Encore Capital Group, Inc. (ECPG) Q3 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Encore Capital Group Third Quarter 2015 Quarterly Earnings Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference maybe recorded. I would now like to turn the conference over to our host of today's call, Mr. Bruce Thomas, Vice President of Investor Relations. You may begin.

Thank you, operator. Good afternoon, and welcome to Encore Capital Group's third quarter 2015 earnings call. With me on the call today, are Ken Vecchione, our President and Chief Executive Officer; Jonathan Clark, Executive Vice President and Chief Financial Officer; Ashish Masih, Executive Vice President, U.S. Debt Purchasing and Operations. Ken and Jon will make prepared remarks today, and 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 third quarter of 2015 and the third quarter of 2014. Today's discussion will include forward-looking statements subject to risks and uncertainties. Actual results could differ materially from these forward-looking statements. Please refer to our SEC filings for a detailed discussion of potential risks and uncertainties. During this call, we will use rounding and abbreviations for the sake of brevity. We will also be discussing non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are included in our earnings release, which was filed on Form 8-K earlier today. As a reminder, this conference call will also be made available for replay on the Investors section of our Web site, where we will also post our prepared remarks following the conclusion of this call. With that, let me turn the call over to Ken Vecchione, our President and Chief Executive Officer.

Thank you, Bruce, and good afternoon everyone. I appreciate everyone joining us this afternoon. After the market closed we posted our third quarter 2015 financial results and we are pleased with our performance. We once again established new records for adjusted income, non-GAAP economic EPS and adjusted EBITDA on a trailing 12 month basis. All progress in the third quarter was driven primarily by three of our strategic initiatives within the company. First, our international platform is delivering strong growth in collections, revenues, and earnings; second, we continued to expand our global footprint by entering new markets and by strengthening and widening our presence in geographies where we are already established. And told they are successfully sustaining our core U.S. business through sizable capital deployments and commitments for 2016 forward flows. Turning to our results, in the third quarter Encore recorded a GAAP loss of $0.43 per share driven primarily by a one-time after-tax charge of $42 million related to our settlement with the CFPD. The corresponding net loss was $11 million. Non-GAAP economic EPS reached a record $1.34 per share compared to $1.17 per share, an increase of 15% from the third quarter of 2014. This is the ninth consecutive quarter that we delivered double-digit economic EPS growth on a percentage basis. Adjusted income grew 12% over the last year to a record $34 million. Cash collections increased 4% to a record $422 million. Adjusted EBITDA, one of our most important measures of underlying performance grew to $268 million; an increase of 7%. On a trailing 12-month basis, adjusted EBITDA grew 9% to $1.053 billion compared to $963 million a year ago . Our overall cost to collect this quarter was 39.2%, up slightly from the 38.9% a year ago reflecting a higher concentration of legal collections compared to a year ago. Our estimated remaining collections or ERC at September 30 was approximately $5.7 billion, an increase of 10% or $526 million compared to the end of the third quarter of 2014. Deployments totaled $215 million in the quarter. In the U.S. the majority of the deployments represented charged off credit card paper mostly comprised of fresh accounts. This purchasing level reflects our substantial domestic market share and reinforces the fact that the U.S. core markets to provides us with solid opportunities to deploy capital. Our Propel subsidiary also purchased $28 million in tax liens during the third quarter. Our operations in Cabot and Grove deployed $42 million in Europe during the quarter. In Latin America we deployed $13 million. Approaching the unity expect to deploy capital in 2015 at a level that is consistent with the previous years' deployments in the U.S. and we remain on track to deploy capital globally within the $1.2 billion to $1.4 billion target range for the full-year. As you take a view towards 2016, committed contractual flows has positioned as well for the upcoming year. Issuers have become more comfortable lengthening their forward flow contracts with us as the ambiguity surrounding the regulatory environment has been resolved. We are no more convinced than ever that has to increased emphasis on compliance itself by the others in the industry, the mould around our business built upon debt compliance and risk management practices would only get wider and deeper enhancing the barriers to entry and competition within the U.S. market. The primary driver of our collection performance in Q3 was the continued growth of our international business over the past two years, our acquisitions around the world have expanded our footprint and provided Encore with greater optionality when we may capital allocation decision. Establishing leadership positions in the markets outside of the United States has been a primary goal of Encore’s overall growth strategy. In the third quarter, collections from our international business grew 23% compared to last year and now comprised 33% of our total collections, reflecting our continue growth outside of the United States. Most notably collections in Europe grew 26% in the third quarter compared to the last year. Our collection performance in the third quarter let us strong cash flows we generated $268 million of adjusted EBITDA, an increase of 7% over the third quarter of 2014. Adjusted EBITDA is one of the most important ways that we measure our company’s operating performance that helps us determine amounts of available for future purchases, capital expenditures, debt service, and taxes and it gives the investors a clear picture of the strong cash flow generated by our business. On a trailing 12-month basis, adjusted EBITDA grew 9% to over $1 billion. Cabot continues to improve its position in the growing UK market and delivering solid performance in the third quarter. Cabot's revenues grew 22% year-over-year while Cabot generated $123 million of collections in the third quarter of 2015 reflecting more than 20% growth in collections compared with the same period a year ago. To the end of the third quarter, Cabot has deployed approximately $335 million in 2015 including the portfolio purchase as part of the DLC acquisition. Cabot’s economic EPS contribution to Encore's results rose to $0.30 in the third quarter of 2015, up 43% compared to the $0.21 contribution from the same quarter a year ago. Cabot continues to enhance their collections through Marlin’s litigation focused capabilities. In October, we completed the acquisition of the controlling interest in Baycorp, a leader in the debt recovery solutions throughout Australia and New Zealand. Baycorp is well recognized by consumers in the region and is well respected by the issuers there. Baycorp holds a top four position in Australia and the clear number one in New Zealand. These are the two markets for Encore that are showing solid growth and possess promises and opportunities to continue to diversify geographically while growing and consolidating market share. Approximately one-third of Baycorp’s current business is in contingency collections. We expect to leverage Encore’s resources in India and the U.S. to support Baycorp becoming the leading debt specialist in the models. In September, we announced the settlement agreement with the CFPB that removes uncertainty that was associated with the Bureau Investigation of the debt buying industry. Importantly, through our settlement the industry received much needed clarity regarding the Bureau operational expectations in advance of their anticipated rule making due in 2016. In our discussions with the CFPB, we provided many detailed examples of our current collection practices believing that they should become the industry's new standards. Indications are that the issuers are adapting some of these same standards and will require mid-tier competitors to comply with these enhanced expectations. This is what we wanted and what we have worked towards for the past several years as the market leader in driving initiatives that protect consumer’s right in the debt recovery status. We introduced our Consumer Bill of Rights in 2011 and since then we have grown our business and improved our procedures with the ultimate goal of providing economic relief and empowerment to consumers so they can restore their personal, financial health. This principal intent remains an important footing upon which we built our company. I want to take a moment to address the events of the past couple of days. First, we welcome and fully support the FTC and their new initiative to crack down on abusive debt collectors who continue to give our important industry a poor reputation. We also applaud the FTC and their partners' efforts in establishing a clear, reasonable basis to collect. This is the cause that we have worked diligently towards so that we can assure the consumer really owes what we are trying to collect. While now since like the one made on Tuesday can cause a temporary dislocation of our stock price, we want to emphasize that we continue to differentiate ourselves within our industry by the level of investment that we have made in compliance and risk management. Alongside of our strong data analysts these investments represent a true competitor advantage. The star truth is that companies who want to compete with us going forward must also invest heavily in their own compliance capabilities. We made this in an intense area of focus for ourselves. The issuers appreciate our diligent approach and have begun to require it from our competitors and the regulators now demand it. This is the standard we have set in the industry. Cemented in place by our settlement with the CFPB. I will turn it over to John who will go through the financial results and then I will answer some of your questions.

Thank you, Ken. Before going into our financial results in detail I would like to remind you that it is required by US GAAP we are showing 100% of Cabot, Grove, and Refinancia's results in our financial statements. Where indicated, we will adjust the numbers to account for non-controlling interest. Ken covered some of the information about our third quarter collection during his remarks. Worldwide collections grew 4% to $422 million compared to $407 million in the third quarter of 2014. For the quarter our call centers contributed 44% of our total collections or approximately $188 million compared to 46% of total collections or $189 million in the same quarter a year ago. Legal channel collection accounted for 42% of total collections and grew to $179 million in the third quarter compared to $166 million and 41% of collections a year ago. Agency collection for the third quarter remained at 13% of total collections, the same percentage last year. In the past, as we have transition accounts weaved from collection agencies and on to our own platform the portion of collection from agencies has declined. However, in Q3 this impact was offset by the growth of gross businesses which employees agencies for collection. Revenue in the quarter was $288 million, an increase of 5% over the $273 million in the third quarter of 2014, excluding the allowance charge related to the CFPB revenues would have grown 8% in the quarter. International revenues grew 30% in Q3 driven by European revenues which grew 26% and Latin American revenues which nearly doubled when compared to the same quarter a year ago. Once again this quarter we had no performance related portfolio allowances but as Ken mentioned earlier as part of the one-time charge related to the CFPB settlement we did take an allowance of $8 million in Q3 reflecting the impact to revenues related to the consent order. Our overall revenue recognition rate excluding the effects of allowances and allowance reversals was 63.7% compared to 60.4% in the third quarter of 2014. We recorded $3 million of net portfolio allowances in the quarter compared to $6 million of net portfolio reversals in the third quarter of 2014, excluding the allowances related to settlement we recorded $5 million of net allowance reversals in Q3. As many of you know once we have evidence of sustained performance and approval we will increase that pools yield consistent with this practice and as a result of continued over-performance we increase yields in the third quarter primarily in the 2010 through 2014 vintages. Turing to cost to collect, excluding acquisitions related another one-time cost, our overall cost of collector third quarter was 39.2% compared to 38.9% in the same quarter year ago reflecting a higher concentration of legal collections occurring within our international business. While cost of collection is important metric we don't focus on it in isolation. Overall, financial success in our business is driven by generating the greatest net return per dollar invested. In some instances, it makes sense to spend more to collect more. I would also like to reiterate that our long stated preferences to work with our consumers to negotiate a mutually acceptable payment plan tailored to the personal financial situation. These plans almost always involve substantial discounts from whatever the consumer owes. We not only believe that this is the right thing to do for our consumer but the right thing to do for our business. For Encore, legal action is always the last resource and is pursued only after numerous attempts to communicate and reach an acceptable agreement with the consumer. Our estimated remaining collections or ERC at the end of the quarter was $5.7 billion an increase of 10% over the last year. ERC related to our international business has grown 27% over the last year driven primarily by the acquisition of DLC and the further application of Marlin's score card to Cabot's back book. We believe that our ERC which reflects the value of portfolios that have already acquired 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. In the third quarter, Cabot contributed $7.8 million of income to Encore's Q3 results which equates to $0.30 of economic earnings per share. This compares to $0.21 of economic EPS contribution in the third quarter a year ago, an increase of 43% Because we own our interest in Cabot together with our partner JC Flower's, Cabot's contribution to Encore's profit is calculated by backing out JC Flower's interest and management's interest along with the preferred equity certificates attributable to Encore, which eliminate in consolidation. For Encore as a whole, there were certain one-time and non-cash items that affected our results this quarter. In particular the one-time $42.6 million charge related to our settlement with CFPB and other state regulatory matters equates to $1.61 per share. $0.07 were related to non-cash interest and issuance costs associated with our convertible notes and $0.04 were related to one-time acquisition, integration and restructuring costs. Additionally $0.01 is related to including diluted potential shares from the GAAP loss per share calculation due to their anti-dilutive effect. After these adjustments, we ended up with $1.30 per fully diluted share and $1.34 on a non-GAAP economic basis. In calculating our EPS on a non-GAAP economic basis, we exclude those shares associated with our convertible debt that are reflected in our EPS denominator from an accounting perspective but which will not be issued as a result of the call spread we entered into at the time we issued the convert. For the third quarter, we excluded approximately 800,000 shares from the calculation as a result of the call spread. With that, I'd like to turn it back over to Ken.

Thanks, Jon. Before we wrap up our prepared comments, I’d like to summarize our third quarter progress and provide our outlook going forward. At first we grew economic EPS by 15% in Q3. Our competitive position in the U.S. is excellent. We made solid progress during Q3 regarding our domestic deployments and are on track to satisfy our full year purchasing goal in the U.S. In addition, we have already secured significant commitments toward our U.S. deployments for 2016. We also remain on track to deploy capital globally within the $1.2 billion to $1.4 billion target range for the full year of 2015. Our recent purchase of Baycorp has provided us with access to Australia and New Zealand, two new attractive growth markets for us with promising opportunities for growth, market consolidation and asset diversification. And lastly as we look at our [indiscernible] of companies our brands and our top market share positions and the growing list of countries in which we operate we sense the growing momentum as we head into 2016. With that operator we are happy to answer some questions.

[Operator Instructions] Our first question comes from David Scharf of JMP Securities. Your line is open.

Thanks for taking my call. I guess a couple of things, one: just focusing on the U.S. environment Ken, first on the purchasing side it looks like, did I hear that U.S. deployment was $160 million, was that correct?

That's yes but $28 million of that is propelled so you are looking at about 131 to 132 which is in U.S.

Got it. Still a very healthy figure and obviously we have still got some banks on the side lines. I am just curious anecdotally is it just lumpy quarter to quarter when portfolios are coming to you or do you get a sense that the banks that have been active for all year are starting to sell more and perhaps benefiting from a little bit of pick up in receivables growth at the issuers?

So those banks that have been selling have been pretty consistent throughout the year. What varies that time is sometimes they will do lump sales, bulk sales and sometimes they will do forward flow arrangements. So for example we could buy from an issuer at the end of Q2. But we may be buying for Q4 deployment. So that's been very consistent for us and we have seen enough of that forward flow commitment that we have purchased a reasonable amount as we move into 2016 which is giving us some enthusiasm as we move out of ’15 into ’16.

Got it. And shifting to the collection side, you noted a few times the channel mix shift, more weighted towards legal this particular quarter. Is this the kind of mix we should count on near term as we try to forecast just curious given that the consumer is a healthier these days why you are finding less call center versus legal in the near term?

So we have been doing a lot of consumer eccentric programs that allowed us to go back into older vintages and to harvest those vintages and at this moment we see investing more on the legal channel that's generating more collections. Now I will tell you recently, this is just the very recent trend where we actually see our call center collections picking up and our legal collections beginning to slow down a little bit. So David the simple answer is wherever there is MPV and positive MPV we will go and we will harvest that in our vintages and you could see some move between call centers and legal we have said in the beginning of the year that we are going to be a little bit more legal heavy and we have been but that doesn't mean that as we move into 2016 it will be the same way and in fact one would think that as more portfolios come to market and a lot of that is fresh portfolios we tend to put that into the call center and we tend to do better in the call center with pressure paper the more season paper we tend to do a little bit better through the legal channel.

Got it and just one last one and I will get back in the queue. As it relates to the UK pricing and competitive environment, can you provide us a little bit of an update? I know it's obviously gotten little more crowded field over there than last year?

Yes, so clearly I am a little bit well actually it's got more competitive. I won’t say it's got crowded because we have seen a lot of – some of the mid-tier competitors begin to disappear such as the DLT acquisition that we made but we see a strong or robust pipeline in the UK and we have already closed several portfolios early into Q4, pricing is certainly higher than when we first entered the market. So it's somewhat elevated. It is also competitive but we like where we sit in the marketplace, we like our relationship with the issuers and I think we will close out the year in rather good fashion as I talk about capital overall inclusive of the DLC acquisition.

Got it. Thank you.

And our next question comes from Hugh Miller of Macquarie. Your line is open.

I appreciate guys taking my questions. Just following up a little bit more on the European business, I think you guys have just noted that you guys closed several portfolios early in the quarter, can you talk about obviously in that area, Q4 is the seasonally strongest period for supply? How is supply trending relative to the prior year for Q4? Is it similar, greater, fewer?

So in the UK I would say it looks like it's trending a little bit more heavier this year than it was in previous years. I think you still see the benefit of financial institutions de-levering. You see credit and consumer lending is certainly improving in the UK which means that charge-offs will also begin to rise but this year there have been larger, bigger deals that have been available than in prior years and those larger bigger deals have usually invited a lot of competition and fierce pricing. We have kind of side steps some of those larger deals. We bought DLC for very attractive returns and by having bought DLC we have been able to go after some more of the smaller and medium term deals which maybe are not as sexy in terms of leading a lead table and how much you deploy but are very sexy in terms of the returns that we are getting. And then the other thing about the UK market and I have said this before, it's not unlike UK issuers to decide and pause and all of the sudden at the last moment not selling the particular half of the year and move it to the back half or back half into the next year.

Okay. that's certainly helpful I mean and so it seems like it's more the improvement in buying returns is more function of kind of the mix of the portfolio in Europe and we are hearing about one larger peer that might be more selective what capital deployment in 4Q and I was wondering in general would you say that the buying returns for kind of the normalized paper is still up despite that reduction in competition in 4Q?

I wouldn't say returns are up. I would say that the pricing has been up from the day we entered the market and our return expectation is down somewhat but we are finding pockets of opportunities in smaller and mid size deals. And that's where we have been looking and that's been having the DLC acquisition done in the middle of the year has given us more opportunity to pick out better returns.

Okay that's helpful and [Cross Talking] and shifting to the U.S. market, can you give us an update on kind of the timing we should think about for the two sidelined issuers and their potential return to the market?

Yes. I will say one of the two to me is far along and doing all the due-diligence it needs to do and setting up its processes and reaching out to issuers and doing everything one would have to do to come back to the market. I also think that with some of the recent clarity in the debt buying industry with the two settlements that were recently announced I think with a little bit more clarity maybe to a particular institutions owned flows and processes I think those things are all good that they get it behind them. They know what is expected of them and then they could prepare themselves, test what they need to test of the processes and then the roll-out selling. So how long would that means is sometime in ’16 we will ready for them when they come.

Okay. Your feeling now would be some time in ’16 as oppose to maybe it happening before yearend?

Yes I think that's there right now plus listen once you see Thanksgiving, things begin to slow down.

Okay. That’s helpful and you commented about firms getting more comfortable on forward flow commitments. You guys have been relatively stable for capital deployment in the U.S. aside from the potential for issuers maybe to return to the market as we just considered the ones that you are working with now given their willingness to kind of extend forward flows would you anticipate that you continue to see excluding that the other issuers relatively flat deployment in the U.S. or would you anticipate that we could see an uptake there?

I am sorry you mean an uptake to the entire industry? Is that what you were referencing?

In the industry your capital deployment in 2016 just excluding the impact of those two issuers sideline you had mentioned that you were seeing banks are getting more comfortable extending longer forward flow commitments. Would you anticipate that you would continue to see consistent capital deployment in the U.S. or you could potentially that as higher next year?

Yes, so I think this year based on our calculation there will be about $1.1 billion, $1.2 billion will be about $1.1 billion to $1.2 billion that will be deployed, it will be very close to 45% to 50% of that for 2015 in the deck that we just showed you if you go back we have been very consistent and what we deployed over the last three or four years and that's been without a couple of the large sidelined issuers. And from what I can see from the issuers they are active, they are selling sooner, they are selling more fresh paper which is right into our sweet spot. That’s why we bought ACF and we are doing very well with that fresh paper. So I see all those things happening to minimum. I see the market staying at least the same size and when the sidelined issuers come I think they are going to raise that level of capital deployment. The other thing that's kind of interesting is we always talk about compliance and risk management and even I sometimes inside the company wonder what am I getting for, what do I see from it. And now recently we have seen some of the mid-tier players be excluded from the issuers deployment cycle because they don't have the appropriate compliance and risk management processes or features in their program. So I think that's also going to help us. Even though we do have 45ish percent of the market we are still little bit more to get and I think some of those smaller or mid-tier players will not participate.

Okay that's helpful and then last from me is just on India you guys were on the [indiscernible] kind of looking at that venture. Are you buying with the in the JV and how are things setting up there? How should we think about capital deployment in that area next year?

Yes I don't think there will be any capital deployment this year. The regulatory process we are still going through it. We have gotten some of our approvals. We are waiting I think basically the last big one. We will see when that comes in, we are working with the government that always is a little bit slower. But I will say this into blue face the opportunity in India is so big that it won’t matter for three or six months late versus our projected start date. There will be plenty of opportunities by paper there. So we would hope that we will deploy money through our India SPV during 2016 but I am going to not give you any guidance as to when I think that is, I proven to be wrong on how to handicap regulatory approval from other governments.

Thank you very much. Appreciate the time.

[Operator Instructions] Our next question comes from Robert Dodd of Raymond James. Your line is open.

Yes. The regulatory impact potential in the market. We look back to at their last year, if you remember the timing like they've going to made this, and they get out to make some statements actually clarifying issues in the third quarter. But it made some banks kiddish at the end of the year as to settling into that until late double check or triple check or quadruple check at that point where they stood. Do you thing the comment, such you guess that which have no implications, have you collect other things but, do you thing they have any risk of causing some hesitation in the short term for some sellers as we get to the end of the year?

I think, most of the deployment has occurred for this year already. I would say about 90% of what's going to be sold has been sold. So I don't see it as an impact at all for this year. You opened up, it was a little choppy on our side, but I think you're kind of referring what the OCC put out the other day.

Yes-yes.

Okay, yes, and actually that plays into exactly where we are positioned. They talked about operational risk and reputational risk and compliance risk and strategic risks. Those were there four buckets. They come out last year and said basically the same thing which is, make sure your debt purchaser has the appropriate systems and controls that they are treating customers fairly and that you the issuer assessing the collection practices off the debt purchaser and make sure that you do your due diligence. On both things I can tell you the due diligence from the issuer's is more thorough, deeper, longer and comprehensive than it has ever been before. And that's good news for us because we tend to show very well in all that. And the more they're concerned about these particular issues, the happier we are, because that's our strength. And as I said this compliance and risk management is not going away. I just tried to give you a visual. The Moto around our company is getting wider, is getting deeper and if you don't invest in it and stay consistently invested in it, you can't compete in this market. So I think as the issue has come to us, they look at what we are doing and take it back to all their risk committees, there been very pleased of what they have seen and are now preparing themselves for I think most of the 2016 issuance. And that's why the fourth quarter are off to the fourth quarter has been very busy for us as the deployment has occurred and they are getting ready for next year. Hopefully that answered your question.

And our next question comes from Brian Hogan of William Blair, your line is open.

Can I get a little more commentary on the competitive environment. I think, Ken you just mentioned of the midtier players are being, can I exclude it from the sales at the current moment, I assume the U.S. but you kind of give a little more commentary on the competitive environment both two in U.S and UK and the other geographies?

So on the competitive environment, really two significant players collectively have 90% of the market from direct from issuer market. I don't see much of the changing. I think the fact that a couple of the midtier players are not in the rotation of the issuers is good. It just reinforces our position where we are today. Pricing is still elevated and it still competitive, that hasn't changed yet. I believe in more supply comes back for the market I think it was remarked to more pricing power for the debt purchasers, and we we’re well positioned for that. So I don't really think much has changed in terms of the competitive environment from the previous couple of quarters to where we are today other than the issuers are getting tighter and tighter on who they are doing business with.

Your conversations, obviously you settled with the CFTB and earlier in the past quarters, do you continue to have conversations with the CFTB?

No, actually what we are doing now is just preparing our remediation plans that we will need to submit to them and they will need to review and then sign off on, but it's all quiet on that front and we just expect -- as we said when we made an announcement we see more of it as fine-tuning as to what we were currently doing. But we do have to submit plans on how we are going to fine-tune our operations going forward and make restitution to the customers that we agree to. But we haven't been talking to them

Do you expect final rules from the CFTB for the NOC, I know that you said to look at the settlement with your peer and JP Morgan Chasers kind of rather example but do you still expect and put out final rules.

I read what you read, which is they're supposed to come out the end of '15 and early '16. We will take it to the Small Business Council for commentary. I don't think they finalize the rules under the end of '16. And this is my guess now. And maybe at the end of '16 they become effective, but I could see them becoming effective in 2017. Quite frankly from our vantage point what we are seeing they got their rulemaking through the settlements and it doesn't seem to be an emphasis for them at this moment.

All right, and then I mean you're doing a lot of things, a lot of interesting things globally; Mexico, I believe I think you are, and kind of go in there in India, Australia, Latin America. I guess my question is getting intrigued, and all these things are through JVs. From a management perspective, do you have enough capacity being the head of team?

Interesting, I would just break it down for you. In the UK we have got a very-very strong Cabot team that is able to run Cabot and also look at other European countries for acquisition going forward. So we have a pretty strong team there. We have been building up a second team, if you will, in India such that the first team led by Manu Ricky, our senior executive there and Jason Thomas our number two there, are now able to focus on the Encore's asset reconstruction company, that's debt purchasing in India, and also focused overseeing Baycorp. So we feel very comfortable that the investments that we made there are already working in terms of human capital. And right now in Latin America we are just making a few purchases on debt and you're working in looking at different services determining which servicer we want to align ourselves with. Using that works in our model is -- remember that we are owning a majority position, usually 50% maybe the growth case is 68%, but we have got existing shareholders that were there before us who are also very involved in running the business and they get the fee management, say more on a day-to-day basis. The way we run the companies is that we have a structured viewpoint on what we need to do with them every week and we have monthly business reviews, but we don't run day-to-day operations. But where we do get very-very involved is the distribution of capital. And we look at capital around the company, as we said before, we are asset managers and capital allocators and what our has the highest return gets off first pound, euro, Colombian peso, Mexican peso, Aussie dollar, you name it. And that's where we get far more involved. But the key to the all these acquisitions is having a very-very strong management team and a good board for corporate governance which we put in place.

I'm showing no further questions at this time. I would now like to turn the conference back to Ken Vecchione.

Thank you all for joining us today, and we look forward to talking to you after the New Year and everyone have a good holiday season coming up. Thanks again.