PROG Holdings, Inc. Q2 FY2026 earnings call

• Overall Quarterly Performance

  • Consolidated Q2 2026 GMV grew 60% year-over-year, accelerating from 54% growth in Q1. Consolidated revenue was ~$720 million, up 22% year-over-year, toward the higher end of management's prior outlook.
  • Consolidated adjusted EBITDA from continuing operations was $88.4 million, and non-GAAP EPS was $1.19, both exceeding the high end of the prior outlook range.
  • All three business segments delivered growth, with disciplined portfolio risk management in a pressured but resilient consumer environment.

• Strategic Pillar: Grow (scale existing businesses)

  • Progressive Leasing returned to positive year-over-year GMV growth after lapping 2025's deliberate tightening actions and the Big Lots bankruptcy headwind. The Prague Marketplace direct-to-consumer platform achieved a 200% annual GMV CAGR from 2022 to 2025, with Q2 2026 GMV up 13-fold over three years. E-commerce now represents 25.6% of total Progressive Leasing GMV, the highest Q2 share on record.
  • Four delivered 111% GMV growth, driven by strong customer engagement and repeat purchasing. AI-driven product improvements lifted average order values, and efficient marketing spend balanced paid and organic customer acquisition. Four Plus subscribers contribute ~80% of total Four GMV, with active shoppers up nearly 80% year-over-year.
  • Purchasing Power signed multiple new employer clients, including a large post-quarter addition with over 80,000 eligible employees. Q2 2026 updates included a faster mobile interface, the new AI Vita Shopping Assistant, a one-click product bundling feature, and expanded categories including new automotive services.

• Strategic Pillar: Enhance (improve customer and retailer experience)

  • Investments focused on improving search results, checkout conversion, decisioning speed, and lower cost to serve across the ecosystem.
  • An AI-powered search tool launched at Purchasing Power delivered roughly double site conversion for logged-in users, proving AI's ability to drive tangible commercial improvements. AI is embedded in dozens of small ongoing improvements that collectively lift conversion, retention, and unit economics.

• Strategic Pillar: Expand (scale new segments and integration)

  • Four maintained a 10% trailing 12-month take rate (revenue as a % of GMV), with average purchase frequency holding at ~5 transactions per shopper per quarter, and quarterly average monthly active users nearly doubling year-over-year.
  • Purchasing Power integration remains on track, with cross-ecosystem customer overlap growing. Four acts as a key entry point to the broader ecosystem, driving growing overlap with Progressive Leasing customers, and early cross-sell momentum with Purchasing Power is building.

• Capital Allocation

  • Unchanged priorities: reinvest in the business, pursue strategic M&A, return excess capital to shareholders via dividends and share repurchases.
  • Deleveraging after the Purchasing Power acquisition brought the net leverage ratio to 1.7x trailing 12-month adjusted EBITDA as of June 30, within the 1.5x-2x long-term target range. The company resumed share repurchases in Q2, buying back 280,000 shares at an average price of $36.34, maintaining the quarterly dividend of 14 cents per share.

1. Progressive Leasing: Q2 2026 GMV was $428.1 million, up 3.4% year-over-year (improving from a 2.2% decline in Q1 2026). Revenue was $550.3 million, down 3.4% year-over-year, with a sequential improvement from Q1's 8.4% decline. Gross margin reached 33.8%, up 143 basis points year-over-year, driven by higher portfolio yield from fewer customers exercising 90-day early purchase options. Lease merchandise write-offs were 8.4% of segment revenue, in line with seasonal expectations. Adjusted EBITDA was $69.9 million, representing a 12.7% margin, an improvement of over 50 basis points year-over-year. This segment contributed 76.5% of total consolidated revenue.
2. Four: Q2 2026 GMV grew 111% year-over-year to $315 million. Revenue was $35.1 million, up 118% year-over-year, contributing 4.9% of total consolidated revenue. Adjusted EBITDA was $8.7 million, with a 24.8% margin, which was a planned moderation from Q1's seasonally elevated 37% margin. For Money App, Four's cash advance product, revenue grew 34% year-over-year, serving as a key cross-sell driver for the broader ecosystem.
3. Purchasing Power: Q2 2026 GMV was $158.8 million, up double-digits year-over-year against its pre-acquisition base. Revenue was $130.4 million, contributing 18.1% of total consolidated revenue. Adjusted EBITDA grew sequentially from $0.8 million in Q1 to $10.6 million, with an 8.1% margin, an improvement of 730 basis points quarter-over-quarter. The sequential margin improvement came from operating leverage on higher volume, favorable product mix, improved pricing, and lower interest expense after debt paydown in Q1.

• Management revised full-year 2026 guidance upward, driven by Q2 outperformance and continued momentum across segments. The new 2026 consolidated outlook calls for revenue of $3.025 billion to $3.1 billion, adjusted EBITDA of $355 million to $375 million, and non-GAAP adjusted EPS of $4.75 to $5.00.
• Full-year 2026 Progressive Leasing write-offs are expected to remain within the long-held 6% to 8% targeted annual range, albeit near the high end of the range, reflecting deliberate portfolio management prioritizing full-year profitability over quarterly write-off stability.
• Management expects Progressive Leasing to return to positive year-over-year revenue comparisons in the second half of 2026, as the gross leased asset balance rebuilds following resumed GMV growth.
• The guidance assumes no material change to current consumer financial pressures, no meaningful increase in unemployment among Prague Holdings' customer base, no major changes to underwriting posture, and a 26% non-GAAP effective tax rate.
• For Four, full-year 2026 adjusted EBITDA margins are projected to reach just shy of 22% at the midpoint of guidance, reflecting ongoing operating leverage and margin expansion as the business scales, on track to hit the long-term target of over 30% adjusted EBITDA margins.

• Prolonged inflation and recent spikes in energy (gas) prices have increased pressure on the budgets of Prague Holdings' core consumer, leading to slightly higher-than-normal seasonal delinquencies and write-offs at Progressive Leasing in Q2, with continued pressure expected into Q3 (the second seasonally high write-off quarter).
• Soft demand remains for large-ticket need-based consumer durable categories (furniture, appliances) at Progressive Leasing, a residual impact of post-COVID demand pull-forward that continues to weigh on segment results.
• Sustained higher-than-expected consumer stress could lead to higher delinquencies and write-offs across all segments, exceeding management's current expectations. This risk is compounded by the difficulty of forecasting customer behavior around early lease buyouts and tenure extension.
• Large new retail partner and employer client acquisitions require extended ramp-up periods (typically 2-3 years for full GMV contribution from new clients), creating uncertainty around near-term growth upside from new business development.

Q: How does management balance lower early 90-day lease buyout activity with consumer health, and has large-ticket demand fully recovered post-COVID? / A: Management confirms the consumer remains stressed but broadly resilient, noting lower early buyout activity signals tighter consumer liquidity. While slightly higher delinquencies and write-offs resulted from this trend in Q2, the dynamic also produces higher-margin longer-duration leases, boosting gross and adjusted EBITDA margins, which management prioritizes over quarterly write-off stability. Large-ticket consumer durables demand still remains soft post-COVID, but lapping prior headwinds and growth in e-commerce and direct-to-consumer channels has returned Progressive Leasing to positive GMV growth, and management remains confident full-year write-offs will stay within the 6% to 8% target range.

Q: Can management unpack why Q2 Progressive Leasing write-offs were above 8%, and what gives them confidence full-year results will hit the target range? / A: Management notes the higher Q2 write-off rate was a deliberate decision: the team could have tightened underwriting to deliver a Q2 write-off rate with a 7-handle, but this would have reduced overall profitability given the margin benefit of longer-duration leases. Q2 and Q3 are always seasonally high write-off quarters, and the 6% to 8% target is an annual, not quarterly, range, so quarterly fluctuations are acceptable. Management has already made minor targeted underwriting tightening, with approval rates down year-over-year, and the portfolio management team has a decade-long track record of keeping full-year write-offs within the target range, giving leadership confidence in the full-year outcome.

Q: What are Four's margin expansion plans, can you share active user/subscriber counts, and how does the team handle investment scaling? / A: Four operates as a lean, AI-native organization, growing headcount at a far slower rate than business growth by leveraging AI to improve product development, customer service, and operational efficiency, resulting in very high revenue per employee. This lean structure creates significant operating leverage as the business scales, supporting ongoing margin expansion. Management noted 3 million monthly active users as of December 2025, but has not updated the figure publicly this quarter and is not ready to provide a new update on this call.

Q: Could the higher margin-writeoff delta observed this quarter lead to a permanent increase in the long-term write-off target range to support faster growth? / A: Management says the 6% to 8% long-term write-off range is a core part of the company's credibility with investors, and any change to this range would only be made after careful consideration based on sustained long-term data, not a single quarter's dynamic. The current approach of allowing quarterly fluctuations within the annual range reflects a data-driven evaluation of all variables, where the margin benefit of longer-duration leases more than offsets slightly higher near-term write-offs, which is why management raised full-year guidance despite the quarterly write-out outcome.