PRA GROUP INC

Previous wording

•our ability to collect sufficient amounts on our nonperforming loans to fund our operations, including as a result of restrictions imposed by local, state, federal and international laws and regulations;

Current wording

•our ability to collect sufficient amounts on our nonperforming loans to fund our operations;

Previous wording

•our ability to successfully implement our strategic and operational initiatives in our U.S. business;

Current wording

•our ability to successfully implement our cash-generating and cost savings initiatives in our United States ("U.S.") business;

Previous wording

•disruptions of business operations caused by cybersecurity incidents or the underperformance or failure of information technology infrastructure, networks or communication systems; and

Current wording

•disruptions of business operations caused by cybersecurity incidents or the failure of information technology infrastructure, networks or communication systems;

Previous wording

•our ability to comply with existing and new regulations of the collection industry;

Current wording

•our ability to comply with existing and new regulations in the collections industry;

Previous wording

•default by, or failure of, one or more of our counterparty financial institutions;

Current wording

•default by, or failure of, one or more of our counterparty financial institutions; and

Previous wording

•the "Risk Factors" in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 ("2023 Form 10-K") and in other filings with the Securities and Exchange Commission.

Current wording

•the "Risk Factors" in Item 1A of our 2024 Form 10-K and our other filings with the Securities and Exchange Commission.

Previous wording

(2)Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") is a non-GAAP financial measure. Refer to section"Non-GAAP Financial Measures" for a reconciliation of Net Income/(loss) attributable to PRA Group, the most directly comparable financial measure calculated and reported in accordance with GAAP, to Adjusted EBITDA.

Current wording

(1)Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") is a non-GAAP financial measure. Refer to section"Non-GAAP Financial Measures" for a reconciliation of Net Income attributable to PRA Group, Inc., the most directly comparable financial measure calculated and reported in accordance with GAAP, to Adjusted EBITDA.

Previous wording

(1)Calculated by dividing cash receipts less operating expenses by cash receipts.

Current wording

(2)Calculated by dividing cash receipts less operating expenses by cash receipts.

Previous wording

(3)Calculated by dividing annualized net income income/(loss) attributable to PRA Group by average Total stockholders' equity - PRA Group for the period.

Current wording

(3)Calculated by dividing annualized Net income attributable to PRA Group, Inc., by average Total stockholders' equity - PRA Group, Inc. for the period.

Previous wording

(4)Return on average tangible equity ("ROATE") is a non-GAAP financial measure. Average tangible equity ("ATE") is also a non-GAAP financial measure. Refer to section"Non-GAAP Financial Measures" for a reconciliation of Total stockholders' equity - PRA Group, the most directly comparable financial measure calculated and reported in accordance with GAAP, to ATE.

Current wording

(4)Return on average tangible equity ("ROATE") is a non-GAAP financial measure. Average tangible equity is also a non-GAAP financial measure. Refer to section"Non-GAAP Financial Measures" for a reconciliation of Total stockholders' equity - PRA Group, Inc., the most directly comparable financial measure calculated and reported in accordance with GAAP, to average tangible equity.

Previous wording

We are a global financial and business services company with operations in the Americas, Europe and Australia. Our primary business is the purchase, collection and management of portfolios of nonperforming loans. We are headquartered in Norfolk, Virginia, and our shares of common stock are traded on the Nasdaq Global Select Market under the symbol "PRAA".

Current wording

We are a global financial services company with operations in the Americas, Europe and Australia. Our primary business is the purchase, collection and management of portfolios of nonperforming loans.

Previous wording

Cash collections were $477.1 million in Q3 2024, an increase of $57.5 million, or 13.7%, compared to $419.6 million in Q3 2023. The increase was primarily due to an increase in U.S. Core cash collections of $44.8 million, mainly due to the impact of higher recent purchasing levels and our cash-generating initiatives, particularly in the legal collections channel. Also contributing to the increase were increased cash collections in Europe of $16.0 million, primarily due to higher recent purchasing levels.

Current wording

Total cash collections were $497.4 million in Q1 2025, an increase of $47.9 million, or 10.7%, compared to $449.5 million in Q1 2024. The increase was primarily due to an increase in U.S. Core cash collections of $39.6 million, mainly due to higher volumes in our legal collections channel, as well as an increase in collections from our non-legal channels due to higher recent purchasing levels. In Europe, higher recent purchasing levels helped drive increased cash collections of $18.1 million, spread broadly across most of our markets. These increases were partially offset by a $10.6 million decrease in cash collections in Brazil, due in large part to variation in the foreign exchange rate and lower recent purchasing levels.

Previous wording

Operating expenses were as follows for the periods indicated (amounts in thousands):

Current wording

Operating expenses were as follows for the periods indicated (in thousands):

Previous wording

Legal collection costs consist primarily of costs paid to courts where a lawsuit is filed for the purpose of attempting to collect on an account. Q3 2024 costs increased $8.0 million, or 38.6%, primarily due to increased activity in our U.S. legal collections channel, as well as the expansion of legal collection activities in Europe. The growth of legal collections activity in both the U.S. and Europe also drove the $24.5 million, or 37.0%, increase for the year-to-date period.

Current wording

Legal collection costs consist primarily of costs paid to courts where a lawsuit is filed for the purpose of attempting to collect on an account. Q1 2025 costs increased $6.7 million, or 25.1%, compared to Q1 2024, primarily due to increased activity in our U.S. legal collections channel.

Previous wording

Legal collection fees represent contingent fees incurred for cash collections generated by our third-party attorney network. Q3 2024 fees increased $4.6 million, or 47.2%, mainly reflecting higher external legal collections within our U.S. Core portfolio. Increased external legal collections in the U.S. were also the primary driver of the $12.1 million, or 43.0%, increase for the year-to-date period.

Current wording

Legal collection fees represent contingent fees incurred for cash collections generated by our third-party attorney network. Q1 2025 fees increased $3.1 million, or 25.7%, compared to Q1 2024, mainly reflecting higher external legal collections within our U.S. Core portfolio.

Previous wording

Interest expense, net was as follows for the periods indicated (amounts in thousands):

Current wording

Interest expense, net was as follows for the periods indicated (in thousands):

Previous wording

Interest expense, net was $61.1 million in Q3 2024, an increase of $11.6 million, or 23.4%, compared to $49.5 million in Q3 2023. The increase was primarily due to a higher average debt balance in the current year period to support higher levels of portfolio investments. Interest expense, net increased by $37.9 million, or 29.0%, for the year-to-date period, driven by higher average debt balances and increased interest rates compared to the prior year period.

Current wording

Interest expense, net was $61.0 million in Q1 2025, an increase of $8.7 million, or 16.6%, compared to Q1 2024. The increase was primarily due to a higher average debt balance in the current year period to support higher levels of portfolio investments.

Previous wording

In both the third quarter and year-to-date periods, Income tax expense/(benefit) was impacted by higher income before tax in the current year periods, offset by a $7.7 million reduction in tax expense due to the reversal of a valuation allowance associated with the resolution of a tax matter in Europe. The effective tax rate was also impacted by higher income before taxes in the current year periods, as well as changes in the mix of income from different taxing jurisdictions and the timing and amount of discrete items, including reversal of the valuation allowance.

Current wording

Income tax expense was $4.3 million in Q1 2025, an increase of $1.9 million, or 80.7%, compared to Q1 2024. The effective tax rate in Q1 2025 was 32.2% compared to 16.9% in Q1 2024. The increase was primarily due to changes in the mix of income from different taxing jurisdictions and the timing and amount of discrete items.

Previous wording

Finance receivables, net were $4.1 billion as of September 30, 2024, an increase of $407.9 million, or 11.2%, compared to $3.7 billion as of December 31, 2023, driven largely by portfolio acquisitions of $975.2 million and changes in expected recoveries of $185.6 million, partially offset by recoveries applied to the negative allowance of $784.3 million.

Current wording

Finance receivables, net were $4.3 billion as of March 31, 2025, an increase of $167.6 million, or 4.0%, compared to $4.1 billion as of December 31, 2024, driven largely by portfolio acquisitions of $291.7 million and foreign currency translation adjustments of $113.1 million, partially offset by recoveries collected and applied to Finance receivables, net of $265.1 million.

Previous wording

As of September 30, 2024, our quarterly impairment assessment did not identify the occurrence of any triggering events, andwe determined our goodwill was not more-likely-than-not impaired. However, consistent with our most recent annual review, the DBC reporting unit may be at-risk for future impairment 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 that impact our estimated purchasing volumes and purchase price multiples, and/or an increase in the discount rate. For additional information, refer to Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates" of the 2023 Form 10-K.

Current wording

Goodwill was $420.7 million as of March 31, 2025, an increase of $24.3 million, or 6.1%, compared to $396.4 million as of December 31, 2024, due to foreign currency translation adjustments. As of March 31, 2025, goodwill consists primarily of $393.8 million in our Debt Buying and Collection ("DBC") reporting unit. We performed our most recent annual impairment review of the DBC reporting unit as of October 1, 2024, and concluded that goodwill was not impaired. As of March 31, 2025, our quarterly assessment did not identify the occurrence of any triggering events, and we determined our goodwill was not more-likely-than-not impaired. However, consistent with our most recent annual review, the DBC reporting unit may be at-risk for future impairment if our cash flow projections are not met or if market factors utilized in the impairment test were to deteriorate, including adverse changes in the debt sales market that impact our estimated purchasing volumes and purchase price multiples, an increase in the discount rate, or a sustained decline in our stock price.

Previous wording

Borrowings were $3.3 billion as of September 30, 2024, an increase of $381.9 million, or 13.1%, compared to $2.9 billion as of December 31, 2023. The increase was primarily due to incremental net borrowings under our North American revolving credit facility of $289.0 million and net borrowings under our senior notes of $102.0 million during the period.

Current wording

Borrowings were $3.5 billion as of March 31, 2025, an increase of $139.5 million, or 4.2%, compared to $3.3 billion as of December 31, 2024. The increase was primarily due to incremental net borrowings under our North American and European revolving credit facilities of $102.0 million and $59.4 million, respectively, offset by net payments of $20.1 million on our United Kingdom ("UK") revolving credit facility.

Previous wording

•adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"), to evaluate the Company's performance and to set performance goals; and

Current wording

•Adjusted EBITDA, to evaluate our performance and to set performance goals; and

Previous wording

•return on average tangible equity ("ROATE"), as a measure to monitor and evaluate operating performance relative to the Company's equity.

Current wording

•ROATE, as a measure to monitor and evaluate operating performance relative to our equity.

Previous wording

We present Adjusted EBITDA because we consider it an important supplemental measure of our operational and financial performance. Our management believes Adjusted EBITDA helps provide enhanced period-to-period comparability of our operational and financial performance, as it excludes certain items whose fluctuations from period-to-period do not necessarily correspond to changes in the operations of our business, and is useful to investors as other companies in the industry report similar financial measures. Adjusted EBITDA should not be considered as an alternative to net income determined in accordance with GAAP. In addition, our calculation of Adjusted EBITDA may not be comparable to the calculation of similarly titled measures presented by other companies. Adjusted EBITDA is calculated starting with our GAAP financial measure, Net income/(loss) attributable to PRA Group, Inc. and is adjusted for:

Current wording

We present Adjusted EBITDA because we consider it an important supplemental measure of our operational and financial performance. Our management believes Adjusted EBITDA helps provide enhanced period-to-period comparability of our operational and financial performance, as it excludes certain items whose fluctuations from period-to-period do not necessarily correspond to changes in the operations of our business, and is useful to investors as other companies in the industry report similar financial measures. Adjusted EBITDA should not be considered as an alternative to net income determined in accordance with GAAP. In addition, our calculation of Adjusted EBITDA may not be comparable to the calculation of similarly titled measures presented by other companies. Adjusted EBITDA is calculated starting with our GAAP financial measure, Net income attributable to PRA Group, Inc. and is adjusted for:

Previous wording

The following table provides a reconciliation of Net income/(loss) attributable to PRA Group, Inc. as reported in accordance with GAAP to Adjusted EBITDA for the periods indicated (amounts in thousands):

Current wording

The following table provides a reconciliation of Net income attributable to PRA Group, Inc. as reported in accordance with GAAP to Adjusted EBITDA for the periods indicated (in thousands):

Previous wording

We use ROATE, which is a supplemental measure of performance that is not required by, or presented in accordance with, GAAP, to monitor and evaluate operating performance relative to the Company's equity. Management believes ROATE is a useful financial measure for investors in evaluating the effective use of equity, and is an important component of our long-term shareholder return. Average tangible equity ("ATE") is defined as average Total stockholders' equity - PRA Group, Inc. less average goodwill and average other intangible assets. ROATE is calculated by dividing annualized Net income/(loss) attributable to PRA Group, Inc. by ATE.

Current wording

We use ROATE, which is a supplemental measure of performance that is not required by, or presented in accordance with, GAAP, to monitor and evaluate operating performance relative to our equity. Management believes ROATE is a useful financial measure for investors in evaluating the effective use of equity, and is an important component of our long-term shareholder return. Average tangible equity is defined as average Total stockholders' equity - PRA Group, Inc. less average goodwill and average other intangible assets. ROATE is calculated by dividing Net income attributable to PRA Group, Inc. by average tangible equity.

Previous wording

The following table displays our ROATE and provides a reconciliation of Total stockholders' equity - PRA Group, Inc. as reported in accordance with GAAP to ATE for the periods indicated (amounts in thousands, except for ratio data):

Current wording

The following table provides a reconciliation of Total stockholders' equity - PRA Group, Inc. as reported in accordance with GAAP to average tangible equity and displays our ROATE for the periods indicated (in thousands, except for ratio data):

Previous wording

(1)Based on annualized Net income/(loss) attributable to PRA Group, Inc.

Current wording

(2)Based on annualized Net income attributable to PRA Group, Inc.

Previous wording

Portfolio Acquisitions by Major Asset Type and Delinquency Category (U.S. Only)

Current wording

•U.S. portfolio purchases by major asset type and delinquency category.

Previous wording

Customer payment patterns in all of the countries in which we operate can be affected by seasonal employment trends, income tax refunds, and holiday spending habits.

Current wording

The collections data presented reflects gross cash collections and does not reflect any costs to collect; therefore, it may not present relative profitability. The past performance of pools within certain geographies and portfolio types may not be comparable with other locations and portfolio types or indicative of future results. Customer payment patterns in all of the countries in which we operate can be affected by various factors, including general business and economic conditions, seasonal employment trends, income tax refunds and holiday spending habits.

Previous wording

We purchase portfolios of nonperforming loans from a variety of credit originators, or acquire portfolios through strategic acquisitions, and segregate them into two main portfolio segments: Core or Insolvency, based on the status of the account upon acquisition. In addition, the accounts are segregated into geographical regions based upon where the account was acquired. Ultimately, accounts are aggregated into annual pools based on portfolio segment, geography and year of acquisition. Portfolios of accounts that were in an insolvency status at the time of acquisition are represented in the Insolvency tables below. All other acquisitions of portfolios of accounts are included in our Core portfolio tables as represented below. Once an account is initially segregated, it is not later transferred from an Insolvency pool to a Core pool, or vice versa, and the account continues to be accounted for as originally segregated regardless of any future changes in operational status. Specifically, if a Core account files for bankruptcy or insolvency protection after acquisition, we adjust our collection practices to comply with any respective bankruptcy or insolvency rules or policies; however, for accounting purposes, the account remains in the Core pool. In the event an Insolvency account is dismissed from its bankruptcy or insolvency status whether voluntarily or involuntarily, we are typically free to pursue alternative collection activities; however, the account remains in the Insolvency pool.

Current wording

We purchase portfolios of nonperforming loans from a variety of creditors, or acquire portfolios through strategic acquisitions, and segregate them into our Core or Insolvency portfolios, based on the status of the account upon acquisition. In addition, the accounts are segregated into geographical regions based upon where the account was acquired and, as applicable, foreign currency exchange rates are fixed for purposes of comparability in future periods. Ultimately, accounts are aggregated into annual pools based on portfolio type, geography and year of acquisition. Portfolios of accounts that were in an insolvency status at the time of acquisition are represented under Insolvency headings in the tables below. All other acquisitions of portfolios of accounts are included under Core headings. Once an account is initially segregated, it is not later transferred from an Insolvency pool to a Core pool, or vice versa.

Previous wording

The purchase price multiple represents our estimate of total cash collections over the original purchase price of the portfolio. Purchase price multiples can vary over time due to a variety of factors, including pricing competition, supply levels, paper type, age of the accounts acquired, mix of portfolios purchased, costs to collect, expected returns and changes in operational efficiency. For example, increased pricing due to elevated levels of competition or supply constraints negatively impacts purchase price multiples as we pay more to buy similar portfolios of nonperforming loans.

Current wording

The purchase price multiple represents our estimate of total cash collections over the original purchase price of the portfolio. Purchase price multiples can vary over time due to a variety of factors, including pricing competition, supply levels, age of the accounts acquired, type and mix of portfolios purchased, expected costs to collect and returns, and changes in operational efficiency and effectiveness. When we pay more for a portfolio, the purchase price multiple and effective interest rate are generally lower. Certain types of accounts, such as Insolvency accounts, have lower collection costs, and we generally pay more for those types of accounts, which results in lower purchase price multiples but similar net income margins compared to other portfolio purchases.

Previous wording

Revenue recognition is driven by estimates of the amount and timing of future cash collections. We record new portfolio acquisitions at the purchase price, which reflects the amount we expect to collect discounted at an effective interest rate. During the year of acquisition, portfolios are aggregated into annual pools, and the blended effective interest rate will change to reflect new buying and new cash flow estimates until the end of the year. At that time, the purchase price amount is fixed at the aggregated amounts paid to acquire the portfolio, the effective interest rate is fixed at the amount we expect to collect, discounted at the rate to equate purchase price to the recovery estimate, and the currency rates are fixed for purposes of comparability in future periods. Depending on the level of performance and expected future impacts from our operations, we may update ERC and TEC levels based on the results of our cash forecasting with a correlating adjustment to the purchase price multiple. We follow an established process to evaluate ERC, and we typically do not adjust our ERC and TEC until we gain sufficient collection experience with a pool of accounts. Over time, our TEC has often increased as pools have aged resulting in the ratio of TEC to purchase price for any given year of buying to gradually increase.

Current wording

Depending on the level of performance and expected future impacts from our operations, we may update ERC and TEC levels based on the results of our cash forecasting with a correlating adjustment to the purchase price multiple. We follow an established process to evaluate ERC, and we typically do not adjust our ERC and TEC until we gain sufficient collection experience with a pool of accounts. Over time, our TEC has often increased as pools have aged resulting in the ratio of TEC to purchase price for any given year of buying to gradually increase.

Previous wording

The following table displays our ERC by geography, year and account type for the 12 months ending September 30, for each year presented (amounts in thousands):

Current wording

The following table displays our ERC by geography, year and portfolio for the 12 months ending March 31, (in thousands):

Previous wording

The following table displays our Core cash collections by geography and source for the periods indicated (amounts in thousands):

Current wording

The following table displays our cash collections by geography and portfolio, Core cash collections separated between call center and other collections and legal collections, and constant currency adjusted cash collections, for the periods indicated (in thousands):

Previous wording

(1)Cash collections adjusted refers to prior year period foreign currency cash collections remeasured at average U.S. dollar exchange rates for the current year period.

Current wording

(1)Total cash collections adjusted refers to prior period foreign currency cash collections remeasured at average U.S. dollar exchange rates for the current period.

Previous wording

(2)Non-U.S. amounts are presented at the exchange rate at the end of the year in which the portfolio was purchased. In addition, any purchase price adjustments that occur throughout the life of the portfolio are presented at the year-end exchange rate for the respective year of purchase.

Current wording

(2)Non-U.S. amounts are presented at the exchange rate at the end of the period in which the portfolio was purchased. In addition, any purchase price adjustments that occur throughout the life of the portfolio are presented at the period-end exchange rate for the respective year of purchase.

Previous wording

(5)The original purchase price multiple represents the purchase price multiple at the end of the year of acquisition.

Current wording

(5)The original purchase price multiple represents the purchase price multiple at the end of the period of acquisition.

Previous wording

(1)Non-U.S. amounts are presented using the average exchange rates during the cash collections period.

Current wording

(1)Non-U.S. amounts are presented at the average exchange rates during the cash collections period.

Previous wording

(3)Non-U.S. amounts are presented at the exchange rate at the end of the year in which the portfolio was purchased. In addition, any purchase price adjustments that occur throughout the life of the pool are presented at the year-end exchange rate for the respective year of purchase.

Current wording

(3)Non-U.S. amounts are presented at the exchange rate at the end of the period in which the portfolio was purchased. In addition, any purchase price adjustments that occur throughout the life of the pool are presented at the period-end exchange rate for the respective period of purchase.