PRA Group Inc: Form 10-Q for the period ended Jun 30, 2026

All references in this Quarterly Report on Form 10-Q ("Quarterly Report") to "PRA Group," "we," "our," "us," "the Company" or similar terms are to PRA Group, Inc. and its subsidiaries. This Quarterly Report should be read in conjunction with our Form 10-K for the year ended December 31, 2025 ("2025 10-K"). See Frequently Used Terms at the end of this Item 2 for certain definitions that may be used in this Quarterly Report. Except as specifically noted, all references to "Notes" in this Item 2 are to Notes to our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report.

FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical fact are forward-looking statements, including statements regarding cash collection trends, operating cost trends, liquidity and capital needs and other statements of expectations, beliefs, future plans, strategies and anticipated events or trends. Our results could differ materially from those expressed or implied by such forward-looking statements, or our forward-looking statements could be wrong, as a result of risks, uncertainties and assumptions, including the following:

• a deterioration in general business and economic conditions, including from ongoing geopolitical conflicts and instability in the Middle East;
• our ability to purchase a sufficient volume of nonperforming loans at favorable pricing;
• our ability to collect sufficient amounts on our nonperforming loans to recover our costs and fund our operations;
• our reliance on internally developed models and the underlying data used in those models;
• a disruption or failure by any of our third-party service providers, or the vendors on whom they may depend, to meet their obligations and our service level expectations, or an ability to contract alternative providers;
• our ability to realize the expected benefits from our cash-generating and cost savings initiatives in our United States ("U.S.") business;
• changes in the regulatory environment for legal collections or our ability to effectively collect on legal recovery and post-judgment processes;
• disruptions of business operations caused by cybersecurity incidents or the underperformance or failure of our information technology ("IT") infrastructure, networks or communication systems;
• our ability to effectively manage change associated with ongoing enhancements to our key operational systems and processes;
• our ability to effectively utilize artificial intelligence ("AI") and machine learning technologies and to adequately safeguard our systems against AI-driven threats;
• our ability to execute our long-term (PRA 3.0) strategy effectively, including the targets related to improving our financial results;
• further impairment of goodwill;
• our ability to manage risks associated with our international operations;
• changes in local, state, federal or international laws or the interpretation of these laws, including tax, bankruptcy and collection laws that limit our ability to collect on our nonperforming loans;
• our ability to comply with existing and new regulations of the collection industry;
• investigations, reviews or enforcement actions by governmental authorities, including the Consumer Financial Protection Bureau ("CFPB");
• our ability to comply with data privacy regulations such as the General Data Protection Regulation ("GDPR");
• our ability to retain, expand, renegotiate or replace our credit facilities and our ability to comply with the covenants under our financing arrangements;
• our ability to manage our capital and liquidity needs effectively, including as a result of changes in credit or capital markets or adverse changes in our credit ratings, whether due to concerns about our industry in general, the financial condition of our competitors, or other factors;
• changes in interest or exchange rates;
• default by, or failure of, one or more of our counterparty financial institutions; and
• the "Risk Factors" in Item 1A of our 2025 Form 10-K and our other filings with the U.S. Securities and Exchange Commission ("SEC").

You should assume that the information appearing in this Quarterly Report is accurate only as of the date it was filed with the SEC. Our business, financial condition, results of operations and prospects may have changed since that date. The future events, developments or results described in, or implied by, this Quarterly Report could turn out to be materially different. Except as required by law, we assume no obligation to publicly update or revise our forward-looking statements after the date of this Quarterly Report and you should not expect us to do so.

EXECUTIVE OVERVIEW

We are a global leader in acquiring and collecting nonperforming loans. Most of our purchases are from credit originators who have chosen not to pursue, or have been unsuccessful in collecting, the full balance owed to them ("Core" accounts). To a lesser extent, we also purchase loans in situations where the customer is involved in a bankruptcy or similar proceeding ("Insolvency" accounts). As part of an ancillary business, we purchase and provide fee-based services for class action claims recoveries in the U.S.

Our operations are organized on a geographic basis, and we have two reportable segments comprised of our U.S. and European businesses. On a significantly smaller scale, we also operate in South America, Canada and Australia. Subject to globally-established parameters for capital allocation, portfolio return thresholds and leverage, each market functions under a similar debt management business model, which is predicated on purchasing nonperforming loans and generating returns through disciplined collection strategies over extended collection periods.

For additional information about our business and reportable segments, refer to Part I, Item 1 "Business" of our 2025 Form 10-K and Note 13.

Second quarter and year-to-date business trends and results

During the second quarter of 2026, we continued to execute against our PRA 3.0 strategic plan and generated continued cash collections growth while maintaining disciplined cost management and investing in future growth initiatives. We purchased $296.6 million in portfolios during the quarter and generated higher net income. Our results for the period included the following:

• Second quarter Net income attributable to PRA Group, Inc. of $57.9 million, an increase of $15.5 million compared to the prior year period.
• Year-to-date Net income attributable to PRA Group, Inc. of $86.1 million, an increase of $40.1 million compared to the prior year period.
• Adjusted EBITDA of $1.4 billion for the last 12 months, an increase of 9.6% compared to the prior 12 month period ("Adjusted EBITDA" is a non-GAAP financial measure; refer to section "Non-GAAP Financial Measures" below).
• Continued geographic diversification, with the U.S. and Europe accounting for 40.4% and 54.0%, respectively, of June 30, 2026 total estimated remaining collections ("ERC") of $8.9 billion. Driven by sustained cash collections overperformance, we updated the forecasts for the majority of our European pools as of June 30, 2026, which contributed to an increase in European ERC of $348.5 million (refer to Note 2).
• A second wave of cost reductions to simplify our U.S. business and drive further savings; and further consolidation of our U.S. call center footprint and offshore third-party collection agencies.
• Maintenance of a diversified capital structure, consistent with our targeted leverage and liquidity objectives. We refinanced our European revolving credit facility in April 2026 for an additional five years and repurchased $10.0 million and $20.0 million shares of our common stock during the second quarter and year-to-date, respectively.

Market environment

In the U.S., credit card balances have remained elevated and charge-off rates continued to support portfolio supply. In Europe, there has been an increase in portfolio supply, and we continued to observe stability in customer payment activity in both the U.S. and Europe during the second quarter of 2026.

SELECTED CONSOLIDATED FINANCIAL DATA

(1) Net income/(loss) attributable to PRA Group, Inc. excluding the impact of certain transactions that are unusual or infrequent in nature and not reflective of our ongoing operations ("Adjusted net income attributable to PRA"), is a non-GAAP financial measure. Refer to section "Non-GAAP Financial Measures" below.

(2) Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") is a non-GAAP financial measure. Refer to section "Non-GAAP Financial Measures" below.

(3) Calculated by dividing cash receipts less operating expenses by cash receipts, both of which are determined based on GAAP.

(4) ROE is calculated by dividing annualized Net income attributable to PRA Group, Inc., by average Total stockholders' equity - PRA Group, Inc.

(5) ROATE is a non-GAAP financial measure calculated by dividing annualized Net income attributable to PRA Group, Inc. by average Total stockholders' equity - PRA Group, Inc. less average goodwill and average other intangible assets ("Average tangible equity"), which is also a non-GAAP financial measure. Refer to section "Non-GAAP Financial Measures" below.

(6) Adjusted ROATE is a non-GAAP financial measure. Refer to section "Non-GAAP Financial Measures" below.

RESULTS OF OPERATIONS

Three months ended June 30, 2026 ("Second Quarter 2026" or "Q2 2026") compared to three months ended June 30, 2025 ("Second Quarter 2025" or "Q2 2025"); and six months ended June 30, 2026 ("Year-to-Date 2026") compared to six months ended June 30, 2025 ("Year-to-Date 2025").

Consolidated and business segment results

Portfolio purchases

Portfolio purchases were as follows (in thousands, except percentages):

(1) Reflects portfolio purchases in South America, Canada and Australia.

We use a global investment framework to optimize the deployment of capital across our markets with a focus on net returns. Our total portfolio purchases in Q2 2026 decreased by $49.9 million, or 14.4%, compared to Q2 2025. Year-to-date 2026 portfolio purchases decreased by $120.8 million, or 18.9%, compared to the prior year period. Total purchases of $296.6 million in Q2 2026 were consistent with our expectations and net return requirements. The Q2 2026 and year-to date 2026 purchase price multiples ("PPMs") for our global Core vintage were 1.99x and 1.98x, respectively. PPMs can vary due to factors contributing to the cost to collect, including the loan type and age, geography and collections strategy, in addition to competitive and market dynamics. Our focus continues to be on net returns, which considers the amount and timing of the projected cash collections, estimated costs to collect, funding costs, risk and agreement terms.

• U.S.: Q2 2026 portfolio purchases decreased by $72.9 million as we remained disciplined in our purchasing and long-term approach focused on net returns. Year-to-date 2026 portfolio purchases decreased by $115.3 million compared to the prior year period. The Q2 2026 PPM for our U.S. Core vintage of 2.16x was an increase compared to the first quarter of 2026. The year-to-date 2026 PPM for our U.S. Core vintage was 2.08x.
• Europe: Q2 2026 portfolio purchases increased by $27.2 million as we continued to invest in portfolios that met our return requirements. Year-to-date 2026 portfolio purchases increased by $5.5 million compared to the prior year period. The Q2 2026 and year-to-date 2026 PPMs for our European Core vintage were 1.87x.

Cash collections

Cash collections were as follows (in thousands, except percentages):

(1) Reflects cash collections in South America, Canada and Australia.

Our total cash collections in Q2 2026 increased by $22.3 million, or 4.2%, compared to Q2 2025. Year-to-date 2026 cash collections increased by $76.7 million, or 7.4%, compared to the prior year period. Total collections of $558.5 million in Q2 2026 exceeded our expectations for the quarter.

• U.S.: Q2 2026 cash collections increased by $16.1 million driven by a $31.1 million increase in legal collections due to higher volume, partially offset by a net decrease of $15.3 million from call center and other channels. Digital cash collections continued to increase driven by an expansion of our customer engagement within this channel. Year-to-date 2026 cash collections increased by $43.6 million driven by a $60.9 million increase in legal collections, partially offset by a net decrease of $17.1 million from call center and other channels.
• Europe: Q2 2026 cash collections increased by $7.8 million driven by increases distributed broadly across our markets and was due, in part, to favorable foreign exchange rate variation. Year-to-date 2026 cash collections in Europe increased by $34.8 million due to similar factors.

Portfolio revenue

Total portfolio revenue was as follows (in thousands, except percentages):

(1) Reflects portfolio revenue in South America, Canada and Australia.

Our total portfolio revenue in Q2 2026 increased by $80.5 million, or 28.3%, compared to Q2 2025. Year-to-date 2026 portfolio revenue increased by $125.1 million, or 22.6%, compared to the prior year period. These increases were driven by higher Changes in expected recoveries, which increased by $63.6 million for the quarter and $79.6 million year-to-date, and higher Portfolio income, which increased by $16.9 million for the quarter and $45.5 million year-to-date. Portfolio income, the yield component of our revenue, which is more predictable than Changes in expected recoveries, increased by 6.7% for the quarter and 9.2% year-to-date.

• U.S.: Q2 2026 portfolio revenue increased by $9.2 million due to increases of $5.0 million in Portfolio income and $4.2 million in Changes in expected recoveries. The increase in Portfolio income was due primarily to improved pricing. Changes in expected recoveries for Q2 2026 were mainly impacted by decreases in the collections forecasts on the 2022-2025 Core pools. The increase in Changes in expected recoveries was due primarily to a lower net decrease in the collections forecasts for certain U.S. Core pools compared to the prior year period. Net overperformance for Q2 2026 was driven mainly by the 2025 Core pool and net overperformance on the Insolvency pools, partially offset by underperformance on the 2022-2024 Core pools. The decrease in cash collections overperformance was primarily due to lower net overperformance on certain U.S. Core pools compared to the prior year period. Year-to-date 2026 portfolio revenue increased by $29.4 million due to increases of $16.1 million in Portfolio income and $13.3 million in Changes in expected recoveries. The increase in portfolio income was due primarily to improved pricing. The increase in Changes in expected recoveries was due to a lower net decrease in the collections forecasts on certain U.S. Core pools compared to Q2 2025 and net overperformance in Q2 2026 compared to net underperformance in Q2 2025.
• Europe: Q2 2026 portfolio revenue increased by $97.0 million due to increases of $88.4 million in Changes in expected recoveries and $8.6 million in Portfolio income. Changes in expected recoveries were impacted by net increases in the collections forecasts in most markets in both Q2 2026 and Q2 2025. The higher net increase in the current year period was driven by updates to the forecasts for a majority of the pools in our European markets (for additional information, refer to Note 2). This increase was partially offset by lower net overperformance in Q2 2026 compared to Q2 2025 in certain European markets. The increase in Portfolio income was driven by increases in several markets due to higher recent purchasing and was due, in part, to favorable foreign exchange rate variation. Year-to-date 2026 portfolio revenue increased by $122.5 million due to similar factors, reflecting increases of $99.8 million in Changes in expected recoveries and $22.7 million in Portfolio income.
• Other Markets: Q2 2026 and year-to-date 2026 portfolio revenue decreased by $25.8 million and $26.8 million, respectively, due primarily to higher net decreases in in the collections forecasts on certain pools within these markets.

Operating expenses

Operating expenses were as follows (in thousands, except percentages):

(1) Reflects operating expenses in South America, Canada and Australia.

(2) Mainly costs paid to courts where a lawsuit is filed for the purpose of attempting to collect on an account.

(3) Contingent fees incurred for cash collections generated by our third-party attorney network.

(4) Mainly third-party collection fees.

(5) Mainly correspondence, network and calling costs associated with our collection efforts.

(6) Mainly IT-related costs and subscriptions, other taxes and fees.

Our Total operating expenses increased by $16.3 million, or 8.1%, compared to Q2 2025. Year-to-date 2026 operating expenses increased by $32.6 million, or 8.2%, compared to the prior year period.

• U.S.: Q2 2026 operating expenses increased by $16.7 million due primarily to an increase in Legal collection costs associated with the expansion in activity in our legal collections channel and costs of $4.9 million associated with the reorganization of our U.S. business. The reorganization-related costs consisted of $2.0 million in severance expenses related to a corporate and overhead headcount reduction and $3.0 million in real estate impairment and other expenses related to site consolidation of our onshore owned and leased call centers. These increases were partially offset by a decrease in Compensation and benefits driven by workforce reduction initiatives implemented over the past 12 months and a decrease in Communication costs due to the use of more cost-efficient digital collection strategies. Year-to-date 2026 operating expenses increased by $24.1 million, or 9.3%, due to similar factors.
• Europe: Q2 2026 operating expenses were stable compared to the prior year period. Year-to-date 2026 operating expenses increased by $8.2 million, or 8.8%, driven primarily by increases in Other operating expenses, Legal collection costs and Compensation and benefits expense associated with organizational changes and higher non-collector wage costs.

Interest expense, net

Interest expense, net was as follows (in thousands, except percentages):

Our Interest expense, net increased by $2.0 million, or 3.2%, compared to Q2 2025. Year-to-date 2026 interest expense increased by $4.6 million, or 3.7%, compared to the prior year period. These increases were due primarily to higher average debt balances.

Foreign exchange gain/(loss), net

Foreign exchange gain/(loss), net, includes the remeasurement of our foreign currency transactions and changes in the fair value of foreign exchange forward contracts used to economically hedge a portion of our remeasurement exposure. Foreign exchange gain/(loss), net included the following components (in thousands, except percentages):

In addition to normal rate fluctuations and ongoing execution of our risk management strategies, our net foreign exchange result may be impacted by elevated volatility in the underlying exchange rates. For additional information about our foreign exchange forward gains/(losses), refer to Note 6.

Income tax expense

Income tax expense and our effective tax rate were as follows (in thousands, except percentages):

Our Income tax expense increased by $14.0 million, or 90.6%, compared to Q2 2025, and our effective tax rate was 33.3% in Q2 2026 compared to 25.2% in Q2 2025. These results were primarily due to the increase in our pretax income, the mix of income from different taxing jurisdictions and the timing and amount of discrete items. Year-to-date 2026 Income tax expense increased by $18.4 million, or 93.4%, and our year-to-date 2026 effective tax rate was 29.6%, which included the reversal of a $3.2 million tax accrual during the first quarter of 2026.

Business segment operating income

Our CEO evaluates the profitability of our U.S. and European business segments based primarily on Income from operations excluding goodwill impairment, when applicable, and certain unallocated corporate expenses ("Adjusted segment operating income"). Refer to Note 13 for further information and a reconciliation of Adjusted segment operating income to consolidated Income before income taxes.

Adjusted segment operating income for our U.S. and European businesses was as follows (in thousands, except percentages):

(1) Amounts include intersegment and intercompany expenses, which are not material, and exclude certain unallocated corporate personnel, administrative and other overhead expenses.

(2) Primarily reflects Communication expenses, Agency fees and Other operating expenses.

• U.S.: Q2 2026 Adjusted segment operating income was stable compared to the prior year period, reflecting an increase in segment revenues, partially offset by an increase in segment expenses. Year-to-date 2026 Adjusted segment operating income increased by $12.6 million, or 36.2%, due to similar factors.
• Europe: Q2 2026 Adjusted segment operating income increased by $97.4 million due primarily to an increase in segment revenues. Year-to-date 2026 Adjusted segment operating income increased by $117.0 million, or 91.9%, reflecting an increase in segment revenues, partially offset by an increase in segment expenses.

Refer to the above discussions of portfolio revenue and operating expenses for additional information.

Consolidated balance sheet

Investments

Investments were $145.5 million as of June 30, 2026, an increase of $78.8 million compared to December 31, 2025. The increase reflects purchases of government securities and corporate notes by our banking subsidiary, AK Nordic AB. Our banking subsidiary is part of our European operations, and it expects to continue to operate with higher levels of liquidity moving forward.

Finance receivables, net

Finance receivables, net were $4.7 billion as of June 30, 2026, increasing marginally compared to December 31, 2025. Compared to June 30, 2025, Finance receivables, net increased $154.6 million, or 3.4%, due to portfolio purchases of $1.1 billion and Changes in expected recoveries of $256.0 million, partially offset by $1.1 billion of recoveries collected and applied to Finance receivables, net, and foreign currency translation of $64.0 million.

Borrowings

Borrowings were $3.8 billion as of June 30, 2026, an increase of $62.0 million compared to December 31, 2025. Compared to June 30, 2025, Borrowings increased $145.1 million, or 4.0%, primarily to fund portfolio purchases, and to a lesser extent, the purchases of investments.

NON-GAAP FINANCIAL MEASURES

We report our financial results in accordance with U.S. generally accepted accounting principles ("GAAP"). However, our management also uses certain non-GAAP financial measures, including the non-GAAP financial measures referred to below, internally to evaluate our performance and set performance goals. We believe these non-GAAP financial measures are useful to investors in evaluating our performance and operational effectiveness and provide for greater comparability. These non-GAAP financial measures should not be considered as an alternative to the most directly comparable financial measure determined in accordance with GAAP and may not be comparable to the calculation of similarly titled financial measures reported by other companies. Included below are reconciliations of the non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP.

Adjusted EBITDA

Adjusted EBITDA is calculated as Net income/(loss) attributable to PRA Group, Inc. plus income tax expense (or less income tax benefit); less foreign exchange gain (or plus foreign exchange loss); plus interest expense, net; plus other expense; plus depreciation and amortization; plus impairment of real estate; plus goodwill impairment; plus net income attributable to noncontrolling interests; less gain on sale of equity method investment; and plus recoveries collected and applied to Finance receivables, net less Changes in expected recoveries. The following table provides a reconciliation of Net loss attributable to PRA Group, Inc. to Adjusted EBITDA for the periods indicated (in thousands):

(1) Reflects non-operating expenses.

Adjusted net income attributable to PRA, ROATE and Adjusted ROATE

Adjusted net income attributable to PRA is calculated as Net income/(loss) attributable to PRA Group, Inc. excluding the impact of certain transactions that are unusual or infrequent in nature and not reflective of our ongoing operations.

ROATE is calculated by dividing annualized Net income/(loss) attributable to PRA Group, Inc. by Average tangible equity. Adjusted ROATE is calculated by dividing Adjusted net income/(loss) attributable to PRA by Average tangible equity.

The following table provides a reconciliation of Total stockholders' equity - PRA Group, Inc. as reported in accordance with GAAP to Average tangible equity, a reconciliation of Net income/(loss) attributable to PRA Group, Inc. to Adjusted net income attributable to PRA Group, Inc., and provides our ROE, ROATE and Adjusted ROATE for the periods indicated (in thousands, except for ratio data):

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SUPPLEMENTAL PERFORMANCE DATA

The tables in this section provide supplemental performance data about our:

• ERC by business segment and expected year of collection; and
• nonperforming loan portfolios and collections by business segment, portfolio type and year of purchase.

For additional information about the supplemental data and our nonperforming loan portfolios, refer to Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations - Supplemental Performance Data" in the 2025 Form 10-K and Note 2.

Estimated remaining collections

The following table displays our ERC by year as of June 30, 2026 (in thousands):

(1) Reflects ERC of $1.8 billion for the UK, $1.4 billion for Central Europe, $1.0 billion for Northern Europe and $607.6 million for Southern Europe.

(2) Reflects ERC in South America, Canada and Australia.

Purchase Price Multiples

as of June 30, 2026

(in thousands, except percentages)

(1) Includes the acquisition date finance receivables portfolios that were acquired through our business acquisitions.

(2) Non-U.S. amounts, including purchase price adjustments that occur throughout the life of a portfolio, are presented at the exchange rate at the end of the respective period of purchase.

(3) Non-U.S. amounts are presented at the period-end exchange rate for the respective period of purchase.

(4) Non-U.S. amounts are presented at the June 30, 2026 exchange rate.

(5) Reflects all vintages in South America, Canada and Australia.

(in thousands)

(1) Includes the nonperforming loan portfolios that were acquired through our business acquisitions.

(2) Non-U.S. amounts are presented using the average exchange rates during the current period.

(3) Non-U.S. amounts are presented at the June 30, 2026 exchange rate.

(4) Reflects all vintages in South America, Canada and Australia.

Cash Collections by Year, By Year of Purchase (1)

as of June 30, 2026

(in millions)

(1) Non-U.S. amounts are presented at the average exchange rates during the cash collections period.

(2) Includes the acquisition date finance receivables portfolios acquired through our business acquisitions.

(3) Non-U.S. amounts, including purchase price adjustments that occur throughout the life of a portfolio, are presented at the exchange rate at the end of the respective period of purchase.

(4) Reflects all vintages in South America, Canada and Australia.

LIQUIDITY AND CAPITAL RESOURCES

We actively manage our liquidity to meet our business needs and financial obligations.

Sources of liquidity

Cash and cash equivalents

As of June 30, 2026, cash and cash equivalents totaled $132.4 million, of which $119.1 million was held by international operations with indefinitely reinvested earnings. For additional information about the unremitted earnings of our international subsidiaries, refer to Note 14 to our Consolidated Financial Statements in the 2025 Form 10-K.

Borrowings

As of June 30, 2026, we had the following committed amounts, outstanding borrowings and availability under our financing arrangements (in thousands):

(1) Available borrowings after calculation of borrowing base, subject to the committed amounts and debt covenants, which may be used for general corporate purposes, including portfolio purchases.

(2) Subject to borrowing base and debt covenants, including advance rates ranging from 35-55% of applicable ERC.

Interest-bearing deposits

As of June 30, 2026, interest-bearing deposits totaled $100.5 million. Under our European revolving credit facility, our interest-bearing deposit funding is limited to SEK 2.2 billion ($226.8 million as of June 30, 2026).

Uses of liquidity and material cash requirements

We believe that funds generated from our business activities, together with existing cash, available borrowings under our revolving credit facilities and access to the capital markets, will be sufficient to finance our operations, planned capital expenditures, forward flow purchase commitments, debt maturities and additional portfolio purchases for at least the next 12 months. Our long-term capital requirements will depend in large part on the level of nonperforming loan portfolios that we purchase.

Market conditions permitting, as we deem appropriate, we may seek to access the debt or equity capital markets or other sources of funding, and it may be necessary to raise additional funds to achieve our business objectives. Business acquisitions or higher than expected levels of portfolio purchasing could require additional financing. We may also from time-to-time repurchase common stock in the open market or otherwise. We also have the ability to slow the purchase of nonperforming loans without significantly impacting current year collections.

Forward flows

We enter into forward flow agreements for the purchase of nonperforming loans. These agreements typically have terms ranging from six to 12 months, or they can be open-ended, and establish purchase prices and specific criteria for the accounts to be purchased. Some of the agreements establish a volume reference for the contract term in the form of a target or maximum, however, very few agreements establish a minimum contractual obligation, and many of the contracts contain early termination provisions allowing either party to cancel the agreements in accordance with a specified notice period.

As of June 30, 2026, we had forward flow agreements in place with an estimated purchase price of approximately $218.7 million over the next 12 months. This total can vary significantly based on the remaining terms and renewal dates of the agreements and is comprised of $117.3 million in Europe, $86.1 million in the U.S. and $15.4 million in our other markets. These amounts represent our estimated forward flow purchases over the next 12 months under the agreements in place based on projections and other factors, including sellers' estimates of future forward flow sales, and are dependent on actual delivery by the sellers and, in some cases, the impact of foreign exchange rate fluctuations. Accordingly, amounts purchased under these agreements may vary significantly.

Borrowings

As of June 30, 2026, we had $3.8 billion in outstanding borrowings. Our estimated interest, unused fees and principal payments for the next 12 months are $247.7 million. With the exception of $2.5 million in quarterly principal payments on our North American term loan, as of June 30, 2026, principal payments on our borrowings have maturity dates ranging from February 2028 through September 2032. Our financing arrangements include covenants with which we must comply, and as of June 30, 2026, we were in compliance with these covenants.

We amended and extended our European revolving credit facility on April 30, 2026, resulting in the extension of the maturity date from November 23, 2027 to April 30, 2031; the reduction of the maximum ERC ratio (as defined in the agreement) from 45.0% to 40.0%; and, subject to certain conditions, the ability of the borrowers to make investments in, or loans to, joint ventures up to an aggregate amount of €100 million.

For additional information about our borrowings, refer to Note 5.

Share repurchases

On February 25, 2022, our Board of Directors approved a share repurchase program under which we are authorized to repurchase up to $150.0 million of our outstanding common stock. The share repurchase program has no stated expiration date; does not obligate us to repurchase any specified amount of shares; remains subject to the discretion of our Board of Directors; is subject to compliance with applicable laws; and may be modified, suspended or discontinued at any time. Repurchases are also subject to restrictive covenants contained in our credit facilities and the indentures that govern our senior notes. Our Board of Directors approved a new share repurchase program on August 3, 2026. For additional information, refer to Note 15.

Repurchases may be made from time-to-time in open market transactions, through privately negotiated transactions, in block transactions, through purchases made in accordance with trading plans adopted under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or other methods, subject to market and/or other conditions and applicable regulatory requirements. During the second quarter of 2026, we repurchased 587,642 shares of our common stock at an average price of $17.02 for a total of $10.0 million. As of June 30, 2026, we had $27.7 million remaining for share repurchases under the program, subject to the restrictive covenants mentioned above.

Leases

Our leases have remaining terms ranging from one to approximately seven years. As of June 30, 2026, we had $30.7 million in lease liabilities, of which $6.6 million is due within the next 12 months. For additional information, refer to Note 5 to our Consolidated Financial Statements in the 2025 Form 10-K.

Derivatives

We enter into derivative financial instruments to reduce our exposure to fluctuations in interest rates on variable rate debt and foreign currency exchange rates. As of June 30, 2026, we had $8.0 million of derivative liabilities, of which $3.5 million matures within the next 12 months and $4.4 million in 2028. For additional information, refer to Note 6.

Investments

As of June 30, 2026, we held $117.6 million in Swedish treasury securities and $26.5 million in Finnish corporate notes to meet liquidity requirements for our banking subsidiary, AK Nordic AB.

Cash flow analysis

The following table summarizes our cash flow activity for the periods indicated (in thousands):

Operating activities

Net cash used in operating activities mainly reflects the portion of our cash collections recognized as revenue and cash paid for operating expenses, interest and income taxes. It does not include cash collections applied to the negative allowance, which are classified as investing activities. Net cash used in operating activities decreased by $54.1 million compared to the prior year period due primarily to higher cash collections recognized as income and lower cash paid for taxes, partially offset by higher cash paid for operating expenses.

Investing activities

Net cash used in investing activities decreased by $1.9 million compared to the prior year period due primarily to a decrease in purchases of nonperforming loan portfolios, increases in recoveries collected and applied to Finance receivables, net, and proceeds from sales and maturities of investments, partially offset by an increase in purchases of investments and the impact of the proceeds received from the sale of our interest in RCB Investimentos S.A., a servicing company for nonperforming loans in Brazil, in the prior year period.

Financing activities

Net cash provided by financing activities decreased by $50.8 million compared to the prior year period due primarily to lower net proceeds from credit lines and higher levels of stock repurchases, partially offset by the activity in our interest-bearing deposit customer accounts and lower levels of noncontrolling interest distributions.

CRITICAL ACCOUNTING ESTIMATES

Our Consolidated Financial Statements have been prepared in accordance with GAAP. Some of our significant accounting policies require that we use estimates, assumptions and judgments that affect the reported amounts of revenues, expenses, assets and liabilities. We consider accounting estimates to be critical if they (1) involve a significant level of estimation uncertainty and (2) have had, or are reasonably likely to have, a material impact on our financial condition or results of operations. We base our estimates on historical experience, current trends and various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. If these estimates differ significantly from actual results, the impact on our Consolidated Financial Statements may be material.

Our critical accounting estimates include revenue recognition on finance receivables, goodwill and income taxes. For a detailed description of our critical accounting estimates, refer to Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates" in the 2025 Form 10-K.

RECENT ACCOUNTING PRONOUNCEMENTS

For discussion of recent accounting pronouncements and the anticipated effects on our Consolidated Financial Statements, refer to Note 14.

FREQUENTLY USED TERMS

We may use the following terms throughout this Quarterly Report:

• "Buybacks" refers to purchase price refunded by the seller due to the return of ineligible nonperforming loan accounts.
• "Cash collections" refers to collections on our nonperforming loan portfolios.
• "Cash receipts" refers to cash collections on our nonperforming loan portfolios, fees and revenue recognized from our class action claims recovery services.
• "Changes in expected recoveries" refers to the difference between actual recoveries collected compared to expected recoveries and the net present value of changes in estimated remaining collections.
• "Core" accounts or portfolios refer to accounts or portfolios that are nonperforming loans and are not in an insolvent status upon acquisition. These accounts are aggregated separately from Insolvency accounts.
• "Estimated remaining collections" or "ERC" refers to the sum of all future projected cash collections on our nonperforming loan portfolios.
• "Finance receivables" or "receivables" refers to the negative allowance for expected recoveries recorded on our balance sheet as an asset.
• "Insolvency" accounts or portfolios refer to accounts or portfolios of nonperforming loans that are in an insolvent status when we purchase them and, as such, are purchased as pools of insolvent accounts. These accounts include IVAs, Trust Deeds in the UK, Consumer Proposals in Canada and bankruptcy accounts in the U.S., Canada, Germany and the UK.
• "Negative allowance" refers to the present value of cash flows expected to be collected on our finance receivables.
• "Portfolio acquisitions" refers to all nonperforming loan portfolios acquired as a result of a purchase or business acquisition.
• "Portfolio purchases" refers to all nonperforming loan portfolios purchased in the normal course of business and excludes those added as a result of business acquisitions.
• "Portfolio income" reflects revenue recorded due to the passage of time using the effective interest rate calculated based on the purchase price and estimated remaining collections of nonperforming loan portfolios.
• "Purchase price" refers to the cash paid to a seller to acquire nonperforming loans.
• "Purchase price multiple" or "PPM" refers to the total estimated collections on our nonperforming loan portfolios divided by purchase price.
• "Recoveries collected" refers to cash collections plus buybacks and other adjustments.
• "Total estimated collections" or "TEC" refers to actual cash collections plus estimated remaining collections on our nonperforming loan portfolios.

Our business is primarily subject to interest rate and foreign currency risk. Our exposure to these risks, as described in Part II, Item 7A in the 2025 Form 10-K, has not changed materially.

Interest rate exposure

Of our $3.8 billion in total borrowings as of June 30, 2026, approximately $1.6 billion was fixed rate debt. Considering these fixed rate borrowings and the interest rate hedges on our variable rate debt, with maturities ranging from seven months to approximately four years, as of June 30, 2026, 60% of our total debt was either fixed rate or converted to a fixed rate. Based on our debt structure, assuming a 50 basis point decrease/increase in interest rates, interest expense over the following 12 months would decrease/increase by an estimated $7.8 million.

Foreign currency exposure

We operate internationally and enter into transactions denominated in various foreign currencies. During Q2 2026, our revenues from operations outside the U.S. were $221.7 million.

Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. We conducted an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based on this evaluation, the principal executive officer and principal financial officer have concluded that, as of June 30, 2026, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting. There was no change in our internal control over financial reporting that occurred during the quarter ended June 30, 2026, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.