PRA GROUP INC

You should carefully read the following discussion of material factors, events and uncertainties when evaluating our business and the forward-looking information contained in this Form 10-K. The events and consequences discussed in these risk factors could materially and adversely affect our business, results of operations, liquidity, cash flow and financial condition. While we believe we have identified and discussed below the material risk factors affecting our business, these risk factors do not identify all of the risks we face, and there could be additional risks and uncertainties that we do not presently know or that we do not currently believe to be material that could have an adverse effect on our business, results of operations, liquidity, cash flow or financial condition in the future.

OPERATIONAL AND INDUSTRY RISKS

Volatility and uncertainty in general business and economic conditions or financial markets could adversely impact our business, financial performance, results of operations and cash flow.

Our business has been sensitive to, and our financial performance is in part dependent on, the general business and economic conditions in the markets in which we operate. Our financial performance may be adversely affected by an economic recession, a significant rise in inflation including sustained high inflation, interest rate uncertainty, and the effects of governmental fiscal and monetary policies in the markets in which we operate. Any prolonged economic downturn or volatility in the financial or credit markets could place financial pressure on and negatively affect the ability of consumers to pay their debts, which could adversely affect collections and the value of our receivable portfolios. In addition, levels of consumer or commercial lending and financing could decline, thus reducing the volume of nonperforming loans available for purchase, which could adversely affect our business and financial results in the markets in which we operate.

We may not be able to purchase a sufficient volume of nonperforming loans at favorable pricing, which could adversely impact our profitability.

Our ability to operate profitably is dependent on our ability to purchase and service a sufficient volume of nonperforming loans to generate revenue that exceeds our expenses. The cadence for the purchase of nonperforming loans by quarter, and by year, has been and may continue to be varied and periodic due in large part to the available supply of portfolios in the markets in which we operate and pricing that meets our return thresholds. The availability of nonperforming loan portfolios at prices that generate an appropriate return on our investment depends on a number of factors, including:

•consumer debt levels;

•sales of nonperforming loan portfolios by credit originators;

•competitive factors affecting potential purchasers and credit originators of nonperforming loans;

•our ability to obtain and analyze portfolio data efficiently and to accurately predict collectability; and

•changes in credit and financial lending laws and regulations.

Changes in the financial or credit markets may cause a forward flow agreement to fail to meet our return thresholds, since we have agreed to purchase portfolios at a negotiated price for a specified term, and may end up paying higher prices for portfolios than we would have otherwise agreed to pay for a spot purchase.

Moreover, there can be no assurance that credit originators will continue to sell their nonperforming loans consistent with historical levels, or at all, or that we will be able to bid competitively for those portfolios. Because of the length of time involved in collecting on acquired portfolios and the variability in the timing of our collections, we may not be able to identify trends and make changes in our purchasing strategies in a timely manner. If we are unable to maintain our business or adapt to changing market needs as well as our current or future competitors, we may experience reduced access to nonperforming loan portfolios at appropriate prices, which could adversely impact our business, liquidity, results of operations and cash flow.

We may not be able to collect sufficient amounts to fund our operations due to the purchase of nonperforming loans that ultimately prove to be unprofitable.

Our principal business consists of purchasing and collecting on nonperforming loans from credit originators that consumers or others have failed to pay. The credit originators have typically made numerous attempts to recover on these accounts, often using a combination of in-house recovery efforts and third-party collection agencies. These nonperforming loans are difficult to collect, and we may not collect a sufficient amount to cover our investment and the costs of operating our business. We use statistical models to make cash flow projections as part of our underwriting process, and if they prove to be inaccurate, we may acquire nonperforming loan portfolios that ultimately prove to be below our return thresholds or unprofitable. Moreover, if we experience operational challenges in our collections processes, we may incur losses on portfolios that would have otherwise been profitable, which could adversely impact our business, financial performance, results of operations and cash flow.

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.

We rely on third-party service providers to conduct collection and other activities on our behalf through both outsourcing and offshoring arrangements. These third parties include law firms, collection agencies, data providers, tracing service providers, business process outsourcing companies and information technology firms. If our third-party service providers fail to perform their service obligations in a timely manner or at a satisfactory quality level, or fail to handle the case volume assigned, the quality of our services and operations, as well as our reputation could be adversely impacted. Furthermore, we may not be able to find alternative third parties in a timely manner on terms that are acceptable to us, or because of contractual restrictions that limit our flexibility in responding to disruptions from these third parties. If any of these third-party service providers fail to implement proper controls to meet our industry’s regulatory requirements, violate laws, do not fulfill their contractual obligations, or act inappropriately in conducting their services on our behalf, our operations and reputation could be negatively impacted and result in regulatory fines and penalties.

Our reliance on these third parties to collect, store, process and transmit confidential and sensitive customer and employee data increases our cybersecurity threat profile. A third-party cybersecurity incident could compromise the security, integrity or availability of data, or result in theft, unauthorized access or processing, or disruption of access to data, which could negatively impact our operations. We rely on these third parties to maintain the security of all software code, information technology ("IT") systems and data provided to them and used while providing their services to us. Cybersecurity incidents involving third parties on which we rely, as further discussed below, could negatively affect our reputation, our competitive position and our financial performance, and we could face regulatory scrutiny, investigations, lawsuits and potential liability.

We may not achieve the expected benefits of offshoring a portion of our collection activities, which could adversely affect our business, financial condition and results of operations.

To improve our operational and labor efficiencies, we have offshored a portion of our collection and related support activities to third-party service providers located in Asia. As a result of offshoring some of these activities, we may experience a loss of continuity, loss of accumulated knowledge and/or inefficiency. We also cannot predict the availability of qualified workers, interruptions in collections or the impact of macroeconomic drivers in the countries we utilize for these activities. There is inherent risk beyond our control, including exposure to political uncertainty and foreign regulatory restrictions. One or more of these factors, or any other factors not yet identified related to our offshoring activities, could result in unexpected increases in operating expenses and make it more difficult for us to manage our costs and operations, which could cause our profitability to decline. Additional risks related to offshoring are further discussed within this section under International Operations Risks.

We may not be successful in implementing or realizing the expected benefits from our cash generating and cost savings initiatives in our U.S. business, which could have an adverse impact on our business and results of operations.

Our ability to successfully compete depends, in part, on our ability to optimize cash collections at lower marginal costs through effective execution. In our U.S. business, we continue to identify and implement initiatives that we believe will position our business for long-term sustainable growth and profitability by allowing us to achieve a lower marginal cost structure and to execute effectively, particularly in the areas of customer contact strategies and post-judgment legal collections. It is possible that the implementation of some of these initiatives could be altered or delayed or result in unintended consequences, such as business disruptions, distraction of management and employees, reduced productivity, unexpected employee attrition or an inability to attract or retain key personnel. If we are unable to successfully implement some or all of our operational initiatives as planned, or we do not achieve the anticipated cash generating or cost savings improvements as a result of these initiatives, our profitability and cash flows could be adversely impacted.

A cybersecurity incident could damage our reputation and adversely impact our business and financial results.

Our business is highly dependent on our ability to process and monitor a large number of transactions across markets and in multiple currencies. We rely on IT systems to conduct our business, including IT systems developed and administered by third parties. Many of these IT systems contain sensitive and confidential information, including personal data, our trade secrets and proprietary business information, and information and materials owned by or pertaining to our customers, vendors and business partners. The secure maintenance of this information, and the IT systems on which they reside, is critical to our business strategy and our operations and financial performance. As our reliance on IT systems increases, maintaining the security of such IT systems and our data becomes more challenging.

Our IT systems and infrastructure may be vulnerable to computer viruses, cyber-attacks, security breaches caused by employee error or malfeasance, or other disruptions. Although we take a number of steps to protect our IT systems, the attacks that companies have experienced have increased in number, sophistication and complexity in recent years, including threats from the malicious use of AI. Additionally, as we shift more employees to work-from-home arrangements, remote access to our systems has increased significantly, which exposes us to additional cybersecurity risks.

As a result of our reliance on IT systems, we may suffer data security incidents or other cybersecurity incidents, which could compromise our IT systems and networks, creating disruptions and exploiting vulnerabilities in our services. Any such breach or other incident could result in the personal data or other confidential or proprietary information stored on our systems and networks, or our vendors’ systems and networks, being improperly accessed, acquired or modified, publicly disclosed, lost, or stolen, which could subject us to liability to our customers, vendors, business partners and others. We seek to detect and investigate such incidents and to prevent their occurrence where practicable through preventive and remedial measures, but such measures may not be successful.

Should a cybersecurity incident occur, we may be required to expend significant resources to notify affected parties, modify our protective measures, or investigate and remediate vulnerabilities or other exposures. Additionally, such cybersecurity events could cause reputational damage and subject us to fines, penalties, litigation costs and settlements, and financial losses that may not be fully covered by our cybersecurity insurance. To date, disruptions to our IT systems, due to outages, security breaches or other causes, including cybersecurity incidents, have not had a material impact on our business, results of operations or financial condition.

The failure of our IT or telecommunication systems could result in a loss in productivity, loss of competitive advantage or business disruption.

We depend on continuous and uninterrupted IT and telecommunication systems to operate our business, and significant resources are required to maintain and upgrade our existing systems. We continue to streamline and integrate our global IT and telecommunication systems, infrastructure, network and other core applications, with a focus on optimizing our systems to meet our changing business demands and to mitigate the risks of a changing cybersecurity threat landscape. Although we have invested in strategies to prevent failures, our IT and telecommunication systems are vulnerable to outages due to natural disasters, power loss, computer viruses, security breaches, hardware or software vulnerabilities, disruptions, and similar events. We may not be able to successfully implement certain updates or upgrades to our systems without experiencing difficulties, which could cause us to lose our competitive advantage, divert management’s time, result in a loss of productivity or disrupt business operations, which could have a material adverse effect on our business, financial condition and results of operations.

We use our IT and telecommunications systems to contact consumers to collect on their debts. Over recent years, consumers, telecommunication carriers and email platforms have adopted and implemented filtering and blocking of spam communications. If our calls, texts, emails or other communications are blocked through a spam filter, or we are otherwise not able to contact our customers, our ability to collect on their debt through our call center and digital channels may be impacted, and we would need to pursue collections through another channel or not at all, which could impact our results of operations and financial condition.

We may not effectively utilize AI, or effectively work with other companies that use AI, which could adversely impact our results of operations and result in a loss of competitive advantage or business disruption.

In a rapidly evolving landscape, AI technologies are playing an increasing role within many facets of business. Some of our systems, tools and resources use, integrate or could integrate some form of AI, which has the potential to result in bias, miscalculations, data errors and other unintended consequences. As AI technologies become integral to improving operational efficiency, customer engagement and decision-making processes, and are potentially deployed by sellers and service providers, our results of operations, competitiveness and reputation could be harmed if we are unable to adopt, utilize and control these technologies as quickly, efficiently and effectively as our competition, or we were to enter into business relationships with other companies that experience similar challenges.

We have a significant amount of goodwill which, if impaired in the future, would adversely impact our results of operations.

We have recorded a significant amount of goodwill as a result of our business acquisitions. Goodwill is not amortized, but rather, is tested for impairment at the reporting unit level. Goodwill is required to be tested for impairment annually, or more frequently if events or circumstances indicate that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. There are numerous risks that may cause the fair value of a reporting unit to fall below its carrying amount, which could lead to the recognition of a goodwill impairment charge, including:

•adverse changes in macroeconomic conditions, the business climate or the market for the entity's services;

•significant variances between actual and expected financial results;

•negative or declining cash flows;

•lowered expectations of future results;

•significant expense increases;

•an adverse action or assessment by a regulator;

•a significant increase in discount rates; or

•a sustained decrease in the price per share of our common stock.

Our goodwill impairment testing involves the use of estimates and the exercise of judgment, including judgments regarding expected future business performance and market conditions.

Based on our October 1, 2024, impairment test, we concluded that the goodwill of our reporting units was not impaired. Under the prior year impairment test, the excess of our Debt Buying and Collection ("DBC") reporting unit’s fair value over its carrying value was 6%, and although the excess increased to 11% under our most recent test, if our cash flow projections are not met or if market factors utilized in the impairment test deteriorate, including adverse changes in the debt sales market and an increase in the discount rate, the reporting unit may be at-risk for future impairment.

Our loss contingency accruals may not be adequate to cover actual losses.

From time-to-time, we are involved in judicial, regulatory and arbitration proceedings or investigations concerning matters arising from our business activities. We establish accruals for potential liability arising from legal proceedings when both the loss is probable and the amount of the loss can be reasonably estimated. We do not have accruals for all legal proceedings where we face a risk of loss, however, we may still incur legal costs for a matter even if we have not accrued a liability. Due to the inherent subjectivity of the assessments and unpredictability of the outcome of legal and regulatory proceedings, amounts accrued may not represent the ultimate loss to us from the legal and regulatory proceedings in question. As a result, our ultimate losses may be significantly higher than the amounts we have accrued. An unfavorable resolution of a legal proceeding or claim could adversely impact our business, financial condition, results of operations or liquidity.

INTERNATIONAL OPERATIONS RISKS

Our international operations expose us to risks, which could harm our business, results of operations and financial condition.

We are a global business with operations in 18 countries. In 2024, our international operations represented 46% of our total portfolio income. Managing a global business is complex, and our international operations are subject to additional risks that may not exist in the U.S., or may be more significant compared to the U.S. This could expose us to adverse economic, industry and political conditions that may have a negative impact on our ability to manage our international operations, which could have a negative impact on our business, results of operations and financial condition.

The global nature of our operations expands the risks and uncertainties described elsewhere in this section, including the following:

•changes in geopolitical conditions and the political, economic, social and labor conditions in the markets in which we operate;

•foreign exchange controls on currency conversion and the transfer of funds that might prevent us from repatriating cash earned in countries outside the U.S. in a tax-efficient manner;

•currency exchange rate fluctuations, currency restructurings, inflation or deflation and our ability to manage these fluctuations through a foreign exchange risk management program;

•different employee/employer relationships, laws and regulations, union recognition and the existence of employment tribunals and works councils;

•laws and regulations imposed by international governments, including those governing data security, sharing and transfer;

•potentially adverse tax consequences resulting from changes in tax laws in the jurisdictions in which we operate, or challenges to our interpretation and application of complex international tax laws;

•logistical, communication and other challenges caused by distance and cultural and language differences, each making it harder to do business in certain jurisdictions;

•volatility of global credit markets and the availability of consumer credit and financing in our international markets;

•uncertainty as to the enforceability of contract rights under local laws;

•the potential of forced nationalization of certain industries, or the impact on creditors' rights, consumer disposable income levels, flexibility and availability of consumer credit and the ability to enforce and collect aged or charged-off debts stemming from international governmental actions, whether through austerity or stimulus measures or initiatives, intended to control or influence macroeconomic factors such as wages, unemployment, national output or consumption, inflation, investment, credit, finance, taxation or other economic drivers;

•the potential for widening military conflicts;

•the potential damage to our reputation due to non-compliance with international and local laws; and

•the complexity and necessity of using non-U.S. representatives, consultants and other third-party vendors.

Any one of these factors could adversely affect our business, results of operations, liquidity, cash flow and financial condition.

Compliance with complex and evolving international and U.S. laws and regulations governing our international operations could increase our cost of doing business in international jurisdictions.

We operate on a global basis with offices and activities in a number of jurisdictions in the Americas, Europe and Australia. We face increased exposure to risks inherent in conducting business internationally, including compliance with complex international and U.S. laws and regulations that apply to our international operations, which could increase our cost of doing business in international jurisdictions. These laws and regulations include those related to consumer debt, taxation, and anti-corruption laws such as EU Directive 2021/2167, the FCPA, and the UK Bribery Act. Given the complexity of these laws, there is a risk that we may inadvertently breach certain provisions of these laws, such as through the negligent behavior of an employee, or our failure to comply with certain formal documentation requirements. Violations of these laws and regulations by us, any of our employees, or our third-party vendors, either inadvertently or intentionally, could result in fines and penalties, criminal sanctions, restrictions on our operations and the inability to offer our services in one or more countries. Violations of these laws could also adversely affect our business, brand, international expansion efforts, ability to attract and retain employees and our results of operations.

We are monitoring the enactment and implementation of Pillar Two legislation to determine the potential impact on our financial results, as well as monitoring U.S. amendments to the U.S. global intangible low-tax income ("GILTI"), if any. While we currently do not expect that implementation of Pillar Two and any amendments to GILTI will significantly increase our U.S. and international income taxes, there is a risk that the final enactment and implementation throughout our global operations could cause a material increase in our income tax expense.

LEGAL AND REGULATORY RISKS

Our ability to collect and enforce our nonperforming loans may be limited under federal, state and international laws, regulations and policies.

Our operations are subject to licensing and regulation by governmental and regulatory bodies in many of the jurisdictions in which we operate. U.S. federal and state laws, and the laws and regulations of the countries in which we operate, may limit our ability to collect on and enforce our rights with respect to our nonperforming loans regardless of any act or omission on our part. Some laws and regulations applicable to credit issuers may preclude us from collecting on nonperforming loans we acquire if the credit issuer previously failed to comply with applicable laws in generating or servicing those accounts. Collection laws and regulations also directly apply to our business, and such laws and regulations are extensive and subject to change. A variety of state, federal and international laws and regulations govern the collection, use, retention, transmission, sharing and security of consumer data. Consumer protection and privacy protection laws, changes in the ways that existing rules or laws are interpreted or enforced, and any procedures that may be implemented as a result of regulatory consent orders, may adversely affect our ability to collect on our nonperforming loans and adversely affect our business. Our failure to comply with laws or regulations could limit our ability to collect on our nonperforming loans, which could reduce our profitability and adversely affect our business.

Failure to comply with government regulation of the collections industry could result in penalties, fines, litigation, damage to our reputation or the suspension or termination of our ability to conduct our business.

The collections industry throughout the markets in which we operate is governed by various laws and regulations, many of which require us to be a licensed debt collector. Our industry is also at times investigated by regulators and offices of state attorneys general, and subpoenas and other requests or demands for information may be issued by governmental authorities who are investigating debt collection activities. These investigations may result in enforcement actions, fines and penalties, or the assertion of private claims and lawsuits. If any such investigations result in findings that we or our vendors have failed to comply with applicable laws and regulations, we could be subject to penalties, litigation losses and expenses, damage to our reputation, or the suspension or termination of, or required modification to, our ability to conduct collections, which would adversely affect our business, results of operations and financial condition.

In a number of jurisdictions, we must maintain licenses to purchase or own debt and/or to perform debt recovery services, and must satisfy related bonding requirements. Our failure to comply with existing licensing requirements, changing interpretations of existing requirements, or the adoption of new licensing requirements, could restrict our ability to collect in certain jurisdictions, subject us to increased regulation, increase our costs, or adversely affect our ability to purchase, own and/or collect on our nonperforming loans.

Some laws, among other things, may limit the interest rates and fees we can impose on our customers, limit the amount of time we have to file legal actions to enforce customer accounts and require specific account information for certain collection activities. In addition, local requirements and court rulings in various jurisdictions may affect our ability to collect.

Regulations and statutes applicable to our industry further provide that, in some cases, consumers cannot be held liable for, or their liability may be limited with respect to, charges to their debit or credit card accounts that resulted from unauthorized use. These laws, among others, may limit our ability to recover amounts owed with respect to our nonperforming loans, whether or not we committed any wrongful act or omission in connection with the account.

If we fail to comply with any applicable laws and regulations, including those discussed above, such failure could result in penalties, litigation losses and expenses, damage to our reputation, or otherwise impact our ability to conduct collections efforts, which could adversely affect our business, results of operations and financial condition.

Investigations, reviews or enforcement actions by governmental authorities may result in changes to our business practices, negatively impact our nonperforming loan portfolio purchasing volume, make collection of nonperforming loans more difficult or expose us to the risk of fines, penalties, restitution payments and litigation.

Our debt collection activities and business practices are subject to review by various governmental authorities and regulators, including the CFPB, which may commence investigations, reviews or enforcement actions targeted at businesses in the financial services industry. These investigations or reviews may involve individual consumer complaints or our debt collection policies and practices generally. Such investigations or reviews could lead to assertions by governmental authorities that we are not complying with applicable laws or regulations. In such circumstances, authorities may request or seek to impose a range of remedies that could involve potential compensatory or punitive damage claims, fines, restitution payments, sanctions or injunctive relief, that if agreed to or granted, could require us to make payments or incur other expenditures.

The CFPB has the authority to obtain cease and desist orders (which can include orders for restitution or rescission of contracts, as well as other kinds of affirmative relief), recover costs, and impose monetary penalties (ranging from $5,000 per day to over $1.0 million per day, depending on the nature and gravity of the violation). In addition, where a company has violated Title X of the Dodd-Frank Act or CFPB regulations implemented thereunder, the Dodd-Frank Act empowers state attorneys general and other state regulators to bring civil actions to remedy violations under state law. Governmental authorities could also request or seek to require us to cease certain practices or institute new practices. Negative publicity relating to investigations or proceedings brought by governmental authorities could have an adverse impact on our reputation, harm our ability to conduct business with industry participants and result in financial institutions reducing or eliminating sales of nonperforming loan portfolios to us. Moreover, changing or modifying our internal policies or procedures, responding to governmental inquiries and investigations and defending lawsuits or other proceedings could require significant efforts on the part of management and result in increased costs to our business. In addition, such efforts could divert management's full attention from our business operations. All of these factors could have an adverse effect on our business, results of operations and financial condition.

The CFPB has issued civil investigative demands ("CIDs") to many companies that it regulates, including PRA Group, and periodically examines practices regarding the collection of consumer debt. In April 2023, Portfolio Recovery Associates, LLC, our wholly owned subsidiary, entered into an order with the CFPB settling a previously disclosed investigation of certain debt collection practices (the "2023 Order"). We are currently executing both our redress plan and our compliance plan as required by the 2023 Order. There can be no assurance we will implement each requirement to the satisfaction of the CFPB or that additional litigation or new industry regulations currently under consideration by the CFPB would not have an adverse effect on our business, results of operations and financial condition.

After the recent change in presidential administration, there have been some indications that the regulatory and enforcement activities of the CFPB may change, but the extent to which these or other future developments may impact our business remains uncertain.

The regulation of data privacy in the U.S. and globally, or an inability to effectively manage our data governance structures, could have an adverse effect on our business, results of operations and financial condition by increasing our compliance costs, exposing us to the risk of liability or decreasing our competitiveness.

A variety of jurisdictions in which we operate have laws and regulations concerning privacy, AI, cybersecurity and the protection of personal data, including the EU GDPR, the UK GDPR, the U.S. GLBA, the EU Artificial Intelligence Act, the EU Digital Operational Resilience Act, and the California Consumer Privacy Act of 2018. These laws and regulations create certain privacy rights for individuals and impose prescriptive operational requirements for covered businesses relating to the processing and protection of personal data, the use of AI and may also impose substantial penalties for non-compliance.

Laws and regulations relating to privacy, AI, cybersecurity and data protection are rapidly evolving, and any such proposed or new legal frameworks could significantly impact our operations, financial performance and business. The application and enforcement of these evolving legal requirements is uncertain and may require us to further change or update our information practices, and could impose additional compliance costs and regulatory scrutiny. If we fail to effectively implement and maintain data governance structures across our business, or to effectively interpret and utilize such data, our operations could be exposed to additional adverse impacts, and we could be at a competitive disadvantage.

In addition, we rely on data provided to us by credit reference agencies and servicing providers. If these agencies and service providers were to stop providing us with data for any reason; for example, due to a change in governmental regulation, there could be a material adverse effect on our business, results of operations and financial condition.

We may incur significant costs complying with legal obligations and inquiries, investigations or any other government actions related to privacy, cybersecurity, and data protection. Such legal requirements and government actions also may impede the development of our business, make existing services or businesses unprofitable, increase our operating costs, require substantial management resources, result in adverse publicity and subject us to remedies that harm our business or profitability, including penalties or orders that may change or terminate current business practices. Our insurance policies may be insufficient to insure us against such risks, and future escalations in premiums and deductibles under these policies may render them uneconomical.

Changes in tax provisions or exposures to additional tax liabilities could have an adverse effect on our financial condition.

We record reserves for uncertain tax positions based on our assessment of the probability of being able to successfully sustain the positions taken. Management may be required to exercise significant judgment when making these assessments, in determining whether a tax liability should be recorded and, if so, estimating the amount. Our tax filings are subject to audit by domestic and international tax authorities. If any tax filing positions are successfully challenged, payments could be required that are in excess of the amounts accrued, or we may be required to reduce the carrying amount of our deferred tax assets, either of which could be significant to our financial condition or results of operations. Although we believe our estimates are reasonable, the ultimate tax outcomes may differ from the amounts recorded in our financial statements and may adversely or beneficially affect our financial results in the period(s) in which such outcomes are determined. While we currently do not expect the implementation of Pillar Two will significantly increase our U.S. and international income taxes, there is a risk that final enactment and implementation throughout our global operations could have a material impact on our effective tax rate and our business, results of operations, financial condition and cash flow.

FINANCIAL RISKS

We expect to continue to use leverage in executing our business strategy, which may have adverse consequences.

We have and may continue to incur a substantial amount of debt in the future. As of December 31, 2024, we had total consolidated indebtedness of $3.3 billion, of which $2.0 billion was secured indebtedness. Our unsecured indebtedness consisted of the $398.0 million outstanding principal amount of our 8.375% Senior Notes due 2028, $350.0 million outstanding principal amount of our 5.00% Senior Notes due 2029 and $550.0 million outstanding principal amount of our 8.875% Senior Notes due 2030. Total availability under our credit facilities as of December 31, 2024 was $1.0 billion, comprised of $564.3 million based on current ERC and subject to debt covenants, and $462.0 million of additional availability subject to borrowing base and debt covenants, including advance rates. We consider a number of factors when evaluating our level of indebtedness and when making decisions about incurring any new indebtedness, including the purchase price of assets to be acquired with debt financing and the ability of those assets, and the Company as a whole, to generate cash flow to cover the expected debt service.

Incurring a substantial amount of indebtedness could have consequences for our business, including:

•making it more difficult for us to satisfy our obligations with respect to our debt and to our trade and other creditors;

•increasing our vulnerability to adverse changes in economic or industry conditions, including higher interest rate environments;

•requiring us to use a substantial portion of our cash flows from operations to repay our indebtedness, which reduces our ability to use our cash flows to fund working capital, capital expenditures, acquisitions and general corporate requirements;

•increasing the amount of interest expense owed since the indebtedness under our credit facilities bears interest at floating rates, which, if interest rates increase, will result in higher interest expense;

Our business may not generate sufficient cash flow from operations, and future borrowings may not be available to us through capital markets financings, under credit facilities or otherwise, in an amount sufficient to enable us to repay our indebtedness, repurchase our senior notes upon a change of control, or fund our other liquidity needs. Furthermore, we may need to refinance all or a portion of our indebtedness at or before its scheduled maturity, but we may not be able to do so on commercially reasonable terms or at all.

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.

Our ability to generate sufficient cash flow from operations to make scheduled payments on our debt obligations will depend on our current and future financial performance, which in part depends on general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. If we do not generate sufficient cash flow from operations to satisfy our debt obligations, including interest payments and the payment of principal at maturity, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets or seeking additional debt or equity, or reducing or delaying capital expenditures, strategic acquisitions, investments and alliances. We cannot provide assurance that any refinancing would be possible, that any assets could be sold, or, if sold, of the timeliness and amount of proceeds that would be realized from those sales, that additional financing could be obtained on acceptable terms, if at all, or that additional financing would be permitted under the terms of our various debt instruments then outstanding. Furthermore, our ability to refinance depends upon the condition of the finance and credit markets. Our inability to generate sufficient cash flow to satisfy our debt obligations, or to refinance our obligations on commercially reasonable terms or on a timely basis, could materially affect our business, financial condition and results of operations, and may delay or prevent the expansion of our business.

The agreements governing our indebtedness include provisions that may restrict our financial and business operations.

Our credit facilities and the indentures that govern our Senior Notes contain financial and other restrictive covenants, including restrictions on certain types of transactions and our ability to pay dividends to our stockholders. These restrictions may interfere with our ability to engage in other necessary or desirable business activities, which could adversely affect our business, financial condition and results of operations.

The failure to satisfy any of these covenants could have negative consequences, including the following:

•acceleration of outstanding indebtedness;

•exercise by our lenders of rights with respect to the collateral pledged under certain of our outstanding indebtedness;

•our inability to continue to purchase nonperforming loans; or

•our inability to secure alternative financing on favorable terms, if at all.

Adverse changes in our credit ratings could have a negative impact on our business, results of operations and financial condition.

Our ability to access capital markets is important to our ability to operate our business. Increased scrutiny of our industry and the impact of regulation, as well as changes in our financial performance and unfavorable conditions in the capital markets, could result in credit agencies reexamining and downgrading our credit ratings. A downgrade in our credit ratings may restrict or discontinue our ability to access capital markets at attractive rates and increase our borrowing costs, which could adversely affect our business, financial condition and results of operations.