On Thursday, Jefferson Capital (NASDAQ:JCAP) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Jefferson Capital reported record collections of $310 million, a 19% increase from the previous year, and revenue of $176 million, up 14% year over year.
The company highlighted its strategic advantage in the auto finance sector, with a focus on portfolios affected by rising vehicle prices and interest rates.
Jefferson Capital’s strategy includes a strong focus on legal channel collections, with significant improvements in process efficiency leading to increased suit volumes.
The company’s cash efficiency ratio was 73%, driven by collections from the Bluestem and Conn’s portfolio purchases, and it maintained a strong financial position with a leverage ratio of 1.79 times.
Management expressed confidence in future portfolio supply due to elevated consumer delinquencies and charge-offs, and highlighted a robust outlook for portfolio purchases.
A new amendment to the senior secured revolving credit facility increased committed capital to $1.15 billion, enhancing liquidity and strategic optionality.
Full Transcript
OPERATOR
Good afternoon and welcome to Jefferson Capital’s fourth quarter and full year 2025 conference call. With us today are David Burton, Founder and Chief Executive Officer and Christo Rylov, Chief Financial Officer. As a reminder, this conference call is being recorded. This call may contain forward looking statements regarding the Company’s plans and initiatives and strategies and the anticipated financial performance of the Company including but not limited to sales and profitability, expected benefits of the Bluestem acquisition, expectations on the market and macroeconomic factors and expected collections and growth in certain collections. Such statements are based upon management’s current expectations, projections, estimates and assumptions. Words such as expect, believe, anticipate, think, outlook, hope and variations of such words and similar expressions identify such forward looking statements. Forward looking statements involve known risks and unknown risks and uncertainties that may cause future results to differ materially from those suggested by the forward looking statements. Such risks and uncertainties are further disclosed in the Company’s most recent filings with the Securities and Exchange Commission. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward looking statements made herein and are cautioned not to place undue reliance on such forward looking statements. The Company does not undertake to update the forward looking statements except as required by law. Also, during this conference call, the Company will be presenting certain non-GAAP financial measures. Reconciliations of the Company’s historical non-GAAP financial measures to their most directly comparable GAAP financial measures appear in today’s earnings press release. And now I will turn the call over to David Burton. Please go ahead.
David Burton (Founder and Chief Executive Officer)
Thank you operator and thanks everyone for joining our investor call. Let’s dive into our first quarter financial performance highlights. We again generated strong results for shareholders. We delivered record collections of 310 million up 19% versus the prior year period and we continue to perform well versus our underwriting expectations. Our estimated remaining collections grew 18% to 3.4 billion, driven by our continued deployment performance and attractive anticipated returns. Revenue for the quarter was a record 176 million up 4.14 percent versus the prior year period. We delivered a sector leading cash efficiency ratio of 73% driven in part by strong collections from the Bluestem and Conn’s portfolio, purchases. We generated strong cash flow in the quarter which improved our leverage to 1.79 times a level which positions us well for future growth and creates significant strategic optionality adjusted EPS for the quarter was $0.73. Turning to the next slide, I’d like to offer a brief market update and cover some of the macroeconomic indicators to provide better context for why we remain confident in the investment opportunity for our business, delinquency trends remained elevated across all non mortgage consumer asset classes create favorable portfolio supply trends. An asset class we continue to watch closely is auto finance. Receivables have grown steadily to a record of 1.68 trillion with an average monthly new vehicle loan payment of $806, up 52 percent compared to pre pandemic. As a result of higher vehicle prices and elevated interest rates. In March of 2026, nearly one-third of used vehicle trade ins carried negative equity. In addition, 72-month loans accounted for 40.5% of all financed vehicle sales and 84-month loans accounted for 12.8%. Continued strain on the consumer and deteriorating credit quality for originators in some instances coupled with financing headwinds, all set the stage for increasing portfolio supply. We remain uniquely positioned to offer solutions across the spectrum of performing charged off and insolvency auto finance portfolios for both secured and unsecured accounts. The next 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 which served as a financial cushion against life’s unexpected events. By the end of 2022 the excess savings had been depleted and in fact the current level of personal savings at 857 billion is substantially lower than than the long term pre pandemic average from 2013 through 2019 of 1.1 trillion, a dynamic which is even more pronounced when adjusted for 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 have seen a well pronounced increase in the number of insolvencies both in the United States and in Canada from the pandemic trough in 2021, which in turn has fueled the resurgence in supply of insolvency portfolios. Insolvency valuation 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 capitalize on this market 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. Our portfolio performance is less sensitive to changes in unemployment compared to an originator and despite the recent labor market headwinds, the overall employment level is still favorable for our business. All of these trends point in one direction elevated levels of consumer delinquencies and charge offs, which we’re seeing across all consumer asset classes and which we believe create a long Runway for a robust portfolio portfolio supply over the coming quarters, coupled with continued strong collection performance on our existing book and on any future portfolio purchases. Moving on, I’d like to review in more detail some of the key performance trends for the quarter. Our collections, as I mentioned, were $310 million, up 19% year over year, driven by strong deployments. In 2024 and 2025, 54.5 million of collections for the quarter were attributable to the Bluestem portfolio purchase and 31 million were attributable to the Conn’s portfolio, purchase. More broadly, our collection performance on the overall portfolio continues to reflect the accuracy of our underwriting models, and we did see the typical seasonal impact of tax refunds on consumer liquidity. In the United States, a key trend in collection performance has been the increase in Legal Channel collections. Jefferson Capital utilizes Legal Channel as a means of last resort in instances where we believe the account holder has the ability but not the willingness to engage or pay. We have achieved a number of important process improvements, specifically in the United States which which have significantly compressed the timing from placement of the account to filing of the lawsuit, which in turn has accelerated suit volumes. This 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 150 million compared to 175 million in in the first quarter of 2025. Returns remain attractive and we remain confident in the deployment landscape. I will note that our deployments in the year ago first quarter benefited from a $28.5 million insolvency back book purchase in Canada. More broadly, our business is subject to pronounced seasonality. The fourth quarter is typically the largest quarter for deployments as credit originators aim to dispose of nonperforming portfolios ahead of year. End deployments then tend to decelerate in the first quarter as portfolio sales activity declines as originators want to take advantage of consumer liquidity related to tax refunds in the US as of March 31st we had 353 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 March 31 were 3.4 billion, up 18% year over year, with ERC related to Bluestem and Conn’s comprising 238 million and 105 million of us distressed, respectively. Our ERC is relatively short in duration due in part to the lower average balance accounts in our portfolio. With 52 percent of our ERC expected to be collected through 2027, we expect to collect 1.1 billion of our March 31 ERC balance during …
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