Jefferson Capital, Inc. Common Stock

Second quarter revenue was $178 million, up 16% year over year. Collections were $301 million, up 18% year over year, deployments were $152 million, up 21% year over year, and adjusted EPS was $0.77. Operating expenses were $95 million, up 46% year over year, adjusted pretax income was $59 million, adjusted cash EBITDA was $226 million, and cash efficiency ratio was 72.2%. Estimated remaining collections were $3.4 billion, up 18% year over year. Management said it expects to collect $1.1 billion of the June 30 ERC over the next 12 months and would need about $565 million of global deployments over that period to maintain ERC levels; it had $312 million already contracted via forward flows for the next 12 months and $480.7 million locked in through forward flows as of June 30. There was no formal next-quarter or full-year guidance, but management said the second-half deployment pace is typically higher and fourth quarter is usually the largest deployment quarter.

David Burton struck an upbeat tone, saying the company delivered another quarter of excellent results and remains confident in the investment opportunity. He emphasized that the market backdrop is favorable because of elevated consumer credit balances, charge-offs and delinquencies, and he pointed to auto finance as a major growth opportunity. He said Jefferson is uniquely positioned because it can work across performing, charged-off and insolvency auto portfolios, and noted the company is now entering Mexico as another growth pillar in Latin America.

Christo Realov focused on the earnings and balance-sheet details: revenue of $178 million, operating expenses of $95 million, adjusted pretax income of $59 million, adjusted pretax ROE of 51.6%, and adjusted cash EBITDA of $226 million. He said the company’s net debt to adjusted cash EBITDA improved to 1.71x, with a long-term target leverage range of 2x to 2.5x, and noted the revolving credit facility had $226 million drawn at June 30. He also said the board declared a quarterly dividend of $0.24 a share, equivalent to a 4.8% annualized yield as of July month-end, and that the company repurchased 3 million shares for $59 million earlier in the year.

Analysts focused heavily on auto, asking how broad the July strength was, how the collections/cost profile differs, and whether Jefferson’s position in auto resembles its more protected core businesses. Management said July involved deployment across charge-offs, insolvencies and performing auto, and that the segment is more complex operationally and legally, which can create a competitive moat. Questions also centered on legal-channel growth and court costs; Christo said the current quarter’s court costs are a good guide for the rest of the year and reaffirmed expectations for cash efficiency in the high 60s excluding Bluestem and Conn’s. When asked whether current deployments plus forward flows were enough to support ERC growth, David answered plainly: “The clear answer is no” headwind was seen.