Jefferson Capital, Inc.

Good afternoon, and welcome to the Jefferson Capital's third quarter 2025 conference call. With us today are David Burton, founder and chief executive officer, and Christo Ryulov, chief financial officer. As a reminder, this conference call is being recorded. This call may contain forward-looking statements regarding the company's plans, initiatives, and strategies, and the anticipated financial performance of the company including but not limited to sales and profitability. 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 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'll turn the call over to Mr. 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 the third quarter of 2024, and we continued 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 the third quarter of 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 ratio of 72.2%, driven in part by strong collections from the CONS 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 74 cents, and the Board of Directors has declared a common stock dividend of 24 cents per share. Next, on October 28th, 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 Crystal 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 the end of 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 U.S. 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 U.S. and by far the largest debt buyer in Canada that can take advantage of 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. 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 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 CONS 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 utilizes 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 U.S., which 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 30th, 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 30th were $2.9 billion, up 27% year-over-year, with ERC related to the cons 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 30th ERC balance during the next 12 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 30th, we had 273 million of deployments contracted via forward flows for the next 12 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 CONS portfolio purchase, which carry lower cost to collect given the significant portion of paying accounts in the CONS portfolio. When excluding the CONS portfolio collections and expenses, the cash efficiency ratio would have been 68.8 percent, 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 CONS portfolio purchase, the transaction is structured with a cutoff date, in this case, June 30, 2025. Jefferson Capital 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 1st of this year, we expect the net purchase price to be approximately $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 CONS portfolio purchase, Jefferson Capital 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 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 non-bank 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, and they are difficult to predict from a timing perspective, as it is not possible for us to induce this type of transaction. But Jefferson Capital 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 cons 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.

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 recovery surrounded to $0 million for the quarter, reflecting the accuracy of our modeling and our execution against the underwritten 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-shoot put forward these expenses to the current quarter. We expect core costs to remain at this level given the increased inventory of SWOT-eligible accounts, resulting from the significant overall portfolio growth over the past several years. We also recorded $8.8 million of 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 non-cash item, which does not reflect any new awards post-IPO, and as such, we treat the expense as an ad-back. Adjusted pre-tax income was $54.8 million for the quarter, up 30% year-over-year, resulting in an adjusted pre-tax ROE of 51.7%. We realized the material level of collections on portfolios purchased in 2023-2024, including the cost 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 recognized portfolio revenue of $22.4 million, servicing revenue of $1.9 million, a net operating income of $16.5 million related to the CONS portfolio purchase. Our credit profile remains strong and positions as well for future opportunities. As of September 30th, our net debt to adjusted cash should be dialing proof to 1.59 times following the CONS-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 2 to 2.5 times. Our balance sheet is solid with ample liquidity to support growth, create strategic optionality, and pay our quarterly dividend. On October 27th, 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 tenor of the facility to five years with an effective two and a half year extension. We improved pricing by 50 basis points across the grid and eliminated the create spread adjustment for an aggregate interest expense savings on the drawn balance of 60 basis points. We also reduced the non-use fee rate for unutilized commitments by five basis points. we implemented a handful of housekeeping BOLO-friendly changes to better align the create agreement with public company precedent. The facility was undrawn at September 30th. 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 BlueStamp portfolio purchase. We have earmarked 300 million of the RCF capacity to repay our 2026 bonds in May of 2026. Given the maturity was fully pre-funded 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 outstanding 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, whose values certainly have closed 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 with attractive 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 $0.24 a share, which represents approximately a 5% annualized yield. The dividend offers an attractive component of shareholder returns, which is not available from other public companies in the sector, and 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 success for M&A, but 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.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two 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. Thank you. Our first question comes from the line of John Hecht with Jefferies LLC. Please go ahead.

Thanks very much for taking the questions. Congratulations on another good quarter. A lot of good stuff going on. First question, just as you guys have diversified channels and geographies, is there any, you know, 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?

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

Sorry, can you hear me?

Yes.

Okay. Yeah, the question is, you know, you've diversified your channels and sources and geographies, and is there any, you know, differences in seasonality of collection across those channels or geographies that's worth pointing out?

Sure. So I think the The most notable and pronounced seasonality is really kind of twofold. One is sort of global, and the other one is more U.S.-centric. The U.S.-centric one 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 non-bank institutions tend to have a calendar year end. And so we tend to see increases in deployment in the fourth quarter across all our geographies.

Okay.

Very helpful. Thanks.

And then you guys mentioned the core costs because of the activity going on in that channel, the core costs were elevated in the quarter. Sounds like that's going to at least continue for some period of time I guess, do you have any granularity for how we should think about that expense in the coming quarters?

Yeah, 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 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 cost for 2026 would be based on run rate from this quarter.

Okay. And then last question is, you know, you guys have obviously comms and now BlueStem to accretive transactions. Anything worth noting just from a pipeline perspective?

Let's see. I think the thing I would note is we have looked at more transactions. in the active or performing category this year, I think, than any other year. I suspect part of that is because after conducting the CONS transaction, there was a general awareness about our capabilities to value and close complex transactions. And I suspect that 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 respond to them. And there tends to be a complex set of circumstances that drive those processes, sometimes involving lender decisions. And so that also makes them probably more speculative in terms of whether or not they're going to close. And so 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, that's very speculative at this point. 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 Cons.

Great. Thank you guys very much.

Thank you, John.

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

Yeah, thank you. Good afternoon. Christo, the Cons portfolio, the operating income portfolio, 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?

Yeah, this is very much reflective of the runoff of the portfolio. As 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 portfolio as previously discussed.

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?

Yeah, I think the only noteworthy trend really was the continuing growth in insolvencies. And there have been, you know, elevated opportunities across all the asset classes. But as you may remember from You know, insolvencies had kind of trended down pretty continuously through kind of the end of 21. And since then, they've been kind of growing more quickly in 24 and 5 than they were previously, but that growth began before 24.

And one final question, if I could. The stock-based comp, 9 million in this quarter. What should we think about 4Q and in the next year?

So we have disclosed that the aggregate amount is $87.3 million, and that will be over 2.74 years. So if you take that as 11 quarters and divide that, it gives you around $8 million a quarter. And that number is going to take you.

Okay. Appreciate that. Thank you. Thanks, Mark.

Our next question comes from the line of Boze George with KBW. Please go ahead.

Boze George Hey, guys. Good afternoon. Actually, when we think about the earnings contribution from Bluestem, you know, should the cadence of those cash flows look a lot like what we saw from CONS?

Michael Heaney Yes. It has a similar kind of short duration and a pretty rapid pace of collections. So while not exactly the same, it would take a similar shape.

Okay, great. And then on the cash efficiency side, is that going to be similar? So this could essentially boost the cash efficiency as this comes in as well?

Absent anything else happening, the answer to that would be yes. But keep in mind that... The CONS 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.

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?

So there is, 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 in the non-prime segment.

Okay, great. Thanks.

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

hi uh good afternoon thanks thanks for taking my questions and uh congrats all around uh a lot to digest um i 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 kind of get a clear picture of sort of the margin potential uh for the business um If we exclude cons, and 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?

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 INSULBANCY BUSINESS AS A PERCENTAGE OF OUR TOTAL. AND INSULBANCY 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 have made the anticipated progress. But every year, we put together a host of what those initiatives should be 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 overall improvement in our cash efficiency ratio.

Got it. That's helpful. It sounds like... It's clearly been improving even without the performing cons in there. Another topic, you know, you talked about the existence and difficulty in timing, whether actions take place of other portfolios like like cons and blue stem finger hut. But I'm 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 going to revisit or if there's anything else that's showing up, particularly since your IPO and you've become more visible.

Sure. So 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 forgiveness. And even though that wouldn't in any eventuality likely be the case for a private student loan versus a U.S. 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 government regulatory change to kind of impact our own anticipated expected returns. So, you know, that certainly with the new administration had kind of sort of quieted down the discussion, although more recently there's been some recent resurgence of discussion about student loan forgiveness. 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 portfolio, 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 capital. And I think we're one of the few companies that have both the data, the analytics, and the capability for actually underwriting and executing against a private or federal government student loan portfolio.

Got it. You know, clearly a lot's in flux right now. Maybe just one more if I can squeeze in. Returning to Bluestem, just want to make sure I understand on the, you know, illustrative example you gave about sort of a net purchase price. of $195 million if the transaction were to close on December 1st. Would that approximate the receivable balance that would be booked at that time?

No, no, no. There's a substantial discount to what the then face value.

And I think the ratio would be sort of... Oh, no, not the face value, but if $195 were the actual purchase price...

Yes, yes. Sorry, a little bit got lost in translation here. The transactional capital is a significant discount to face value, but the receivable balance if you book on our balance sheet would be approximated by the purchase price.

Yeah, that's okay. So it would be about 195 million of, yeah, 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 1st. Does that imply $107 million of collections during what timeframe, from June 30th to December 1st?

So the cutoff date is June 30th, and in the example that we provided for the $195 million, that was an example of a December 1st closing date. And that doesn't imply $107 million of collections because 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 kind of gross purchase price against the then total receivable balances as of June 30th.

Oh, got it, got it. Perfect. Thank you.

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

Hi, guys, and congrats on the quarter. Sticking with Bluestem, well, the concept of Bluestem slash comms, I mean, what – I mean, obviously your priority for deploying capital, number one, is to buy 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-performing? Obviously, the performing applies much more. You get the collections much quicker. It's great ROI. But then you have to find another one. And so what's the balance of where you'd like that to be going forward?

Yeah, so I may answer the question a little differently than you've asked it, but I hope it kind of gets at 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, you know, we deploy capital in a bunch of geographies and across a number of asset classes. And we seek each year to widen that funnel. And the purchase of performing portfolios like Kahn's, 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 non-performing portfolios. So, I, you know, 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. Small balance, of course, 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 a large balance credit card portfolio. But even that, I don't think any of our public competitors have deployed capital against a performing credit card portfolio, for example. large balance 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 amongst our peers.

I agree with you and I appreciate that comment. Thank you. Kind of tying on to that, I mean, If Bluestem works out, and big ifs, you're at 1.5 times leverage now, roughly, ahead of Bluestem. But given how fast cons liquidated and lowered your leverage after an initial peak, I mean, the outlook is, prospectively, your leverage will be down again. This time next year, we'll be looking well, unless there's a lot of other moving parts of it. 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 through its life if it performs anything like cons. So what are 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 12 to 18 months maybe?

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 want to kind of flag for you, Robert, that we also have a bond maturing in the middle of next year for $300 million. And we would plan to utilize our revolver for that and why that doesn't increase our net debt. It does 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... we certainly have available to us potential changes to the dividend or share repurchase or whatever as Christo referred to in his prepared remarks. And then lastly, we've had a history of doing disciplined M&A that have all worked out quite well for us. And so we find ourselves in an environment and with a capacity to consider really all of the above as a means to optimize shareholder returns.

Got it. Thank you. Of course.

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

Thank you. Looking forward, we're excited about the growth prospects for our business for the remainder of this year and beyond. We've built an outstanding platform over the past 23 years, and we're 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.

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