PRA Group Q4 2025 Earnings Report

PRA Group EPS Results

• Actual EPS: $1.46
• Consensus EPS: $0.50
• Beat/Miss: Beat by +$0.96
• One Year Ago EPS: N/A

PRA Group Revenue Results

• Actual Revenue: $333.39 million
• Expected Revenue: $288.86 million
• Beat/Miss: Beat by +$44.53 million
• YoY Revenue Growth: N/A

PRA Group Announcement Details

• Quarter: Q4 2025
• Date: 2/26/2026
• Time: After Market Closes
• Conference Call Date: Thursday, February 26, 2026
• Conference Call Time: 5:00PM ET

PRA Group (NASDAQ:PRAA) is a global financial services company that purchases portfolios of nonperforming consumer accounts from banks, credit unions and other lenders. The company works with consumers to resolve outstanding obligations through a range of repayment and account-management arrangements.

Its business includes the acquisition, servicing and collection of unpaid consumer loans and other receivables. PRA Group also provides related portfolio-management and consulting services, using data analysis and customer-focused communication to manage accounts throughout their recovery cycle.

Founded in 1996 and headquartered in Norfolk, Virginia, PRA Group serves consumers and financial institutions across North America, Europe and Australia. The company became publicly traded on the Nasdaq exchange in 2013. Vik Atal has served as PRA Group’s president and chief executive officer since 2020.

PRA Group Q4 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Record ERC of $8.6 billion and record cash collections of $2.1 billion in 2025 helped drive adjusted EBITDA to $1.3 billion (up 16%), indicating improving operating leverage.
• Positive Sentiment: Management is deliberately investing in the U.S. legal channel and digital/AI initiatives — including ~$125 million of legal investments in 2025 — which materially increased legal collections and digital receipts and are expected to lift long‑term cash generation.
• Positive Sentiment: The balance sheet strengthened with net leverage down to 2.7x, $3.2 billion of committed capital (about $1.1 billion available) and $20 million of share repurchases, supporting continued de‑leveraging and opportunistic buybacks.
• Negative Sentiment: A $413 million non‑cash goodwill impairment produced a GAAP net loss of $305 million for the year and the company warns of quarter‑to‑quarter earnings variability despite positive adjusted results, signaling ongoing headline volatility for investors.

Presentation

[Operator]

Good evening, and welcome to PRA Group's Q4 and Full Year 2025 Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.

[Operator]

To ask a question, you may press star then the number one on your touchtone phone. To withdraw your question, please press star then the number two. Please note this event is being recorded. I would now like to turn the call over to Mr. Najim Mostamand, Vice President, Investor Relations for PRA Group. Please go ahead.

[Najim Mostamand, Vice President of Investor Relations at PRA Group]

Thank you. Good evening, everyone, and thank you for joining us. With me today are Martin Sjolund, President and Chief Executive Officer, and Rakesh Sehgal, Executive Vice President and Chief Financial Officer. We will make forward-looking statements during the call, which are based on management's current beliefs, projections, assumptions, and expectations. We assume no obligation to revise or update these statements.

[Najim Mostamand, Vice President of Investor Relations at PRA Group]

We caution listeners that these forward-looking statements are subject to risks, uncertainties, assumptions, and other factors that could cause our actual results to differ materially from our expectations. Please refer to our earnings press release issued today and our SEC filings for a detailed discussion of these factors. The earnings release, the slide presentation that we will use during today's call, and our SEC filings can all be found in the Investor Relations section of our website at www.pragroup.com.

[Najim Mostamand, Vice President of Investor Relations at PRA Group]

Additionally, a replay of this call will be available shortly after its conclusion, and the replay dial-in information is included in the earnings press release. All comparisons mentioned today will be between Q4 2025 and Q4 2024, unless otherwise noted.

[Najim Mostamand, Vice President of Investor Relations at PRA Group]

During our call, we will discuss certain financial measures on an adjusted basis. Please refer to the appendix of the slide presentation used during this call for a reconciliation of the most directly comparable US GAAP financial measures to non-GAAP financial measures. With that, I'd now like to turn the call over to Martin.

[Martin Sjolund, President and CEO at PRA Group]

Thank you, Najim, thank you everyone for joining us this evening. 2025 was a year of significant progress for PRA as we focused on strengthening our US platform, building on the strength and momentum of our European franchise, executing on our near-term priorities, and developing our longer-term strategy.

[Martin Sjolund, President and CEO at PRA Group]

As you can see on the slide, the key financial and operational metrics are moving in the right direction. We purchased $1.2 billion of portfolios in 2025, in line with our target and our third highest investment year on record. These purchases, along with our numerous operational improvements, have driven our estimated remaining collections, or ERC, to a record $8.6 billion.

[Martin Sjolund, President and CEO at PRA Group]

Cash collections of $2.1 billion were a new record, up double digits for both the quarter and the year, primarily driven by the continued momentum of our operational initiatives, especially in the US legal channel, supplemented by the continued strong performance in Europe. This also drove record revenue of $1.2 billion.

[Martin Sjolund, President and CEO at PRA Group]

Adjusted cash efficiency improved to 61% from 59% last year as we delivered on our cash efficiency target while investing $125 million in the US legal collections channel in 2025. We expect these legal investments to generate significant cash collections in the years to come. Adjusted net income increased to $73 million in 2025, and adjusted EBITDA for the last 12 months was up 16% to $1.3 billion, growing faster than cash collections of 13% in the same period.

[Martin Sjolund, President and CEO at PRA Group]

This suggests that we continue to gain operating leverage even as we increased investments in the legal channel. I think the results you see today demonstrate how far we have come as a company over the past three years and especially in 2025. We've made solid progress across several key areas of our business.

[Martin Sjolund, President and CEO at PRA Group]

First, we've been increasing our purchase price multiples, both in the US and Europe, as we continue to prioritize returns over volume. Purchase price multiples are a proxy for gross returns. On a net basis, we know that even lower multiples can still generate good returns if the costs are lower and the cash timing is faster. Both higher multiples and lower expense rates are the goal we're firmly focused on. Second, we've made numerous enhancements to our capabilities, especially in the US.

[Martin Sjolund, President and CEO at PRA Group]

We revamped our legal collection process, introduced new call center strategies, and expanded digital collections. We also introduced offshore calling and built a network of external debt collection agencies, or DCAs, to give us flexibility. In fact, we now have more than two million accounts being serviced by DCAs in the U.S.

[Martin Sjolund, President and CEO at PRA Group]

Third, we have also been making great progress in modernizing our IT platform. In Europe, we have all of our core markets on one common cloud platform and on one cloud-based omni-channel contact platform. In the U.S., we are well underway in our cloud migration and have initiated the transition to our new global contact platform. At the same time, we're exploring and deploying new technologies globally, such as AI.

[Martin Sjolund, President and CEO at PRA Group]

We've already started testing a range of AI initiatives from processing documents to interactive chatbots, to using large language models to process massive unstructured data sets to help us inform our collection strategies. We see an opportunity for AI to create real value across a range of standardized processes.

[Martin Sjolund, President and CEO at PRA Group]

We are already running very interesting pilots in a number of markets. Our global footprint really helps here since we can test new AI applications in smaller markets and then scale up the ones that deliver real value. On the underwriting side, we have leveraged our top global talent to help us dial in our models and are seeing good performance on the most recent vintages. Fourth, we continue to focus on cost.

[Martin Sjolund, President and CEO at PRA Group]

In the U.S., we made the difficult decision to eliminate more than 115 corporate and overhead roles in the Q4, which resulted in total annualized gross savings of $20 million with around $3 million of these savings being offset by increased outsourcing costs.

[Martin Sjolund, President and CEO at PRA Group]

We have also continued to transition to lower cost call center offshoring, which now represents roughly a third of our U.S. agent headcount. To demonstrate the growing operating leverage in our business, our U.S. call center headcount decreased by 548 agents, or 42%, since the start of 2025, while our 2025 U.S. core cash collections were up 20% versus the prior year.

[Martin Sjolund, President and CEO at PRA Group]

Lastly, we maintained our strong and diversified capital structure with staggered maturities and leverage that has been declining steadily from a peak of 2.9x in 2024 to 2.7x at the end of 2025. We also returned capital to shareholders by repurchasing $20 million of our stock in 2025.

[Martin Sjolund, President and CEO at PRA Group]

The foundations of the business are strong, the future looks bright, and I'm very excited about the opportunities we have to build on this momentum. I will come back to share more on this after Rakesh provides a summary of our Q4 and full year financial results.

[Rakesh Sehgal, EVP and CFO at PRA Group]

Thanks, Martin. We purchased $315 million of portfolios during the Q4, with $112 million in the U.S. and $157 million in Europe and $45 million in other markets. For the full year, we purchased $1.2 billion of portfolios in line with our 2025 target as we continue to focus on driving higher returns and net income while balancing investments with leverage.

[Rakesh Sehgal, EVP and CFO at PRA Group]

This approach is having a positive impact as the returns from our purchases have increased meaningfully over the past two years. Our purchase price multiples, which are a proxy for gross portfolio yields, were 2.16x for U.S. core in 2025 compared to 2.11x in 2024, and higher than the 1.91x in 2023.

[Rakesh Sehgal, EVP and CFO at PRA Group]

Similarly, we have seen an uptick in our Europe core purchase price multiples, with 2025 ending at 1.85x, up from 1.8x in 2024 and 1.69x in 2023. While our purchase price multiples have ticked up, we are ultimately focused on delivering higher net returns, which incorporate the cost to collect, the funding cost, and the timing of cash flows.

[Rakesh Sehgal, EVP and CFO at PRA Group]

As a reminder, our European portfolios in aggregate have lower purchase price multiples due to the lower cost to collect in certain countries. ERC at quarter end was $8.6 billion, up 15% year-over-year. ERC is well-diversified, with the U.S. accounting for 42% and Europe accounting for 51% of our ERC. This diversification helps mitigate risk from any single market and economic cycles.

[Rakesh Sehgal, EVP and CFO at PRA Group]

The replenishment rate, defined as the amount we would need to invest over the next 12 months to maintain current ERC levels based on the average purchase price multiples in 2025, was $982 million. As we look ahead to the next 18 months, we expect portfolio supply to remain stable. U.S. credit card balances are at $1.1 trillion, and industry-wide charge-off rates of 4%+ are still higher versus pre-pandemic levels, with certain card issuers having charge-off rates north of that, providing significant supply opportunities.

[Rakesh Sehgal, EVP and CFO at PRA Group]

Cash collections for the quarter were $532 million, reflecting a strong 14% growth year-over-year. For the full year, cash collections grew 13% to $2.1 billion, exceeding the high single-digit growth target we had for 2025.

[Rakesh Sehgal, EVP and CFO at PRA Group]

Cash collections were driven by continued growth in our U.S. legal collections channel and strong performance in Europe across multiple markets. In addition, our digital channel continues to show significant momentum, with global cash collections up 25% in 2025. U.S. cash collections grew 17% in Q4 as well as in the full year 2025. U.S. legal cash collections for the full year grew 28% to $483 million, and were up approximately 83% since 2023 when we first started seeing the benefits from the improvements made in that channel.

[Rakesh Sehgal, EVP and CFO at PRA Group]

It's important to note that legal is not the channel that we lead with, but in cases where we are not able to get customers to engage with us through our other channels, we will eventually consider an account for legal collections.

[Rakesh Sehgal, EVP and CFO at PRA Group]

The legal channel typically provides greater collections certainty and a higher overall amount of cash collected versus other channels. Legal accounted for 48% of U.S. core cash collections in 2025 compared to 39% two years ago. Europe cash collections grew 11% for the Q4 and 13% for full year 2025. We had strong cash collections this quarter relative to our expectations.

[Rakesh Sehgal, EVP and CFO at PRA Group]

Globally, cash collections exceeded our expectations by 7%, with the U.S. exceeding by 5% and Europe exceeding by 10%. The U.S. core COVID vintages of 2021, 2022 and 2023, which now comprise 9% of ERC, collectively performed in line with expectations in Q4. Our recent U.S. vintages have also performed well, with the 2024 vintage increasing relative to expectations driven by strong legal performance, and the 2025 vintage is performing to expectations.

[Rakesh Sehgal, EVP and CFO at PRA Group]

With respect to the consumer environment, our overall customer profile remains stable across the U.S. and Europe. Moving to a summary of our income statement. Portfolio revenue increased 15% during the quarter and 8% in 2025, driven primarily by the growth in Portfolio income. Portfolio income, which is the more stable and predictable yield component of our revenue, grew 14% in the quarter to $263 million and 18% for the full year to $1 billion, a company record.

[Rakesh Sehgal, EVP and CFO at PRA Group]

Our Portfolio income increased by 34% compared to 2023, as we have continued to benefit from a healthy supply environment and improved purchase price multiples. Portfolio income has been growing faster than cash collections and is contributing more to net income. We expect the Portfolio income contribution to net income to increase as we move forward.

[Rakesh Sehgal, EVP and CFO at PRA Group]

Changes in expected recoveries were $64 million in the quarter and $176 million in 2025. Of the $176 million, 68% or $121 million came from cash over-performance or cash received above our expectations, and the remaining $56 million or 32% was from changes in expected future recoveries or the net present value of the increase in our ERC.

[Rakesh Sehgal, EVP and CFO at PRA Group]

Let me dive a little deeper into what is actually driving our portfolio income. Some of the factors include, Number one, higher purchase price multiples on our investments as we become more selective in our buying and more effective in our collection capabilities. Number two, improved cash performance driven by operational initiatives such as legal and digital collections.

[Rakesh Sehgal, EVP and CFO at PRA Group]

Number three, when appropriate, increasing our future projections of ERC on existing portfolios to reflect higher levels of expected lifetime collections, leading to portfolio write-ups. As you can see on the chart, we have a long track record of cash over-performance, especially in Europe. You may recall we did a deep dive on our U.S. vintages in the Q3. We may do these deep dives from time to time across our global vintages.

[Rakesh Sehgal, EVP and CFO at PRA Group]

Turning now to the rest of the income statement. Operating expenses were $208 million for the quarter and $1.2 billion for the full year. Excluding the non-cash goodwill impairment charge recorded in Q3, adjusted operating expenses were $819 million in 2025, up 6% from the prior year, primarily due to the continued investments in the legal collections channel.

[Rakesh Sehgal, EVP and CFO at PRA Group]

Legal collection costs were $44 million this quarter, up $10 million from the prior-year period. For the full year, legal collection costs were $162 million, up $37 million or 30% from the prior-year. What is important is that when you look at the composition of our expenses, you'll see that our operating model is becoming more flexible and variable.

[Rakesh Sehgal, EVP and CFO at PRA Group]

Over the past couple of years, our U.S. onshore agent headcount has declined by 42% in 2025. The percentage of offshore agents has grown from 0% to approximately 32%. The number of U.S. call centers has shrunk from six to three. Our IT infrastructure is moving more to third-party cloud versus on-premise data centers, and we have been using more DCAs.

[Rakesh Sehgal, EVP and CFO at PRA Group]

This progress gives us greater optionality to flex up or down as needed, further supporting our business through different stages of the credit cycle. Net interest expense was $64 million for the quarter and $252 million for the full year. The year-over-year increase for both periods primarily reflects an increase in debt balances due to new portfolio purchases.

[Rakesh Sehgal, EVP and CFO at PRA Group]

Net income attributable to PRA for the quarter was $57 million. This reflects an effective tax rate of 4% for the quarter, driven by a number of factors impacting the year, including the non-cash goodwill impairment charge and the geographic mix of earnings during the Q4. For the full year, net loss attributable to PRA was $305 million, which was driven by the non-cash goodwill impairment charge of $413 million we recorded in the Q3.

[Rakesh Sehgal, EVP and CFO at PRA Group]

On an adjusted basis, after excluding the gain on sale of our equity investment in Brazil in Q2 and the non-cash goodwill impairment, net income was $73 million or $1.84 in adjusted diluted earnings per share, up 3% from the $71 million in 2024.

[Rakesh Sehgal, EVP and CFO at PRA Group]

The adjusted net income in 2025 demonstrates the earnings power of our platform with a higher portion of net income from portfolio income as we continue to improve core operations, reduce overhead, and invest in legal, digital, and offshoring to transform the business. Ultimately, while there will be variability in our net income on a quarterly basis, our focus remains on growing the bottom line and improving returns with the goal of continuing the trends you have seen in 2025.

[Rakesh Sehgal, EVP and CFO at PRA Group]

Our Q4 results give a glimpse into the kind of earnings power that we can generate from our significant ERC and our improving operations, we are not yet at a point where that magnitude of earnings is a baseline. Q1, for example, tends to have higher operating expenses as we begin the year with enhanced marketing to our customers.

[Rakesh Sehgal, EVP and CFO at PRA Group]

Q4 results were impacted by an unusually low effective tax rate. Due to the quarter-to-quarter variability that can occur, we believe it is more helpful to look at the business on an annual or rolling four-quarter average basis. In addition to net income, we also focus on cash metrics, which we believe provides a more telling measure of our operating success. Cash efficiency ratio was 61% for the quarter and 42% for the full year.

[Rakesh Sehgal, EVP and CFO at PRA Group]

On an adjusted basis, excluding the goodwill impairment charge, adjusted cash efficiency was 61% for the full year, in line with our 60%+ target for the year. adjusted EBITDA for the last 12 months was $1.3 billion, up 16% year-over-year, driven by our cash collections growth of 13% exceeding adjusted operating expense growth of 6%. adjusted EBITDA was also up 31% compared to 2023. Our net leverage, defined as net debt to adjusted EBITDA, was 2.7x as of 31 December, compared to 2.8x in the prior year period and 2.9x at the peak in September 2024 as we continue to reduce leverage.

[Rakesh Sehgal, EVP and CFO at PRA Group]

You will note that not only is adjusted EBITDA increasing, but the quantum of debt has been fairly stable over the past three quarters as we generate higher cash flow. With adjusted EBITDA continuing to grow, we expect to further de-lever in the near term. In terms of our funding, we have ample liquidity and a strong capital structure that is well-diversified between bank and bond debt.

[Rakesh Sehgal, EVP and CFO at PRA Group]

As of 31 December, we had $3.2 billion in total committed capital under our credit facilities, with total availability of $1.1 billion, comprised of $825 million available based on current ERC and $274 million of additional availability that we can draw from subject to borrowing base and debt covenants, including advance rates.

[Rakesh Sehgal, EVP and CFO at PRA Group]

Over the past couple of years, we have taken numerous actions to further diversify and strengthen our capital structure, including most recently issuing our first ever Eurobond in late 2025. We have no debt maturities until November 2027 when our European credit facility matures. We are already in discussions with our long-standing partners to refinance the facility this year.

[Rakesh Sehgal, EVP and CFO at PRA Group]

During the quarter, we also repurchased $10 million of our shares, bringing the total amount repurchased in 2025 to $20 million. We have approximately $50 million remaining under our board authorization and will continue to evaluate share repurchases as part of our overall capital allocation strategy.

[Rakesh Sehgal, EVP and CFO at PRA Group]

As we have previously noted, the authorization remains subject to the discretion of our board and repurchases are subject to restrictive covenants in our credit facilities and the indentures that cover our outstanding notes. Overall, as our 2025 financial performance shows, we are moving in the right direction, improving our financial profile and delivering higher returns while reducing leverage. I'll now turn it back over to Martin.

[Martin Sjolund, President and CEO at PRA Group]

Thanks, Rakesh. PRA has come a long way in the past three years, and I want to share our strategy for the next few years. To set the stage and provide a little bit of context, we're celebrating PRA's 30th anniversary this year. Looking back at our history, we can see three distinct phases of our company's evolution. The first phase of PRA, or PRA 1.0, was when PRA grew from a startup into one of the leading players in the U.S. industry.

[Martin Sjolund, President and CEO at PRA Group]

We see PRA 2.0 as the period of global expansion into Europe, South America, and beyond, building one of the most globally diversified companies in the industry. Now PRA 3.0 is about how we evolve PRA into a high-performing, technology-enabled global allocator of capital. This strategy has three important vectors. one. Capital and investing. two. Operations, technology, and data. three. People and culture.

[Martin Sjolund, President and CEO at PRA Group]

The first vector is capital and investing, where we are focused on investing with discipline and allocating capital to the highest return opportunities. This vector has four main elements. Number one, we will make disciplined global NPL investments. We will do this by leveraging our global diversification, which allows us to allocate capital across a range of markets.

[Martin Sjolund, President and CEO at PRA Group]

We manage this through a global investment framework, prioritizing long-term returns over growth for growth's sake, and expanding carefully into new product opportunities that fit our return profile. On this point, we have been exploring the possibility of new asset classes that leverage our data and capabilities.

[Martin Sjolund, President and CEO at PRA Group]

Number two, we're focused on delivering a strong financial profile, one that can generate more predictable net income, significantly grow cash flow, create a more flexible cost profile, and reduce our leverage to the mid 2x area over time.

[Martin Sjolund, President and CEO at PRA Group]

Number three, we will maintain a conservative balance sheet with ample liquidity and well-diversified and staggered funding. We will also explore alternative funding mechanisms to create optionality and flexibility for the future. Number four, we will continue to employ a prudent capital allocation strategy, prioritizing investments in the core business, whether that's through disciplined purchases of portfolios with attractive returns or investments in our operations.

[Martin Sjolund, President and CEO at PRA Group]

In addition, we will evaluate opportunistic share repurchases when we believe that they can create incremental value. At the same time, we're focused on ensuring that all markets and segments are delivering the returns we need. Turning now to the second vector, operations, technology, and data. Here we are focused on continuing to modernize the engine, becoming leaner, more flexible, and more tech-driven. The first subcomponent here is transforming our operations.

[Martin Sjolund, President and CEO at PRA Group]

We aim to balance a mix of in-house collections with a range of flexible external capabilities. The internal platform gives us cost benefits in the legal channel, good customer engagement, more visibility of data, and better predictability. On the external side, we will continue to leverage our US offshore operations, which are still growing and provide a low cost and effective platform for certain types of collection activity.

[Martin Sjolund, President and CEO at PRA Group]

Today, offshoring represents about a third of our US agents, and we will look to grow this mix in the coming years. We will also leverage our global network of DCAs to create flexibility to scale up and down and to leverage specialist capabilities. At the same time, we will also be using automation and scale across the business, specifically in the legal collections channel.

[Martin Sjolund, President and CEO at PRA Group]

Finally, we plan to continue driving digital innovation that makes it easier for customers to work with us in resolving their debts while providing us with a very low-cost collection channel. The second subcomponent is fully leveraging technology. We are driving scale benefits by leveraging technology standardization where it makes sense for us. This is already in place in Europe, and we expect to make significant progress on this in the U.S. in 2026.

[Martin Sjolund, President and CEO at PRA Group]

We're also planning to modernize our U.S. core system and data architecture. This should improve our ability to rapidly apply new technologies and save us significant cost over time. The third subcomponent is enhanced data and analytics. This has long been a key part of what we do, and we are investing in talent and data to generate better customer insights. We also believe that AI has the potential to transform a company like ours.

[Martin Sjolund, President and CEO at PRA Group]

PRA has large data sets from the 70 million accounts we have acquired globally. We have hundreds of millions of documents and billions of call recordings. There's a significant opportunity to digitize workflows, serve customers digitally, and use virtual agents to transform customer service. This will take time, but with our data, our scale, and our continued investment in technology and talent, we see a big opportunity.

[Martin Sjolund, President and CEO at PRA Group]

In fact, we recently hired a senior AI leader into our new Charlotte office, and we are excited to see how he can help us accelerate our progress. The final subcomponent is disciplined cost management. As I have said from day one, cost is very important in a business like ours. Although we made a lot of progress last year, cost control is a mindset, not just a one-off project.

[Martin Sjolund, President and CEO at PRA Group]

We will continue our drive to reduce our costs and create flexibility in our cost structure. This includes employing a bottoms-up approach of zero-based reviews while driving synergies across existing overhead functions. We will also be shifting more toward a variable cost structure, leveraging external legal capabilities, call center offshoring, and DCAs globally.

[Martin Sjolund, President and CEO at PRA Group]

The third and final vector of our 3.0 strategy is people and culture, where we're focused on establishing a winning culture by embedding a high-performance ownership mindset. I'm a strong believer in the importance of culture in an organization. We can develop the best strategy on paper, but at the end of the day, it's only as good as the teams of people across PRA who will execute this strategy. PRA has a highly talented team of people, many who have been with us for decades.

[Martin Sjolund, President and CEO at PRA Group]

We will focus on continuing to build on the strong culture we have in place, both leveraging the long experience of those who have been here for decades and integrating fresh perspectives from people who joined recently but who bring critical external perspectives. We want to create an environment where talented and successful people collaborate together to execute on our strategy, deliver for customers, and hit our targets.

[Martin Sjolund, President and CEO at PRA Group]

Some of the key elements here include talent hubs to ensure we can access the talent we need and company-wide objectives and key results, or OKRs, to ensure that we're executing on our plans. We will also continue to make sure that staff incentives are aligned with shareholders. Lastly, our governance and values continue to be a source of strength. We maintain a strong compliance culture and operate under the guidance of a global board with diverse and highly relevant experience.

[Martin Sjolund, President and CEO at PRA Group]

As a responsible corporate citizen, we remain committed to supporting the communities where we operate, an attribute that has defined us for the last 30 years. Finally, I want to give a sense of our financial trajectory when we deliver on these three vectors. One, we will remain disciplined with our investments.

[Martin Sjolund, President and CEO at PRA Group]

As I mentioned, we will prioritize returns over growth for growth's sake, and hence will not chase investments that do not meet our return thresholds. Based on what we see today, we anticipate investments in the range of $1 billion-$1.3 billion per year, with 2026 projected to be at a similar level as 2025. Two, by driving cash initiatives and managing costs, we expect our adjusted EBITDA to continue to grow.

[Martin Sjolund, President and CEO at PRA Group]

Our aim is for adjusted EBITDA to continue growing faster than cash collections, even as we invest in legal collections, IT, and AI. three, as I said at the start, we are very focused on our leverage. This strategy should see our net leverage continue to decline over the next few years, and we aim to land in the mid 2 times area. Finally, returns.

[Martin Sjolund, President and CEO at PRA Group]

Ultimately, our goal is to deliver returns in line with what investors would expect from a specialty finance company like ours. As you can see on the slide, we made significant progress in these metrics over the past three years, and we expect to continue moving in the right direction. Overall, I feel confident in where PRA is and where we are heading. Our prospects for 2026 look good and the outlook beyond that is even better.

[Martin Sjolund, President and CEO at PRA Group]

We are confident that the actions we are going to take will continue to drive stronger financial results and unlock meaningful long-term value for our shareholders. Thank you everyone for tuning in and for your time, support, and continued confidence in our future. Next week we will be participating at the Raymond James Conference, and we look forward to seeing many of you there. With that, we'll open it up for questions.

[Operator]

Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. If you would like to withdraw from the polling process, please press star then the two. If you are using a speakerphone, please make sure to lift your handset before pressing any keys. Your first question comes from the line of David Scharf from Citizens Capital Markets. Please go ahead.

[David Scharf, Analyst at Citizens Capital Markets]

Hi, good afternoon, and thanks for taking my questions. Martin Sjolund, really appreciate all of the detail that was provided on all of these initiatives in the presentation. Maybe just kind of a bigger picture question. There's a lot to digest there. I mean, it looks like you're really attacking every facet of the business.

[David Scharf, Analyst at Citizens Capital Markets]

You know from an investor looking in from the outside, is there any maybe prioritization they should think about in terms of, you know, maybe what are the top three things that are outlined in all of the things on those three slides? You know, whether it's more offshoring or more outsourcing. You know, just to maybe provide some guideposts that we should be paying most attention to.

[Martin Sjolund, President and CEO at PRA Group]

Yeah, thanks. I, you know, as I've been saying for a while now, we wanted to lay out what our, what our strategy was for the coming three years. We've really broken it down into these three vectors that I talked about. You know, on one hand you have capital and investing. Making sure that we do that in a, in a prudent way, that we are not chasing growth for growth's sake, but really focused on returns.

[Martin Sjolund, President and CEO at PRA Group]

And that the other part of that is that making sure that we have a really strong funding structure. We're in a strong position on funding today, and that's something that's very important to us. The, the second vector is really around the whole operations. There continuing to create this cost flexibility is very important.

[Martin Sjolund, President and CEO at PRA Group]

you know, PRA, we're celebrating 30 years, I've been here for 15 of those 30 years. Over time, that's something we've really learned, is that it's important to have flexibility on the cost side and to constantly be working to creating a lean and efficient platform. I would say that's the second part. The third part is really just around technology, where we will continue to modernize this platform. There is a big opportunity for us as we do that.

[Martin Sjolund, President and CEO at PRA Group]

Things like AI, as I mentioned before, if you think of the tens of millions of customer accounts and hundreds of millions of documents and the, and the processes we run in different countries across the world, I really do believe that there's a significant opportunity for us to leverage technology and AI in particular to improve the business. I'd say those are some of the main themes. Overall, I know it's a lot to digest here, but we did want to give a thorough review of the initiatives that we're driving across the global company.

[David Scharf, Analyst at Citizens Capital Markets]

Got it. No, understood. Actually, that's very helpful to kind of zero in on those handful of initiatives. Then maybe just as a quick follow-up, I don't know if this is more on the, on the confidential side, but are you able to share potentially what new asset classes you were considering looking at or experimenting with?

[Martin Sjolund, President and CEO at PRA Group]

No, not really. I wouldn't be able to do that. What I can say is we, you know, we look at things that are adjacent and, you know, remember, we're in a lot of markets across the world, not just here in the U.S. We clearly believe that there's attractive return opportunities in adjacent asset classes.

[Martin Sjolund, President and CEO at PRA Group]

What we typically do, though, is to approach those in a careful way. We'll buy sample portfolios, we'll make investments, we'll start building data, improving underwriting models, and making sure that we have the operational capabilities to execute. As we do that, we'll ramp up more quickly thereafter.

[Martin Sjolund, President and CEO at PRA Group]

It's really just to signal that we think that there's an opportunity for us using our capabilities and our platform and our underwriting capabilities, to move into more segments, over the longer term.

[David Scharf, Analyst at Citizens Capital Markets]

Got it. Understood. Thank you.

[Operator]

Your next question comes from the line of Mark Hughes from Truist. Please go ahead.

[Mark Hughes, Analyst at Truist]

Thank you. Good afternoon. Martin, Rakesh, how should we think about the collections in 2026? You've given us some good guideposts around purchasing and EBITDA and net income. Any thing you'd like to say about the collections?

[Martin Sjolund, President and CEO at PRA Group]

No. Well, I think, you know, just to start, I think, you know, we entered 2026 with really strong momentum. We had really good cash performance in 2025. We're seeing, I think, all the key metrics are ticking in the right direction.

[Martin Sjolund, President and CEO at PRA Group]

We had, you know, growing cash EBITDA faster than cash. We have reducing our leverage. You know, on the funding side, we've been able to, you know, get the Eurobond out. I think we enter the year in a really strong way, and we'll continue to invest, as Rakesh mentioned earlier, in the U.S. legal channel. I think that's an important part of what we're doing. I don't know, Rakesh, anything to add to that?

[Rakesh Sehgal, EVP and CFO at PRA Group]

Yeah. What I would add, Mark, is, look, we had a very strong 2025 where we delivered 13% cash, collections growth. That's higher than the high single digits that we had telegraphed. A lot of that, I would say, number one, came from the higher buying that we had in 2024, where we bought $1.4 billion, our highest ever.

[Rakesh Sehgal, EVP and CFO at PRA Group]

That obviously played a big role in 2025. This past year, we had our third highest, year of buying at $1.2 billion, so we are still gonna see strong cash growth, albeit not at the levels that we saw in 2025. Importantly, it's not about just the cash growth, it's about delivering the bottom line.

[Rakesh Sehgal, EVP and CFO at PRA Group]

We expect that ultimately that cash is gonna grow faster than our cost, and ultimately we're gonna drive higher, cash EBITDA growth rates as well.

[Mark Hughes, Analyst at Truist]

Very good. The competitive, dynamic, kind of the supply-demand in Europe, I wonder if you could, maybe just give a couple of quick thoughts on that.

[Martin Sjolund, President and CEO at PRA Group]

Yeah. I mean, we see Europe in a fairly stable place. We have, you know, as we shared earlier, we saw the multiples in Europe for us in 2025, ticked up. That, you know, that shows, I think, on our part, good discipline in terms of our buying. The European market remains competitive.

[Martin Sjolund, President and CEO at PRA Group]

I think we've been saying that for some time. It's a competitive market, and I think this is where we really benefit from our diversification. You know, we are able to channel our investments to the markets where we see the best returns. Because we run lean markets, we can also hang back when we need to. I think that's really the key thing for us.

[Martin Sjolund, President and CEO at PRA Group]

We'll continue to allocate capital to markets where the returns are good. Overall, in Europe, I think the supply environment is stable. It's competitive, but there's still enough opportunity for us to deploy the capital that we wanna deploy. There will be certain markets from time to time that become very stretched on pricing. Because we're in so many markets, we're able to channel the capital to the right place.

[Mark Hughes, Analyst at Truist]

Martin, if you think about the improvement, say over the last several quarters since you've taken over, collections have been quite strong. How much of that is kind of rebalancing collections between domestic and offshore? Was there some kind of refinement in your scoring system or your kind of systems that target particular consumers that have made a difference here? I'm just sort of curious what from your perspective has been the biggest contributor to this improvement here lately.

[Martin Sjolund, President and CEO at PRA Group]

Well, you know, I really think that the results you're seeing are the result of several years of initiatives that have been made across the business here. You've had a number of initiatives ranging from building out the DCA network, significant investments in legal collections, and also strong growth on the digital channel as well.

[Martin Sjolund, President and CEO at PRA Group]

I think all of these things are not, you know, that's not something, you know, that has happened overnight. They've been put in place, and we've really been able to, I think, tune them. You know, I mentioned AI earlier, just as an example. We've been able to use AI to address the unstructured data in documentation.

[Martin Sjolund, President and CEO at PRA Group]

We could go through millions of documents and identify cases that are suitable for legal, and that's one of the things that's driving this. I think, you know, collections to me is really, it's like a, like an oil tanker. It's not easy to change it in the short term. Through these initiatives and just in a disciplined and structured way, executing on these initiatives across a range of them, I think we've seen these improvements.

[Mark Hughes, Analyst at Truist]

I think you've talked about your share repurchase authorization, looking to improve your leverage. Looks like EBITDA, you expect to improve. Any early thoughts in terms of perhaps increasing the tempo of share buybacks?

[Rakesh Sehgal, EVP and CFO at PRA Group]

Mark, look, we're always looking at opportunities to drive shareholder value and drive equity value. For us, share repurchases is part of that toolkit. You know, number one, our priority is to continue to invest in the business, continue to buy portfolios at higher returns that creates that sustainable growth in our net income.

[Rakesh Sehgal, EVP and CFO at PRA Group]

You know, the second is to also invest in our business. Whether that's on the legal channel, the digital channel that Martin mentioned. To the extent we see that there is an opportunity to do share buybacks, given what we believe is the intrinsic value of the business and how the market is valuing us, we would absolutely look to do share buyback.

[Rakesh Sehgal, EVP and CFO at PRA Group]

You know, as I mentioned earlier in the call, we do have $50 million currently under our board authorization, and that actually lines up now pretty well with what is available under the various covenants in our credit facilities as well as our notes.

[Rakesh Sehgal, EVP and CFO at PRA Group]

The good news is, given the momentum that we have created in 2025 and delivering that $73 million of net income, that capacity actually has increased quite a bit versus where we were earlier in the year in 2025. You should see us continuing to opportunistically undertaking share repurchases as we move into 2026 and recalibrate where the market thinks about our business today.

[Mark Hughes, Analyst at Truist]

Very good. Thank you.

[Operator]

Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star followed by the number one on your touchtone phone. If you are using a speakerphone, please make sure to lift your handset before pressing any keys. Your next question comes from the line of Robert Dodd from Raymond James. Please go ahead.

[Robert Dodd, Analyst at Raymond James]

Hi everybody, congrats on the quarter. Yeah, a lot to digest here. If I look at kind of the summary where the all the vectors kind of come together with the financials because, well, you know, that's what I do. The disciplined investment seems like you're not expecting an upward sloping to the right investment or either you want to be very careful about that.

[Robert Dodd, Analyst at Raymond James]

I get that. You are expecting adjusted EBITDA to grow, though. I think my two takeaways from that are you expect growth in collections faster than investments, and you expect growth in expenses slower than collections. I think those are my takeaways. You can correct me if I'm wrong there.

[Robert Dodd, Analyst at Raymond James]

On the growth in collections faster than investments, I mean, is this an expectation that with all these new technology tools, AI, searching documents, et cetera, that you can reach kind of more customers in a pool? Or do you expect to get more cash from the same number of customers in that pool? If, how would you rank those kind of? Probably both, but you know, the relative components there about how you think the technology is going to work on the collections versus investment side. Then I've got questions about expenses, obviously.

[Martin Sjolund, President and CEO at PRA Group]

Okay. Well, we'll come back to that. No, the, it's really about pulling a number of levers here as we go. On one hand, you know, we are investing significantly in legal, in particular in the U.S., and that is something that, you know, there's a bit of a catch-up effect there where we've identified opportunities to invest in legal and we see a good performance on those legal collections from portfolios that we've had for some time.

[Martin Sjolund, President and CEO at PRA Group]

That's one of the things driving it. We're improving our digital collections significantly. As we said earlier, that was up 25% last year, and we see that as we are able to tune that and improve that, we can also drive additional liquidation through that. You have that.

[Martin Sjolund, President and CEO at PRA Group]

On the other hand, you have the call centers where by using more offshore resources, it makes it more economical for us to call accounts where with a higher cost profile it doesn't make sense. When you have a lower cost, you're able to penetrate some of those portfolios more deeply. There's a number of levers there. There's also the external debt collection agencies.

[Martin Sjolund, President and CEO at PRA Group]

You know, this was something that in the U.S. we didn't really do before. Outside the U.S., it's always been an important part of how we operate. You know, certain DCAs have specialist capabilities. They might have certain trace capabilities. We're getting better about leveraging those capabilities and putting accounts out that maybe weren't being worked fully by us in the past, but there's still opportunity and value there.

[Martin Sjolund, President and CEO at PRA Group]

All of those things together are helping to drive the cash. I know you mentioned you wanted to come back to cost, but the other part of this obviously is the cost side. We made significant adjustments to our cost base during last year.

[Martin Sjolund, President and CEO at PRA Group]

As we mentioned, over 500 call center agents reduction and also 115 on the corporate overhead side. As those cost reductions start to work their way through over time, we see the benefit of that too. We're really working both to improve our cash on one side and to reduce our cost on the other.

[Martin Sjolund, President and CEO at PRA Group]

As these things come together, that's why we think we have a good direction of travel on the key metrics, ultimately leading to higher returns, even though we're being cautious on the investing side. That's why on the investments, as you said, we're not gonna buy our way out of this, you know, that's not our goal. We wanna generate returns, but really tune the platform so that we can get our returns up, then we can think about pushing on beyond that.

[Robert Dodd, Analyst at Raymond James]

Got it. Thank you for answering the question I was about to ask. One follow-up to that. I mean, to your point, I mean, the DCAs, et cetera, and you've moved to more variable and outsourced call centers, et cetera. How far do you think you can push the overall expense structure to fully variable, if you will?

[Robert Dodd, Analyst at Raymond James]

I mean, obviously, there's still, you know, you've still got three call centers. You've still got a lot of things, but you've gone cloud, et cetera. I mean, how much of the in-house fixed cost infrastructure do you think you need to keep versus how much can you go to a fully variable expense structure?

[Martin Sjolund, President and CEO at PRA Group]

You know, Robert, I really see this as a trade-off. You know, we have markets where we have zero people. We just have accounts, and we place them with the debt collection agencies, and there they go. That is a completely variable model. We don't have a one person sitting there. We have other markets where we do every single thing ourself in-house.

[Martin Sjolund, President and CEO at PRA Group]

You know, and then a lot of markets are on a spectrum somewhere in between there. I don't really think that there's a perfect model out there. From running all these different countries, the benefits of in-house collections is that you often have a cost advantage because, you know, by definition, if you outsource to someone else, they need to make money, too.

[Martin Sjolund, President and CEO at PRA Group]

By doing it in-house, you can do it in a less expensive way, you can have more control of the accounts, you can have more control of the data and so on. There's benefits to that. On the other hand, as we know, it's harder to flex the cost if you're doing everything yourself.

[Martin Sjolund, President and CEO at PRA Group]

If the volumes go up or the volumes go down, it's, you know, it's not easy to adjust your cost base to that. I think that really it's about having a mix. If I look across all of our countries, like I said, you will find some countries are on one absolute extreme and others are on the other.

[Martin Sjolund, President and CEO at PRA Group]

You know, the biggest markets like the UK or the US, I think are probably somewhere in between where I think a mix of variable collection channels with internal. We have this big enough scale for internal in-house collections to be cost-effective, but we can also leverage these external channels for the marginal collections, if you will. That's really how I think about it.

[Robert Dodd, Analyst at Raymond James]

Got it. Thank you. Understood.

[Operator]

Thank you. There are no further questions at this time. I would like to turn the call back to Martin Sjolund, President and CEO, for closing comments.

[Martin Sjolund, President and CEO at PRA Group]

Okay. Well, yeah, I wanna thank everyone for listening. you know, just to emphasize, I think we had a really, really strong Q4. We feel positive about the outlook ahead. I tried to lay out what our strategy is going forward.

[Martin Sjolund, President and CEO at PRA Group]

How these three vectors of capital and investing, operations, technology and data, and people and culture are really gonna come together and I think put PRA on a really strong trajectory going forward. We look forward to attending the Raymond James Conference next week, and we'll be getting into a little bit more detail on each of these vectors to talk about more about our plans. Thanks for listening.

Participants

Executives

• Martin Sjolund, President and CEO
• Najim Mostamand, Vice President of Investor Relations
• Rakesh Sehgal, EVP and CFO

Analysts

• David Scharf, Analyst at Citizens Capital Markets
• Mark Hughes, Analyst at Truist
• Robert Dodd, Analyst at Raymond James