Today s Discussion Topics

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2 Today s Discussion Topics Client Changes and Opportunities Vendor Management Requirements and Technology Advancement Major Macroeconomic Trends Impacting ARM CFPB and Regulatory Updates: What to Expect The Changing M&A Landscape Predictions 2

3 Disclaimer This information is not intended as legal or business advice and may not be used as such. Legal and business advice must be tailored to the specific circumstances of each case. Every effort has been made to assure this information is up-to-date as of the date of this presentation. It is not intended to be a full and exhaustive explanation of the law in any area, nor may you use the information to replace the advice of your own legal counsel. The presenters, Kaulkin Ginsberg and Ontario Systems assume no liability for typographical or other errors contained in the presentation and materials or for changes in the law affecting anything discussed therein. 3

4 4 Client Changes and Opportunities

5 Student Loans Growing with Increased Collection Demand ($ Billion) Kaulkin Ginsberg Company total student loan 90+ bad debt 5

6 1,200,000 Hospital Total Revenue and Revenue Per Physician Visits 900 1,000, , , , , Revenue Revenue Per Physician Visit Kaulkin Ginsberg Company 600 6

7 Top 5 States with Highest Bad Debt California Ohio New Jersey Illinois Pennsylvania Top 5 States with Highest Delinquency Rate Florida Nevada New York New Jersey Illinois 7

8 16 Financial Services 90+ Days Delinquent by Loan Type Mortgage HELOC Auto Credit Card Student Loan All Kaulkin Ginsberg Company 8

9 9 Vendor Management Requirements and Technology Advancement

10 Vendor Management CFPB s new found focus on service providers and vendors CFPB Bulletin, April 12, 2013 CFPB expects banks and nonbanks to have an effective process for managing the risks of service provider relationships Service provider defined: Any person that provides a material service to a covered person in connection with the offering or provision by such covered person of an consumer financial product or service Duties: Conduct due diligence to ensure compliance with consumer protection laws Review policies and procedures and training Include consumer protection expectations in contract Establish internal controls and monitoring Take prompt action to fully address problems including termination 10

11 Technology Advancements Technology will become an integrated part of your Compliance Management system Compliance Management System software application Complaint Tracker CL [Complaint solution] Manual Device [TCPA compliance] Validity [TCPA compliance] Speech analytics [FDCPA compliance] Fused solutions [State and federal requirements] Call recording [Creditor and CFPB compliance] Business intelligence solutions [Analytics] 11

12 12 Major Macroeconomic Trends Impacting ARM

13 Aggregate Household Debt Kaulkin Ginsberg Company Household Debt % Change 13

14 Unemployment Rate 8.4 U3 15 U Kaulkin Ginsberg Company Kaulkin Ginsberg Company 14

15 15 CFPB & Regulatory Update

16 The New Sheriff CFPB - the new chief regulator of the collection industry FTC the Quiet Giant Business through the eyes of the consumer The CFPB examination process Areas of focus Field observations Impact on operations Assessing your readiness 16

17 Hot Topics TCPA manual dial, consent per credit transaction, right number wrong consumer Electronic Funds Transfers (EFTs) authorization requirements for credit card, ACH debit transactions and E-checks Call recording the $5000K phone call and text messages unique consent requirements Disputes, inquiries and complaints FCRA takes center stage Debt collector discretion the need for written guidelines Collector compensation and the new definition of the successful collector Compliance management system/compliance officer 17

18 18 The Changing M&A Landscape

19 ARM Industry Market Share in 2013 (Estimated) NCO Group Inc., 9.24% Encore Capital Group, 6.40% Other small and mid-size firms, 68.99% Following 3-5 firms, 15.37% Kaulkin Ginsberg Company *The 2013 revenue data is estimated based on the historical revenue and its growth rate. 19

20 20 ARM Deal Volume st 6 Mo nd 6 Mo st 6 Mo nd 6 Mo st 6 Mo Kaulkin Ginsberg Company 20

21 Size of Acquired Company ($ Revenues) Multiples/Structure Small* (< $5M) Mid-Sized** ($5-$10M) Large** ($10-$25M) Platform** ($20M+) Multiples 2-4X SDE 3-6X Adj. EBITDA 5-7X Adj. EBITDA 5-8X Adj. EBITDA Structure 0%-100% cash 25%-100% cash 50%-100% cash 50%-100% cash *SDE = Seller s Discretionary Earnings (Seller compensation + expenses combined with EBITDA **Adj. EBITDA (Earnings Before Interest, Taxes, Depreciation + Amortization adjusted for non-recurring expenses that would not exist post-transaction Kaulkin Ginsberg Company 21

22 22 Predictions