Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
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.
EXECUTIVE OVERVIEW
We are a global leader in acquiring and collecting nonperforming loans with 2,615 full-time employees worldwide. Most of the nonperforming loans we purchase are from credit originators who have chosen not to pursue, or have been unsuccessful in collecting, the full balance owed to them ("Core" accounts). To a lesser extent, we also purchase loans in situations where the customer is involved in a bankruptcy or similar proceeding ("Insolvency" accounts).
During the fourth quarter of 2025, we reorganized our business segment structure from a single operating segment into two operating and reportable segments, comprised of our U.S. and European businesses. On a significantly smaller scale, we also operate in South America, Canada and Australia. Subject to globally-established parameters for capital allocation, portfolio return thresholds and leverage, each market functions under a similar debt management business model, which is predicated on purchasing nonperforming loans and generating returns through disciplined collection strategies over extended collection periods.
For additional information about our business and reportable segments, refer to Part I, Item 1 "Business" of this Form 10-K and Note 16 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.
Results and business trends
During 2025, we focused on strengthening our U.S. platform, building on the strength and momentum of our European business, executing on our near-term priorities and developing our longer-term strategy. Our 2025 results included the following:
• Net loss attributable to PRA Group, Inc. of $305.1 million. Excluding the impact of Gain on sale of equity method investment and Goodwill impairment, Adjusted net income attributable to PRA of $72.6 million ("Adjusted net income attributable to PRA" is a non-GAAP financial measure; refer to section "Non-GAAP Financial Measures" below).
• Portfolio income, the more stable and predictable yield component of our revenue, increased by 18.2% compared to 2024, outpacing the growth in cash collections and contributing more to our net results.
• 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%.
• Maintenance of a diversified capital structure consistent with our targeted leverage and liquidity objectives, completing the issuance of our first Euro-denominated senior notes (€300.0 million) and repurchasing $20.0 million shares of our common stock.
• Further progress on our U.S. business initiatives focused on improving cost efficiency and operational flexibility, with a reduction in our U.S. onshore agent headcount of approximately 40% and concurrent increase in U.S. Core cash collections of 19.8%.
Environment
The nonperforming loans segment in the U.S. has been characterized by regulatory complexity, with a relatively high level of customer disputes, a fairly stable competitive landscape, a small number of sellers and a tendency toward forward flow-driven sales. In Europe, the segment has been characterized by a more fragmented regulatory environment, with each jurisdiction having its own rules, a more competitive environment and larger number of sellers, and sales, until recently, more typically made on a spot basis.
Consumer behavior in the nonperforming loans segment can be seasonal and change in response to macroeconomic conditions, government programs or shifts in household finances. Our overall customer base has remained stable across the U.S. and Europe, and we believe our global diversification helps to mitigate risk from individual markets. Over the last two years, market conditions included a favorable supply environment, which contributed to higher purchase price multiples ("PPMs") and improved returns. Based on current trends and recent pipeline activity, subject to changes in market and economic conditions, we expect portfolio supply to remain relatively stable over the near to medium term.
SELECTED CONSOLIDATED FINANCIAL DATA
As of or for the year ended December 31, (in thousands, except per share and ratio data)
Income statement
Portfolio income
Changes in expected recoveries
Total revenues
Total operating expenses
Adjusted operating expenses (1)
Goodwill impairment
Interest expense, net
Gain on sale of equity method investment
Net income/(loss) attributable to PRA Group, Inc.
Adjusted net income/(loss) attributable to PRA (2)
Diluted earnings per share
Adjusted diluted earnings per share (2)
Performance data and ratios
Adjusted EBITDA (3)
Cash efficiency ratio (4)
Adjusted cash efficiency ratio (5)
Return on average Total stockholders' equity - PRA Group, Inc. (6)
Return on average tangible equity ("ROATE") (7)
Adjusted return on average tangible equity ("Adjusted ROATE") (8)
Portfolio volumes
Portfolio purchases
Cash collections
Estimated remaining collections (year-end)
Balance sheet (year-end)
Finance receivables, net
Borrowings
Total stockholders' equity - PRA Group, Inc.
Credit facility availability (year-end)
Based on current ERC
Additional availability
Total availability
(1) Total operating expenses excluding the impact of Goodwill impairment ("Adjusted operating expenses") is a non-GAAP financial measure. Refer to section " Non-GAAP Financial Measures " below.
(2) Net income/(loss) attributable to PRA Group, Inc. and Diluted earnings per share excluding the impact of certain transactions that are unusual or infrequent in nature and not reflective of our ongoing operations ("Adjusted net income/(loss) attributable to PRA" and "Adjusted diluted earnings per share", respectively), are non-GAAP financial measures. Refer to section " Non-GAAP Financial Measures " below.
(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.
(4) Calculated by dividing cash receipts less operating expenses by cash receipts.
(5) Calculated by dividing cash receipts less Adjusted operating expenses by cash receipts ("Adjusted cash efficiency ratio"), which is a non-GAAP financial measure. Refer to section " Non-GAAP Financial Measures " below.
(6) Calculated by dividing Net income/(loss) attributable to PRA Group, Inc. by average Total stockholders' equity - PRA Group, Inc.
(7) ROATE is calculated by dividing Net income/(loss) attributable to PRA Group, Inc. by Average tangible equity ("Average tangible equity"). ROATE and Average tangible equity are non-GAAP financial measures. Refer to section " Non-GAAP Financial Measures " below.
(8) Adjusted ROATE, which is a non-GAAP financial measure, is calculated by dividing Adjusted net income/(loss) attributable to PRA by Average tangible equity. Refer to section " Non-GAAP Financial Measures " below.
Consolidated and Business Segment Results of Operations (2025 and 2024)
Purchasing and collections activity
Portfolio purchases
Portfolio purchases by business segment and in total for 2025 and 2024 were as follows (in thousands, except percentages):
$ Change
% Change
Europe
Segments total
Other markets (1)
Total portfolio purchases
(1) Reflects portfolio purchases in South America, Canada and Australia.
Our total portfolio purchases in 2025 decreased by $199.3 million, or 14.2%, compared to the prior year. Total portfolio purchases of $1.2 billion were in-line with our 2025 target as we continued to invest selectively, focusing on long-term returns and balancing our investments with our leverage. Coupled with the improvements in our collection capabilities, this approach to allocating capital helped drive higher PPMs and increased Portfolio income.
• U.S. : Portfolio purchases decreased by $205.7 million reflecting more selectivity in our buying and focus on net returns. The PPM for our 2025 U.S. Core vintage was 2.16x, reflecting a steady increase in recent years.
• Europe : Portfolio purchases were distributed broadly across our markets and increased by $10.4 million. Core portfolio purchases increased by $34.1 million due to higher volumes in certain markets and the addition of new sellers, partially offset by a decrease of $23.7 million in Insolvency purchases. The PPM for our 2025 European Core vintage was 1.85x, reflecting a steady increase in recent years.
Cash collections
Cash collections by business segment and in total for 2025 and 2024 were as follows (in thousands, except percentages):
$ Change
% Change
Europe
Segments total
Other markets (1)
Total cash collections
(1) Reflects cash collections in South America, Canada and Australia.
Our total cash collections in 2025 increased by $239.1 million, or 12.8%, compared to the prior year. Total cash collections of $2.1 billion exceeded our growth target for the year and was driven by performance in both the U.S. and Europe.
• U.S. : Cash collections increased by $157.8 million driven in large part by higher volumes resulting from the expansion in our legal collections channel.
• Europe : Cash collections increased by $91.0 million distributed broadly across multiple markets and due, in part, to foreign exchange rate variation.
Operating results
Segment operating income
Our CEO evaluates the profitability of our U.S. and European business segments based primarily on segment operating income, which we define as Income/(loss) from operations adjusted to exclude goodwill impairment and certain unallocated corporate expenses. Refer to Note 16 to our Consolidated Financial Statements included in Item 8 of this Form 10-K for further information and a reconciliation of segment operating income to consolidated Income/(loss) before income taxes.
Segment operating income for 2025 and 2024 was as follows (in thousands, except percentages):
$ Change
% Change
Europe
Total segments operating income
• U.S. : Segment operating income decreased by $6.9 million due primarily to an increase in operating expenses, partially offset by an increase in portfolio revenue.
• Europe : Segment operating income increased by $52.1 million due primarily to an increase in portfolio revenue, partially offset by an increase in operating expenses.
Portfolio revenue
Total portfolio revenue by component and business segment for 2025 and 2024 were as follows (in thousands, except percentages):
$ Change
% Change
By component:
Portfolio income
Recoveries collected in excess of forecast
Changes in expected future recoveries
Changes in expected recoveries
Total portfolio revenue
By business segment:
Europe
Segments total
Other markets (1)
Total portfolio revenue
(1) Reflects portfolio revenue in South America, Canada and Australia.
Our total portfolio revenue in 2025 increased by $91.7 million, or 8.3%, compared to the prior year, while Portfolio income, the more stable and predictable yield component of our revenue, increased by $156.1 million, or 18.2%.
• U.S. : Portfolio revenue increased by $17.6 million due primarily to a $115.8 million increase in portfolio income driven largely by higher purchasing levels in recent years and improved pricing. This increase was partially offset by a $98.2 million decrease in Changes in expected recoveries driven by a lower net increase in changes in expected future recoveries and lower net overperformance on our U.S. Core pools.
• Europe : Portfolio revenue increased by $67.0 million due primarily to a $42.9 million increase in portfolio income driven by higher recent purchasing levels in several of our European markets and due, in part, to foreign exchange rate variation. Changes in expected recoveries increased by $24.1 million due to a higher net increase in changes in expected future recoveries.
Operating expenses
Total operating expenses and Adjusted operating expenses for 2025 and 2024 were as follows (in thousands, except percentages):
$ Change
% Change
Compensation and benefits
Legal collection costs (1)
Legal collection fees (2)
Agency fees (3)
Professional and outside services
Communication (4)
Rent and occupancy
Depreciation, amortization and impairment of long-lived assets
Goodwill impairment
Other operating expenses
Total operating expenses
Adjusted operating expenses (5)
(1) Mainly costs paid to courts where a lawsuit is filed for the purpose of attempting to collect on an account.
(2) Contingent fees incurred for cash collections generated by our third-party attorney network.
(3) Mainly third-party collection fees.
(4) Mainly correspondence, network and calling costs associated with our collection efforts.
(5) Adjusted operating expenses is a non-GAAP financial measure. Refer to section " Non-GAAP Financial Measures " below.
Our Total operating expenses increased by $457.3 million, or 59.0%, compared to the prior year. This was primarily due to a goodwill impairment charge of $412.6 million in 2025 related to our DBC reporting unit (refer to Note 4 to our Consolidated Financial Statements included in Item 8 of this Form 10-K for additional information). Adjusted operating expenses, which exclude the impact of the goodwill impairment charge, increased by $44.7 million, or 5.8%.
• U.S. : Operating expenses increased by $37.7 million due primarily to the goodwill impairment charge and higher legal collection costs and fees associated with expanded activity in our legal collections channel. These increases were partially offset by lower compensation costs driven in part by the consolidation of our U.S. call centers and offshoring of a portion of our collection activities, as well as a reduction in communication costs due to the use of more cost-efficient strategies.
• Europe : Operating expenses increased by $375.5 million due primarily to the goodwill impairment charge. The increase was also due to higher compensation expense associated with organizational changes and higher non-collector wage costs, in addition to higher agency fees associated with increased outsourcing in certain markets.
Consolidated non-operating results
Gain on sale of equity method investment
In April 2025, we sold our 11.7% interest in RCB Investimentos S.A., a servicing company for nonperforming loans in Brazil, and recorded a gain of $38.4 million in our Consolidated Income Statement for 2025. The sale did not impact the ownership of our portfolio investments in South America or our existing operations and expected future portfolio investments.
Interest expense, net
Interest expense, net f or 2025 and 2024 was as follows (in thousands, except percentages):
$ Change
% Change
Interest on revolving credit facilities and term loan, and unused line fees
Interest on senior notes
Amortization of debt premium and issuance costs, net
Interest income
Interest expense, net
Our Interest expense, net increased by $22.5 million, or 9.8%, compared to the prior year due primarily to a higher average debt balance in 2025.
Income tax expense
Income tax expense and our effective tax rate for 2025 and 2024 were as follows (in thousands, except percentages):
$ Change
% Change
Income tax expense
Effective tax rate
Our Income tax expense increased by $25.7 million, or 122.2%, compared to the prior year, while our effective tax rates for the years ended December 31, 2025 and 2024 were (19.2)% and 19.2%, respectively. Our effective tax rate depends on the mix of income from different taxing jurisdictions and the timing and amount of discrete items. The effective tax rate for 2025 was further impacted by the goodwill impairment charge.
Noncontrolling interests
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.
Consolidated balance sheet
Finance receivables, net
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.
Goodwill
Goodwill was $26.9 million as of December 31, 2025, a decrease of $369.5 million, or 93.2%, due to a goodwill impairment charge. As part of our September 30, 2025 interim impairment assessment, 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. As a result, we determined that the goodwill in our DBC reporting unit was fully impaired and recorded an impairment charge of $412.6 million. For additional information, refer to Note 4 to our Consolidated Financial Statements included in Item 8 of this Form 10-K. The December 31, 2025 goodwill balance related to our CCB reporting unit.
Borrowings
Borrowings were $3.7 billion as of December 31, 2025, an increase of $370.7 million, or 11.1%, due primarily to an increase in amounts outstanding under our senior notes and net borrowings under our European revolving credit facility of $21.6 million. On September 30, 2025, we completed the issuance of €300.0 million ($352.4 million as of December 31, 2025) aggregate principal amount of our 6.250% senior notes due 2032.
Interest-bearing deposits
Interest-bearing deposits were $106.1 million as of December 31, 2025, a decrease of $57.3 million, or 35.0%, due primarily to lower interest rates resulting in decreased deposit levels, partially offset by foreign exchange rate variation.
Consolidated Results of Operations (2024 and 2023)
Refer to Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of our 2024 Form 10-K for a discussion of our 2024 results compared to our 2023 results.
NON-GAAP FINANCIAL MEASURES
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):
Adjusted EBITDA Reconciliation
Net income/(loss) attributable to PRA Group, Inc.
Adjustments:
Income tax expense/(benefit)
Foreign exchange (gain)/loss
Interest expense, net
Other expense (1)
Depreciation and amortization
Impairment of real estate
Goodwill impairment
Net income attributable to noncontrolling interests
Gain on sale of equity method investment
Recoveries collected and applied to Finance receivables, net less Changes in expected recoveries
Adjusted EBITDA
(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 Operating Expenses Reconciliation and Adjusted Cash Efficiency Ratio
Cash collections
Fee income
Cash receipts
Total operating expenses
Goodwill impairment
Adjusted operating expenses
Cash receipts less Adjusted operating expenses
Adjusted cash efficiency ratio
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):
Balance as of Year End
Average Tangible Equity Reconciliation (1)
Total stockholders' equity - PRA Group, Inc. (2)
Goodwill
Other intangible assets
Average tangible equity
(1) Amounts represent the average balances for the respective years.
(2) Not adjusted for Gain on sale of equity method investment in 2025 due to the de minimis effect.
ROATE
Net income/(loss) attributable to PRA Group, Inc.
ROATE
Adjusted Net Income/(Loss) Attributable to PRA Reconciliation and Adjusted ROATE
Net income/(loss) attributable to PRA Group, Inc.
Gain on sale of equity method investment
Goodwill impairment
Tax effect of adjusting items (1)
Adjusted net income/(loss) attributable to PRA
Adjusted ROATE
(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:
Adjusted Diluted Earnings Per Share Reconciliation
Diluted earnings per share
Effect of adjusting items and dilutive shares (1)
Adjusted diluted earnings per share
(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):
ERC By Business Segment, Year and Portfolio
U.S. Core
U.S. Insolvency
Total U.S.
Europe Core
Europe Insolvency
Total Europe (1)
Total Other Markets (2)
Total Company
Thereafter
Total ERC
(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):
Cash Collections by Business Segment and Portfolio Type
Call center/other
Legal
Total Core
Insolvency
Total U.S.
Europe
Call center/other
Legal
Total Core
Insolvency
Total Europe
Total other markets (1)
Total cash collections
Total cash collections adjusted (2)
(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.
Purchase Price Multiples
as of December 31, 2025
In thousands, except percentages
Purchase Period
Purchase Price (1)(2)
Total Estimated Collections (3)
Estimated Remaining Collections (4)
Current Purchase Price Multiple
Original Purchase Price Multiple
U.S. Core
Subtotal
U.S. Insolvency
Subtotal
Total U.S.
Europe Core
Subtotal
Europe Insolvency
Subtotal
Total Europe
Total other markets (5)
Total PRA Group
(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.
Portfolio Financial Information (1) (in thousands)
Year ended December 31, 2025
December 31, 2025
Purchase Period
Cash
Collections (2)
Portfolio Income (2)
Changes in Expected Recoveries (2)
Total Portfolio Revenue (2)
Net Finance Receivables (3)
U.S. Core
Subtotal
U.S. Insolvency
Subtotal
Total U.S.
Europe Core
Subtotal
Europe Insolvency
Subtotal
Total Europe
Total other markets (4)
Total PRA Group
(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.
Cash Collections by Year, By Year of Purchase (1)
as of December 31, 2025 In millions
Cash Collections
Purchase Period
Purchase Price (2)(3)
Total
U.S. Core
Subtotal
U.S. Insolvency
Subtotal
Total U.S.
Europe Core
Subtotal
Europe Insolvency
Subtotal
Total Europe
Total other markets (4)
Total PRA Group
(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.
Borrowings
As of December 31, 2025, we had the following committed amounts, outstanding borrowings and availability under our financing arrangements (in thousands):
Composition of Total Availability
Committed Amount
Outstanding Borrowings
Total Availability
Based on Current ERC (1)
Additional Availability (2)
North American revolving credit facility
North American term loan
UK revolving credit facility
European revolving credit facility
Colombian revolving credit facility
Senior notes
Debt premium and issuance costs, net
Total
(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.
Borrowings
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 rel ates to principal on our term loan. After 12 months, principal payments on our debt are due from betwee n one and approximately seven year s. 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 d erivative 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):
Change
Net cash provided by/(used in):
Operating activities
Investing activities
Financing activities
Effect of foreign exchange rates
Net increase/(decrease) in cash and cash equivalents
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.
Goodwill
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.
