purchase help as volumes those should how we you objectives or And competing achieve we not I'm target line,

Ashish Masih

David. Great questions there,

me in couple a Let answer ways. of

was deployment But in year than So one quarter QX high last in deployment year. last very is a the for Cabot. lower Europe was

In fact, years XXXX high. very and were XXXX,

Difficulty]. there's issue comparison [Technical there So a

expect target other deployment deliberate of are including all in the on what are the peers it's XXXX, And that in Secondly, said we I right, more said for we numbers that due I we to to beyond did lower can't to XXXX. XXXX what we we we and the that's than we've deleveraging for U.S., and achieve. to past, you that's the have a said XXXX, in Cabot, have we for go and repeat, expect plan into part numbers we really and that deployment have the outlook, will strategy. Europe Europe, in deploy is, in less than are in is shooting we deploy what And

positive the Now us that the by lower are and is peers side our in Europe deployments improving. returns of

So what a we're portfolios. buying is IRR at higher

same they're As XXX I than time. points year, about mentioned, last higher basis

the coming positive that's dynamic So that's up.

committed of have We to goals are plans our to point at and change for this Cabot, no deleveraging that. kind

right and will is market the now. terms deployment I whatnot. what future the if come in do just time. we But for out, efforts XXXX sticking You're laid and what this are refinancing something right the clearly tell to by But that changes us opportunities in up, plan our of at there that's

David Scharf

about that this problems Last where thing, in last the Chase return I've currently year Or that's recent almost maybe tailwinds. long-term in U.S., Got to And of All slide? ago. of about few a just potential a large us you of that and and some in sort have talks sort But two it. that of something longer-term kind Is forgetting Got others where the has of been broad lot changing is it looking Ashish. the is on I'm it. versus years? actually potential presentations. about sort Slide at issuers, X, of driver a have. this good forgotten or

Ashish Masih

in supply things. absolutely. ways On run to debt front, long-term supply And It Yes. it some higher in the have now right our ago. And said, the as a of market driver be we by is a deployment we meant to be is years increase, in that three the way, well meant couple without sideline for a than few of the total business expecting issuers when were market. the is

good that's news. So

all of But observe increased agencies building that market, issuers through planning issuer activity comment So that is when definitely are credit exactly capacity, and planning absolutely not, finding of for we level an and working which in your issuers more of we will are cannot increased we That the that. or I what sales. whether return. we and losses happen. debt to for include and talk will discussions as talk Most the they to on banks will sell up

being sensing that's discussions are part of So the kind and hearing of. dialogue we and and

that will And issuers the sales, what sideline uptick increasing the us and quarters gives whether the or the losses so confidence that's when increase as years other increase, the in that credit happens. issuers it's coming supply

Operator

Instructions]. [Operator

Our Hugh next question comes of from Buckingham. Miller from the line

Hugh Miller

Just know to can of wanted leverage us the start at end let housekeeping front. I one you now XQ? off X, IFRS under stands where guess the on Cabot's

Kenneth Stannard

should we everybody know whether time. until the let okay, the know call actually, same that's at Hugh. If that tomorrow, to don't I wait

Hugh Miller

terms as others kind ROIs. problem. we to to all sounds talked No encouraging last some a higher in think that Or out in guess may also problem. points some change that factor terms but Is year, activity basis also that apples-to-apples Europe? returns It'll other of I'll of in does XXX for have capital here. mix higher what relative certainly play of about, than No their I deployment the questions on bit you an at basis? improvement about alluding influence a of been check purchasing tomorrow.

Ashish Masih

Ken?

Kenneth Stannard

know, money basis. IRRs No. but The a reason it on as mix, apples-to-apples, do difference in is terms multiples make like-for-like in very is actually to always quoted much we reflect you because, IRR it a

very of is [indiscernible]. basis the XXX that effective year-on-year So points

Hugh Miller

paying Are multiples an think loans? nonperforming some category those you like seemed returns that it the gross channels then we'll there accounts those as in was provide two I of two in difference between obviously NPL XQ But channels, paying we color, and loan in kind were in improvement continued differences in get improvement you of kind seeing it And and relatively in do returns? and and nonpaying. seeing about money guess we of terms any any unchanged. the tomorrow the in the Are Okay. reperforming of of terms kind in

Ashish Masih

Yes.

the think is all that positive and are the general I answer channels, in the classes i.e., direction, in going increasing. multiples asset money

we'll money So talk on of more in that about call multiples. the some terms IFRS

the you overall filing, If in also money detail the aggregate historically. you'll of Encore look see multiples that our in XXXX than higher were

mix money But are moving. the there's So in it's obviously multiples because complicated shift there.

the it at basis a reflective in points, is increase. number very most year-on-year, increase So healthy is, the IRR which XXX

Hugh Miller

returns I color. a and appreciate No, And your I guess that you're of improvement in know lot I than larger in in buying Yes. are Europe? the the definitely relative mainland level Europe U.K. in there what and the or size the operations mainland it difference is. you terms your Europe. to, obviously comfort the U.K.'s And just returns the returns I then risk-adjusted of But in in any noticing the guess

Ashish Masih

think capability increased we it's being But operation, the not driving even in we don't increase selective, returns we're as the able the in more through Well, markets scale applying. in I we that operational to, are we're dominant where selectivity have because are enhancements through well.

But U.K. fact think cases seeking true, to the lesser across the Europe. that driven mostly it's that us by overall delever. And to returns the I obvious that's I also buyers in think more extent to in improving all are the market a all almost it's across are

Hugh Miller

$X.XX cost you and I that shift correctly, there helpful. Thank then that Got we that there is in in time question If And that think of situation. you. could quarter, the back can the potentially it. just That's which the normalized towards kind very said recovery a revenue horizon a get was recognition? way Mexico about on any headwind

Ashish Masih

that happened homes. in houses. time we uncertainty bit some shifted the a government has of cost secured have these are to because the economic reason the given in the of some political Mexico. with market Hugh, recovery terms And are buying mortgages, changes uncertain been and portfolios of of is there that at this secured And these investors

same, overall of you ERCs from timing as is So the lot the these a collections the uncertain come about know, are because, we selling homes. but the you

So are investors would are happens uncertain and these has seeing no likely what because we change at there. there when this been point, waiting yet, but policy and collections come

So and that's we reason accrual or cost to it back put will the to know cause to recovery, when come on that we don't it change not.

Jonathan Clark

operating person, And for might move before a we're on that the the not asked to this I about point. IFRS. those have IFRS about and Operator, on you just regulations. We're permitted a to wanted the clarify phone, not Hugh question who to U.S. understood next under exchange call. GAAP occurred talk SEC

So that's why we deferred tomorrow. that until Cabot call has its own

clarification. for Just

Operator

the Hogan William from Brian from Blair. comes line question next of Our

Brian Hogan

to from on what I and how the guess get long a to comfortable year exactly Just a target Europe. leverage? And kind is it please. there? before timeframe leverage you to is. take leverage actually think of it's you going But it your do get that, question first not guess guess is in it I a, I My to manage

Ashish Masih

Yes.

to and commitment Europe of And a So earlier, for is end decrease. investors our bond again, It's the in XXXX. Jon that we've predominant finance made of Europe in point XXXX, a range, it's Clark's XXXX to steady purchases end and to But a that the permitted not about leverage horizon it. That's in X-year to a commitment rather, decrease Again IFRS. position to, of is range in to to -- not XXXX. detail bond by end a certain talk it's we're investors.

Brian Hogan

nice but in business seemed then like the Thank bit, and discuss it Europe, business? it sticking actually you. Can servicing a that you next question fell it. little in behind Okay. momentum trends there The had off some

Ashish Masih

Yes.

Ken stab on the me I'll point is observing business the and in kind in let declines you he jump the what just on business. take Let made, of servicing a then

$X.X So are purposes, sold see last servicing management comparison But the or largely our servicing. which year, other revenues off revenues that you million, Refinancia so. also, of, $X million, right, company we you're for a combination European had

that's So decrease. a

about The drag other is factor X% FX. from a

currency that's would So numbers. it quarter-to-quarter drag that's grown. second impacting in have But our the constant

in In now have the work work many to in U.K., on pre-charge-off Ken insurers providers charge-off terms as more who push and that capabilities. color want of increasingly BPO little outsource continuing let with the they and outlook, the banks servicing Wescot, to bit I which to a is like players as are Europe, and both especially players particularly credit well with in us Wescot, this provide will front. side but

Kenneth Stannard

in other the growth, certainly businesses. our secured, of mean operational defaults continues you the business the U.K., indeed, got increasing Backing our Clearly revenue, when with we it we're percentage business to year, healthily. at over but servicing also on opportunity points, ample future, seeing we're that's And but servicing future. the the of in the happened grow service of outperform opportunity in pressure, growth increased the door Yes. as look Ashish's I and to in the regulatory in which and either two But mean increase always DP relative or, the healthily. many Europe up see won't service it's at lots growing is those to of moment also depending last because I servicing go respect healthy where up necessarily in to a at percentage. preparedness markets business for order the

Brian Hogan

accounting do on you thoughts My impact? updated next question, have any right. All CECL

Jonathan Clark

standard. had work yet a very all issues the need is They a in that We towards standard the we as closely working we the toward And setters. of good progress But way we industry whole is has we not a of a new made place standard. open lot we economics business. the And still -- to trying the explicit, have per working make finalized the QX, end with nothing clarify that completely to in where se. sure up look. No, clarifying we're with as model standard that our think which the will consistent this

a and XX. in filed Encore industry, and many comment the letter the also, We July FASB, on ours we industry with filed the

involved, with closely working are and we good So progress. everybody making

Brian Hogan

guess, just review I by you time mid-September. any comments. to extended right. it, But deadline updates their to seeing, All thoughts? more saw Had you're then I CFPB anything And obviously. hearing, Can month, comment overall just the provide another on

Ashish Masih

Yes, right. Brian, you're

extended XX, like or think September CFPB it the something So to I that.

our rules. three unchanged our comments. proposed major categories. this out. on to lot done But wait the final rules view time. preparing thoughts will work a filing We'll is be of into We the for We've And or our two at in they fall basically come

had new the was So level technologies enable rather, adding And And how or voicemails, reduced heavily contact model, much text as validation about are require that for is so past, state in then not and call it's years given we had there used do dialing any to that's we things regulation We whether focus showed there's kind very safe this emails such operational dialing be which that kind camp some used, rules much forth. And of on been data leaving been or minted changes any notices. disclosures, by, RPCs. rule. more to anyway. without also. we've that in consumer the X/X, and enable to that A will proposed. finally, making There losing newer ago, our elements call of few

So way we much. in a new of sources customers, leveraging innovate as depending using data with new consumers and not to just day ways time to just of on dialing to calling, connect continue using skip approaches

wait but something that's we So see, continue fronts to on we'll those work all the and time.

with new and we implementing us In order rules second did state consent rules. nature general, as to are our laws with

that team just basis. a does regular on a have We that

So as any expect either the from we from things. these don't well costs implementation extra

that, the process consensus sometime, goes depends and that's summer But on on if track. next it of year, rules effect go CFPB is into these kind again, should expectation their as everything that beyond my So well.

Brian Hogan

Sure. And is actually question. then this picture a big

Your pretty a you trends. efficiency European IRRs your ultimate good is been well. good question I is, and like ROE do guess operating showing and your you improvement's And obviously improving U.S. my mind? target underlying are in doing got business really have

is ROE the long-term model what like? of Just look kind

Ashish Masih

all that That's we course, liked not of stage, metrics focus a and would not a apologies we it something to as to both we prepared have this too. it's directly - other We number, GAAP the Brian. on so performance in as and time. look At question metrics, where answer But at addition ROE. great and - look economic at question, internally other have you on target adjusted ROE disclosed

Operator

[Operator Instructions].

the comes Oppenheimer. question from next from Our Gabriele Dominick line of

Dominick Gabriele

just in improvement talk I collect What Great see. see efficiency to Thanks. efficiency see inning Could quarter-over-quarter you say is? you've wanted your just have we you what quarter. of And of runway How going your the about that do runway or for would think initiatives? lumpy, And corporate to the continue you cost to gains started these kind we within the guys overall should for or seen? a little be some this of forward? do Where expect improvement? your you bit the efficiency you to improvements improvements are steady

Ashish Masih

That's a question. great

for let's are to if improving a cost on improvements, very you say that, efficiency as use proxy we focused them. collect So

of So a target lumpy at let's divide more than can an it. output It's number, be it and times.

large issuer paper be as whether or of change paper, if trends. the U.S. business, terms or two continue balance stabilize. more has some cost won't it's digital, sell, different should a they collect to through few and there's from at very a older lower here or we'll are driving which fresh of the continues continue for point collection center except it If lumpy, So the trend, a it a paper to profile. But type in improve the call which paper

factor. one that's So

or portfolios higher OPM to kind has have a of different and quite we've nonpaying are that purchasing, collect, collect. lower of to Paying very and paper can CTC, the collect. is it paying lumpy cost mix very know, be you times be side, it And cost cost depending And large collect of the charged-off on different, of normal as cost kinds the or to different books, to purchased and portfolios there can impact profiles. can

collect it's forth. is, that so away channel on and work in, we or take operation we and are center, whether collections, focused call each cost of should improving to you the paying What litigation collect nonpaying, legal --

keeping the the you cost down also is. So impact if the control output and we what collect to within improving managing would. on focused number, G&A are and it, But mix will the

you through well. there's rise, collections scale as a as see effect comes overall, So that

an a very as we on the output it's Sorry focus lower managing result reducing and go of clear answer. lower quarter. cost as through our expenses long-winded more a to But each of it's collect to and be

Dominick Gabriele

various million a No, you the interest that's would say we given basically, makes if expense, And your interest items these taking do you say curve interest one-timer would that think go-forward roughly and around out of rest of yield that executing penalty, go-forward expense, expense stay XXXX? $XX a how should that sense. Or basis into guys that in you your then think lot been on Thanks. you have well. market, really developing 'XX about over the outlook million? we a about see and the $X that the leading And

Jonathan Clark

Yes, Dominick, think you're right. I

that QX. look that of get out you If part net most the at basically, 'XX, QX QX versus you'll you you in for million, see $X

the proxy QX's think go-forward. pretty a for I So good

Dominick Gabriele

you making giving just with to had legal about loan That's fees Thanks. the to Great. they what's legal entities were that for for some or fee take the end mentioned you awesome. power with you fees work less then lower your commissions collections, provide them of if you that willing collection. collected? that Can about pricing you talk per think And on actual the

Ashish Masih

Dominick. Sure,

that you got So right.

is very - while states. have firms of had legal work for we in in build various in as good So collecting law well states of over us, internal time MCM partners many we - ours with this

has Now vary the and can based the time commission we changed on for quality over firms paper put. rate the it of

structure the times lower. has been So quality of improved in we've when certain fee paper, the

was comment sure increased. high-quality accounts coming are the that commission fair from to collections partner stuff, commission rate, big firms that referring But the a commission the So make to those drive for we because lower which I in was has the our with have that which when by as focus. is the doing us, a they in focuses incur rate rate charges. fee, a for and not is then, itself netback, What's the that result, expense is collections there's

observing shifting that and But right great factors, the improved MCM. in to that's partners. -- in So that to one collections is one cost lower mix showing for factors you're commission the of been of rate, that's collect many have that they've somewhat up

Dominick Gabriele

my questions. Really much quarter. great so for Thanks. Thanks Great. taking

Operator

Raymond Dodd Our James. next Robert question comes from the lines from of

Robert Dodd

of obvious questions my have been But Most answered. one.

Brooks it couple assuming of I'm And knows. any of gave us the Ashish, ago for end a may looks at likely, color quarters you There a October. about but increasingly preparations hard who some Brexit. be really good

any given bit prepare? change or that, time of a result think been incremental to an plans what there you of as has So to extra happen could

Ashish Masih

Yes.

of back, to and So books base, a analysis our payer kind could awhile happen we modeling what did lot and around our of ERC.

prepared. So we were

on this to on and continue that just we different front, them. very let be impacts and Brexit business. going his economy. the the of nature jump And impact U.K. he's the I'm relook to in of also Ken it U.K., the happens. and could when as But to its well, in we'll given at those So kind update plans wait that, happen for

Kenneth Stannard

time. don't great some it's Yes. been our preparing And anything's for of a terms preparation, I think but Really, we've in question. changed

we at is So the a XXX,XXX that a number it's us count, nature of paying last have back small our of relatively amount money. payers, book large of

payments XX. buffer GBP to for are to significant with pay, over And shock. receive sort ability to just full So all of ability, some income aligned those them people's their a

the You time, because of regulation couldn't business working ago. certainly X But the has not but prepare on about something necessarily, or years considerable to say that we affordability for Brexit, some ACA. been from the XX for were that

quickly and a also pay. our paying adapt but impact to extremely in with in good because of macro-economic when ability terms be very Brexit standards those if to minimize through we we'll books, no-deal stead on that of it able the Brexit assessment a or go Now to nominally people's ramifications,

preparing we've been So a I think time. long for

the low exercise the impact As come out percentage on book. said, single-digit with back a impact, and where modeled we'll naturally potential on Ashish our our ERC, we

sale and in with front they opportunities unsecured likely a past. the result at book, On in to higher to defaults opportunities additional books, and performing the there can service higher be so likely emerge than that's on return considerable is current opportunity

we're goes day for still hoping form or in way, we of a actually So yes, deal that obviously, think or not by prepare some don't there's But that where materializes. sort some Brexit. shape

Bruce Thomas

people hour, So before question the other time run one think I operator, for before more off we calls. to have

Operator

Yes.

Our last from Hughes of the comes Mark from line question SunTrust.

Mark Hughes

Yes. I'm Thank sorry. answered. My have been you. questions

Operator

over to back We Mr. time. further questions at I have this Masih. turn the call now no will

Ashish Masih

we forward November. That concludes today. quarter taking for us, look providing XXXX call the and in to the join third to time results for Thanks our

Operator

and gentlemen, concludes This conference you us. for call. thank joining Ladies today's

disconnect. now may You

Encore Capital (ECPG) 10 Aug 192019 Q2 Earnings call transcript