Good day, ladies and gentlemen and welcome to the Encore Capital Group Fourth Quarter 2013 Earnings Conference 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 call is being recorded. I would now like to introduce your host for today’s conference, Adam Sragovicz. You may begin.

Thank you, Nicole. Good afternoon and welcome to Encore Capital Group’s fourth quarter and full year 2013 earnings call. With me on the call today are Ken Vecchione, our President and Chief Executive Officer; and Paul Grinberg, our Executive Vice President and Chief Financial Officer. Ken and Paul will make prepared remarks 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 full year of 2013 and the full year of 2012. 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. 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 website, 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, Adam and good afternoon. I appreciate everyone joining us for a discussion of our fourth quarter and full year results. For those of you who have been following our strong growth in 2013 and our activities in 2014, you know that we have been very busy. The fourth quarter concluded an outstanding year for Encore as our financial results for 2013 reflect the strength of our emerging global investments and servicing platform. This has been a time of significant change in our industry and today we will share with you how we are capitalizing on this change. We are building a diversified platform that will enable us to achieve our 15% earnings growth target. We will drive growth organically through our existing business and with new asset classes and geographies through strategic acquisitions. This approach positions us as one of the leading global specialty finance companies in the world. Now, I’d like to take a few minutes or highlight some significant achievements for the quarter and the year. As you can see, Encore had a record core. Our GAAP EPS from continuing operations was $0.87 per share compared to $0.79 per share in 2012. EPS on an economic basis and excluding one-time expenses and convertible non-cash interest was $1.5 per share compared $0.80 in 2012, an increase of 31%. Cash collections increased 52% to $351 million. The significant increase was driven by our acquisitions of Asset Acceptance and Cabot, both of which we will address in more detail as we move through the presentation. Adjusted EBITDA was $206 million, an increase of 53%. Our overall cost-to-collect decreased by 70 basis points from 2012 to 42.1%. With the acquisitions of Cabot and Asset Acceptance, our estimated remaining collections, or ERC at December 31 was approximately $4 billion. On a…

Thank you, Ken. As Ken discussed, we had a very strong fourth quarter and year reflecting strong performance from our core business and our recent acquisitions. Before I go into our financial results in detail, I would just like to remind you that as required by U.S. GAAP, we are showing 100% of Cabot’s results in our financial statements. Where indicated, we will adjust the numbers to account for our non-controlling interest. The Asset and Cabot acquisitions led to strong capital deployment in 2013. We invested $1.4 billion across all geographies in asset classes with $380 million associated with the Asset deal and $621 million attributable to Cabot. In the fourth quarter, we deployed $150 million across all business lines, with $97 million in the U.S., $35 million in the UK and Ireland and $18 million in Latin America. As we mentioned earlier this year, the Asset acquisition provided us with nearly $1 billion in ERC that returns much higher than we would have achieved have we been purchasing directly from issuers. This allowed us to be more strategic in our domestic purchases for the rest of 2013 and will allow us similar flexibility in 2014. That said we expect a solid purchasing year in 2014, but we anticipate then those issuers will return to the market this year, we also expect elevated pricing will continue. One of the reasons we have invested so heavily in other geographies and asset classes is to have the flexibility to deploy our capital, where we see the best returns or when warranted to buy strategically in the U.S. With elevated pricing, we also anticipate that 2014 will be a year of further industry consolidation as smaller players are unable to make the compliance and regulatory investments required by leading issuers. It is our…

Thanks Paul. As you can see 2013 and the first quarter of 2014 have been a very busy times at our company, we continue to position Encore to be successful on a go forward basis. Looking ahead, we are confident in Encore’s long-term prospects, our culture of continuous improvement which drives ever improving performance as demonstrated by our strong operating results and capital deployment. We continued to enhance our ability to take advantage of new opportunities as a result of our strong liquidity and solid access to capital. This quarter and the full year’s results demonstrate our acquisition activities continue to drive strong growth in cash flow, ERC and profit. Lastly with our recent geographic and asset diversification we are now truly a global company with investments in several asset classes and geographies which positions us for a strong earnings growth in 2014 and beyond. And with that operator please open up the lines and we will be happy to answer any questions.

Thank you. (Operator Instructions) Our first question comes from the line of Robert Dodd of Raymond James. Your line is now open.

Hi, guys. Congratulations on the (whole) acquisitions that you have been very busy. Could you give us anymore color on just the reporting that we are going to see obviously you have just – when we bought in Marlin, Grove and Refinancia particularly you said Encore will be purchasing those assets into services, so how are those going to be – are they going to be held by the U.S. entity and are you going separate out an international segment or break it up by geography anymore color you can give us there will be very helpful at this point?

So Grove and Refinancia will be held by the U.S. company but through Luxembourg subsidiary. In Grove’s case and a Colombian subsidiary in Refinancia’s case we will be consolidating the operations of both Grove and Refinancia. And we will show a non-controlling interest for that portion of those businesses, which we don’t own. The portfolio that we acquire for both of those entities will again be held in SPVs. So we won’t be doing capital deployment through either Grove or Refinancia, but they will be done through SPVs Encore will be deploying all of the capital associated with Refinancia and the bulk of the capital associated with Grove although Grove’s minority shareholders will participate in some of those purchases with us. From a reporting perspective we are likely to show UK operations will show as it gets material separating between bankruptcy and non-bankruptcy as we do in the United States. For Refinancia until it becomes material it will likely be just included within our core operations, but at a point in time where it becomes larger as a percentage of our business then we would break it out.

Okay. Great, thank you. On Refinancia is kind of you made some comments about de-factoring a little bit of credit cards product etcetera and maybe that could be expanded to your other geographies, any color on timing? Obviously, it’s very early days, its own business and there is a lot of work to be done, but I mean that’s obviously could be some significant and incremental products added to either UK or the U.S. market, give us more color there?

Yes, you are right, there is great opportunity to deploy their knowledge base throughout the rest of our companies and geographies. We just closed on Refinancia December 1. So we are in the infancy of understanding what they are doing, their credit card book of business literally is under 2,000 accounts. What we see is, we love it, but that’s just 2,000 accounts. We like what they are doing with their factoring and check guaranteeing business for merchants in Colombia. My guess is as we look to move out of Colombia and Peru into Brazil that will be some of the first places you will see us take those products and extend them out into Latin America first. Lending is always something we chat about here and we will probably have little more comments about that as we get closer to our Investor Day. But I think you are going to see a slow rollout of most of the services of Refinancia at first.

Okay, prefect. I will hop back in the queue. Thanks.

Okay, thank you.

Thank you. Our next question comes from the line of Bob Napoli of William Blair. Your line is now open.

Thank you. Gee, not much to ask questions about this quarter. Did I hear you say you did a Propel deal as well that Propel bought a competitor?

Yes, they bought a small competitor $35 million which while small in size really moves Propel’s EPS contribution in 2014 for the company. So – but Propel whether it be Propel or whether it be Cabot, Refinancia, Grove, we buy these deals, we buy these companies with the ability to grow organically and have the right platform that we can consolidate upon and Propel is a good example of that as we see consolidation in the Texas tax lien transfer business.

So you bought an account of $35 million portfolio?

Largely it was a portfolio there is – the bulk of that $35 million was allocated to portfolio. There is a few million dollars that were allocated on that, but it was largely the portfolio.

Then the IVA deal with Grove what did they, what did Grove have before what kind of history do you have and what kind of volume do you expect, I mean you have already started purchasing out of Grove you said, so what kind of purchase volume do you expect out of Grove?

Let me just clear, we started purchasing with Refinancia. With Grove, they – we expect them to deploy $50 million going forward on an annual basis, could be a little more depending on the market size and…

What did they do in the past, how long have they been doing it?

They have been doing it for several years about three years, they have deployed over £100 million to-date and we will put it in other SPVs. So on day one when we buy the management company, we will be getting 68% of the management fees that support the servicing of those SPVs, but going forward as we do deals, we will get the bulk of earnings from those deals. The Grove existing shareholders have the right to tag along with us and invest if they wish.

And just to get a feeling, your target to grow earnings by 15%, you said I mean this year your adjusted earnings per share was $3.86 and that’s the number you would expect to grow – you would hope to grow by 15% in 2014?

That’s correct.

What gives you confidence that in the U.S. that you are going to see JPMorgan, Bank of America, Wells back in the market?

Well, I will say two out of those three I don’t think are coming back into the market in 2014. And if they do, it will be the end of the ‘14, most probably early ‘15. One of those three has been rumored to be coming back for some time, but is yet to show up. So a couple of reasons why we are confident? Number one, we saw this trend early on. And hence we got ahead of it by buying Asset with a very strong multiple and Asset continues to be a strong contributor to our earnings as we move throughout 2014. Second, Cabot was another reason. Another reason, we purchased Cabot was to get ahead of sort of the slowdown that we saw in the U.S. in terms of supply. So supply is contracting, there is some scarcity value, pricing is being elevated, returns are coming down, but between Asset and Cabot, we saw better returns and better opportunities to deploy our monies there. And then as we said about two weeks ago, now it seems almost of a lifetime, but when we announced the Marlin deal that we are going to use some of the Marlin EPS that we are going to generate to ensure that we grow 15% this year. So we will be a little less dependent on the U.S. It doesn’t mean we are going to be absent the U.S. market at all. We have been actually very active so far, but it gives us, as I said earlier optionality to move into different markets in different geographies.

And then the last question on the deal for Refinancia, how long have they been in business and what kind of history database, do you have? What’s the market like there, what are the returns like, what kind of database you have, so how long they have been in business, what do you see as the IRRs there versus the other places in the world and how confident are you? How much history it gives you how much confidence I guess?

Yes. We will put this question up between Paul and I, but on the return side, we have been investing with them for the last year plus and what I will say is the IRR returns are far in excess of what we are seeing in the U.S. and the UK. The best way I could describe them is they are juicy, okay. And that’s why we like being in the market. They have today I think have deployed about $165 million in different SPVs, so much like growth. We are buying the management company in which we will get 50% of the income from a management company, but we get 100% of the deployment of the capital. Do you want to do some…

Yes, I think they have around Bob for about 7 or 8 years or so and have been ramping up the deployment of capital in both of those markets. So they have got a very long history of deploying capital. And similar to our approach, they are valuing portfolios at the consumer level. They are making decisions around how to collect at the consumer levels. They share a lot of our perspective on both analytics, on cost efficiencies and on treating consumers fairly. So there were lot of things that aligned as we started having discussions nearly two years ago with them about potentially doing something together.

I just want to bring on one thing with Refinancia, what’s different is with acquisitions sometimes there is always a short period to get to know them. So basically you get married and then you learn to fall in love with acquisitions. With Refinancia since we have been working with them for over a year, maybe closer to a year and a half working with them and valuing portfolios and working with them, their investment committee working with our investment committee, we really have a long lead time here to get to know them and understand how they think and to trade best practices and understand markets between Encore and Refinancia. So what I like about the transaction is that we really had a long look into their business for a little over a year, maybe year and a half.

And how do you think you will buy out of Refinancia this year, I mean just…

I think we will do about $40 million and they own the market share position in Colombia is about 39% and the market share position in Peru because they also do business in Peru is 56%, I think I will have to give you a quote on that, but I think it’s 56% in Peru – I am sorry 54% for Peru.

Great, thank you very much.

Thank you.

Thank you. Our next question comes from the line of David Scharf of JMP Securities. Your line is now open.

Hi, good afternoon. Once again where to start, Ken or Paul, I wonder if you can comment on actually the UK pricing environment, because obviously, not just Encore, but along with your other public competitor, you have seen five acquisitions entering that market in a short period of time, plus you have got Arrow as a newly invented public company there, so a lot of capital flowing into that market. Have you yet to see that manifest itself in any of the kind of pricing pressures that you have seen in the U.S. admittedly for different reasons?

Yes. So far mix, certain bids not much pressure, certain bids you are beginning to see pressure. But I would suggest that much like the U.S. market over time, you will see elevated pricing as new entries into the market and people that are public or companies that expect to go public there is a pipeline of rumors of who is going to be coming. We will look to all feed there, multiples or projected multiples and it would not surprise me if pricing would continue to stay elevated and returns will come down somewhat. Offsetting that is that there is a greater supply in the UK coming out today and there is a greater stock of supply that has to be released as well, as UK banks try to come under the new capital levels. So that should offset some of the pricing pressure, but I think you should expect over time that the market will follow something of the model to U.S. I don’t think it’s going to move as quickly as the U.S., but over time I think it will look a little bit more like the U.S.

And David, one of the reasons that we were focused on executing on the Marlin acquisition was so that we had a full suite of collection strategies that we could bring to bear. So we have the call center and the expertise of Cabot in the semi-performing states, Encore brings to that, India which enables us to collect older portfolio, lower balanced portfolio and semi-performing portfolio at a lower cost. Marlin brings the litigation platform, which allows us to collect on a significant volume of accounts that frankly prior to the acquisition of Marlin we wouldn’t be able to generate any net liquidation from. So Marlin adds both a lot to our existing ERC, but also as we go forward and bid, we are going to have the benefit of all of the strategies for generating liquidation and that will result in what we believe to be better yields than others will be able to sustain in that market.

I should say that it’s an interesting question and let me just add one last thing, the difference between the UK market and the U.S., at least for us we are buying a lot of semi-performing paper in the UK. So once you get that paper, you have it for the next 10 years and it’s paying over time. So we kind of anticipated that a little bit and wanted to be one of the first to move in the market in order to take advantage of that and then look to use our Cabot operations – sorry, India Cabot operations is the way we are describing it to continue to lower our cost base, so that we can remain competitive.

Got it, got it. And you gave the expected capital deployment for Refinancia and Grove and I know Cabot had been putting about £100 million to use per year, I guess, leading up to the acquisition, what kind of figure from Marlin should we be thinking about this year?

What we will do as we do every year, Dave, is give you a sense of total deployment and we will split it by geographies at our Investor Day on June 5.

Got it.

And we will share and talk about Propel, talk about Cabot, Marlin and also have some more color on where Grove and Refinancia will be.

Okay. And switching to the U.S. back to the question Bob asked about whether we see some big sellers return to the market. I have been talking to a number of collection companies and debt buyers and it seems like some are insinuating that the banks are more focused on getting CFPB rulemaking out of the way once there is some clarity, there is a roadmap for hopefully a quick return to the market. Others are saying that now it’s really the OCC guidelines dating back to last year that they are still vague enough and open ended enough that the banks just seem to be kind of caught in some inertia. Do you have an opinion are you getting feedback from the banks, are they all different, are they all focused on kind of one thing more than the other, because I am trying to get a sense of ultimately what might be the catalyst for a return of the market?

Yes, so I will say right now things are quiet, which is nice. We have had about 11 issuer audits in the last quarter. We did very well with them and we seem to be – and all the issuers seem to be saying that there is only going to be a handful of people they are going to sell to and we are one of them. So that’s our good news. What comes first CFPB or the OCC, a little hard to say and it’s almost sort of on a point by point basis, but if I had to make a generalization I would say that the banks are being driven a little more by the OCC, but the OCC is probably taking some input or taking some suggestions from the CFPB. But hard for me to see it fully sitting here, what we do is, we respond to the risk metrics and the compliance questions and issues that they have for us and we respond for it that way and we are really not asking who is asking this ultimate question. But my guess is the OCC is probably taking a little bit more of a lead there. But that’s just a former banker taking a guess.

And then our focus is to make sure that whenever the issuers that are on the sideline do come back to the market we have done everything that we need to up to that point so that there is no question that Encore is on the very short list to sell to. So when they are ready to come back we will be positioned to buy from them.

Got it. And since the latest round of audits, these 11 that occurred in the last quarter, I know this was a hot topic a quarter ago, but I will kind of have to throw it out again. Have any of them taken a hard look at the off-shoring commentary any way in the guidelines?

No, I think we gave you guidance last time that there were two banks that wanted to do on-shoring and we are going to accommodate them. One of those two hasn’t really come to the market, so there hasn’t been much accommodation yet. But we will accommodate them. And I think some of that is just temporary for them. And eventually once they get through a couple of rounds with buying with us, we will get them comfortable. Hopefully, we will get them comfortable with India and this won’t be an issue. So there hasn’t been any more conversation really since the last time we have discussed this.

Great. And then speaking to India, is it too early Ken to gauge whether or not the Indian based collection efforts for Cabot are running as expected, I know it’s very early in the process and when the company first moved to India, there was a long period of trail and error, but any observation so far?

Yes, we had our morning meeting about it today. So it’s been three weeks up and running, and so I will give you some general facts because percentages will move too quickly in the early stages. But we are – we Cabot India, they are performing better than the standard Cabot has set for both collections and quality. Now, we are trying to determine was it because we have had some of our best collectors or is it that we have really got some of the nuances down and we are really beginning to make a lot of progress. So we are proud that what was going to happen – getting Cabot in the up and running at the end of Q1 was moved to January 20. And we will have a little more to say about that as time goes on, but right now all the initial indications are pretty positive. But as I said still small sample group and we are learning our way through this, but I like what I am hearing.

Got it. And Paul just to confirm when asked about kind of how things are going to be reported going forward in the Qs that come out this year, are we just going to see vintage analysis by country, I mean is there basically going to be a U.S. core and bankruptcy and then kind of UK consolidated?

Well, as it becomes materially our UK core and bankruptcy as well, but that we can show the differences between the two.

But as the – but would we expect Cabot, Marlin and Grove all to be kind of consolidate initially?

Initially, it will be when Grove when IVAs become more material then we will break it out.

Okay. And then it sounds like Refinancia over you – will actually be captured in the U.S.?

That’s right and that’s where it has been captured since we started acquiring portfolios in Colombia and Peru, which the first one we did was over a year ago.

And I will just I will just correct on one thing Cabot and Marlin is just one company, so we are not differentiating what’s coming from Marlin now, what was coming from Cabot. We will be out there in two weeks from now or three weeks from now out to do the Board meeting, our first combined Board meeting to set new budgets and we are happy that there will be just one number that we are going to be looking for. So we are not going to be dividing this between Marlin and Cabot. We are going to talk about it as just one company.

Got it, got it. Thanks very much.

Okay, thanks. You’re welcome.

Thank you. Your next question comes from line of Sameer Gokhale of Janney Montgomery. Your line is now open.

Thank you. I just got a question about how much you gave for Grove and Refinancia I apologize if it’s in the slide, but I missed that and I was just trying to get a sense for the multiple as a percentage of ERC, I don’t have that handy, but I just want to calculate some of the metrics there, if you are able to share those?

We talked about the purchase price for Refinancia which was about $15 million little bit less, but that was, that’s effectively primary equity going into the business, so the owners of that of Refinancia did not take any money off the table, so that went directly into the business. Grove is largely a servicer though there is about $10 million or so of ERC that will get with that transaction, but it's largely the acquisition of a servicing platform. With Grove we didn’t disclose specifically what their purchase price was for that, it’s less than Refinancia. But again we are just acquiring a servicing platform, but we are not getting portfolio because Grove the capital invested in acquiring IVAs were done through SPVs and then serviced by Grove which is how we will be doing it going forward.

Okay, that’s helpful. And then in terms of the operations in Peru and Colombia, I mean is their thinking that with the acquisition of Refinancia maybe there is some things that you could take from those two markets and then apply them to the India market, you said you will start purchasing April or I think earlier this year, do you find those markets to be fairly similar where or are those quite different?

Interesting question, I don’t think we have any answer to that yet. We are still in the process of setting up the Indian business, its complicated rules there. And we probably won’t know anything for certain, if there is any cross learnings to be shared until some time into 2015. We won’t probably, it would be good to go with the Indian business until the very, very back part of the end of the year. So if we buy a few dollars at the end of the year, great, buts it’s really you will see most of our buying happening in 2015 and that market is slightly different. And we will explain what that market looks like again on Investor Day, but I don’t necessarily know that there is going to be any initial learnings that we are going to be able to swap. I think maybe over time its going to be interesting to see the analytic group of Marlin, Cabot, Encore and Refinancia begin to share stuff. We are hoping that there is going to be knowledge transfer there but we will wait and see on that and we will give more color as we go along.

As Ken mentioned earlier, I think the learnings are likely to come from the three lending businesses that Refinancia has and as we continued to learn more about that seeing how we can apply those products and offerings to other parts of our business.

Okay, thank you. And then just to think about the purchasing, I think Paul in the U.S. I think I believe you said you deployed what was it $97 million in the fourth quarter for purchases, is that right?

Yes, that’s for our core business and for Propel.

And for Propel, so should we expect that to be roughly kind of the run rate going forward, because I guess Propel also had been an acquisition that you made in Texas, so let’s say ex-Propel if you were to just look at the core kind of purchases you see in this market, would you expect that to go down in 2014, just given the pricing environment or stable offset by Grove and Propel and some of the other acquisitions. I mean I am just trying to get a handle how to think about of course this is in the core U.S. market in 2014?

But what we have done every year is provide more detailed guidance on purchasing at the Investor Day in June, because we do see opportunities from issuers. We also see a lot of consolidation in the market and some of the smaller competitors are making decisions to exit the market. We are able to execute on the Asset deal last year, which was a large competitor exiting the market, but getting clarity on a specific number will depend on how many of those come to market, whether we are successful at any of those, we will have some good clarity on our U.S. deployment at our Investor Day. I think for now we did give some general guidance on what should be a typical year for capital deployment in each one of our markets. We gave that last June what it should be on an ongoing basis and nothing has changed since then, but to get specific on where it will be this year, I think we will give you more guidance in June.

Okay, fair enough. And then in terms of capital management, I mean you have made these acquisitions diversify and sort of view the optionality of your largest competitors is doing the same thing, but at what point do you feel, because you have got these partial stakes in companies and it seems like buying out the remaining stakes also at some point could make sense where you could deliver maybe some sort of EPS benefit depending on how those acquisitions are funded, but on the flip side, you also have with all this cash coming in the opportunity to buyback stock. So again as we look out the next year or two is the assumption essentially that you will probably exercise your option to pull the trigger on some of the other remaining stake that you have if you haven’t already acquired and that we still buyback stock is still kind of maybe off the table for the foreseeable future, is that the way you think about that?

I think you have that right. Right now, the acquisitions perform the way we expected. We would expect over the next couple of years to be buying up our positions in Cabot and in Refinancia and Grove. And as long as those returns are far better than the returns of buying back our stock, I think that’s the path we are going to go down.

Okay. Alright, well thank you very much.

Thank you.

Thanks, Sameer.

Thank you. And our next question comes from the line of Mark Hughes of SunTrust. Your line is now open.

Thank you very much. What should we expect in the non-controlling interest line off of the tax rate going forward?

So I don’t know if there is anything we can expect from the non-controlling interest line. What I would say Mark is that we have shown what the contribution is from Cabot for the last two quarters of this year and I think that will continue into 2014. Our goal is with the acquisition of Marlin that should improve from where it was at the back half of this year. From a tax rate perspective, it’s going to be in the 39% range give or take as things move from quarter-to-quarter, but it will be somewhere in that ballpark.

Give little more specifics on the degree of the inflation in the cost of the portfolios in the fourth quarter, was it a continuation of the trend that you have seen, was it a significant acceleration, how would you characterize it?

I would just say continuation of the trend. I think you guys all know the influences they are all complaining together, less supply, two major issuers early out of the market, another one not coming back to the market yet. And you still have some smaller guys hanging around the hoop, as I would call it, trying to put some bids in and pushing the price up somewhat. So I think those are all the things that are happening in the market and the pricing hasn’t come down, it continues to move up.

If I am clear you said that the Refinancia had I guess collected on a $165 million in different SPVs, is that right?

Collecting on, that’s so much capital they deployed over the years.

Right. And…

We don’t get any of that distribution.

Right.

This is the income from the servicing fees.

But because of the depth of experience I guess?

Yes, that’s correct.

And then did you give a similar number for growth?

They have deployed about £100 million in over our three-year period.

Great. Talk about supply, could you be a little bit more specific about the supply in the fourth quarter, what you saw, you obviously didn’t buy that much in the domestic core market, was that because it just wasn’t there or you were anticipating other capital deployment, how was the 4Q specifically and do you think the market overall in 2014 what’s – what do you anticipate in terms of supply compared to 2013?

Yes. I would say that supply was down somewhat compared to fourth quarter of 2012. And for us, the story that we told you guys in middle of the year with Asset, which is we’d be selective about what we wanted to bid on all during the course of the year continue to play out in Q4. Having said that, there were portfolios that we lost for some irrational pricing that we did not follow with, but we were I will say protected with the purchase that we made with Asset and then with the purchase of Cabot. So going forward, if I might, supply is the hardest thing to gauge, I will just say that, but my guess is supply would probably be constant to – equal to 2013 as we go forward.

And to be clear that’s in the U.S. market?

U.S. market, that was your question right?

That’s right. And then growing in other markets?

We think there is a faster – certainly a faster growth rate in the UK and in Colombia and Peru.

Thank you.

Thank you.

Thank you. (Operator Instructions) Our next question comes from the line of Bob Napoli of William Blair. Your line is now open.

Just quickly, what is the economic share count?

Let me look that up and I will…

Again, while you are looking that up, a question on the IVA market and the returns on IVA, what kind – I mean if the IVA is it I mean it’s the bankruptcy market is at a very, very similar to the U.S. bankruptcy market in the way that it works?

It’s actually a little bit different in the way that it works there, I guess similar to trustees, but there are IPs or insolvency practitioners that look at the consumers’ overall debt and then negotiate with the creditors around that. So it’s relatively similar to a ‘13, but it’s not as formalized through a court system like the U.S. market is. And then 27.1 million is your economic share count.

Okay. And the returns on the IVAs?

The returns on the IVAs are our belief is better than the returns on ‘13’s are in the U.S. market.

But not as high of a return as the core business in UK, I guess?

That’s correct.

Okay. And then what is the other revenue $6 million this quarter and $6 million last quarter, where did that come from?

That’s largely going to be servicing revenues.

So Cabot has services portfolios for other banks. Refinancia does some of that as well. So you will see that show up in that number.

Okay. And then just last question in the U.S. competitive environment, so what you are seeing, are you seeing 10 competitors that you are bidding against with is that compared to a year ago? And I mean are there some players do you feel like are just hanging on that are still buying paper or I mean are there some bigger private companies that are out there, that are being more aggressive that you feel like might go away?

Yes. It’s interesting we have seen some deals where it’s been open to as many as 10 folks and we have seen some deals where it’s just come down to two or three folks. So I think over a longer trend, the issuers as they get more comfortable – well, I’ll just say this way, the issuers have said to us over a longer period of time, it will be just three or four players that are going to basically bid. Today, there are few players that can still speak in there as I said is still hanging around the hoop and make some bids that get them to the party.

So we did believe, Bob, that there will be continued consolidation and we do believe that there are companies that are bidding to negative returns and that can’t be sustained for a long period of time and similar to the last time we saw this in the cycle, I think we were pretty vocal about the fact that there are certain players out there that’s lumpy around for the long-haul and that was the case then and that will probably be the case again now.

Okay, thank you very much.

Sure. You’re welcome.

Thank you. And our next question comes from the line of David Scharf of JMP Securities. Your line is now open.

Hi, just a few added ones, one just to clarify the capital deployment of Propel, the $45 million that included the acquisition, correct?

Yes.

I mean, okay, that was effectively sort of $10 million core plus $35 million by much of competitors?

Of the $35 million, $29 million or so was allocated to the portfolio, so it’s $15 million and $29 million.

Got it, got it. And could you just kind of run through remind us, I mean with returns of the investment with Flowers and Cabot, which is now Marlin as well as Refinancia and Grove, I mean what are the triggers or the options for you to take up your ownership stake from the current maturity, but not full interest or are there any?

Yes. Each deal is little bit different, the one we talked about at length because of the size of it was the Cabot deal with Flowers at a certain point in time, they are obligated to offer us to acquire their interest and then their various mechanisms to what the appropriate price would be, but the goal is that it would be at fair market value. So there are trigger points at various times, which would ultimately in our view result in us owning 100% of that business. With Grove again, it will be similar probably on a faster timeframe than Cabot at least contractually on a faster timeframe than Cabot that would enable us to own 100% of the business. Refinancia is a little bit different, where we would increase our ownership stake, but not get to – potentially not get to 100% as quickly as we would with the others, but we would increase beyond the 50% over a couple – after a couple of years. So it’s different for each one and all those agreements, David are filed as part of our 10-K, so that you can go in and look at the specific mechanisms for each one.

Got it, got it. Lastly, just on the U.S. market once again, where are all the charge-offs now? I mean are the banks still outsourcing as much to collection agencies? Are they picking up the amount of placements since they are selling less or are they still just kind or are they working more and more of it in-house?

I think it’s a little bit of all three of that’s happening, but the charge-offs are coming just from handful of players, major players.

And like the regulatory pressure on our business, there is also similar regulatory pressure on the agencies that service the debt, so many of the issuers are culling their agency network from many, many contingent agencies to just a handful of contingent agencies. So that’s shrinking as well. So there is definitely contraction across the system.

And just thinking ahead strategically, I mean, the agency business has just been exceptionally tougher and tougher one for the last 10, 15 years, but if this new regulatory regime is such that suddenly the number of agencies that are permitted, if you will, shrinks, is that a business you would ever get back into?

I think there are other businesses that we see that have far better returns that are more exciting to us and the agency business is not one that’s on the top of our list at this time.

That’s good to hear. Thank you.

Thank you. And our next question comes from the line of Mark Hughes of SunTrust. Your line is now open.

Any updates on how much of the Marlin purchase price will be allocated to the portfolios versus other?

We will report that in our Q1, 10-Q, so early May, stay tuned till early May.

Why didn’t you do sort of a simple ERC-based calculation with the portfolios becoming two times something less, something more?

I think if you did what we did for Cabot, it’s a good enough swag for our purposes of modeling.

And what was that?

We actually published that in the Q that we did – it’s in the K and it’s also published in the Q that we – our third quarter Q. So we have the allocation of the purchase price. So it will be, I mean it’s complicated market as of the tax situation and deferred taxes, which have an impact on goodwill and in allocations of the portfolio. So it’s I think if you put that – the best way to do it is to look at the ERC assume a cost to collect, assume that return associated with that and you can sort of reengineer Cabot’s that way and then apply that percentage to Marlin’s ERC and you will come up with something that won’t be too far out of the ballpark.

Thank you.

Thank you. And I am showing no further questions at this time. I would like to hand the call back over to Ken Vecchione.

Thank you. Listen thanks a lot for joining us today. A little longer call than normal. Well, we had a lot to report on good questions and we look forward to our next conference call with you guys. Thanks again.

Ladies and gentlemen, thank you for your participating in today’s conference. This does conclude today’s program, you may all disconnect. Have a great day everyone.