Encore Capital Group Inc (ECPG) 2013 Q1 法說會逐字稿

Good day ladies and gentlemen, and welcome to your Encore Capital Group first quarter 2013 earnings conference. (Operator Instructions). Now I would like to introduce your first host for today Adam Sragovicz. Please go ahead, sir.

Thank you, John.

Good afternoon and welcome to Encore Capital Group first quarter 2013 earnings conference call. With me on the call today are Brandon Black, our Chief Executive Officer; Ken Vecchione, our President; and Paul Grinberg, our Chief Financial Officer. Brandon, Ken and Paul will make prepared remarks, then we will be happy to take your questions.

Before we begin, we have a few housekeeping items. Unless otherwise noted, all comparisons made on this conference call will be between the first quarter of 2013 and the first quarter of 2012.

Throughout the call, we will use forward-looking statements including predictions, expectations, estimates or other information that might be considered forward-looking. While these forward-looking statements represent our current judgment, these statements are also subject to risks and uncertainties that may cause actual results to differ materially from statements being made today.

As a result, we caution you against placing undue reliance on these forward-looking statements, which speak only as of the date they are made. We will also use rounding and abbreviations in our conference call for the sake of brevity. For more detailed numbers and explanations, please refer to our Form 10-Q that will be filed later today with the SEC.

We will also be referencing both GAAP and non-GAAP financial results. We believe certain non-GAAP financial measures provide useful information about our business. However, the presentation of this additional information should not be considered an alternative to, or more meaningful than, our results prepared in accordance with GAAP.

Management utilizes adjusted EBITDA, which is similar to a financial measure contained in covenants used in our credit agreement in the evaluation of our operations and believes this measure is a useful indicator of our ability to generate cash collections in excess of operating expenses through the liquidation of our receivable portfolios.

We included information concerning adjusted operating expenses, excluding stock-based compensation expense, in order to facilitate a comparison of approximate cash costs to cash collections for the debt purchasing business in the periods presented. Once again, please be sure to see our Forms 10-K, 10-Q and other SEC filings, including a press release issued as an exhibit to our current report on Form 8-K filed today, which includes a reconciliation of non-GAAP financial measures for a more complete discussion of these factors and other risks.

As a reminder, this conference call will also be made available for replay on the Investors section of our website, and we also plan to post the prepared remarks following the conclusion of this call.

With that let me turn the call over to Brandon Black, our Chief Executive Officer.

Thank you, Adam, and good afternoon. I appreciate you joining us today to discuss Encore's first quarter results. Once again we maintained our consistent growth pattern by posting record results in the quarter. We achieved these results even as we consciously repositioned our purchasing activity in the anticipation of the closing of Asset Acceptance, and continued investing in corporate compliance and internal legal initiatives.

I want to first and foremost recognize and express my appreciation to our 2,800 employees around the world, who's dedication, hard work and perseverance helped make this quarter so successful. They continue to add to the solid foundation on which we will build Encore's future growth.

Our core business delivered strong results in the quarter. Collections reached an all time high of $270 million which is a 17% increase over the first quarter 2012. Operating cash flow or adjusted EBITDA was $174 million up 21% from 2012. We were able produce these collections while continuing to expand our operating margin. During the quarter our overall cost to collect ratio decreased 190 basis points to a record low of 36.5%. The growth in collections and improvement in cost-to-collect lead to earnings per share of $0.80. When taking into account non cash interest expense related to the convert and deal costs we achieved earnings of $0.86 per share.

The acquisition of Asset Acceptance has allowed us to be more selective about portfolio purchasing. In the quarter we deployed $59 million on new portfolios, and an Asset Acceptance deployed an additional $27 million on portfolios that we will manage after closing. Bringing the total combined investment to nearly $86 million.

We have spent the last few months finalizing plans for the integration. During that time we have created a detail work plan for each area of our business, have held joint planning sessions with key leaders of Asset Acceptance and have communicated with their employees on a regular basis. Despite the uncertainty the Asset Acceptance team has done a fantastic job of focusing on collecting and producing results consistent with our valuation expectations.

The integration is being lead by one of our most experience leaders Ashish Masih, who has been with Encore for almost 4 four years and the in the financial industry for 15 years. Ashish is particularly well suited for this transaction given his M&A and acquisition integration experience during his time at McKinsey and Capital One. We are also relocating another executive who has been at Encore for over a decade to Warren Michigan to manage their operations after the acquisition closes.

As we have demonstrated with previous acquisition of competitor inventories Encore's deep and experienced leadership team combined with our consumer level analytics and operational advantages will enable us to drive strong returns on large complicated transactions. We believe this acquisition marks the beginning of a new phase in our highly fragmented industry. A phase defined by more efficient companies committed to operating ethically and treating customers with respect. As we have consistently said success in our industry depends on three factors; an efficient operating platform, access to low cost capital, and a deep understanding of the financial distressed consumer.

We have also said that companies that lack these factors will find it difficult to survive in this competitive environment particularly as regulatory compliance becomes more and more complex. As we look into the future we believe Encore's ability to expand its market share will be enhanced as consolidation continues and competition for portfolio is reduced.

Turning to Propel. We continue to execute against our plan, which is three core elements; optimize in the tax lien transfer business in Texas, expanding the Texas model to other states, and acquiring tax certificates in those states with established practices. During the quarter we increased the book at Propel by 14%, began deploying capital on tax lien certificates in two states, and introduce legislation in six states. We are excited about both the near and long-term prospects at Propel, and we expect to be able to deploy significant capital over the next few years in the tax lien space.

Before turning the call over to Paul, I want to highlight some of the things we are seeing on the regulatory front. Coming off of an election year, we anticipate there will be a significant amount legislative activity, and this has proven to be accurate. However will bill have been introduced in 10 states most have stalled, been removed from consideration or been amended into an acceptable form. In partnership with our industry associations our government relations team has excellent job of educating legislators about the existing regulatory frame work and the untended consequences for consumers from certain bills as well as dispelling common misconceptions about the collection industry.

We have received many calls on one bill in New York that recently passed the general assembly and awaits consideration in the Senate. This bill has been introduces at least three other times in New York, but failed to reach the Governor's desk each time. And while still has many legislative hurdles I wanted to provide our insight on the proposal to shorten the statute of limitations. If the legislative passes, Encore would largely mitigate the impact through proactive account management and pricing decisions.

The real impact from a bill like this would be felt by the consumers of the state of New York. Instead of being able to partner with consumers to give them time to recover and pay their bills voluntarily, collections companies would be forced to accelerate the decision to pursue litigation. The only certain outcome of this bill is that far too many individuals would find themselves with a judgement on their credit report. For this reason Encore is working closely with legislatures and key stakeholders in an effort to provide a more balanced approach.

With that, I will turn the call over to Paul, who will discuss our financial result in more detail. Pall?

Thank you, Brandon. As Brandon discussed we had a very strong first quarter. Collections grew 17% to $270 million, adjusted EBITDA grew 21% to $174 million and earnings per fully diluted share adjusted for deal costs incurred during the quarter and non cash interest expense related to convert grew 23% to a record $0.86. On the operations front our cost to collect was the lowest in the Company's history at 36.5% down from 38.4%. Our efficient operating platform and low cost-to-collect were key factors in the Asset Acceptance transaction.

believe our cost advantage will enable us to extract more value out of the Asset Acceptance portfolio than any other bidder could have, and combined with our ability to generate incremental collections positions us to generate a strong return on this purchase and other opportunities as we see more industry consolidation.

The quarter's strong cash generation enabled us to deploy $59 million for purchases while net debt declined by $72 million. Although purchasing was lower this quarter than in comparative periods, this was a deliberate strategy in light of the Asset Acceptance acquisition. On a pro forma basis our combined purchase for the first quarter were almost $86 million. More importantly when we complete the Asset Acceptance acquisition later this quarter, subject to the final purchase price allocation, it will represent the equivalent of acquiring a portfolio in excess of $400 million. As such we expect that purchases during the second and third quarters will be less than historical levels. By the fourth quarter we would expect to be deploying capital as we would in any other period.

One of the many benefits we have created as a result of our consistent operating results is a strong partnership with our capital providers. During the past five years we have been able to increase our capital commitments from about $190 million in 2007 to over $800 million. The latest increase happened today when we closed on an additional $217.5 million in commitments and expanded the total facility to almost $1 billion. Funding the Asset Acceptance transaction will require a significant amount of capital somewhere in the magnitude of $300 million to $350 million depending on how many Asset Acceptance shareholders elect to take Encore's stock as part of the deal consideration.

This amendment to our facility gives us the committed capital to fund the deal and pursue additional opportunities on very attractive terms. We appreciate the support of our existing bank group, and welcome three of Asset Acceptance lenders; RBS Citizens, the private bank and flag start to our facility as well as two new lenders Raymond James and Torrey Pines Bank.

As part of the amendment we reloaded the accordion by $200 million expanding the total facility to $975 million and made certain amendments including the ability to raise additional junior capital as well as capital to fund our tax lien business. This access to additional capital affords Encore unparallel flexibility to execute its strategic plans and take advantage of market opportunities even after the acquisition of Asset Acceptance.

One of the metrics we monitor closely is our estimated remaining collections or ERC. At March 31st ERC was just under $2 billion. We believe that our ERC, which reflects the estimated remaining value of our existing is conservatively stated because of our cautious approach to setting initial curves and our practice of only increasing future expectations after a sustained period of over performance. Our pro forma ERC reflecting the acquisition Asset Acceptance will approach $3 billion.

Taking a closer look at our collections by channel. Our call centers contributed 46.8% of total collections or $127 million for the quarter, as compared to $110 million in 2012. Legal channel collections grew to $122 million in quarter compared to $110 million last year and accounted for 45.3% of total collection. The remaining 8% of collections came primarily from collection agencies. Direct cost per dollar collected in our call centers declined to 5.7% for the quarter from 5.9% in 2012. This improvement is largely the result of collection growth from our operation center in India which increased 12% from $59.5 million in 2012 to $66.4 million in 2013. India represented 52% of total call center collections during the quarter. Cost-to-collect in the legal channel in 2013 was 34.6% down from 35.3% in 2012.

Moving on, revenue from receivables portfolios in the quarter was $141 million an increase of 11% over the $126 million in 2012. As percentage of collections and excluding the affects of allowances the revenue recognition rate was 51.7% in the first quarter slightly lower than the 54.9% in the first quarter 2012. During the quarter we had $1 million net portfolio allowance reverse compared to $373,000 of allowances in 2012. Looking at the breakdown by pool, we had $459,000 of allowances in the 2006 vintage which were offset by $1.5 million in reversals. We had no allowance charges for the 2009, 2010, 2011, 2012 or 2013 vintages in the quarter as has been the case since we acquired these portfolios.

Revenue is impacted by the timing and volume of purchased. Since we expect to close the Asset Acceptance acquisition in June and as result expect lower levels of other purchases in the second quarter, we encourage investors to look at revenue over the course of the year rather than focus on quarterly levels. The Asset Acceptance acquisition will likely cause some lumpiness to revenue and earnings this year with the second quarter being impacted by our somewhat lower purchases year-to-date and integration expenses while the third and fourth quarter will benefit from the acquisition. Our outlook for all of 2013 excluding the impact of deal, transition and integration cost remain consistent with prior guidance.

Turning to Propel we continue to grow the book. The balance and property tax payments receivable grew from $135 million in December 31st to nearly $154 million at the end of the first quarter. Propel continues to generate earnings for Encore contributing $5.2 million in pre tax earnings or $0.13 in EPS over the last three full quarters of ownership. We will provide more details on Propel at our Investor Day in June.

The income tax provision in the quarter was $12.6 million reflecting an overall tax rate of 39.3%, as compared to 39.2% in the same period 2012.

Over the last few years we focused our business on developing more insights into the financially stressed consumer, improving our marketing efforts and operational models through analytical rigor and building a superior cost effective operating platform. These have all lead to record cash flows, strength in our balance sheet and as I mentioned earlier allowed us to be up a reservoir of value reflected in ERC.

Before we open up the call for questions, I wanted to turn it over Brandon to introduce Ken who will be our new CEO beginning in June. Brandon?

Thank you, Paul. It is a source of pride that with Encore's history of success we were able to attract a new CEO of the caliber of Ken Vecchione. Many of you have seen the press release announcing his coming on board and are aware of his extensive leadership experience at leading financial services firms. Since joining Ken and I have worked closely to ensure a seamless transition, and I look forward to the many contributions he will make to enhance the future of Encore. Ken?

Thank you, Brandon, and good afternoon everyone. And thanks again for joining us. It has been a month since I joined Encore, and I can tell you it has been extremely exciting as I have engaged with key leaders and people of the Company. It has also confirmed that I made the right choice in coming here. When I first heard about the opportunity and researched the Company, I was immediately intrigued. Here was a Company that was a leader in its space and had an outstanding track record of year-over-year growth across all metrics. Encore's share price has increased more than 270% over the past 5 years. Adjusted EBITDA has grown 27% annually over the past 5 years. These financial results were pretty compelling, so I looked deeper at what differentiates Encore from the rest of the industry and frankly that is when my interest turned to excitement.

Encore is the only company that puts the distressed consumer front and center through the Consumer Bill of Rights and the Consumer Credit Research Institute. This depth of knowledge and commitment to respectful consumer treatment are huge advantages especially as the industry continues to consolidate, and we find ourselves interacting with the same consumers over and over. Another key advantage is Encore's analytic strength, which allows us to buy the right portfolio at the right price, allocate accounts to the right channels, and optimize our collections. Perhaps most importantly in speaking with Brandon, Paul and the Board it became clear that Encore has an amazingly bright,talented workforce and a strong leadership team.

Together Encore's growth and financial performance combined with its operating advantages presented me with the opportunity to join a great Company with a bright future. It was an opportunity I couldn't pass up. For the past month I have been emerging myself in the business, doing a lot of listening and working side by side on a daily basis with Paul and Brandon. I have indepth meetings with each of the senior leaders been to most of the domestic sites, visited India, hosted dozens of town halls and met hundreds of employees.

My early days have only reinforced my initial assessment of the Company. I like the strategy and the direction of the Company. I am excited about the opportunities that lie ahead. I am invigorated by our leadership teams talent and skills. I look forward to working with the Encore team to drive its current strategy.

Finally I feel specially fortunate to have Brandon's partnership for such an extended period of time. I don't have to tell you how rare it is for a departed CFO to spend months working through a transition plan. Having Brandon on a three year consulting contract will allow me to reach out to him a solicit his counsel and advice as circumstances warren. Brandon's guidance will continue to be invaluable as I engage more deeply across the business in the coming months. I look forward to meeting you all at our Investor Day in June and in the days and weeks to come.

Operator, at this time could you please open up the line for questions.

(Operator Instructions). We will take our first question from David Scharf from JMP Securities. David, please go ahead.

Good afternoon, thanks for taking my questions. A few things first , Paul, I just wanted to make sure I jotted this down correctly as it relates to thinking about purchasing activity for the rest of the year. Did I hear you correctly that effectively after taking a breather in Q2 and Q3 that the fourth quarter at the juncture you should be deploying capital along the normal seasonal pace following the integration?

That is correct. We will be back in the market like we would in any typical fourth quarter at that time. And as flows come up for 2014 in Q4 and Q1 we want to make sure we are back in the market and bidding for all those forward flows.

Okay. Perfect. A question staying on AACC, as we look at the merger proxy if I looked at the analysis of ERC collectively in the proxy it looks like $1.1 billion, $1.2 billion and it looks like that is now attributable to finance receivable or a static pool of about $400 million. It looks like it is ultimately 2.5 to 3X purchase multiple. Is that the right way of looking at this, and does it suggest that there were uniquely attractively priced pieces of paper in there?

When we did our analysis of the transaction and we looked at Asset Acceptance portfolio our ERC from their portfolio at that time was about $1 billion. That was a couple of months ago. They certainly have collected since then, they have made additional purchases since then, so the ultimate ERC will be determined at the point when we close, when we go back and we reassess the activity since our evaluation day.

We think the amount we will allocated to the portfolio will be about $400 million and ERC will be about $1 billion give or take the activity that has taken place in the ensuing period of time. So I think your assessment of a multiple somewhere in 2.5 range give or take is probably about right. Again because a lot of activity has taken place since our evaluation date, it is difficult to put an exact number on it until we ultimately close and see what collections and purchasing activity have taken place over the interim.

Got it. And I am looking at my notes from the last call when the acquisition was announced. I think at that point I had jotted down you thought you could get the cost-to-collect on those operations basically in line with Encore's levels within about 9 months. Is that still a time frame you are comfortable with?

There abouts. We will share more information at the Investor Day around specific plans for the Asset Acceptance integration, but our goal is and our investment thesis was we would be able to take Asset Acceptance's portfolio because of the analytics we have collect more and reduce the costs because of the efficiencies we have built and our ability to understand which consumers to work with and which ones where there aren't value. So our goal is to reduce the cost and three quarters is probably a reasonably period of time to believe we will be able to get those collections to our average cost.

Okay. Two more quick ones. One, is there any commentary on the lower than usual yield in the quarter? We haven't seen the Q yet and the vintage analysis, but I know you book things cautiously, but did anything stand out?

Nothing stands out. We do as you stated book things cautiously. We continue to do that for the most recent vintages, and as we collect and hopefully over perform we will increase those yields over time as we have done in previous vintages.

Along with that is we actually had very strong collections in the quarter, so as you know when you outperform your curve you have collections and collection expense but you don't have the revenue. So we also just saw very strong performance across all vintages, which we feel very good about.

So basically it is the out performance, you keep the yield the same you just choice not to write it up effectively, which keeps them in your back pocket for future periods. Last and then I will get back in line just on the overall cost-to-collect which was so low this quarter, it looks like some of that is just a function of legal collections being a lower part of the mix than in previous quarters and obviously the ongoing shift to India. But is there anything on the macro side, anything on average payment size, settlement full, consumer behavior that is improving or is that still on the come?

I think we continue to see consistent consumer performance. We didn't see a major shift. It is our belief that over time we have continued to get smarter and smarter about how to deploy accounts in the right channel to maximum yield and minimize costs, and I think that is just an extension of that.

Got it. Thank as lot.

Thanks.

Thank you. We will take our next question from And we'll take our next question from Sameer Gokhale from Janney Capital.

Hello. This is Andrew Kerai calling in for Sameer Gokhale. Thank you for taking my question. The one question I had for you was that if you look at the income from the tax lien business, it was down modestly if you look sequential relative to Q4. I just wanted a little bit of additional color on that, given that -- if you could just remind us, I believe the first half of the year is seasonally strong for that business. So if you had a bit of additional color on that end.

Sure. The first part of the year is actually the point in time where we acquire new customers. The delinquent tax roll comes out in the first quarter. And so Propel spends virtually or the majority of the marketing dollars or customer acquisition dollars in the first and second quarter. So while the book has grown, expenses -- the earnings are a little bit lower because of all of the marketing expenses that we incur. So that is the typical seasonality that we see from Propel. So it is expected, it is budgeted for, and that is just how the business works.

Great. Thank you. And then I guess I just have a follow-up as well. You mentioned you had made some marginal investments in that business. When do you, I guess, expect those to kind of materialize? Is this something that we can maybe expect to see within the next 12 months or more of a longer-term objective there within Propel?

So I think with anything, we are going to ramp that up at a pace that we are comfortable with. We started small, we are investing, we are going to different geographies. But as we continue to come for it, I think you could see acceleration in that business. But we are just making sure that our models are right and our processes are set. And at that point, I think you should see an acceleration.

Great. Thank you for the additional color.

Thank you.

Thank you. We will take our next question from Hugh Miller from Sidoti. Please go ahead, Hugh.

I appreciate you taking my question. I wanted to circle back with a couple of questions on the Propel business. It seems like as we look at some of the data there, and I think what the previous question was referring to was the sequential decline in net revenue, is that just a function of very late in the quarter deployment of capital? The lien portfolio did expand nicely during the quarter. You had a 10% sequential decline in net revenue. I am just wondering, is that just a function of the business where the list comes out and you are acquiring these portfolios very late in the quarter?

It's more so a function of the fact that you get payoffs throughout the year. And during the period of time where you are acquiring fewer consumers, the payoffs outweigh the originations, and so that obviously impacts the revenue in that quarter. So as we now have built up the book and we are growing it further, you'll expect to see that reverse. So you'll see buildup of the book in the first, second, third quarter declining for the rest of the year, and the revenue will follow suit.

Got you. If I'm hearing you correctly, is it a function of people that you may have acquired as portfolio of or consumers that, the tax lien that you acquired in the previous period finally got their tax returns, those types of things and may have paid down the liability and then throughout the latter part of the quarter, you were expanding the portfolio.

The other thing is just from a timing perspective, the delinquent tax roll comes out early February. You have lots of marketing expense in February and March, and you are booking sort of start to push out there. So there is also the effect you were referring to, where you have a lot of expense before you actually start booking the accounts.

Sure. I was looking at the top line basis. That also leads to my other question about the 40% increase in the cost to run the business there for Propel. What percentage of that is marketing per se versus some of the costs that were from a legislative standpoint in order to advance on those fronts?

The largest component of it is marketing cost, as well as during this time of year, we bring onboard a number of temporary resources because of the volumes associated with originating new tax lien transfers. So it is the salaries or the employee costs associated with the temporary resources, as well as the marketing costs. That's the bulk of the increase in expense during the quarter.

Okay. Very helpful.

If you look at G&A Q4 to Q1 it is basically flat.

Okay. And just another question, on the purchasing environment you guys alluded to a touch. But are you guys seeing a reduction in purchasing competition from the credit issuers being a bit more selective? You kind of gave a longer-term outlook that you feel as though it'll be a positive for you. But are you starting to see any of that currently this year?

We are. It doesn't mean there's not sufficient demand to bid on portfolios, but certainly, we are seeing people be less aggressive. We see the banks actually take a much more concerted interest in who they sell to. I don't know if we've shared this before, but I think in the first 14 years I've been here, we were never audited by a bank. And in the last six months, we've been audited by three of them. So it's certainly changed. And we think it plays well into Encore's strengths, and that's why we're so bullish about the future.

Thank you. And I didn't get the breakout of the collections as you were talking with them, but I'll get them from the K tonight. But can you just talk about any influence that we did see from the tax returns being a touch below what they were in the prior year? Did that really influence collections? I know they were very strong overall in the quarter, but..

It did not.

Okay. And the last question I had is do you have any insight for us on how we should be thinking about the Asset Acceptance integration costs for 2Q and as we think about just for the remainder of the year?

Yes. We will provide some more details in our Investor Day. But I think the way I would think about it is that for the first couple of quarters, the cost-to-collect on the Asset Acceptance portfolio is going to be similar to what their cost-to-collect was as a stand alone business. And as we go through our plan of integrating parts of their operations into Encore, you'll see some of those costs decline.

And as David had mentioned on the first series of questions, we think that within three quarters or so, the cost-to-collect will be about where Encore's cost-to-collect is today. So I think as you model things out, go from what would be a typical cost-to-collect for Asset Acceptance in Q2 and then you can sort of reduce that over time and get to Encore's cost-to-collect in three-or-so quarters. There will be some other deal costs and related things like that which we will highlight for you, but those will be non recurring costs which will be onetime that we will incur.

Right. Do you have a sense of what those types of expenses will amount to?

We haven't shared those yet. We're working through all the details on that. And when we have more information to share, we'll do that.

Sure. one other quick question one for Ken. I was wondering with what he has seen coming onboard right now are there areas that he feels as though he will be able to strengthen the current executive team and areas he finds he might we be able to help with some improvement ? Is there anything he is noticing off the bat?

I would say what I'm pleasantly surprised about is how strong the management team is. And interesting about the team, they're a team of people that like to be a team of people. And what is really unusual is to find a lot of Type-A people that are very cooperative and that like to work together and collectively have a win. And I've been at a number of companies where that always hasn't been the case.

But in my four weeks here, I'm very surprised about that. And right now, my goal is to work on tactics, which is to make sure the Asset Acceptance deal works well, we continue to work on our cost-to-collect and we continue to be ready for the fourth quarter to grow our purchase volume. Absent that, I think some of the bigger questions I'll deal with on Investor Day.

Okay. Thank you very much.

Thank you.

Thank you. And our next question is from Mark Hughes from SunTrust. Mark, go ahead.

Thank you. Good afternoon Any commentary on the supply of paper or pricing in the quarter? You may have touched on this, you were not as active by design, but what are your observations about the flow?

The good news is we bid on everything. We just bid to high returns than we would've otherwise. It's our observation that pricing remains at levels that it remained at from last year. It's still very competitive. Yields are down for I think most of our competitors, which bodes well for us when we think about consolidation. On the supply front, again, not a lot of change. We continue to see supply come in that we are bidding on very actively. But I would say you have a fairly consistent picture from the fourth quarter, first quarter, fairly high pricing, some people stretching in places they probably shouldn't, but plenty of deals that are being bid on.

How about re-trade?

There continue to be companies in our space who are obviously under pressure, and we continue to talk with those companies. We see deals that get done. So like we saw in 2012, there is a flow of the re-trade deals. But I think again also competitive deals. It is the one place where we probably have an advantage, given the history of how we bought the Company and our ability to integrate complicated transactions. So it's out there, but I don't think there's any real story to draw from it.

How about the value of the property tax receivable $154 million this quarter. What was it in the first quarter of last year? Do you have that handy?

I think we, if my recollection is correct, the end of 2011 was $115-ish million. So I don't know exactly where it was at the end of the first quarter, probably not that different, but I don't have it in front of me

Okay. The interest rate we should apply to this balance is that similar, has that gone down with lower yields, or is that pretty steady?

It is relatively similar in the 13%-ish range.

Okay. Great. Thank you.

Thanks, Mark.

Thank you. Our next question comes from Mike Grondahl with Piper Jaffray.

Thanks for taking my questions. The first one, the $59 million in purchases, can you break that out between credit card, telecom and bankruptcy? And then secondly, how many states besides the two do you think you'll be in by year end with Propel?

So I'll answer the first question, let Brandon answer the second one. It was about $15 million of telecom and the rest was credit card, really, no bankruptcy of much size in the first quarter.

In terms of Propel we are actively engaging on all the deals that are out there. I expect we are in 5-ish by the end of the year, is the number I would say we are actively deploying capital.

Okay. 5-ish. Maybe lastly any new development or new learnings coming out of the research institute?

There are. We haven't published anything recently. But I know Chris is working on publishing a few things. So I'll actually have you wait till those come out in print. We have partners that we work with, and I don't think they'd appreciate me telling the world what those insights are before they get to write a report and put it out there in literature.

Okay. Fair enough.

Thank you. And our next and final question at the moment comes from Andrew Kerai from Janney Capital Markets.

Actually, this is Sameer Gokhale. I think the lines got crossed earlier with Andrew. So I just have a couple of questions and comments. Firstly, Brandon, I just want to acknowledge again the terrific work you've done, (Inaudible) happen. So congratulations to you on the great run of the Company. I know you are going to be around in a consulting capacity for some time, but I just wanted to still, again, acknowledge all the good work you've done at the Company. And then the other thing I wanted to do is just to address this question to Ken. Ken, it seems like given your background, you've clearly had experienced in (Inaudible).

You've you worked at Apollo, you recently were at a bank. So the question I have is after, interviewing for the job at Encore, I am sure you must have made some sort of Board presentation about where you want the Company to go over the next three to five years, aside from the near-term tactical stuff. So what can you share with us as far as what you envision this Company doing over the next three to five years in terms of newer businesses, newer products? Given your background, what can you share with us today?

Well, what I'm first doing is listening, and going around and seeing what the Company's strengths are and where the senior management team collectively would like to take the business. And I did not make any presentations to the Board about where the Encore is going to be in three to five years. We talked about many different aspects. And you'll see some of those flow out of our conversation on June 5th. So much like Brandon's conversation about the Credit Research Institute, that's what part of our conversation will be on the fifth. I've been working with the team to develop strategies and tactics, and I'll share them at that time.

Okay, that's helpful. And then just another question. Recently, there were some articles about payoff.com and your relationship with them. And it sounds like what you are doing is trying to really help your customers or your debtors rehabilitate their credit and really improve their finances and the like. And somehow, the press seemed to put that into something negative in terms of information sharing potentially by the debtors to Payoff and then that's not flowing to you. So I just want to clarify, in your arrangement with Payoff, is there any sort of arrangement where you get information about your customers that goes to Payoff that could be used in your collections effort on a customer-by-customer basis? I don't think that's the case, but I just want to get some clarifications.

Yes, there is no relationship where that happens. It's actually to the contrary, we set this up intentionally so that the consumers had an independent relationship with Payoff. We are literally trying to help them. And unfortunately, in America in 2013, the story that you make up is a lot better than the facts that are true, and I think that's the case here. And I know that we're disappointed in the article, but it was 100% factual inaccurate.

Okay, great. That is all I have. Thank you.

Thank you. And I'm showing no further questions at the moment. I'd like to turn it back to the hosts for any concluding remarks.

Thank you, everybody, for joining us today. You're not done with me yet. You have to see me a little bit in June, but I appreciate some of your comments and look forward to seeing everybody on June 5. Take care.

Okay. Ladies and gentlemen, this does conclude your conference. You may now disconnect, and have a great day.