PRA Group Q2 2025 Earnings Report

PRA Group EPS Results

• Actual EPS: $1.08
• Consensus EPS: $0.62
• Beat/Miss: Beat by +$0.46
• One Year Ago EPS: N/A

PRA Group Revenue Results

• Actual Revenue: $287.69 million
• Expected Revenue: $279.34 million
• Beat/Miss: Beat by +$8.34 million
• YoY Revenue Growth: N/A

PRA Group Announcement Details

• Quarter: Q2 2025
• Date: 8/4/2025
• Time: After Market Closes
• Conference Call Date: Monday, August 4, 2025
• Conference Call Time: 5:00PM ET

PRA Group (NASDAQ:PRAA), a financial and business services company, engages in the purchase, collection, and management of portfolios of nonperforming loans worldwide. It is involved in the purchase of accounts that are primarily the unpaid obligations of individuals owed to credit originators, which include banks and other types of consumer, retail, and auto finance companies. The company also acquires nonperforming loans, including Visa and MasterCard credit card accounts, private label and other credit card accounts, personal loans, automobile loans, and small business loans from banks, credit unions, consumer finance companies, retailers, utilities, automobile finance companies, and other credit originators. In addition, it provides fee-based services on class action claims recoveries. The company was formerly known as Portfolio Recovery Associates, Inc. and changed its name to PRA Group, Inc. in October 2014. PRA Group, Inc. was founded in 1996 and is headquartered in Norfolk, Virginia.

PRA Group Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Under new CEO Martin Scholand, PRA is applying proven European transformation strategies—upgrading technology, standardizing processes, and reinforcing leadership—to accelerate global performance and shareholder value.
• Positive Sentiment: Q2 results showed strong momentum with $347 million in portfolio purchases, record ERC of $8.3 billion (up 22% YoY), cash collections of $536 million (up 13%), portfolio income growth of 20%, and adjusted EBITDA up 20%, all while maintaining a net leverage ratio of 2.81x within its 2–3x target.
• Positive Sentiment: The company completed the sale of its Brazilian servicing JV equity interest for a $30 million after-tax gain, demonstrating PRA’s ability to unlock value opportunistically while retaining core portfolio operations.
• Positive Sentiment: PRA is reorganizing U.S. operations under a single P&L led by Steve Mackey, consolidating call centers, implementing a return-to-office policy, establishing a Charlotte office for tech talent, and launching a deep dive into IT modernization to boost efficiency and accountability.
• Positive Sentiment: Maintaining a disciplined capital allocation framework, PRA sees an elevated U.S. supply environment and more rational competition in Europe, and plans to stay focused on high-return portfolio purchases with disciplined underwriting.

Presentation

[Operator]

Evening, and welcome to PRA Group Second Quarter twenty twenty five Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference call over to Mr. Najeeb Mostamad, Vice President, Investor Relations for PRA Group. Please go ahead.

[Najim Mostamand, VP - IR at PRA Group]

Thank you, operator. Good evening, everyone, and thank you for joining us. With me today are Martin Scholand, President and Chief Executive Officer and Rakesh Segal, 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.

[Najim Mostamand, VP - IR at PRA Group]

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 www.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 between Q2 twenty twenty five and Q2 twenty twenty four, unless otherwise noted, and our Americas results include Australia.

[Najim Mostamand, VP - IR at PRA Group]

During our call, we will discuss net debt to adjusted EBITDA for the twelve months ended 06/30/2025. 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. And with that, I'd now like to turn the call over to Martin.

[Martin Sjolund, President, CEO & Director at PRA Group]

Thank you, Najim, and thank you everyone for joining us this evening. It's only been seven weeks since the June that I took on the role of President and CEO, but we've gotten off to a good start and the entire team is working with urgency to continue improving our performance. During this time, I've been in ongoing active dialogue with leaders across the organization, credit issuers who sell non performing loans, our rating agencies, and of course our investors. In fact, I've had dozens of engaging and insightful investor meetings in this short span, and I look forward to many more in the months ahead. Having been with the company for thirteen years now, including the last seven as part of the global senior leadership team, I have a clear perspective on how we can best deliver value for our shareholders.

[Martin Sjolund, President, CEO & Director at PRA Group]

This perspective has been significantly shaped by the transformation I helped implement in our European business. As a reminder, over the past decade, I served as Europe's chief operating officer prior to stepping into the role of president of Europe. When I became president in 2018, we faced a challenging and highly competitive market in Europe. At the same time, internally, we had a patchwork of systems and limited digital IT and analytical capabilities. Under my leadership, the team laid out a clear strategy to transform the European business that included upgrading our technology platform, bolstering our digital capabilities, investing in talent and standardizing key processes and technologies across markets.

[Martin Sjolund, President, CEO & Director at PRA Group]

As a result, we established a proven multi year track record of performance in Europe, driven by a long term orientation and four main themes. Number one, the leadership team. We have an experienced and tenured leadership team supported by a strong performance management culture. Number two, underwriting. We have a disciplined underwriting approach leading to ERC from the European business growing to half of PRA's total ERC in recent years.

[Martin Sjolund, President, CEO & Director at PRA Group]

Number three, operational execution. We also have a long track record of cash over performance and cash collections growth supported by a modern technology platform and strong digital capabilities. And number four, cost efficiency. Over the past seven years, we have developed one of the most cost efficient platforms in the region. This success gives me confidence in our ability to drive change and deliver value.

[Martin Sjolund, President, CEO & Director at PRA Group]

And I will bring many of these learnings to the global business, including our US business, which is well underway in its transformation journey. What's perhaps most encouraging is that PRA operates from an incredibly strong foundation built through decades of experience, scale, and deep operational and compliance expertise. Starting from the top, we have a highly seasoned leadership team with decades of experience, not only in the debt buying industry, but also in strategy, financial services, and operations. I'm confident that we have a strong team in place to drive improved performance. In addition, we have presence across 18 countries, giving us a healthy level of global diversification. This reinforces the resilience of our business model and enables us to take advantage of unique opportunities as seen by our operations in Brazil. We entered Brazil through a joint venture in 2015 that encompassed investments in a servicing platform and making portfolio investments.

[Martin Sjolund, President, CEO & Director at PRA Group]

Over the past ten years, we have developed a strong local franchise together with our local partners, collecting more than $1,000,000,000 and we still have more than $200,000,000 in ERC. This past quarter, we completed the previously announced sale of our equity interest in RCB, the servicing platform for our investments in Brazil, generating a $30,000,000 after tax gain, while still maintaining our portfolios and operations in that market. I would especially like to thank our Brazilian partners and I look forward to continued opportunities there in the future. This case illustrates how PRA can bring our capital and experience into new markets and create value in a variety of ways. We also have deep seller relationships globally with an attractive supply environment in The US and a more rational competitive dynamic in Europe compared to a few years ago.

[Martin Sjolund, President, CEO & Director at PRA Group]

Markets are always competitive, but at the moment we see fewer new entrants overpaying portfolios than we have in the past. We remain focused on higher return opportunities and maintaining a disciplined approach to purchasing. Our European business continues to deliver strong results and I'm excited about the path forward under the new leadership of Owen James, who recently succeeded me as President of PRA Group Europe. Owen has also been in the company for thirteen years now and most recently served as our Global Investments Officer, where he was instrumental in strengthening our seller relationships, improving our purchase price multiples, and achieving record portfolio purchases of $1,400,000,000 in 2024. His promotion is another great example of how we are leveraging the strengths of our global business and team to drive results.

[Martin Sjolund, President, CEO & Director at PRA Group]

While I see opportunities to further strengthen our European business, I believe the biggest opportunity for us today is accelerating the transformation of our US business. We've made great strides over the past couple of years, particularly in our legal, digital and call center operations, but I still see areas to improve and strengthen. Additionally, I wanna mention our capital structure. I have met with many of our major global creditors and bondholders over the past few weeks, and I'm encouraged by the strong creditor relationships and ample funding we have in place with no debt obligations maturing until 2027. This funding position enables us to continue capitalizing on the portfolio supply environment while investing further to improve our operating platform.

[Martin Sjolund, President, CEO & Director at PRA Group]

As you can see, there's a lot to be excited about, and I see significant potential in developing PRA into the global leading player in our industry. The work to achieve this is well underway as we focus on making the changes necessary to drive a meaningful improvement in our financial and operational results. I'll now spend some time going through my priorities for the second half of this year. As I mentioned on the last call, I remain focused on our three core strategic pillars of optimizing investments, operational execution, and managing expenses. Starting with optimizing investments, we are committed to remaining disciplined and strategic in our allocation of capital.

[Martin Sjolund, President, CEO & Director at PRA Group]

This means executing on our global investment framework and staying focused on higher return opportunities. We can deploy capital where we see the best returns for PRA, and we have shown in the past that we are willing to hold back when we feel pricing is overheated. That said, while there are local variances from time to time, the overall market volumes and competitive intensity are tracking as we expected. Turning to operational execution. We are focused on continuing to improve the overall productivity and efficiency of The U.

[Martin Sjolund, President, CEO & Director at PRA Group]

S. Business. Regarding our call centers, I regularly spend time with our frontline agents and I'm always reminded by what a challenging and important role they have, and I want to acknowledge and thank them for their hard work and contribution to our overall success. We recently revamped our performance management system, which should lead to a better reward structure for our highest performers. We also successfully consolidated our site footprint from six to three call centers in The US.

[Martin Sjolund, President, CEO & Director at PRA Group]

Combined with our work from home initiative for eligible agents, this has translated into a higher retention of our most tenured and productive staff. Within the legal collections channel, we've made great strides in reducing the overall time to collect cash. We also continue to see growth in the number of wage garnishment filings, which has been recently supplemented by other activities in post judgment execution. These actions have resulted in a significantly revamped legal channel that is becoming more efficient and productive in driving cash collections. Despite all of this progress in the call center and legal channel, we must go beyond what we are already doing.

[Martin Sjolund, President, CEO & Director at PRA Group]

And this includes taking a different approach on how we are organized and track performance and how we use technology, data and analytics. To support this, we are reorganizing the structure of our US operations to create a US focused operational team led by our global operations officer, Steve Mackey. Steve brings more than three decades of industry experience, having spent his career leading all aspects of collections operations for Citigroup. He played a key role in driving operational execution and improving efficiency across our US business. And his new team will now be measured on a single P and L.

[Martin Sjolund, President, CEO & Director at PRA Group]

I believe this will result in more accountability and faster decision making. As a way to elevate our standards, we have also announced a return to office initiative for our corporate and support staff, which we expect to lead to better teamwork, performance, and collaboration across functions. But we also need to ensure that we can attract the best talent when it comes to analytics, technology, and beyond. Therefore, we will be setting up an office in Charlotte later this year. To be clear, we are not moving our headquarters, but we acknowledge the need to access specialist talent and having access to a significantly larger market will help us achieve this goal.

[Martin Sjolund, President, CEO & Director at PRA Group]

It's the same playbook we have been using in Europe to access and retain top talent. As it relates to our technology, we are performing a deep dive analysis on how we can best accelerate the modernization of our US IT platform. In Europe, we have already deployed a state of the art cloud based contact platform across all the markets, and our infrastructure there is on one common cloud. We have also consolidated our collection systems to simplify the data sources and leverage expertise across markets. These moves have resulted in significant efficiencies in Europe, and I'm looking at opportunities for how we can apply those learnings and improve our technology platform in The US.

[Martin Sjolund, President, CEO & Director at PRA Group]

Finally, turning to managing expenses. I'm focused on other ways to further improve our efficiency. While there is an opportunity to continue leveraging our offshore capabilities, we must also supplement that with a comprehensive review of our overhead costs. It is important that we manage the business with maximum efficiency. In Europe, there are numerous markets where we have had to consolidate or restructure in order to improve efficiencies or withstand downturns in the market cycle.

[Martin Sjolund, President, CEO & Director at PRA Group]

So there's already a strong blueprint within the company for making these adjustments. And I have already started working closely with our leaders in The US to identify cost savings opportunities. These actions will take time and I don't expect to see a significant impact in the near term, but we will structure our business to support the most productive cash generating activities. So to summarize, the five main priorities we've focused on for the second half of the year are number one, building on the momentum of our cash generating initiatives. Number two, restructuring our US operations.

[Martin Sjolund, President, CEO & Director at PRA Group]

Number three, implementing return to office for our corporate and support staff. Number four, performing a deep dive analysis on modernizing our US technology platform. And number five, taking off a comprehensive review of our overhead costs. We are tackling all these priorities with urgency and we'll introduce additional initiatives as the year progresses and we enter 2026. Overall, I'm excited by the opportunity to truly transform our business and to make impactful changes that better position PRA to deliver substantial and sustainable value.

[Martin Sjolund, President, CEO & Director at PRA Group]

And with that, I'll turn it over to Rakesh for a summary of our Q2 financial results before returning to provide some closing remarks.

[Rakesh Sehgal, EVP & CFO at PRA Group]

Thanks, Martin. We purchased $347,000,000 of portfolios during the quarter, of which $199,000,000 were in The Americas and $147,000,000 were in Europe. On a year to date basis, our 2025 purchase price multiple was 2.14 times for Americas Core and 1.82 times for Europe Core. Both represent a continuation of the upward trend in purchase price multiples we have experienced in the past couple of years. As comparison, the Americas Core purchase price multiple was 1.75 times at the start of 2023.

[Rakesh Sehgal, EVP & CFO at PRA Group]

This trend reflects both the strong portfolio supply, especially in The US, as well as our disciplined approach to investing in portfolios with higher returns globally. We will maintain this discipline and the high return focus to drive cash collections, portfolio income, and ultimately net income. Primarily as a result of strong buying this quarter, we grew ERC to another record of $8,300,000,000 at the end of Q2. This is up 22% year over year and up 6% on a sequential basis. Looking to the 2025, we expect portfolio supply to remain at elevated levels in The U.

[Rakesh Sehgal, EVP & CFO at PRA Group]

S. And to be relatively stable in Europe. Cash collections for the quarter were $536,000,000 up 13% from the prior year period. This is on top of the double digit growth we experienced last year. The increase for this quarter was driven by both higher levels of recent portfolio purchases and the continued investments we have been making in The US legal channel.

[Rakesh Sehgal, EVP & CFO at PRA Group]

Q2 US legal cash collections grew 24% year over year to $119,000,000 As a reminder, legal is an important channel for us, but it is not the channel that we lead with. We will consider using it if and when customers do not choose to engage with us voluntarily. While there is an upfront investment required in the form of port costs, the legal channel typically provides greater collections certainty and a higher overall amount of cash collected versus other channels. We look at all our collection strategies from a net present value perspective. And because of its strong relative performance and value, we will be looking to further strengthen our legal collections channel.

[Rakesh Sehgal, EVP & CFO at PRA Group]

Let's turn now to total portfolio revenue, which was $284,000,000 for the quarter, up 1%. Portfolio income, which is the yield component of our portfolio revenue and the more predictable revenue line item was $251,000,000 up 20% for the quarter. This year over year growth has accelerated from the growth we saw in Q2 last year, reflecting an increased level of portfolio investments at higher purchase price multiples. The other portfolio line item is changes in expected recoveries, which was $33,000,000 this quarter and included cash over performance of $40,000,000 On a consolidated basis, our overall business over performed by 7% with Europe exceeding expectations by 14% and The Americas exceeding by 3%. This $40,000,000 in overperformance was partially offset by negative $7,000,000 in changes in expected future recoveries, which primarily reflects ERC adjustments we have made in The US.

[Rakesh Sehgal, EVP & CFO at PRA Group]

Overall, The US vintages exceeded expectations by 3%, with The recent US core vintages performing in line with expectations this quarter. However, based on our latest estimates, we have adjusted our forecast for cash collections over the life of the vintages, primarily on the 2023 vintage. As a reminder, GAAP accounting requires us to make our best and most accurate estimate each quarter for each vintage, which often introduces volatility in changes in expected recoveries, even if cash collections meet or beat expectations for that vintage in the current quarter. It's important to note that our cash curves span many years as evidenced by the fact that we are still collecting on vintages that are ten years old or more. Operating expenses were $2.00 $3,000,000 up 4% from the prior year period.

[Rakesh Sehgal, EVP & CFO at PRA Group]

This was primarily driven by increases in professional and outside services expenses and legal collection costs. Professional and outside services expenses were up $3,000,000,000 primarily due to increased investment in call center offshoring to provide greater operating flexibility as that channel ramps up. Our U. S. Focused offshore agent headcount grew 34 year over year and now makes up more than 35% of our overall U.

[Rakesh Sehgal, EVP & CFO at PRA Group]

S. Focused agent headcount. Legal collection costs were up $2,000,000 driven primarily by investments in our U. S. Legal channel, which is expected to continue driving growth in future cash collections.

[Rakesh Sehgal, EVP & CFO at PRA Group]

While the growth in legal collection costs was somewhat muted this quarter, we expect the growth to be higher next quarter. Our cash efficiency ratio was 62%, up from 59% in the prior year period. Net interest expense was $62,000,000 an increase of $7,000,000 primarily reflecting higher debt balances due to increased portfolio investments. Our effective tax rate was 25% for the quarter. For full year 2025, we expect our effective tax rate to be in the mid to high 20s, depending on the income mix from various countries and other factors.

[Rakesh Sehgal, EVP & CFO at PRA Group]

Net income attributable to PRA was $42,000,000 or $1.08 in diluted earnings per share. This includes the approximately $30,000,000 after tax gain from the previously announced sale of our equity interest in RCB, our servicing provider in Brazil. Excluding this one time gain, our net income attributable to PRA was $13,000,000 or $0.32 in diluted earnings per share. This transaction demonstrates our ability to be opportunistic and continue to deliver economic value for our shareholders. Given that we are a cash on cash business, we believe it is also important to look at adjusted EBITDA in addition to net income, which is susceptible to quarterly fluctuations because of how this industry's revenue accounting works.

[Rakesh Sehgal, EVP & CFO at PRA Group]

Adjusted EBITDA represents what we believe to be a better view of our operational and financial progress and performance. As a result of our strong cash collections growth and disciplined expense management in recent quarters, we have been able to accelerate adjusted EBITDA growth, which grew 20% this quarter versus the 13% growth in cash collections. Our net leverage, defined as net debt to adjusted EBITDA was 2.81 times as of June 30. We continue to operate within our long term leverage target of two to three times. In terms of our funding capacity, we have ample capacity and financial flexibility under our current debt structure.

[Rakesh Sehgal, EVP & CFO at PRA Group]

We have 3,200,000,000 in total committed capital under our credit facilities as of June 30. We have total availability of $841,000,000 comprised of $522,000,000 available based on current ERC and $319,000,000 of additional availability that we can draw from subject to borrowing base and debt covenants, including advance rates. We have no debt maturities until November 2027 when our European facility matures, enabling us to continue supporting the growth of the European business and transforming our U. S. Business.

[Rakesh Sehgal, EVP & CFO at PRA Group]

We believe the cash generated from our business, the capital available under our credit facilities and access to capital markets in both The U. S. And Europe position us well to finance our operations, forward flow commitments, debt maturities and additional portfolio purchases. During the second quarter, we saw another opportunity to enhance shareholder value and repurchased $10,000,000 of our stock. Ideally, we would have repurchased more shares, but we're constrained by limitations under our debt covenants, though we expect these constraints to ease somewhat as we move forward.

[Rakesh Sehgal, EVP & CFO at PRA Group]

We are always evaluating opportunistic ways to deploy capital with the highest returns to shareholders and we'll continue to do so going forward. Looking ahead, we expect to see more progress in our cash based metrics through the 2025, putting us on track to deliver on our purchase target of $1,200,000,000 cash collections growth target of high single digits and cash efficiency target of 60% plus for the full year. As we head into the next planning cycle, we will be reviewing our longer term strategic outlook and expect to provide more substantial updates early next year. I'll now turn it back to Martin.

[Martin Sjolund, President, CEO & Director at PRA Group]

Thanks Rakesh. In summary, I'm excited about the road ahead. As we look out beyond the coming months and quarter, I see a tremendous opportunity to build on our positive momentum over the past couple of years to drive shareholder value. I recognize that our financial performance is not yet where we want it to be, but the team and I are committed to implementing the changes necessary to realize the company's full potential.

[Martin Sjolund, President, CEO & Director at PRA Group]

Thank you for your continued support, and I look forward to engaging with all of you and hearing your input as we work to transform PRA. And with that, we'll open it up for questions.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed with the number one on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline for the polling process, please press star followed with the number two.

[Operator]

Your first question comes from the line of David Sharp from Citizens Capital Markets.

[David Scharf, Analyst at Citizens Capital Markets and Advisory]

Hello. Good afternoon, and and thanks for taking my questions. Hey, Martin. Wondering if you could just provide some color in in US on supply and opportunity, not from the macro sense. We're obviously all aware of the elevated debt levels and the charge offs that are rolling off.

[David Scharf, Analyst at Citizens Capital Markets and Advisory]

But can you just remind us how we ought to be thinking about the company's both volume of seller relationships and whether or not there are any new sellers in the pipeline that could impact purchase volumes, as well as whether there are new asset classes or non credit card asset classes that might be growing that we should think about?

[Martin Sjolund, President, CEO & Director at PRA Group]

Yeah, thanks. Thanks, David. I can make a few comments about that. As you kind of alluded to, the overall buying environment in The US we've described as elevated compared to sort of longer term baseline. So we see attractive opportunities to deploy capital here in The US.

[Martin Sjolund, President, CEO & Director at PRA Group]

We have a global capital allocation framework that we use. So, you know, we are a global company obviously, and we do look to optimize how we allocate capital between markets. So often balancing between Europe and The US, but generally speaking, the outlook for us is positive. You can see that in some of our multiples and you can see that in the comments that Rakesh made about our target for the year. You also asked about alternative segments and relationships.

[Martin Sjolund, President, CEO & Director at PRA Group]

My sense is that we have strong seller relationships here in The US that go back in some cases decades. So we continue to work closely with those large sellers in the core areas where we have good data and good experience. We are always looking for opportunities to expand as well. And we're aware that there are more segments out there and asset classes that could be interesting to us. What we would typically do is to start small in those areas and carefully test our way in there to build data, build operational capability, etcetera.

[Martin Sjolund, President, CEO & Director at PRA Group]

So, I definitely think that for the longer term, there's an opportunity there for PRA. But I would say in the near term, focus is really on the core business, deploying the capital towards the targets that we had set for ourselves, and just making sure that the operational execution against that is where it needs to be.

[David Scharf, Analyst at Citizens Capital Markets and Advisory]

Got it. Understood. Thank you. And maybe just as a follow-up, I'll let others dig into the revenue side. But on the expenses, can you give us a sense for how we should think about kind of longer term where you want the legal channel to be in terms of collection mix and how that factors into the sort of the ceiling, on the cash efficiency ratio.

[David Scharf, Analyst at Citizens Capital Markets and Advisory]

Obviously, it's kind of a a channel you only wanna deploy after you determine an account has some ability to repay, but it is more expensive than, you know, the primary call center outreach. How should we be thinking about kind of that 60% level as a ceiling within the context of legal growing as a percentage of the mix?

[Martin Sjolund, President, CEO & Director at PRA Group]

Yeah, I mean, as you pointed out, legal was, we would never lead with legal. We would always try first, you know, over a longer period of time to set up account repayment options with customers in an amicable way. That's always our first option. However, you know, as you know, over time, if our data tells us that there's opportunity there and the customers aren't engaging with us, then we will go to the legal channel. The legal channel is important in all countries.

[Martin Sjolund, President, CEO & Director at PRA Group]

I've been running Europe for the past seven years and legal is a very important channel in those countries as well. In terms of your question for The US, we would always look to maximize the value of the legal investments that we make. So, we have a very, I think, very sophisticated legal analysis that we do to understand the legal potential of an account, but also weighing that against the cost. And in terms of ceiling, I don't really have a target in mind there. And you have to remember a lot of this is about timing.

[Martin Sjolund, President, CEO & Director at PRA Group]

So, you typically incur significant legal costs earlier in the cycle, but then you can have, you know, a longer tail of cash collections over time. So, we will always be weighing those two factions. So, the legal investments depends both on the portfolio we have, what we are attempt to maximize the value of each account, and then to implement that over time. So, I think maybe Rakesh, you can comment on the trajectory where legal OpEx at the moment is trending, but that's what I would say.

[Rakesh Sehgal, EVP & CFO at PRA Group]

Yeah, David, to add to what Martin said, first of all, I would say whenever we look at an account, we look at it on an NPV basis and whether it is in the legal channel or it's in the call center channel, it has to work from an economic perspective on a net present value perspective. So, we're always doing that analysis before we put accounts into the legal channel. Second is, Mark mentioned, we have significantly over the last year plus improved our processes. And we know that we're delivering greater value in terms of cash collections from the legal channel. And if you just look at where we were pre COVID, that's a good data point.

[Rakesh Sehgal, EVP & CFO at PRA Group]

We were in the low 30s in terms of the cash we collected from the legal channel. And today we are in the low 40s. As we have continued to optimize that channel and investing in it, we expect to continue driving more cash from that channel. Now, as it relates to the OpEx side, if we were at total across PRA at 89,000,000 growing to 125,000,000 between '23 and '24. We expect, as I've mentioned on previous calls that that growth rate of about 40% to moderate starting in 2025.

[Rakesh Sehgal, EVP & CFO at PRA Group]

And since you brought up the legal OpEx, this quarter, legal OpEx was up only 2,000,000. That was a 7% year on year growth. When you look at it sequentially, it grew 12% versus the previous quarter. And as you look out to the rest of 2025, we expect that growth to be somewhere between 1520%. And one of the reasons is we had a very strong buying environment in 2024.

[Rakesh Sehgal, EVP & CFO at PRA Group]

So you're starting to see all those accounts either going into now the legal channel or into the call center channel.

[David Scharf, Analyst at Citizens Capital Markets and Advisory]

Understood. That that cadence is very helpful. Thank you so much.

[Operator]

Your next question comes from the line of Mark Hughes from Truist Securities. Your line is now open.

[Mark Hughes, Analyst at Truist Securities]

Yeah. Thank you very much. Good afternoon. The collections over performance, 7% overall, was a nice improvement from Q1 both in Europe and The Americas. Can you talk about what drove that?

[Mark Hughes, Analyst at Truist Securities]

Was that just more appropriate forecasts going into the quarter? Or did you see some improvement in the overall market, or was it internal efforts were bearing more fruits?

[Martin Sjolund, President, CEO & Director at PRA Group]

Yeah, thanks, Mark. I agree that we're happy with the overperformance that we saw in Q2. Generally speaking, the European performance has been really strong for quite a period now. So, think there we're seeing generally speaking across most of the markets that cash is coming in stronger than we had originally projected. So, I think that probably reflects a number of things, both operational initiatives that the teams are running, but also, I think, in some markets, a strong position of the consumer in those markets.

[Martin Sjolund, President, CEO & Director at PRA Group]

And then finally, I think just it's a signal of the underwriting, which has been maybe in some cases, conservative, and we're seeing a strong performance there. In The US, we're also pleased with the performance to be 3% above. I wouldn't attribute that necessarily to any specific thing around the forecast, but I would say that we're seeing strong performance from the various initiatives that have been rolled out here in The US. In particular, legal cash was up 24%. I think that's a sign that the investments that we've been making in legal, are bearing fruit and that the initiatives that the team here has been pushing, are starting to generate results.

[Martin Sjolund, President, CEO & Director at PRA Group]

A couple of percentage points up and down in a quarter But generally speaking, I think we're in a good place.

[Mark Hughes, Analyst at Truist Securities]

Martin, you talked about the reorganizing structure in The US. Could you expand on that a little bit more? And are there any financial targets you've got associated with that?

[Martin Sjolund, President, CEO & Director at PRA Group]

Yeah, so in The US, I mean, I'm only sixty days in or something, but obviously I've been a member of the global team here for a long time. And one of the observations I've had is that the way we organize some of our European markets is different from The US. So, The US had on the operational side, a more functional setup, I would say, whereas in European markets, we tended to have a more focus around the operation. And so, one of the things after discussing with the teams here, I concluded that there was an opportunity in our US structure to create a more empowered US operational team so that we have the different functions rolling up to The US operational leader. As I mentioned earlier, we have a very experienced leader here in The US and by giving him different levers ranging from IT to data analytics to the other functions, I think we'll be able to create more accountability for cash performance, but also more accountability for costs.

[Martin Sjolund, President, CEO & Director at PRA Group]

So, this team is going to be measured on a single P and L And I'm looking for speed and decision making and speed and execution. In terms of specific metrics for that P and L, that's something we'll have to come back on internally later. We're just in the process of rolling this out now.

[Mark Hughes, Analyst at Truist Securities]

Then on the twenty twenty five multiples in The US and the core paper ticked down just a little bit from, I think it was two eighteen to two fourteen. Europe on the other hand, ticked up. Anything to think about? Was The US market a little more competitive, or is that just a mix issue?

[Martin Sjolund, President, CEO & Director at PRA Group]

Yeah, I'll let Rakesh comment on that. The only thing

[Martin Sjolund, President, CEO & Director at PRA Group]

I would say is that money multiples are obviously an important proxy for how we're investing, but it doesn't necessarily always imply that a higher multiple is better. If we, there's obviously a lot of other factors, including our efficiency and the time value of money that play in there. That a multiple ticking up and down, again, it doesn't necessarily imply that mix is a big factor here too, but I'll let Rakesh comment on that, the specifics.

[Rakesh Sehgal, EVP & CFO at PRA Group]

Yeah, Mark, you're right. Look, it all comes down to mix, depending on whether we are buying more primary or secondary tertiary paper that can have an impact. There are other demand supply variables. But to Martin's point, at the end of the day, are also taking into account the cost to collect and looking to drive net returns. We have a global investment framework and whether it's a deal in Europe or different deals in The US, depending on type of paper, we're all looking at certain thresholds that they have to meet.

[Rakesh Sehgal, EVP & CFO at PRA Group]

So the headline number of purchase price multiple can vary depending on what it is that sellers are bringing to market also.

[Mark Hughes, Analyst at Truist Securities]

Thank you very much.

[Operator]

Your next question comes from the line of Robert Dodd from Raymond James. Your line is now open.

[Robert Dodd, Director - Finance at Raymond James Financial]

Hi, guys. Just kind of tied to that point. I mean, when we look at the purchase environment, if you look at The U. S. Market, obviously, versus, say, '23, you're the the multiple's higher.

[Robert Dodd, Director - Finance at Raymond James Financial]

The volume this year versus '24, obviously, four was a very strong year in The US. Volumes are down. So, I mean, is it is it fair to say I mean, you you're you're focused on those higher multiple opportunities. So would it be fair to say that, like, your peak purchasing is is now in the rearview mirror? Is it is it that the focus on the higher multiples now is such that deployed volumes might be might be lower this year, next year, versus, obviously, the peaks of '23, 24?

[Robert Dodd, Director - Finance at Raymond James Financial]

But the the the multiple mix is going to more than make up for that. Any thoughts there?

[Martin Sjolund, President, CEO & Director at PRA Group]

Yeah, thanks. No, I wouldn't read too much into that. You know, we're obviously trying to strike a balance here between our leverage, the amount that we invest for the business, the multiples that we can get, etcetera. So, there's a number of factors that are being traded off there. We had set out a plan that was based around these numbers that we talked about earlier, 1,200,000,000.0.

[Martin Sjolund, President, CEO & Director at PRA Group]

We felt that that was a good target for us. And that would allow us an opportunity to strike the right balance between returns and volumes. We never want to just chase volumes for the sake of chasing volumes. It's easy to deploy capital if all you do is chase the volumes in this business, but I can tell you after ten years plus of managing our European business, there have been times where we've had to sit back and watch and just let other people take the volume because they haven't been able to meet our return thresholds. And it's always a mystery what other people are doing.

[Martin Sjolund, President, CEO & Director at PRA Group]

We only can account for what we are doing, but I think it's healthy to set ourselves a target that allows us to strike that balance. And our goal is to maximize value really and for ourselves and our shareholders.

[Robert Dodd, Director - Finance at Raymond James Financial]

Got it. Got it. Thank you. And then on kind of the five indicators of the focus. Right?

[Robert Dodd, Director - Finance at Raymond James Financial]

I mean, three of those seem to me to be well, arguably, for to be very cost focused. Right? Restructure The US business, cost of operations, technology improvements, etcetera, review the overhead. I mean, if if you were and I'm I'm not asking you for cash efficiency guidance or anything. But, I mean, all the kind of cost saving initiatives and components of that, I mean, is that 50 basis points of of efficiency improvement over some long period of time?

[Robert Dodd, Director - Finance at Raymond James Financial]

Obviously, cash, you know, with with legal and things move around. But is it 50 basis points? Is it 200 basis points? How how much cost do you think and restructuring and efficiency, how much is in there that you think you can take out, over the the the longer period? I mean, is it is this is it gonna be some talking points, or are we going to see it in the numbers?

[Martin Sjolund, President, CEO & Director at PRA Group]

Yeah. Thanks, Robert. I I wouldn't necessarily say that they're all cost focused. You know, the The US restructuring is more about speed of execution and operational execution capability, really. So, I wouldn't necessarily say that cost is driving that one.

[Martin Sjolund, President, CEO & Director at PRA Group]

But obviously, one that is, and the other one, sorry, is the technology side. Of course, we're looking to leverage technology to help us with cost, but there are also other operational capabilities that we need to invest in on the technology side. So, but coming to the last point around the cost side, as I said in the script earlier, this is going to take time and we're expecting to see immediate impact on the numbers. And I think it's worth calling out also, the way I think about it is there's two main dimensions to cost really in our business. One is the operational cost and that's things like optimizing, our automation of legal, for example, or leveraging offshore call centers to reduce that cost.

[Martin Sjolund, President, CEO & Director at PRA Group]

That's like operational cost, But the other side of it is the overhead and corporate costs. And so the initiative that I mentioned earlier, as a specific focus is really focused on the second one of those, the overhead and corporate costs. That cost as a percent of the overall cost is relatively small. The bulk of our cost is for the actual collections costs. So I think it's too early to put a number and I wouldn't put massive expectations on this initiative as such.

[Martin Sjolund, President, CEO & Director at PRA Group]

But I did want to call it out because it shows the importance that I placed on cost. I've always done that in our European business. We think we've built one of the most cost efficient platforms in the industry there. And and I will certainly be focusing on cost here in The US as well.

[Robert Dodd, Director - Finance at Raymond James Financial]

Got it. Thank you.

[Operator]

There are no further questions at this time. I will now turn the call over to Martin Schollin. Please continue.

[Martin Sjolund, President, CEO & Director at PRA Group]

Yeah. Thank you. So, all I'd say is that I'm very excited about the road ahead for PRA. I think we have a great opportunity. I'm excited about the team.

[Martin Sjolund, President, CEO & Director at PRA Group]

And I just want to thank everybody for your continued support. And I look forward to working with you all going forward. So thank you.

[Operator]

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

Participants

Executives

• Najim Mostamand, VP - IR
• Martin Sjolund, President, CEO & Director
• Rakesh Sehgal, EVP & CFO

Analysts

• David Scharf, Analyst at Citizens Capital Markets and Advisory
• Mark Hughes, Analyst at Truist Securities
• Robert Dodd, Director - Finance at Raymond James Financial