Jefferson Capital, Inc. Common Stock Q3 FY2025 earnings call

• Strong Q3 results with collections up 63% to $237 million, largest third-quarter deployments at $151 million (up 22% y/y), revenue up 36% to $151 million.
• Cash efficiency of 72.2% driven by Conn's Portfolio collections. LTM adjusted cash EBITDA $727 million, leverage 1.59 times.
• Completed amendment of senior secured revolving credit facility, increasing capital commitments to $1 billion and reducing pricing.
• Excited about BlueStem portfolio purchase, expected to close in Q4 2025, acquiring credit card assets from Bluestem Brands.
• Market update: Elevated delinquency trends across non-mortgage consumer asset classes, low personal savings, increased insolvencies in US and Canada, low unemployment supporting liquidation rates.
• Strong operating efficiency with best-in-class metrics, outsourcing commoditized collection aspects, using champion-challenger performance measures for portfolio allocation.

In the third quarter, Jefferson Capital, Inc. generated strong results. Collections were $237 million, up 63% versus 2024. Deployments were $151 million, the largest third-quarter deployments in the company's history, up 22% versus 2024. Revenue for the quarter was $151 million, up 36% versus the prior year period. Cash efficiency was 72.2%. LTM adjusted cash EBITDA was $727 million, and leverage was 1.59 times. Adjusted EPS for the quarter was $0.74, and a common stock dividend of $0.24 per share was declared. Estimated remaining collections were $2.9 billion, up 27% year over year, driven by deployment performance and attractive returns.

• Completed amendment of senior secured revolving credit facility, increasing capital commitments to $1 billion and improving terms.
• Expect BlueStem portfolio purchase to close in Q4 2025.
• Plan to deploy capital to purchase portfolios and maintain focus on risk-adjusted returns.
• Board declared a quarterly dividend of 24¢ per share.
• Earmarked $300 million of RCF capacity to repay 2026 bonds in May 2026.

• Market uncertainties and potential disruptions related to servicing transfers in portfolio purchases.
• Regulatory changes or exigent government actions that could impact expected returns on certain asset classes, such as private student loans.
• Difficulties in predicting episodic opportunities for portfolio purchases given operational complexity and timing challenges.

Q: How does the mix of portfolio purchases look, especially on insolvency paper and others?

A: Continued growth in insolvencies, with elevated opportunities across all asset classes, though insolvencies had trended down but are growing more quickly since 2021.

Q: Stock-based comp outlook for 4Q and next year?

A: Aggregate stock-based comp of $87.3 million over 2.74 years, around $8 million per quarter.

Q: Similarity in cash efficiency between Bluestem and Conn's?

A: Absent other factors, Bluestem would boost cash efficiency similarly to Conn's, with offsetting impacts from Conn's diminishing contribution and Bluestem increasing after closing.

Q: Opportunities in auto asset class?

A: More opportunities in auto, particularly non-prime, due to rapid increases in delinquencies in the non-prime sector.

Q: Balance of acquiring lumpy but performing portfolios versus non-performing?

A: Company is agnostic across funnel of opportunities, seeking attractive risk-adjusted returns across geographies and asset classes, with small balance portfolios providing competitive advantage. Forward focus remains on deployment against portfolios in existing or new geographies, with consideration of dividend changes, share repurchases, or M&A as appropriate.