PRA Group Q2 Earnings Call Highlights

PRA Group (NASDAQ:PRAA) reported higher second-quarter cash collections, revenue and net income as the debt purchaser continued executing its “PRA 3.0” strategy, including cost reductions, technology modernization and disciplined portfolio buying.

Cash collections rose 4% year over year to $559 million, with U.S. collections increasing 6% and European collections growing 4%. Net income attributable to PRA Group increased to $58 million, or $1.51 per diluted share, while total revenue rose 29% to $372 million.

President and Chief Executive Officer Martin Sjolund said the quarter reflected continued progress in the company’s strategic plan, which centers on capital allocation, operational and technology improvements, and organizational culture.

European portfolio review lifts expected recoveries

A key contributor to the quarter was PRA Group’s comprehensive review of its European portfolios. The company increased its estimated remaining collections, or ERC, in Europe by $349 million after citing a multiyear history of collections exceeding forecasts.

European portfolios have outperformed cash expectations for 26 consecutive quarters, including 9% overperformance during the past 12 months, Sjolund said. Chief Financial Officer Rakesh Sehgal said the review covered most vintages across the company’s European markets and was supported by enhancements to analytical and forecasting processes.

Total ERC reached a record $8.9 billion at quarter-end, up 7% from a year earlier. Europe accounted for 54% of ERC and the U.S. represented 40%.

Sehgal said the ERC revision is expected to produce about $260 million of additional portfolio income over the remaining life of the European cash curves, which extend more than 10 years from purchase. The company expects an average annualized portfolio-income increase of roughly $25 million in the near term.

Changes in expected recoveries totaled $97 million during the quarter. Of that amount, $23 million came from cash collections above forecast, while $74 million reflected changes in expected future recoveries and the net present value of the ERC increase.

Portfolio income, the company’s largest revenue component, grew 7% to $268 million. Sehgal said portfolio income growth exceeded cash collections growth for the second consecutive quarter.

Portfolio purchases and collections trends

PRA Group invested $297 million in portfolio purchases during the quarter, including $174 million in Europe and $109 million in the U.S. The company said supply remained healthy in both regions and that it continued to direct capital toward opportunities meeting its return thresholds.

In Europe, the company described the second quarter as a record investment period for the region, citing a generally favorable supply environment and success in bidding on opportunities. Sjolund noted that European portfolio purchases can vary because the market has more spot transactions.

Core purchase price multiples were largely steady globally. Europe’s core purchase price multiple remained sequentially stable at 1.865x, while the U.S. core purchase price multiple increased to 2.17x. Management said the U.S. increase represented a normalization from first-quarter investments in segments with lower multiples and lower collection costs.

The company said it would need to invest about $1 billion over the next 12 months, based on average purchase price multiples in the first half of 2026, to maintain its current ERC level.

In the U.S., legal cash collections increased 26% to $150 million and represented more than half of U.S. core cash collections. PRA Group said the increase reflected prior investments as accounts moved through the legal channel. Management emphasized that legal collections are not the company’s first-choice contact method, saying it first uses calls, texts, emails and other voluntary engagement methods before considering legal action for customers deemed able to pay.

Nearly half of new payment plans created during the quarter came through digital channels, according to the company. Management cited digital engagement as a source of both collections growth and lower communications costs.

Cost reductions, technology investments and leverage

PRA Group implemented a second wave of cost reductions during the quarter, eliminating 100 U.S. corporate and overhead roles and 35 offshore roles. The company expects those actions to generate approximately $20 million in annualized net savings.

Including a first wave of reductions begun in the fourth quarter of 2025, PRA Group has eliminated more than 215 corporate and overhead roles, or more than 25% of those positions, as well as more than 575 call center roles. Together, the two rounds of actions are expected to generate about $35 million in annualized net savings.

The company also closed two additional U.S. call center sites and moved their operations to a work-from-home model. PRA Group now has one remaining U.S. call center, down from seven in 2023, and has consolidated two offshore third-party collection sites into one location.

Operating expenses totaled $219 million, up $16 million from a year earlier. Sehgal attributed $15 million of the increase to legal-channel investments and $5 million to one-time U.S. reorganization costs, including severance and site-consolidation expenses. Compensation and benefits expenses declined 7%, while communication expenses fell 19% as the company shifted toward digital engagement.

The company launched a cloud-based omnichannel contact platform in the U.S. during the quarter, integrating voice, digital, chat and email interactions. It also centralized global oversight of artificial intelligence initiatives through a dedicated team in Charlotte focused on automation, analytics and operational efficiency.

Last-12-month adjusted EBITDA increased 10% year over year to $1.4 billion. Net leverage declined to 2.67x at quarter-end, from 2.71x in the first quarter and a peak of 2.87x in the third quarter of 2024.

Funding and shareholder returns

As of June 30, PRA Group had $3.1 billion of total committed capital under its credit facilities and approximately $1 billion of availability. During the quarter, it refinanced its $730 million European credit facility, preserving the commitment level and pricing while extending the maturity by five years. The company said it has no debt maturities until February 2028.

PRA Group repurchased $10 million of shares in the second quarter, bringing its trailing 12-month total to about $40 million. Its board also authorized a new share repurchase program of up to $150 million.

Management reaffirmed a long-term target range of $1 billion to $1.3 billion in portfolio investments, while stressing that actual purchases will depend on available opportunities and return requirements rather than country-specific volume targets.

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.

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