PRA Group PRAA Form 10-Q filing Q3 FY2025

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PRA Group, Inc.

Consolidated Balance Sheets

September 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 Three and Nine Months Ended September 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 Three and Nine Months Ended September 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 Nine Months Ended September 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 Nine Months Ended September 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 Nine Months Ended September 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. These 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, and 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 Balance Sheets and 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 September 30, 2025 and December 31, 2024 (in thousands):

Changes in Finance receivables, net by portfolio type for the three and nine months ended September 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 purchases made during the three and nine months ended September 30, 2025 and 2024 was as follows (in thousands):

The purchase price for purchases made during the three and nine months ended September 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 nine months ended September 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 September 30, 2025 and 2024 were as follows (in thousands):

Changes in expected recoveries for the three months ended September 30, 2025 were $51.4 million, which included $27.4 million in recoveries collected in excess of forecast and a $24.0 million positive adjustment to changes in expected future recoveries. Recoveries collected in excess of forecast were due largely to cash collections overperformance in Europe, and also included overperformance in South America and the U.S. Collections overperformance in the U.S. was net of a one-time payment of $15.0 million to a seller to modify the terms and conditions of certain previously purchased portfolios to allow for increased use of legal collections. Changes in expected future recoveries were driven by the results of the Company's forecasting models, combined with evaluations of recent performance, and were due in large part to increases in the collections forecasts for certain European and South American pools and the 2024 U.S. Core pool (driven by the increase in estimated remaining collections resulting from the above-mentioned contract modification) and 2017 to 2020 U.S. Core pools. These increases were partially offset by negative changes in expected future recoveries on the 2021 to 2023 U.S. Core pools, a portion of which was driven by changes in the expected timing of the recoveries.

Changes in expected recoveries for the three months ended September 30, 2024 were $60.6 million, which included $34.2 million in recoveries collected in excess of forecast, due primarily to collections performance in the U.S. and Europe. Changes in expected future recoveries of $26.5 million mainly reflect the Company's assessment of the 2013 to 2020 U.S. Core pools and a number of pools in Europe, which resulted in increases to the expected cash flows considering that recent performance of those pools is expected to continue.

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

Changes in expected recoveries for the nine months ended September 30, 2025 were $112.6 million, which included $84.2 million in recoveries collected in excess of forecast and a $28.4 million positive adjustment to changes in expected future recoveries. Recoveries collected in excess of forecast were primarily due to cash collections overperformance in Europe, South America, and to a lesser extent the U.S., where collections overperformance was impacted by a one-time payment of $15.0 million to a seller to modify the terms and conditions of certain previously purchased portfolios to allow for increased use of legal collections. Changes in expected future recoveries were driven by the results of the Company's forecasting models, combined with evaluations of recent performance, and were due in large part to increases in the collections forecasts for certain European and South American pools and the U.S. 2024 Core pool (driven by the increase in estimated remaining collections resulting from the above-mentioned contract modification). These increases were partially offset by negative changes in expected future recoveries on the 2021 to 2023 U.S. Core pools, a portion of which was driven by changes in the expected timing of the recoveries.

Changes in expected recoveries for the nine months ended September 30, 2024 were $185.6 million, which included $124.3 million in recoveries collected in excess of forecast, due primarily to collections performance in the U.S. and Europe. Changes in expected future recoveries of $61.4 million mainly reflect the Company's assessment of the 2013 to 2020 U.S. Core pools and a number of pools in Europe, which resulted in increases to the expected cash flows considering that recent performance of those pools is expected to continue.

Note 3. Investments

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

Debt securities

As of September 30, 2025, the Company's debt securities consisted of Swedish treasury securities maturing within one year. As of September 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 sold its 11.7% interest in RCB Investimentos S.A., a servicing company for nonperforming loans in Brazil, in April 2025.

Note 4. Goodwill

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

The Company performs an annual impairment test of goodwill as of October 1 of each year, or more frequently if indicators of impairment exist. As of September 30, 2025, as part of the Company’s interim impairment assessment, based on a sustained decrease in its stock price and market capitalization, the Company determined there to be an indicator of potential goodwill impairment in its Debt Buying and Collection (“DBC”) reporting unit. As a result, the Company performed a quantitative impairment test of the DBC reporting unit as of September 30, 2025, using the income approach, and also compared the estimated fair value to the Company’s market capitalization.

The Company estimates fair value based on the present value of estimated future cash flows and a residual terminal value. Forecasted financial results for the DBC reporting unit are developed considering several inputs and assumptions, including portfolio purchasing volume, purchase price multiples, ERC growth rate, terminal value and operating expenses.

Based on the quantitative impairment test performed as of September 30, 2025, driven in large part by the comparison to market capitalization and the impact on estimated fair value of a decrease in the terminal value assumption and an increase in the discount rate assumption since the most recent annual impairment test, the Company determined that the goodwill in its DBC reporting unit was fully impaired, and as a result, recorded a goodwill impairment charge of $412.6 million in the Consolidated Income Statement for the three months ended September 30, 2025.

As of September 30, 2025, goodwill of $26.9 million related to the Company’s Claims Compensation Bureau, LLC (“CCB”) reporting unit, and the Company determined there were no indicators of impairment related to this reporting unit as of September 30, 2025.

Note 5. Borrowings

Borrowings consisted of the following as of September 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 and description of the 2032 senior notes below.

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

2032 senior notes

On September 30, 2025, the Company completed the private offering of €300.0 million ($352.0 million) in aggregate principal amount of its 6.250% senior notes due September 30, 2032 through its wholly-owned subsidiary, PRA Group Europe Holding II S.à r.l. ("Issuer"). The notes are senior unsecured obligations of the Issuer and are guaranteed on a senior unsecured basis by the Company and all of the Company's existing and future domestic restricted subsidiaries that guarantee the North American revolving credit facility, subject to certain exceptions. Interest on the notes is payable semi-annually, in arrears, on March 31 and September 30 of each year.

Prior to September 30, 2028, the Issuer may redeem the notes, in whole or in part, at a price equal to 100% of the aggregate principal amount of the notes being redeemed, plus the applicable "make whole" premium. On or before September 30, 2028, the Issuer may redeem up to 40% of the aggregate principal amount of the notes at a redemption price of 106.250% plus accrued and unpaid interest with the net cash proceeds of a public offering of common stock of the Company provided, that at least 60% in aggregate principal amount of the notes remains outstanding immediately after the occurrence of such redemption and that such redemption will occur within 90 days of the date of the closing of such public offering.

In addition, on or after September 30, 2028, the Issuer may redeem the notes, in whole or in part, at a price equal to 103.1250% of the aggregate principal amount of the notes being redeemed. The applicable redemption price changes if redeemed during the 12 months beginning September 30 of each year to 101.5625% for 2029 and then 100% for 2030 and thereafter.

In the event of a change of control, each holder will have the right to require the Issuer to repurchase all or any part of such holder's notes at an offer price equal to 101% of the aggregate principal amount plus accrued and unpaid interest. If the Company sells assets under certain circumstances and does not use the proceeds for specified purposes, the Company will be required to make an offer to repurchase the notes at 100% of their principal amount plus accrued and unpaid interest.

The related indenture contains customary terms and covenants, including certain events of default after which the notes may be due and payable immediately.

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 September 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 nine months ended September 30, 2025 and 2024 were as follows (in thousands):

As of September 30, 2025 and December 31, 2024, the notional amount of outstanding interest rate swaps was $886.7 million and $800.7 million, respectively. These swaps remained highly effective as of September 30, 2025 and have remaining terms ranging from four months to five years. As of September 30, 2025, the Company estimates that $0.7 million of net derivative losses included in other comprehensive income ("OCI") will be reclassified into earnings within the next 12 months.

Derivatives not designated as hedging instruments

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

As of September 30, 2025 and December 31, 2024, the notional amount of outstanding foreign exchange contracts was $423.1 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 September 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 September 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.

During the three months ended September 30, 2025, the Company assessed the goodwill in its DBC reporting unit for impairment and determined that the goodwill was fully impaired. The estimated fair value of the DBC reporting unit represents a Level 3 nonrecurring fair value measurement. Refer to Note4 in these Consolidated Financial Statements for additional information.

Note 8. Accumulated Other Comprehensive Income/Loss

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

(1) Net of deferred taxes for unrealized (gains)/losses from cash flow hedges of $(0.9) million and $2.8 million for the three months ended September 30, 2025 and 2024, respectively.

(1) Net of deferred taxes for unrealized (gains)/losses from cash flow hedges $1.1 million and $0.1 million for the nine months ended September 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 nine months ended September 30, 2025 and 2024 (in thousands, except per share amounts):

Basic EPS are computed by dividing net (loss)/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. For the three and nine months ended September 30, 2025, approximately 0.1 million and 0.2 million antidilutive shares were excluded from the computation of diluted EPS, respectively.

Note 10. Income Taxes

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

The relationship between (Loss)/income before income taxes and Income tax expense/(benefit) for the three and nine months ended September 30, 2025 was mainly impacted by the goodwill impairment charge.

The relationship between (Loss)/income before income taxes and Income tax expense/(benefit) for the three and nine months ended September 30, 2024 was impacted by a $7.7 million reduction in tax expense due to the reversal of a valuation allowance associated with the resolution of a tax matter in Europe.

Recently enacted tax legislation

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into law in the U.S. The OBBBA introduced a broad range of tax reform provisions affecting businesses, including the expansion of bonus depreciation and revisions to the U.S. taxation of profits derived from international operations. The legislation has multiple effective dates, with certain provisions effective in fiscal year 2025 and others implemented through fiscal year 2027.

The Company does not expect the relevant provisions of the OBBBA will have a material impact on its 2025 income tax expense and is currently assessing the impact on future periods, which it expects will depend, in large part, on the amount and composition of taxable income generated by the Company.

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 September 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 September 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, DBC, which generates revenue through the purchase, collection and management of portfolios of nonperforming loans, and 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 (loss)/income attributable to PRA Group, Inc.

Segment assets

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

Other segment information

ARM segment profit or loss and segment assets for three and nine months ended September 30, 2025 and 2024 include the following amounts (in thousands):

Note 13. Recently Issued Accounting Pronouncements

Recently issued accounting pronouncements 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 plans to adopt ASU 2023-09 on a prospective basis in its annual financial statements for the year ending December 31, 2025 and is currently evaluating the impact on its income tax 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.

All other recently issued accounting pronouncements not yet adopted have been deemed either immaterial or not applicable.

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

General

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. We also purchase and provide fee-based services for class action claims recoveries in the U.S.

The nonperforming loans we acquire are primarily the unpaid obligations of individuals owed to credit originators. 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.

With 2,814 full-time equivalent employees worldwide, we collaborate with customers to help them resolve their debt. For additional information about our business, refer to Part I, Item 1 "Business" in our 2024 10-K.

Third quarter of 2025

Our focus for the third quarter of 2025 was on executing and delivering against our near-term priorities, which, for the U.S. business, included the reorganization of our leadership and governance structure, establishing a talent hub in Charlotte, North Carolina, and bringing our corporate and support staff back to the office. We strengthened our capital structure through the issuance of €300.0 million aggregate principal amount of senior notes due 2032 ("2032 senior notes"), our first bond offering in Europe. We also made progress on our information technology roadmap and capitalized on an opportunity to increase the ERC on certain portfolios by modifying an existing contract, and shortly after quarter-end, we implemented a cost reduction program in the U.S.

Due to a sustained decrease in our stock price and market capitalization, we performed an interim goodwill impairment test during the third quarter and determined that the goodwill in our Debt Buying and Collection ("DBC") reporting unit was fully impaired, which resulted in a non-cash impairment charge of $412.6 million.

Overall, we remain focused on executing our strategy and continuing to improve the financial performance of our business. Our financial results for the quarter included the following:

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 (loss)/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 cash receipts less Total operating expenses excluding the impact of Goodwill impairment ("Adjusted operating expenses") by cash receipts ("Adjusted cash efficiency ratio"). Adjusted operating expenses is a non-GAAP financial measure. Refer to section "Non-GAAP Financial Measures" for a reconciliation of Total operating expenses, the most directly comparable financial measure calculated and reported in accordance with GAAP, to Adjusted operating expenses.

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

(5) 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.

(6) Adjusted ROATE is a non-GAAP financial measure. Refer to section "Non-GAAP Financial Measures" for a reconciliation of Net (loss)/income attributable to PRA Group, Inc., the most directly comparable financial measure calculated and reported in accordance with GAAP, to Net (loss)/income attributable to PRA Group, Inc. excluding the impact of certain transactions that are either unusual or infrequent in nature, or both ("Adjusted net income attributable to PRA Group, Inc.").

RESULTS OF OPERATIONS

Three months ended September 30, 2025 ("Third Quarter 2025" or "Q3 2025") compared to three months ended September 30, 2024 ("Third Quarter 2024" or "Q3 2024"); and nine months ended September 30, 2025 ("Year-to-Date 2025") compared to nine months ended September 30, 2024 ("Year-to-Date 2024").

Portfolio purchases

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

Our portfolio purchases reflect a global framework that seeks to optimize our deployment of capital to achieve appropriate returns and take advantage of the opportunities in our markets.

Total portfolio purchases were $255.5 million in Q3 2025, a decrease of $94.5 million, or 27.0%, compared to $350.0 million in Q3 2024. Americas and Australia portfolio purchases decreased $119.5 million, while purchases in Europe increased $25.0 million. Q3 2025 purchases reflected a heightened focus on prioritizing net returns over volumes purchased and balancing purchases with our leverage.

Total year-to-date portfolio purchases were $893.7 million in 2025, a decrease of $81.5 million, or 8.4%, compared to $975.2 million in 2024. Americas and Australia purchases decreased $163.9 million, while purchases in Europe increased $82.5 million.

Cash collections

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

Total cash collections were $542.2 million in Q3 2025, an increase of $65.1 million, or 13.7%, compared to $477.1 million in Q3 2024. U.S. Core collections increased $44.7 million, which included a $26.4 million increase in legal collections, driven in large part by higher volumes resulting from the expansion of our U.S. legal collections activity. Europe Core collections increased $27.7 million, spread broadly across most of our markets and due, in part, to favorable foreign exchange variation. These increases were partially offset by a $4.3 million decrease in cash collections in South America, due primarily to lower recent purchasing levels.

Total year-to-date cash collections were $1.6 billion in 2025, an increase of $175.5 million, or 12.5%, compared to $1.4 billion in 2024. U.S. Core collections increased $125.2 million, which included a $77.0 million increase in legal collections, driven in large part by higher volumes resulting from the expansion of our U.S. legal collections activity. Europe Core collections increased $75.0 million, spread broadly across most of our markets and due, in part, to favorable foreign

exchange rate variation. These increases were partially offset by a $19.2 million decrease in cash collections in South America, due primarily to lower recent purchasing levels and unfavorable foreign exchange rate variation.

Portfolio revenue

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

Total portfolio revenue was $309.9 million in Q3 2025, an increase of $33.2 million, or 12.0%, compared to $276.7 million in Q3 2024. Portfolio income increased $42.4 million, or 19.6%, driven largely by the impact of higher recent purchasing and improved pricing. Changes in expected recoveries decreased $9.3 million, or 15.3%. Recoveries collected in excess of forecast decreased $6.8 million due largely to a one-time payment of $15.0 million to a seller in Q3 2025 to allow for the increased use of legal collections on certain previously purchased U.S. Core portfolios, partially offset by higher overperformance on our South American pools. Changes in expected future recoveries, which included the increase in estimated remaining collections resulting from the one-time payment in the U.S., decreased $2.4 million due primarily to a lower net increase in the collections forecasts on certain U.S. Core pools. These decreases were partially offset by a net increase in the collections forecasts on our South American pools in Q3 2025 compared to a net decrease in Q3 2024.

Total year-to-date portfolio revenue was $863.0 million in 2025, an increase of $49.9 million, or 6.1%, compared to $813.1 million in 2024. Portfolio income increased $123.0 million, or 19.6%, driven largely by the impact of higher recent purchasing and improved pricing. Changes in expected recoveries decreased $73.0 million. Recoveries collected in excess of forecast decreased $40.1 million compared to the prior year period due primarily to lower overperformance on our U.S. pools and the one-time payment of $15.0 million to a seller in the current year period to allow for the increased use of legal collections on certain previously purchased U.S. Core portfolios, partially offset by higher overperformance on our European pools across most of our markets. Changes in expected future recoveries, which included the increase in estimated remaining collections resulting from the one-time payment in the U.S., decreased $32.9 million due largely to a net decrease in the collections forecast on our U.S. Core pools compared to a net increase in the prior year period. These decreases were partially offset by a higher net increase in the collections forecast on our European pools and a net increase in the collections forecasts on our South American pools compared to a net decrease in the prior year period.

Gain on sale of equity method investment

In April 2025, we sold our 11.7% interest in RCB Investimentos S.A., a servicing company for nonperforming loans in Brazil, and recorded a gain of $38.4 million in our Consolidated Financial Statements for the second quarter of 2025. The sale did not impact the ownership of our portfolio investments in Brazil or our existing operations and expected future portfolio investments.

Operating expenses

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

Compensation and benefits

Compensation and benefits expense was $74.2 million in Q3 2025, a decrease of $1.9 million, or 2.5%, compared to Q3 2024, while the year-to-date expense decreased $0.7 million, or 0.3%. These decreases were primarily due to lower collector compensation costs in the U.S., driven by the consolidation of our U.S. call centers and offshoring of a portion of our U.S. collection activities, partially offset by higher non-collector wage costs.

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. Q3 2025 legal collection costs increased $18.0 million, or 62.5%, compared to Q3 2024, while the year-to-date costs increased $27.0 million, or 29.7%. These increases were driven by an expansion in activity in our U.S. legal collections channel resulting, in large part, from our cash generating initiatives.

Legal collection fees

Legal collection fees represent contingent fees incurred for cash collections generated by our third-party attorney network. Q3 2025 fees increased $2.1 million, or 14.4%, compared to Q3 2024, while year-to-date fees increased $7.1 million, or 17.5%. These increases mainly reflected higher external legal collections within our U.S. Core portfolio resulting, in large part, from the expansion in activity in our U.S. legal collections channel.

Agency fees

Agency fees primarily represent third-party collection fees. Q3 2025 fees increased $3.5 million, or 16.8%, compared to Q3 2024, while year-to-date fees increased $6.9 million, or 11.1%. Higher collection fees in Brazil and increased outsourcing in certain European markets drove the increase for the quarterly period. The increase for the year-to-date period was primarily due to additional fees paid to debt collection agencies in the U.S. and increased outsourcing in Europe.

Communication

Communication expense relates mainly to correspondence, network and calling costs associated with our collection efforts. Q3 2025 communication expense decreased $1.7 million, or 16.6%, compared to Q3 2024, while year-to-date expense decreased $5.9 million, or 17.3%. These decreases were primarily due to a mix of lower-cost communications strategies utilized across our U.S. Core operation.

Goodwill impairment

We recorded a goodwill impairment charge of $412.6 million in Q3 2025 related to our DBC reporting unit. For additional information, refer to Note4 to our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report.

Interest expense, net

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

Interest expense, net was $64.1 million in Q3 2025, an increase of $3.0 million, or 5.0%, compared to Q3 2024, while year-to-date expense increased $18.7 million, or 11.1%. These increases were primarily due to higher average debt balances.

Income tax expense/(benefit)

Income tax expense/(benefit) and our effective tax rate were as follows for the periods indicated (in thousands):

Income tax expense was $24.4 million in Q3 2025, an increase of $25.0 million compared to an income tax benefit of $0.7 million in Q3 2024, while year-to-date expense increased $33.7 million to $44.1 million. The effective tax rate in Q3 2025 was (6.4)% compared to an effective tax benefit rate of (2.4)% in Q3 2024. Our effective tax rate depends on the mix of income from different taxing jurisdictions and the timing and amount of discrete items. The change in the effective tax rate for both the quarterly and year-to-date periods was due largely to the goodwill impairment charge in the current year and a $7.7 million prior year reduction in tax expense due to the reversal of a valuation allowance associated with the resolution of a tax matter in Europe.

Balance sheet

Finance receivables, net

Finance receivables, net were $4.6 billion as of September 30, 2025, an increase of $431.4 million, or 10.4%, compared to $4.1 billion as of December 31, 2024, driven largely by portfolio acquisitions of $893.7 million, foreign currency translation adjustments of $252.3 million and Changes in expected recoveries of $112.6 million, partially offset by recoveries collected and applied to Finance receivables, net of $827.2 million.

Goodwill

Goodwill was $26.9 million as of September 30, 2025, a decrease of $369.5 million, or 93.2%, compared to $396.4 million as of December 31, 2024, due to a goodwill impairment charge. As of September 30, 2025, as part of our interim impairment assessment, based on a sustained decrease in our stock price and market capitalization, we determined there to be an indicator of potential goodwill impairment in our DBC reporting unit. As a result, we performed a quantitative impairment test as of September 30, 2025, and determined that the goodwill in our DBC reporting unit was fully impaired. For additional information, refer to Note 4 to our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report. As of September 30, 2025, goodwill consisted of $26.9 million in our Claims Compensation Bureau, LLC reporting unit.

Borrowings

Borrowings were $3.6 billion as of September 30, 2025, an increase of $280.4 million, or 8.4%, compared to $3.3 billion as of December 31, 2024. On September 30, 2025, we completed the issuance of €300.0 million ($352.0 million) in aggregate principal amount of our 2032 senior notes and initially paid down approximately $172.0 million principal amount of outstanding borrowings under each of our North American and European revolving credit facilities with the net proceeds. Issuance of the 2032 senior notes drove an increase of $352.0 million in borrowings under senior notes, which was partially offset by net payments of $53.3 million on our United Kingdom revolving credit facility.

Total stockholders' equity - PRA Group, Inc.

Total stockholders' equity - PRA Group, Inc. was $928.5 million as of September 30, 2025, a decrease of $206.5 million, or 18.2%, compared to $1.1 billion as of December 31, 2024. The decrease was driven primarily by the net loss for the period, partially offset by foreign currency translation adjustments.

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;
• Adjusted cash efficiency ratio, to monitor and evaluate operating expenses;
• 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 (loss)/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 (loss)/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;
• goodwill impairment;
• net income attributable to noncontrolling interests;
• gain on sale of equity method investment; and
• recoveries collected and applied to Finance receivables, net less Changes in expected recoveries.

The following table provides a reconciliation of Net (loss)/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.

Cash efficiency

We use an Adjusted cash efficiency ratio, which is a supplemental measure of performance that is not required by, or presented in accordance with, GAAP, to monitor and evaluate operating expenses, excluding goodwill impairment, relative to our cash collections plus fees and revenue recognized from our class action claims recovery services. Management believes the Adjusted cash efficiency ratio is a useful financial measure for investors in evaluating our management of operating expenses. The Adjusted cash efficiency ratio is calculated by dividing cash receipts less Adjusted operating expenses by cash receipts. The following table provides a reconciliation of Total operating expenses to Adjusted operating expenses and presents our Adjusted cash efficiency ratios for the periods indicated (in thousands, except for ratio data):

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 stockholder return. Average tangible equity is defined as average Total stockholders' equity - PRA Group, Inc. less average goodwill and average other intangible assets. ROATE is calculated by dividing annualized Net (loss)/income attributable to PRA Group, Inc. by average tangible equity.

ROATE may include certain items that are not indicative of the ongoing operating results of our business. Accordingly, management also uses Adjusted ROATE to monitor and evaluate operating performance relative to our equity. Management believes Adjusted ROATE is a useful financial measure for investors because it excludes the impact of certain transactions that are either unusual or infrequent in nature, or both. Adjusted ROATE is calculated by dividing Adjusted net income attributable to PRA Group, Inc. by average tangible equity.

The following table provides a reconciliation of Total stockholders' equity - PRA Group, Inc. as reported in accordance with GAAP to average tangible equity and a reconciliation of Net (loss)/income attributable to PRA Group, Inc. to Adjusted net income attributable to PRA Group, Inc., and presents 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 September 30, (in thousands):

(1) Reflects ERC of $3.6 billion for the U.S. and $515.8 million for other Americas and Australia.

(2) Reflects ERC of $1.64 billion for the UK, $1.06 billion for Central Europe, $964.5 million for Northern Europe and $567.7 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 September 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 September 30, 2025 exchange rate.