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| Part I | Financial Information | |
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| Item 1. | Combined and Condensed Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024 (Unaudited) | 6 |
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| | Combined and Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2025 and 2024 (Unaudited) | 7 |
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| | Combined and Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended June 30, 2025 and 2024 (Unaudited) | 8 |
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| | Combined and Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024 (Unaudited) | 9 |
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| | Notes to Combined and Condensed Consolidated Financial Statements (Unaudited) | 11 |
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| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 32 |
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| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 66 |
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| Item 4. | Controls and Procedures | 67 |
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| Part II | Other Information | 68 |
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| Item 1. | Legal Proceedings | 68 |
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| Item 1A. | Risk Factors | 68 |
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| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 87 |
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| Item 3. | Defaults Upon Senior Securities | 87 |
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| Item 4. | Mine Safety Disclosures | 87 |
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| Item 5. | Other Information | 88 |
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| Item 6. | Exhibits | 88 |
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| Exhibit Index | | 88 |
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| Signatures | | 90 |
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BASIS OF PRESENTATION
Except as otherwise indicated or as the context otherwise requires, all references in this Quarterly Report on Form 10-Q (the “Quarterly Report”) to the “Company,” “we,” “our,” and “us” and similar terms refer to Jefferson Capital, Inc. a Delaware corporation, together with its subsidiaries. Unless otherwise indicated, all references to our financial information are to the combined and condensed consolidated financial information of the Company and references to “dollars” and “$” in this Quarterly Report are to, and amounts are presented in, U.S. dollars. Financial data as of and for the three months and six months ended June 30, 2025 and December 31, 2024, relate to financial information of the Company on a combined and condensed consolidated basis.
Special Note Regarding Forward-Looking Statements
This Quarterly Report contains forward-looking statements about Jefferson Capital, Inc. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, future economic conditions and the anticipated future revenue, expenses, financial condition, asset quality, capital and liquidity levels, plans, prospects and operations of Jefferson Capital, Inc. Forward-looking statements often use words such as “anticipates,” “targets,” “expects,” “hopes,” “estimates,” “projects,” “forecasts,” “intends,” “plans,” “goals,” “believes,” “continue” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.”
Forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those set forth in forward-looking statements. Factors that may materially affect such forward-looking statements include:
| ● | Deterioration in general business and economic conditions or turbulence in domestic or global financial markets, which could adversely affect Jefferson Capital, Inc.’s revenues and the values of its assets and liabilities; |
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| ● | Turmoil and volatility in the financial services industry; |
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| ● | Actions taken by governmental agencies to stabilize the financial system and the effectiveness of such actions; |
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| ● | Changes in interest rates; |
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| ● | Increases in unemployment rates; |
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| ● | Impacts of current, pending or future litigation and governmental proceedings; |
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| ● | Increased competition from both banks and non-banks; |
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| ● | Effects of climate change and related physical and transition risks; |
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| ● | Changes in customer behavior and preferences and the ability to implement technological changes to respond to customer needs and meet competitive demands; |
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| ● | Failures or disruptions in or breaches of Jefferson Capital, Inc’s operational, technology or security systems or infrastructure, or those of third parties, including as a result of cybersecurity incidents; |
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| ● | Failures to safeguard personal information; |
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| ● | Impacts of pandemics, natural disasters, terrorist activities, civil unrest, international hostilities and geopolitical events; |
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| ● | Impacts of supply chain disruptions, rising inflation, slower growth or a recession; |
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| ● | Failure to execute on strategic or operational plans; |
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| ● | Effects of mergers and acquisitions and related integration; |
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| ● | Effects of critical accounting policies and judgments; |
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| ● | Effects of changes in or interpretations of tax laws and regulations; and |
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| ● | Management’s ability to effectively manage market risk, operational risk, compliance risk, strategic risk, liquidity risk and reputation risk. |
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Factors other than these risks, including those described under the sections in this Quarterly Report entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report, also could adversely affect Jefferson Capital, Inc.’s results, and the reader should not consider these risks to be a complete set of all potential risks or uncertainties. Readers are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date hereof, and Jefferson Capital, Inc. undertakes no obligation to update them in light of new information or future events, except as required by applicable law.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
Summary Risk Factors
Investing in our common stock involves substantial risk. Our ability to execute our strategy is also subject to certain risks. The risks described under the heading “Risk Factors” in this Quarterly Report may cause us not to realize the full benefits of our strengths or may cause us to be unable to successfully execute all or part of our strategy. Some of the most significant challenges and risks we face include the following:
| ● | A deterioration in the economic or inflationary environment in the countries in which we operate could have an adverse effect on our business and results of operations. |
| ● | We may not be able to continually replace our nonperforming loans with additional portfolios sufficient to operate efficiently and profitably, or we may not be able to purchase nonperforming loans at appropriate prices. |
| ● | We may not be able to collect sufficient amounts on our nonperforming loans to fund our operations. |
| ● | Our collections may decrease if certain types of insolvency proceedings and bankruptcy filings involving liquidations increase. |
| ● | We outsource and offshore certain activities related to our business to third parties. Any disruption or failure of these third parties to provide these services could adversely affect our business operations, financial condition and reputation. |
| ● | Disruptions at our co-sourced operation in Mumbai could adversely impact our business. |
| ● | Goodwill impairment charges could negatively impact our net income and stockholders’ equity. |
| ● | Our loss contingency accruals may not be adequate to cover actual losses. |
| ● | Solicitors of Moriarty, our wholly-owned law firm subsidiary in the United Kingdom, could act outside our interests and/or regulatory bodies to which such law firm subsidiary and its solicitors are subject could take enforcement action or impose sanctions that could impact our business, financial condition and results of operations. |
| ● | Our expected collections from the Conn’s Portfolio Purchase may not be realized, or our expenses from the full-time equivalents (“FTE”) that were formerly employed by Conn’s may be higher than we anticipated, which may adversely impact our financial results. |
| ● | Our international operations expose us to risks, which could harm our business, financial condition and results of operations. |
| ● | We may experience losses on portfolios consisting of new asset classes of receivables or receivables in new geographies due to our lack of collection experience with these receivables, which could harm our business, financial condition and results of operations. |
| ● | Compliance with complex and evolving international and U.S. laws and regulations that apply to our international operations could increase our cost of doing business in international jurisdictions. |
| ● | Evolving regulation, particularly in Latin America, where the regulatory environment is less restrictive with respect to the use of certain new technologies and where we test new collection capabilities before broader adoption across our business, could adversely affect our business, financial condition and results of operations. |
| ● | Our ability to collect and enforce our nonperforming and performing loans may be limited under federal, state and international laws, regulations and policies. |
| ● | The regulation of data privacy in the United States and globally, or an inability to effectively manage our data governance structures, could have an adverse effect on our business, financial condition and results of operations by increasing our compliance costs or decreasing our competitiveness. |
| ● | We are dependent on our data gathering systems and proprietary consumer profiles, and if access to such data was lost or became public, our business could be materially and adversely affected. |
| ● | A cybersecurity incident could damage our reputation and adversely impact our business and financial results. |
| ● | The underperformance or failure of our information technology infrastructure, networks or communication systems could result in a loss in productivity, loss of competitive advantage and business disruption. |
| ● | We may not be able to adequately protect the intellectual property rights upon which we rely and, as a result, any lack of protection may diminish our competitive advantage. |
| ● | Our use of machine learning and AI technologies could adversely affect our products and services, harm our reputation, or cause us to incur liability resulting from harm to individuals or violation of laws and regulations or contracts to which we are a party. |
| ● | We expect to use leverage in executing our business strategy, which may have adverse consequences. |
| ● | We may not be able to generate sufficient cash flow or complete alternative financing plans, including raising additional capital, to meet our debt service obligations. |
| ● | The JCF Stockholders (as defined below) control us, and their interests may conflict with ours or yours in the future, including with respect to matters that involve corporate opportunities. |
| ● | We are a “controlled company” within the meaning of the corporate governance rules of the Nasdaq and, as a result, we qualify for exemptions from certain corporate governance requirements. You will not have the same protections as those afforded to stockholders of companies that are subject to such governance requirements. |
