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Financial Results
Q3 2015
November 12, 2015
Time: 8:30am MTN
Domestic: (877) 201-0168
International: (647) 788-4901
Confir...
Safe Harbor Provisions
2
Certain statements made in this presentation are forward-looking statements under the Private Sec...
Our Strategy
Paul A. Larkins, Chief Executive Officer
Key Strategic Goals
4
Our People
• Inspire a culture of leadership by living our core values
Our Services
• Pursue systemi...
Third Quarter Highlights
5
• Continued Improvement in Costs to Collect
• Customer Connection Strategy Drives Liquidations
...
6
SquareTwo and the Market
Evolving Debt Sales:
--------------------------------------------------------------------------...
Financial Results
John D. Lowe, Chief Financial Officer
ERP and Adjusted EBITDA
8
• Consolidated ERP of $592M
• Adjusted EBITDA of $40M
Q3 2014 Q3 2015 Q3 2014 Q3 2015
64.7% 74.7...
Returns by Purchase Year
9
• Active Portfolio Returns Maintain Strength
• 2015 Returns Improve
1.9x
1.3x
0.8x
0.3x
2.2x
0....
Purchasing
10
• Disciplined
Purchasing
Maintained
• Canadian
Purchases Up
Significantly
2015 2014 $ Variance % Variance
Cr...
Proceeds
11
• Mix of Legal as % of Total Collections Increased from 52% to 56%
• Commercial Proceeds Continued to Increase...
Unadjusted Results
12
• Purchased Debt Revenues, Net:
›$51 million, 11% decrease from $57 million in Q3 2014
• Costs to Co...
Liquidity Update
13
• Investment Strategy + Cost Reduction = Net Returns+
• Consolidated ERP of $592 million
• Liquidity =...
Q & A
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Q3 2015 investor call presentation final

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Q3 2015

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Q3 2015 investor call presentation final

  1. 1. Financial Results Q3 2015 November 12, 2015 Time: 8:30am MTN Domestic: (877) 201-0168 International: (647) 788-4901 Confirmation Code: 58855409
  2. 2. Safe Harbor Provisions 2 Certain statements made in this presentation are forward-looking statements under the Private Securities Litigation Reform Act of 1995. These can be identified by words such as "intend," "believe," and "expect," and phrases using those or similar terms. Specifically, statements relating to projections of future proceeds, revenue, income, profitability, cash flow, non-GAAP financial measures such as Adjusted EBITDA and Estimated Remaining Proceeds, also known as “ERP”, and our ability to expand and utilize flexibility under our credit facility are forward-looking statements. These forward‐looking statements are not guarantees of our future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward‐looking statements. Factors that could affect our results and cause them to materially differ from those contained in the forward looking statements include those that we discuss in “Risk Factors” or comparable headings in our most recent Annual Report on Form 10-K. Adjusted EBITDA and ERP, as presented today and in our earnings release we issued this morning, are supplemental measures of our performance and purchased debt asset value, respectively, that are not required by, or presented in accordance with, accounting principles generally accepted in the U.S., also known as “GAAP.” They are not measurements of our financial performance or asset value under GAAP and should not be considered as alternatives to net income, asset value, or any other performance measures derived in accordance with GAAP, or as alternatives to cash flows from operating activities or a measure of our liquidity. We believe adjusted EBITDA is representative of our cash flow generation that can be used to purchase charged- off receivables, pay down or service debt, pay income taxes, and for other uses. ERP represents the expected cash proceeds of our then-current purchased debt portfolios over a nine year period. You are, however, cautioned not to place undue reliance on adjusted EBITDA and ERP.
  3. 3. Our Strategy Paul A. Larkins, Chief Executive Officer
  4. 4. Key Strategic Goals 4 Our People • Inspire a culture of leadership by living our core values Our Services • Pursue systemic operational and compliance excellence Our Channels • Create an outstanding network of call centers and exclusive branch offices Our Customers • Deliver the Fair Square Promise Our Financials • Deliver solid financial results
  5. 5. Third Quarter Highlights 5 • Continued Improvement in Costs to Collect • Customer Connection Strategy Drives Liquidations • Continued Expansion of Fintech Relationships • Largest Portfolio Acquisition in Canada’s History
  6. 6. 6 SquareTwo and the Market Evolving Debt Sales: ------------------------------------------------------------------------------------- ReturntoMarket Charge-Off Growth Money Center Banks Fintech Commercial Regional Banks Canada
  7. 7. Financial Results John D. Lowe, Chief Financial Officer
  8. 8. ERP and Adjusted EBITDA 8 • Consolidated ERP of $592M • Adjusted EBITDA of $40M Q3 2014 Q3 2015 Q3 2014 Q3 2015 64.7% 74.7% 1.95x 2.66x Company Debt as a % of Consolidated ERP Company Debt ÷ TTM Adjusted EBITDA 681 655 612 600 592 100 200 300 400 500 600 700 800 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Consolidated ERP Trending ($ millions) Canada US 48 42 42 43 40 0 10 20 30 40 50 60 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Adjusted EBITDA Trending ($ millions)
  9. 9. Returns by Purchase Year 9 • Active Portfolio Returns Maintain Strength • 2015 Returns Improve 1.9x 1.3x 0.8x 0.3x 2.2x 0.4x 0.5x 0.8x 1.6x 0.00x 0.50x 1.00x 1.50x 2.00x 2.50x Active Portfolio 2012 2013 2014 YTD 2015 Consolidated Return on Investment Purchase Years 2012 through YTD 2015 Actual Returns Estimated Returns
  10. 10. Purchasing 10 • Disciplined Purchasing Maintained • Canadian Purchases Up Significantly 2015 2014 $ Variance % Variance Credit Card/Consumer Loan - Fresh* Face $120,401 $135,678 ($15,277) (11.3%) Price 14,601 20,355 (5,754) (28.3%) Price (%) 12.1% 15.0% Credit Card/Consumer Loan - Non-Fresh* Face 251,724 151,853 99,871 65.8% Price 8,562 6,971 1,591 22.8% Price (%) 3.4% 4.6% Other** Face 38,866 54,584 (15,718) (28.8%) Price 3,888 2,340 1,548 66.2% Price (%) 10.0% 4.3% TOTAL Face $410,991 $342,115 $68,876 20.1% Price 27,051 29,666 (2,615) (8.8%) Price (%) 6.6% 8.7% * Includes both Domestic and Canadian purchases. ** Other includes commercial, student loan, and other purchased debt assets. NM Not meaningful. Purchasing (in thousands) Quarter Ended September 30,
  11. 11. Proceeds 11 • Mix of Legal as % of Total Collections Increased from 52% to 56% • Commercial Proceeds Continued to Increase Cash Proceeds (in thousands) 2015 2014 $ Variance % Variance Credit Card/Consumer Loan Collections Non-Legal Collections $30,003 $44,278 ($14,275) (32.2%) Legal Collections 45,418 51,058 (5,640) (11.0%) Other Collections* 9,005 5,172 3,833 74.1% Total Collections 84,426 100,508 (16,082) (16.0%) Sales, Recourse & Bankruptcy 1,845 1,593 252 15.8% Total Cash Proceeds on Purchased Debt $86,271 $102,101 ($15,830) (15.5%) Quarter Ended September 30, *Other includes non-legal collections, legal collections, and court cost recoveries on commercial, student loan, medical and other accounts
  12. 12. Unadjusted Results 12 • Purchased Debt Revenues, Net: ›$51 million, 11% decrease from $57 million in Q3 2014 • Costs to Collect as % of Purchased Debt Collections: ›Including Gross Court Costs: 41.2%; -391bps from Q1 2015 ›Excluding Gross Court Costs: 30.8%; -623bps from Q1 2015 ›Non-Legal/Legal Mix: 46%/54% (Q1’15), 44%/56% (Q3’15) • GAAP EBITDA: › $4 million, increase of $3 million from Q3 2014 • Net Loss: › $10 million net loss, decrease of $3 million from Q3 2014
  13. 13. Liquidity Update 13 • Investment Strategy + Cost Reduction = Net Returns+ • Consolidated ERP of $592 million • Liquidity = $32 million
  14. 14. Q & A

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