PRA Group NASDAQ: PRAA reported a stronger first quarter of 2026, with management pointing to higher cash collections, continued growth in its U.S. legal collections channel and steady performance in Europe as key drivers of the period.
President and Chief Executive Officer Martin Sjolund said the company “started 2026 with solid momentum,” building on gains from the prior year. Cash collections rose 11% year over year to $552 million, while net income increased to $28 million, or $0.73 per diluted share. Adjusted EBITDA for the last 12 months rose 14% to $1.3 billion, outpacing cash collections growth.
Chief Financial Officer Rakesh Sehgal said the company’s profitability trend is improving as PRA Group works to strengthen core operations, reduce overhead and invest in legal, digital and offshore collection capabilities. “While there will be variability in our net income on a quarterly basis, our focus remains on growing the bottom line and improving returns,” Sehgal said.
Portfolio Purchases Remain Disciplined
PRA Group purchased $221 million of portfolios during the quarter, including $119 million in the U.S., $92 million in Europe and $11 million in other markets. Management said the level of purchasing was in line with expectations and reflected a focus on net returns rather than growth for its own sake.
Sjolund said the company also invested in some “adjacent lower cost to collect segments” where it saw attractive returns. During the question-and-answer portion of the call, he said the company is testing into adjacent product segments where it can leverage its operating, underwriting and seller relationship capabilities. He added that while the areas are not “hugely different,” they have different cost-to-collect characteristics and could represent larger opportunities over time.
Sehgal said global purchase price multiples were steady in the quarter, with a slight decline in the U.S. offset by an increase in Europe. He emphasized that purchase price multiples are not a standalone measure of profitability because they do not account for collection costs, funding costs or timing of cash flows.
Estimated remaining collections, or ERC, stood at $8.5 billion at quarter-end, up 10% year over year. The U.S. accounted for 43% of ERC and Europe accounted for 51%, a mix management said helps reduce exposure to any single market or economic cycle.
Legal and Digital Channels Drive Collections
U.S. cash collections increased 11% in the quarter, supported by continued expansion in legal collections. U.S. legal cash collections grew 27% to $141 million, and legal accounted for 53% of U.S. core cash collections, compared with 46% a year earlier.
Sjolund said PRA Group does not lead with legal collections, instead first attempting to engage customers through digital and call center channels. However, he said the company will consider legal collections when customers do not engage and the company determines they should be able to repay.
Sehgal said the legal channel typically provides greater certainty and a higher overall amount of cash collected than other channels. He also said accounts are scored before being moved into legal collections and must meet return thresholds.
Digital collections also continued to grow. Sehgal said global digital cash collections rose 19% year over year. He also noted that communication expense declined by $1 million in the quarter, following a $7 million decline in 2025, as the company shifted toward lower-cost digital strategies instead of letters to customers.
Europe Continues to Contribute Growth
Europe’s cash collections rose 15% in the first quarter, with growth spread across several core markets. Overall, global cash collections exceeded the company’s expectations by 3%, including a 1% beat in the U.S. and an 8% beat in Europe.
Total revenue increased 17% during the quarter, driven mainly by portfolio income. Portfolio income rose 12% to $270 million. Changes in expected recoveries totaled $44 million, with $23 million tied to cash collections above expectations and $21 million related to changes in expected future recoveries.
Operating expenses were $211 million, up $16 million year over year. Sehgal said legal collection costs accounted for $15 million of that increase, while other operating expense items were flat in aggregate. Compensation and benefits expense declined by $3 million, which he attributed to agent headcount changes, greater use of external collection resources including offshore agents and the elimination of more than 115 corporate roles in the fourth quarter of last year.
PRA 3.0 Strategy Emphasizes Technology, Capital Discipline
Sjolund provided an update on PRA Group’s PRA 3.0 strategy, which he described as centered on three areas: capital and investing; operations, technology and data; and people and culture.
On capital allocation, management said PRA Group intends to continue investing with discipline and reducing leverage over time. Net leverage ended the quarter at 2.71 times, down from 2.73 times at year-end and 2.82 times in the prior-year period. Sehgal said the company’s goal is to move toward the mid-2 times area over the next few years.
The company also repurchased $10 million of shares during the quarter, following $20 million in repurchases in 2025. Sehgal said PRA Group will continue to evaluate repurchases as part of its broader capital allocation strategy and within covenant restrictions.
On technology, Sjolund said PRA Group is working to modernize its U.S. platform and expects to have one global cloud platform and one cloud-based contact platform by the end of the year. The company also recently launched the first version of a new mobile app in the U.K., and Sjolund said customers have already begun using it to make payments.
Sjolund said the company is piloting artificial intelligence initiatives across the U.S. and Europe, targeting better processes and greater automation in call center, digital and legal channels. He described the effort as a “multi-year journey” to transform the U.S. technology platform, improve efficiency, leverage AI and reduce costs over time.
Management Says Customers Remain Stable Despite Macro Uncertainty
Sjolund addressed the macroeconomic backdrop, including elevated energy costs and gas prices, and said PRA Group’s customers remain stable in both the U.S. and Europe. He said first-quarter global cash collections were in line with expectations and that the company had not been hearing customers cite gas prices or inflation as reasons for not being able to pay, based on its analysis of call recordings.
He cautioned that the company cannot predict future conditions but said PRA Group is monitoring the situation closely. Sjolund said customers have historically been “fairly resilient” across economic downturns, though stress periods can sometimes lead to fewer large payments and settlements.
Management also noted that economic stress can increase charge-off rates and potentially create future buying opportunities. Sehgal said portfolio supply is expected to remain relatively stable in the U.S. and Europe over the next 12 to 18 months, with U.S. credit card balances around $1.1 trillion and charge-off rates above 4%.
PRA Group ended the quarter with what Sehgal described as ample liquidity. The company had $3.1 billion in total committed capital under its credit facilities and approximately $1 billion of total availability as of March 31. Sehgal also said the company refinanced its $730 million European revolving credit facility ahead of its November 2027 maturity, extending it to a new five-year term with no change to commitment level or pricing.
About PRA Group NASDAQ: PRAA
PRA Group, Inc is a global specialty finance company focused on the acquisition and management of nonperforming loans. Founded in 1996 as Portfolio Recovery Associates, the company purchases defaulted consumer and commercial receivables at discounted rates from financial institutions, utilities and other creditors. By combining rigorous analytics with a consumer-centric ethos, PRA Group seeks to maximize recoveries while maintaining respectful and compliant interactions with debtors.
The company's core activities include first-party and third-party collections across a range of asset classes such as credit cards, auto loans and utility receivables.
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