PRA Group (NASDAQ:PRAA) executives said 2025 marked “significant progress” as the debt buyer and collector invested in U.S. operations while building on continued strength in Europe, delivering record cash collections, record revenue, and record estimated remaining collections (ERC) during the year.
2025 highlights: record ERC, collections, and revenue
President and CEO Martin Sjöslund said PRA purchased $1.2 billion of portfolios in 2025, aligning with its target and representing its third-highest investment year on record. Those purchases, along with operational improvements, drove ERC to a record $8.6 billion.
Adjusted cash efficiency improved to 61% from 59% a year earlier, Sjöslund said, even as PRA invested $125 million in the U.S. legal collections channel in 2025. He said the company expects those legal investments to generate “significant cash collections” in future years.
Portfolio purchasing and returns: focusing on multiples and net returns
Executive Vice President and CFO Rakesh Sehgal said PRA purchased $315 million of portfolios in the fourth quarter, including $112 million in the U.S., $157 million in Europe, and $45 million in other markets.
Sehgal said the company has been “more selective” in buying portfolios, with purchase price multiples (a proxy for gross portfolio yields) trending higher:
- U.S. core purchase price multiple: 2.16x in 2025 vs. 2.11x in 2024 and 1.91x in 2023
- Europe core purchase price multiple: 1.85x in 2025 vs. 1.80x in 2024 and 1.69x in 2023
Management emphasized that while multiples are one indicator, the company is focused on net returns that incorporate collection costs, funding costs, and timing of cash flows. Sehgal also noted that European portfolios, in aggregate, tend to carry lower purchase price multiples due to lower costs to collect in certain countries.
ERC at quarter end was $8.6 billion, up 15% year-over-year, with the U.S. representing 42% and Europe representing 51% of ERC. Sehgal said this diversification helps mitigate risk tied to any single market or cycle. The replenishment rate—defined as the amount of investment needed over the next 12 months to maintain current ERC levels based on 2025’s average multiples—was $982 million.
Looking ahead, Sehgal said portfolio supply is expected to remain stable over the next 18 months, pointing to $1.1 trillion in U.S. credit card balances and industry-wide charge-off rates above 4%, which remain higher than pre-pandemic levels.
Collections performance: legal, digital, and Europe
Cash collections totaled $532 million in the fourth quarter, up 14% year-over-year. For the full year, cash collections rose 13% to $2.1 billion, exceeding the “high single-digit” growth target management had previously communicated for 2025.
Sehgal said U.S. cash collections grew 17% in both Q4 and the full year, driven by continued growth in the U.S. legal channel. Full-year U.S. legal cash collections increased 28% to $483 million and were up approximately 83% since 2023, when management said it began seeing benefits from improvements in the channel. Legal collections accounted for 48% of U.S. core cash collections in 2025, up from 39% two years earlier. Management stressed that legal is not the first channel used, but is pursued when other engagement efforts are unsuccessful, with legal providing “greater collections certainty and a higher overall amount of cash collected.”
Europe cash collections grew 11% in Q4 and 13% in 2025. Sehgal said collections exceeded expectations globally by 7% in the quarter, including 5% above expectations in the U.S. and 10% above expectations in Europe.
Management also highlighted momentum in digital collections, with global cash collections in the digital channel up 25% in 2025.
Financial results: portfolio income growth, expense mix, and leverage
Sehgal said portfolio revenue increased 15% in the fourth quarter and 8% for full-year 2025, driven primarily by portfolio income. Portfolio income grew 14% in Q4 to $263 million and 18% for the year to a company-record $1.0 billion. Sehgal said portfolio income has been growing faster than cash collections and is contributing more to net income, a trend management expects to continue.
Changes in expected recoveries were $64 million in Q4 and $176 million for 2025. Sehgal said 68% of the annual amount ($121 million) came from cash over-performance, with the remaining 32% ($56 million) stemming from changes in expected future recoveries, reflecting an increase in the net present value of ERC.
Operating expenses were $208 million in Q4 and $1.2 billion for 2025. Excluding a non-cash goodwill impairment recorded in Q3, adjusted operating expenses were $819 million in 2025, up 6% year-over-year, which management attributed primarily to investments in legal collections. Legal collection costs were $44 million in the quarter (up $10 million) and $162 million for the year (up $37 million, or 30%).
Management also described steps to make the expense base more flexible, including increased offshoring and use of external debt collection agencies (DCAs). Sjöslund said the company eliminated more than 115 corporate and overhead roles in Q4, producing $20 million in annualized gross savings, partially offset by approximately $3 million of increased outsourcing costs. Offshoring represented about a third of U.S. agent headcount, and Sjöslund said U.S. call center headcount decreased by 548 agents (42%) since the start of 2025 while U.S. core cash collections increased 20% versus the prior year.
Net interest expense was $64 million in Q4 and $252 million for 2025, which Sehgal said primarily reflected higher debt balances tied to portfolio purchases. Net income attributable to PRA was $57 million in Q4, with an effective tax rate of 4% that management said was driven by several factors, including the goodwill impairment and geographic mix of earnings. For the full year, net loss attributable to PRA was $305 million, driven by a $413 million non-cash goodwill impairment charge recorded in Q3. On an adjusted basis—excluding the goodwill impairment and a gain on the sale of an equity investment in Brazil in Q2—adjusted net income was $73 million, or $1.84 in adjusted diluted EPS, up from $71 million in 2024.
Adjusted EBITDA for the last 12 months was $1.3 billion, up 16% year-over-year, which management attributed to cash collections growth outpacing adjusted operating expense growth. Net leverage (net debt to adjusted EBITDA) was 2.7x at year-end, down from 2.8x a year earlier and from a peak of 2.9x in September 2024.
Strategy and outlook: “PRA 3.0,” investment range, and buybacks
Sjöslund outlined what he called “PRA 3.0,” describing a strategy to evolve the company into a “high-performing, technology-enabled global allocator of capital,” centered on three vectors: capital and investing; operations, technology and data; and people and culture.
On capital allocation, Sjöslund said the company will prioritize returns over “growth for growth’s sake” and anticipates annual investments in the range of $1.0 billion to $1.3 billion, with 2026 projected at a similar level to 2025. Management also reiterated a focus on reducing leverage toward the “mid 2x” area over time.
During the Q&A, management characterized the European market as competitive but stable, emphasizing PRA’s ability to allocate capital across markets and “hang back” in markets where pricing becomes stretched. Management also said it expects cash collections growth in 2026 to remain strong but “not at the levels” seen in 2025, noting that 2025 benefited from higher 2024 purchasing levels.
Regarding capital returns, Sehgal said PRA repurchased $10 million of shares in Q4 and $20 million in total for 2025, with approximately $50 million remaining under board authorization. He said the company expects to continue evaluating opportunistic repurchases, subject to board discretion and covenant limitations, while prioritizing portfolio investments and operational investments such as legal and digital.
About PRA Group (NASDAQ:PRAA)
PRA Group, Inc is a global specialty finance company focused on the acquisition and management of nonperforming loans. Founded in 1996 as Portfolio Recovery Associates, the company purchases defaulted consumer and commercial receivables at discounted rates from financial institutions, utilities and other creditors. By combining rigorous analytics with a consumer-centric ethos, PRA Group seeks to maximize recoveries while maintaining respectful and compliant interactions with debtors.
The company’s core activities include first-party and third-party collections across a range of asset classes such as credit cards, auto loans and utility receivables.
