8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): March 15, 2011

ENCORE CAPITAL GROUP, INC.

(Exact Name of Registrant as Specified in Charter)

Delaware	000-26489	48-1090909
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

8875 Aero Drive, Suite 200, San Diego, California	92123
(Address of Principal Executive Offices)	(Zip Code)

(877) 445-4581

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 7.01. Regulation FD Disclosure.

A copy of an investor slide presentation to be given by J. Brandon Black, President and Chief Executive Officer of Encore Capital Group, Inc., at an investor presentation on March 15, 2011, is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein solely for purposes of this Item 7.01.

The information in this Current Report on Form 8-K, including the information contained in Exhibit 99.1, is being furnished to the Securities and Exchange Commission pursuant to Item 7.01, and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by a specific reference in such filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit Number	Description
99.1	Investor slide presentation of Encore Capital Group, Inc. dated March 2011.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ENCORE CAPITAL GROUP, INC.
Date: March 15, 2011	/s/ Paul Grinberg
	Paul Grinberg
	Executive Vice President, Chief Financial Officer and Treasurer

EXHIBIT INDEX

Exhibit Number	Description
99.1	Investor slide presentation of Encore Capital Group, Inc. dated March 2011.

EX-99.1

Encore Capital Group Investor Presentation

March 15, 2011

Exhibit 99.1

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

1

FORWARD-LOOKING STATEMENTS

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.

INVESTMENT HIGHLIGHTS

2

•

Favorable supply and demand dynamics have existed since

2008, with only a few credible, large buyers

•

Strong performance is expected to continue

•

Operational

and

financial

leverage

is

increasing,

largely

due

to

our

successful operating center in India

•

Analytic insights inform our valuation and operating strategies

and allow for a closer partnership with consumers

ENCORE IS A LEADING PLAYER IN THE CONSUMER DEBT BUYING AND

RECOVERY INDUSTRY

3

Revenue Composition

As of December 31, 2010

Global Capabilities

95%

5%

Debt Purchasing & Collections

Bankruptcy Servicing

•

Purchase and collection

of

charged-off unsecured

consumer receivables

(primarily credit card)

•

Robust business model

emphasizing consumer

intelligence and

operational

specialization

•

Invested ~$1.8 billion to

acquire receivables with a face

value of ~$55 billion

•

Acquired ~33 million consumer

accounts since

inception

•

Process secured consumer bankruptcy accounts for leading

auto

lenders and other financial institutions

•

Proprietary software dedicated to bankruptcy servicing

•

Operational platform that integrates lenders, trustees,

and

consumers

Debt Purchasing & Collections

Bankruptcy Servicing

St Cloud, MN

Arlington, TX

Phoenix, AZ

Delhi, India

•

Call Center /

Technology Site

•

Call Center Site

•

Bankruptcy

Servicing

•

Call Center Site

San Diego,

CA

•

Headquarters

•

Call Center

Site

STRATEGIC DECISIONS MADE OVER THE PAST DECADE DEMONSTRATE

OUR ABILITY TO FORESEE AND ADAPT TO CHANGES

4

•

Hired first statisticians

•

Created first and second generation

forecasting models

•

Created 1 

generation operational

models

An Emerging

Market

2001

2003

•

In late 2005, we established a call center in

India. We believe

it is in the only late-stage

collections platform in India, at

approximately 1/3 the cost of our U.S.

operations.

•

Between 2005 and 2007 we remained

disciplined

and

avoided

high

priced

portfolios

that

did

not

meet

internal

hurdle

rates

•

In 2008 we built and implemented the industry’s

first known ability-to-pay (capability) model

Overconfidence and

Irrational Pricing

2005

2007

•

In 2009, we ramped up

purchasing

to take

advantage of the favorable

market environment

•

In

February

2010,

we

entered

into a new $327.5 million

revolving credit facility which

was subsequently increased

to $410.5 million and added

$75 million in two private

placement transactions with

Prudential

Significant

Opportunity

2011

2009

2002

2004

2006

2008

2010

Demand

Supply

st

(mail channel and call center)

2010

2009

YOY Growth

Annual Variance

$604,609

$116,817

24%

$487,792

Collections

$381,308

$64,889

21%

$316,419

Revenue

$346,656

$82,051

31%

$264,605 

Adjusted EBITDA*

$361,957 

$105,325

41%

$256,632

Purchases

$1.95

$0.58

42%

$1.37

EPS

($000s, except EPS and ratios)

THESE DECISIONS ARE DRIVING STRONG RESULTS

5

* Adjusted EBITDA is a non-GAAP number. The Company considers Adjusted EBITDA to be a meaningful indicator of operating performance and uses it as a measure to

assess the operating performance of the Company. See Reconciliation of Adjusted EBITDA to GAAP Net Income at the end of the presentation.

Q4 10

$149,181

$99,772

$83,888

$119,100 

$0.56

Q4 09 

$124,476

$81,552

$66,103

$40,952 

$0.34

WE HAVE SIGNIFICANTLY INCREASED BOTH OPERATING CASH FLOW

(ADJUSTED EBITDA) AND CASH COLLECTIONS

Adjusted EBITDA* and Gross Collections by quarter

($ millions)

* Adjusted EBITDA is a non-GAAP number. The Company considers Adjusted EBITDA to be a meaningful indicator of operating performance and uses it as a measure to

assess the operating performance of the Company. See Reconciliation of Adjusted EBITDA to GAAP Net Income at the end of the presentation.

6

$150

$200

$250

$300

$350

$400

$450

$500

$550

$600

2007

2008

2009

2010

Gross Collections

Adjusted  EBITDA

OUR OPERATING CASH FLOW IS IMPROVING PRIMARILY BECAUSE OF OUR

INDIA TEAM, WHICH IS PRODUCING HALF OF CALL CENTER COLLECTIONS

7

Collections from all call centers

($ millions)

$126

$157

$186

$268

Percent

of Total:

10%

19%

30%

44%

2007

2008

2009

2010

India

U.S.

THE INCREASED CONTRIBUTION FROM INDIA, HAS REDUCED OUR INTERNAL,

DIRECT COST-TO-COLLECT BY 58% OVER THE LAST 4 YEARS

Variable cost to collect *

* Represents salaries, variable compensation and employee benefits

8

51.5

50.2

47.6

43.7

5

10

15

20

25

2007

2008

2009

2010

40

44

48

52

Global Call Centers (LHS)

India Call Center (LHS)*

Total CTC (RHS)

(%)

AND THE TREND SHOULD CONTINUE, AS A SIGNIFICANT PORTION OF OUR

INDIA EMPLOYEES ARE STILL IN THEIR LEARNING CURVES

Encore India Account Manager headcount and indicative cash average

Headcount (number)*; Cash average (indicative)

*Headcount data as of 12/31/2010

9

50

100

150

200

250

300

0-3 Months

4-6 Months

7-15 Months

15+ Months

AM HC

Indicative cash average

Full

year

purchases

for

2008

-

2010

($ millions)

WE ARE INVESTING IN THE FUTURE THROUGH INCREASED PURCHASING

VOLUMES

$230.3

$362.0

$256.6

2008

2009

2010

10

Annual Estimated Remaining Gross Collection (ERC)

and Total Debt  ($ millions, at end of period)

WHICH HAS MEANINGFULLY ENHANCED THE COMPANY’S EMBEDDED

VALUE, WHILE MAINTAINING CONSERVATIVE RATIOS

11

* CTC = Cost-to-Collect    ** DTL = Deferred Tax Liability

$758

Net Debt +

DTL**

Taxes

(40% Rate)

Gross ERC

$1,389

40% CTC*

Net ERC

We are

approximately 1.9X

over-collateralized

Net

Debt

DTL**

$374

$18

($556)

($75)

Annual Estimated Remaining Net Collection (Net ERC)

and Net Debt  + Deferred Taxes ($ millions, at end of period)

$757

$892

$1,063

$1,160

$1,389

$179

$256

$304

$303

$385

2006

2007

2008

2009

2010

ERC

Debt

$392

WE BELIEVE THAT OUR CURRENT ESTIMATE OF REMAINING COLLECTIONS

IS CONSERVATIVE GIVEN OUR HISTORY

12

$-

$250

$500

$750

$1,000

$1,250

$1,500

$1,750

$2,000

$2,250

$2,500

$2,750

$3,000

$3,250

Cumulative collections (initial expectation vs. actual)

($ millions,

December

01

–

December

10)

Actual cash

collections

Initial

projections

MARKET DYNAMICS INFLUENCE OUR APPROACH TO THE BUSINESS

13

Charge-offs

remain

elevated

Consumer

credit continues

to experience

losses at near

record levels

Supply more

closely

managed by

the issuers

Demand

increasing, albeit

slowly

Few players with

access to

significant

amounts of capital

Continued exit of

large players, but

others starting to

gain traction

Consumer

performance

remains predictable

Our models continue

to predict consumer

behavior with a high

degree of accuracy

Significant

regulatory and

legislative scrutiny

Both in our industry

and in the financial

services sector at

large

DESPITE THE MACROECONOMIC HEADWINDS, OUR CONSUMER’S BEHAVIOR

REMAINS CONSISTENT

14

Metric

Recent trend

•

Payer rates

•

Slightly upward

•

Average payment size

•

Stable

•

Single vs. multi-payers

•

More payment plans

•

Broken payer rates

•

Mild improvement

•

Settlement rates

•

Upward trend

IN FACT, WE SAW IMPROVEMENT IN PAYER RATES OVER THE PRIOR YEAR

THROUGHOUT 2010

15

Overall payer rate for all active inventory

2008

2009

2010

WE UNDERSTAND OUR CONSUMERS ARE GOING THROUGH A DIFFICULT

TIME AND WE STRIVE TO IDENTIFY WAYS TO ENCOURAGE A DIALOGUE

16

Operational practices

Activity

•

Interest policy

•

Discounts

•

Outbound

communication

•

Work segmentation

•

We do not charge interest during the course of payment plans to

improve the likelihood that  consumers will be able to fulfill their

obligations

•

We consistently provide significant discounts to consumers in an

effort to establish a mutually beneficial negotiation

•

It is our policy not to leave messages on answering machines

(unless previous contact made) or intentionally contact third-

parties

out

of

respect

for

our

consumers’

privacy

•

We use our suite of powerful analytic scores to identify those

consumers that are unable to repay their obligations, and we

proactively choose to forgo all work effort either temporarily or

permanently

THESE PRACTICES HAVE ALLOWED US TO EFFECTIVELY HELP MILLIONS OF

CONSUMERS

Consumers with whom we have partnered to retire their debt (cumulative)

17

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

OUR OPERATIONAL SUCCESS IS BASED UPON FOUR STRATEGIC PRIORITIES

18

ENCORE’S

STRATEGIC

PILLARS

ANALYTIC

STRENGTH

COST

LEADERSHIP

CONSUMER

INTELLIGENCE

PRINCIPLED

INTENT

Offer

significant

discounts

and

plans

that

accommodate

many small payments

Focus on payment plans and

opportunities to build longer

relationships

with consumers

Hardship

strategies

Remind

consumers

of

their

obligation

through

legal

communications

Our

attempts

to

contact

or

work

with

consumers

are

typically

ignored,

and

the

legal

option

becomes

necessary

OUR ANALYTIC INSIGHTS ALLOW US TO MATCH OUR COLLECTION

APPROACH TO THE INDIVIDUAL CONSUMER’S PAYMENT BEHAVIOR

19

Strong

partnership

opportunities

with

willing

and able consumers

Willingness to pay

Is the debtor willing to resolve the debt on fair terms?

HIGH

HIGH

LOW

LOW

Core competency in understanding the

payer behavior of distressed consumers

Cross-channel

coordination

and optimization

Consumer

behavior

research

Market data

and insight

Portfolio

valuation

Pre-purchase

model

No effort

Legal

Outsourcing

Legal effort

model with

Capability

Call

Centers

Call effort

model with

Capability

Direct

Mail

Letter effort

model with

Capability

Collection

Agency

Outsourcing

Agency effort

model with

Capability

Collections operations that

optimize effort and profitability

OUR ANALYTIC REACH EXTENDS FROM PRE-PURCHASE THROUGHOUT OUR

ENTIRE OWNERSHIP PERIOD

20

Continuous feedback between

operations and valuation

Collections lift over deciles, comparing Encore’s ability-to-pay model against both

commercial scores and random servicing strategies

Commercial score 1

Random

servicing

Commercial score 2

Encore

AND IS SUPERIOR TO WHAT CAN BE ACQUIRED COMMERCIALLY

21

OUR CONSUMER-CENTRIC FOCUS ENABLES US TO PROACTIVELY DEAL

WITH THE INCREASING REGULATORY ACTIVITY

22

Technology

Proprietary software platforms allow the company to make

changes as new regulations and laws emerge

Sophisticated software and analytics platforms ensure that

all data-driven activities are compliant

Data management

Expanded legal and quality assurance teams partner with training

department to keep account managers abreast of changes

Training

Zero tolerance policy in place to address errors by account

managers

Self-discipline

SUMMARY

23

•

Strong performance is expected to continue

•

Operational and financial leverage is increasing, largely due to

our

successful operating center in India

•

Favorable supply and demand dynamics have existed since

2008, with only a few credible, large buyers

•

Analytic insights inform our valuation and operating strategies

and allow for a closer partnership with consumers

Reconciliation of Adjusted EBITDA to GAAP Net Income

(Unaudited, In Thousands)

Three Months Ended

Note:

The

periods

3/31/07

through

12/31/08

have

been

adjusted

to

reflect

the

retrospective

application

of

ASC

470-20

APPENDIX:  RECONCILIATION OF ADJUSTED EBITDA

24

3/31/07

6/30/07

9/30/07

12/31/07

3/31/08

6/30/08

9/30/08

12/31/08

3/31/09

6/30/09

9/30/09

12/31/09

3/31/10

6/30/10

9/30/10

12/31/10

GAAP net income, as reported

4,991

(1,515)

4,568

4,187

6,751

6,162

3,028

(2,095)

8,997

6,641

9,004

8,405

10,861

11,730

12,290

14,171

Interest expense

4,042

4,506

4,840

5,260

5,200

4,831

5,140

5,401

4,273

3,958

3,970

3,959

4,538

4,880

4,928

5,003

Contingent interest expense

3,235

888

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Pay-off of future contingent interest

-

11,733

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Provision for income taxes

3,437

(1,031)

1,315

2,777

4,509

4,225

2,408

(1,442)

5,973

4,166

5,948

4,609

6,490

6,749

6,632

9,075

Depreciation and amortization

869

840

833

810

722

766

674

652

623

620

652

697

673

752

816

958

Amount applied to principal on receivable portfolios

28,259

29,452

26,114

29,498

40,212

35,785

35,140

46,364

42,851

48,303

49,188

47,384

58,265

64,901

63,507

53,427

Stock-based compensation expense

801

1,204

1,281

1,001

1,094

1,228

860

382

1,080

994

1,261

1,049

1,761

1,446

1,549

1,254

Adjusted EBITDA

45,634

46,077

38,951

43,533

58,488

52,997

47,250

49,262

63,797

64,682

70,023

66,103

82,588

90,458

89,722

83,888