Post on 13-Apr-2017
Financial Results Q2 2015
August 13, 2015
Time: 8:30am MTN
Domestic: (877) 201-0168
International: (647) 788-4901
Confirmation Code: 67941700
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.
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 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
Second Quarter Highlights
5
• Significant Improvement in Costs to Collect
• Customer Connection Strategy Drives Results
• Continued Expansion of Valuable Fin-Tech Relationships
6
SquareTwo and the Market Evolving Debt Sales:
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Ret
urn
to
Mar
ket
Charge-Off Growth
Money
Center Banks
Fin-Tech Commercial
Regional Banks
Canada
Financial Results
John D. Lowe, Chief Financial Officer
ERP and Adjusted EBITDA
8
• Consolidated ERP of $600M
• Adjusted EBITDA of $43M
Q2 2014 Q2 2015 Q2 2014 Q2 2015
59.8% 73.3% 1.69x 2.52x
Company Debt as a %
of Consolidated ERP
Company Debt ÷ TTM
Adjusted EBITDA
732681
655612 600
100
200
300
400
500
600
700
800
Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015
Consolidated ERP Trending($ millions)
Canada US
5448
42 42 43
0
10
20
30
40
50
60
Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015
Adjusted EBITDA Trending($ millions)
Returns by Purchase Year
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• Active Portfolio Returns Maintain Strength
• 2015 Returns Improve
1.9x
1.2x
0.7x
0.2x
2.1x
0.4x
0.6x
0.9x 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
Purchasing
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• Discipline Purchasing Maintained
• Commercial Purchases Up Significantly
2015 2014 $ Variance % Variance
Credit Card/Consumer
Loan - Fresh*Face $110,949 $246,781 ($135,832) (55.0%)Price 12,427 36,882 (24,455) (66.3%)Price (%) 11.2% 14.9%
Credit Card/Consumer
Loan - Non-Fresh*Face 96,826 40,006 56,820 142.0%Price 5,398 2,735 2,663 97.4%Price (%) 5.6% 6.8%
Other**Face 69,371 54,020 15,351 28.4%Price 13,886 2,435 11,451 NMPrice (%) 20.0% 4.5%
TOTALFace $277,146 $340,807 ($63,661) (18.7%)Price 31,711 42,052 (10,341) (24.6%)Price (%) 11.4% 12.3%
* Includes both Domestic and Canadian purchases.
** Other includes primarly commercial and student loan purchased debt assets.NM Not meaningful.
Purchasing (in thousands)
Quarter Ended June 30,
Proceeds
11
• Mix of Legal as % of Total Collections Increased from 51% to 55%
• Commercial Proceeds Increase Significantly
Cash Proceeds (in thousands) 2015 2014 $ Variance % Variance
Credit Card/Consumer Loan Collections
Non-Legal Collections $33,908 $50,658 ($16,750) (33.1%)
Legal Collections 47,370 54,388 (7,018) (12.9%)
Other Collections* 8,195 4,965 3,230 65.1%
Total Collections 89,473 110,011 (20,538) (18.7%)
Sales, Recourse & Bankruptcy 2,134 1,893 241 12.7%
Total Cash Proceeds on Purchased Debt $91,607 $111,904 ($20,297) (18.1%)
Quarter Ended June 30,
*Other includes non-legal collections, legal collections and court cost recoveries on
commercial, student loan, and other accounts
Unadjusted Results
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• Purchased Debt Revenues, Net:
›$49 million, 27% decrease from $67 million in Q2 2014
• Costs to Collect as % of Purchased Debt Collections:
›Including Gross Court Costs: 41.8%; -332bps from Q1 2015
›Excluding Gross Court Costs: 33.5%; -348bps from Q1 2015
›Non-Legal/Legal Mix: 46%/54% (Q1’15), 45%/55% (Q2’15)
• GAAP EBITDA:
› -$0.4 million, decrease of $8 million from Q2 2014
• Net Loss:
› $14 million net loss, increase of $7 million from Q2 2014
Liquidity Update
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• Investment Strategy + Cost Reduction = Net Returns+
• Consolidated ERP of $600 million
• Liquidity = $50 million
Q & A