First Quarter 2015 Financial Results Investor Call

Financial Results Q1 2015

     May 14, 2015

Time: 8:30am MTN Domestic: (877) 201-0168 International: (647) 788-4901 Confirmation Code: 30894149

Safe Harbor Provisions

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 Certain  statements  made  in  this  presenta/on  are  forward-­‐looking  statements  under  the  Private  Securi/es  Li/ga/on  Reform  Act  of  1995.  These  can  be  iden/fied  by  words  such  as  "intend,"  "believe,"  and  "expect,"  and  phrases  using  those  or  similar  terms.  Specifically,  statements  rela/ng  to  projec/ons  of  future  proceeds,  revenue,  income,  profitability,  cash  flow,  non-­‐GAAP  financial  measures  such  as  Adjusted  EBITDA  and  Es/mated  Remaining  Proceeds,  also  known  as  “ERP”,  and  our  ability  to  expand  and  u/lize  flexibility  under  our  credit  facility  are  forward-­‐looking  statements.  These  forward-­‐looking  statements  are  not  guarantees  of  our  future  performance  and  are  subject  to  risks  and  uncertain/es  that  could  cause  actual  results  to  differ  materially  from  the  results  contemplated  by  the  forward-­‐looking  statements.  Factors  that  could  affect  our  results  and  cause  them  to  materially  differ  from  those  contained  in  the  forward  looking  statements  include  those  that  we  discuss  in  “Risk  Factors”  or  comparable  headings  in  our  most  recent  Annual  Report  on  Form  10-­‐K.    

 Adjusted  EBITDA  and  ERP,  as  presented  today  and  in  our  earnings  release  we  issued  this  morning,  are  supplemental  measures  of  our  performance  and  purchased  debt  asset  value,  respec/vely,  that  are  not  required  by,  or  presented  in  accordance  with,  accoun/ng  principles  generally  accepted  in  the  U.S.,  also  known  as  “GAAP.”  They  are  not  measurements  of  our  financial  performance  or  asset  value  under  GAAP  and  should  not  be  considered  as  alterna/ves  to  net  income,  asset  value,  or  any  other  performance  measures  derived  in  accordance  with  GAAP,  or  as  alterna/ves  to  cash  flows  from  opera/ng  ac/vi/es  or  a  measure  of  our  liquidity.    

 We  believe  adjusted  EBITDA  is  representa/ve  of  our  cash  flow  genera/on  that  can  be  used  to  purchase  charged-­‐off  receivables,  pay  down  or  service  debt,  pay  income  taxes,  and  for  other  uses.    ERP  represents  the  expected  cash  proceeds  of  our  then-­‐current  purchased  debt  por[olios  over  a  nine  year  period.  You  are,  however,  cau/oned  not  to  place  undue  reliance  on  adjusted  EBITDA  and  ERP.    

Our Strategy

Paul  A.  Larkins,  Chief  Execu6ve  Officer  

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SquareTwo and the Market Evolving Debt Sales:

-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐  

Retu

rn to

Mar

ket

Charge-Off Growth

Money Center Banks  

FinTech Commercial  

Regional Banks  

Canada

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•  Launched  in  January  at  Partner  Summit  

•  Franchise  agreements  -­‐>  Modified  

•  Regionaliza/on  +  Technology  =  Cost  Structure  Reduc/on  

Profitability Improvement Initiative

Key Strategic Goals

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Our  People    •  Inspire  a  culture  of  leadership  by  living  our  core  values    Our  Services    •  Pursue  systemic  opera/onal  and  compliance  excellence    Our  Channels  •  Create  an  outstanding  network  of  call  centers  and  exclusive  

branch  offices      

Our  Customers      •  Deliver  the  Fair  Square  Promise    Our  Financials  •  Deliver  solid  financial  results  

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•  Financial  ins/tu/on  visits  con/nue  

•  Marketplace  lenders  =  Success  

•  Closed  Loop  Network  =  Compelling    

•  Proposed  Payday  rules  providing  insights  

Our Services Pursue systemic operational and compliance excellence

Our Channels Create an outstanding network of call centers and branch offices

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•  Denver  consumer  call  center  complete  

•  New  por[olios  being  placed  with  Fresh  View  

•  Fresh  View  Solu/ons  reduces  non-­‐legal  costs  

Financial Results

John  D.  Lowe,  Chief  Financial  Officer  

ERP and Adjusted EBITDA

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•  Consolidated  ERP  of  $612M  

•  Adjusted  EBITDA  of  $42M  

Q1  2014 Q1  2015 Q1  2014 Q1  201557.1% 71.8% 1.55x 2.37x

Company  Debt  as  a  %  of  Consolidated  ERP

Company  Debt  ÷  TTM  Adjusted  EBITDA

772732

681 655612

100200300400500600700800

Q1  2014 Q2  2014 Q3  2014 Q4  2014 Q1  2015

Consolidated   ERP  Trending($  millions)

Canada US

54 5448

42 42

0

10

20

30

40

50

60

Q1  2014 Q2  2014 Q3  2014 Q4  2014 Q1  2015

Adjusted  EBITDA  Trending($  millions)  

Returns by Purchase Year

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•  Ac/ve  Por[olio  Returns  Maintain  Strength  

•  2015  Returns  Improve  

•  Ini/al  12  Months  =  Conserva/sm  

1.8x    

1.1x    

0.6x    0.1x    

2.1x    

0.4x    

0.7x    

1.0x     1.8x    

0.00x  

0.50x  

1.00x  

1.50x  

2.00x  

2.50x  

Ac6ve  PorLolio  *   2012   2013   2014   YTD  2015  

Consolidated  Return  on  Investment  Purchase  Years  2012  through  YTD  2015  

Actual  Returns   Es/mated  Returns  

Purchasing

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•  Purchased          $22  Million  

•  Commercial  purchases  up  significantly  

•  53%  =  Fresh  Consumer  Debt  

2015 2014 $  Variance %  VarianceCredit  Card/Consumer  Loan  -­‐  Fresh*Face   $97,305 $174,811 ($77,506)  (44.3%)Price   11,579 24,172 (12,593)  (52.1%)Price  (%)   11.9% 13.8%

Credit  Card/Consumer  Loan  -­‐  Non-­‐Fresh*Face   68,642 9,606 59,036 NMPrice   4,770 573 4,197 NMPrice  (%)   6.9% 6.0%

Other**Face   70,903 36,380 34,523 94.9%Price   5,653 1,019 4,634 NMPrice  (%)   8.0% 2.8%

TOTALFace   $236,850 $220,797 $16,053 7.3%Price   22,002 25,764 (3,762)  (14.6%)Price  (%)   9.3% 11.7%

   *  Includes  both  Domestic  and  Canadian  purchases.    **  Other  includes  commercial,  student  loan,  and  medical  purchased  debt  assets.NM  Not  meaningful.

Purchasing  (in  thousands)

Quarter  Ended  March  31,

Proceeds

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•  Mix  of  Legal  as  %  of  Total  Collec/ons  Increased  from  48%  to  52%    

•  Legal  and  Other  Collec/ons  Maintain  Strength  

Cash  Proceeds  (in  thousands) 2015 2014 $  Variance %  Variance

Credit  Card/Consumer  Loan  CollectionsNon-­‐Legal  Collections $38,326 $52,253 ($13,927)  (26.7%)Legal  Collections 48,288                 52,875                 (4,587)  (8.7%)

Other  Collections* 6,517                     5,282                       1,235 23.4%Total  Collections 93,131                 110,410             (17,279)  (15.6%)

Sales,  Recourse  &  Bankruptcy 1,342                     1,830                       (488)  (26.7%)Total  Cash  Proceeds  on  Purchased  Debt $94,473 $112,240 ($17,767)  (15.8%)

Quarter  Ended  March  31,

*Other  includes  collections  and  court  cost  recoveries  on  commercial,  student  loan,  and  medical  accounts

Unadjusted Results

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•  Purchased  Debt  Revenues,  Net:  › $52  million,  28%  decrease  from  $72  million  in  Q1  2014  

•  Costs  to  Collect  as  %  of  Purchased  Debt  Collec/ons:  › Including  Gross  Court  Costs:    45.1%  ;  +111bps  from  Q1  2014    

› Excluding  Gross  Court  Costs:      37.0%  ;  +163bps  from  Q1  2014    › Non-­‐Legal/Legal  Mix:    47%/48%  (Q1’14),  41%/52%  (Q1’15)  › Costs  to  Collect  Expected  to  decrease  500bps+  by  EOY  

•  GAAP  EBITDA:  ›   -­‐$1  million,  decrease  of  $13  million  from  Q1  2014  

•   Net  Loss:  ›   $15  million  net  loss,  decrease  of  $13  million  from  Q1  2014  

Liquidity Update

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•  Investment  Strategy  +  Cost  Reduc/on  =  Net  Returns+  

•  Consolidated  ERP  of  $612  million  

•  Liquidity  =  $55  million  

Q & A