PRA GROUP INC Q4 FY2025 earnings call

• 2025 was a year of significant progress with focus on strengthening US platform, building on European franchise, executing near-term priorities, and developing longer-term strategy.
• Purchased $1.2 billion of portfolios in 2025, third highest investment year on record. ERC at record $8.6 billion, cash collections $2.1 billion new record. Adjusted cash efficiency 61%, adjusted net income $73 million, adjusted EBITDA up 16% to $1.3 billion.
• Increased purchase price multiples in US and Europe, prioritizing returns over volume. Made enhancements to capabilities: revamped legal collection process, new call center strategies, expanded digital collections, built network of DCAs. Modernized IT platforms, exploring and deploying AI. Focused on cost: eliminated over 115 corporate and overhead roles in US, transitioned to lower-cost call center offshoring, US call center headcount decreased 548 agents (42%) since start of 2025 while US core cash collections up 20% vs prior year. Maintained strong and diversified capital structure, repurchased $20 million of stock in 2025.

In 2025, PRA purchased $1.2 billion of portfolios, third highest investment year on record. ERC reached a record $8.6 billion. Cash collections were $2.1 billion, a new record, up double digits for quarter and year. Revenue was $1.2 billion, a record. Adjusted cash efficiency improved to 61% from 59% in 2024. Adjusted net income was $73 million in 2025. In Q4, purchased $315 million of portfolios ($112M in US, $157M in Europe, $45M in other markets). ERC at quarter end was $8.6 billion, up 15% y/y, with US accounting for 42% and Europe 51% of ERC. Cash collections in Q4 were $532 million, up 14% y/y; full year cash collections grew 13% to $2.1 billion. US legal cash collections full year 2025 grew 28% to $483 million, accounting for 48% of US core cash collections in 2025. Europe cash collections grew 11% in Q4 and 13% for full year 2025.

• Expect portfolio supply to remain stable in next 18 months. US credit card balances at $1.1 trillion, industry-wide charge-off rates still high providing supply opportunities. Expect adjusted EBITDA to continue growing, aim for adjusted EBITDA to grow faster than cash collections even as investing in legal collections, IT, and AI. Anticipate investments in range of $1 to $1.3 billion per year, 2026 projected to be similar to 2025. Aim to reduce net leverage to mid two times area over time.

Q: From an investor perspective, what are the top three things to pay most attention to in the strategy?

A: Capital and investing (prudent global NPL investments, strong financial profile, conservative balance sheet, prudent capital allocation); operations (transforming operations, leveraging technology, enhanced data and analytics, disciplined cost management); technology (modernizing platform, leveraging AI).

Q: Martin, how should we think about collections in 2026?

A: Entered 2026 with strong momentum, had good cash performance in 2025, key metrics ticking in right direction, will continue to invest in US legal channel. 2025 had 13% cash collections growth, expect strong cash growth albeit not at 2025 levels, but cash to grow faster than cost and drive higher cash EBITDA growth rates.

Q: Thoughts on competitive dynamic and supply-demand in Europe?

A: Europe in stable place, multiples in Europe ticked up in 2025 showing good buying discipline, European market competitive, benefit from diversification, allocate capital to markets with best returns, supply environment stable, competitive but enough opportunity to deploy capital.

Q: Biggest contributor to recent improvement in collections?

A: Result of several years of initiatives including building out DCA network, significant investments in legal collections, strong growth on digital channel, use of AI to address unstructured data in documentation, adjustments to cost base like call center agent reduction and corporate overhead reduction.

Q: Early thoughts on increasing tempo of share buybacks?

A: Priority is to continue investing in business to create sustainable growth in net income and invest in business, but will opportunistically undertake share repurchases as market values the business, have $50 million under board authorization which lines up with covenants, capacity increased due to momentum in 2025 and net income of $73 million.

Q: How far can push overall expense structure to fully variable?

A: Tradeoff, some markets have zero people with debt collection agencies (completely variable), some markets do everything in-house (fixed cost), most markets on spectrum in between. Mix of variable and in-house collections, benefits of in-house include cost advantage and control, but harder to flex cost; big markets like UK or US are somewhere in between with mix of variable collection channels and internal collections.