PRA GROUP INC

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.

Adjusted EBITDA

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:

•income tax expense (or less income tax benefit);

•foreign exchange loss (or less foreign exchange gain);

•interest expense, net;

•other expense;

•depreciation and amortization;

•impairment of real estate;

•goodwill impairment;

•net income attributable to noncontrolling interests;

•gain on sale of equity method investment; and

•recoveries collected and applied to Finance receivables, net less Changes in expected recoveries.

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

(1)Reflects non-operating activities.

Adjusted cash efficiency ratio

We use an Adjusted cash efficiency ratio to monitor and evaluate operating expenses, excluding goodwill impairment, relative to our cash collections plus fees and revenue recognized from our class action claims recovery services. Management believes the Adjusted cash efficiency ratio is a useful financial measure for investors in evaluating our management of operating expenses. The Adjusted cash efficiency ratio is calculated by dividing cash receipts less Adjusted operating expenses by cash receipts. The following table provides a reconciliation of Total operating expenses to Adjusted operating expenses and presents our Adjusted cash efficiency ratios for the years indicated (in thousands, except for ratio data):

Adjusted net income/(loss) attributable to PRA, Adjusted diluted earnings per share, ROATE and Adjusted ROATE

We use Adjusted net income/(loss) attributable to PRA and Adjusted diluted earnings per share to monitor and evaluate our operating performance and allow for better comparability. Management believes Adjusted net income/(loss) attributable to PRA and Adjusted diluted earnings per share are useful financial measures for investors in evaluating our operating results. Adjusted net income/(loss) attributable to PRA is defined as Net income/(loss) attributable to PRA Group, Inc. excluding the impact of certain transactions that are unusual or infrequent in nature and not reflective of our ongoing operations. Calculation of Adjusted diluted earnings per share excludes those same transactions and, if dilutive based on Adjusted net income attributable to PRA, may also include the impact of additional potentially dilutive shares.

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.

ROATE may include certain items that are not indicative of the ongoing operating results of our business. Accordingly, management also uses Adjusted ROATE to monitor and evaluate operating performance relative to our equity. Management believes Adjusted ROATE is a useful financial measure for investors because it is based on Adjusted net income/(loss) attributable to PRA. Adjusted ROATE is calculated by dividing Adjusted net income/(loss) attributable to PRA by Average tangible equity.

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):

(1)Based on the annual effective tax rate and pretax income excluding the effect of the adjusting items.

The following table provides a reconciliation of Diluted earnings per share to Adjusted diluted earnings per share for the years indicated:

(1)Impact of the non-GAAP adjusting items and dilutive effect of all potential shares of common stock.

SUPPLEMENTAL PERFORMANCE DATA

The tables in this section provide supplemental performance data about our:

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

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

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

Purchasing

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.

Purchase price multiples ("PPMs")

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.

Estimated remaining collections ("ERC") and Total estimated collections ("TEC")

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.

For additional information about our nonperforming loan portfolios, refer to Note 1 and Note 2 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.

Estimated remaining collections

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

(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.

(2)Reflects ERC in South America, Canada and Australia.

Cash collections

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):

(1)Reflects total cash collections in South America, Canada and Australia.

(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.

(1)Includes the acquisition date finance receivables portfolios that were acquired through our business acquisitions.

(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.

(3)Non-U.S. amounts are presented at the year-end exchange rate for the respective year of purchase.

(4)Non-U.S. amounts are presented at the December 31, 2025 exchange rate.

(5)Reflects all vintages in South America, Canada and Australia.

(1)Includes the nonperforming loan portfolios that were acquired through our business acquisitions.

(2)Non-U.S. amounts are presented using the average exchange rates during the current year.

(3)Non-U.S. amounts are presented at the December 31, 2025 exchange rate.

(4)Reflects all vintages in South America, Canada and Australia.

(1)Non-U.S. amounts are presented using the average exchange rates during the respective year.

(2)Includes the acquisition date finance receivables portfolios acquired through our business acquisitions.

(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.

(4)Reflects all vintages in South America, Canada and Australia.

LIQUIDITY AND CAPITAL RESOURCES

We actively manage our liquidity to meet our business needs and financial obligations.

Sources of liquidity

Cash and cash equivalents

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.

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

(1)Available borrowings after calculation of borrowing base, subject to the committed amounts and debt covenants, which may be used for general corporate purposes, including portfolio purchases.

(2)Subject to borrowing base and debt covenants, including advance rates ranging from 35-55% of applicable ERC.

Interest-bearing deposits

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).

Uses of liquidity and material cash requirements

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.

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.

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.

Forward flows

We enter into forward flow agreements for the purchase of nonperforming loans. These agreements typically have terms ranging from six to 12 months, or they can be open-ended, and establish purchase prices and specific criteria for the accounts to be purchased. Some of the agreements establish a volume reference for the contract term in the form of a target or maximum, however, very few agreements establish a minimum contractual obligation, and many of the contracts contain early termination provisions allowing either party to cancel the agreements in accordance with a specified notice period.

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.

As of December 31, 2025, we had $3.7 billion in outstanding borr owings. The estimated interest, unused fees and principal payments for the next 12 months are $251.7 million, of which $10.0 million relatesto principal on our term loan. After 12 months, principal payments on our debt are due from between one and approximately seven years. Our financing arrangements include covenants with which we must comply, and as of December 31, 2025, we were in compliance with these covenants.

On September 30, 2025, we completed the private offering of our 2032 senior notes. For additional information about our borrowings, refer to Note 7 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.

Share repurchases

On February 25, 2022, our Board of Directors approved a share repurchase program under which we are authorized to repurchase up to $150.0 million of our outstanding common stock. The share repurchase program has no stated expiration date and does not obligate us to repurchase any specified amount of shares, remains subject to the discretion of our Board of Directors and, subject to compliance with applicable laws, may be modified, suspended or discontinued at any time. Repurchases are also subject to restrictive covenants contained in our credit facilities and the indentures that govern our senior notes.

Repurchases may be made from time-to-time in open market transactions, through privately negotiated transactions, in block transactions, through purchases made in accordance with trading plans adopted under Rule 10b5-1 of the Exchange Act or other methods subject to market and/or other conditions and applicable regulatory requirements. During the year ended December 31, 2025, we repurchased 1,299,760 shares of our common stock at an average price of $15.39 for a total cost of $20.0 million. As of December 31, 2025, we had $47.7 million remaining for share repurchases under the program.

Leases

Our leases have remaining terms from one to seven years. As of December 31, 2025, we had $32.2 million in lease liabilities, of which $7.7 million is due within the next 12 months. For additional information, refer to Note 5 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.

Derivatives

We enter into derivative financial instruments to reduce our exposure to fluctuations in interest rates on variable rate debt and foreign currency exchange rates. As of December 31, 2025, we had $12.4 million of derivative liabilities, of which $2.1 million matures within the next 12 months. Of the remaining $10.3 million, $7.6 million matures in 2028 and $2.8 million matures in 2029 and 2030. For additional information, refer to Note 8 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.

Investments

As of December 31, 2025, we held $64.9 million in Swedish treasury securities to meet the liquidity requirements of the Swedish Financial Services Authority for our banking subsidiary, AK Nordic AB.

Cash flow analysis

The following table summarizes our cash flow activity for the years ended December 31, 2025 and 2024 (in thousands):

Operating activities

Net cash used in operating activities mainly reflects the portion of our cash collections recognized as revenue and cash paid for operating expenses, interest and income taxes. It does not include cash collections applied to the negative allowance, which are classified as cash flows provided by investing activities. Net cash used in operating activities decreased by $9.1 million in 2025 due primarily to higher cash collections recognized as income, partially offset by higher cash paid for operating expenses, interest and taxes.

Investing activities

Net cash used in investing activities decreased by $322.5 million in 2025 due primarily to a decrease of $203.3 million in purchases of nonperforming loan portfolios, an increase of $71.3 million in recoveries collected and applied to Finance receivables, net and an increase of $49.2 million in proceeds from sales and maturities of investments.

Financing activities

Net cash provided by financing activities decreased by $374.9 million in 2025 due primarily to a decrease of $269.0 million in net proceeds from lines of credit, a $148.0 million decrease related to interest bearing deposits activity and a decrease of $37.6 million in net proceeds from long-term debt, partially offset by a $94.6 million increase in net proceeds from the issuance and repayment of senior notes. Additionally, we repurchased $20.0 million of our common stock in 2025 compared to no repurchases during the prior year.

For additional information about our credit facilities, term loan and senior notes, refer to Note 7 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.

Effect of foreign exchange rates

The net effect of foreign exchange rates on cash decreased by $50.8 million in 2025, primarily due to the impact of the devaluation of the U.S. dollar on foreign currency denominated borrowings and intercompany balances.

RECENT ACCOUNTING PRONOUNCEMENTS

For discussion of recent accounting pronouncements and the anticipated effects on our Consolidated Financial Statements, refer to Note 1 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.

CRITICAL ACCOUNTING ESTIMATES

Our Consolidated Financial Statements have been prepared in accordance with GAAP. Some of our significant accounting policies require that we use estimates, assumptions and judgments that affect the reported amounts of revenues, expenses, assets and liabilities. For discussion of our significant accounting policies, refer to Note 1 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.

We consider accounting estimates to be critical if they (1) involve a significant level of estimation uncertainty and (2) have had, or are reasonably likely to have, a material impact on our financial condition or results of operations. We base our estimates on historical experience, current trends and various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. If these estimates differ significantly from actual results, the impact on our Consolidated Financial Statements may be material. We have determined that the following accounting policies involve critical estimates:

Revenue recognition - finance receivables

Revenue recognition for finance receivables involves the use of estimates and the exercise of judgment on the part of management. These estimates include projections of the amount and timing of cash collections we expect to receive from our pools of accounts. We review individual pools for trends, actual performance versus projections and curve shape (a graphical depiction of the amount and timing of cash collections). We then project ERC and apply a discounted cash flow methodology to our ERC. Adjustments to ERC may include adjustments reflecting recent collection trends, our view of current and future economic conditions, changes in collection assumptions or other timing-related adjustments.

Significant changes in our cash flow estimates could result in increased or decreased revenue as we immediately recognize the discounted value of such changes using the constant effective interest rate of the pool. Generally, adjustments to cash forecasts result in an adjustment to revenue at an amount less than the impact of the performance in the period due to the effects of discounting. Cash collection forecast increases and decreases result in more and less revenue, respectively, being recognized over the life of a pool.

We evaluate goodwill for impairment annually as of October 1 and more frequently if circumstances indicate that it is more-likely-than-not that the fair value of a reporting unit is below its carrying value. We determine the fair value of a reporting unit by applying the income approach and market approach. Under the income approach, we estimate the fair value of a reporting unit based on the present value of estimated future cash flows and a residual terminal value. Cash flow projections are based on management's estimates of a variety of factors, including growth rates and operating margins, which take into consideration industry and market conditions. Under the market approach, we estimate fair value based on market trading multiples and other relevant market transactions involving comparable publicly traded companies with operating and investment characteristics similar to the reporting unit. Depending on the availability of public data and suitable comparable transaction data, we may give more weight to the income approach than the market approach. We also assess the reasonableness of the aggregate estimated fair value of our reporting units by comparison to our market capitalization over a reasonable period, considering historic control premiums in the financial services industry and the current market environment.

As part of our interim impairment assessment as of September 30, 2025, based on a sustained decrease in our stock price and market capitalization, we determined there to be an indicator of potential goodwill impairment in our DBC reporting unit and performed a quantitative impairment test. We estimated the fair value of the DBC reporting unit based on the income approach and also compared the estimated fair value to our market capitalization. Key inputs to the DBC reporting unit’s fair value under the income approach included our forecasted financial results and the discount rate. Forecasted financial results were developed considering several inputs and assumptions, including portfolio purchasing volume, PPMs, ERC growth rate, terminal value and operating expenses. PPMs related to our existing portfolios were based on historical growth rates, while PPMs on projected portfolio purchases were based on recent and expected future purchasing metrics. The discount rate was based on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics, including assumptions related to the reporting unit's ability to execute on the projected cash flows.

Based on the quantitative impairment test performed, driven in large part by the comparison of fair value to market capitalization and impact on the estimated fair value of a decrease in the terminal value assumption and an increase in the discount rate assumption since the most recent annual impairment test, we determined that the goodwill in our DBC reporting unit was fully impaired and recorded a goodwill impairment charge of $412.6 million for the year ended December 31, 2025.

As of December 31, 2025, goodwill of $26.9 million related to our class action claims recoveries ("CCB") reporting unit. Based on our October 1, 2025 qualitative impairment assessment, we determined that the fair value of our CCB reporting unit was not more-likely-than-not below its carrying value.

Our goodwill evaluation is dependent on a number of factors, both internal and external. The assumptions used in estimating fair value were based on currently available data and involved the exercise of judgment. There are inherent uncertainties related to the assumptions used in our evaluation and to our application of those assumptions. If market factors deteriorate, or if estimates used in our quantitative assessment prove to be inaccurate, we may have to record additional impairment charges in future periods.

Income taxes

We are subject to income taxes in the U.S. and in numerous international jurisdictions. These tax laws are complex and subject to different interpretations by the taxpayer and the relevant government taxing authorities. When determining our U.S. and non-U.S. income tax expense, we make judgments about the application of these inherently complex laws.

We record a tax provision for the anticipated tax consequences of the reported results of operations. The provision for income taxes is estimated using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled.

We exercise significant judgment in estimating the potential exposure to unresolved tax matters and apply a more-likely-than-not standard for recording tax benefits related to uncertain tax positions in the application of complex tax laws. While actual results could vary, we believe we have adequate tax accruals with respect to the ultimate outcome of such unresolved tax matters. We record interest and penalties related to unresolved tax matters as a component of income tax expense when the more-likely-than-not standards are not met.

If all or part of the deferred tax assets are determined not to be realizable in the future, we establish a valuation allowance and charge the impact to earnings in the period such determination is made. If we subsequently realize deferred tax assets that were previously determined to be unrealizable, the respective valuation allowance is reversed, resulting in a positive adjustment to earnings. The establishment or release of a valuation allowance does not have an impact on cash, nor does such an allowance preclude the use of loss carryforwards or other deferred tax assets in future periods. The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on our results of operations and financial position. For further information regarding our uncertain tax positions, refer to Note 14 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.

FREQUENTLY USED TERMS

We may use the following terms throughout this Form 10-K:

•"Buybacks" refers to purchase price refunded by the seller due to the return of ineligible nonperforming loan accounts.

•"Cash collections" refers to collections on our nonperforming loan portfolios.

•"Cash receipts" refers to cash collections on our nonperforming loan portfolios, fees and revenue recognized from our class action claims recovery services.

•"Changes in expected recoveries" refers to the difference between actual recoveries collected compared to expected recoveries and the net present value of changes in estimated remaining collections.

•"Core" accounts or portfolios refer to accounts or portfolios that are nonperforming loans and are not in an insolvent status upon acquisition. These accounts are aggregated separately from insolvency accounts.

•"Estimated remaining collections" or "ERC" refers to the sum of all future projected cash collections on our nonperforming loan portfolios.

•"Finance receivables" or "receivables" refers to the negative allowance for expected recoveries recorded on our balance sheet as an asset.

•"Insolvency" accounts or portfolios refer to accounts or portfolios of nonperforming loans that are in an insolvent status when we purchase them and, as such, are purchased as pools of insolvent accounts. These accounts include IVAs, Trust Deeds in the UK, Consumer Proposals in Canada and bankruptcy accounts in the U.S., Canada, Germany and the UK.

•"Negative allowance" refers to the present value of cash flows expected to be collected on our finance receivables.

•"Portfolio acquisitions" refers to all nonperforming loan portfolios acquired as a result of a purchase or business acquisition.

•"Portfolio purchases" refers to all nonperforming loan portfolios purchased in the normal course of business and excludes those added as a result of business acquisitions.

•"Portfolio income" reflects revenue recorded due to the passage of time using the effective interest rate calculated based on the purchase price and estimated remaining collections of nonperforming loan portfolios.

•"Purchase price" refers to the cash paid to a seller to acquire nonperforming loans.

•"Purchase price multiple" or "PPM" refers to the total estimated collections on our nonperforming loan portfolios divided by purchase price.

•"Recoveries collected" refers to cash collections plus buybacks and other adjustments.

•"Total estimated collections" or "TEC" refers to actual cash collections plus estimated remaining collections on our nonperforming loan portfolios.