PRA GROUP INC

Previous wording

The following discussion should be read in conjunction with our audited financial statements and accompanying notes thereto included in Item 8 of this Form 10-K (see Frequently Used Terms at the end of this Item 7 for certain definitions that may be used throughout this Form 10-K).

Current wording

The following discussion should be read in conjunction with our audited financial statements and accompanying notes thereto included in Item 8 of this Form 10-K. See Frequently Used Terms at the end of this Item 7 for definitions used throughout this Form 10-K. Unless otherwise specified, references to 2025, 2024 and 2023 are for the years ended December 31, 2025, December 31, 2024 and December 31, 2023, respectively.

Previous wording

•ERC of $7.5 billion at year-end, an increase of 16.6%.

Current wording

•ERC of $8.6 billion at year-end, an increase of 15.4% compared to 2024, with the U.S. accounting for 42.5% of total ERC and Europe 51.0%.

Previous 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/(loss) attributable to PRA Group, the most directly comparable financial measure calculated and reported in accordance with GAAP, to Adjusted EBITDA.

Current wording

(3)Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") is a non-GAAP financial measure. Refer to section "Non-GAAP Financial Measures" below.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

(6)Calculated by dividing Net income/(loss) attributable to PRA Group, Inc. by average Total stockholders' equity - PRA Group, Inc.

Previous wording

Total portfolio revenue for 2024 and 2023 was as follows (amounts in thousands):

Current wording

Segment operating income for 2025 and 2024 was as follows (in thousands, except percentages):

Previous wording

Operating expenses for 2024 and 2023 were as follows (amounts in thousands):

Current wording

Total operating expenses and Adjusted operating expenses for 2025 and 2024 were as follows (in thousands, except percentages):

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. The increase of $35.7 million, or 40.0%, was primarily due to higher account volumes in both our U.S. and Europe legal collections channels.

Current wording

(1)Mainly costs paid to courts where a lawsuit is filed for the purpose of attempting to collect on an account.

Previous wording

Legal collection fees represent contingent fees incurred for cash collections generated by our third-party attorney network. The increase of $18.6 million, or 48.7%, mainly reflected higher external legal collections within our U.S. Core portfolio.

Current wording

(2)Contingent fees incurred for cash collections generated by our third-party attorney network.

Previous wording

Agency fees primarily represent third-party collection fees. The increase of $8.6 million, or 11.6%, was primarily due to higher collection fees in Brazil.

Current wording

(3)Mainly third-party collection fees.

Previous wording

Communication expense relates mainly to correspondence, network and calling costs associated with our collection efforts. The increase of $3.0 million, or 7.4%, was primarily due to an expansion in account volumes associated with higher levels of portfolio purchases.

Current wording

(4)Mainly correspondence, network and calling costs associated with our collection efforts.

Previous wording

Interest expense, net for 2024 and 2023 was as follows (amounts in thousands):

Current wording

Interest expense, net for 2025 and 2024 was as follows (in thousands, except percentages):

Previous wording

Income tax expense/(benefit) and our effective tax rate for 2024 and 2023 were as follows (amounts in thousands):

Current wording

Income tax expense and our effective tax rate for 2025 and 2024 were as follows (in thousands, except percentages):

Previous wording

In Brazil, we purchase nonperforming loan portfolios through investment funds in which we hold a majority interest. The portion of our Net income/(loss) attributable to noncontrolling interests is reflected in Adjustment for net income attributable to noncontrolling interests in our Consolidated Income Statements, which totaled $18.0 million in 2024 compared to $16.7 million in 2023.

Current wording

In South America, we purchase nonperforming loan portfolios through investment funds in which we hold a majority interest. The portion of our Net income/(loss) attributable to noncontrolling interests in those funds is reflected in Net income attributable to noncontrolling interests in our Consolidated Income Statements, which totaled $15.2 million and $18.0 million in 2025 and 2024, respectively.

Previous wording

Finance receivables, net were $4.1 billion as of December 31, 2024, an increase of $484.1 million, or 13.2%, compared to $3.7 billion as of December 31, 2023, driven largely by portfolio purchases of $1.4 billion and changes in expected recoveries of $240.9 million, partially offset by recoveries collected and applied to Finance receivables, net of $1.0 billion.

Current wording

Finance receivables, net were $4.7 billion as of December 31, 2025, an increase of $547.3 million, or 13.2%, driven largely by portfolio purchases of $1.2 billion and Changes in expected recoveries of $176.5 million, partially offset by recoveries collected and applied to Finance receivables, net of $1.1 billion. The remaining difference was attributable to foreign currency translation.

Previous wording

We report our financial results in accordance with U.S. generally accepted accounting principles ("GAAP"). However, our management also uses certain non-GAAP financial measures, including:

Current wording

We report our financial results in accordance with U.S. generally accepted accounting principles ("GAAP"). However, our management also uses certain non-GAAP financial measures, including the non-GAAP financial measures referred to below, internally to evaluate our performance and to set performance goals. This Form 10-K includes certain non-GAAP financial measures that exclude the impact of certain items and are not required by, or presented in accordance with, GAAP. Also included are reconciliations of the most directly comparable financial measures calculated in accordance with GAAP to the corresponding non-GAAP financial measure. The non-GAAP financial measures included below should not be considered as an alternative to the most directly comparable financial measure determined in accordance with GAAP and may not be comparable to the calculation of similarly titled financial measures reported by other companies.

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. 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 is calculated starting with Net income/(loss) attributable to PRA Group, Inc. and is adjusted for:

Previous wording

•net income attributable to noncontrolling interests; and

Current wording

•net income attributable to noncontrolling interests;

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 years indicated (amounts in thousands):

Current wording

The following table provides a reconciliation of Net income/(loss) attributable to PRA Group, Inc. to Adjusted EBITDA for the years indicated (in thousands):

Previous wording

(1)Other expense reflects non-operating activities.

Current wording

(1)Reflects non-operating activities.

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 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/(loss) attributable to PRA Group, Inc. by average tangible equity.

Current wording

We use ROATE 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 stockholder 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/(loss) 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 average tangible equity for the years indicated (amounts in thousands, except for ratio data):

Current wording

The following table provides a reconciliation of Total stockholders' equity - PRA Group, Inc. to Average tangible equity and a reconciliation of Net income/(loss) attributable to PRA Group, Inc. to Adjusted net income/(loss) attributable to PRA, and presents our ROATE and Adjusted ROATE for the years indicated (in thousands, except for ratio data):

Previous wording

•ERC by geography, portfolio type and expected year of collection;

Current wording

•ERC by business segment, portfolio type and expected year of collection;

Previous wording

•Core cash collections separated between call center and other collections and legal collections, and constant currency adjusted cash collections;

Current wording

•Cash collections by business segment, Core cash collections separated between call center/other and legal collections and total constant currency adjusted cash collections; and

Previous wording

•nonperforming loan portfolios and collections by geography, portfolio type and year of purchase; and

Current wording

•nonperforming loan portfolios and collections by business segment, portfolio type and year of purchase.

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, 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.

Current wording

The PPM represents our estimate of total cash collections over the original purchase price of the portfolio. PPMs 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 PPM 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 resulting in lower PPMs but similar net income margins compared to other portfolio purchases.

Previous 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.

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 forecasts with a correlating adjustment to the PPM. 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 portfolio for the 12 months ending December 31, 2024 (amounts in thousands):

Current wording

The following table displays our ERC by business segment, year and portfolio type as of December 31, 2025 (in thousands):

Previous wording

(2)Reflects ERC of $1.6 billion for the UK, $931.1 million for Central Europe, $826.0 million for Northern Europe and $285.3 million for Southern Europe.

Current wording

(1)Includes ERC of $1.7 billion for the UK, $1.1 billion for Central Europe, $998.5 million for Northern Europe and $564.6 million for Southern Europe.

Previous 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 years indicated (amounts in thousands):

Current wording

The following table displays our cash collections by business segment and portfolio type, Core cash collections separated between call center/other and legal collections and total constant currency adjusted cash collections for the years indicated (in thousands, except percentages):

Previous wording

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

Current wording

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

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 year in which the portfolio was purchased. 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.

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 year in which the portfolio was purchased. 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.

Previous wording

As of December 31, 2024, cash and cash equivalents totaled $105.9 million, of which $91.1 million consisted of cash related to international operations with indefinitely reinvested earnings. For additional information about the unremitted earnings of our international subsidiaries, refer to Note 13 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.

Current wording

As of December 31, 2025, cash and cash equivalents totaled $104.4 million, of which $93.0 million was held by international operations with indefinitely reinvested earnings. For additional information about the unremitted earnings of our foreign subsidiaries, refer to Note 14 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.

Previous wording

As of December 31, 2024, we had the following committed amounts, borrowings and availability under our financing arrangements (amounts in thousands):

Current wording

As of December 31, 2025, we had the following committed amounts, outstanding borrowings and availability under our financing arrangements (in thousands):

Previous wording

As of December 31, 2024, interest-bearing deposits totaled $163.4 million. Under our European revolving credit facility, our interest-bearing deposit funding is limited to SEK 2.2 billion (the equivalent of $199.0 million U.S. dollars as of December 31, 2024).

Current wording

As of December 31, 2025, interest-bearing deposits totaled $106.1 million. Under our European revolving credit facility, our interest-bearing deposit funding is limited to SEK 2.2 billion ($239.2 million as of December 31, 2025).

Previous wording

We believe that funds generated from our business activities, together with existing cash, available borrowings under our revolving credit facilities and access to the capital markets, will be sufficient to finance our operations, planned capital expenditures, forward flow purchase commitments, debt maturities and additional portfolio purchases for at least the next 12 months.

Current wording

We believe that funds generated from our business activities, together with existing cash, available borrowings under our revolving credit facilities and access to the capital markets, will be sufficient to finance our operations, planned capital expenditures, forward flow purchase commitments, debt maturities and additional portfolio purchases for at least the next 12 months. Our long-term capital requirements will depend in large part on the level of nonperforming loan portfolios that we purchase.

Previous wording

Market conditions permitting, as we deem appropriate, we may seek to access the debt or equity capital markets or other sources of funding, and it may be necessary to raise additional funds to achieve our business objectives. Business acquisitions or higher than expected levels of portfolio purchasing could require additional financing. We may also from time-to-time repurchase senior notes in the open market or otherwise.

Current wording

Market conditions permitting, as we deem appropriate, we may seek to access the debt or equity capital markets or other sources of funding, and it may be necessary to raise additional funds to achieve our business objectives. Business acquisitions or higher than expected levels of portfolio purchasing could require additional financing. We may also from time-to-time repurchase common stock or senior notes in the open market or otherwise.

Previous wording

Our long-term capital requirements will depend in large part on the level of nonperforming loan portfolios that we purchase. We have the ability to slow the purchase of nonperforming loans without significantly impacting current year collections. For example, in 2024, we purchased $1.4 billion in nonperforming loan portfolios, which generated $213.6 million of cash collections, representing 11.4% of our total cash collections.

Current wording

We also have the ability to slow the purchase of nonperforming loans without significantly impacting current year collections. In 2025, we purchased $1.2 billion in nonperforming loan portfolios, which generated $196.6 million of cash collections, representing 9.3% of our total cash collections.

Previous wording

As of December 31, 2024, we had forward flow agreements in place with an estimated purchase price of approximately $498.9 million over the next 12 months. This total can vary significantly based on the remaining terms and renewal dates of the agreements and is comprised of $403.1 million for the Americas and Australia and $95.8 million for Europe. These amounts represent our estimated forward flow purchases over the next 12 months under the agreements in place based on projections and other factors, including sellers' estimates of future forward flow sales, and are dependent on actual delivery by the sellers and, in some cases, the impact of foreign exchange rate fluctuations. Accordingly, amounts purchased under these agreements may vary significantly. In addition to these agreements, we may also enter into new or renewed forward flow commitments and/or close on spot purchase transactions.

Current wording

As of December 31, 2025, we had forward flow agreements in place with an estimated purchase price of approximately $378.0 million over the next 12 months. This total can vary significantly based on the remaining terms and renewal dates of the agreements and is comprised of $167.4 million in the U.S., $194.8 million in Europe and $15.8 million in our other markets. These amounts represent our estimated forward flow purchases over the next 12 months under the agreements in place based on projections and other factors, including sellers' estimates of future forward flow sales, and are dependent on actual delivery by the sellers and, in some cases, the impact of foreign exchange rate fluctuations. Accordingly, amounts purchased under these agreements may vary significantly.