PRA Group (PRAA) Q4 2025 Earnings Call Transcript

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Date

Thursday, Feb. 26, 2026 at 5 p.m. ET

Call participants

• President and Chief Executive Officer — Martin Sjolund
• Executive Vice President and Chief Financial Officer — Rakesh Sehgal
• Vice President, Investor Relations — Najim Mostamand

Takeaways

• Portfolio purchases -- $1,200,000,000 in 2025, marking the third highest investment year and matching the company’s target.
• Estimated remaining collections (ERC) -- $8,600,000,000, a new company record, up 15% year over year; U.S. comprised 42% and Europe 51%.
• Cash collections -- $2,100,000,000 for the year, up 13%, and $532,000,000 for the quarter, up 14%.
• Revenue -- $1,200,000,000 in 2025, establishing a new record high for the company.
• Purchase price multiples -- U.S. Core reached 2.16x (up from 2.11x in 2024) and Europe Core hit 1.85x (up from 1.80x in 2024).
• Adjusted net income -- $73,000,000, representing a 3% increase over 2024 after adjusting for one-off items.
• Adjusted diluted EPS -- $1.84 per share, calculated on the same adjusted basis as net income.
• Adjusted EBITDA -- $1,300,000,000 for the past twelve months, up 16% year over year and up 31% versus 2023.
• Cash efficiency ratio -- 61% both for Q4 and the full year (adjusted), reaching the company’s target level.
• U.S. legal channel investments -- $125,000,000 invested in 2025 with legal collection costs rising 30% to $162,000,000.
• Digital channel performance -- Global digital cash collections increased 25% in 2025, reflecting ongoing digital initiatives.
• Net leverage -- Ended the year at 2.7x net debt to adjusted EBITDA, down from a peak of 2.9x in September 2024.
• Share repurchases -- $20,000,000 repurchased in 2025, with $50,000,000 remaining under board authorization.
• Replenishment rate -- $982,000,000 required to maintain ERC over twelve months at current purchase price multiples.
• U.S. offshoring -- Offshore agents now comprise approximately 32% of U.S. agent headcount, up from 0% two years ago; U.S. call center headcount declined by 42% in 2025.
• Capital structure -- $3,200,000,000 in committed credit lines with $1,100,000,000 currently available, and no debt maturities until November 2027.
• Goodwill impairment -- Non-cash goodwill impairment charge of $413,000,000 in Q3 drove a reported net loss of $305,000,000 for 2025.
• Operational flexibility -- Number of U.S. call centers reduced from six to three; external DCAs now service more than 2,000,000 U.S. accounts.

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Risks

• Non-cash goodwill impairment charge of $413,000,000 in Q3 led to a reported net loss attributable to PRA Group of $305,000,000 for the year.
• Management cautioned that "we are not yet at a point where that magnitude of earnings is a baseline" due to quarter-to-quarter variability and highlighted that Q4 benefited from an "unusually low effective tax rate."
• Increased legal collection costs were up 30% year over year.

Summary

PRA Group (NASDAQ:PRAA) achieved record high estimated remaining collections, cash collections, and revenue, and its portfolio purchases were the third highest on record, with management crediting operational initiatives and disciplined investments across global markets. Management emphasized the successful scaling of U.S. legal collections and digital channels, which contributed to faster growth in adjusted EBITDA of 16% versus 13% for cash collections, indicating increasing operating leverage. Cost transformation was advanced through offshoring, DCA partnerships, and technology modernization—including AI deployment—providing flexibility to adjust operations and support future cash growth. The capital structure remains diversified and well-positioned, with leverage falling and no near-term debt maturities; the company repurchased $20,000,000 of shares and retains further authorization. Leaders outlined a disciplined forward strategy prioritizing high-return investments, cost variability, ongoing technology adoption, and prudent capital allocation as integral to sustaining improved returns in 2026 and beyond.

• Legal collections accounted for 48% of U.S. forecast collections in 2025, up from 39% two years ago, reflecting a shift in operational emphasis.
• Cash overperformance—actual cash received above projections—contributed $121,000,000 of the $176,000,000 in changes in expected recoveries, highlighting accuracy in underwriting and collection strategies.
• Portfolio income, representing the stable yield portion of revenue, increased by 18% year over year to $1,000,000,000 and has grown 34% compared to 2023, now contributing a greater share to net income.
• Management signaled a continued annual portfolio investment range of $1,000,000,000-$1,300,000,000 for 2026, aligning with 2025 levels and a strategy of return prioritization over expansion volume.
• Q4’s effective tax rate was just 4%, which management described as "unusually low" and not representative of future quarters, confirming the need for an annual or rolling average view of results.
• The company issued its first Eurobond in late 2025 and is proactively negotiating refinancing for maturities in 2027, reinforcing liquidity management.
• A senior AI leader was hired to accelerate technology-driven efficiencies, with ongoing pilots in AI-based collections, chatbots, and data analysis across multiple markets.
• Executive commentary confirmed that variable and outsourced operational models will continue to be balanced with in-house efficiencies, tailored to market size and opportunity.

Industry glossary

• ERC (Estimated remaining collections): The projected gross future cash collections on owned loan portfolios over their remaining life, undiscounted.
• DCA (Debt collection agency): Third-party firm contracted to collect debt on behalf of the portfolio owner, providing operational flexibility and specialized collection channels.
• Purchase price multiple: The ratio of the expected lifetime collections to the portfolios’ purchase price, used as a proxy for gross returns on NPL investments.
• NPL (Nonperforming loan): Loan that is in default or close to being in default, typically purchased by collections companies at a discount to face value for recovery activity.

Full Conference Call Transcript

Najim Mostamand: Thank you. Good evening, everyone, and thank you for joining us. With me today are Martin Sjolund, President and Chief Executive Officer, and Rakesh Sehgal, Executive Vice President and Chief Financial Officer. We will make forward-looking statements during the call, which are based on management's current beliefs, projections, assumptions, and expectations. We assume no obligation to revise or update these statements. We caution listeners that these forward-looking statements are subject to risks, uncertainties, assumptions, and other factors that could cause our actual results to differ materially from our expectations. Please refer to our earnings press release issued today and our SEC filings for a detailed discussion of these factors.

The earnings release, the slide presentation that we will use during today's call, and our SEC filings can all be found in the Investor Relations section of our website at pragroup.com. Additionally, a replay of this call will be available shortly after its conclusion, and the replay dial-in information is included in the earnings press release. All comparisons mentioned today will be Q4 2025 and Q4 2024 unless otherwise noted. During our call, we will discuss certain financial measures on an adjusted basis. Please refer to the appendix of the slide presentation used during this call for a reconciliation of the most directly comparable U.S. GAAP financial measures to non-GAAP financial measures.

I will now turn the call over to Martin.

Martin Sjolund: Thank you, Najim, and thank you everyone for joining us this evening. 2025 was a year of significant progress for PRA Group, Inc. as we focused on strengthening our U.S. platform, building on the strength and momentum of our European franchise, executing on our near-term priorities, and developing our longer-term strategy. As you can see on the slide, the key financial and operational metrics are moving in the right direction. We purchased $1,200,000,000 of portfolios in 2025, in line with our target and our third highest investment year on record. These purchases, along with our numerous operational improvements, have driven our estimated remaining collections, or ERC, to a record $8,600,000,000.

Cash collections of $2,100,000,000 were a new record, up double digits for both the quarter and the year, primarily driven by the continued momentum of our operational initiatives, especially in the U.S. legal channel, supplemented by the continued strong performance in Europe. This also drove record revenue of $1,200,000,000. Adjusted cash efficiency improved to 61% from 59% last year, as we delivered on our cash efficiency target while investing $125,000,000 in the U.S. legal collections channel in 2025. We expect these legal investments to generate significant cash collections in the years to come.

Adjusted net income increased to $73,000,000 in 2025, and adjusted EBITDA for the last twelve months was up 16% to $1,300,000,000, growing faster than cash collections of 13% in the same period. This suggests that we continue to gain operating leverage even as we increased investments in the legal channel. I think the results you see today demonstrate how far we have come as a company over the past three years, especially in 2025. We have made solid progress across several key areas of our business. First, we have been increasing our purchase price multiples, both in the U.S. and Europe, as we continue to prioritize returns over volume. Purchase price multiples are a proxy for gross returns.

On a net basis, we know that even lower multiples can still generate good returns if the costs are lower and the cash timing is faster. But both higher multiples and lower expense rates are the goal we are firmly focused on. Second, we have made numerous enhancements to our capabilities, especially in the U.S. We revamped our legal collection process, introduced new call center strategies, and expanded digital collections. We also introduced offshore calling and built a network of external debt collection agents, or DCAs, to give us flexibility. In fact, we now have more than 2,000,000 accounts being serviced by DCAs in the U.S. Third, we have also been making great progress in modernizing our IT platform.

In Europe, we have all of our core markets on one common cloud platform and on one cloud-based omnichannel contact platform. In the U.S., we are well underway in our cloud migration and have initiated the transition to our new global contact platform. At the same time, we are exploring and deploying new technologies globally such as AI. We have already started testing a range of AI initiatives from processing to interactive chatbots to using large language models to process massive unstructured datasets to help us inform our collection strategies. We see an opportunity for AI to create real value across a range of standardized processes. We are already running very interesting pilots in a number of markets.

Our global footprint really helps here since we test new AI applications in smaller markets and then scale up the ones that deliver real value. On the underwriting side, we have leveraged our top global talent to help us dial in our models and are seeing good performance on the most recent vintages. Fourth, we continue to focus on cost. In the U.S., we made the difficult decision to eliminate more than 115 corporate and overhead roles in the fourth quarter, which resulted in total annualized gross savings of $20,000,000, around $3,000,000 of these savings being offset by increased outsourcing costs.

We have also continued to transition to lower-cost call centers; offshoring now represents roughly a third of our U.S. agent headcount. To demonstrate the growing operating leverage in our business, our U.S. call center headcount decreased by 548 agents, or 42%, since the start of 2025, while our 2025 U.S. core cash collections were up 20% versus the prior year. And lastly, we maintained our strong and diversified capital structure, with staggered maturities and leverage that has been declining steadily from a peak of 2.9x in 2024 to 2.7x at the end of 2025. We also returned capital to shareholders by repurchasing $20,000,000 of our stock in 2025.

The foundations of the business are strong, the future looks bright, and I am very excited about the opportunities we have to build on this momentum. I will now turn the call over to Rakesh for the financial results.

Rakesh Sehgal: Thanks, Martin. We purchased $315,000,000 of portfolios during the fourth quarter, with $112,000,000 in the U.S., $157,000,000 in Europe, and $45,000,000 in other markets. For the full year, we purchased $1,200,000,000 of portfolios, in line with our 2025 target as we continue to focus on driving higher returns and net income while balancing investments with leverage. This approach is having a positive impact as the returns from our purchases have increased meaningfully over the past two years. Our purchase price multiples, which are a proxy for gross portfolio yields, were 2.16x for U.S. Core in 2025 compared to 2.11x in 2024 and higher than 1.91x in 2023.

Similarly, we have seen an uptick in our Europe Core purchase price multiples with 2025 ending at 1.85x, up from 1.80x in 2024 and 1.69x in 2023. While our purchase price multiples have ticked up, we are ultimately focused on delivering higher net returns that incorporate the cost to collect, the funding cost, and the timing of cash flows. As a reminder, our European portfolios in aggregate have lower purchase price multiples due to the lower cost to collect in certain countries. ERC at quarter end was $8,600,000,000, up 15% year over year. ERC is well diversified with the U.S. accounting for 42% and Europe accounting for 51% of our ERC.

This diversification helps mitigate risk from any single market and economic cycles. The replenishment rate, defined as the amount we would need to invest over the next twelve months to maintain current ERC levels based on the average purchase price multiples in 2025, was $982,000,000. As we look ahead to the next eighteen months, we expect portfolio supply to remain stable. U.S. credit card balances are at $1,100,000,000,000, and industry-wide charge-off rates of 4% plus are still higher versus pre-pandemic levels, with certain card issuers having charge-off rates north of that, providing significant supply opportunities. Cash collections for the quarter were $532,000,000, reflecting a strong 14% growth year over year.

For the full year, cash collections grew 13% to $2,100,000,000, exceeding the high single-digit growth target we had for 2025. Cash collections were driven by continued growth in our U.S. legal collections channel, and strong performance in Europe across multiple markets. In addition, our digital channel continues to show significant momentum, with global cash collections up 25% in 2025. U.S. cash collections grew 17% in Q4 as well as in the full year 2025. U.S. legal cash collections for the full year grew 28% to $483,000,000 and were up approximately 83% since 2023 when we first started seeing the benefits from the improvements made in that channel.

It is important to note that legal is not the channel that we lead with. But in cases where we are not able to get customers to engage with us through our other channels, we will eventually consider an account for legal collections. The legal channel typically provides greater collections certainty and a higher overall amount of cash collected versus other channels. Legal accounted for 48% of U.S. forecast collections in 2025, compared to 39% two years ago. Europe cash collections grew 11% for the fourth quarter and 13% for full year 2025. We had strong cash collections this quarter relative to our expectations.

Globally, cash collections exceeded our expectations by 7%, with the U.S. exceeding by 5% and Europe exceeding by 10%. The U.S. Core COVID vintages of 2021, 2022, and 2023, which now comprise 9% of ERC, collectively performed in line with expectations in Q4. Our recent U.S. vintages have also performed well with the 2024 vintage increasing relative to expectations driven by strong legal performance, and the 2025 vintage is performing to expectations. With respect to the consumer environment, our overall customer profile remains stable across the U.S. and Europe. Moving to a summary of our income statement. Portfolio revenue increased 15% during the quarter and 8% in 2025, driven primarily by the growth in portfolio income.

Portfolio income, which is the more stable and predictable yield component of our revenue, grew 14% in the quarter to $263,000,000 and 18% for the full year to $1,000,000,000, a company record. Our portfolio income increased by 34% compared to 2023 as we have continued to benefit from a healthy supply environment and improved purchase price multiples. Portfolio income has been growing faster than cash collections and is contributing more to net income, and we expect the portfolio income contribution to net income to increase as we move forward. Changes in expected recoveries were $64,000,000 in the quarter and $176,000,000 in 2025.

Of the $176,000,000, 68%, or $121,000,000, came from cash overperformance, or cash received above our expectations, and the remaining $56,000,000, or 32%, was from changes in expected future recoveries of the net present value of the increase in our ERC. Let me dive a little deeper into what is actually driving our portfolio income.

Some of the factors include: number one, higher purchase price multiples on our investments as we become more selective in our buying and more effective in our collection capabilities; number two, improved cash performance driven by operational initiatives such as legal and digital collections; and number three, when appropriate, increasing our future projections of ERC on existing portfolios to reflect higher levels of expected lifetime collections, leading to portfolio write-ups. As you can see on the chart, we have a long track record of cash overperformance, especially in Europe. You may recall, we did a deep dive on our U.S. vintages in the third quarter. We may do these deep dives from time to time across our global vintages.

Turning now to the rest of the income statement. Operating expenses were $28,000,000 for the quarter, and $1,200,000,000 for the full year. Excluding the non-cash goodwill impairment charge recorded in Q3, adjusted operating expenses were $819,000,000 in 2025, up 6% from the prior year, primarily due to the continued investments in the legal collections channel. Legal collection costs were $44,000,000 this quarter, up $10,000,000 from the prior year period. For the full year, legal collection costs were $162,000,000, up $37,000,000, up 30% from the prior year. What is important is that when you look at the composition of our expenses, you will see that our operating model is becoming more flexible and variable.

Over the past couple of years, our U.S. onshore agent headcount has declined by 42% in 2025. The percentage of offshore agents has grown from 0% to approximately 32%. The number of U.S. call centers has shrunk from six to three. Our IT infrastructure is moving more to third-party cloud versus on-premise data centers. And we have been using more DCAs. This progress gives us greater optionality to flex up or down as needed, further supporting our business through different stages of the credit cycle. Net interest expense was $64,000,000 for the quarter, and $252,000,000 for the full year. The year-over-year increase for both periods primarily reflects an increase in debt balances due to new portfolio purchases.

Net income attributable to PRA Group, Inc. for the quarter was $57,000,000. This reflects an effective tax rate of 4% for the quarter driven by a number of factors impacting the year, including the non-cash goodwill impairment charge and the geographic mix of earnings during the fourth quarter. For the full year, net loss attributable to PRA Group, Inc. was $305,000,000, which was driven by the non-cash goodwill impairment charge of $413,000,000 recorded in the third quarter. On an adjusted basis, after excluding the gain on sale of our equity investment in Brazil in Q2 and the non-cash goodwill impairment charge, net income was $73,000,000, or $1.84 in adjusted diluted earnings per share, up 3% from the $71,000,000 in 2024.

The adjusted net income in 2025 demonstrates the earnings power of our platform, with a higher portion of net income from portfolio income as we continue to improve core operations, reduce overhead, and invest in legal, digital, and offshoring to transform the business. Ultimately, while there will be variability in our net income on a quarterly basis, our focus remains on growing the bottom line and improving returns with the goal of continuing the trends you have seen in 2025. Although our Q4 results give a glimpse into the kind of earnings power that we can generate from our significant ERC and our improving operations, we are not yet at a point where that magnitude of earnings is a baseline.

Q1, for example, tends to have higher operating expenses as we begin the year with enhanced marketing to our customers. Also, Q4 results were impacted by an unusually low effective tax rate. Due to the quarter-to-quarter variability that can occur, we believe it is more helpful to look at the business on an annual or rolling four-quarter average basis. In addition to net income, we also focus on cash metrics, which we believe provide a more telling measure of our operating success. Cash efficiency ratio was 61% for the quarter and 42% for the full year.

On an adjusted basis, excluding the goodwill impairment charge, cash efficiency was 61% for the full year, in line with our 60% plus target for the year. Adjusted EBITDA for the last twelve months was $1,300,000,000, up 16% year over year, driven by our cash collections growth of 13% exceeding adjusted operating expense growth of 6%. Adjusted EBITDA was also up 31% compared to 2023. Our net leverage, defined as net debt to adjusted EBITDA, was 2.7x as of December 31, compared to 2.8x in the prior year period and 2.9x at the peak in September 2024 as we continue to reduce leverage.

You will note that not only is adjusted EBITDA increasing, but the quantum of debt has been fairly stable over the past three quarters as we generate higher cash flow. With adjusted EBITDA continuing to grow, we expect to further delever in the near term. In terms of our funding, we have ample liquidity and a strong capital structure that is well diversified between bank and bond debt. As of December 31, we had $3,200,000,000 in total committed capital under our credit facilities, with total availability of $1,100,000,000 comprised of $825,000,000 available based on current ERC and $274,000,000 of additional availability that we can draw from, subject to borrowing base and debt covenants, including advance rates.

Over the past couple of years, we have taken numerous actions to further diversify and strengthen our capital structure, including most recently issuing our first ever Eurobond in late 2025. We have no debt maturities until November 2027 when our European credit facility matures. We are already in discussions with our longstanding partners to refinance the facility this year. During the quarter, we also repurchased $10,000,000 of our shares, bringing the total amount repurchased in 2025 to $20,000,000. We have approximately $50,000,000 remaining under our board authorization and will continue to evaluate share repurchases as part of our overall capital allocation strategy.

As we have previously noted, the authorization remains subject to the discretion of our board and repurchases are subject to restrictive covenants in our credit facilities and the indentures that cover our outstanding notes. Overall, as our 2025 financial performance shows, we are moving in the right direction, improving our financial profile and delivering higher returns while reducing leverage. I will now turn it back over to Martin.

Martin Sjolund: PRA Group, Inc. has come a long way in the past three years, and I want to share our strategy for the next few years. To set the stage and provide a little bit of context, we are celebrating PRA Group, Inc.'s thirtieth anniversary this year, and looking back at our history, we can see three distinct phases of our company's evolution. The first phase of PRA Group, Inc., or PRA Group, Inc. 1.0, was when PRA Group, Inc. grew from a startup into one of the leading players in the U.S. industry. We see PRA Group, Inc.

2.0 as the period of global expansion into Europe, South America, and beyond, building one of the most globally diversified companies in the industry. And now PRA Group, Inc. 3.0 is about how we evolve PRA Group, Inc. into a high-performing, technology-enabled global allocator of capital. This strategy has three important vectors: one, capital and investing; two, operations, technology, and data; and three, people and culture. The first vector is capital and investing, where we are focused on investing with discipline and allocating capital to the highest return opportunities. This vector has four main elements. Number one, we will make disciplined global NPL investments.

We will do this by leveraging our global diversification, which allows us to allocate capital across a range of markets. We manage this through a global investment framework, prioritizing long-term returns over growth for growth's sake, and expanding carefully into new product opportunities that fit our return profile. On this point, we have been exploring the possibility of new asset classes that leverage our data and capabilities. Number two, we are focused on delivering a strong financial profile, one that can generate more predictable net income, significantly grow cash flow, create a more flexible cost profile, and reduce our leverage to the mid-2x area over time.

Number three, we will maintain a conservative balance sheet with ample liquidity, well-diversified and staggered funding. We will also explore alternative funding mechanisms to create optionality and flexibility for the future. And number four, we will continue to employ a prudent capital allocation strategy, prioritizing investments in the core business, whether that is through disciplined purchases of portfolios with attractive returns or investments in our operations. In addition, we will evaluate opportunistic share repurchases when we believe they can create incremental value. At the same time, we are focused on ensuring that all markets and segments are delivering the returns we need. Turning now to the second vector, operations, technology, and data.

Here, we are focused on continuing to modernize the engine, becoming leaner, more flexible, and more tech-driven. The first subcomponent here is transforming our operations. We aim to balance a mix of in-house collections with a range of flexible external capabilities. The internal platform gives us cost benefits in the legal channel, good customer engagement, more visibility of data, and better predictability. On the external side, we will continue to leverage our U.S. offshore operations, which are still growing and provide a low-cost and effective platform for certain types of collection activity. Today, offshoring represents about a third of our U.S. agents, and we will look to grow this mix in the coming years.

We will also leverage our global network of DCAs to create flexibility to scale up and down and to leverage specialist capabilities. At the same time, we will also be using automation and scale across the business, specifically in the legal collections channel. Finally, we plan to continue driving digital innovation that makes it easier for customers to work with us in resolving their debts while providing us with a very low-cost collection channel. The second subcomponent is fully leveraging technology. We are driving scale benefits by leveraging technology standardization where it makes sense for us. This is already in place in Europe, and we expect to make significant progress on this in the U.S. in 2026.

We are also planning to modernize our U.S. core system and data architecture. This should improve our ability to rapidly apply new technologies and save significant cost over time. The third subcomponent is enhanced data and analytics. This has long been a key part of what we do, and we are investing in talent and data to generate better customer insights. We also believe that AI has the potential to transform a company like ours. PRA Group, Inc. has large datasets from the 70,000,000 accounts we have acquired globally. We have hundreds of millions of documents and billions of call recordings. There is a significant opportunity to digitize workflows, serve customers digitally, and use virtual agents to transform customer service.

It will take time. With our data, our scale, and our continued investment in technology and talent, we see a big opportunity. In fact, we recently hired a senior AI leader into our new Charlotte office, and we are excited to see how he can help us accelerate our progress. The final subcomponent is disciplined cost management. As I have said from day one, cost is very important in a business like ours. Although we made a lot of progress last year, cost control is a mindset, not just one project. And so we will continue our drive to reduce our costs and create flexibility in our cost structure.

This includes employing a bottoms-up approach of zero-based reviews while driving synergies across existing overhead functions. We will also be shifting more toward a variable cost structure, leveraging external legal capabilities, call center offshoring, and DCAs globally. The third and final vector of our 3.0 strategy is people and culture, where we are focused on establishing a winning culture by embedding a high-performance, ownership mindset. I am a strong believer in the importance of culture in an organization. We can develop the best strategy on paper; at the end of the day, it is only as good as the teams of people across PRA Group, Inc. who will execute this strategy.

PRA Group, Inc. has a highly talented team of people, many who have been with us for decades. We will focus on continuing to build on the strong culture we have in place, both leveraging the long experience of those who have been here for decades and integrating fresh perspectives from people who joined recently but who bring critical external perspectives. We want to create an environment where talented and successful people collaborate together to execute on our strategy, deliver for customers, and hit our targets.

Some of the key elements here include talent hubs to ensure we can access the talent we need and company-wide objectives and key results, or OKRs, to ensure that we are executing on our plans. We will also continue to make sure that staff incentives are aligned with shareholders. And lastly, our governance and values continue to be a source of strength. We maintain a strong compliance culture and operate under the guidance of a global board with diverse and highly relevant experience. As a responsible corporate citizen, we remain committed to supporting the communities where we operate, a attribute that has defined us for the last thirty years.

Finally, I want to give a sense of our financial trajectory when we deliver on these three vectors. One, we will remain disciplined with our investments. As I mentioned, we will prioritize returns over growth for growth's sake and hence will not chase investments that do not meet our return thresholds. Based on what we see today, we anticipate investments in the range of $1,000,000,000 to $1,300,000,000 per year, with 2026 projected to be at a similar level as 2025. Two, by driving cash initiatives and managing costs, we expect our adjusted EBITDA to continue to grow. Our aim is for adjusted EBITDA to continue growing faster than cash collections, even as we invest in legal collections, IT, and AI.

Three, as I said at the start, we are very focused on our leverage. This strategy should see our net leverage continue to decline over the next few years, and we aim to land in the mid-2x area. And finally, returns. Ultimately, our goal is to deliver returns in line with what investors would expect from a specialty finance company like ours. As you can see on the slide, we made significant progress in these metrics over the past three years, and we expect to continue moving in the right direction. Overall, I feel confident in where PRA Group, Inc. is and where we are heading. Our prospects for 2026 look good, and the outlook beyond that is even better.

We are confident that the actions we are going to take will continue to drive stronger financial results and unlock meaningful long-term value for our shareholders. Thank you, everyone, for tuning in and for your time, support, and continued confidence in our future. Next week, we will be participating at the Raymond James Conference and we look forward to seeing many of you there. We will now open for questions.

Operator: Ladies and gentlemen, we will now begin the question and answer session. You will hear a prompt that your hand has been raised. If you would like to withdraw from the polling process, please press star then the number two. If you are using a speakerphone, please make sure to lift your handset before pressing any keys. Your first question comes from the line of David Scharf from Citizens Capital Markets. Please go ahead.

David Scharf: Hi, good afternoon, and thanks for taking my questions. Martin, I really appreciate all of the detail that was provided on all of these initiatives in the presentation. Maybe just kind of a bigger-picture question. There is a lot to digest there. I mean, it looks like you are really attacking every facet of the business. You know, from an investor looking in from the outside, is there any maybe prioritization they should think about in terms of, you know, maybe what are the top three things that are outlined in all of the things on those three slides, you know, whether it is more offshoring or more outsourcing?

Just to maybe provide some guideposts that we should be paying most attention to.

Martin Sjolund: Yeah, thanks. You know, as I have been saying for a while now, we wanted to lay out what our strategy was for the coming three years. We have really broken it down into these three vectors that I talked about. So, you know, on one hand, you have capital and investing, so making sure that we do that in a prudent way, that we are not chasing growth for growth's sake, but really focused on returns. And the other part of that is making sure that we have a really strong funding structure. So we are in a strong position on funding today, and that is something that is very important to us.

The second vector is really around the whole operations, and so there continuing to create this cost flexibility is very important. PRA Group, Inc., we are celebrating thirty years and I have been here for fifteen of those thirty years. And over time, that is something we have really learned, that it is important to have flexibility on the cost side and to constantly be working to creating a lean and efficient platform. So I would say that is the second part. And the third part is really just around technology, where we will continue to modernize this platform.

It is a big opportunity for us as we do that, and things like AI, as I mentioned before, if you think of the tens of millions of customer accounts and hundreds of millions of documents, and the processes we run in different countries across the world, I really do believe that there is a significant opportunity for us to leverage technology, and AI in particular, to improve the business. So I would say those are some of the main themes. But overall, I know it is a lot to digest here, but we did want to give a thorough review of the initiatives that we are driving across the global company.

David Scharf: Got it. Understood. Actually, that is very helpful to zero in on those handful of initiatives. And then maybe just as a quick follow-up, I do not know if this is more on the confidential side, but are you able to share potentially what new asset classes you were considering looking at or experimenting with?

Martin Sjolund: No, not really. I would not be able to do that. What I can say is we, you know, we look at things that are adjacent and, you know, remember, we are in a lot of markets across the world, not just here in the U.S. But we clearly believe that there are attractive return opportunities in adjacent asset classes. What we typically do, though, is to approach those in a careful way. So we will buy sample portfolios, we will make investments, we will start building data, improving underwriting models, making sure that we have the operational capabilities to execute, and then as we do that, we will ramp up more quickly thereafter.

So it is really just to signal that we think that there is an opportunity for us, using our capabilities and our platform and our underwriting capabilities, to move into more segments over the longer term.

David Scharf: Got it. Understood. Thank you.

Operator: Your next question comes from the line of Mark Hughes from Truist. Please go ahead.

Mark Hughes: Yes, thank you. Good afternoon. Martin or Ken, how should we think about the collections in 2026? You have given us some good guideposts around purchasing and EBITDA, income. Anything you would like to say about the collections?

Martin Sjolund: No. Well, I think, you know, we entered 2026 with really strong momentum. We had really good cash performance in 2025. We are seeing, I think, all the key metrics are ticking in the right direction. So we had growing cash, EBITDA faster than cash, we had reducing our leverage, and, you know, on the funding side we have been able to, you know, get the Eurobond out. So I think we entered the year in a really strong way. We will continue to invest, as Rakesh mentioned earlier, in the U.S. legal channel. So I think that is an important part of what we are doing. I do not know, Rakesh, anything to add to that?

Rakesh Sehgal: Yeah. What I would add, Mark, is, look, we had a very strong 2025 where we delivered 13% cash collections growth. That is higher than the high single digits that we had telegraphed. And a lot of that, I would say, number one, came from the higher buying that we had in 2024, where we bought $1,400,000,000, our highest ever, and so that obviously played a big role in 2025. This past year, we had our third highest year of buying at $1.2 billion, and so we are still going to see strong cash growth, albeit not at the levels that we saw in 2025. But importantly, it is not about just the cash growth.

It is about delivering the bottom line. So we expect that ultimately that cash is going to grow faster than our cost, and ultimately we are going to drive higher cash EBITDA growth rates as well.

Mark Hughes: Very good. And then the competitive dynamic, kind of the supply-demand in Europe. I wonder if you could maybe just give a couple of quick thoughts on that.

Rakesh Sehgal: Yeah, we see Europe in a fairly stable place.

Martin Sjolund: We have, as we shared earlier, we saw the multiples in Europe for us in 2025 ticked up. So that shows, I think, on our part, good discipline in terms of our buying. The European market remains competitive. I think we have been saying for some time, so it is a competitive market. I think this is where we really benefit from our diversification. We are able to channel our investments to the markets where we see the best returns. And because we run lean markets, we can also hang back when we need to. So I think that is really the key thing for us. We will continue to allocate capital to markets where the returns are good.

Overall in Europe, I think the supply environment is stable. It is competitive. There is still enough opportunity for us to deploy the capital that we want to deploy. And there will be certain markets from time to time that become very stretched on pricing. But because we are in so many markets, we are able to channel capital to the right place.

Mark Hughes: Martin, if you think about the improvement, say, over the last several quarters since you have taken over, collections have been quite strong. How much of that is kind of rebalancing collections between domestic and offshore? Was there some kind of refinement in your scoring system or your systems that target particular consumers that made a difference here? I am just sort of curious what, from your perspective, has been the biggest contributor to this improvement here lately?

Martin Sjolund: You know, I really think that the results you are seeing are the result of several years of initiatives that have been made across the business here. So you have had a number of initiatives ranging from building out the DCA network, significant investments in legal collections, and also strong growth on the digital channel as well. So I think all of these things are not, you know, that is not something that happens overnight. They have been put in place and we have really been able to, I think, tune them. I mentioned AI earlier, just as an example. We have been able to use AI to address the unstructured data in documentation.

So we go through millions of documents and identify cases that are suitable for legal, and that is one of the things that is driving this. So I think, you know, collections to me is really like an oil tanker. It is not easy to change it in the short term, but through these initiatives, and just in a disciplined and structured way, executing on these initiatives across a range of them, I think we have seen these improvements.

Mark Hughes: And then I think you have talked about your share repurchase authorization, looking to improve your leverage. Looks like EBITDA you expect to improve. Any early thoughts in terms of perhaps increasing the tempo of share buybacks?

Rakesh Sehgal: Yeah, Mark, look, we are always looking at opportunities to drive shareholder value and drive equity value. And for us, share repurchases are part of that toolkit. But number one, our priority is to continue to invest in the business, continue to buy portfolios at higher returns that create that sustainable growth in our net income. The second is to also invest in our business, so whether that is on the legal channel, the digital channel that Martin mentioned. But to the extent we see that there is an opportunity to do share buybacks given what we believe is the intrinsic value of the business and how the market is valuing us, we would absolutely look to do share buybacks.

As I mentioned earlier in the call, we do have $50,000,000 currently under our board authorization. And that actually lines up now pretty well with what is available under the various covenants in our credit facilities as well as our notes. The good news is, given the momentum that we have created in 2025, delivering that $73,000,000 of net income, that capacity actually has increased quite a bit versus where we were earlier in the year in 2025. So you should see us continuing to opportunistically undertake share repurchases as we move into 2026 and we calibrate where the market thinks about our business today.

Operator: Very good. Thank you. And if you are using a speakerphone, please make sure to lift your handset before pressing any keys. Your next question comes from the line of Robert Dodd from Raymond James. Please go ahead.

Robert Dodd: Hi, and congrats on the quarter. Yes, a lot to digest here. If I look at kind of the summary where all the vectors kind of come together with the financials, because, well, you know, that is what I do. The disciplined investment seems like you are not expecting an upward-sloping to the right investment horizon. You want to be very careful about that, I get that. You are expecting adjusted EBITDA to grow, though. So I think my two takeaways of that are you expect growth in collections faster than investments, and you expect growth in expenses slower than collections. I think that is my takeaway; you can correct me if I am wrong there.

On the growth in collections faster than investments, I mean, is this an expectation that with all these new technology tools, AI, searching documents, etcetera, that you can reach kind of more customers in a pool, or do you expect to get more cash from the same number of customers in that pool? How would you rank those—probably both—but the relative components there about how you think the technology is going to work on the collections versus investment side? And then I have got questions about expenses, obviously.

Martin Sjolund: Okay. Yeah. Well, we will come back to that. No, it is really about pulling a number of levers here as we go. So on one hand, we are investing significantly in legal, in particular in the U.S. And that is something that, you know, there is a bit of a catch-up effect there where we have identified opportunities to invest in legal, and we see good performance on those legal collections from portfolios that we have had for some time. That is one of the things driving it. We are improving our digital collections significantly.

As we said earlier, that was up 25% last year, and we see that as we are able to tune that and improve that, we can also drive additional liquidation through that. So you have that. On the other hand, you have the call centers, where by using more offshore resources, it makes it more economical for us to call accounts where, with a higher cost profile, it does not make sense. But when you have a lower cost, you are able to penetrate some of those portfolios more deeply. So there are a number of levers there. There are also the external debt collection agencies.

You know, this was something that in the U.S. we did not really do before, but outside the U.S. it has always been an important part of how we operate. And certain DCAs have specialist capabilities; they might have certain trace capabilities, and so we are getting better about leveraging those capabilities and putting accounts out that maybe were not being worked fully by us in the past, but there is still opportunity and value there. So all of those things together are helping to drive the cash. So as those cost reductions start to work their way through over time, we see the benefit of that too.

So we are really working both to improve our cash on one side and to reduce our cost on the other. And as these things come together, that is why we think we have a good direction of travel on the key metrics, ultimately leading to higher returns even though we are being cautious on the investing side. That is why on the investments, as you said, we are not going to buy our way out of this. You know, that is not our goal. We want to generate returns but really tune the platform so that we can get our returns up, and then we can think about pushing on beyond that.

Robert Dodd: Got it. Got it. Thank you. And answering the question I was about to ask. One follow-up to that. On the DCAs, etcetera, and your move to more variable and now outsourced call centers, etcetera, how far do you think you can push the overall expense structure to fully variable, if you will? I mean, obviously, you have still got three call centers, you have still got a lot of things, you have gone cloud, etcetera. I mean, how much of the in-house fixed cost infrastructure do you think you need to keep versus how much can you go to a fully variable expense structure?

Martin Sjolund: You know, Robert, I really see this as a trade-off. So we have markets where we have zero people. We just have accounts and we place them with the debt collection agencies and there they go. So that is a completely variable model; we do not have a single person sitting there. Then we have others where we do every single thing ourselves in-house. And then a lot of markets are on a spectrum somewhere in between there. So I do not really think that there is a perfect model out there from running all these different countries.

The benefits of in-house collections are that you often have a cost advantage because, by definition, if you outsource to someone else, they need to make money too. So by doing it in-house you can do it in a less expensive way, you can have more control of the accounts, you can have more control of the data, and so on. So there are benefits to that. But on the other hand, as we know, it is harder to flex the cost if you are doing everything yourself. And if the volumes go up or the volumes go down, it is not easy to adjust your cost base to that.

So I think that really it is about having a mix. And if I look across all of our countries, like I said, you will find some countries are at one absolute extreme and others are on the other. You know, the biggest markets like the U.K. or the U.S., I think, are probably somewhere in between, where I think a mix of variable collection channels with internal—we have this big enough scale to print internal in-house collections to be cost effective—but we can also leverage these external channels for the marginal collections, if you will. So that is really how I think about it.

Robert Dodd: Got it. Thank you. Understood.

Operator: There are no further questions at this time. I would like to turn the call back to Martin Sjolund, President and CEO, for closing comments.

Martin Sjolund: Okay. Well, I want to thank everyone for listening. You know, just to emphasize, I think we had a really, really strong Q4. We feel positive about the outlook ahead. I tried to lay out what our strategy is going forward and how these three vectors of capital and investing, operations, technology, and data, and people and culture are really going to come together and I think put PRA Group, Inc. on a really strong trajectory going forward. We look forward to attending the Raymond James Conference next week, and we will be going into a little bit more detail on each of these vectors to talk more about our plans. So thanks for listening.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.

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