PROG Holdings, Inc. Q4 FY2024 earnings call

Grow Pillar: Focused on expanding retail partnerships across regional and national markets, strengthening direct-to-consumer efforts, increasing e-commerce penetration. Signed long-term exclusive partnerships, renewed almost 70% of GMV to multiyear exclusive contracts. Plan to make incremental investments in marketing strategy, including enhancing brand awareness, expanding SEO, etc. ### Enhance Pillar: Invested in improving customer and retailer experiences. Enhanced personalized web content, streamlined application process, and optimized lease lifecycle. Invested in faster onboarding, expanded ways to acquire new customers, and self-service tools for retail partners. PROG Labs used generative AI to boost productivity and enhance experiences. ### Expand Pillar: Developed multiproduct ecosystem. Other operations made significant strides towards profitability. Forre's buy now pay later solution tripled GMV in 2024, reaching over $300 million. PRG Ventures introduced products like Credit Builder and Money App, with Money App achieving unit-level profitability in Q4 2024.

Progressive Leasing's GMV in 2024 was $1.93 billion, growing 7.3% year-over-year. In Q4 2024, GMV grew 9.1% year-over-year. Revenue for Q4 grew 6.3%. For the full year 2024, adjusted EBITDA for Progressive Leasing reached 11.8%, within the targeted annual range of 11% to 13%. In Q4 2024, adjusted EBITDA for Progressive Leasing was $65.8 million, which was 11.1% of revenue.

2025 Outlook: Progressive Leasing's gross lease asset balance up 6.1% year-over-year. Forre expected to more than double its GMV. Consolidated revenue expected to be in the range of $2.52 billion to $2.59 billion. Adjusted EBITDA expected in the range of $260 million to $280 million. Non-GAAP EPS expected in the range of $3.10 to $3.50. First-quarter Progressive Leasing GMV expected to be roughly flat year-over-year, but excluding Big Lots GMV results, rest of the business expected to have high single-digit GMV growth.

Risks: Impact of Big Lots bankruptcy on GMV. Macroeconomic challenges and consumer financial pressures. Higher delinquencies from new customers leading to increased write-offs. Credit supply tightening affecting approval rates and portfolio performance.

Q: Hey. Good morning, guys. Thanks for taking my question. Just want to pick your brain. You know, obviously, we've seen a number of bankruptcies in the furniture space and some shakeout for that industry. And, obviously, it's been a challenging time. Just want to get your sense for, you know, how you see the industry evolving over time and implications for the VLTO sector? Does it become kind of more of an online industry or, you know, what's the shakeout from all this?

A: Yeah, Kyle. Good morning. Yeah. That, I mean, that's a difficult crystal ball. There's certainly been some challenges as is well documented coming out of the pandemic and soft demand in that space. And clearly, depending on the capital and the balance sheet of the provider, the fixed cost of having a lot of stores can be difficult. But there's been some supply, you know, or some stores leaving the system. So my, you know, I would expect that the demand that is out there will be spread across the remaining players. I mean, overall, all categories are shifting more online. But I don't think I would not say that our call is that stores are going away. Stores are still going to be an important part of the omnichannel experience for our customers and shopping generally. As it relates to VLTO specifically, we're going to try and be where the customer is. And if the customer navigates online, we'll be there for them. But it's our expectation or mine personally that it'll continue to be a multichannel journey for the customers, and so we need to have a good solution across those channels in-store and online.

Q: Okay. That's really helpful. And then just for simplicity purposes, was there minimal impact from Big Lots to Q4? So we should expect kind of an annualized basis for the next four quarters.

A: Yeah. We didn't have a full quarter in the fourth quarter, I would say, because they had closed some stores. But, yeah, I think annualizing those numbers I gave are pretty safe.

Q: Thanks for taking my question. I want to dig a little bit deeper into the Big Lots assumptions. I know I think they're so guess, 200 to 400 stores to another partner. I mean, is there any assumptions around those stores that they are keeping? I mean, are they outperforming stores versus, you know, the stores that are closing? And, you know, are you assuming maybe any, you know, one-time boost in volume from closeout sales and have a follow-up?

A: Yeah. I'll start with the end. I mean, the closeout sale started in December, and are, I guess, wrapping up as we speak depending on the store. We didn't really see a boost in volume related to those going out of business sales. There was, I would say, spotty inventory positions across the stores. And they were very clear that they were final sales and no returns and exchanges and things of that nature. So we didn't see much there. On the disposition of the potential of 200 to 400 stores, we're in contact with our counterparts over there at Big Lots. It's unclear to us right, as we sit here today, what stores will survive and what their approach to actually carrying furniture will be. So I will tell you that in our assumptions, we're not planning on having volume from Big Lots after early this month. If it turns out that they have 200 plus stores, you know, in a region of the country that are serving furniture, we will certainly partner with them. And that might be a little bit of upside, but that's not in our base case.

Q: Good morning. Thanks for taking my question. So I guess my first question is on American Signature. My recollection is that, you know, that you didn't start generating any GMV till kind of late in 2024. And I was just wondering, you know, even just kind of directionally, what your expectation is for the GMV contribution from American Signature in 2025. Thanks.

A: Yeah. Anthony, yeah, we're really pleased with the partnership with the ASI team. You're right. We didn't really start to generate much GMV in 2024. There was some in the kind of back half of the fourth quarter. But, you know, we're partnering well. We've got great connectivity across the top of the management team, and we're in the stores a lot talking to sales associates. Things are going very well. And they're adopting the program, you know, above our expectations. And we expect to basically achieve the, you know, replace the volume that they were doing in the past with their previous provider and then take that a leg up. It'll, you know, it may take a little bit of time to ramp the growth and exceed what they were doing previously, but our 2025 expectations are to replace what they were doing before, at least.

Q: Hey, good morning. Thanks for taking my questions. Just a follow-up on some prior questions. I guess the first one to talk about some of the trade-down activity and maybe coming from lenders that are above their credit stack. If you could talk about the opportunities there. And, you know, with GMV having a lot of moving parts this year with Big Lots and also the tighter decisioning, kind of particularly wondering about the application volume that you might be getting in from some of these lenders tightening up if that's growing.

A: Yeah. I mean, Vincent, we certainly saw the credit slab above us, you know, have a few different cycles in 2024. We started to see it kind of in Q2 of 2024, and think our position was that kind of as we got into the fall and holiday period that they were about as tight. They weren't going to loosen, but they probably wouldn't tighten again. We certainly saw application volume from the top of the funnel, and as we said, we were appreciative of that volume. It's helped to drive our new customer dynamic, which we think is healthy for the overall portfolio, even if it does have some near-term impacts on delinquencies because they're new customers to us. It'll be, you know, we're going to be watching the numbers and, just like you are, on what's going to happen with that credit supply above us in 2025. There are those that are predicting that they may loosen a little bit in the back half. If that's the case, I hope it's because there's other macro things that are tailwinds, and I think that it will be good for all of us. But the application volume is, we have good trends in application volume. But outside of the apps that are flowing from the trade-down, as I said earlier, the average quality of the app that we're seeing is a little bit lower than what we saw last year. So not all apps are created equal.