figure out how to sequence. You know, I wouldn't put 185 in the model every month. Let me put it that way. So maybe just trying to understand if there was anything unusually large about it.

Yeah, we certainly wouldn't encourage you to do that. But what we would say is, you know, it's a it's a wide distribution of our more of like a normal kind of distribution across asset classes. Yes, there was a larger distribution in the month of July for auto.

And then I have a question just about, so the collection activity just continues to be good and kind of ahead of our expectation. Is it, do you talk about collection performance by in vintage? Meaning, is it, you know, kind of given the dynamic where there's a larger, you know, balance of charge-offs at the same time that people have jobs, is it, are you, are collections better on kind of more recent vintages and not as good in older vintages? How should we think about that?

Yeah, I don't know that that's necessarily the way I would think about it as your underwriting should take into account the consumer's capability of repayment based on history and the volatility around liquidation rates as it relates to things like, you know, levels of unemployment are pretty, are relatively narrow, except in the case where there's an actual recession, where unemployment increases rapidly to levels, you know, that exceed six, seven percent. And so I would say the level of variance in times of, you know, non-recession, the liquidation rates don't have substantial changes, you know, given macroeconomic fluctuations.

Understood.

Thanks for the responses. Of course.

And next, we'll move to John Hecht with Jefferies LLC. Afternoon, guys.

Another good quarter. Thanks for voting my questions. First one is maybe, David, can you talk about the pipeline? I mean, obviously, you guys have a lot of good organic growth, but both performing portfolio acquisitions as well as buying into other channels has been an important part of your story. Maybe talk about the characteristics of the pipeline and pricing and so forth.

Yeah, I think what I would say is that the level of activity is certainly elevated across all of the kinds of investments that we make. And so when you look at deployments across all of our geographies, for example, you're going to see attractive levels of growth. Um, and, um, I think that's evidence of, uh, uh, both, uh, attractive backdrop in terms of supply, but also it's indicative of, uh, increased effectiveness in building our pipeline.

Okay. And then, um, Chrisco, maybe, um, can you, I mean, I guess you have to think about blue stem and tons in this, but then also just general, like, Q2 to Q3 seasonality. just maybe remind us and refresh us how those factors impact the coming quarters relative to key things I mean look I think that the seasonality impact is probably a much bigger driver of performance and specifically collections in the first quarter going kind of into the rest of the year that obviously

the kind of, it's a kind of a, I think the seasonality impact weakens, we certainly see on deployments, you know, a trend of acceleration of activity as we're getting into the second half of the year. And typically, right, the fourth quarter is the largest quarter in terms of deployments, as we have discussed before.

So I don't think that there's anything out of the ordinary that we're seeing.

And the activity that we saw in the month of July is probably indicative more of this broader opportunity that we discussed in the prepared remarks around auto finance and around the broader consumer credit asset class rather than any seasonal impacts.

And I'll just add to that. I'll just add to that, John, a reminder of the record level forward flow commitments that we have, which are $480 million, which is a substantial increase. I think if you looked at that on just a year-over-year basis, that's up 80%. And so I think that is one component of the future deployment pipeline. Okay.

And then final question for me is, I mean, all geographies seem to be doing very well, but that and kind of stuck out the story in terms of growth and momentum. Maybe anything to point out there that was one time or maybe just talk about the overall conditions there and opportunities you're seeing?

Yeah, thank you. Thanks for noticing that. We're really proud of the platform that we're continuing to build in Latin America and continuing to be a leader in the Colombian and Peru market as we have expanded our pipeline of opportunities there. And we also have been successful in putting in place, I think, some of the first forward flows that that region has initiated as that market has historically been characterized really just by spot sales. And so that helps us develop sustained growth as we build these longer-term relationships with originators in the region. And, of course, we did mention to you that we did an inaugural deployment in Mexico in July, and as all of our initial forays when we're making an organic investment into a new geography, we take a very measured and patient approach to ensure that we validate our underwriting model and that we build a robust servicing capacity before deploying, you know, lots of capital in that market.

Wonderful. Thanks very much, Gary.

Thank you, John.

And our next question we'll hear from Robert Dodd with Raymond James. uh hi guys oh on um the the timing of collections on auto obviously we look at non-auto right where where there's legal channel some i mean obviously the court costs front run um collections to to degree so we kind of understand what's going on there on the the auto channel when you do have those higher um cost elements like if it's repo for example which is not the all of it obviously But I would imagine those high costs are incurred kind of essentially in the same or very closely related time period to when the collection occurs as well, i.e. maybe wholesaling the vehicle at an auction. And so does the auto – it does have high collection elements, but are those closely aligned, i.e. they're not as distortive time-wise to cash efficiency ratios as, say, sometimes the regular cost component is, if that makes sense.

It does make sense, and my answer is not intentionally confusing. But I just want to flag that we purchase across kind of the three core businesses, if you will, of, you know, charge-off, insolvency, and now performing an auto. And performing has a low cost to collect, and as you say, at least in the context of how closely do the expenses correlate to, you know, collections. And I think they're not in any way out of sequence in the performing side of the business, nor are they really an insolvency, at least for secured insolvencies, as those are paid out at 100% in the bankruptcy process, plus interest in some cases. but it's in the deficiency collections in distressed where you may have a disconnect between some expenses and recoveries. Repossession is one example of that, and court cost is another. And because deficiency balances tend to be a low-priority obligation for the consumer, a higher percentage of recoveries in the deficiency balance and distressed segment will require the legal channel. And so you'll see a greater disconnect between costs and recoveries or collections. So, again, because in the quarter we deployed capital across all three of those, you know, the answer is a little complicated and we're not going to, you know, disclose exactly how much was in each. but I think your bigger question is do you expect some kind of a step function change in the timing of your expenses in your collections and how would that flow through perhaps to your cash efficiency ratio and I think Christo sort of guided on that and it's consistent with what we've really indicated in the past you know, both with and without the performing side, without performing, you know, high 60s is what we would expect. And despite the larger deployments in auto, we are not anticipating really any change in that because we have more exposure to auto.

Maybe, Robert, one additional comment. The return profile of the incremental deployments in July is not substantially different than our historical return targets and what we're seeing on the rest of the portfolio, right?

Got it. Got it. Thank you. The follow-up to that kind of title, I mean, you said in the prepared remarks, I can't remember if it was you or David, please, you've got forward flows locked in over the next year in 312. You bought 185 in July. Maybe a tiny part of that was from the forward flows, but i don't imagine very much that's that's 497 um and you also said that you need to deploy over the next year uh 565 to maintain erc um i mean that looks like you're almost there in july right with with contracts on forward flows i mean so it it are there any headwinds you can see, where you would not generate substantial, maybe you don't want to use the word substantial, but meaningful ERC growth over the course of the next year, given the position you're starting in, in July, and the amount that you need to deploy over the next 12 months?

The clear answer is no. Fair enough.

Yes. Thank you.

Of course.

And next, I'll move to both George with KBW.

Hey, guys. Good afternoon. Just going back to the auto discussion, you know, it seems like it's hitting kind of an inflection point, that asset class. You know, how much of the change is being driven by just the increased supply that you noted versus a shift among lenders, maybe recognizing that the outcomes, you know, could be better, you know, through selling the receivables?

Uh, so you have a number of drivers in the auto market. Some are, you know, permanent and some are sort of episodic to this moment in time. And so the permanent drivers are that relatively low percentage of autos happen to be sold into the market. and our quest is to cultivate relations with more originators and encourage them to undertake their first sale, which is a profit-maximizing option for them. And so there's a large organic opportunity that really has nothing to do with the level of charge-offs or any headwinds that are sort of an episodic component right now. And then turning to the episodic aspect, there happens to be higher balances in auto, a more stressed consumer that also happens to have depleted the savings that were built up during the pandemic after receiving government stimulus. and the level of delinquency and defaults for some originators has become an important headwind that is driving them to look at asset sales either at levels that are higher than they were before or in some cases more holistically and potentially exiting the origination business. And so, you know, it's a very fragmented industry, and so there's lots going on, and it's hard for me to, like, characterize how much of our deployments were derived from either the episodic trends or the broader trend of more auto originators choosing to optimize their profitability by beginning to sell their charge-offs to us or to the sector.

Okay, great. That's helpful. Thanks. And then just on the forward flow numbers, can you just remind us, is there kind of a sweet spot for purchase forward flow commitments as a percentage of your total acquisitions?

Historically, that percentage has ran in the 50% range, plus or minus 10%. And so we're not really trying to optimize around a specific percentage of our deployments. Our goal is to deploy capital at attractive risk-adjusted returns, and we seek to have as many forward flows in place that reflect those levels of attractive risk-adjusted returns. They certainly help in terms of having certainty and allow us to have a base to be able to jump off of as we attempt to grow in the aggregate. So I would – Forward Flows is not a specific target. It hopefully is a byproduct of a good relationship with originators where we can add value and we turn that value into something that's more long-term in a Forward Flow agreement.

Okay, great.

Thanks for the call.

And that will conclude today's question and answer session. I would now like to turn the floor back to David Burton for closing remarks.

Thanks, operator. 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 very much for joining us in today's call, and we look forward to providing another update on our third quarter earnings call.

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.