PROG Holdings, Inc. Q1 FY2025 earnings call

• First quarter revenue approximated the high end of outlook, earnings and non-GAAP diluted EPS exceeded top end of outlook. Earnings outperformance driven by strong growth at Four Technologies and improved profitability at Progressive Leasing. - Progressive Leasing's GMV affected by loss of large retail partner, tightened approval rates, and challenging retail environment, but excluding the partner's impact, saw low to mid-single-digit GMV growth. - Lease portfolio balance up 6.1% year over year as of Dec 31, 2024. Q1 write-offs at 7.4%, aiming to stay within 6%-8% targeted annual write-off range. - Strategic priorities: Grow pillar saw encouraging traction with GMV and active door count growth; enhance pillar made strides in improving customer and retailer experience; expand pillar with momentum in multiproduct ecosystem, Four Technologies' growth and cross-sell initiatives. - Direct-to-consumer efforts: PROG Marketplace had double-digit growth in Q1, on track to drive over $75 million in GMV this year; targeted lifecycle campaigns and digital personalization supported application volume at Progressive Leasing.

Progressive Leasing segment: Q1 GMV was $402 million, down 4% year over year. Revenue grew 5% to $651.6 million. Adjusted EBITDA increased from $64.2 million in Q1 2024 to $67.2 million in Q1 2025. Four Technologies: Achieved triple-digit revenue growth for the sixth consecutive quarter and first quarter of positive adjusted EBITDA. Consolidated revenue in Q1 2025 was $684.1 million, up 6.6% year over year. Adjusted EBITDA was $70.3 million.

• Revised 2025 full-year outlook: Revenue in range of $2.425 to $2.5 billion, adjusted EBITDA in range of $245 to $265 million, non-GAAP EPS in range of $2.90 to $3.30. - Expect Q2 write-offs as percentage of lease revenue to approximate high end of targeted 6%-8% annual write-off range, due to seasonally lower revenue. - Confident lease portfolio performance will stay within 6%-8% targeted annual write-off range. - Progressive Leasing's SG&A expected to deleverage slightly year over year as specific investments continue.

• Macro environment deterioration including inflation, tariff concerns, potential recession creating pressure on direct-to-consumer and retail partner channels. - Retail environment challenges affecting consumer confidence and discretionary spending. - Uncertainty around when macro conditions will normalize, impacting ability to accurately predict business performance.

Q: Bobby Griffin asked about trade-down environment and retail softness across durable categories.

A: Steve Michaels said trade-down still exists but is more muted than in back half of 2024; retail softness is larger macro force, top of funnel still more open today than same time last year.

Q: Brad Thomas asked about Big Lots' demise and legacy customers.

A: Steve Michaels said they have a strategic plan to direct Big Lots customers to other partners, seeing success in reactivating and directing those customers.

Q: Kyle Joseph asked about credit changes.

A: Steve Michaels said portfolio is healthy, write-offs came in slightly better than expected for Q1, approval rates down but due to multiple variables, conversion post-approval saw decline.

Q: John Hecht asked about American Signature ramp and pipeline.

A: Steve Michaels said American Signature is going well, encouraged by pipeline conversations and ability to help retailers during challenging times.

Q: Anthony Chukumba asked about lease approval rate reduction and application volume.

A: Steve Michaels said approval rate was 300-400 basis points lower year over year due to multiple variables; application volume had growth excluding Big Lots but conversion post-approval declined.

Q: Hoang Nguyen asked about guidance and GMV outlook.

A: Brian Garner said GMV headwinds in front half of year drove guidance revision; Steve Michaels said they didn't provide GMV guide for rest of year due to lack of clarity; discussed conversations with partners about lease to own amidst tariff and other challenges