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Date

Thursday, November 13, 2025 at 5 p.m. ET

Call participants

  • Chief Executive Officer — David Burton
  • Chief Financial Officer — Christo Ryolov

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Takeaways

  • Collections -- $237 million, up 63%, primarily driven by deployment growth and including $50 million from Conn's portfolio.
  • Portfolio Deployments -- $151 million, a 22% increase that represents the largest third-quarter deployments in company history.
  • Estimated Remaining Collections (ERC) -- $2.9 billion, up 27%, with 61% expected to be collected through 2027 and $894 million expected within the next twelve months.
  • Revenue -- $151 million, marking 36% YOY growth.
  • Cash Efficiency Ratio -- 72.2%, aided by lower-cost Conn's portfolio collections; excluding Conn’s, the ratio would have been 68.8%.
  • Adjusted Cash EBITDA (LTM) -- $727 million, sustaining improved leverage and future financial flexibility.
  • Leverage Ratio -- 1.59 times net debt to adjusted cash EBITDA, below the firm’s target range of 2.0-2.5 times.
  • Adjusted EPS -- $0.74 for the quarter, calculated using 6.4 million legally issued restricted shares subject to time vesting.
  • Dividend -- Board declared $0.24 per share, representing approximately a 5% annualized yield.
  • Operating Expenses -- $80 million, up 59%, aligned with increased collections.
  • Court Costs -- $14.9 million, up 66%, resulting from accelerated legal channel activity and higher suit volume; expected to remain at this level near term.
  • Stock-Based Compensation Expense -- $8.8 million for the quarter, with approximately $87.3 million remaining to amortize over 2.74 years (about $8 million per quarter).
  • Amended Revolving Credit Facility -- Commitments increased to $1 billion, grid pricing reduced by 50 bps, credit spread adjustment removed, nonuse fee reduced by 5 bps, and two new lenders added.
  • Liquidity -- Facility undrawn as of September 30, supplemented by $42 million in unrestricted cash; $300 million earmarked to repay May 2026 bonds.
  • Year-to-Date Deployments -- $451 million, a 24% rise, with $316 million locked via forward flows for upcoming quarters and $273 million contracted for the next twelve months.
  • Conn’s Portfolio Contribution -- $22.4 million portfolio revenue, $1.9 million servicing revenue, and $16.5 million net operating income this quarter.
  • Bluestem Portfolio Acquisition -- $303 million gross purchase price for $488 million face value; estimated net purchase price $195 million assuming December 1 close, with $20 million in escrow for servicing transfer obligations.
  • Bluestem Portfolio Closing -- Expected by year-end, subject to HSR approval but excludes ongoing originations, employees, and retail operations.
  • Collection Channel Mix -- Legal collections and insolvency accounts are increasing; insolvency collections described as a growing contribution, especially in North America.
  • Asset Class Observations -- Opportunity expansion in non-prime auto and insolvency receivables due to elevated delinquency rates.
  • Seasonality -- US tax refunds drive collection peaks from February through April; fourth-quarter deployments are seasonally strongest globally.

Summary

Jefferson Capital (JCAP +2.67%) delivered record collections and deployment figures, demonstrating substantial year-over-year growth across core operating and financial metrics. The company executed a strategic revolving credit facility amendment, increasing available capital, lowering financing costs, and extending maturity, which enhances balance sheet strength and future deployment capacity. Management outlined heightened legal collections, elevated insolvency portfolio activity, and newly acquired performing portfolios as differentiators supporting cash efficiency leadership and long-term return potential. The pending Bluestem portfolio transaction is positioned to accelerate near-term earnings and fortify the company’s leadership in acquiring and managing dislocated consumer finance assets.

  • Chief Executive Officer Burton said, “We expect the transaction to close later in the fourth quarter,” reinforcing the pipeline visibility for new asset inflows.
  • Chief Financial Officer Ryolov said, “Operating expenses were $80 million, up 59% year over year, corresponding to an increase in collections of 63%.”
  • The amended $1 billion revolving credit facility was undrawn at quarter-end, preserving full utilization flexibility as deployment opportunities arise.
  • Net leverage, at 1.59 times, was highlighted as materially below public peers.
  • Short-duration portfolio acquisitions (Conn’s and Bluestem) will affect near-term collection cadence, overall cash efficiency, and balance sheet composition.
  • Management anticipates continued improvement in efficiency ratios, excluding temporary effects from Conn’s and Bluestem runoff, driven by strategic initiatives and increasing insolvency recoveries.
  • Dividend policy and opportunistic capital allocation, including possible share repurchases and M&A, remain under active review as liquidity and leverage targets are sustained.
  • The firm underlined its unmatched scale and expertise in specialized asset classes, positioning Jefferson Capital to capitalize on episodic and complex transaction opportunities when they arise.

Industry glossary

  • Estimated Remaining Collections (ERC): Present value of expected future cash collections on owned portfolios.
  • Forward Flows: Contractual agreements to purchase newly originated or charged-off portfolios over a defined period at pre-negotiated terms.
  • Legal Channel: Debt recovery pathway involving litigation to collect on receivables from consumers deemed able but unwilling to pay voluntarily.
  • Cash Efficiency Ratio: Collections as a percentage of cash expenses, measuring operating efficiency exclusive of non-cash items.
  • Suit-Eligible Accounts: Receivables meeting internal criteria for pursuit through legal procedures.

Full Conference Call Transcript

David Burton: Thank you, operator, and thanks, everyone, for joining our investor call. Let's dive into the financial performance highlights. In the third quarter, we again generated strong results for shareholders. Our collections were $237 million, up 63% versus 2024. We continue to perform well versus our underwriting expectations. We generated the largest third-quarter deployments in the company's history with $151 million invested, up 22% versus 2024. Our estimated remaining collections were $2.9 billion, up 27% year over year, driven by our continued deployment performance and attractive returns. Revenue for the quarter was $151 million, up 36% versus the prior year period.

We delivered a sector-leading cash efficiency of 72.2%, driven in part by strong collections from the Conn's Portfolio purchase, which we completed in the fourth quarter of last year. We generated strong cash flow, with LTM adjusted cash EBITDA of $727 million, which in turn improved our leverage to 1.59 times, a level which positions us well for future growth and creates significant strategic optionality. Adjusted EPS for the quarter was $0.74, and the Board of Directors has declared a common stock dividend of $0.24 per share. Next, on October 28, we completed an amendment of our senior secured revolving credit facility, increasing capital commitments to $1 billion and reducing pricing.

This is an important milestone which positions us well for the significant market opportunities ahead, and Christo will provide additional detail on the upside in his prepared remarks. Finally, we are very excited about the previously announced BlueStem portfolio purchase, which we believe solidifies our leadership position as a strategic acquirer of a wide spectrum of dislocated consumer credit assets. We expect the transaction to close later in the fourth quarter, and I'll share additional detail further on in the presentation. Next, I'd like to offer a brief market update and cover some of the macroeconomic indicators to provide better context for why we remain bullish on the investment opportunity for our business.

I'll start with delinquency trends, which remain elevated across all non-mortgage consumer asset classes and create favorable portfolio supply trends for our business. An important component to better understand the state of the consumer is the current level of personal savings. During the pandemic, consumers accumulated abnormally high savings as a result of the unprecedented levels of government stimulus. By 2022, the excess savings had been depleted, and in fact, the current level of personal savings at $1.1 trillion is lower than the long-term pre-pandemic average from January 2013 through December 2019, and the reduction in personal savings in real terms is even more substantial when considering inflation.

This suggests that consumers have a more limited ability to absorb unanticipated temporary financial hardships, which is an important driver for delinquency and charge-off volumes. Next, regarding the insolvency market, we've seen a well-pronounced increase in the number of insolvencies both in the US and in Canada from the pandemic trough in 2021, which in turn has fueled a resurgence in supply of insolvency portfolios. Insolvency evaluation and servicing requires highly specialized expertise, a robust data set to develop accurate forecasts, and a technologically advanced servicing platform, and we remain one of the very few debt buyers in the US and by far the largest debt buyer in Canada that can take advantage of this opportunity.

Finally, this backdrop is also underpinned by a low level of unemployment, which supports the expected liquidation rates on our existing portfolio and gives us confidence in underwriting new purchases. All of these trends point in one direction: elevated levels of consumer delinquencies and charge-offs, which we are seeing across all consumer asset classes, and which we believe create a long runway for a robust portfolio supply over the coming quarters, coupled with continued strong collection performance on the existing book and on any future portfolio purchases. Moving on, I'd like to review in more detail some key performance trends for the quarter.

Our collections were $237 million, up 63% year over year, driven by strong deployment growth in 2023 and 2024. The Conn's portfolio purchase represented $50 million of collections for the quarter. Our collection performance continues to reinforce the accuracy of our underwriting models. A key trend in collection performance has been the increase in legal channel collections. Jefferson Capital, Inc. Common Stock utilizes the legal channel in instances where we believe the account holder has the ability but not the willingness to pay. We've achieved a number of important process improvements, specifically in the US, have significantly compressed the timing from placement of the account to filing of the suit, which in turn has accelerated suit volumes.

The inventory of suit-eligible accounts has increased given the significant growth in deployments over the past three years. So over time, we expect to see continued growth in legal collections. Our portfolio purchases for the quarter were $151 million, up 22% year over year. Year-to-date deployments were $451 million, up 24% versus the same period in 2024. Returns remain attractive, and we remain confident in the deployment landscape. As of September 30, we had $316 million of deployments locked in through forward flows, which is an important building block of our deployment strategy for the coming quarters.

Our estimated remaining collections as of September 30 were $2.9 billion, up 27% year over year, with ERC related to the Conn's portfolio purchase comprising $179 million of the total. Our ERC is relatively short in duration due in part to the lower average account balances in our portfolio, with 61% of our ERC expected to be collected through 2027. We expect to collect $894 million of our September 30 ERC balance during the next twelve months. Based on the average purchase price multiples recorded thus far in 2025, we would need to deploy approximately $456 million globally over the same timeframe to replace this runoff and maintain current ERC levels.

I would note that as of September 30, we had $273 million of deployments contracted via forward flows for the next twelve months. Moving on to slide seven, I'd like to review in more detail another core pillar of our business model and a critical building block of our differentiated return profile: our best-in-class operating efficiency. We seek to own the high-value-added aspects of the purchasing and collection process, including proprietary portfolio and consumer payment performance data, advanced analytical and modeling capabilities, certain proprietary technological capabilities, and the collection processes and techniques that we believe create both a competitive advantage for the company as well as a significant barrier to entry.

In contrast, we seek to outsource the aspects of the collection value chain that we view as commoditized or operationally intensive and do not produce a competitive advantage, such as running large domestic call centers. We utilize champion-challenger performance measures to allocate portfolio segments to the best servicers, and our internal collection platform is required to compete for market share against our external vendors in both the agency and the legal collection channels. Our mostly variable cost structure provides flexibility to scale deployments depending on market conditions. The benefits of our relentless pursuit of operating efficiency are evident in our efficiency metrics relative to the rest of the sector.

As I mentioned, our cash efficiency ratio for the quarter was 72.2%. It was aided by collections on the Conn's portfolio purchase, which carry lower cost to collect, given the significant portion of paying accounts in the Conn's portfolio. When excluding the Conn's portfolio collections and expenses, the cash efficiency ratio would have been 68.8%, which remains materially higher compared to other public companies in the sector. Our leading operational efficiency is a powerful competitive advantage and, coupled with the strong returns on our differentiated investment strategy, supports consistent, attractive shareholder returns.

Next, I wanted to provide an update on the previously announced BlueStem portfolio purchase, where we are acquiring a portfolio of credit card assets from affiliates of Bluestem Brands. The portfolio was originated by Bluestem to finance e-commerce purchases of home goods and consumer products and consists of small balance revolving credit card receivables for which new purchases have been suspended. The transaction does not include a back book of charged-off receivables. Similar to the Conn's portfolio purchase, the transaction is structured with a cutoff date, in this case, June 30, 2025. Jefferson Capital, Inc.

Common Stock will pay a gross purchase price of $303 million to acquire receivables with a face value of $488 million as of the cutoff date. At closing, the gross purchase price will be adjusted for interim portfolio cash flows net of servicing expense. Assuming, for illustrative purposes, that the deal closes on December 1, we expect the net purchase price to be $195 million, and that number would be lower if the transaction is completed further out. Given the significant portion of paying accounts and the short duration of the assets, we expect the half-life of the ERC to be less than one year. Unlike the Conn's portfolio purchase, Jefferson Capital, Inc.

Common Stock is not acquiring any employees or physical facilities. Instead, the portfolio will be serviced by CardWorks Servicing going forward. $20 million of the purchase price will be held in escrow to secure implementation obligations relating to the servicing transfer. Jefferson Capital, Inc. Common Stock does not intend to pursue ongoing originations through the Bluestem platform, and the transaction does not include any Bluestem retail operations or assets. We expect closing in the fourth quarter of this year, subject to customary conditions, including an HSR approval. I believe the Bluestem portfolio purchase positions us well for a wide spectrum of opportunities involving dislocated consumer finance portfolios.

A number of nonbank consumer credit originators are facing challenges, and a consumer finance business is one that requires significant scale to support profitability. A portfolio sale is frequently the value-optimizing option, and liquidity upfront is paramount, particularly in any lender-driven processes or where the decision has been made to cease new originations. The potential buyer universe in these situations is limited, given the significant operational complexity, risks of portfolio deterioration related to a servicing transfer, and the potential for disruptions related to that servicing transfer. These opportunities remain episodic in nature, and as such, they require a particular set of circumstances; they are difficult to predict from a timing perspective.

As it is not possible for us to induce this type of transaction, Jefferson Capital, Inc. Common Stock remains uniquely positioned to react to these opportunities as they arise. We have specialized capabilities in hard-to-value and hard-to-service asset classes, particularly in small balance portfolios, which have given us an edge in both the Conn's and the Bluestem transactions. These capabilities are hard to replicate as they are underpinned by over two decades of data, coupled with our proprietary analytics. We have the deep operational experience to manage the servicing transfer at close and also to improve servicing efficiency as we manage the portfolio runoff.

And finally, we have a low-cost funding structure with ample capital availability, which allows us to offer speed and certainty of close, critical transaction components for the seller in situations where business disruption is rapidly eroding the value of the assets. With that, I'd now like to hand over the call to Christo for a more detailed look at our financial results.

Christo Ryolov: Thank you, David. Taking a closer look at the financial details for the third quarter, revenue was $151 million, up 36% year over year. Changes in recoveries rounded to $0 for the quarter, reflecting the accuracy of our modeling and our execution against the under forecast. Operating expenses were $80 million, up 59% year over year, corresponding to an increase in collections of 63%. Court costs increased to $14.9 million, or 66% year over year, as a result of the trends in increased legal channel volumes that David reviewed in his comments. This is an upfront expense to support future collections through the legal channel, and the accelerated time to suit put forward these expenses to the current core.

We expect court costs to remain at this level, given the increased inventory of suit-eligible accounts resulting from the significant overall portfolio growth over the past several years. We also recorded $8.8 million stock-based compensation expense from vesting of restricted shares related primarily to the company's 2018 award plan. As a reminder, there are 6.4 million shares of restricted stock, which are subject to a three-year time vesting requirement in equal increments from the date of the initial public offering. These shares are legally issued, and the company includes them in the share count for the adjusted EPS.

The related expense is a noncash item, which does not reflect any new awards post-IPO, and as such, we treat the expenses as an add-back. Adjusted pretax income was $54.8 million for the quarter, up 30% year over year, resulting in an adjusted pretax ROE of 51.7%. We realized a material level of collections on portfolios purchased in 2023 to 2024, including the Conn's portfolio purchase, which in turn drove a near doubling of adjusted cash EBITDA to $206 million for the quarter. Finally, for the third quarter, Jefferson Capital, Inc. Common Stock recognized portfolio revenue of $22.4 million, servicing revenue of $1.9 million, and net operating income of $16.5 million related to the Conn's portfolio purchase.

Our credit profile remains strong and positions us well for future opportunities. As of September 30, our net debt to adjusted cash EBITDA improved to 1.59 times following the Conn's-related uptick last December as a result of strong collections for the quarter. This leverage ratio is significantly better than our publicly traded peers. Over the long term, our target leverage ratio is in the range of two to two and a half times. Our balance sheet is solid with ample liquidity to support growth, create strategic optionality, and pay our quarterly dividend. On October 27, we completed an amendment of our senior secured revolving credit facility, which achieved a number of capital structure objectives and substantially improved the terms.

We increased the aggregate committed capital by $175 million to $1 billion and added two new lenders to the bank group. We refreshed the tenure of the facility to five years, an effective two-and-a-half-year extension. We improved pricing by 50 basis points across the grid and eliminated the credit spread adjustment, an aggregate interest expense savings on the drawn balance of 60 basis points. We also reduced the nonuse fee rate for unutilized commitments by five basis points. Finally, we implemented a handful of housekeeping borrower-friendly changes to better align the credit agreement with public company precedent.

The facility was undrawn at September 30, and in addition, we had $42 million of unrestricted cash on the balance sheet to supplement our liquidity needs, including the expected closing of the BlueStem portfolio purchase. We have earmarked $300 million of the RCF capacity to repay our 2026 bonds in May 2026. Given the maturity was fully prefunded with a $500 million unsecured issuance earlier this year, and at this point, we are not taking on any market risk. We plan to keep the bonds out as long as possible to take advantage of the attractive 6% coupon.

This strong liquidity profile is a critical component of our value proposition to sellers who value certainty of close in periods when portfolio activity increases, but the funding markets could be constrained or unavailable. With regard to our capital allocation priorities, our primary focus remains on deploying capital to purchase portfolios in the track its risk-adjusted returns. The fourth quarter typically offers an elevated level of deployment opportunities, and we're well positioned with capital to respond. Our board has declared a quarterly dividend of 24¢ a share, which represents approximately a 5% annualized yield. The dividend offers an attractive component of shareholder return, which is not available from other public companies in the sector.

It also reinforces long-term discipline around investment returns. We will evaluate share repurchases at the appropriate time while also aiming to maintain trading liquidity in the stock. And finally, we have a long history of successful M&A. We intend to remain disciplined and opportunistic. Now we'll be happy to answer any questions that you may have. Operator, please open up the line for questions.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of John Hecht with Jefferies LLC. Please go ahead.

John Hecht: Thanks very much for taking my questions. On another good quarter. A lot of good stuff going on. First question, just as, you know, as you guys have diversified channels, and geographies, is there any you know, yeah, I guess, any details on the seasonality of collection that you've discovered that are worth noting, or is it pretty much consistent across the board?

David Burton: John, there was a little bit of background noise there for a second. Would you mind repeating that question?

John Hecht: Sorry. Can you hear me?

David Burton: Yes. Yeah.

John Hecht: Okay. Yeah. The question is, you know, you've diversified your channels as sources and geographies. And is there any you know, differences in seasonality of collection across those channels or geographies that's worth pointing out.

David Burton: Sure. So I think the most notable and pronounced seasonality is really kind of twofold. One is sort of global, and the other one is more US-centric. The US-centric one is relates to the seasonality relating to tax season refunds where collections are most elevated between the months of February and April. And the global characterization from a seasonality perspective affects deployments where historically, the fourth quarter has been the largest quarter for deployments. And that is fairly universal across all our geographies. I will note that many of the banks in Canada have a year-end that doesn't coincide with the calendar year. But even in Canada, the nonbank institutions tend to have a calendar year-end.

And so we tend to see increases in deployments in the fourth quarter across all our geographies.

John Hecht: Okay. Very helpful. Thanks. And then you guys mentioned the core cost because of the activity going on in that channel, the core costs were elevated in the quarter. Sounds like that's gonna know, at least continue for some period of time I guess, you have any granularity for how we should think about that expense in the coming quarters?

Christo Ryolov: Yes, John. Thanks. I think probably the best way to think about this is if you take we reported $15 million of court costs for the for the quarter. I'll think of this as maybe slightly higher elevated level for the fourth quarter and then run rate for, you know, 2026. The aggregate amount of call cost for 2026 would be based on run rate from this score.

John Hecht: Okay. And then last question is yeah, you guys have obviously comms and now Boostem to accretive transactions. Anything worth noting just from a pipeline perspective?

David Burton: Let's see. I think the thing I would note is we have looked at more transactions in the, you know, active or performing category this year, I think, than any other year. I suspect part of that is because after conducting the Conn's transaction, there was a general awareness about our capabilities. To value and close complex transactions. And I suspect that's helped us be identified as a suitor for more opportunities like that. I will say that these are not opportunities that we prospectively can create. And rather we, like, respond to them. And there tends to be a complex set of circumstances. That, you know, drive those processes sometimes involving, you know, lender decisions.

And so that also makes them probably more speculative in terms of whether or not they're going to close. And so you know, all of that is to suggest that we expect to look at more of those transactions But the certainty around whether or not those will be transactable is all you know, that's very speculative at this point. But you know, we hope to report at some point in the future that we've been successful at acquiring portfolios that are similar to a Bluestem or Conse.

John Hecht: Great. Thank you guys very much.

David Burton: Thank you, John.

Operator: Our next question comes from the line of Mark Hughes with Truist Securities. Please go ahead.

Mark Hughes: Yes. Thank you. Good afternoon. Crystal, the comms portfolio, the operating income if I remember properly, it was $20 million last quarter. $11 million this quarter, Was there any seasonal fluctuation with that, or is that just the timing of the runoff of the portfolio, the collections on the portfolio and $11 million is kind of the starting point from here.

Christo Ryolov: Yeah. This is very much the reflective of the runoff of the portfolio. We've discussed previously, we expect the financial impact of that transaction to largely be contained within this year. And driven by the relatively short duration of the of the portfolio as previously discussed.

Mark Hughes: Very good. And then the mix on the portfolio purchases, David, you talked about more insolvency paper. Anything else you'd highlight Credit card, utilities, anything else that you are seeing any noteworthy trends in the quarter?

David Burton: Yeah. I think the only noteworthy trend really was the continuing growth in insolvencies. And there have been elevated opportunities across all the asset classes. But as you may remember, know, insolvencies had kind of trended down pretty continuously through kind of the '21. And since then, they've been kind of growing more quickly in 2024 and five. Than they were previously, but that growth began before '24.

Mark Hughes: And one final question, if I could. The stock-based comp, $9 million in this quarter, what should we think about 4Q and into next year?

Christo Ryolov: So we have disclosed that the aggregate amount is $87.3 million. And that'll be over 2.74 years. So if you take that as 11 quarters, and divide that gives you around $8 million a quarter. And that number is Thank very much. Thank you.

Mark Hughes: Okay. Appreciate that. Thank you.

David Burton: Thanks, Mark.

Operator: Our next question comes from the line of Bose George with KBW. Please go ahead.

Bose George: Hey, guys. Good afternoon. Actually, when we think about the earnings contribution from Bluestem, should the cadence of those cash flows look a lot like what we saw from Conn's?

Christo Ryolov: Yes. The it has a similar kind of short duration. A pretty rapid pace of collections. So while not know, exactly the same, it would take a similar shape.

Bose George: Okay. Great. And then on the cash efficiency side, is that is that gonna be similar? So this could know, essentially be sort of boost the cash efficiency as this comes in as well?

David Burton: Absent anything else happening, the answer to that would be yes. But keep in mind that the Conn's portfolio will continue to diminish in its overall contribution to our overall collections. While the Bluestem portfolio will begin increasing after closing. So you've got kind of two offsetting impacts. But both of the portfolios are enhancements to our cash efficiency ratio.

Bose George: Okay. Great. And then actually, there's one more. There's been obviously a lot of noise in some asset classes like auto in the market. Are you seeing anything, you know, in terms of opportunities as a result yet?

David Burton: So there is a you're you're right to point out that there is a lot of activity in auto with more rapid increases in delinquencies, particularly in the non-prime sector. And so we are seeing more opportunities in auto generally, but in particular, the nonprime.

Bose George: Okay. Great. Thanks.

Operator: Our next question comes from the line of David Scharf with JMP Capital Markets. Please go ahead.

David Scharf: Hi. Good afternoon. Thanks. Congrats all around. Lots to digest. Wonder if I can maybe just follow-up on the last question on the efficiency ratio. You know, Dave, just maybe to help investors or myself kinda get a clearer picture of sort of the margin potential. For the business. If we exclude cons in obviously, Bluestem going forward and just focus on that call it 8%. Can you give us some maybe directional color on whether that has been increasing? Or whether the increase in legal collections, which is a more expensive channel, will probably keep that at that level for a while.

David Burton: Great question, David. And let me see if I can be helpful here. Putting cons and bluestem aside, you would have seen continued improvement in our cash efficiency ratio on kind of a consecutive basis. And that was occurring despite kind of lower overall collections from our insolvency business as a percentage of our total. And insolvency collections carry with them a much lower cost to collect compared to distressed. And so I would expect two impacts as we move forward when excluding both cons and Bluestem.

And that would be I would expect for us to produce continuous efficiency gains in our cash efficiency ratio as we continue to implement a myriad of strategic initiatives that are precisely designed to deliver efficiency improvements. And we have had a myriad of those underway this year and are have made the anticipated progress. But every year, we put together a host of what those initiatives should be for the for the coming year. And so I would expect that to be continuing. The other aspect would be that our mix of collections for insolvencies I would expect to kind of increase.

Pretty much sort of on the margin, not some kind of a massive overall increase, but that will also contribute to some an overall improvement in our cash efficiency ratio.

David Scharf: Got it. That's helpful. It sounds like it's clearly been improving even without the performing cons in there. Hey. Another topic you know, you talked about the existence and difficulty in timing. Whether actions take place of other portfolios like Conn's and Bluestem Fingerhut. But curious, are there any other asset classes that you're starting to take a closer look at? I actually received an email today from you know, word of a private student loan portfolio of charge offs being for sale.

And I know those are higher balanced than your core focus on small balance accounts, but you know, I'm curious if the student loan market is one you're maybe gonna revisit or if there's anything else that's showing up. Particularly since your IPO and you become more visible?

David Burton: Sure. So first of I appreciate that question. Student loans in particular is something that the company has a fair amount of experience in. We haven't been an active purchaser of private student loans for some time. In part because there was a fair amount under the last administration of speculation around whether or not student loans broadly would become something that becomes subject to, you know, forgiveness. And even though that wouldn't in any eventuality, likely be the case for a private student loan versus a US Department of Education originated student loan. The consumer could change their payment priority or payment preference and we wouldn't want some type of exigent you know, government regulatory change.

To kind of impact the our own anticipated expected return. So you know, for that certainly with the new administration had kind of sort of quieted down. That discussion, although more recently, there's been some recent resurgence of discussion about student loan forgiveness. So I still have apprehension about making any material deployments in the private student loan space. Until that kind of noise subsides. All of that being said, there also has been some discussion more recently that the federal government has begun some consideration about their own consideration of selling their student loan which is something that I don't think has ever been considered or undertaken before.

And so that kind of a transaction would likely create the kind of certainty that would give us the kind of encouragement to deploy. And I think we're one of the few companies have both the data the analytics, and the capability for actually underwriting and executing against private or federal government student loan portfolio.

David Scharf: Got it. No. Clearly, a lot's in flux right now. Maybe just one more if I can squeeze in. Returning to Bluestem, just wanna make sure I understand. And the you know, illustrative example you gave about sort of a net purchase price, of a $195 million. It the transaction were to close on December 1. Would that approximate the receivable balance that would be booked at that time?

David Burton: No. No. No. There's a substantial discount to what the then face value. And I think the ratio would be sort of.

David Scharf: Oh, no. Not the face value, but it's a $195 where the actual purchase price.

David Burton: Yes. That yes. Sorry. A little bit. We've got mostly in translation here. The transactional capital to see at the significant discount to face value but the receivable balance you book on our balance sheet would be approximated by the purchase price.

David Scharf: That's okay. So it would be about a $195 million of finance receivables on your balance sheet. And then as we think about the pace of liquidation, it looks like the gross purchase price of $303 down to $195 at December 1. Does that imply a $107 million of collections during what time frame? From June 30 to December 1?

David Burton: Yeah. So the cutoff date is June 30. And in the example that we provided for the $195 million, that was a example of a December 1 closing date. And that doesn't imply a $107 million of collections because there's there are collections happening, and then there's also receivable balances that are changing. But I think the best way to think about it is the original kinda gross purchase price against the then total receivable balances of as of June 30.

David Scharf: Oh, got it. Got it. Perfect. Thank you.

Operator: Our next question comes from the line of Robert Dodd with Raymond James. Please go ahead.

Robert Dodd: Hi, guys, and congrats on the quarter. On sticking with Bluestem for well, the concept of Bluestem slash cons. I mean, what mean, obviously, you priority for deploying capital, number one, is to buy put. Portfolios. But, I mean, how would you if you had your wishes, what kind of mix would you like to be acquiring of lumpy but performing portfolios versus non Obviously, the performing applies much for you. You get the collections much quicker. It's great ROI. But then you have to find another one. And so what's the what's the balance of where you like that to be going forward?

David Burton: Yeah. So I may answer the question a little differently than you've asked it, but I hope it kind of gets at least the way we think about deployments. From a risk-adjusted return standpoint. And as you've sort of noted and we've discussed, we deploy capital in a bunch of geographies. Across a number of asset classes. And we seek each year to widen that funnel. And the purchase of performing portfolios like cons or Bluestem, are just another demonstration of using our capability to deploy capital at attractive risk-adjusted returns. And so I look at active or performing portfolios as just another expansion of our funnel of opportunities.

And we're largely agnostic across that funnel of opportunities because we have underwriting models to be able to forecast accurately. And then, you know, onboard and execute against that forecast. Across all these asset classes, geographies and active or nonperforming portfolio. So you know, it of course, it's nice to be able to deploy a lot of money against an attractive risk-adjusted return opportunity. And so you know, active portfolios are helpful in that regard because you can put a lot of money to work in a single transaction. But whether it's retail installment loans or credit card or auto. You know, I think we are quite happy underwriting and executing against any of those kinds of opportunities.

And would be at the ready to deploy our capabilities for any attractive opportunity across a number of asset classes. And so I you know, small balance, of course, is creates a further kind of competitive advantage because not as many folks have the data or the platform that is able to underwrite and execute against those. So that certainly is maybe more attractive to us or at least would have maybe even less competition than you know, a large balance credit card portfolio. But even that, I think I don't think any of our public competitors have deployed capital against a performing credit portfolio, for example. Large balance, small or small balance.

So I think this whole category of the ability to make an attractive investment in performing portfolios is something that is unique to Jefferson Capital, Inc. Common Stock. Amongst our peers.

Robert Dodd: Oh, I agree with you, and I appreciate that color. Thank you. You're kinda tying on to that. I mean, if Bluestem works out as a big right, you're at 1.5 times leverage now, roughly, ahead of Bluestem. But, you know, given how fast Conn's liquidated and lowered your leverage after an initial peak. Mean, the outlook is, prospectively, you know, your leverage will be you know, down again. This time next year, we'll be looking, you know, well unless there's a lot of other moving parts, obviously. But, you know, it's realistic that your leverage could be even further below the low end of your target.

By the time Bluestem gets onboarded and, you know, it's six months to its life if it performs anything like Conk. So what do you guys get your thoughts there? I mean, obviously, you know, there's the dividend. But what else would you look at given, you know, the potential outlook for leverage? Not a bad thing. Over the next, you know, twelve to eighteen months, maybe.

David Burton: So great question and a great observation that we obviously are operating below our target leverage and that's before we get an accelerated amount of cash flow that we would derive from the Bluestem purchase once it closes. I just wanna kinda flag for you, Robert, that we also have a bond maturing in the middle of next year. Mhmm. For $300 million. And we would plan to utilize our revolver for that and why that doesn't increase our net debt. It does show demonstrate our utilization of our existing capacity. Under our billion-dollar revolver, which we just upsized and for which we had nothing drawn on.

At the and so we would certainly hope and the primary focus would remain deployment against portfolios in our geographies or potentially in a new geography. And we are you know, we certainly have available to us you know, potential changes to the dividend or share repurchase or whatever as Christo referred to in his in his prepared remarks. And then, you know, lastly, you know, we've had a history of doing disciplined M&A. That have all worked out quite well for us. And so we've we find ourselves in an environment and with a capacity to consider really all of the above. As a means to optimize shareholder returns.

Robert Dodd: Got it. Thank you.

David Burton: Of course.

Operator: This now concludes our question and answer session. I would like to turn the floor back over to Mr. David Burton for closing comments.

David Burton: Thank you. Looking forward, we're excited about the growth prospects for our business for the remainder of this year and beyond. We have built an outstanding platform. Over the past twenty-three years, and we are in a great position to capitalize on opportunities as the market continues to evolve. Thank you all for attending today's investor earnings call. We look forward to providing a further update on our fourth-quarter investor call next year.

Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.