PRAA 10-K & 10-Q changes, risk factors and insider trading
Pra Group Inc. · Nasdaq · Short-Term Business Credit Institutions · CIK 1185348 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We outsource certain activities related to our business to third parties. Any disruption or failure of these third parties to provide their services, or an inability to contract alternative providers for such services, could adversely affect our business operations, financial condition and reputation.”
New heading “As we increase the use of our legal collections channel, deficiencies in the systems and processes we use to support this channel, adverse changes in the regulatory environment or an inability to obtain and collect on favorable court judgments could have an adverse impact on our business, financial condition and results of operations.”
New heading “Ongoing enhancements to key operational systems and processes require effective change management, and if not executed properly, our business operations could be adversely affected.”
New heading “We may utilize AI and machine learning in our business. Challenges with effectively managing such technologies, or adequately safeguarding our systems from cyber threat actors, could result in reputational and competitive harm, legal liability and adversely affect our business, financial condition and results of operations.”
Removed heading “We outsource and offshore certain activities related to our business to third parties. Any disruption or failure of these third parties to provide these services could adversely affect our business operations, financial condition and reputation.”
Removed heading “We may not effectively utilize AI, or effectively work with other companies that use AI, which could adversely impact our results of operations and result in a loss of competitive advantage or business disruption.”
Removed heading “Our loss contingency accruals may not be adequate to cover actual losses.”
Removed heading “Changes in tax provisions or exposures to additional tax liabilities could have an adverse effect on our financial condition.”
Largest changes
“Goodwill is required to be tested for impairment annually, or more frequently if events or circumstances indicate that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. 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 Debt Buying and Collection (“DBC”) reporting unit. …”see in full comparison
“Our reliance on these third parties to collect, store, process and transmit confidential and sensitive customer and employee data increases our cybersecurity threat profile. A third-party cybersecurity incident could compromise the security, integrity or availability of data, or result in theft, unauthorized access or processing, or disruption of access to data, which could negatively impact our operations. We rely on these third parties to maintain the security of all software code, IT systems and data provided to them and used while providing their services to us. …”see in full comparison
“Our reliance on these third parties to collect, store, process and transmit confidential and sensitive customer and employee data increases our cybersecurity threat profile. A third-party cybersecurity incident could compromise the security, integrity or availability of data, or result in theft, unauthorized access or processing, or disruption of access to data, which could negatively impact our operations. We rely on these third parties to maintain the security of all software code, information technology ("IT") systems and data provided to them and used while providing their services to us. …”see in full comparison
“We may utilize AI and machine learning in our business. Challenges with effectively managing such technologies, or adequately safeguarding our systems from cyber threat actors, could result in reputational and competitive harm, legal liability and adversely affect our business, financial condition and results of operations.”see in full comparison
“We rely on both onshore and offshore third-party service providers who, in turn, may depend on additional vendors (fourth-party and other downstream entities), to conduct collection and other activities on our behalf. These third parties include law firms, collection agencies, data providers, tracing service providers, business process outsourcing companies and information technology firms. …”see in full comparison
“We rely on third-party service providers to conduct collection and other activities on our behalf through both outsourcing and offshoring arrangements. These third parties include law firms, collection agencies, data providers, tracing service providers, business process outsourcing companies and information technology firms. …”see in full comparison
Full comparison: every changed paragraph (87)
You should carefully read the following discussion of material factors, events and uncertainties when evaluating our business and the forward-looking information contained in this Form 10-K. The events and consequences discussed in these risk factors could materially and adversely affect our business, results of operations, liquidity, cash flow and financial condition. While we believe we have identified and discussed below the material risk factors affecting our business, these risk factors do not identify all of the risks we face, and there could be additional risks and uncertainties that we do not presently know of or that we do not currently believe to be material that could have an adverse effect on our business, results of operations, liquidity, cash flow or financial condition in the future.
VolatilityA and uncertaintydeterioration in general business and economic conditions or financial markets could adversely impact our business,business and financial performance, results of operations and cash flow.results.
Our business has been sensitive to, and our financial performance is in part dependent on, the general business and economic conditions in the markets in which we operate. Our financial performance may be adversely affected by an economic recession, a significant rise in inflationinflation, including sustained high inflation, interest rate uncertainty,uncertainty and the effects of governmental fiscal and monetary policies in the markets in which we operate. Any prolonged economic downturn or volatility in the financial or credit markets could place financial pressure on and negatively affect the ability of consumers to pay their debts, which could adversely affect collections and the value of our receivable portfolios. In addition, levels of consumer or commercial lending and financing could decline, thusthereby reducing the volume of nonperforming loans available for purchase, which could adversely affect our business and financial results in the markets in which we operate.
Our ability to operate profitably is dependent on our ability to purchase and service a sufficient volume of nonperforming loans to generate revenue that exceeds our expenses. The cadence for the purchase of nonperforming loansloan portfolios by quarter, and by year, has been and may continue to be varied and periodic due in large part to the available supply of portfolios in the markets in which we operate and pricing that meets our return thresholds. The availability of nonperforming loan portfolios at prices that generate an appropriate return on our investment depends on a number of factors, including:
•salesthe sale of nonperforming loan portfolios by credit originators;
•our ability to obtain and analyze portfolio data efficiently and to accurately predict loan collectability; and
Changes in the financial or credit markets may cause aan existing forward flow agreement to fail to meet our expected return thresholds, since we haveare agreedcommitted to purchasepurchasing portfolios at a previously negotiated price forover a specified term, and may endultimately up payingpay higher prices for portfolios than we would have otherwise agreedbeen willing to pay forunder asimilar spotmarket purchase.conditions.
Moreover, there can be no assurance that credit originators will continue to sell their nonperforming loansloan portfolios consistent with historical levels, or at all, or that we will be able to bid competitively for those portfolios. Because of the length of time involved in collecting on acquired portfoliosnonperforming loans and the variability in the timing of our collections, we may not be able to identify trends and make changes into our purchasing strategies in a timely manner. If we are unable to maintain our business or adapt to changingevolving market needsdemands, asor wellkeep aspace with our current or future competitors, we may experiencelimit reducedour accessability to acquire nonperforming loan portfolios at appropriateacceptable prices,pricing, or at all, which could adversely impact our business, liquidity, results of operations and cash flow.
We may not be able to collect sufficient amounts to recover our costs and fund our operations due to the purchase of nonperforming loans that ultimately prove to be unprofitable.operations.
Our principal business consists of purchasing and collecting on nonperforming loans from credit originators that consumers or others have failed to pay. The credit originators have typically made numerous attempts to recover on these accounts, often using a combination of in-house recovery efforts and third-party collection agencies. These nonperforming loans are difficult to collect, and we may not collect a sufficient amount to coverrecover our investment and fund the costs of operating our business. We use statistical models to make cash flow projections as part of our underwriting process, and if they prove to be inaccurate, we may acquire nonperforming loan portfolios that ultimately prove to be below our return thresholds or unprofitable. Moreover, if we experience operational challenges in our collections processes, we may incur losses on portfolios that would have otherwise been profitable, which could adversely impact our business, financial performance, results of operations and cash flow.
We outsource and offshore certain activities related to our business to third parties. Any disruption or failure of these third parties to provide these services could adversely affect our business operations, financial condition and reputation.
We rely on third-party service providers to conduct collection and other activities on our behalf through both outsourcing and offshoring arrangements. These third parties include law firms, collection agencies, data providers, tracing service providers, business process outsourcing companies and information technology firms. If our third-party service providers fail to perform their service obligations in a timely manner or at a satisfactory quality level, or fail to handle the case volume assigned, the quality of our services and operations, as well as our reputation could be adversely impacted. Furthermore, we may not be able to find alternative third parties in a timely manner on terms that are acceptable to us, or because of contractual restrictions that limit our flexibility in responding to disruptions from these third parties. If any of these third-party service providers fail to implement proper controls to meet our industry’s regulatory requirements, violate laws, do not fulfill their contractual obligations, or act inappropriately in conducting their services on our behalf, our operations and reputation could be negatively impacted and result in regulatory fines and penalties.
Our reliance on these third parties to collect, store, process and transmit confidential and sensitive customer and employee data increases our cybersecurity threat profile. A third-party cybersecurity incident could compromise the security, integrity or availability of data, or result in theft, unauthorized access or processing, or disruption of access to data, which could negatively impact our operations. We rely on these third parties to maintain the security of all software code, information technology ("IT") systems and data provided to them and used while providing their services to us. Cybersecurity incidents involving third parties on which we rely, as further discussed below, could negatively affect our reputation, our competitive position and our financial performance, and we could face regulatory scrutiny, investigations, lawsuits and potential liability.
WeOur mayreliance noton achieveinternally developed models and the expectedunderlying benefitsdata ofused offshoringin athose portion of our collection activities, whichmodels could adversely affect our business, financial condition and results of operations.operations if the models or data prove to be inaccurate or ineffective.
We rely on internally developed models across various aspects of our business, including for projecting cash flows as part of the underwriting and ongoing management of our nonperforming loan portfolios and more broadly to support certain strategic and operational decision-making activities. These models involve significant judgment and are based on assumptions, methodologies and data inputs that may not accurately reflect future conditions or events.
Our models incorporate historical data regarding collections performance and consider, among other inputs, changes in external consumer factors, macroeconomic conditions, portfolio characteristics and information available when we acquire accounts, as well as data obtained from third parties and public sources. These models may not fully identify or appropriately assess all material factors, trends or risks, and our historical experience may not be indicative of current or future results. In addition, we may not achieve the collection levels forecasted by our models, and changes in economic conditions, consumer behavior, regulatory or legal environments, portfolio mix, collection strategies or business practices may reduce the predictive accuracy of our models over time, even if they have performed reliably in the past.
The effectiveness of our models also depends on the accuracy, completeness, timeliness and continued availability of the data used as inputs. Inaccuracies, errors, omissions, delays, changes in third-party data sources or methodologies, or limitations in internal or external data could cause our models to produce forecasts or estimates that differ materially from actual outcomes. Furthermore, limitations in model design, assumptions, calibration, validation or governance processes may impair model performance or result in the use of models that are not appropriately suited for their intended purpose.
If our models or the underlying data prove to be inaccurate, incomplete or ineffective, we could make inappropriate or ineffective decisions, including in how we allocate capital and deploy resources. Any such outcomes could adversely affect our financial condition, results of operations and cash flows, and could also subject us to increased regulatory scrutiny or reputational harm.
We outsource certain activities related to our business to third parties. Any disruption or failure of these third parties to provide their services, or an inability to contract alternative providers for such services, could adversely affect our business operations, financial condition and reputation.
We rely on both onshore and offshore third-party service providers who, in turn, may depend on additional vendors (fourth-party and other downstream entities), to conduct collection and other activities on our behalf. These third parties include law firms, collection agencies, data providers, tracing service providers, business process outsourcing companies and information technology firms. If our third-party service providers fail to perform their service obligations in a timely manner or at a satisfactory quality level, or fail to handle the case volumes assigned to them, the quality of our services and operations, as well as our reputation, could be adversely impacted. Furthermore, we may not be able to find alternative third parties in a timely manner on terms that are acceptable to us, or because of contractual restrictions that limit our flexibility in responding to disruptions from these third parties. If any of these third-party service providers, or the vendors on whom they may depend, fail to implement proper controls to meet our industry’s regulatory requirements, violate laws, do not fulfill their contractual obligations, or act inappropriately in conducting their services on our behalf, our operations and reputation could be negatively impacted and result in regulatory fines and penalties.
Our reliance on these third parties to collect, store, process and transmit confidential and sensitive customer and employee data increases our cybersecurity threat profile. A third-party cybersecurity incident could compromise the security, integrity or availability of data, or result in theft, unauthorized access or processing, or disruption of access to data, which could negatively impact our operations. We rely on these third parties to maintain the security of all software code, IT systems and data provided to them and used while providing their services to us. Cybersecurity incidents involving third parties on which we rely, as well as the vendors on whom they may depend, as further discussed below, could negatively affect our reputation, competitive position and financial performance, and we could face regulatory scrutiny, investigations, lawsuits and potential liability.
To improve our operational and labor efficiencies, we have offshored a portion of our collection and related support activities to third-party service providers located in Asia. As a result of offshoring some of these activities, we may experience a loss of continuity, loss of accumulated knowledge and/or inefficiency. We also cannot predict the availability of qualified workers, interruptions in collections or the impact of macroeconomic drivers in the countries we utilize for these activities. There is inherent risk beyond our control, including exposure to political uncertainty and foreign regulatory restrictions. One or more of these factors, or any other factors not yet identified related to our offshoring activities, could result in unexpected increases in operating expenses and make it more difficult for us to manage our costs and operations, which could cause our profitability to decline. Additional risks related to offshoring are further discussed within this section under International Operations Risks.
We may not be successful in implementing or realizingrealize the expected benefits from our cash generatingcash-generating and cost savings initiatives in our U.S. business, which could have an adverse impact on our business and resultsfinancial of operations.results.
Our ability to successfully compete depends, in part, on our ability to optimize cash collections atin lowerrelation to our marginal costs through effective execution. In our U.S. business, we continue to identify and implement initiatives that we believe will position our business for long-term sustainable growth and profitability by allowing us to achieve a lower marginal cost structure and to execute effectively, particularly inas therelates areasto ofour customer contact strategies and post-judgment legal collections. It is possible that the implementation of some of these initiatives could be altered or delayed or result in unintended consequences, such as business disruptions, distraction of management and employees, reduced productivity, unexpected employee attrition or an inability to attract or retain key personnel. If we are unable to successfully implement some or all of our operational initiatives as planned,initiatives, or we do not achieve the anticipated cash generatingcash-generating or cost savings improvements as a result of these initiatives, our profitability and cash flows could be adversely impacted.
As part of these initiatives, to improve our operational and labor efficiencies in our U.S. business, we have offshored a portion of our collection and related support activities to third-party service providers located in Asia. As a result, we may experience a loss of continuity, loss of accumulated knowledge or inefficiency. We also cannot predict the availability of qualified workers, interruptions in collections or the impact of macroeconomic drivers in the countries we utilize for these activities. There is inherent risk beyond our control, including exposure to political uncertainty and foreign regulatory restrictions. One or more of these factors, or any other factors not yet identified related to our offshoring activities, could result in unexpected increases in operating expenses and make it more difficult for us to manage our costs and operations, which could cause our profitability to decline.
As we increase the use of our legal collections channel, deficiencies in the systems and processes we use to support this channel, adverse changes in the regulatory environment or an inability to obtain and collect on favorable court judgments could have an adverse impact on our business, financial condition and results of operations.
We generate a significant portion of our revenue by collecting on judgments that are granted by courts in lawsuits filed against our customers. A decrease in the willingness of courts to grant these judgments, a change in the requirements for filing these cases or obtaining these judgments, a decrease in our ability to collect on these judgments, including because of operational deficiencies or the closure of any court systems, could have an adverse effect on our business, financial condition and results of operations. As we increase our use of the legal channel, short-term margins may decrease as a result of an increase in upfront court costs and costs related to counter claims, and we may not be able to collect on certain aged accounts because of applicable statutes of limitations. Furthermore, courts in certain jurisdictions require that a copy of the account statements or applications be attached to the pleadings in order to obtain a judgment against consumers. If, despite the contractual obligations of sellers, we are unable to produce those account documents, courts could deny our claims and our business, financial condition and results of operations may be adversely affected.
Our business is highly dependent on our ability to process and monitor a large number of transactions across markets and in multiple currencies. We rely on IT systems to conduct our business, including IT systems developed and administered by third parties. Many of these IT systems contain sensitive and confidential information, including personal data, our trade secrets and proprietary business information, and information and materials owned by or pertaining to our customers, vendors and business partners. The secure maintenance of this information,information and the IT systems on which they reside,reside is critical to our business strategy and ourstrategy, operations and financial performance. As our reliance on IT systems increases, maintaining the security of suchthese IT systems and safeguarding our data becomes more challenging.
Our IT systems and infrastructure may be vulnerable to computer viruses, cyber-attacks, security breaches caused by employee error or malfeasance,malfeasance orand other disruptions. Although we take a number of steps to protect our IT systems, the attacks that companies have experienced have increased in number, sophistication and complexity in recent years, including emerging threats from the malicious use of AI. Additionally, as we shift more employees to work-from-home arrangements, remote access to our systems has increased significantly, which exposes us to additional cybersecurity risks.
As a result of our reliance on IT systems, we may sufferexperience data security incidents or other cybersecurity incidents, which could compromise our IT systems and networks, creating disruptions and exploiting vulnerabilities in our services.IT applications and systems. Any such breach or other incident could result incause the personal data or other confidential or proprietary information stored on our systems and networks, or our vendors’ systems and networks, beingto be improperly accessed, acquired or modified, or publicly disclosed, lost,lost or stolen, which could subject us to liability to our customers, vendors, business partners and others. We seek to detect and investigate such incidents and to prevent their occurrence where practicable through preventive and remedial measures, but such measures may not always be successful.
Should a cybersecurity incident occur, we may be required to expend significant resources to notify affected parties, modify our protective measures,measures or investigate and remediate vulnerabilities or other exposures. Additionally, such cybersecurity events could cause reputational damage and subject us to fines, penalties, litigation costs and settlements, andor other financial losseslosses, that may not be fully covered by our cybersecurity insurance.insurance To date, disruptions to our IT systems, due to outages, security breaches or other causes, including cybersecurity incidents, have not had a material impact on our business, results of operations or financial condition.policy.
The underperformance or failure of our IT or telecommunication systems could result in a loss in productivity, loss of competitive advantage or business disruption.
We depend on continuous and uninterrupted IT and telecommunication systems to operate our business, and significant resources are required to maintain and upgrade our existing systems. We continue to streamline and integrate our global IT and telecommunication systems, infrastructure, network and other core applications, with a focus on optimizing our systems to meet our changing business demands and to mitigate the risks of a changing cybersecurity threat landscape. Although we have invested in strategies to prevent failures, our IT and telecommunication systems are vulnerable to outages due to natural disasters, power loss, computer viruses, security breaches, hardware or software vulnerabilities, disruptions,disruptions and similar events. We may not be able to successfully implement certain updates or upgrades to our systems without experiencing difficulties, which could cause us to lose our competitive advantage, divert management’s time, result in a loss of productivity or disrupt business operations, which could have a material adverse effect on our business, financial condition and results of operations.
We use our IT and telecommunications systems to contact consumers to collect on their debts. Over recent years, consumers, telecommunication carriers and email platforms have adopted and implemented filtering and blocking of spam communications. If our calls, texts, emails or other communications are blocked through a spam filter, or we are otherwise not able to contact our customers, our ability to collect on their debt through our call center and digital channels may be impacted, and we would need to pursue collections through anotheran alternative channel or not at all, which could impact our results of operations and financial condition.
Ongoing enhancements to key operational systems and processes require effective change management, and if not executed properly, our business operations could be adversely affected.
We are executing multiple concurrent enhancements to operating systems that support our key business activities. These initiatives require coordinated change management, including system configuration, process updates, testing and user retraining, and they rely heavily on the same internal resources, external resources and subject-matter experts, which increases the risk of resource constraints, execution errors and delays. If we do not effectively manage these changes, we may experience system instability, data integrity issues or failures in key controls, any of which could adversely affect our business and operational efficiency.
We may utilize AI and machine learning in our business. Challenges with effectively managing such technologies, or adequately safeguarding our systems from cyber threat actors, could result in reputational and competitive harm, legal liability and adversely affect our business, financial condition and results of operations.
AI and machine learning technologies are rapidly evolving, and our ability to benefit from them depends on our capacity to assess their performance, accuracy and appropriateness for broader adoption. AI systems may behave unpredictably, generate inaccurate or biased outputs or underperform if the underlying data is insufficient or flawed. If we do not properly design, test, monitor and validate our pilot programs, or if employees rely on these tools without adequate human oversight, our evaluation of potential AI capabilities or future deployment decisions could be impaired.
The use of AI introduces legal, regulatory and ethical considerations. Regulators in the U.S. and abroad are developing new laws and standards governing automated decision-making, data use, transparency and accountability. Failure to anticipate or comply with emerging AI-related requirements as we expand our use of these technologies could expose us to regulatory scrutiny, government investigations, civil liability or contractual disputes. Additionally, concerns regarding our use of AI, including perceptions of bias, lack of transparency, inadequate controls or any broader ethical implications, could harm our reputation and affect customer and partner trust.
The use of AI technologies also contributes to increased cybersecurity risks. Threat actors increasingly use AI-enabled tools to conduct sophisticated attacks and exploit vulnerabilities. If our systems and data protection measures are not effectively designed to defend against emerging AI-driven threats, we could experience operational disruptions, data loss, theft of proprietary information, financial fraud or other harms. Any such incident could result in significant remediation costs, legal liability, business interruption or reputational damage.
We may not effectively utilize AI, or effectively work with other companies that use AI, which could adversely impact our results of operations and result in a loss of competitive advantage or business disruption.
In a rapidly evolving landscape, AI technologies are playing an increasing role within many facets of business. Some of our systems, tools and resources use, integrate or could integrate some form of AI, which has the potential to result in bias, miscalculations, data errors and other unintended consequences. As AI technologies become integral to improving operational efficiency, customer engagement and decision-making processes, and are potentially deployed by sellers and service providers, our results of operations, competitiveness and reputation could be harmed if we are unable to adopt, utilize and control these technologies as quickly, efficiently and effectively as our competition, or we were to enter into business relationships with other companies that experience similar challenges.
WeFurther have a significant amountimpairment of goodwill which, if impaired in the future, wouldmay adversely impact our results of operations.
Goodwill is required to be tested for impairment annually, or more frequently if events or circumstances indicate that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. 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 Debt Buying and Collection (“DBC”) reporting unit. Based on the quantitative impairment test performed, we determined that the DBC reporting unit's goodwill was fully impaired and recorded an impairment charge of $412.6 million. The impairment was driven in large part by the impact on the reporting unit's fair value of a decrease in the terminal value assumption and an increase in the discount rate assumption since our most recent annual impairment test, as well as the comparison of the reporting unit's fair value to the Company's market capitalization. As of December 31, 2025, remaining goodwill of $26.9 million related to our class action claims recoveries ("CCB") reporting unit.
We have recorded a significant amount of goodwill as a result of our business acquisitions. Goodwill is not amortized, but rather, is tested for impairment at the reporting unit level. Goodwill is required to be tested for impairment annually, or more frequently if events or circumstances indicate that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. There are numerous risks that may cause the fair value of a reporting unit to fall below its carrying amount, which could lead to the recognition of a goodwill impairment charge, including:
•adverse changes in macroeconomic conditions, the business climate or the market for the entity's services;
•significant variances between actual and expected financial results;
•negative or declining cash flows;
•lowered expectations of future results;
•significant expense increases;
•an adverse action or assessment by a regulator;
•a significant increase in discount rates; or
•a sustained decrease in the price per share of our common stock.
Our goodwill impairment testing involves the use of estimates and the exercise of judgment, including judgments regarding expected future business performance and market conditions. Changes in our assessment of such factors, including the deterioration of market conditions, could affect our assessment of the fair value of our CCB reporting unit and could result in a goodwill impairment charge in a future period.
Based on our October 1, 2024, impairment test, we concluded that the goodwill of our reporting units was not impaired. Under the prior year impairment test, the excess of our Debt Buying and Collection ("DBC") reporting unit’s fair value over its carrying value was 6%, and although the excess increased to 11% under our most recent test, if our cash flow projections are not met or if market factors utilized in the impairment test deteriorate, including adverse changes in the debt sales market and an increase in the discount rate, the reporting unit may be at-risk for future impairment.
Our loss contingency accruals may not be adequate to cover actual losses.
From time-to-time, we are involved in judicial, regulatory and arbitration proceedings or investigations concerning matters arising from our business activities. We establish accruals for potential liability arising from legal proceedings when both the loss is probable and the amount of the loss can be reasonably estimated. We do not have accruals for all legal proceedings where we face a risk of loss, however, we may still incur legal costs for a matter even if we have not accrued a liability. Due to the inherent subjectivity of the assessments and unpredictability of the outcome of legal and regulatory proceedings, amounts accrued may not represent the ultimate loss to us from the legal and regulatory proceedings in question. As a result, our ultimate losses may be significantly higher than the amounts we have accrued. An unfavorable resolution of a legal proceeding or claim could adversely impact our business, financial condition, results of operations or liquidity.
Our international operations expose us to risks,risks and uncertainties, which could harm our business, results of operations and financial condition.
We are a global business with operations in 18 countries. In 2024,2025, our international operations represented 46%43% of our total portfolio income. Managing a global business is complex, and our international operations are subject to additional risks that may not exist in the U.S., or that may be more significant compared to the U.S. This could expose us to adverse economic, industry and political conditions that may haveadversely a negative impact onaffect our ability to manage our international operations, which could have a negative impact on our business, results of operations and financial condition.
•laws and regulations imposed by international governments, including those governing datathe security, sharing and transfer of data;
Management's Discussion & Analysis (MD&A)
New heading “Results and business trends”
New heading “Consolidated and Business Segment Results of Operations (2025 and 2024)”
New heading “Purchasing and collections activity”
New heading “Operating results”
New heading “Segment operating income”
New heading “Consolidated non-operating results”
New heading “Gain on sale of equity method investment”
New heading “Consolidated Results of Operations (2024 and 2023)”
New heading “Adjusted cash efficiency ratio”
New heading “Adjusted net income/(loss) attributable to PRA, Adjusted diluted earnings per share, ROATE and Adjusted ROATE”
New heading “Estimated remaining collections ("ERC") and Total estimated collections ("TEC")”
Removed heading “2024 highlights”
Removed heading “Compensation and benefits”
Removed heading “Legal collection costs”
Removed heading “Legal collection fees”
Removed heading “Depreciation, amortization and impairment”
Removed heading “Return on average tangible equity”
Removed heading “Portfolio purchases by major asset type and delinquency category (U.S. only)”
Largest changes
“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. …”see in full comparison
“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.”see in full comparison
“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.”see in full comparison
“As of December 31, 2024, we had goodwill of $396.4 million, consisting primarily of $369.5 million in our Debt Buying and Collection ("DBC") reporting unit. We performed our most recent annual impairment review as of October 1, 2024, using a quantitative assessment, and concluded that goodwill was not impaired. …”see in full comparison
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. Wesee in full comparisonestimateestimated the fair value of the DBC reporting unit based on the incomeapproach,approach andas an assessment for reasonableness,alsoapplycompared the estimated fair value to our marketapproach.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,purchase price multiples,PPMs, ERC growth rate, terminal valuemultiple,and operatingexpensesexpenses.and the projected impact of certain strategic and operational initiatives. Purchase price multiplesPPMs related to our existing portfolios were based on historical growth rates, whilepurchase price multiplesPPMs onfutureprojected 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.
Full comparison: every changed paragraph (214)
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-K10-K. (seeSee Frequently Used Terms at the end of this Item 7 for certain definitions that may be used throughout this Form 10-K).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.
Unless otherwise specified, references to 2024, 2023 and 2022 are for the years ended December 31, 2024, December 31, 2023 and December 31, 2022, respectively.
ExecutiveEXECUTIVE SummaryOVERVIEW
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.
We are a global financial services company with operations in the Americas, Europe and Australia. Our primary business is the purchase, collection and management of portfolios of nonperforming loans.
2024 highlights
•Portfolio purchases of $1.4 billion, an increase of 22.0%.
•ERC of $7.5$8.6 billion at year-end, an increase of 16.6%.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.
•Cash collections of $1.9 billion, an increase of 12.5%.
•Net income attributable to PRA Group, Inc. of $70.6 million.
•Diluted earnings per share of $1.79.
The past year was one of the most transformational years in our nearly three-decade long history. In 2024, we expanded our senior leadership team, further differentiated our European business, strengthened our capital structure and delivered on our cash-generating and operational initiatives in the U.S, where improvements in our legal collections process helped drive 2024 U.S. legal collections of $376.0 million, an increase of 42.4% compared to the prior year. Additionally, we initiated the consolidation of our U.S. collection sites from six to three and expanded our use of third-party offshore collection agencies, resulting in offshore collectors representing more than 30.0% of our overall U.S. collector base as of December 31, 2024.
We continued to strengthen and expand our seller relationships globally in 2024, leveraging the diversification provided by our global portfolio. With strong execution, and by maintaining focus on our strategic pillars of optimizing investments, driving operational execution and managing expenses, we believe we are well positioned to sustain the momentum in 2025.
U.S.
Portfolio purchases were $795.8 million in the U.S. in 2024, an increase of 40.2% compared to 2023, and the second highest annual total in our history. We continued to capitalize on the strong levels of portfolio supply, driven by the growth in industry credit card balances, as well as elevated delinquency and charge-off rates, and pricing discipline has resulted in an expectation for improved returns on our investments.
During 2024, we implemented a wide range of enhancements in our U.S. call center operations. Within our legal collections channel, we focused on refining our processes, reducing cycle times and optimizing our post-judgment activities. Additionally, we launched a second offshore call center in Asia in 2024 and anticipate adding additional offshore collectors in 2025. Looking ahead, we expect overall strong U.S. portfolio supply in 2025, driven by rising credit card balances and elevated charge-off rates.
Europe
Portfolio purchases were $508.3 million in Europe in 2024, an increase of 14.4% compared to 2023, with stronger market supply in the fourth quarter of 2024 and broad geographic diversity of our portfolio purchases. During 2024, our deep seller relationships helped us expand on our track record of disciplined growth and profitability in the region, and for 2025, we are expecting portfolio supply to remain relatively stable.
Brazil
Through our strategic partnerships, we have been able to consistently generate cash collections growth and profitability in Brazil. On January 2, 2025, we exercised our right to sell our remaining 11.7% interest in RCB Investimentos S.A. ("RCB"), a servicing company for nonperforming loans in Brazil, and expect to record an estimated net after-tax gain of approximately $25.0 million prior to June 30, 2025 (refer to Note 17 to our Consolidated Financial Statements included in Item 8 of this Form 10-K for additional information). This transaction will not impact our majority ownership interests in our Brazilian investment funds, and we do not expect it will impact our existing operations or future portfolio investment opportunities in Brazil.
SummarySELECTED ofCONSOLIDATED SelectedFINANCIAL Financial DataDATA
(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.
(13)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.below.
(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.
(36)Calculated by dividing Net income income/(loss) attributable to PRA GroupGroup, Inc. by average Total stockholders' equity - PRA GroupGroup, for the year.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
(4)Return on average tangible equity ("ROATE") is a non-GAAP financial measure. Average tangible equity is also a non-GAAP financial measure. Refer to section "Non-GAAP Financial Measures" for a reconciliation of Total stockholders' equity - PRA Group, the most directly comparable financial measure calculated and reported in accordance with GAAP, to average tangible equity.
2024 vs. 2023
Portfolio purchases forby 2024business segment and 2023in total for 2025 and 2024 were as follows (amounts in thousandsthousands, except percentages):
(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.
Total portfolio purchases were $1.4 billion in 2024, an increase of $253.8 million, or 22.0%, compared to $1.2 billion in 2023. The increase was primarily due to an increase in Americas and Australia Core purchases of $212.2 million, driven by increases in market supply. Additionally, Europe Core purchases, which were spread broadly across our markets, increased $65.7 million due to higher volumes in certain markets and the addition of new sellers.
Cash collections forby 2024business segment and 2023in total for 2025 and 2024 were as follows (amounts in thousandsthousands, except percentages):
(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):
•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.
What changed in the latest 10-Q
Risk Factors
There have been no material changes in our risk factors from those disclosed in Part I, Item 1A of the 2025 Form 10-K.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Adjusted net income attributable to PRA, ROATE and Adjusted ROATE”
Removed heading “Prepaid expenses and other assets”
Removed heading “Other liabilities”
Removed heading “Adjusted net income attributable to PRA”
Removed heading “Return on average tangible equity”
Largest changes
“•U.S.: Q2 2026 operating expenses increased by $16.7 million due primarily to an increase in Legal collection costs associated with the expansion in activity in our legal collections channel and costs of $4.9 million associated with the reorganization of our U.S. business. The reorganization-related costs consisted of $2.0 million in severance expenses related to a corporate and overhead headcount reduction and $3.0 million in real estate impairment and other expenses related to site consolidation of our onshore owned and leased call centers. …”see in full comparison
see in full comparisonROATE is calculated by dividing annualized Net income/(loss) attributable to PRA Group, Inc. by Average tangible equity, which is defined as average Total stockholders' equity - PRA Group, Inc. less average goodwill and average other intangible assets.The following table provides a reconciliation of Total stockholders' equity - PRA Group, Inc. as reported in accordance with GAAP to Average tangibleequityequity, a reconciliation of Net income/(loss) attributable to PRA Group, Inc. to Adjusted net income attributable to PRA Group, Inc., andpresentsprovides ourROEROE, ROATE and Adjusted ROATE for the periods indicated (in thousands, except for ratio data):
Full comparison: every changed paragraph (78)
•a deterioration in general business and economic conditions, including from the ongoing geopolitical conflictconflicts and instability in the Middle East;
FirstSecond quarter and year-to-date business trends and results
During the second quarter of 2026, we continued to execute against our PRA 3.0 strategic plan and generated continued cash collections growth while maintaining disciplined cost management and investing in future growth initiatives. We purchased $296.6 million in portfolios during the quarter and generated higher net income. Our results for the period included the following:
During the first quarter of 2026, we continued to gain momentum in improving our U.S. business and benefited from the strength of our European business, executing on our near-term priorities and long-term PRA 3.0 strategy. Our results for the first quarter of 2026 included the following:
•Second quarter Net income attributable to PRA Group, Inc. of $28.2$57.9 million, an increase of $24.6$15.5 million compared to the prior year period.
•Year-to-date Net income attributable to PRA Group, Inc. of $86.1 million, an increase of $40.1 million compared to the prior year period.
•Continued geographic diversification, with the U.S. and Europe accounting for 40.4% and 54.0%, respectively, of June 30, 2026 total estimated remaining collections ("ERC") of $8.9 billion. Driven by sustained cash collections overperformance, we updated the forecasts for the majority of our European pools as of June 30, 2026, which contributed to an increase in European ERC of $348.5 million (refer to Note 2).
•A second wave of cost reductions to simplify our U.S. business and drive further savings; and further consolidation of our U.S. call center footprint and offshore third-party collection agencies.
•Continued geographic diversification, with the U.S. and Europe accounting for 42.7% and 50.7%, respectively, of total ERC of $8.5 billion as of March 31, 2026.
•AMaintenance of a diversified capital structure, consistent with our targeted leverage and liquidity objectives. In April 2026, weWe refinanced our European revolving credit facility in April 2026 for an additional five years withand norepurchased change$10.0 tomillion and $20.0 million shares of our common stock during the commitmentsecond levelsquarter orand fundingyear-to-date, costs (refer to Note 15 for additional details).respectively.
In the U.S., credit card balances have remained elevated and charge-off rates continued to support portfolio supply. In Europe, there has been an increase in portfolio supply, and we continued to observe stability in customer payment activity in both the U.S. and Europe during the second quarter of 2026.
We expect portfolio supply to remain relatively stable in the U.S. and Europe over the next 12 to 18 months. We observed stability in our customers' payment activity in the U.S. and Europe during the first quarter of 2026, and we continue to monitor the ongoing geopolitical conflict and instability in the Middle East, and in particular, how it has led to elevated energy costs and gas prices.
(3)Calculated by dividing cash receipts less operating expenses by cash receipts.receipts, both of which are determined based on GAAP.
(5)ROATE is a non-GAAP financial measure calculated by dividing annualized Net income attributable to PRA Group, Inc. by Averageaverage tangibleTotal stockholders' equity - PRA Group, Inc. less average goodwill and average other intangible assets ("Average tangible equity"), which is also a non-GAAP financial measure. Refer to section "Non-GAAP Financial Measures" below.
(6)Adjusted ROATE is a non-GAAP financial measure. Refer to section "Non-GAAP Financial Measures" below.
Three months ended MarchJune 31,30, 2026 ("FirstSecond Quarter 2026" or "Q1Q2 2026") compared to three months ended MarchJune 31,30, 2025 ("FirstSecond Quarter 2025" or "Q1Q2 2025"); and six months ended June 30, 2026 ("Year-to-Date 2026") compared to six months ended June 30, 2025 ("Year-to-Date 2025").
We use a global investment framework to optimize the deployment of capital across our markets with a focus on net returns. Our total portfolio purchases in Q1Q2 2026 decreased by $70.9$49.9 million, or 24.3%,14.4%, compared to Q1Q2 2025. Year-to-date 2026 portfolio purchases decreased by $120.8 million, or 18.9%, compared to the prior year period. Total purchases of $220.9$296.6 million in Q1Q2 2026 were in-lineconsistent with our expectations forand thenet quarter,return requirements. The Q2 2026 and theyear-to PPMdate 2026 purchase price multiples ("PPMs") for our global Core vintage waswere 1.96x,1.99x slightlyand lower1.98x, than the 2.01x for Q1 2025.respectively. PPMs can vary due to factors contributing to the cost to collect, including the loan type and age, geography and collections strategy, in addition to competitive and market dynamics. Our focus continuedcontinues to be on net returns, which considers the amount and timing of the projected cash collections, estimated costs to collect, funding costs, risk and agreement terms.
•U.S.: PortfolioQ2 2026 portfolio purchases decreased by $42.5$72.9 million as we remained disciplined in our purchasing and long-term approach focused on net returns. AsYear-to-date of2026 Marchportfolio 31,purchases 2026,decreased by $115.3 million compared to the prior year period. The Q2 2026 PPM for our U.S. Core vintage of 2.16x was an increase compared to the first quarter of 2026. The year-to-date 2026 PPM for our U.S. Core vintage was 2.02x, reflecting a 7% decrease compared to Q1 2025 due to purchases of a higher percentage of portfolios with lower costs to collect.2.08x.
•Europe: Q2 2026 portfolio purchases increased by $27.2 million as we continued to invest in portfolios that met our return requirements. Year-to-date 2026 portfolio purchases increased by $5.5 million compared to the prior year period. The Q2 2026 and year-to-date 2026 PPMs for our European Core vintage were 1.87x.
•Europe: Portfolio purchases decreased by $21.7 million reflecting the occurrence of a large spot purchase in Q1 2025 and continued purchasing discipline in Q1 2026. As of March 31, 2026, the PPM for our 2026 European Core vintage was 1.85x, reflecting a 6% increase compared to Q1 2025.
Our total cash collections in Q1Q2 2026 increased by $54.5$22.3 million, or 11.0%,4.2%, compared to Q1Q2 2025. Year-to-date 2026 cash collections increased by $76.7 million, or 7.4%, compared to the prior year period. Total collections of $551.9$558.5 million in Q1Q2 2026 exceeded our expectations for the quarter.
•U.S.: Q2 2026 cash collections increased by $16.1 million driven by a $31.1 million increase in legal collections due to higher volume, partially offset by a net decrease of $15.3 million from call center and other channels. Digital cash collections continued to increase driven by an expansion of our customer engagement within this channel. Year-to-date 2026 cash collections increased by $43.6 million driven by a $60.9 million increase in legal collections, partially offset by a net decrease of $17.1 million from call center and other channels.
•U.S.: Cash collections increased by $27.5 million driven by a $29.8 million increase in legal collections due primarily to an expansion in activity associated with our operational initiatives.
•Europe: CashQ2 2026 cash collections increased by $27.0$7.8 million duedriven toby theincreases performancedistributed inbroadly severalacross our markets and was due, in part, to favorable foreign exchange rate variation. Year-to-date 2026 cash collections in Europe increased by $34.8 million due to similar factors.
Our total portfolio revenue in Q1Q2 2026 increased by $44.6$80.5 million, or 16.6%,28.3%, compared to Q1Q2 2025. Year-to-date 2026 portfolio revenue increased by $125.1 million, or 22.6%, compared to the prior year period. These increases were driven by higher Changes in expected recoveries, which increased by $63.6 million for the quarter and $79.6 million year-to-date, and higher Portfolio income, which increased by $16.9 million for the quarter and $45.5 million year-to-date. Portfolio income, the yield component of our revenue, which is more predictable than Changes in expected recoveries, increased by 11.9%.6.7% for the quarter and 9.2% year-to-date.
•U.S.: Q2 2026 portfolio revenue increased by $9.2 million due to increases of $5.0 million in Portfolio income and $4.2 million in Changes in expected recoveries. The increase in Portfolio income was due primarily to improved pricing. Changes in expected recoveries for Q2 2026 were mainly impacted by decreases in the collections forecasts on the 2022-2025 Core pools. The increase in Changes in expected recoveries was due primarily to a lower net decrease in the collections forecasts for certain U.S. Core pools compared to the prior year period. Net overperformance for Q2 2026 was driven mainly by the 2025 Core pool and net overperformance on the Insolvency pools, partially offset by underperformance on the 2022-2024 Core pools. The decrease in cash collections overperformance was primarily due to lower net overperformance on certain U.S. Core pools compared to the prior year period. Year-to-date 2026 portfolio revenue increased by $29.4 million due to increases of $16.1 million in Portfolio income and $13.3 million in Changes in expected recoveries. The increase in portfolio income was due primarily to improved pricing. The increase in Changes in expected recoveries was due to a lower net decrease in the collections forecasts on certain U.S. Core pools compared to Q2 2025 and net overperformance in Q2 2026 compared to net underperformance in Q2 2025.
•Europe: Q2 2026 portfolio revenue increased by $97.0 million due to increases of $88.4 million in Changes in expected recoveries and $8.6 million in Portfolio income. Changes in expected recoveries were impacted by net increases in the collections forecasts in most markets in both Q2 2026 and Q2 2025. The higher net increase in the current year period was driven by updates to the forecasts for a majority of the pools in our European markets (for additional information, refer to Note 2). This increase was partially offset by lower net overperformance in Q2 2026 compared to Q2 2025 in certain European markets. The increase in Portfolio income was driven by increases in several markets due to higher recent purchasing and was due, in part, to favorable foreign exchange rate variation. Year-to-date 2026 portfolio revenue increased by $122.5 million due to similar factors, reflecting increases of $99.8 million in Changes in expected recoveries and $22.7 million in Portfolio income.
•Other Markets: Q2 2026 and year-to-date 2026 portfolio revenue decreased by $25.8 million and $26.8 million, respectively, due primarily to higher net decreases in in the collections forecasts on certain pools within these markets.
•U.S.: Portfolio revenue increased by $20.2 million due to increases of $11.1 million in Portfolio income and $9.1 million in Changes in expected recoveries. The increase in Portfolio income was driven largely by higher recent purchasing and improved pricing on the 2025 Core vintage. The increase in Changes in expected recoveries was due to net cash collections overperformance in Q1 2026, driven primarily by the 2024 Core pool, compared to net underperformance in Q1 2025, driven by the 2019-2023 Core pools. This increase was partially offset by a lower net increase in the collections forecasts on certain Core pools compared to Q1 2025 and the impact of changes in the expected timing of collections on certain Core pools in Q1 2026.
•Europe: Portfolio revenue increased by $25.4 million due to increases of $14.1 million in Portfolio income and $11.3 million in Changes in expected recoveries, which were distributed across multiple pools. The increase in Portfolio income was driven by higher purchasing and favorable foreign exchange rate variation. The increase in Changes in expected recoveries was due primarily to a higher net increase in the collections forecasts on certain Core pools in Q1 2026.
Our Total operating expenses increased by $16.2$16.3 million, or 8.3%,8.1%, compared to Q1Q2 2025. Year-to-date 2026 operating expenses increased by $32.6 million, or 8.2%, compared to the prior year period.
•U.S.: Q2 2026 operating expenses increased by $16.7 million due primarily to an increase in Legal collection costs associated with the expansion in activity in our legal collections channel and costs of $4.9 million associated with the reorganization of our U.S. business. The reorganization-related costs consisted of $2.0 million in severance expenses related to a corporate and overhead headcount reduction and $3.0 million in real estate impairment and other expenses related to site consolidation of our onshore owned and leased call centers. These increases were partially offset by a decrease in Compensation and benefits driven by workforce reduction initiatives implemented over the past 12 months and a decrease in Communication costs due to the use of more cost-efficient digital collection strategies. Year-to-date 2026 operating expenses increased by $24.1 million, or 9.3%, due to similar factors.
•U.S.: Operating expenses increased by $7.4 million due primarily to an increase in Legal collection costs associated with the expansion in activity in our legal collections channel, partially offset by a decrease in Compensation and benefits driven by continued rationalization of our U.S. call centers, increased use of external collectors, including offshore service providers, and the impact of our corporate headcount reduction in 2025.
•Europe: OperatingQ2 2026 operating expenses were stable compared to the prior year period. Year-to-date 2026 operating expenses increased by $7.4$8.2 millionmillion, dueor 8.8%, driven primarily toby an increaseincreases in Other operating expenses, Legal collection costs and Compensation and benefits expense associated with organizational changes and higher non-collector wage costs, and to a lesser extent, an increase in Other operating expenses.costs.
•Other markets: An increase in Agency fees of $3.2 million was due primarily to higher collection fees in South America.
Our Interest expense, net increased by $2.5$2.0 million, or 4.2%,3.2%, compared to Q1Q2 20252025. Year-to-date 2026 interest expense increased by $4.6 million, or 3.7%, compared to the prior year period. These increases were due primarily reflecting ato higher average debt balance.balances.
Foreign exchange gain/(loss), net, includes the remeasurement of our foreign currency transactions and changes in the fair value of foreign exchange forward contracts used to economically hedge a portion of our remeasurement exposure. Foreign exchange gain/(loss), net included the following components (in thousandsthousands, except percentages):
In addition to normal rate fluctuations and ongoing execution of our risk management strategies, our net foreign exchange result may be impacted by elevated volatility in the underlying exchange rates. For additional information about our foreign exchange forward gains/(losses), refer to Note 6.
Our Income tax expense increased by $4.5$14.0 million, or 103.2%,90.6%, compared to Q1Q2 2025, and theour effective tax rate was 21.6%33.3% in Q1Q2 2026 compared to 32.2%25.2% in Q1Q2 2025. These results were primarily due to the increase in our pretax income, the mix of income from different taxing jurisdictions and the timing and amount of discrete items,items. includingYear-to-date 2026 Income tax expense increased by $18.4 million, or 93.4%, and our year-to-date 2026 effective tax rate was 29.6%, which included the reversal of a $3.2 million tax accrual induring Q1the first quarter of 2026.
•U.S.: Q2 2026 Adjusted segment operating income was stable compared to the prior year period, reflecting an increase in segment revenues, partially offset by an increase in segment expenses. Year-to-date 2026 Adjusted segment operating income increased by $12.6 million, or 36.2%, due to similar factors.
•Europe: Q2 2026 Adjusted segment operating income increased by $97.4 million due primarily to an increase in segment revenues. Year-to-date 2026 Adjusted segment operating income increased by $117.0 million, or 91.9%, reflecting an increase in segment revenues, partially offset by an increase in segment expenses.
Refer to the above discussions of portfolio revenue and operating expenses for additional information.
Adjusted segment operating income increased by $12.8 million and $19.6 million in the U.S. and Europe, respectively, both reflecting an increase in segment revenues partially offset by an increase in segment operating expenses (refer to the above discussions of segment portfolio revenue and operating expenses for additional details).
Investments were $143.4$145.5 million as of MarchJune 31,30, 2026, an increase of $76.7$78.8 million compared to December 31, 2025. The increase reflects purchases of government securities and corporate notes by our banking subsidiary, AK Nordic AB. Our banking subsidiary is part of our European operations, and it expects to continue to operate with higher levels of liquidity moving forward.
Finance receivables, net were $4.6$4.7 billion as of MarchJune 31,30, 2026, decreasingincreasing marginally compared to December 31, 2025. Compared to MarchJune 31,30, 2025, Finance receivables, net increased $328.8$154.6 million, or 7.6%,3.4%, due to portfolio purchases of $1.1 billion,billion and Changes in expected recoveries of $192.4 million and foreign currency translation of $120.3$256.0 million, partially offset by $1.1 billion of recoveries collected and applied to Finance receivables, net.net, and foreign currency translation of $64.0 million.
Prepaid expenses and other assets
Prepaid expenses and other assets were $134.8 million as of March 31, 2026, an increase of $66.2 million compared to December 31, 2025. The increase was driven by the receipt of a derivative settlement payment made in error by the financial institution counterparty on March 31, 2026. The funds were returned the following day.
Borrowings were $3.8 billion as of MarchJune 31,30, 2026, increasingan marginallyincrease of $62.0 million compared to December 31, 2025. Compared to MarchJune 31,30, 2025, Borrowings increased $313.1$145.1 million, or 9.0%,4.0%, primarily to fund portfolio purchases, and to a lesser extent, the purchases of investments discussed above under Investments.investments.
Other liabilities
Other liabilities were $99.5 million as of March 31, 2026, an increase of $50.5 million compared to December 31, 2025. The increase was primarily due to the same payment error discussed above under Prepaid expenses and other assets.
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 set performance goals. AlsoWe includedbelieve belowthese are reconciliations of the most directly comparablenon-GAAP financial measures calculatedare useful to investors in accordanceevaluating withour GAAPperformance toand theoperational correspondingeffectiveness non-GAAPand financialprovide measure.for greater comparability. These non-GAAP financial measures 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. Included below are reconciliations of the non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP.
Adjusted net income attributable to PRA
Adjusted net income 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. The following table provides a reconciliation of Net income/(loss) attributable to PRA Group, Inc. to Adjusted net income attributable to PRA for the periods indicated (in thousands):
(1)Based on the annual effective tax rate and pretax income excluding the effect of the adjusting items.
Adjusted EBITDA is calculated as Net income/(loss) attributable to PRA Group, Inc. plus income tax expense (or less income tax benefit); less foreign exchange gain (or plus foreign exchange loss); plus interest expense, net; plus other expense; plus depreciation and amortization; plus impairment of real estate; plus goodwill impairment; plus net income attributable to noncontrolling interests; less gain on sale of equity method investment; and plus recoveries collected and applied to Finance receivables, net less Changes in expected recoveries. The following table provides a reconciliation of Net loss attributable to PRA Group, Inc. as reported in accordance with GAAP to Adjusted EBITDA for the periods indicated (in thousands):
Adjusted net income attributable to PRA, ROATE and Adjusted ROATE
Adjusted net income attributable to PRA is calculated 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.
ROATE is calculated by dividing annualized Net income/(loss) attributable to PRA Group, Inc. by Average tangible equity. Adjusted ROATE is calculated by dividing Adjusted net income/(loss) attributable to PRA by Average tangible equity.
Return on average tangible equity
ROATE is calculated by dividing annualized Net income/(loss) attributable to PRA Group, Inc. by Average tangible equity, which is defined as average Total stockholders' equity - PRA Group, Inc. less average goodwill and average other intangible assets. The following table provides a reconciliation of Total stockholders' equity - PRA Group, Inc. as reported in accordance with GAAP to Average tangible equityequity, a reconciliation of Net income/(loss) attributable to PRA Group, Inc. to Adjusted net income attributable to PRA Group, Inc., and presentsprovides our ROEROE, ROATE and Adjusted ROATE for the periods indicated (in thousands, except for ratio data):
PRAA insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-15 | Sehgal Rakesh |
Shares withheld for tax | 1,514 | $19.39 | $29.4K |
| 2026-09-10 | Weaver Lance L |
Gift | 5,370 | — | — |
| 2026-09-10 | Weaver Lance L |
Gift | 5,371 | — | — |
| 2026-08-15 | Tarrant Latisha Owens |
Shares withheld for tax | 3,342 | $20.60 | $68.8K |
| 2026-08-15 | James Richard Owen |
Shares withheld for tax | 1,844 | $20.60 | $38.0K |
| 2026-06-17 | James Richard Owen |
Shares withheld for tax | 1,086 | $15.65 | $17.0K |
| 2026-06-17 | Sjolund Martin |
Shares withheld for tax | 9,772 | $15.65 | $152.9K |
| 2026-06-16 | Weaver Lance L |
Grant/award | 10,543 | — | — |
| 2026-06-16 | Butler Adrian M |
Grant/award | 10,543 | — | — |
| 2026-06-16 | Connelly Marjorie Mary |
Grant/award | 10,543 | — | — |
| 2026-06-16 | Tabakin Scott M |
Grant/award | 10,543 | — | — |
| 2026-06-16 | Paschke Brett Lee |
Grant/award | 10,543 | — | — |
| 2026-06-16 | Gadhia Jayne-Anne |
Grant/award | 10,543 | — | — |
| 2026-06-16 | Gadhia Jayne-Anne |
Shares withheld for tax | 3,223 | $15.50 | $50.0K |
| 2026-06-16 | Olsen Geir |
Shares withheld for tax | 3,223 | $15.50 | $50.0K |
| 2026-06-16 | Olsen Geir |
Grant/award | 10,543 | — | — |
Well-known investors holding PRAA (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| D. E. Shaw & Co. | 2026-06-30 | 783,504 | $14.9M | 0.01% | Reduced 5% |
| Millennium Management (Israel Englander) | 2026-06-30 | 753,597 | $14.3M | 0.01% | Added 161% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 581,087 | $11.0M | 0.01% | Added 135% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 269,056 | $5.1M | 0.0% | Reduced 12% |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 183,528 | $3.5M | 0.01% | Added 761% |
| Renaissance Technologies | 2026-06-30 | 120,000 | $2.3M | 0.0% | Added 44% |
| Two Sigma Investments | 2026-06-30 | 38,726 | $735.4K | 0.0% | Added 85% |