PRA Group PRAA Form 10-Q filing Q2 FY2025

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PRA Group, Inc.

Consolidated Balance Sheets

June 30, 2025 and December 31, 2024

(In thousands)

The accompanying notes are an integral part of these Consolidated Financial Statements.

PRA Group, Inc.

Consolidated Income Statements

For the Six Months Ended June 30, 2025 and 2024

(In thousands, except per share amounts)

(unaudited)

The accompanying notes are an integral part of these Consolidated Financial Statements.

PRA Group, Inc.

Consolidated Statements of Comprehensive Income

For the Six Months Ended June 30, 2025 and 2024

(In thousands)

(unaudited)

The accompanying notes are an integral part of these Consolidated Financial Statements.

PRA Group, Inc.

Consolidated Statements of Changes in Equity

For the Six Months Ended June 30, 2025

(In thousands)

(unaudited)

The accompanying notes are an integral part of these Consolidated Financial Statements.

PRA Group, Inc.

Consolidated Statements of Changes in Equity

For the Six Months Ended June 30, 2024

(In thousands)

(unaudited)

The accompanying notes are an integral part of these Consolidated Financial Statements.

PRA Group, Inc.

Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2025 and 2024

(In thousands)

(unaudited)

The accompanying notes are an integral part of these Consolidated Financial Statements.

PRA Group, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

Note 1. Organization and Business

As used herein, the terms "PRA Group," the "Company," or similar terms refer to PRA Group, Inc. and its subsidiaries.

Nature of operations

PRA Group, Inc., a Delaware corporation headquartered in Norfolk, Virginia, is a global financial services company with operations in the Americas, Europe and Australia. The Company's primary business is the purchase, collection and management of portfolios of nonperforming loans. The Company also purchases and provides fee-based services for class action claims recoveries in the United States ("U.S.").

Basis of presentation

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and the instructions for Quarterly Reports on Form 10-Q of the U.S. Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal and recurring items, necessary for a fair presentation have been included. The unaudited Consolidated Financial Statements include the accounts of PRA Group and other entities in which the Company has a controlling interest. All significant intercompany accounts and transactions have been eliminated.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed. Realized results could differ from those estimates and assumptions. These unaudited Consolidated Financial Statements may not be indicative of future results and should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 Form 10-K").

Prior period reclassifications

In the Consolidated Statements of Cash Flows, certain prior period amounts have been reclassified for consistency with the current period presentation.

Note 2. Finance Receivables, net

Finance receivables, net consisted of the following as of June 30, 2025 and December 31, 2024 (in thousands):

Changes in Finance receivables, net by portfolio type for the three and six months ended June 30, 2025 and 2024 were as follows (in thousands):

(1) Initial negative allowance for expected recoveries on current period purchases

The initial negative allowance for expected recoveries on current period purchases for the three and six months ended June 30, 2025 and 2024 was as follows (in thousands):

The purchase price on current period purchases for the three and six months ended June 30, 2025 and 2024 was as follows (in thousands):

(2) Recoveries collected and applied to Finance receivables, net

Recoveries collected and applied to Finance receivables, net for the three and six months ended June 30, 2025 and 2024 were as follows (in thousands):

(a)Includes cash collections, buybacks and other cash-based adjustments.

(b)Reclassifications from Finance receivables, net to Portfolio income based on the effective interest rate of the underlying account pools.

(3) Changes in expected recoveries

Changes in expected recoveries for the three months ended June 30, 2025 and 2024 were as follows (in thousands):

Changes in expected recoveries for the three months ended June 30, 2025 were $33.3 million, which included $40.3 million in recoveries collected in excess of forecast (cash collections overperformance) and a $7.0 million negative adjustment in changes in expected future recoveries. Recoveries collected in excess of forecast were largely due to cash collections overperformance in Europe, U.S., and Brazil. Changes in expected future recoveries were primarily due to a decrease to the collections forecast on the 2023 U.S. Core pool, which was partially offset by the impact of increases to the Company's collections forecasts in Europe.

Changes in expected recoveries for the three months ended June 30, 2024 were $73.3 million, which included $54.3 million in recoveries collected in excess of forecast, due mainly to collections performance in the U.S., driven in large part by the Company's cash-generating initiatives, coupled with collections performance in Europe. Changes in expected future recoveries of $19.1 million mainly reflect the Company's assessment of certain pools in the U.S. and Europe, resulting in an increase to the expected cash flows based primarily on overperformance in recent periods. The increase in expected cash flows was driven in large part by forecast increases to the 2013 to 2019 U.S. Core pools, as well as increases to a number of pools in Europe.

Changes in expected recoveries for the six months ended June 30, 2025 and 2024 were as follows (in thousands):

Changes in expected recoveries for the six months ended June 30, 2025 were $61.2 million, which included $56.8 million in recoveries collected in excess of forecast (cash collections overperformance) and $4.4 million in changes in expected future recoveries. Recoveries collected in excess of forecast were largely due to cash collections overperformance in Europe and Brazil. Changes in expected future recoveries were primarily due to the impact of increases to the Company's collections forecasts on certain European pools, which was partially offset by decreases to the Company's collections forecasts on the 2023 U.S. Core pool.

Changes in expected recoveries for the six months ended June 30, 2024 were $125.0 million, which included $90.1 million in recoveries received in excess of forecast, due mainly to collections performance in the U.S., driven in large part by the Company's cash-generating initiatives, coupled with collections performance in Brazil and Europe. Changes in expected future recoveries of $34.9 million mainly reflect the Company's assessment of certain pools in the U.S. and Europe, resulting in an increase to the expected cash flows based primarily on overperformance in recent periods. The increase in expected cash flows was driven in large part by forecast increases to the 2013 to 2019 U.S. Core pools, as well as increases to a number of pools in Europe.

Note 3. Investments

Investments consisted of the following as of June 30, 2025 and December 31, 2024 (in thousands):

Debt securities

As of June 30, 2025, the Company's debt securities consisted of Swedish treasury securities maturing within one year. As of June 30, 2025 and December 31, 2024, the amortized cost and fair value of these investments were as follows (in thousands):

Equity method investment

The Company's equity method investment of 11.7% interest in RCB Investimentos S.A. ("RCB"), a servicing company for nonperforming loans in Brazil, was sold in April 2025. The Company recorded a $38.4 million pretax gain on sale in its Consolidated Financial Statements for the three months ended June 30, 2025. The sale does not impact the Company's ownership of existing portfolio investments in Brazil, nor its existing operations or future portfolio investments in Brazil.

Note 4. Goodwill

Changes in goodwill for the three and six months ended June 30, 2025 and 2024, were as follows (in thousands):

The Company performs an annual review of goodwill as of October 1 of each year, or more frequently if indicators of impairment exist. The Company evaluated whether any triggering events had occurred as of June 30, 2025, which included consideration of market conditions, and determined that an interim impairment test of goodwill did not need to be performed.

Note 5. Borrowings

Borrowings consisted of the following as of June 30, 2025 and December 31, 2024 (in thousands):

(1) Revolving credit facility under the Company's North American credit agreement with a combined domestic and Canadian limit of $1.1 billion (subject to the borrowing base and debt covenants, including advance rates), maturing on October 28, 2029.

(2) Term loan under the Company's North American credit agreement, with a final maturity date of October 28, 2029.

(3) Revolving credit facility with a limit of $725.0 million (subject to the borrowing base and debt covenants, including advance rates), maturing on October 30, 2029.

(4) Revolving credit facility with an aggregate limit of approximately €730.0 million (subject to the borrowing base and debt covenants, including advance rates), maturing on November 23, 2027.

For additional information about the North American revolving credit facility and term loan, United Kingdom revolving credit facility, European revolving credit facility and the Company's senior notes, refer to Note 7 to the Consolidated Financial Statements in the 2024 Form 10-K.

On April 24, 2025, the European revolving credit facility was amended and restated; however, the terms have not changed substantially from the terms described in the 2024 Form 10-K.

The Company was in compliance with the covenants contained in its financing arrangements as of June 30, 2025.

Note 6. Derivatives

The Company periodically enters into interest rate swaps and foreign exchange contracts to reduce its exposure to fluctuations in interest rates on variable-rate debt and foreign currency exchange rates. The fair value of these instruments as of June 30, 2025 and December 31, 2024 was as follows (in thousands):

Derivatives designated as hedging instruments

The effects of interest rate swaps designated as cash flow hedging instruments for the three and six months ended June 30, 2025 and 2024 were as follows (in thousands):

As of June 30, 2025 and December 31, 2024, the notional amount of outstanding interest rate swaps was $908.8 million and $800.7 million, respectively. These swaps remained highly effective as of June 30, 2025 and have remaining terms ranging from seven months to five years. As of June 30, 2025, the amounts of derivative gains and losses included in other comprehensive income ("OCI") that are estimated to be reclassified into earnings within the next 12 months net to $0.

Derivatives not designated as hedging instruments

The effects of foreign exchange contracts not designated as hedging instruments for the three and six months ended June 30, 2025 and 2024 were as follows (in thousands):

As of June 30, 2025 and December 31, 2024, the notional amount of outstanding foreign exchange contracts was $477.6 million and $376.4 million, respectively.

Note 7. Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

Financial instruments carried at fair value

As of June 30, 2025 and December 31, 2024, financial instruments measured at fair value on a recurring basis were as follows (in thousands):

(1) Fair value of derivatives is estimated using industry standard valuation models, which project future cash flows and discount the future amounts to present value using market-based observable inputs, including interest rate curves and other factors.

Financial instruments not carried at fair value

As of June 30, 2025 and December 31, 2024, the estimated fair value and carrying amount of financial instruments not carried at fair value were as follows (in thousands):

(1) Fair value is estimated using the proprietary pricing models the Company utilizes to make portfolio acquisition decisions.

(2) Fair value is based on quoted prices for similar instruments in active markets and approximates carrying value due to the short-term deposit periods.

(3) Fair value is based on quoted prices for similar instruments in active markets and approximates carrying value due to the short-term interest rate periods.

(4) Fair value is based on quoted market prices obtained from secondary market broker quotes.

(5) The carrying amounts and fair values do not include debt issuance costs.

Note 8. Accumulated Other Comprehensive Income/Loss

Reclassifications out of Accumulated other comprehensive loss for the three and six months ended June 30, 2025 and 2024, were as follows (in thousands):

(1) Income tax effects are released from Accumulated other comprehensive loss contemporaneously with the related gross pretax amount.

Changes in Accumulated other comprehensive loss by component, after tax, for the three and six months ended June 30, 2025 and 2024, were as follows (in thousands):

(1) Net of deferred taxes for unrealized (gains)/losses from cash flow hedges of $(2.0) million and $0.4 million for the three months ended June 30, 2025 and 2024, respectively

(1) Net of deferred taxes for unrealized (gains)/losses from cash flow hedges $(2.0) million and $(2.7) million for the six months ended June 30, 2025 and 2024, respectively.

Note 9. Earnings per Share

The following tables provide a reconciliation between basic earnings per share ("EPS") and diluted EPS for the three and six months ended June 30, 2025 and 2024 (in thousands, except per share amounts):

Basic EPS are computed by dividing net income available to common stockholders of PRA Group, Inc. by weighted average common shares outstanding. Diluted EPS are computed using the same components as basic EPS, with the denominator adjusted for nonvested share awards, if dilutive. Share-based awards that are contingent upon the attainment of performance goals are included in the computation of diluted EPS if the effect is dilutive.

In February 2022, the Board of Directors approved a share repurchase program under which the Company is authorized to repurchase up to $150.0 million of its outstanding common stock. During the three months ended June 30, 2025, the Company repurchased 660,395 shares of its common stock for an aggregate cost of approximately $10.0 million at an average price of $15.14 per share. As of June 30, 2025, there was $57.7 million remaining for share repurchases under the program. The Company's practice is to retire the shares it repurchases. Repurchases are subject to restrictive covenants contained in the Company's credit facilities and the indentures that govern its senior notes.

Note 10. Income Taxes

The Company's effective tax rate for the three and six months ended June 30, 2025 and 2024 was as follows (in thousands):

The relationship between Income before income taxes and Income tax expense for the three and six months ended June 30, 2025 and 2024 was impacted by changes in the mix of income from different taxing jurisdictions and the timing of certain discrete items.

On July 4, 2025, the One Big Beautiful Bill Act was signed into law in the U.S. The Company is evaluating the impact this law may have on its income taxes.

Note 11. Commitments and Contingencies

Forward flow agreements

The Company enters 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. The amounts purchased are also dependent on actual delivery by the sellers, and while purchases under these agreements comprise a significant portion of the Company's overall purchases, as of June 30, 2025, the estimated minimum contractual purchase obligation under forward flow agreements was not significant.

Litigation and regulatory matters

The Company and its subsidiaries are from time-to-time subject to a variety of legal and regulatory claims, inquiries, proceedings, and other matters, including those described in Note 14 to the Consolidated Financial Statements in the 2024 Form 10-K. The Company accrues for potential liability arising from legal proceedings and regulatory matters when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These estimates involve significant judgment, and accordingly, the Company's estimates will change from time-to-time, and actual expenses could exceed the current estimates. As of June 30, 2025, there were no material developments in any of the previously disclosed legal proceedings.

Note 12. Segments

The Company has determined that it is managed on a consolidated basis under a single operating segment, Accounts Receivable Management ("ARM"), and accordingly, it has one reportable segment. The ARM segment is comprised of the Company's primary business, Debt Buying and Collection ("DBC"), which generates revenue through the purchase, collection and management of portfolios of nonperforming loans, and Claims Compensation Bureau, LLC ("CCB"), which generates revenue through the purchase of, and provision of fee-based services for, class action claims recoveries in the U.S. The chief operating decision maker ("CODM") is the Company’s chief executive officer, who assesses performance based on the Company's consolidated results prepared in accordance with GAAP.

Segment revenue, significant segment expenses and profit or loss

ARM segment revenue is presented in the Company's Consolidated Income Statements under Total revenues. Significant segment expenses regularly considered by the CODM are those most directly related to the Company's revenue generating activities, including Compensation and benefits, Legal collection costs, Legal collection fees, Agency fees, Professional and outside services and Communication. All other operating expenses appearing in the Consolidated Income Statements constitute other segment items. ARM segment profit or loss is presented in the Company's Consolidated Income Statements under Net Income/(loss) attributable to PRA Group, Inc.

Segment assets

ARM segment assets are presented in the Company's Consolidated Balance Sheets under Total assets.

Other significant segment items

Other significant segment items not presented in the Company's Consolidated Income Statements or Consolidated Balance Sheets for the three and six months ended June 30, 2025 and 2024 were as follows (in thousands):

Note 13. Recently Issued Accounting Standards

Recently issued accounting standards not yet adopted:

In December 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"), which requires enhanced annual disclosures with respect to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and may be adopted on a prospective or retrospective basis, with early adoption permitted. The Company is evaluating the impact ASU 2023-09 will have on its disclosures.

In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses" ("ASU 2024-03"). Subsequently, the FASB issued ASU 2025-01 to clarify the effective date of ASU 2024-03. ASU 2024-03 provides guidance that will expand disclosures related to the disaggregation of income statement expenses and is effective for fiscal years beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, on a retrospective or prospective basis, with early adoption permitted. The Company is evaluating the impact these ASUs will have on its disclosures.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

All references in this Quarterly Report on Form 10-Q ("Quarterly Report") to "PRA Group," "we," "our," "us," "the Company" or similar terms are to PRA Group, Inc. and its subsidiaries.

This Quarterly Report should be read in conjunction with our Form 10-K for the year ended December 31, 2024 ("2024 10-K"). See Frequently Used Terms at the end of this Item 2 for certain definitions that may be used in this Quarterly Report.

EXECUTIVE OVERVIEW

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. Our Core operation specializes in purchasing and collecting nonperforming loans, which are sold by credit originators when they choose not to pursue, or have been unsuccessful in, collecting the full balance owed. Our Insolvency operation consists primarily of purchasing and collecting on nonperforming loans where the customer is involved in a bankruptcy or similar proceeding. Our global investment team leverages our deep seller relationships to identify purchasing opportunities, and we make purchasing offers based upon proprietary models backed by over 25 years of data. We develop collections strategies and execute on collections activity via call center, digital, and legal channels (where appropriate) and single payment or payment plans (short duration, long duration or hardship accommodation).

Financial highlights

Second Quarter of 2025 June 30, 2025 Year-to-Date

Portfolio purchases of $346.5 million. Portfolio purchases of $638.2 million.

–Americas and Australia: $199.3 million. –Americas and Australia: $377.7 million.

–Europe: $147.2 million. –Europe: $260.5 million.

–8.7% decrease compared to Q2 2024. –2.1% increase compared to prior year period.

Cash collections of $536.3 million. Cash collections of $1,033.7 million.

–Americas and Australia: $326.0 million. –Americas and Australia: $637.9 million.

–Europe: $210.3 million. –Europe: $395.8 million.

–13.2% increase compared to Q2 2024. –11.9% increase compared to prior year period.

Net income attributable to PRA of $42.4 million. Net income attributable to PRA of $46.0 million.

–Diluted earnings per share: $1.08. –Diluted earnings per share: $1.16.

–96.9% increase compared to Q2 2024. –84.2% increase compared to prior year period.

With continued focus on disciplined portfolio purchasing, in the second quarter of 2025 we purchased $346.5 million of finance receivables at attractive purchase price multiples and recorded a 19.9% increase in portfolio income over the same quarter last year. Under the direction of our new Chief Executive Officer, Martin Sjolund, we plan to continue the transformation of our U.S. business by focusing on our three strategic pillars – optimizing investments, operational execution, and managing expenses.

As of June 30, 2025, estimated remaining collections of $8.3 billion represented an increase of 11.2% compared to December 31, 2024 and 21.9% compared to June 30, 2024, with $4.1 billion related to the Americas and Australia and $4.2 billion to Europe.

Operating expenses of $202.6 million in the second quarter of 2025 represented an increase of 3.9% compared to the second quarter of 2024. For the year-to-date period, operating expenses were $397.6 million, an increase of 3.5% over the prior year's period.

During the second quarter, we completed the previously announced sale of our 11.7% interest in RCB Investimentos S.A. ("RCB"), a servicing company for nonperforming loans in Brazil, for a pre-tax gain on the sale of $38.4 million. The proceeds were used for portfolio purchases and general corporate needs. The sale does not impact our ownership of existing portfolio investments in Brazil, nor our existing operations or future portfolio investments in Brazil.

SUMMARY OF SELECTED FINANCIAL DATA

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

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

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

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

(5) Adjusted return on average tangible equity is a non-GAAP financial measure. Refer to section "Non-GAAP Financial Measures" for a reconciliation of Net income attributable to PRA Group, Inc., the most directly comparable financial measure calculated and reported in accordance with GAAP, to Adjusted net income attributable to PRA Group, Inc.

RESULTS OF OPERATIONS

Three months ended June 30, 2025 ("Second Quarter 2025" or "Q2 2025") compared to three months ended June 30, 2024 ("Second Quarter 2024" or "Q2 2024"); and six months ended June 30, 2025 ("Year-to-Date 2025") compared to six months ended June 30, 2024 ("Year-to-Date 2024").

Portfolio purchases

Portfolio purchases were as follows for the periods indicated (in thousands):

Total portfolio purchases were $346.5 million in Q2 2025, a decrease of $32.9 million, or 8.7%, compared to $379.4 million in Q2 2024. Europe portfolio purchases decreased $6.8 million and Americas and Australia portfolio purchases decreased $26.1 million.

Total year-to-date portfolio purchases were $638.2 million in 2025, an increase of $13.0 million, or 2.1%, compared to $625.2 million in 2024. An increase in Europe portfolio purchases of $57.5 million was partially offset by a decrease in Americas and Australia purchases of $44.5 million. Our portfolio purchases reflect our global framework that seeks to optimize our deployment of capital to achieve appropriate returns and take advantage of opportunities in our markets.

Cash collections

Cash collections were as follows for the periods indicated (in thousands):

Total cash collections were $536.3 million in Q2 2025, an increase of $62.4 million, or 13.2%, compared to $473.9 million in Q2 2024. The increase was primarily due to an increase in U.S. and Europe Core cash collections, mainly due to higher recent purchasing levels. U.S. Core collections increased $40.9 million. Europe Core collections increased $28.9 million, spread broadly across most of our markets. These increases were partially offset by an $8.2 million decrease in cash collections in Brazil, due in large part to variation in the foreign exchange rate and lower recent purchasing levels.

Total year-to-date cash collections were $1.03 billion in 2025, an increase of $110.3 million, or 11.9%, compared to $923.4 million in 2024. The increase was primarily due to an increase in U.S. and Europe Core cash collections mainly due to higher recent purchasing levels. U.S. Core collections increased $80.5 million. Europe Core collections increased $47.4 million, spread broadly across most of our markets. These increases were partially offset by an $18.8 million decrease in cash collections in Brazil, due in large part to variation in the foreign exchange rate and lower recent purchasing levels.

Portfolio revenue

Portfolio revenue was as follows for the periods indicated (in thousands):

Total portfolio revenue was $284.2 million in Q2 2025, an increase of $1.6 million, or 0.6%, compared to $282.6 million in Q2 2024. Portfolio income increased $41.6 million, or 19.9%, driven largely by the impact of higher purchasing and improved pricing in the U.S. beginning in 2023, while changes in expected recoveries decreased $40.0 million. Recoveries collected in excess of forecast decreased $14.0 million due primarily to lower overperformance in Q2 2025 on most U.S. Core pools compared to Q2 2024. This decrease was partially offset by higher overperformance on our European pools. Changes in expected future recoveries decreased $26.1 million due largely to a decrease to the collections forecast on the 2023 U.S. Core pool.

Total year-to-date portfolio revenue was $553.1 million in 2025, an increase of $16.8 million, or 3.1%, compared to $536.3 million in 2024. Portfolio income increased $80.5 million, or 19.6%, driven largely by the impact of higher purchasing and improved pricing in the U.S. beginning in 2023, while changes in expected recoveries decreased $63.8 million. Recoveries collected in excess of forecast decreased $33.3 million due primarily to lower overperformance in 2025 on most U.S. Core pools compared to 2024. This decrease was partially offset by higher overperformance on our European pools. Changes in expected future recoveries decreased $30.5 million due largely to decreases to our collections forecasts on certain U.S. Core pools.

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

Compensation and benefits

Compensation and benefits expense was $75.7 million in Q2 2025, an increase of $1.5 million, or 2.0%, compared to Q2 2024. Year-to-date compensation and benefits expense increased $1.2 million, or 0.8%, compared to the 2024 period. The increases were primarily due to higher non-collector wage costs in the current year periods, partially offset by a decrease in our collector compensation as we continue to leverage third parties and offshore call centers.

Legal collection costs

Legal collection costs consist primarily of costs paid to courts where a lawsuit is filed for the purpose of attempting to collect on an account. Q2 2025 legal collection costs increased $2.3 million, or 6.5%, compared to Q2 2024, primarily due to increased activity in our U.S. legal collections channel. The growth of legal collections activity in the U.S. also drove the $9.0 million, or 14.5%, increase for the year-to-date 2025 period.

Legal collection fees

Legal collection fees represent contingent fees incurred for cash collections generated by our third-party attorney network. Q2 2025 fees increased $1.9 million, or 13.5%, compared to Q2 2024, mainly reflecting higher external legal collections within our U.S. Core portfolio. Increased external legal collections in the U.S. were also the primary driver of the $5.0 million, or 19.3%, increase for the year-to-date 2025 period.

Agency fees

Agency fees primarily represent third-party collection fees. Higher fees paid to third-party debt collection agencies in the U.S. and Europe drove both the Q2 2025 increase of $1.7 million, or 8.0%, compared to Q2 2024, and the year-to-date 2025 increase of $3.3 million, or 8.2%.

Professional and outside services

Professional and outside services expense includes expenses related to third-party service providers and corporate legal activities. Q2 2025 expense increased $2.9 million, or 16.3%, compared to Q2 2024, primarily due to increased investment in call center offshoring to provide greater operating flexibility. Year-to-date 2025 expenses decreased $1.0 million, or 2.3%, compared to 2024, mainly reflecting lower legal expenses and consulting fees in the U.S., partially offset by increased investment in call center offshoring.

Communication

Communication expense relates mainly to correspondence, network and calling costs associated with our collection efforts. Q2 2025 communication expense decreased $2.2 million, or 18.7%, compared to Q2 2024, primarily due to a mix of lower-cost communications strategies utilized in our U.S. business. The use of lower-cost communications strategies utilized in our U.S. business was also primarily responsible for the decrease of $4.3 million, or 17.6% in the year-to-date 2025 period.

Interest expense, net

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

Interest expense, net was $62.4 million in Q2 2025, an increase of $7.0 million, or 12.7%, compared to Q2 2024. Year-to-date 2025 interest expense, net increased 14.6% to $123.3 million. The increases in both the quarterly and year-to-date periods were primarily due to a higher average debt balance in the current year period to support higher levels of portfolio investments.

Income tax expense

Income tax expense was as follows for the periods indicated (in thousands):

Income tax expense was $15.4 million in Q2 2025, an increase of $6.7 million, or 77.1%, compared to Q2 2024. The effective tax rate in Q2 2025 was 25.2% compared to 25.7% in Q2 2024. Year-to-date 2025 income tax expense increased 77.9% to $19.7 million. The changes in the effective tax rates in both the quarterly and year-to-date periods were primarily due to changes in the mix of income from different taxing jurisdictions and the timing and amount of discrete items.

Balance sheet

Finance receivables, net

Finance receivables, net were $4.6 billion as of June 30, 2025, an increase of $421.8 million, or 10.2%, compared to $4.1 billion as of December 31, 2024, driven largely by portfolio acquisitions of $638.2 million and foreign currency translation adjustments of $277.1 million, partially offset by recoveries collected and applied to Finance receivables, net of $554.7 million.

Goodwill

Goodwill was $439.4 million as of June 30, 2025, an increase of $43.1 million, or 10.9%, compared to $396.4 million as of December 31, 2024, due to foreign currency translation adjustments. As of June 30, 2025, goodwill consisted primarily of $412.6 million in our Debt Buying and Collection ("DBC") reporting unit. We performed our most recent annual impairment review of the DBC reporting unit as of October 1, 2024, and concluded that goodwill was not impaired. As of June 30, 2025, we did not identify the occurrence of any triggering events requiring us to perform an interim assessment of goodwill. However, consistent with our most recent annual assessment, the goodwill in our DBC reporting unit may be at-risk for future impairment. If our stock price does not return to higher levels on a sustained basis, this market indicator could be a triggering event indicating possible impairment. Additionally, if our cash flow projections are not met or if other market factors utilized in the impairment test were to deteriorate, including adverse changes in the debt sales market that impact our estimated purchasing volumes and purchase price multiples and an increase in the discount rate, this reporting unit could become impaired.

Borrowings

Borrowings were $3.6 billion as of June 30, 2025, an increase of $287.6 million, or 8.6%, compared to $3.3 billion as of December 31, 2024. The increase was primarily due to incremental net borrowings under our North American and European revolving credit facilities of $147.4 million and $157.8 million, respectively, offset by net payments of $14.9 million on our United Kingdom ("UK") revolving credit facility.

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:

• Adjusted EBITDA, to evaluate our performance and to set performance goals;
• ROATE, to monitor and evaluate operating performance relative to our equity; and
• Adjusted ROATE, to standardize ROATE across periods by eliminating certain nonrecurring transactions.

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 should not be considered as an alternative to net income determined in accordance with GAAP. In addition, our calculation of Adjusted EBITDA may not be comparable to the calculation of similarly titled measures presented by other companies. Adjusted EBITDA is calculated starting with our GAAP financial measure, Net income attributable to PRA Group, Inc. and is adjusted for:

• income tax expense (or less income tax benefit);
• foreign exchange loss (or less foreign exchange gain);
• interest expense, net (or less interest income, net);
• other expense (or less other income);
• depreciation and amortization;
• impairment of real estate;
• 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 attributable to PRA Group, Inc. as reported in accordance with GAAP to Adjusted EBITDA for the periods indicated (in thousands):

(1) Other expense reflects non-operating activities.

Return on average tangible equity and adjusted return on average tangible equity

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

ROATE may include certain items that are not indicative of the operating results of our portfolios of nonperforming loans. Accordingly, management believes that Adjusted ROATE is a useful financial measure for investors because it excludes the impact of gains/losses that are not indicative of the operating results of our portfolios of nonperforming loans.

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

SUPPLEMENTAL PERFORMANCE DATA

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

• ERC by geography, portfolio type and expected year of collection;
• Core cash collections separated between call center and other collections and legal collections, and constant currency adjusted cash collections; and
• nonperforming loan portfolios and collections by geography, portfolio type and year of purchase.

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

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 multiple

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

ERC and 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 forecasting with a correlating adjustment to the purchase price multiple. We follow an established process to evaluate ERC, and we typically do not adjust our ERC and TEC until we gain sufficient collection experience with a pool of accounts. Over time, our TEC has often increased as pools have aged resulting in the ratio of TEC to purchase price for any given year of buying to gradually increase.

For additional information about our nonperforming loan portfolios, refer to Note 2 to our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report.

Estimated remaining collections

The following table displays our ERC by geography, year and portfolio for the 12 months ending June 30, (in thousands):

(1) Reflects ERC of $3.5 billion for the U.S. and $513.4 million for other Americas and Australia.

(2) Reflects ERC of $1.7 billion for the UK, $1,079.9 million for Central Europe, $950.8 million for Northern Europe and $509.6 million for Southern Europe.

Cash collections

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

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

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

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

(4) Non-U.S. amounts are presented at the June 30, 2025 exchange rate.

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

(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 reporting period.

(3) Non-U.S. amounts are presented at the June 30, 2025 exchange rate.

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

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

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 June 30, 2025, cash and cash equivalents totaled $131.6 million, of which $117.4 million was held by international operations with indefinitely reinvested earnings. For additional information about the unremitted earnings of our international subsidiaries, refer to Note 13 to our Consolidated Financial Statements in the 2024 Form 10-K.

Borrowings

As of June 30, 2025, we had the following committed amounts, borrowings and availability under our financing arrangements (in thousands):

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

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

Interest-bearing deposits

As of June 30, 2025, interest-bearing deposits totaled $168.7 million. Under our European revolving credit facility, our interest-bearing deposit funding is limited to SEK 2.2 billion (the equivalent of $233.0 million in U.S. dollars as of June 30, 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 in the open market or otherwise. We also have the ability to slow the purchase of nonperforming loans without significantly impacting current year 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 June 30, 2025, we had forward flow agreements in place with an estimated purchase price of approximately $311.2 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 $210.6 million for the Americas and Australia and $100.5 million for Europe. These amounts represent our estimated forward flow purchases over the next 12 months under the agreements in place based on projections and

other factors, including sellers' estimates of future forward flow sales, and are dependent on actual delivery by the sellers and, in some cases, the impact of foreign exchange rate fluctuations. Accordingly, amounts purchased under these agreements may vary significantly. In addition to these agreements, we may also enter into new or renewed forward flow commitments and/or close on spot purchase transactions.

Borrowings

As of June 30, 2025, we had $3.6 billion in outstanding borrowings. The estimated interest, unused fees and principal payments for the next 12 months are $249.3 million. After 12 months, principal payments on our debt are due from between one and five years. Many of our financing arrangements include covenants with which we must comply, and as of June 30, 2025, we were in compliance with these covenants.

For additional information about our borrowings, refer to Note 5 to our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report.

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 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 Securities Exchange Act of 1934, as amended (the "Exchange Act"), or other methods, subject to market and/or other conditions and applicable regulatory requirements. During the second quarter of 2025, we repurchased 660,395 shares of our common stock for an aggregate cost of approximately $10.0 million at an average price of $15.14 per share. As of June 30, 2025, we had $57.7 million remaining for share repurchases under the program. Repurchases are also subject to restrictive covenants contained in our credit facilities and the indentures that govern our senior notes.

Leases

Our leases have remaining terms from one to 8 years. As of June 30, 2025, we had $29.5 million in lease liabilities, of which $7.5 million is due within the next 12 months. For additional information, refer to Note 5 to our Consolidated Financial Statements in the 2024 Form 10-K.

Derivatives

We enter into derivative financial instruments to reduce our exposure to fluctuations in interest rates on variable rate debt and foreign currency exchange rates. As of June 30, 2025, we had $14.1 million of derivative liabilities, of which $3.2 million matures within the next 12 months. The remaining $10.9 million matures in 2028 and later. For additional information, refer to Note 6 to our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report.

Investments

As of June 30, 2025, we held $64.8 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 periods indicated (in thousands):