# PRA GROUP INC (PRAA) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from PRA GROUP INC's 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1185348/000118534823000007/praa-20221231.htm
Accession: 0001185348-23-000007
Filing date: 2023-02-28
Report date: 2022-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/PRAA/
All MD&A years: /company/PRAA/mda/
Previous year: /company/PRAA/mda/fy2021/ (FY 2021)
Next year: /company/PRAA/mda/fy2023/ (FY 2023)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Objective

This discussion is from the perspective of management and is intended to help the reader understand our financial condition, cash flows and other changes in financial condition and results of operations. It should be read in conjunction with the financial statements and notes thereto included in Item 8 of this Form 10-K. Additionally, this discussion includes material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be indicative of our future operating results or of our future financial condition.

Executive Overview

We are a global financial and business services company with operations in the Americas, Europe and Australia. Our primary business is the purchase, collection and management of portfolios of nonperforming loans. For the year ended December 31, 2022 we had:

•Total portfolio purchases of $850.0 million.

•Total cash collections of $1.7 billion.

•Estimated remaining collections ("ERC") of $5.7 billion.

•Cash efficiency ratio of 61.0%.

•Diluted earnings per share of $2.94.

Leading financial industry publications have indicated that excess consumer liquidity has resulted in lower levels of charge offs across most lending institutions, primarily in the U.S. As a result, this has caused a decrease in the supply of portfolios available for purchase in the U.S. during 2021 and 2022 resulting in a lower level of portfolio purchases and pricing pressures. We expect these trends to continue temporarily; however, consistent with our experience during previous economic cycles, we believe charge offs will increase. This should lead to a greater level of supply, which we anticipate could occur in the coming months.

Furthermore, the combination of robust demand for goods and services and lingering supply chain constraints continue to contribute to elevated levels of inflation, rising interest rates, foreign exchange rate fluctuations, and concerns of global recession. We cannot predict the full extent to which these items will impact our business, results of operations and financial condition. See Item 1A of this Form 10-K.

Frequently Used Terms

We may use the following terminology throughout this Form 10-K:

•"Buybacks" refers to purchase price refunded by the seller due to the return of ineligible 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.

•"Change in expected recoveries" refers to the differences of actual recoveries received when 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 a pool 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 expected cash collections on our finance receivables.

•"Portfolio acquisitions" refers to all nonperforming loan portfolios acquired as a result of a purchase, but also includes portfolios added as a result of a business acquisition.

20

•"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 of nonperforming loan portfolios and estimated remaining collections.

•"Purchase price" refers to the cash paid to a seller to acquire nonperforming loans.

•"Purchase price multiple" refers to the total estimated collections on our nonperforming loan portfolios divided by purchase price.

•"Recoveries" 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.

Unless otherwise specified, references to 2022, 2021 and 2020 are for the years ended December 31, 2022, December 31, 2021 and December 31, 2020, respectively.

21

Results of Operations

The results of operations include the financial results of the Company and all of our subsidiaries. Certain prior year amounts have been reclassified for consistency with the current year presentation. Fee Income is now included within Other revenue on our Consolidated Income Statements. The following table sets forth Consolidated Income Statement amounts as a percentage of total revenues for the periods indicated (dollars in thousands):

[[GREPCENT_TABLE]]
[["","2022","","2021","","2020"],["Revenues:"],["Portfolio income","$","772,315","","","79.9","%","","$","875,327","","","79.9","%","","$","984,036","","","92.4","%"],["Changes in expected recoveries","168,904","","","17.5","","","197,904","","","18.1","","","69,297","","","6.5"],["Total portfolio revenue","941,219","","","97.4","","","1,073,231","","","98.0","","","1,053,333","","","98.9"],["Other revenue","25,305","","","2.6","","","22,501","","","2.0","","","12,081","","","1.1"],["Total revenues","966,524","","","100.0","","","1,095,732","","","100.0","","","1,065,414","","","100.0"],["Operating expenses:"],["Compensation and employee services","285,537","","","29.5","","","301,981","","","27.6","","","295,150","","","27.7"],["Legal collection fees","38,450","","","4.0","","","47,206","","","4.3","","","53,758","","","5.1"],["Legal collection costs","76,757","","","7.9","","","78,330","","","7.1","","","101,635","","","9.5"],["Agency fees","63,808","","","6.6","","","63,140","","","5.8","","","56,418","","","5.3"],["Outside fees and services","92,355","","","9.6","","","92,615","","","8.5","","","84,087","","","7.9"],["Communication","39,205","","","4.1","","","42,755","","","3.9","","","40,801","","","3.8"],["Rent and occupancy","18,589","","","1.9","","","18,376","","","1.7","","","17,973","","","1.7"],["Depreciation and amortization","15,243","","","1.6","","","15,256","","","1.4","","","18,465","","","1.7"],["Other operating expenses","50,778","","","5.2","","","61,077","","","5.5","","","47,426","","","4.5"],["Total operating expenses","680,722","","","70.4","","","720,736","","","65.8","","","715,713","","","67.2"],["Income from operations","285,802","","","29.6","","","374,996","","","34.2","","","349,701","","","32.8"],["Other income and (expense):"],["Interest expense, net","(130,677)","","","(13.6)","","","(124,143)","","","(11.3)","","","(141,712)","","","(13.2)"],["Foreign exchange gain/(loss), net","985","","","0.1","","","(809)","","","(0.1)","","","2,005","","","0.2"],["Other","(1,325)","","","(0.1)","","","282","","","\u2014","","","(1,049)","","","(0.2)"],["Income before income taxes","154,785","","","16.0","","","250,326","","","22.8","","","208,945","","","19.6"],["Income tax expense","36,787","","","3.8","","","54,817","","","5.0","","","41,203","","","3.9"],["Net income","117,998","","","12.2","","","195,509","","","17.8","","","167,742","","","15.7"],["Adjustment for net income attributable to noncontrolling interests","851","","","0.1","","","12,351","","","1.1","","","18,403","","","1.7"],["Net income attributable to PRA Group, Inc.","$","117,147","","","12.1","%","","$","183,158","","","16.7","%","","$","149,339","","","14.0","%"]]
[[/GREPCENT_TABLE]]

22

Year Ended December 31, 2022 Compared With Year Ended December 31, 2021

Cash Collections

Cash collections for the years indicated were as follows (amounts in millions):

[[GREPCENT_TABLE]]
[["","2022","","2021","","","","$ Change","","% Change"],["Americas and Australia Core","$","946.1","","","$","1,206.9","","","","","$","(260.8)","","","(21.6)","%"],["Americas Insolvency","129.4","","","147.3","","","","","(17.9)","","","(12.2)"],["Europe Core","559.7","","","614.6","","","","","(54.9)","","","(8.9)"],["Europe Insolvency","93.9","","","92.9","","","","","1.0","","","1.1"],["Total cash collections","$","1,729.1","","","$","2,061.7","","","","","$","(332.6)","","","(16.1)","%"],["Cash collections adjusted (1)","$","1,729.1","","","$","1,986.9","","","","","$","(257.8)","","","(13.0)","%"]]
[[/GREPCENT_TABLE]]

(1) Cash collections adjusted refers to 2021 cash collections translated using 2022 exchange rates.

Cash collections were $1,729.1 million in 2022, a decrease of $332.6 million, or 16.1%, compared to $2,061.7 million in 2021. The decrease was largely due to a decrease of $229.5 million, or 30.6%, in cash collections in U.S. call center and other collections, which we believe was mainly due to higher collections driven by excess consumer liquidity during 2021 coupled with lower levels of portfolio purchasing. Additionally, U.S. legal cash collections decreased $41.2 million, or 12.3%, mainly reflecting the impact from the lower volume of accounts placed in the legal channel in the last few years. Europe cash collections decreased by $53.9 million, or 7.6%, reflecting a $76.1 million impact from the strengthening of the U.S. dollar partially offset by higher levels of portfolio purchases in the last few years.

Revenues

Revenue generation for the years indicated were as follows (amounts in thousands):

[[GREPCENT_TABLE]]
[["","2022","","2021","","$ Change","","% Change"],["Portfolio income","$","772,315","","","$","875,327","","","$","(103,012)","","","(11.8)","%"],["Changes in expected recoveries","168,904","","","197,904","","","(29,000)","","","(14.7)"],["Total portfolio revenue","941,219","","","1,073,231","","","(132,012)","","","(12.3)"],["Other revenue","25,305","","","22,501","","","2,804","","","12.5"],["Total revenues","$","966,524","","","$","1,095,732","","","$","(129,208)","","","(11.8)","%"]]
[[/GREPCENT_TABLE]]

Total Portfolio Revenue

Total portfolio revenue was $941.2 million in 2022, a decrease of $132.0 million, or 12.3%, compared to $1,073.2 million in 2021. The decrease was primarily driven by lower levels of portfolio purchasing, lower levels of cash overperformance, and the impact of foreign exchange. These decreases were partially offset by an increase to our forecasted ERC in certain pools.

Other Revenue

Other revenue was $25.3 million in 2022, an increase of $2.8 million, or 12.5%, compared to $22.5 million in 2021. The increase was primarily attributable to settlement timing in our claims processing company, CCB.

Operating Expenses

Total operating expenses were $680.7 million in 2022, a decrease of $40.0 million, or 5.6%, compared to $720.7 million in 2021.

Compensation and Employee Services

Compensation and employee service expenses were $285.5 million in 2022, a decrease of $16.5 million, or 5.5%, compared to $302.0 million in 2021. The decrease was primarily attributable to lower levels of compensation accruals and a decrease in collector compensation expenses in the U.S. call centers. Total full-time equivalents decreased 4.9% to 3,277 as of December 31, 2022 from 3,446 as of December 31, 2021 mainly reflecting natural attrition.

23

Legal Collection Fees

Legal collection fees represent contingent fees incurred for the cash collections generated by our independent third-party attorney network. Legal collection fees were $38.4 million in 2022, a decrease of $8.8 million, or 18.6%, compared to $47.2 million in 2021. The decrease was mainly due to lower external legal cash collections in the U.S.

Legal Collection Costs

Legal collection costs primarily consist of costs paid to courts where a lawsuit is filed for the purpose of attempting to collect on an account. Legal collection costs were $76.8 million in 2022, compared to $78.3 million in 2021.

Agency Fees

Agency fees primarily represent third-party collection fees. Agency fees were $63.8 million in 2022, compared to $63.1 million in 2021.

Communication

Communication expenses primarily represent postage and telephone related expenses incurred as a result of our collection efforts. Communication expenses were $39.2 million in 2022, a decrease of $3.6 million, or 8.4%, compared to $42.8 million in 2021. The decrease mainly reflects a decrease in postage expenses due to lower portfolio purchasing in the U.S.

Other

Other expenses were $50.8 million in 2022, a decrease of $10.3 million, or 16.9%, compared to $61.1 million in 2021. The decrease primarily reflects lower advertising costs.

Interest Expense, Net

Interest expense, net for the years indicated were as follows (amounts in thousands):

[[GREPCENT_TABLE]]
[["","2022","","2021","","$ Change","","% Change"],["Interest on debt obligations and unused line fees","$","71,108","","","$","76,759","","","$","(5,651)","","","(7.4)","%"],["Interest on senior notes","39,625","","","26,889","","","12,736","","","47.4"],["Coupon interest on convertible notes","12,075","","","12,075","","","\u2014","","","\u2014"],["Amortization of loan fees and other loan costs","10,097","","","9,508","","","589","","","6.2"],["Interest income","(2,228)","","","(1,088)","","","(1,140)","","","104.8"],["Interest expense, net","$","130,677","","","$","124,143","","","$","6,534","","","5.3","%"]]
[[/GREPCENT_TABLE]]

Interest expense, net was $130.7 million in 2022, an increase of $6.5 million, or 5.3%, compared to $124.1 million in 2021 primarily due to higher interest rates.

Foreign Exchange Gain/(Loss), Net

Foreign exchange gains were $1.0 million in 2022 compared to foreign exchange losses of $0.8 million in 2021. In any given period, we may incur foreign currency exchange gains or losses from transactions in currencies other than the functional currency. Refer to our Currency Exchange Risk discussion in Item 7A of this Form 10-K.

Income Tax Expense

Income tax expense was $36.8 million in 2022, a decrease of $18.0 million, or 32.8%, compared to $54.8 million in 2021. In 2022, our effective tax rate was 23.8% compared to 21.9% in 2021. The decrease in income tax expense was primarily due to lower income before income taxes, which decreased $95.5 million, or 38.2%. The increase in effective tax rate was mainly due to a change in the mix of income from different taxing justifications, return to provision adjustments and the lack of beneficial tax rate changes offset by valuation allowance releases on net operating losses.

Year Ended December 31, 2021 Compared To Year Ended December 31, 2020

Refer to Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of our 2021 Form 10-K for a discussion of our 2021 results compared to our 2020 results.

24

Supplemental Performance Data

Finance Receivables Portfolio Performance

We purchase portfolios of nonperforming loans from a variety of credit originators or acquire portfolios through business acquisitions and segregate them into two main portfolio segments: Core or Insolvency, based on the status of the account upon acquisition. In addition, the accounts are segregated into geographical regions based upon where the account was acquired. Ultimately, accounts are aggregated into annual pools based on portfolio segment, geography, and year of acquisition. Portfolios of accounts that were in an insolvency status at the time of acquisition are represented in the Insolvency tables below. All other acquisitions of portfolios of accounts are included in our Core portfolio tables as represented below. Once an account is initially segregated, it is not later transferred from an Insolvency pool to a Core pool or vice versa and the account continues to be accounted for as originally segregated regardless of any future changes in operational status. Specifically, if a Core account files for bankruptcy or insolvency protection after acquisition, we adjust our collection practices to comply with any respective bankruptcy or insolvency rules or policies; however, the account remains in the Core pool. In the event an insolvency account is dismissed from its bankruptcy or insolvency status whether voluntarily or involuntarily, we are typically free to pursue alternative collection activities.

The purchase price multiple represents our estimate of total cash collections over the original purchase price of the portfolio. Purchase price multiples can vary over time due to a variety of factors, including pricing competition, supply levels, paper type, age of the accounts acquired, mix of portfolios purchased and changes in operational efficiency. For example, increased pricing due to elevated levels of competition or supply constraints negatively impacts purchase price multiples as we pay more to buy similar portfolios of nonperforming loans.

Further, there is a direct relationship between the price we pay for a portfolio, the purchase price multiple and the effective interest rate of the pool. When we pay more for a portfolio, the purchase price multiple and effective interest rates are lower. The opposite tends to occur when we pay less for a portfolio. We incur lower collection costs on certain types of accounts we purchase for which we are able to generally pay more for these types of accounts. This typically results in lower purchase price multiples, while generating similar net income margins when compared with other portfolio purchases. Within a given portfolio type, to the extent that lower purchase price multiples are the result of more competitive pricing, this will generally lead to lower profitability. As portfolio pricing becomes more favorable on a relative basis, our profitability will tend to increase. Profitability within given Core portfolio types may also be impacted by the age and quality of the accounts, which impact the cost to collect those accounts. Fresher accounts, for example, typically carry lower associated collection costs, while older accounts and lower balance accounts typically carry higher costs and, as a result, require higher purchase price multiples to achieve the same net profitability as fresher paper.

Revenue recognition is driven by estimates of the amount and timing of future cash collections. We record new portfolio acquisitions at the purchase price, which reflects the amount we expect to collect discounted at an effective interest rate. During the year of acquisition, portfolios are aggregated into annual pools, and the blended effective interest rate will change to reflect new buying and new cash flow estimates until the end of the year. At that time, the purchase price amount is fixed at the aggregated amounts paid to acquire the portfolio, the effective interest rate is fixed at the amount we expect to collect, discounted at the rate to equate purchase price to the recovery estimate and the currency rates are fixed for purposes of comparability in future periods. Depending on the level of performance and expected future impacts from our operations, we may update ERC and TEC levels based on the results of our cash forecasting with the correlating adjustment to the purchase price multiple. We follow an established process to evaluate ERC. During the first years following purchase, we typically do not increase our purchase price multiples. Following the initial years, as we gain collection experience and confidence with a pool of accounts we may begin to adjust our purchase price multiples. Over time, our TEC has often increased as pools have aged resulting in the ratio of ERC to purchase price for any given year of buying to gradually increase. Thus, all factors being equal in terms of pricing, one would typically tend to see a higher collection to purchase price ratio from a pool of accounts that was six years from acquisition than a pool that was just two years from acquisition.

The numbers presented in the following tables represent gross cash collections and do not reflect any costs to collect; therefore, they may not represent relative profitability. Due to all the factors described above, readers should be cautious when making comparisons of purchase price multiples among periods and between types of categories of portfolio segments and related geographies.

25

[[GREPCENT_TABLE]]
[["Purchase Price Multiplesas of December 31, 2022Amounts in thousands"],["Purchase Period","Purchase Price (2)(3)","Total Estimated Collections (4)","Estimated Remaining Collections (5)","Current Purchase Price Multiple","Original Purchase Price Multiple (6)"],["Americas and Australia Core"],["1996-2012","$","1,541,897","","$","4,798,281","","$","42,398","","311%","238%"],["2013","390,826","","905,829","","17,025","","232%","211%"],["2014","404,117","","872,066","","26,384","","216%","204%"],["2015","443,114","","905,285","","55,162","","204%","205%"],["2016","455,767","","1,081,751","","93,292","","237%","201%"],["2017","532,851","","1,208,081","","156,253","","227%","193%"],["2018","653,975","","1,464,612","","225,935","","224%","202%"],["2019","581,476","","1,294,519","","288,207","","223%","206%"],["2020","435,668","","948,088","","337,470","","218%","213%"],["2021","435,846","","811,328","","553,876","","186%","191%"],["2022","406,082","","726,523","","659,290","","179%","179%"],["Subtotal","6,281,619","","15,016,363","","2,455,292"],["Americas Insolvency"],["1996-2012","1,038,222","","2,146,283","","285","","207%","165%"],["2013","227,834","","355,578","","142","","156%","133%"],["2014","148,420","","218,674","","392","","147%","124%"],["2015","63,170","","87,891","","279","","139%","125%"],["2016","91,442","","117,449","","612","","128%","123%"],["2017","275,257","","355,272","","4,406","","129%","125%"],["2018","97,879","","137,315","","16,401","","140%","127%"],["2019","123,077","","168,002","","46,299","","137%","128%"],["2020","62,130","","89,698","","46,704","","144%","136%"],["2021","55,187","","72,934","","50,407","","132%","136%"],["2022","33,442","","46,651","","43,464","","139%","139%"],["Subtotal","2,216,060","","3,795,747","","209,391"],["Total Americas and Australia","8,497,679","","18,812,110","","2,664,683"],["Europe Core"],["2012","20,409","","43,718","","\u2014","","214%","187%"],["2013","20,334","","26,909","","\u2014","","132%","119%"],["2014 (1)","773,811","","2,365,317","","406,593","","306%","208%"],["2015","411,340","","728,250","","153,190","","177%","160%"],["2016","333,090","","567,637","","189,769","","170%","167%"],["2017","252,174","","358,816","","119,854","","142%","144%"],["2018","341,775","","540,246","","220,787","","158%","148%"],["2019","518,610","","798,429","","373,658","","154%","152%"],["2020","324,119","","557,983","","305,148","","172%","172%"],["2021","412,411","","699,520","","498,755","","170%","170%"],["2022","359,447","","660,999","","546,522","","184%","184%"],["Subtotal","3,767,520","","7,347,824","","2,814,276"],["Europe Insolvency"],["2014 (1)","10,876","","18,611","","\u2014","","171%","129%"],["2015","18,973","","28,950","","125","","153%","139%"],["2016","39,338","","56,990","","1,500","","145%","130%"],["2017","39,235","","50,905","","4,673","","130%","128%"],["2018","44,908","","52,582","","11,526","","117%","123%"],["2019","77,218","","110,515","","35,296","","143%","130%"],["2020","105,440","","153,006","","66,106","","145%","129%"],["2021","53,230","","71,526","","45,007","","134%","134%"],["2022","44,604","","61,057","","56,551","","137%","137%"],["Subtotal","433,822","","604,142","","220,784"],["Total Europe","4,201,342","","7,951,966","","3,035,060"],["Total PRA Group","$","12,699,021","","$","26,764,076","","$","5,699,743"]]
[[/GREPCENT_TABLE]]

(1)Includes finance receivables portfolios that were acquired through the acquisition of Aktiv Kapital AS in 2014 (as described in Item 1 of this Form 10-K).

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

(3)Non-U.S. amounts are presented at the exchange rate at the end of the year in which the portfolio was purchased. In addition, any purchase price adjustments that occur throughout the life of the portfolio are presented at the year-end exchange rate for the respective year of purchase.

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

(5)Non-U.S. amounts are presented at the December 31, 2022 exchange rate.

(6)The Original Purchase Price Multiple represents the purchase price multiple at the end of the year of acquisition.

26

[[GREPCENT_TABLE]]
[["Portfolio Financial InformationFor the Year Ended December 31, 2022Amounts in thousands"],["Purchase Period","CashCollections (2)","Portfolio Income (2)","Changes in Expected Recoveries (2)","Total Portfolio Revenue (2)","Net Finance Receivables as of December 31, 2022 (3)"],["Americas and Australia Core"],["1996-2012","$","23,470","","$","12,731","","$","10,208","","$","22,939","","$","10,343"],["2013","12,526","","4,728","","6,476","","11,204","","7,438"],["2014","14,998","","6,106","","7,433","","13,539","","10,541"],["2015","19,542","","12,818","","(3,411)","","9,407","","21,250"],["2016","38,350","","28,246","","(16,381)","","11,865","","31,464"],["2017","76,269","","41,197","","(4,578)","","36,619","","68,396"],["2018","146,106","","55,912","","49,297","","105,209","","125,682"],["2019","177,717","","76,857","","21,872","","98,729","","159,586"],["2020","192,001","","88,284","","1,918","","90,202","","195,163"],["2021","177,340","","112,434","","(45,560)","","66,874","","298,645"],["2022","67,735","","44,054","","1,401","","45,455","","381,914"],["Subtotal","946,054","","483,367","","28,675","","512,042","","1,310,422"],["Americas Insolvency"],["1996-2012","1,066","","572","","494","","1,066","","\u2014"],["2013","535","","232","","305","","537","","\u2014"],["2014","718","","717","","(87)","","630","","46"],["2015","596","","165","","354","","519","","140"],["2016","1,810","","299","","932","","1,231","","481"],["2017","20,751","","2,489","","1,941","","4,430","","3,970"],["2018","24,627","","3,282","","3,301","","6,583","","15,207"],["2019","37,815","","5,933","","4,770","","10,703","","42,207"],["2020","20,361","","5,830","","3,386","","9,216","","39,299"],["2021","17,904","","6,699","","(753)","","5,946","","40,900"],["2022","3,186","","1,778","","1,239","","3,017","","32,797"],["Subtotal","129,369","","27,996","","15,882","","43,878","","175,047"],["Total Americas and Australia","1,075,423","","511,363","","44,557","","555,920","","1,485,469"],["Europe Core"],["2012","870","","\u2014","","871","","871","","\u2014"],["2013","481","","\u2014","","481","","481","","\u2014"],["2014 (1)","122,232","","73,843","","41,828","","115,671","","114,254"],["2015","40,701","","19,278","","7,740","","27,018","","83,984"],["2016","36,912","","17,962","","2,616","","20,578","","112,355"],["2017","25,151","","8,750","","3,081","","11,831","","82,457"],["2018","50,702","","17,202","","8,425","","25,627","","146,171"],["2019","89,820","","27,307","","18,949","","46,256","","255,401"],["2020","69,045","","26,602","","5,300","","31,902","","188,109"],["2021","89,938","","39,653","","2,889","","42,542","","301,235"],["2022","33,867","","12,051","","5,727","","17,778","","341,819"],["Subtotal","559,719","","242,648","","97,907","","340,555","","1,625,785"],["Europe Insolvency"],["2014 (1)","238","","14","","211","","225","","\u2014"],["2015","649","","182","","(4)","","178","","104"],["2016","2,710","","634","","104","","738","","1,131"],["2017","6,499","","593","","1,371","","1,964","","4,325"],["2018","9,828","","1,218","","863","","2,081","","10,512"],["2019","21,020","","3,458","","7,268","","10,726","","30,837"],["2020","34,086","","6,011","","14,364","","20,375","","57,627"],["2021","14,417","","4,637","","1,312","","5,949","","36,707"],["2022","4,452","","1,557","","951","","2,508","","42,511"],["Subtotal","93,899","","18,304","","26,440","","44,744","","183,754"],["Total Europe","653,618","","260,952","","124,347","","385,299","","1,809,539"],["Total PRA Group","$","1,729,041","","$","772,315","","$","168,904","","$","941,219","","$","3,295,008"]]
[[/GREPCENT_TABLE]]

(1)Includes finance receivables portfolios that were acquired through the acquisition of Aktiv Kapital AS in 2014 (as described in Item 1 of this Form 10-K).

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

(3)Non-U.S. amounts are presented at the December 31, 2022 exchange rate.

27

[[GREPCENT_TABLE]]
[["Cash Collections by Year, By Year of Purchase (1)as of December 31, 2022Amounts in millions"],["","","Cash Collections"],["Purchase Period","Purchase Price (3)(4)","1996-2012","2013","2014","2015","2016","2017","2018","2019","2020","2021","2022","Total"],["Americas and Australia Core"],["1996-2012","$","1,541.9","","$","2,962.4","","$","554.9","","$","412.5","","$","280.4","","$","179.0","","$","118.0","","$","83.8","","$","62.9","","$","41.5","","$","29.8","","$","23.5","","$","4,748.7"],["2013","390.8","","\u2014","","101.6","","247.8","","194.0","","120.8","","78.9","","56.4","","36.9","","23.2","","16.7","","12.5","","888.8"],["2014","404.1","","\u2014","","\u2014","","92.7","","253.4","","170.3","","114.2","","82.2","","55.3","","31.9","","22.3","","15.0","","837.3"],["2015","443.1","","\u2014","","\u2014","","\u2014","","117.0","","228.4","","185.9","","126.6","","83.6","","57.2","","34.9","","19.5","","853.1"],["2016","455.8","","\u2014","","\u2014","","\u2014","","","138.7","","256.5","","194.6","","140.6","","105.9","","74.2","","38.4","","948.9"],["2017","532.9","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","107.3","","278.7","","256.5","","192.5","","130.0","","76.3","","1,041.3"],["2018","654.0","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","122.7","","361.9","","337.7","","239.9","","146.1","","1,208.3"],["2019","581.5","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","143.8","","349.0","","289.8","","177.7","","960.3"],["2020","435.7","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","133.0","","284.3","","192.0","","609.3"],["2021","435.8","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","85.0","","177.3","","262.3"],["2022","406.1","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","67.8","","67.8"],["Subtotal","6,281.7","","2,962.4","","656.5","","753.0","","844.8","","837.2","","860.8","","945.0","","1,141.5","","1,271.9","","1,206.9","","946.1","","12,426.1"],["Americas Insolvency"],["1996-2012","1,038.2","","1,021.6","","417.3","","338.8","","208.3","","105.3","","37.7","","8.3","","4.0","","2.2","","1.4","","1.1","","2,146.0"],["2013","227.8","","\u2014","","52.5","","82.6","","81.7","","63.4","","47.8","","21.9","","2.9","","1.3","","0.8","","0.5","","355.4"],["2014","148.4","","\u2014","","\u2014","","37.0","","50.9","","44.3","","37.4","","28.8","","15.8","","2.2","","1.1","","0.7","","218.2"],["2015","63.2","","\u2014","","\u2014","","\u2014","","3.4","","17.9","","20.1","","19.8","","16.7","","7.9","","1.3","","0.6","","87.7"],["2016","91.4","","\u2014","","\u2014","","\u2014","","\u2014","","18.9","","30.4","","25.0","","19.9","","14.4","","7.4","","1.8","","117.8"],["2017","275.3","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","49.1","","97.3","","80.9","","58.8","","44.0","","20.8","","350.9"],["2018","97.9","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","6.7","","27.4","","30.5","","31.6","","24.6","","120.8"],["2019","123.1","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","13.4","","31.4","","39.1","","37.8","","121.7"],["2020","62.1","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","6.5","","16.1","","20.4","","43.0"],["2021","55.2","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","4.5","","17.9","","22.4"],["2022","33.4","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","3.2","","3.2"],["Subtotal","2,216.0","","1,021.6","","469.8","","458.4","","344.3","","249.8","","222.5","","207.8","","181.0","","155.2","","147.3","","129.4","","3,587.1"],["Total Americas and Australia","8,497.7","","3,984.0","","1,126.3","","1,211.4","","1,189.1","","1,087.0","","1,083.3","","1,152.8","","1,322.5","","1,427.1","","1,354.2","","1,075.5","","16,013.2"],["Europe Core"],["2012","20.4","","11.6","","9.0","","5.6","","3.2","","2.2","","2.0","","2.0","","1.5","","1.2","","1.2","","0.9","","40.4"],["2013","20.3","","\u2014","","7.1","","8.5","","2.3","","1.3","","1.2","","1.3","","0.9","","0.7","","0.7","","0.5","","24.5"],["2014 (2)","773.8","","\u2014","","\u2014","","153.2","","292.0","","246.4","","220.8","","206.3","","172.9","","149.8","","149.2","","122.2","","1,712.8"],["2015","411.3","","\u2014","","\u2014","","\u2014","","45.8","","100.3","","86.2","","80.9","","66.1","","54.3","","51.4","","40.7","","525.7"],["2016","333.1","","\u2014","","\u2014","","\u2014","","\u2014","","40.4","","78.9","","72.6","","58.0","","48.3","","46.7","","36.9","","381.8"],["2017","252.2","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","17.9","","56.0","","44.1","","36.1","","34.8","","25.2","","214.1"],["2018","341.8","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","24.3","","88.7","","71.2","","69.1","","50.7","","304.0"],["2019","518.6","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","47.9","","125.7","","121.4","","89.8","","384.8"],["2020","324.1","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","32.4","","91.7","","69.0","","193.1"],["2021","412.4","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","48.4","","89.9","","138.3"],["2022","359.5","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","33.9","","33.9"],["Subtotal","3,767.5","","11.6","","16.1","","167.3","","343.3","","390.6","","407.0","","443.4","","480.1","","519.7","","614.6","","559.7","","3,953.4"],["Europe Insolvency"],["2014 (2)","10.9","","\u2014","","\u2014","","\u2014","","4.3","","3.9","","3.2","","2.6","","1.5","","0.8","","0.3","","0.3","","16.9"],["2015","19.0","","\u2014","","\u2014","","\u2014","","3.0","","4.4","","5.0","","4.8","","3.9","","2.9","","1.6","","0.6","","26.2"],["2016","39.3","","\u2014","","\u2014","","\u2014","","\u2014","","6.2","","12.7","","12.9","","10.7","","7.9","","6.0","","2.7","","59.1"],["2017","39.2","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","1.2","","7.9","","9.2","","9.8","","9.4","","6.5","","44.0"],["2018","44.9","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","0.6","","8.4","","10.3","","11.7","","9.8","","40.8"],["2019","77.2","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","5.1","","21.1","","23.9","","21.0","","71.1"],["2020","105.4","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","6.1","","34.6","","34.1","","74.8"],["2021","53.3","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","5.4","","14.4","","19.8"],["2022","44.6","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","4.5","","4.5"],["Subtotal","433.8","","\u2014","","\u2014","","\u2014","","7.3","","14.5","","22.1","","28.8","","38.8","","58.9","","92.9","","93.9","","357.2"],["Total Europe","4,201.3","","11.6","","16.1","","167.3","","350.6","","405.1","","429.1","","472.2","","518.9","","578.6","","707.5","","653.6","","4,310.6"],["Total PRA Group","$","12,699.0","","$","3,995.6","","$","1,142.4","","$","1,378.7","","$","1,539.7","","$","1,492.1","","$","1,512.4","","$","1,625.0","","$","1,841.4","","$","2,005.7","","$","2,061.7","","$","1,729.1","","$","20,323.8"]]
[[/GREPCENT_TABLE]]

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

(2)Includes finance receivables portfolios that were acquired through the acquisition of Aktiv Kapital AS in 2014 (as described in Item 1 of this Form 10-K).

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

(4)Non-U.S. amounts are presented at the exchange rate at the end of the year in which the portfolios were purchased. In addition, any purchase price adjustments that occur throughout the life of the pool are presented at the year-end exchange rate for the respective year of purchase.

28

Estimated Remaining Collections

The following chart shows our ERC of $5,699.7 million at December 31, 2022 by geographical region (amounts in millions).

The following chart shows our ERC by year, by geography as of December 31, 2022. The forecast amounts reflect our current estimate of how much we expect to collect on our portfolios. These estimates are translated to U.S. dollars at the December 31, 2022 exchange rate.

29

The following table displays our ERC by year, by geography as of December 31, 2022 (amounts in thousands).

[[GREPCENT_TABLE]]
[["ERC By Year By Geography"],["","Americas and Australia Core","","Americas Insolvency","","Europe Core","","Europe Insolvency","","Total"],["2023","$","803,547","","","$","91,220","","","$","490,519","","","$","77,755","","","$","1,463,041"],["2024","574,765","","","60,606","","","402,824","","","60,744","","","1,098,939"],["2025","355,894","","","34,161","","","334,508","","","40,250","","","764,813"],["2026","236,037","","","16,262","","","284,296","","","23,346","","","559,941"],["2027","161,312","","","6,238","","","242,470","","","11,359","","","421,379"],["2028","113,141","","","891","","","208,568","","","4,612","","","327,212"],["2029","80,370","","","13","","","178,287","","","1,440","","","260,110"],["2030","58,309","","","\u2014","","","148,153","","","292","","","206,754"],["2031","39,943","","","\u2014","","","125,803","","","245","","","165,991"],["2032","27,557","","","\u2014","","","107,326","","","206","","","135,089"],["Thereafter","4,417","","","\u2014","","","291,522","","","535","","","296,474"],["","$","2,455,292","","","$","209,391","","","$","2,814,276","","","$","220,784","","","$","5,699,743"]]
[[/GREPCENT_TABLE]]
Seasonality

Customer payment patterns in all of the countries in which we operate can be affected by seasonal employment trends, income tax refunds, and holiday spending habits. Typically cash collections in the Americas tend to be higher in the first half of the year due to the high volume of income tax refunds received by individuals in the U.S., and trend lower as the year progresses. In the first half of 2022, this spike was not as pronounced. Additionally, 2021 and 2020 deviated from usual seasonal patterns due to the impact of the COVID-19 pandemic.

Cash Collections

The following table displays our quarterly cash collections by geography and portfolio type, for the periods indicated (amounts in thousands).

[[GREPCENT_TABLE]]
[["Cash Collections by Geography and Type"],["","2022","","2021"],["","Q4","","Q3","","Q2","","Q1","","Q4","","Q3","","Q2","","Q1"],["Americas and Australia Core","$","205,619","","","$","225,775","","","$","244,377","","","$","270,284","","","$","257,705","","","$","276,691","","","$","324,845","","","$","347,638"],["Americas Insolvency","27,971","","","31,911","","","34,278","","","35,209","","","36,851","","","37,464","","","37,768","","","35,253"],["Europe Core","134,016","","","132,072","","","142,470","","","151,162","","","155,853","","","151,625","","","157,637","","","149,486"],["Europe Insolvency","24,051","","","22,586","","","22,935","","","24,325","","","23,262","","","22,574","","","23,579","","","23,510"],["Total Cash Collections","$","391,657","","","$","412,344","","","$","444,060","","","$","480,980","","","$","473,671","","","$","488,354","","","$","543,829","","","$","555,887"]]
[[/GREPCENT_TABLE]]

The following table provides additional details on the composition of our Core cash collections for the periods indicated (amounts in thousands).

[[GREPCENT_TABLE]]
[["Cash Collections by Source - Core Portfolios Only"],["","2022","","2021"],["","Q4","","Q3","","Q2","","Q1","","Q4","","Q3","","Q2","","Q1"],["Call Center and Other Collections","$","216,182","","","$","235,832","","","$","260,764","","","$","291,266","","","$","283,606","","","$","298,717","","","$","338,022","","","$","355,043"],["External Legal Collections","48,925","","","49,243","","","50,996","","","55,179","","","55,760","","","54,445","","","61,836","","","65,613"],["Internal Legal Collections","74,528","","","72,772","","","75,087","","","75,001","","","74,192","","","75,154","","","82,624","","","76,468"],["Total Core Cash Collections","$","339,635","","","$","357,847","","","$","386,847","","","$","421,446","","","$","413,558","","","$","428,316","","","$","482,482","","","$","497,124"]]
[[/GREPCENT_TABLE]]

30

Collections Productivity (U.S. Portfolio)

The following table displays a collections productivity measure for our U.S. portfolios for the periods indicated.

[[GREPCENT_TABLE]]
[["Cash Collections per Collector Hour Paid U.S. Portfolio"],["","Call center and other cash collections (1)"],["","2022","","2021","","2020","","2019","","2018"],["First Quarter","$","261","","","$","279","","","$","172","","","$","139","","","$","121"],["Second Quarter","226","","","270","","","263","","","139","","","101"],["Third Quarter","210","","","242","","","246","","","124","","","107"],["Fourth Quarter","186","","","232","","","204","","","128","","","104"]]
[[/GREPCENT_TABLE]]

(1)Represents total cash collections less internal legal cash collections, external legal cash collections and Insolvency cash collections from trustee-administered accounts.

Cash Efficiency Ratio

The following table displays our cash efficiency ratio for the periods indicated.

[[GREPCENT_TABLE]]
[["Cash Efficiency Ratio (1)"],["","2022","","2021","","2020","","2019","","2018"],["First Quarter","65.1%","","68.0%","","61.5%","","59.2%","","60.7%"],["Second Quarter","61.3","","66.8","","68.7","","60.4","","60.1"],["Third Quarter","58.4","","62.4","","65.6","","60.2","","55.7"],["Fourth Quarter","58.6","","63.5","","61.9","","59.7","","55.0"],["Full Year","61.0","","65.3","","64.5","","59.9","","58.0"]]
[[/GREPCENT_TABLE]]

(1) Calculated by dividing cash receipts less operating expenses by cash receipts.

Portfolio Acquisitions

The following chart shows the purchase price of our portfolios by year since 2012. It also includes the acquisition date portfolios that were acquired through our business acquisitions.

* 2014 includes portfolios acquired in connections with the acquisition of Aktiv Kapital AS in 2014 (as described in Item 1 of this Form 10-K).

31

The following table displays our quarterly portfolio acquisitions for the periods indicated (amounts in thousands).

[[GREPCENT_TABLE]]
[["Portfolio Acquisitions by Geography and Type"],["","2022","","2021"],["","Q4","","Q3","","Q2","","Q1","","Q4","","Q3","","Q2","","Q1"],["Americas and Australia Core","$","118,581","","","$","100,780","","","$","99,962","","","$","90,639","","","$","90,263","","","$","162,451","","","$","98,901","","","$","88,912"],["Americas Insolvency","8,967","","","8,988","","","6,369","","","9,118","","","21,183","","","9,878","","","14,642","","","9,486"],["Europe Core","140,011","","","59,426","","","123,814","","","38,764","","","60,430","","","212,194","","","106,134","","","44,095"],["Europe Insolvency","20,535","","","13,910","","","1,202","","","8,929","","","29,820","","","7,424","","","\u2014","","","16,468"],["Total Portfolio Acquisitions","$","288,094","","","$","183,104","","","$","231,347","","","$","147,450","","","$","201,696","","","$","391,947","","","$","219,677","","","$","158,961"]]
[[/GREPCENT_TABLE]]

Portfolio Acquisitions by Stratifications (U.S. Only)

The following table categorizes our quarterly U.S. portfolio acquisitions for the periods indicated into major asset type and delinquency category. Since our inception in 1996, we have acquired more than 60.0 million customer accounts in the U.S. (amounts in thousands).

[[GREPCENT_TABLE]]
[["U.S. Portfolio Acquisitions by Major Asset Type"],["","2022","","2021"],["","Q4","","Q3","","Q2","","Q1","","Q4"],["Major Credit Cards","$","10,242","","11.7","%","","$","10,236","","15.8","%","","$","20,673","","26.7","%","","$","18,160","","23.0","%","","$","50,017","","51.4","%"],["Private Label Credit Cards","60,380","","69.0","","","44,727","","68.8","","","52,368","","67.4","","","46,195","","58.6","","","28,293","","29.1"],["Consumer Finance","16,366","","18.7","","","9,396","","14.4","","","2,062","","2.7","","","13,968","","17.7","","","4,617","","4.8"],["Auto Related","515","","0.6","","","630","","1.0","","","2,443","","3.2","","","514","","0.7","","","14,319","","14.7"],["Total","$","87,503","","100.0","%","","$","64,989","","100.0","%","","$","77,546","","100.0","%","","$","78,837","","100.0","%","","$","97,246","","100.0","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["U.S. Portfolio Acquisitions by Delinquency Category"],["","2022","","2021"],["","Q4","","","Q3","","Q2","","Q1","","Q4"],["Fresh (1)","$","55,117","","70.2","%","","","$","30,510","","54.5","%","","$","28,235","","39.7","%","","$","29,077","","41.7","%","","$","17,096","","22.5","%"],["Primary (2)","511","","0.7","","","","587","","1.0","","","369","","0.5","","","11,445","","16.4","","","557","","0.7"],["Secondary (3)","21,620","","27.5","","","","19,886","","35.5","","","28,148","","39.5","","","26,748","","38.4","","","54,915","","72.2"],["Other (4)","1,288","","1.6","","","","5,018","","9.0","","","14,425","","20.3","","","2,449","","3.4","","","3,495","","4.6"],["Total Core","78,536","","100.0","%","","","56,001","","100.0","%","","71,177","","100.0","%","","69,719","","100.0","%","","76,063","","100.0","%"],["Insolvency","8,967","","","","","8,988","","","","6,369","","","","9,118","","","","21,183"],["Total","$","87,503","","","","","$","64,989","","","","$","77,546","","","","$","78,837","","","","$","97,246"]]
[[/GREPCENT_TABLE]]
(1) Fresh accounts are typically past due 120 to 270 days, charged-off by the credit originator and sold prior to any post-charge-off collection activity.

(2) Primary accounts are typically 240 to 450 days past due, charged-off and have been previously placed with one contingent fee servicer.

(3) Secondary accounts are typically 360 to 630 days past due, charged-off and have been previously placed with two contingent fee servicers.

(4) Other accounts are 480 days or more past due, charged-off and have previously been worked by three or more contingent fee servicers.

32

Non-GAAP Financial Measures

We report our financial results in accordance with U.S. generally accepted accounting principles ("GAAP"). However, management uses certain non-GAAP financial measures, including adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"), to evaluate our operating and financial performance as well as to set performance goals. We present Adjusted EBITDA because we consider it an important supplemental measure of operations and financial performance. Management believes Adjusted EBITDA helps provide enhanced period-to-period comparability of operations and financial performance, as it excludes certain items whose fluctuations from period to period do not necessarily correspond to changes in the operations of our business, and is useful to investors as other companies in the industry report similar financial measures. Adjusted EBITDA should not be considered as an alternative to net income determined in accordance with GAAP. In addition, our calculation of Adjusted EBITDA may not be comparable to the calculation of similarly titled measures presented by other companies.

Adjusted EBITDA is calculated starting with our GAAP financial measure, net income attributable to PRA Group, Inc. and is adjusted for:

•income tax expense (or less income tax benefit);

•foreign exchange loss (or less foreign exchange gain);

•interest expense, net (or less interest income, net);

•other expense (or less other income);

•depreciation and amortization;

•net income attributable to noncontrolling interests; and

•recoveries applied to negative allowance less changes in expected recoveries.

The following table provides a reconciliation of net income attributable to PRA Group, Inc., as reported in accordance with GAAP, to Adjusted EBITDA for the years ended December 31, 2022, 2021 and 2020 (amounts in thousands).

[[GREPCENT_TABLE]]
[["Reconciliation of Non-GAAP Financial Measures"],["","2022","","2021","","2020"],["Net income attributable to PRA Group, Inc.","$","117,147","","","$","183,158","","","$","149,339"],["Adjustments:"],["Income tax expense","36,787","","","54,817","","","41,203"],["Foreign exchange (gains)/losses","(985)","","","809","","","(2,005)"],["Interest expense, net","130,677","","","124,143","","","141,712"],["Other expense/(income) (1)","1,325","","","(282)","","","1,049"],["Depreciation and amortization","15,243","","","15,256","","","18,465"],["Adjustment for net income attributable to noncontrolling interests","851","","","12,351","","","18,403"],["Recoveries applied to negative allowance less Changes in expected recoveries","805,942","","","988,050","","","968,362"],["Adjusted EBITDA","$","1,106,987","","","$","1,378,302","","","$","1,336,528"]]
[[/GREPCENT_TABLE]]

(1) Other expense/(income) reflects non-operating related activity.

Additionally, we evaluate our business using certain ratios that use Adjusted EBITDA, including Debt to Adjusted EBITDA, which is calculated by dividing borrowings by Adjusted EBITDA. The following table reflects our Debt to Adjusted EBITDA at December 31, 2022 and 2021 (amounts in thousands).

[[GREPCENT_TABLE]]
[["Debt to Adjusted EBITDA"],["","2022","","2021"],["Borrowings","$","2,494,858","","","","$","2,608,714"],["Adjusted EBITDA","1,106,987","","","","1,378,302"],["Debt to Adjusted EBITDA","2.25","x","","1.89","x"]]
[[/GREPCENT_TABLE]]

33

Liquidity and Capital Resources

We actively manage our liquidity to help provide access to sufficient funding to meet our business needs and financial obligations.

Sources of Liquidity

Cash and cash equivalents. As of December 31, 2022, cash and cash equivalents totaled $83.4 million, of which $75.3 million consisted of cash on hand related to international operations with indefinitely reinvested earnings. See the "Undistributed Earnings of International Subsidiaries" section below for more information.

Borrowings. At December 31, 2022, we had the following borrowings outstanding and availability under our credit facilities (amounts in thousands):

[[GREPCENT_TABLE]]
[["","","Outstanding","","Available without Restrictions","","Available with Restrictions (1)"],["Americas revolving credit (2)","","$","186,867","","","$","888,957","","","$","191,221"],["UK revolving credit","","453,528","","","346,472","","","105,362"],["European revolving credit","","419,856","","","401,134","","","168,543"],["Term loan","","450,000","","","\u2014","","","\u2014"],["Senior Notes","","650,000","","","\u2014","","","\u2014"],["Convertible Notes","","345,000","","","\u2014","","","\u2014"],["Less: Debt discounts and issuance costs","","(10,393)","","","\u2014","","","\u2014"],["Total","","$","2,494,858","","","$","1,636,563","","","$","465,126"]]
[[/GREPCENT_TABLE]]

(1) Available borrowings after calculation of borrowing base and debt covenants as of December 31, 2022.

(2) Includes North American revolving credit facility and Colombian revolving credit facility.

On February 6, 2023, we completed the private offering of $400.0 million in aggregate principal amount of our 8.375% Senior Notes due February 1, 2028 ("2028 Notes"). We deposited $345.0 million of the net proceeds from the offering into a newly-formed segregated deposit account and will use such proceeds to retire all or any portion of our 2023 Convertible Notes or to satisfy any other obligations with respect to our 2023 Convertible Notes. We used the remainder of the net proceeds from the offering to repay a portion of our outstanding borrowings under our North American revolving credit facility.

Interest-bearing deposits. Per the terms of our European credit facility, we are permitted to obtain interest-bearing deposit funding of up to SEK 1.2 billion (approximately $115.0 million as of December 31, 2022). Interest-bearing deposits as of December 31, 2022 were $113.0 million.

Furthermore, we have the ability to slow the purchase of nonperforming loans if necessary, and use the net cash flow generated from our cash collections from our portfolio of existing nonperforming loans to temporarily service our debt and fund existing operations. For example, we invested $850.0 million in portfolio acquisitions in 2022. The portfolios acquired in 2022 generated $109.4 million of cash collections, representing only 6.3% of 2022 cash collections.

Uses of Liquidity and Material Cash Requirements

Forward Flows. Contractual obligations over the next year are primarily related to purchase commitments. As of December 31, 2022, we have forward flow commitments in place for the purchase of nonperforming loans with a maximum purchase price of $792.2 million, of which $722.9 million is due within the next 12 months. The $792.2 million includes $461.1 million for the Americas and Australia and $331.1 million for Europe. We may also enter into new or renewed forward flow commitments and close on spot transactions in addition to the aforementioned forward flow agreements.

Borrowings. Of our $2.5 billion of borrowings at December 31, 2022, estimated interest, unused fees and principal payments for the next 12 months are approximately $489.7 million, of which, $345.0 million relates to principal payment due on our 2023 Convertible Notes, which, as discussed above, we will retire using the funds from the offering of our 2028 Notes that we deposited in the segregated deposit account. Beyond 12 months our principal payment obligations related to debt maturities occur between one and seven years. Many of our financing arrangements include restrictive covenants with which we must comply. As of December 31, 2022, we determined that we were in compliance with these covenants. For more information, see Note 6 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.

34

Share Repurchase. On February 25, 2022, we completed our $230.0 million share repurchase program. Also on February 25, 2022, our Board of Directors approved a new share repurchase program under which we are authorized to repurchase up to $150.0 million of our outstanding common stock. 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 Exchange Act, or other methods, subject to market and/or other conditions and applicable regulatory requirements. The new share repurchase program has no stated expiration date and does not obligate us to repurchase any specified amount of shares, remains subject to the discretion of our Board of Directors and, subject to compliance with applicable laws, may be modified, suspended or discontinued at any time. During the year ended December 31, 2022, we repurchased 2,331,364 shares of our common stock for approximately $99.4 million. As of December 31, 2022, we had $67.7 million remaining for share repurchases under the new program.

Leases. The majority of our leases have remaining lease terms of one to 14 years. As of December 31, 2022, we had $59.4 million in lease liabilities, of which $10.8 million matures within the next 12 months. For more information, see Note 4 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.

Derivatives. Derivative financial instruments are entered into to reduce our exposure to fluctuations in interest rates on variable rate debt and foreign currency exchange rates. As of December 31, 2022, we had $19.1 million of derivative liabilities, all of which mature within the next 12 months. For more information, see Note 9 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.

We believe that funds generated from operations and from cash collections on nonperforming loan portfolios, together with existing cash, available borrowings under our revolving credit facilities, including recent modifications to the terms of those 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 during the next 12 months and beyond. We may seek to access the debt or equity capital markets as we deem appropriate, market permitting. Business acquisitions or higher than expected levels of portfolio purchasing could require additional financing from other sources.

Cash Flows Analysis

The following table summarizes our cash flow activity for the years ended December 31, 2022 and 2021 (amounts in thousands):

[[GREPCENT_TABLE]]
[["","","2022","","2021","","Change"],["Total cash provided by (used in):"],["Operating activities","","$","21,592","","","$","84,925","","","$","(63,333)"],["Investing activities","","120,453","","","160,376","","","(39,923)"],["Financing activities","","(121,342)","","","(262,812)","","","141,470"],["Effect of exchange rate on cash","","(25,017)","","","(14,464)","","","(10,553)"],["Net decrease in cash and cash equivalents","","$","(4,314)","","","$","(31,975)","","","$","27,661"]]
[[/GREPCENT_TABLE]]

Operating Activities

Cash provided by operating activities mainly reflects cash collections recognized as revenue partially offset by cash paid for operating expenses, interest and income taxes. Net income was adjusted for (i) non-cash items included in net income such as provisions for unrealized gains and losses, changes in expected recoveries, depreciation and amortization, deferred taxes, fair value changes in equity securities and stock-based compensation as well as (ii) changes in the balances of operating assets and liabilities, which can vary significantly in the normal course of business due to the amount and timing of payments.

Net cash provided by operating activities decreased $63.3 million during the year ended December 31, 2022, mainly driven by lower cash collections recognized as portfolio income, lower cash paid for income taxes, and the impact of foreign exchange.

Investing Activities

Cash provided by investing activities mainly reflects recoveries applied to our negative allowance. Cash used in investing activities mainly reflects acquisitions of nonperforming loans and net investment activity.

Net cash provided by investing activities decreased $39.9 million during the year ended December 31, 2022, primarily driven by a decrease of $211.1 million in recoveries applied to negative allowance partially offset by decreases in purchases of finance receivables and investments of $127.5 million and $47.9 million, respectively.

35

Financing Activities

Cash provided by financing activities is normally provided by draws on our lines of credit and proceeds from debt offerings. Cash used in financing activities is primarily driven by principal payments on our lines of credit and long-term debt.

Cash used in financing activities decreased $141.5 million during the year ended December 31, 2022, primarily due to net proceeds from our lines of credit of $8.5 million in 2022 compared to net payments on our lines of credit of $393.2 million in 2021. Additionally, proceeds from debt issuance decreased $350.0 million and repurchases of our common stock decreased $89.5 million.

Undistributed Earnings of International Subsidiaries

We intend to use predominantly all of our accumulated and future undistributed earnings of international subsidiaries to expand operations outside the U.S.; therefore, such undistributed earnings of international subsidiaries are considered to be indefinitely reinvested outside the U.S. Accordingly, no provision for income tax or withholding tax has been provided thereon. If management's intentions change and eligible undistributed earnings of international subsidiaries are repatriated, we could be subject to additional income taxes and withholding taxes. This could result in a higher effective tax rate in the period in which such a decision is made to repatriate accumulated or future undistributed international earnings. The amount of cash on hand related to international operations with indefinitely reinvested earnings was $75.3 million and $61.9 million as of December 31, 2022 and 2021, respectively. Refer to the Note 13 to our Consolidated Financial Statements included in Item 8 of this Form 10-K for further information related to our income taxes and undistributed international earnings.

Recent Accounting Pronouncements

For a summary of recent accounting pronouncements and the anticipated effects on our Consolidated Financial Statements see Note 1 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.

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. For a discussion of our significant accounting policies refer to Note 1 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.

We consider accounting estimates to be critical if (1) the accounting estimates made involve a significant level of estimation uncertainty and (2) has 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.

We have determined that the following accounting policies involve critical estimates:

Revenue Recognition - Finance Receivables

Revenue recognition for finance receivables involves the use of estimates and the exercise of judgment on the part of management. These estimates include projections of the amount and timing of cash collections we expect to receive from our pools of accounts. We review individual pools for trends, actual performance versus projections and curve shape (a graphical depiction of the amount and timing of cash collections). We then project ERC and then apply a discounted cash flow methodology to our ERC. Adjustments to ERC may include adjustments reflecting recent collection trends, our view of current and future economic conditions, changes in collection assumptions or other timing related adjustments that could impact TEC. In 2022, total adjustments of this nature resulted in a net positive change in the estimate of future recoveries of $62.2 million.

Significant changes in our cash flow estimates could result in increased or decreased revenue as we immediately recognize the discounted value of such changes using the constant effective interest rate of the pool. Generally, adjustments to estimated cash forecasts for performance experienced in the current period result in an adjustment to revenue at an amount less than the impact of the overperformance due to the effects of discounting. Additionally, cash collection forecast increases will generally result in more revenue being recognized and cash collection forecast decreases will generally result in less revenue being recognized over the life of the pool. As we continue to perform against expectations, performance may vary, which could result in additional adjustments to our cash flow forecasts with a corresponding adjustment to total portfolio revenue.

36

Income Taxes

We are subject to income taxes throughout the U.S. and in numerous international jurisdictions. These tax laws are complex and are subject to different interpretations by the taxpayer and the relevant government taxing authorities. When determining our domestic and non-U.S. income tax expense, we make judgments about the application of these inherently complex laws.

We record a tax provision for the anticipated tax consequences of the reported results of operations. The provision for income taxes is estimated using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled.

We exercise significant judgment in estimating the potential exposure to unresolved tax matters and apply a more likely than not criteria approach for recording tax benefits related to uncertain tax positions in the application of the complex tax laws. While actual results could vary, we believe we have adequate tax accruals with respect to the ultimate outcome of such unresolved tax matters. We record interest and penalties related to unresolved tax matters as a component of income tax expense when the more likely than not standards are met.

If all or part of the deferred tax assets are determined not to be realizable in the future, we would establish a valuation allowance and charge to earnings the impact in the period such a determination is made. If we subsequently realize deferred tax assets that were previously determined to be unrealizable, the respective valuation allowance would be reversed, resulting in a positive adjustment to earnings. The establishment or release of a valuation allowance does not have an impact on cash, nor does such an allowance preclude the use of loss carryforwards or other deferred tax assets in future periods. The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on our results of operations and financial position. For further information regarding our uncertain tax positions, refer to Note 13 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.