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| 8-K - FORM 8-K - ENCORE CAPITAL GROUP INC | d8k.htm |
 Celebrating Five Years in India: An Update on Our Strategy
to Drive Growth and Shareholder Value
January 12, 2011
Exhibit 99.1 |
 CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
2
The statements in this presentation that are not historical facts, including, most
importantly, those statements preceded by, or that include, the words
“may,” “believe,”
“projects,”
“expects,”
“anticipates”
or the negation thereof, or similar
expressions, constitute “forward-looking statements”
within the meaning of the Private
Securities Litigation Reform Act of 1995 (the “Reform Act”).
These statements may
include,
but
are
not
limited
to,
statements
regarding
our
future
operating
results
and
growth.
For all “forward-looking statements,”
the Company claims the protection of
the safe harbor for forward-looking statements contained in the Reform
Act. Such
forward-looking statements involve risks, uncertainties and other factors which
may cause actual results, performance or achievements of the Company
and its
subsidiaries to be materially different from any future results,
performance or
achievements expressed or implied by such forward-looking statements. These
risks, uncertainties and other factors are discussed in the reports filed by
the Company with the Securities and Exchange Commission, including the most
recent reports on Forms 10-K, 10-Q and 8-K, each as it may be
amended from time to time. The
Company disclaims any intent or obligation to update these forward-looking
statements.
FORWARD-LOOKING STATEMENTS |
 AGENDA
3
•
Discuss our rationale for choosing India
•
Highlight our business continuity plans and risk mitigation
strategies for our India operations
•
Describe Encore’s success in India and discuss how our Indian
operations can continue to positively contribute to the Company's
future
•
Provide an overview of the Business Process Outsourcing sector
|
 4
We believe that we are the only company in our industry with a successful
late stage collection platform in India
India now represents half of our call center collections and we expect this
contribution to continue to increase, both on an absolute and a relative
basis
Beyond collections, our India site now directs several IT and other
administrative functions
The India management team has an average of 12 years of industry
experience and individual team members have worked for U.S.
multinationals including GE Capital, Dell, IBM, and American Express
OUR INDIA OPERATION DRIVES SIGNIFICANT VALUE |
 THE
SUCCESS OF OUR INDIA EXPANSION HAS FUNDAMENTALLY CHANGED ENCORE’S COST
STRUCTURE 5
Collection sites’
direct cost per dollar collected
(%) |
 6
Cash
average
comparison
between
India
and
U.S.
collectors,
using
a
specific
collection team for comparison
THIS IS A RESULT OF OUR ABILITY TO CREATE WORK TEAMS IN INDIA THAT
PERFORM AT LEVELS CONSISTENT WITH OUR DOMESTIC SITES
(%)
ILLUSTRATION |
 %
on a dollar of face 7
WE MADE THE DECISION TO ESTABLISH OFFSHORE OPERATIONS IN EARLY
2005, AS INDUSTRY PRICING WAS INCREASING
•
We expected the high cost
environment to persist for some time
due to the significant influx of capital
•
We were convinced that a successful
offshore facility would give us the
flexibility to bid higher prices for
portfolios and maintain strong
margins
•
To our knowledge, there were no
other offshore initiatives being
undertaken by our competitors
•
We aggressively pursued this
opportunity, meeting with offshore
experts in early 2005 and opening
our doors in October 2005
Pricing trend from one issuer through time
4.3%
4.3%
4.5%
5.3%
9.8%
2001
2002
2003
2004
2005 |
 8
THE DELHI NATIONAL CAPITAL REGION BECAME THE LOCATION OF CHOICE
BECAUSE OF A COMBINATION OF FACTORS
Highly qualified skill pool
(4 million English speaking
residents & 2.2 million new college
graduates across India every year)
50-75% cost
reduction
compared to
U.S.
Entrepreneurial
culture
Significant presence of large
multi-national corporations
Continually improving
infrastructure |
 WE HAVE
VALIDATED THIS DECISION SEVERAL TIMES DURING THE LAST 5 YEARS BY EXPLORING
NUMEROUS ALTERNATIVES, NEAR AND FAR 9
Relative Competitiveness Index (not industry or function specific)
100.0
97.8
94.3
92.6
91.4
90.1
89.1
87.9
87.7
86.4
86.2
84.4
81.0
80.0
75.8
74.6
74.1
73.6
73.3
72.8
71.1
71.1
70.6
India
Vietnam
Philippines
China
Russia
Malaysia
Mexico
Hungary
Czech Republic
Brazil
Poland
Distribution of weights: Human Capital-40%; Cost-20%; Environment-20%;
Infrastructure-10%; Risk-10% Source: Encore Capital Group
|
 WHILE
INDIA HAS EXCEEDED EXPECTATIONS, SUCCESS DID NOT COME EASILY AND WILL BE
DIFFICULT FOR OTHERS TO REPLICATE College graduates
with strong career
and family aspirations
Establishing brand
identity takes time
Work between
5:00pm and 3:00am
Collecting unpaid
consumer receivables
10
Overcome concerns
about job stability
and career growth
We have not
terminated a single
U.S. position to
move them to India
during our call center
expansion
Work hours, travel time, cultural
differences
The learning curve is
long and demanding
Attracting the right
talent is not easy
The U.S. workforce
needs to support
the enterprise,
without reservation
The logistics are difficult to manage |
 AGENDA
11
•
Discuss our rationale for choosing India
•
Highlight our business continuity plans and risk mitigation
strategies for our India operations
•
Provide an overview of the Business Process Outsourcing sector
•
Describe Encore’s success in India and discuss how our Indian
operations can continue to positively contribute to the Company's
future |
 Many of those
early ventures
led to negative
stereotyping of
Indian workers’
accents
Special Economic Zones
create incentives to attract
new foreign investors,
followed
by
the
advent
of
3
rd
party BPOs
and significant
off-shoring by large IT
companies like IBM, Dell, HP
The National
Association of
Software and
Services Companies
(NASSCOM) is
founded,
serving
as
the Indian chamber of
commerce for the IT-
BPO industry
12
THE INFORMATION TECHNOLOGY ENABLED SERVICES INDUSTRY (ITES)
BEGAN MORE THAN 30 YEARS AGO
In the early 1980s,
British Airways and
American Express
began using
employees in India
for back-office
operations
The Software
Technology Parks of
India
is
established
to
support growth by
providing access to
physical infrastructure,
increased opportunity for
foreign investment, and
tax incentives
General Electric
explores voice
operations in India
1980
1991
1988
1997
2001 |
 Source: NASSCOM
($ Billions, % of GDP)
Indian Information Technology Enabled Services (ITES) industry
growth (2004-2009)
THE INDUSTRY HAS GROWN DRAMATICALLY AND NOW ACCOUNTS FOR
ALMOST SIX PERCENT OF INDIA’S GROSS DOMESTIC PRODUCT
13 |
 14
Source: NASSCOM
($ Billions)
Indian BPO sector growth (2004-2009)
WITHIN THE INFORMATION TECHNOLOGY ENABLED SERVICES INDUSTRY, THE
BPO SECTOR’S REVENUE HAS INCREASED 400% TO ALMOST $15 BILLION
|
 Source: NASSCOM
THE BPO SECTOR PROVIDES SERVICES TO MANY INDUSTRIES AND
COUNTRIES, WITH MORE THAN 60% BEING PROVIDED TO THE UNITED STATES
Indian BPO sector by industry
(%)
Indian BPO sector by geography
(%)
15 |
 AGENDA
16
•
Discuss our rationale for choosing India
•
Highlight our business continuity plans and risk mitigation
strategies for our India operations
•
Provide an overview of the Business Process Outsourcing sector
•
Describe Encore’s success in India and discuss how our Indian
operations can continue to positively contribute to the Company's
future |
 17
THE FIRST FEW YEARS WERE MARKED BY CONSTANT TRIAL AND ERROR,
WITH SUCCESS COMING TOWARD THE END OF YEAR TWO
2005
Journey
begins
35 employees
2007
First taste
of success
•
Shifted to higher balance
accounts drives strong
performance
•
Started competing with
U.S. on paper of similar
balance and age
310 employees
Note: Employees refers to the total site staffing number as of last working day of
the year 2006
Year of
growing pains
•
Only working low
balance accounts
•
Limited connection to
the U.S.
•
High attrition and low
performance
187 employees |
 18
THAT SUCCESS FUELED A PERIOD OF RAPID EXPANSION OF PEOPLE AND
FUNCTIONS
2008
Accelerating
confidence
and trust
•
Successfully ramped
up hiring without
compromising
performance
•
New work groups
established
•
Meaningfully reduced
attrition
463 employees
2009
Expansion of
influence
and impact
•
Significant involvement
in collection strategy
•
Built analytics, IT and
bankruptcy servicing
teams
•
Invested in world-class
facility
891 employees
Note: Employees refers to the total site staffing number as of last working day of
the year 2010E +
Enabling
future growth
•
India is expected to
account for approximately
50% of all call center
collections in 2011
•
Fundamentally improved
internal cost to collect
•
Enhancing our ability to
purchase portfolios and
win new bankruptcy
servicing contracts
1,213 employees |
 19
India collections growth
THE INDIA SITE HAS INCREASED ITS OUTPUT BY 1,000% AND IS NOW EXPECTED TO
CONTRIBUTE 50% OR MORE OF ENCORE’S CALL CENTER COLLECTIONS IN 2011
(% of total AM headcount)
India AM* headcount as percentage of total
234
341
665
909E
Total India AM
headcount:
($ Millions)
* Note: AM stands for account manager, which can be used interchangeably with the
term collector |
 20
THIS GROWTH HAS ENABLED US TO REDUCE OUR INTERNAL, DIRECT COST-
TO-COLLECT BY 58% OVER THE LAST 4 YEARS
Variable cost to collect *
(%)
* Represents salaries, variable compensation and employee benefits
|
 21
ORIGINAL
SITE
CURRENT
SITE*
Available
capacity
Occupied
capacity
THE SCALE WE HAVE ACHIEVED IN OUR NEW BUILDING IS DRIVING MUCH OF
THE COST SAVINGS, WHILE PROVIDING ROOM FOR EXPANSION
386
1213
367
* Estimate as of last working day of the year |
 22
IN THE PROCESS, WE MAINTAINED OUR COST PER COLLECTION EMPLOYEE
DURING A PERIOD OF WAGE EXPANSION IN INDIA
*
Cost
per
FTE
is
a
monthly
figure
which
includes
all
India
site
costs |
 23
Delhi National Capital Region Population
21,000,000
Proficient in English
4,000,000
Employable / willing to work in BPOs
600,000
Employed in international BPOs
211,000
India site collector headcount budgeted Dec 2010
900+
Source: NASSCOM
DEMOGRAPHIC AND MACROECONOMIC CONDITIONS WILL EASILY
ACCOMMODATE FUTURE EXPANSION |
 24
Pay for Performance
Growth & Development
Employee Engagement
Employee Wellness
•
Variable compensation plans
foster a meritocracy and provide
significant incentives
•
Top performers earn 3 to 4 times
the India BPO sector average
•
Cultural events held frequently
to build camaraderie between
employees
•
Employee surveys done every
other year to gauge morale and
identify areas of improvement
•
Focused training designed to
facilitate the movement of
employees between work groups
•
Partnering with local universities
to provide on-site courses to
further our employees’
education
•
Employee Assistance Program
(EAP) instituted to support
employees’
needs
•
Programs like smoking cessation
and the introduction of an on-site
gym help promote wellness and
well-being in the workplace
WE HAVE CREATED A CORPORATE CULTURE DESIGNED TO ATTRACT AND
RETAIN TOP TALENT
The acronym “EG”
stands for “Encore Giants”
which is a term that refers to our India employees and that recognizes their
contribution to the Company’s success |
 25
AND OUR SOCIAL RESPONSIBILITY INITIATIVES HAVE HELPED BUILD BRAND
EQUITY IN THE COMMUNITY
WE INTEGRATE OUR
COMMUNITY OUTREACH
PROGRAM IN ALL OUR
ENGAGEMENT EFFORTS
EDUCATION IS ONE SOCIAL
CAUSE WE SUPPORT AS
AN ORGANIZATION |
 26
Account Manager hiring: Employee referrals
(%)
2009 India Engagement Scores (Internal)
(%)
*
MEU
represents
the
‘Most
Engaged
Units’
for
clients
of
Kenexa,
our
external
provider
of
industry
employee
survey
data
THE SUCCESS OF THESE INVESTMENTS CAN BE SEEN IN OUR EVOLVING
HIRING PRACTICES & THE LEVEL OF ENGAGEMENT OF OUR EMPLOYEES
Source: Encore Capital Group |
 27
Honing
Refining
On-the-job training in a
focused learning environment
Ongoing job skill training
•
6 months of concentrated
development
•
Needs based “capsule”
training to enhance
performance though skill
development
•
Integrated approach for
learning reinforcement
with Quality and
Operations teams
ONCE HIRED, SKILLS ARE NURTURED THROUGH STRUCTURED LEARNING AND
DEVELOPMENT
Learning
3 week new hire classroom
training
•
Business understanding
•
Functional & technical
knowledge
•
Compliance training
•
Basic job skill
development |
 28
1-
3 Months
4-
6 Months
7 -15 Months
15+ Months
Tenure
ONBOARDING SKILL
DEVELOPING SKILL
LEVERAGING SKILL
LOWER COLLECTABILITY
HIGHER COLLECTABILITY
ILLUSTRATION
MAINTAINING A STABLE WORKFORCE IS IMPORTANT, BECAUSE IT TAKES
ABOUT A YEAR FOR A COLLECTOR TO REACH THEIR FULL POTENTIAL
After
approximately 12
months, cash
average per AM
ramps
significantly
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5 |
 OUR
INVESTMENT IN PERSONNEL IN 2010 SHOULD BEGIN PAYING SIGNIFICANT DIVIDENDS IN
2011 29
Encore India Account Manager headcount and indicative cash average
Headcount (number); Cash average (indicative)
Source : Encore Capital Group |
 30
WE PLACE A SIGNIFICANT EMPHASIS ON COMPLIANCE |
 AGENDA
31
•
Discuss our rationale for choosing India
•
Highlight our business continuity plans and risk mitigation
strategies for our India operations
•
Provide an overview of the Business Process Outsourcing sector
•
Describe Encore’s success in India and discuss how our Indian
operations can continue to positively contribute to the Company's
future |
 32
WE HAVE A SYSTEMATIC RISK MANAGEMENT STRATEGY
COMPLIANCE AND
REPORTING
CURRENCY RISK
INDIA SITE
RISK
MANAGEMENT
STRATEGY
DATA
MANAGEMENT
ENVIRONMENTAL
THREATS |
 WITH A
SOPHISTICATED FRAMEWORK AROUND EACH AREA OF RISK 33
•
All consumer data resides in U.S.
•
Stringent controls around access to data
•
Zero tolerance policy on violations
Consumer data security
•
Systematic hedging program
Currency fluctuations
•
Segregation of duties / SOX controls
•
Periodic audits by KPMG
•
SAS 70 audits
Compliance & Internal control
Environmental risks
•
Comprehensive Business Continuity Plan
•
Redundant IT infrastructure
•
Strategically located site |
 34
We believe that we are the only company in our industry with a successful
late stage collection platform in India
India now represents half of our call center collections and we expect this
contribution to continue to increase, both on an absolute and a relative
basis
Beyond collections, our India site now directs several IT and other
administrative functions
The India management team has an average of 12 years of industry
experience and individual team members have worked for U.S.
multinationals including GE Capital, Dell, IBM, and American Express
SUMMARY |