Financial Results Year End 2014

     March 3rd, 2015

Time: 8:30am MTN Domestic: (877) 201-0168 International: (647) 788-4901 Confirmation Code: 91157337

Safe Harbor Provisions

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 Certain  statements  made  in  this  presenta/on  are  forward-­‐looking  statements  under  the  Private  Securi/es  Li/ga/on  Reform  Act  of  1995.  These  can  be  iden/fied  by  words  such  as  "intend,"  "believe,"  and  "expect,"  and  phrases  using  those  or  similar  terms.  Specifically,  statements  rela/ng  to  projec/ons  of  future  proceeds,  revenue,  income,  profitability,  cash  flow,  non-­‐GAAP  financial  measures  such  as  Adjusted  EBITDA  and  Es/mated  Remaining  Proceeds,  also  known  as  “ERP”,  and  our  ability  to  expand  and  u/lize  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  uncertain/es  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,  respec/vely,  that  are  not  required  by,  or  presented  in  accordance  with,  accoun/ng  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  alterna/ves  to  net  income,  asset  value,  or  any  other  performance  measures  derived  in  accordance  with  GAAP,  or  as  alterna/ves  to  cash  flows  from  opera/ng  ac/vi/es  or  a  measure  of  our  liquidity.    

 We  believe  adjusted  EBITDA  is  representa/ve  of  our  cash  flow  genera/on  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  por[olios  over  their  en/re  remaining  life.    You  are,  however,  cau/oned  not  to  place  undue  reliance  on  adjusted  EBITDA  and  ERP.    

Our Strategy

Paul  A.  Larkins,  Chief  Execu6ve  Officer  

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Closed Loop Network

Key Strategic Goals

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Our  People    •  Inspire  a  culture  of  leadership  by  living  our  core  values    Opera6onal  and  Compliance  Excellence    •  Pursue  systemic  opera/onal  and  compliance  excellence    Growth    •  Grow  and  diversify    Partners      •  Create  an  outstanding  network  of  Partners    Financial  Performance      •  Deliver  solid  financial  results  

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•  Fresh  View  Solu/ons  Expands  

•  eAGLE  Enhancements  =  Efficiency  +  Returns  

•  Deep  Customer  Data  Improves  Experience  

Operational and Compliance Excellence Pursue systemic operational and compliance excellence

Growth Grow and diversify

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•  Disciplined  Capital  Deployment  Strategy    

•  Recent  Bank  Visits  =  Op/mism  

•  Diversifica/on  Posi/ves  Con/nue    

 

Partners Create an outstanding network of Partners

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•  Partner  Investment  Con/nues  

•  Integrated  Account  Management  and  Compliance  

•  Consistency  Drives  Uniform  Customer  Experience      

Financial Performance Deliver solid financial results

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•  Performance  Meets  Expecta/ons  

•  Lower  Volumes  =  Lower  Adjusted  EBITDA  &  ERP  

•  Purchasing  Discipline  Con/nues  

Financial Results

John  D.  Lowe,  Chief  Financial  Officer  

ERP and Adjusted EBITDA

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•  Consolidated  ERP  of  $655  million  

•  Adjusted  EBITDA  of  $198  million  

(1)  

(1)  

(1)  Domes/c  only  

 $-­‐          $50    

 $100      $150      $200      $250      $300      $350      $400    

2010   2011   2012   2013   2014  

Adjusted  EBITDA  Trending    ($  million)  

Company  Debt  ÷  TTM  Adjusted  EBITDA  2010  2.08x  

2011  1.65x  

2012  1.22x  

2013  1.42x  

2014  2.18x  

Company  Debt  as  a  %  of  Consolidated  ERP  

2010  68.8%  

2011  57.7%  

2012  45.8%  

2013  52.0%  

2014  65.7%  

$0  

$200  

$400  

$600  

$800  

$1,000  

2010   2011   2012   2013   2014  

Consolidated  ERP  -­‐  Trending  ($  million)  

CAN  

US  

Returns by Purchase Year - 2014

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•  2014  Returns  Lower  in  Compe//ve  Market  

•  Ac/ve  Por[olio  Returns  Maintain  Strength  

•  Ini/al  12  Months  =  Conserva/sm    

2.2x    1.7x    

1.0x    

0.4x    

2.1x    

0.4x    

0.5x    

0.8x    

1.2x    

0.00x  

0.50x  

1.00x  

1.50x  

2.00x  

2.50x  

3.00x  

Ac6ve  Por[olio  *   2011   2012   2013   2014  

Consolidated  Return  on  Investment  Purchase  Years  2011  through  2014  

Actual  Returns   Es/mated  Returns  

Purchasing – Q4 2014

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•  Long-­‐Term  Investment  Strategy  =  $29M  Purchased  

•  Diversifica/on  Con/nues  

2014 2013 $  Variance %  VarianceCredit  Card/Consumer  Loan  -­‐  Fresh*Face   $157,411 $159,923 ($2,512) -­‐1.6%Price   19,693 22,824 (3,131) -­‐13.7%Price  (%)   12.5% 14.3%

Credit  Card/Consumer  Loan  -­‐  Non-­‐Fresh*Face   83,089 6,459 76,630 NMPrice   4,067 498 3,569 NMPrice  (%)   4.9% 7.7%

Other**Face   79,641 147,810 (68,169) -­‐46.1%Price   5,505 3,793 1,712 45.1%Price  (%)   6.9% 2.6%

TOTALFace   $320,141 $314,192 $5,949 1.9%Price   29,265 27,115 2,150 7.9%Price  (%)   9.1% 8.6%

   *  Includes  both  Domestic  and  Canadian  purchases.    **  Other  includes  commercial,  student  loan,  and  medical  purchased  debt  assets.NM  Not  meaningful.

Purchasing  (in  thousands)

Quarter  Ended  December  31,

Purchasing - 2014

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•  Disciplined    Inves/ng  Results  in  Scale-­‐Back  

•  80%  =  Fresh  Consumer  Debt  

2014 2013 $  Variance %  VarianceCredit  Card/Consumer  Loan  -­‐  FreshFace   $714,681 $1,572,612 ($857,931) -­‐54.6%Price   101,102 197,420 (96,318) -­‐48.8%Price  (%)   14.1% 12.6%

Credit  Card/Consumer  Loan  -­‐  Non-­‐FreshFace   284,554 800,694 (516,140) -­‐64.5%Price   14,346 40,912 (26,566) -­‐64.9%Price  (%)   5.0% 5.1%

Other*Face   224,625 450,368 (225,743) -­‐50.1%Price   11,299 19,778 (8,479) -­‐42.9%Price  (%)   5.0% 4.4%

TOTALFace   $1,223,860 $2,823,674 ($1,599,814) -­‐56.7%Price   126,747 258,110 (131,363) -­‐50.9%Price  (%)   10.4% 9.1%

   *  Other  includes  commercial,  student  loan,  and  medical  purchased  debt  assets.

Purchasing  (in  thousands)

Year  Ended  December  31,

Proceeds – Q4 2014

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•  Mix  of  Legal  as  %  of  Total  Collec/ons  Increased  from  43%  to  53%  

•  Legal  &  Other  Collec/ons  Maintain  Strength  

Cash  Proceeds  (in  thousands) 2014 2013 $  Variance %  Variance

Credit  Card/Consumer  Loan  CollectionsNon-­‐Legal  Collections $37,785 $62,588 ($24,803) -­‐39.6%Legal  Collections 49,099               50,538               (1,439) -­‐2.8%

Other  Collections* 5,966                   5,332                   634 11.9%Total  Collections 92,850               118,458           (25,608) -­‐21.6%

Sales,  Recourse  &  Bankruptcy 1,037                   6,103                   (5,066) -­‐83.0%Total  Cash  Proceeds  on  Purchased  Debt $93,887 $124,561 ($30,674) -­‐24.6%

Quarter  Ended  December  31,

*Other  includes  collections  and  court  cost  recoveries  on  commercial,  student  loan,  and  medical  accounts

Proceeds – 2014

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•  Mix  of  Legal  as  %  of  Total  Collec/ons  Increased  from  39%  to  50%  

•  Non-­‐legal  Collec/ons  Impacted  by  Lower  Purchasing  Volumes  

Cash  Proceeds  (in  thousands) 2014 2013 $  Variance %  Variance

Credit  Card/Consumer  Loan  CollectionsNon-­‐Legal  Collections $184,974 $306,222 ($121,248) -­‐39.6%Legal  Collections 207,420           212,529           (5,109) -­‐2.4%

Other  Collections* 21,385               23,198               (1,813) -­‐7.8%Total  Collections 413,779           541,949           (128,170) -­‐23.6%

Sales,  Recourse  &  Bankruptcy 6,353                   21,760               (15,407) -­‐70.8%Total  Cash  Proceeds  on  Purchased  Debt $420,132 $563,709 ($143,577) -­‐25.5%

Year  Ended  December  31,

*Other  includes  collections  and  court  cost  recoveries  on  commercial,  student  loan,  and  medical  accounts

Unadjusted Results – Q4 2014

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•  Purchased  Debt  Revenues,  Net:  › $52  million,  30%  decrease  from  $74  million  in  Q4  2013  

•  Costs  to  Collect  as  %  of  Purchased  Debt  Collec/ons:  › Including  Gross  Court  Costs:    45.3%  ;  +411bps  from  Q4  2013  

› Excluding  Gross  Court  Costs:      37.3%  ;  +336bps  from  Q4  2013  

› Non-­‐Legal/Legal  Mix:    53%/43%  (Q4’13),  41%/53%  (Q4’14)  

•  GAAP  EBITDA:  ›   -­‐$1  million,  decrease  of  $12  million  from  Q4  2013  

•   Net  Loss:  ›   $15  million  net  loss,  decrease  of  $11  million  from  Q4  2013  

Unadjusted Results – 2014

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•  Purchased  Debt  Revenues,  Net:  › $247  million,  27%  decrease  from  $338  million  in  2013  

•  Costs  to  Collect  as  %  of  Purchased  Debt  Collec/ons:  › Including  Gross  Court  Costs:    44.4%  ;  +274bps  from  2013  

› Excluding  Gross  Court  Costs:      35.7%  ;  +172bps  from  2013  

› Non-­‐Legal/Legal  Mix:    57%/39%  (2013),  45%/50%  (2014)  

•  GAAP  EBITDA:  › $19  million,  decrease  of  $45  million  from  2013  

•  Net  Loss:  ›   $38  million  net  loss,  decrease  of  $43  million  from  2013  

Liquidity Update – Year End 2014

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•  Disciplined  Buying  Con/nues  

•  Consolidated  ERP  of  $655  million  

•  Liquidity  =  $72  million    

Q & A