Q1 2021 PROG Holdings Inc Earnings Call
Okay.
Good morning, My name is Kate and I will be your conference coordinator at this time I would like to welcome everyone to the Prog Holdings, Inc. First quarter 2021 earnings conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. This call is being recorded I will now turn the call over to Mr and John Baugh, Vice President of Investor Relations for Prog Holdings, you May begin your conference.
Yeah.
Thank you and good morning, everyone.
Welcome to the product Holdings first quarter 2021 earnings call, our second as a standalone and tech business.
Joining me. This morning are Steve Michaels Prog Holdings, President and Chief Executive Officer, and Brian and Garner our Chief Financial Officer.
Many of you have already seen a copy of our earnings release issued this morning.
Which is available on our Investor relations website at Investor <unk> Com leasing and Dot com.
During this call certain statements, we make will be forward looking on.
On a call your attention to our safe Harbor provision for forward looking statements that can be found at the end of our earnings release.
The safe Harbor provision identifies risks and may cause actual results to differ materially and the content of our forward looking statements.
There are additional risks that can be found in our latest 10-K filing.
Listeners are cautioned not to place undue emphasis on forward looking statements and.
We undertake no obligation to update any such statements.
On today's call, we will be referring to certain non-GAAP financial measures, including EBITDA and adjusted EBITDA non-GAAP net earnings and non-GAAP, EPS, which have been adjusted for certain items, which may affect the comparability of our performance.
And with other companies.
These non-GAAP measures are detailed and the reconciliation table included with our earnings release.
The company believes that these non-GAAP financial measures provide meaningful insight and the company's operational performance and cash flows and provides these measures to investors to help facilitate comparisons of operating results with prior periods and.
To assist them and understanding the company's ongoing operational performance with that I will now turn the call over to Steve Michaels Steve.
Thanks, John and good morning, everyone and.
We're excited to report our results for the first quarter of what we believe will be a pivotal year for our business and the beginning of a return to our historical growth trajectory as the headwinds of the pandemic and begin to subside.
I want to start by thanking our employees for their tireless efforts to support our customers and point of sale of retail partners as we continue to innovate and tailor our solutions to serve our customers. However, they choose to transact mobile and online or in store.
On our Q4 earnings call, we conveyed our excitement about the new opportunities that exist for us as a standalone company and our ability to drive incremental growth.
We believe our first quarter results reflect the beginning of the return to GMB growth positioning us to achieve strong 2021 results as we execute on our key initiatives.
While the federal stimulus and barge proved to be beneficial for the quarters results. It is important to note that the company was on track for post results in excess of our first quarter outlook prior to the effects of the March stimulus.
Revenues and the first quarter were 721 million compared to $668 million a year ago of seven 9% increase and were favorably impacted by elevated buyout activity and continued strong payment performance from our customers by growth from certain large Pos partners.
And by an increase and lease revenues generated from ecommerce platforms.
Adjusted EBITDA was $118 million compared to $63 million of the year ago period.
This was primarily driven by a 580 basis point decrease and write offs as our customers continued to demonstrate increased levels of liquidity driving delinquencies to historic lows.
On the Decisioning front, we continue to optimize approval rate and amounts which are in line or slightly higher than pre pandemic levels.
Even considering the continued shift to digital application channels, which typically have lower approval rates.
We closely monitor the performance of our leases and we will adjust accordingly should conditions change.
Our <unk> for the Progressive leasing segment grew 10, 4% and the quarter, marking a return to growth relative to the roughly flat performance of the prior three quarters.
We should note that we achieved this double digit growth despite facing headwinds in the quarter from the delayed tax refund season, and smaller tax refunds on average and continuing supply chain disruptions with some Pos partners.
While the March stimulus appears to have benefited results. We also saw a meaningful lift from the continued growth of our large national partners Decisioning optimization price.
These enhancements and great progress on e-commerce penetration.
We have been working aggressively with our partners on multiple fronts, including implementing enhanced technology solutions and strategic marketing and promotional campaigns.
And also expectations for improved store traffic and the back half of 2021 should provide a boost to our largest source of DMV.
As a result, we believe we will deliver GMB growth and mid to high teens for the full year 2021.
We continue to expand and improve our ecommerce capabilities and we are increasing our traction on many fronts, particularly with larger at Pos partners.
We are working to leverage our plug and capabilities to attract new ecommerce partners, while streamlining our process from application to lease signing.
The company also recently announced several key additions to our technology product and sales leadership teams to support these efforts.
We are on track to have ecommerce checkout capability with nearly all of our leading POS partners before the end of 2021, which we expect will further drive our <unk> growth this year and into 2020 two.
As we shared last quarter, we narrowly define E. Commerce GMB is completion of a lease and their retailers cart checkout and that we expect of more than double of our ecommerce business and 2021.
We're pleased to report that in Q1 14, 3% of our GMB and for e-commerce compared to only one 9% and the same period of 2020.
As we have stated before we believe our total addressable market remains multiples of the current market.
I'd like to quickly revisit our key strategic objectives for expanding our leadership position.
First we aim to grow our business with existing and new partners.
Second we expect to continue to simplify and improve the customer experience through technology enhancements and investments that allow our customers to shop, how and when and where they want.
Third we plan to drive repeat business by leveraging our database of millions of customers.
Fourth we expect to expand our product and solutions ecosystem via further innovations and strategic acquisitions.
Finally, we are increasing our direct to consumer marketing efforts to attract new customers and drive <unk> to our Pos partners.
We communicated on our last call that we view 2021 is at a very important year for our company.
We recognize at the point of sale of payment space is evolving rapidly that competition is strong and at the pandemic has changed our consumers' behavior.
We are and the process of reinvigorating our growth, adding additional products and services to our ecosystem.
Converting pipeline opportunities and.
And improving our technology based product capabilities to enhance our consumer and partner experience.
Finally, and shifting to capital and capital allocation, our balance sheet remains in great shape.
We ended the quarter was at net cash position of $101 million, even after the repurchase of $28 million of our stock and the quarter.
Our capital priorities remain unchanged first and foremost, we expect to invest and the business as we pursue multiple growth initiatives alongside of our normal funding of GMB and our modest capital expenditure needs.
Second we will consider M&A opportunities that can broaden our product offerings or enhance our technical capabilities.
And third we expect to return excess cash to shareholders, which we commenced in Q1 with our buyback.
With those comments I'll turn it over to Bryan Garner, our Chief Financial Officer.
Brian.
Thanks, Steve turning to the financial results. The first quarter's financial results exceeded our outlook on both revenue and EBITDA due to the financial strength of our consumer and the accelerated growth of GMB.
While quarter to date results were strong heading into the last two weeks of March the latest stimulus further improved our financial metrics driving delinquencies to near historic lows.
Throughout the quarter, we experienced elevated levels of 90 day, buyouts and well above historical averages.
This is a continuation of a trend that we've seen over the last 12 months as prior stimulus packages and changes in consumer behavior have driven 90 day buyouts and meaningfully higher.
The weight of stimulus further contributed to this dynamic as we closed out the period.
While 90 day buyouts place downward pressure on margins and the increased payment activity in the period drove revenue higher and write offs of lower more than offsetting the dilutive impact of higher 90 day buyout levels.
The net result was improved consolidated adjusted EBITDA margins year over year of 64% for the first quarter of 2021 compared to nine 4% for the same period last year.
And we look ahead and we are encouraged by the trends, we are seeing and our portfolio of performance supporting of our 'twenty, one financial outlook, which I will touch on in a moment.
Turning to the results of our progressive leasing segment.
Net revenues for the Progressive leasing segment and the first quarter reached a record of $708 million and increase of $49 4 million or seven 5% compared to the first quarter of 2020, while.
While the increased buyouts and payment activity helped drive revenue higher in the period Progressive <unk> increase of 10, 4% benefited from the continued scaling of large national retail partners and increases to our e-commerce penetration.
With respect of revenue headwinds in the period as noted on our Q4 earnings call. We entered Q1 with gross lease assets are reflection of overall portfolio size at 1 billion down five 6% year over year and finished the quarter at 951 million down six seven.
Per cent.
In short our customers and the period paid down their lease balances at a faster rate and GMB grew resulting at a lower portfolio of balance for the quarter.
Because gross lease asset drive future period revenue, a smaller portfolio will serve as a headwind to revenue and the short term.
As Steve stated, we expect our 2021 GMB growth to be in the mid to high teens contributing and the portfolio of growth over and over the course of the year.
Yes.
And progressive leasing segment's gross margin was 28, 7% for the first quarter versus 29, 6% for the same period last year, and 90 basis point decline year over year as the impact of 90 day buyouts drove good gross margin and lower and were offset by strong paint reforms and the period.
SG&A expenses, excluding write offs for the Progressive leasing segment were 72 million 10, 2% of revenues and the quarter compared to 10, 4% and the prior year period.
While investment and technology and product enhancements continue to ramp we reduced levels of discretionary spend and the period consistent with prior periods impacted by COVID-19.
Progressive leasing and write offs, which have historically ranged from 6% to 8% on an annual basis were two 6% and Q1 of 2021 compared to eight 5% and the year ago period.
This quarter's results benefited from near historic low delinquencies at the end of the period and strong portfolio of performance previously mentioned.
Of note and the first quarter of 2020, we recorded $16 1 million and incremental reserves relating to the COVID-19 pandemic.
We continue to evaluate the appropriate levels of our reserves based on relevant historical and anticipated payment performance.
And the period.
We relieved of COVID-19 reserves by $2 5 million as we are encouraged by the low delinquency levels, we are seeing.
While we expect near term write offs to be below our targeted annualized range, we anticipate a return to historical levels as macroeconomic conditions normalize over time.
Adjusted EBITDA for the Progressive leasing segment was a first quarter record of $116 3 million at 59, 4% increase year over year end of 16, 4% margin.
The margin performance was primarily driven Brian at by improved portfolio performance and associated lower write offs.
Pivoting to consolidated results.
Consolidated adjusted EBITDA, including our volume segment was $118 1 million for the first quarter of 2021 compared to $62 6 million for the same period last year and increase of $55 5 million for 88, 7% adjusted.
Adjusted EBITDA was 16, 4% of revenue and the first quarter of 2021 up 700 basis points from the nine for in the first quarter to prior year.
GAAP EPS was $1 16, compared to 85 and the year ago period.
Non-GAAP EPS was $1 22 compared to <unk> 41.
For the same period and 2020.
Now turning to our balance sheet and liquidity profile, we generated $167 1 million of cash from operations and Q1.
We ended the quarter with a cash position of $151 2 million and debt of $50 million.
We have $300 million available under our revolving credit facility.
And we purchased $28 $1 million of shares and the quarter.
And our remaining share repurchase authorization is $271 9 million.
Finally, as you've seen and the earnings release, we provide the outlook for the full year of 2021.
We expect consolidated revenues between $2, seven and $2 seven and seven 5 billion adjusted EBITDA of between 380 and $400 million and non-GAAP EPS of $3 80.
For $4 five.
This outlook assumes strong customer payment activity no additional stimulus and no significant deterioration and the current retail environment throughout the remainder of the year.
It also assumes at 25% tax rate and no additional share repurchases.
I will now turn things over to the operator for the Q&A portion of the call operator.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchstone zone.
You are using a speakerphone please pick up your handset before pressing of Q2.
Of withdraw from the question queue. Please press Star then two.
Our first question is from Kyle Joseph of Jefferies. Please go ahead.
Hey, good morning, guys and congratulations on a on a strong recovery.
In the quarter.
Oh. Thank you I wanted to first touch base on on G. M D and just kind of get a sense for that for the cadence of throughout the quarter. I know you guys. You guys mentioned last quarter that you know January and February were positive and there were some and.
Incremental impacts from the stimulus that just give us a sense for how that looked in March and maybe into April.
Yeah. Thanks.
Yes, we said at on the last call of it.
Through when we reported Q4, which was late February we were up.
Mid single digits and that was for me.
Our small and but muted impact from the January of stimulus and then kind of coming into earnings for Q4, We had just we're in the middle or towards the tail end of it was pretty severe weather event and Texas, along with as you know of very delayed and at that point and muted tax season. So.
Those things as they usually do kind of play themselves out and we were on track to deliver at probably mid to high single digits of <unk> for the quarter and.
And then the March stimulus hit and we did see and again, what we've experienced before which is kind of that.
Sure Hi, and applications from the liquidity that hits the consumers of accounts.
And that.
Each of it seems like each time, we see it at.
And maybe as a little bit.
More fleeting or it doesn't last quite as long. So it did curious and a little bit into the into April and reward but were less concentrating on the on the impact of the stimulus and more on the on the things that we've done to help helped.
Helped drive <unk> on the Decisioning fraud, and all of the product innovation front end.
And promotional and marketing campaign, so we're happy with it.
And with where we what we printed for Q1 and excited about what we what's going to happen and the rest of the year.
Got it and.
And then Jim B, there are a number of headwinds, particularly in the fourth quarter and some of them at least.
Brick and mortar exposure and some of it was lapping challenging underwriting and then again that was at play.
<unk> resolution and.
The fourth quarter and it sounds like you had some good E com growth and gross from from retail partners, but did you at <unk>.
Doesn't sound like you're necessarily experiencing the real benefit to the reopening on the retail side of the business and if I.
If I'm reading your comments correctly.
Yeah, I mean I think.
You listed the headwinds that we experienced in 2020 and correctly. We had we had store closures, we had limited store and store traffic, we had some supply chain disruptions and we also had decision.
Decisioning that lease decisions that we made on the Decisioning front.
So we expect and we sort of wholesale.
Number of headwinds.
Two tailwind, but we.
We havent experienced all of that yet so we believe that the back half of the reopening happens more and as our E. Comm capabilities continue to expand but also layered on top of that people are out and in stores more and more frequently we expect that those.
Those tailwind will kick in more and the back half and they did and certainly in the first quarter. So we feel like we're set up pretty pretty well.
Got it one last question for me and I'll hop back in the queue.
I see elevated by out of activity from stimulus.
Not surprising, but can you walk us through your <unk>.
And from 2021.
Stimulus on it.
And at the back half of July and like how long and how long of a pet.
For buyout activity to start to normalize in 2020 and your expectations for that kind of and are factored into your 'twenty one guidance this year, yes.
Yes, Bryan and I can take that and the dynamics throughout 2020, I think day.
Drought stimulus and even well after stainless we saw elevated 90 day buyout activity.
And I and I think that speaks not only stimulus with some changes in consumer spending patterns of that allowed them additional liquidity to do exercise of those buyouts. So.
Really for the better part of the last 12 months 90 day buyouts of an elevated and I think going forward. Our expectation is debt that they should remain elevated certainly not at the end.
At the rate that we saw here in Q1, I think it was the abnormally high particularly on the size of the stimulus and the.
And the magnitude of the.
The checks and got caught debuted household so.
And it was elevated Q1, I expect it to continue to be elevated and cheaper and off throughout the year, but but no question about 2020 and as we saw at really since March on elevated 90 day buyouts.
Got it thanks very much for answering my questions guys. Thanks.
Thanks Kyle.
The next question is from Jason Haas of Bank of America. Please go ahead.
Great. Thanks for answering my questions and congrats on a great quarter.
So I wanted to dig into to write offs and a little bit I'm curious just what's implied.
And your guidance and just how you're thinking about that asking let's say of the year.
Yes, I'm happy to take that certainly the rates that we're seeing youre at Q1, and walks and of last couple of quarters or well below the 60% that we were accustomed to see and I think.
And obviously, it's anybody's guess on when we returned to normal and when the economy kind of kind of gets back to what we saw on 2019, but but the two 6% that we posted here in Q1 my expectations for the year and that's our low point and.
And we will see somewhat of a.
And increase as we move throughout the year, but I think when it's all sudden done for the year, we will still post below about 6% to 8% just given that at that dynamics that are at play.
The consumer health and we are seeing and the.
And really the liquidity that seems to be.
B and the market right now so that would be my expectation is somewhere below the 68%, but not hovering at these two and a half pushout of levels.
Yes.
Got it thanks, and then as a follow up on changing topics and a bit of curious if you could speak to the growth that you're seeing and E. Commerce, you made really fantastic progress there. So I'm just curious since you laid out at target for the low to mid teens penetration for the year I mean, that's still there at framework or at there's potentially upside to that now.
Yeah, Jason. Thank you Oh, yes, we're very pleased with our ecommerce business, it's a big business just by itself and.
We've got we've got great partners, there and a lot more to come on the roadmap not only with existing partners, but with some exciting new.
New opportunities that we're working on so.
We're not changing the not changed and the guide the guide is a more than doubling from last year obviously.
Last year ramps and so we're not expecting the whatever that number is 740% year over year increase each quarter, but we're expecting a really really big growth and E. Com this year and there's certainly upside, but what we're trying to do is grow the entire pie. So.
<unk>.
We also want to grow the <unk> on the on the rest of the channel so that that'll be some of the interplay of.
<unk>.
The overall GNP growth compared to the E Com channel and <unk> growth and as we said last quarter.
We expect E com and <unk> will grow faster than overall for a while to come now, but we're not targeting of particular balance of sales for many any channel because we want the customer to dictate how and when they want to engage with us and ultimately we believe that.
And almost every.
Shopping journey, there will be interaction with our digital channels, but it doesn't necessarily mean that the customer will choose to checkout on.
On online or through the App.
And then that's okay. We're not we're not directed at one place or another so.
We were pleased with the call Theres massive ups.
Side of and opportunity for us there.
And we look forward to continuing to report our exciting results.
Got it and that makes a lot of sense. Thanks.
Okay.
The next question is from Alex Tomorrow, Nokia of Bear and bark. Please go ahead.
Hi, Good morning, guys. Thanks for taking my questions for.
First one is on improved customer payments and we get to the back half of the year have you thought about a scenario, where 90 day buyouts returned to normal while monthly payment activity remains high and how beneficial would that be for margin.
Yes, so with respect to 90 days 90 days actually put downward pressure on margins overall and and.
And the reason why as I said at my prepared remarks, I mean, the reason why we're seen 16% overall EBITDA margins.
Is that dilutive impact of those all weighted 90 days are effectively being offset by.
Near record low write offs and just overall health of the consumer and so.
There was really that kind of give and take going on and P&L right now within our dispositions.
In isolation of 90 days of dilutive, but but the net result has been strong portfolio of health and at higher cash on cash return. So in the event that 90 days continue to be elevated which which are within our guidance, we anticipate and element of that.
We also anticipated at the write offs and was below our historical range just like we talked about and I think the net result is for the year.
As a really applied and then the guidance that we gave as is.
Pretty strong EBITDA margins overall.
And I will take a little bit from what we've seen historically so.
That's kind of what's baked into the guidance and how I'm thinking about or how we're thinking about.
The 90 day dynamic.
And in conjunction with overall portfolio performance of write offs.
And then.
90 day buyouts basically go back to normal, but we still see better than average payment activity would that be of material margin benefit and the back half.
Yes that would be that'd be of benefits they went back to normal and and the <unk>.
Payment activity was what sort of magnitude higher that would be that would be a scenario that would work out well for us.
Okay got it and secondly can you just give us a sense of strength and various categories and if any products and might've been abnormally weak that could reverse in the coming quarters.
Yes, I mean, we saw.
We saw strength in mobile we saw strength and jewelry, we saw strength.
And across most of the categories we had various.
For sporadic I would call it and supply chain issues, continuing and some of them and some of the furniture category that was not widespread across the entire category, but and some of the on some of the retail partners, we still saw that.
And so we look forward to that easing as well and they are.
And the rest of the rest of the year, but.
Just pretty pretty good strength across the categories.
Alright, that's great I appreciate it thank you Alex.
And next question is from Brad Thomas of Keybanc Capital markets. Please go ahead.
Hi, good morning, and nice quarter I got on a few minutes at getting on cause of another earnings call and I apologize for you address the split.
And when we think about the G N V gross of 10, 4%.
And I know you can't know this for sure but do you have any estimate of perhaps how much of the benefit of lift you got because of all of the stimulus that was occurring in and around the quarter.
Yeah Brad.
At this stage, we talked about that but just briefly.
We as we said on the call in February we were at mid single digits of quarter to date, we believe that we would have ended the quarter mid to high single digits of.
We're at not for the large stimulus and then with that stimulus. We ended up that was at 10, 4% print so.
Some of proved.
Proved to be somewhat beneficial, but not the entire story.
That's helpful and you've obviously given clear revenue guidance for the year.
Are you thinking about me and the trends trending in the quarters of head here.
Yes.
None of the areas of waste, but at the prepared remarks, we did say that we believed <unk> would come in at the in the mid to high teens for the year and that that would imply that we printed the the lowest quarter of growth already.
That's really encouraging and and my last point, just on and operationally how things are working.
As you talk to your partners, particularly at the biggest partners.
You know last year of the year that they obviously had to focus on operations and COVID-19 and you talk to them about.
You know taking tools and the progressive tool kit and.
Leaning in and and and and promoting and and making customers aware of at progressive.
And what are you hearing and and.
Paul on.
Optimistic are you about on your part.
And there's better utilizing progressing kind of this year.
Yeah, it's at.
Actually a very exciting for our for us because we've seen that already and we've seen that and.
And the wild and in Q on and we have good plans and partnering with the partners and their marketing teams.
You've seen we've tiered to your question, we've seen our partners that have not historically reach for some of our tools and our tool kit.
Doing that and Thats encouraging we've seen some co co branded.
Our marketing campaigns.
And the retailers had been interested in doing and the past, which are at which is great drives GMB for them and for US we've seen some co.
Cooperative reduced IP type promotions.
And so we've got as you know we have a.
And.
Stable or of <unk>.
Suite of solutions that they can reach for and we're talking to them. All the time of about that and we're having a lot of luck and we've.
We've seen that already and we've got good plans on the on the calendar for the rest of the year that we're excited about.
And it's really intelligent and thank you so much day.
Thanks, Brad.
Yeah.
As a reminder, if you have a question. Please press Star then one and next question is from Bobby Griffin of Raymond James. Please go ahead.
Good morning body.
That's on the quarter and thank you for taking my questions.
But what I wanted to circle back up on GMB growth, you know targeting mid teens, the two year stacks, though it does step down if you do mid teens versus kind of what you just printed and one for you is that just a function of of some uncertainty and <unk>.
Stimulus wearing off and and you know kind of not having a crystal ball on to the environment or are you are you seeing something different inside the customers that we.
We should think about as well.
Well, yeah, Bobby maybe mid to high teens.
As you know, we think is pretty strong and we we certainly aren't going to be satisfied with how we're going to work to make it more than that from a two year stack standpoint, and you got to remember what happened and the back half of of 19.
We haven't really accelerating GMB growth and the back half of 19, culminating with a 35, 8% GMB growth and Q4, so the quantum and the numbers of <unk>.
And really get large when you start doing that too your stack and.
And so that has certainly and influence on the on the growth rates this year.
The from a dollar standpoint, the GMB troughs in dollar terms and Q2 of 2020 of them yet.
So we will expect that.
Q2 will be our fastest growth rate and percentage terms, but we're looking for a really really strong growth and the back half as well and and I think it has more of a function to do with what the what the base number is going all the way back to <unk> 18 on a two year stack and it does on the water.
Excitement is our expectations are for the back half of 'twenty one.
Alright that makes sense, it's very helpful and very fair points with that 34% there and for COVID-19 in building out that kind of G. M. D expectations can you talk a little bit of mean, we've talked a lot about you know building up the E Commerce platform for some of your big partners as well as maybe getting some of the technology, where you can be the plug and play type things and on some of.
Their platforms he updates on on how those initiatives are going and what's assumed on timing of those two to hit that mid teens number.
Yeah. So.
For me from a development standpoint, we've already got some of the plug ins and the wild and who I think we can.
Sort of a release out on that and in March we are still on track to have.
And basically the suite of of platform plug ins by the end of Q2.
And we think that will be.
And that we know that'll be helpful. I'm not sure exactly how much of <unk> that will drive actually in 'twenty, one, but it's certainly foundational efforts that we are working hard on to to keep the keys and <unk> machine growing into 'twenty two.
And it relates to our larger partners, we're working with them.
And diligently the tech teams are in constant contact we don't control the timing of that completely because obviously when it comes to a customer integration, it's not just us throw in and API over the defense is a little bit more complicated and that.
And so we're working with them and we expect we still have a.
Strong belief and that were going on.
And the live and the check on car with with most of our retail partners and 'twenty one but.
And as the year gets deeper.
It is probably less impactful to the 'twenty, one <unk> and more of a 22 stores. So we think that there's big upside there.
But the numbers that we're looking for and 21 are not reliant on on really large a.
Deliverables from those projects because of they are probably more 22 projects. I mean, there are 21 projects, but they will deliver the <unk> and 'twenty two.
Alright, that's very helpful and I guess lastly for me is at the high level of industry type question, and clearly you know a lot of activity new companies and industry capital getting thrown at the space and what are you what is that driving in terms of what youre seeing and for competing for customers holding on to your current customers I mean and have you seen the competitive environment and drastically increase.
Or is this kind of.
Always been the case and the virtual rent to own space, we just didn't see it as well because most of the small players where you know private before and doing kind of more quiet fundraisings and different things like that.
And maybe a little bit of both I mean, it's always been competitive space and we've talked extensively about how it is competitive and are in the SMB space and in the regions and that Hasnt changed and we expect that won't change and the.
Future on the enterprise side on the large larger accounts its business.
A different story and.
We expect we will see some of these competitors that you're referring to more and the future than we saw on the past it's at.
And there has been some excitement around this basically on the Grand scheme of things and it's been a fairly short period of time, So I can't say that we've seen material changes yet, but we are we're not we're not resting because we're expecting that to.
And to happen and we're and we're prepared to.
You know to show well.
Okay. I appreciate the details for best of luck here and second quarter and remainder of of.
Of the year Thanks, Bobby.
The next question is for Michael Young of true. Please go ahead.
Hey, good morning, Thanks for taking the question I actually wanted to start with the first one of the follow up to Bobby's question. Just you know as you see kind of the increase adaptation of the NPL et cetera.
Ross the industry are you seeing increased awareness of the product or maybe and increased desire for new partners.
And to find a partner and is that helping at all of our sales for them.
Yeah. So that's a great observation I mean, I think generally COVID-19 was it was an interesting year because of the NPL and the.
Basically they blew up and whenever we have and educated retail or debt.
Understands the power of a fully developed finance stack. That's a good thing for us, especially if they if they don't have at least on solution. So.
You know at certainly shortens the sales cycle when you're on.
And there's always an education process and we're happy to do that and we're happy to talk about.
The voice of the customer work and how the customer feels about at least on and how they feel about the retailers brand for operating lease up but to your point when they if.
And if they if they have looked at of BPL products and.
Or actually installed on or have won at at that means that there are very.
Educated on the phone on the power of the stack now on the flip side of it can actually take some some mind share.
And some depth of resources.
And that can be of competing priority and it's our job to say well listen that not that.
And that product is a good product and we think you should have at but listen the size of the price for L. T. O US is larger and so we think of as you prioritize this and ahead of that and that's always a dance with within any organisation is the prioritization stack, especially when it comes to our.
Strengths and development cycles, but on the whole I would say, it's been positive for us and for the for the sales cycle, just having a more.
Knowledgeable potential retail or prospects.
Thanks, that's great color and and maybe it was just a follow up the you know.
If you could talk maybe just about the pipeline of potential new partners on them I know after the spin and that was kind of of focus to expand out. So just any kind of color you can give on how that's going on particularly with maybe some getting back to normal maybe there's more resources and and mental space I think for the partners to consider.
And our options and expansion.
Yeah, I mean, we don't we don't comment on knees and the pipeline, but I.
And I can tell you that where the pipeline is is great and we're talking to.
People all over the spectrum from the from the accounts has and then the brands and logos that you have and your head all the way down to.
Super Regionals, and and SMB accounts and we've got teams that are focused on and incentivized across spectrum.
The pipeline is good we have expectations for for.
And for pipeline conversion I would tell you at it won't come as a surprise but.
The larger the account.
And the not only of the longer the sales cycle.
But the the longer the implementation cycle is and we're working hard to get that.
Shortened that but we can have a win.
This summer that you may not hear about until.
Of until 2022.
But we're constantly it's our job to constantly be feeding that engine and so we're very excited about the pipeline and some near term and some intermediate and longer term opportunities that we've got.
Okay.
And maybe one last one if I can sneak it in and just on the EBITDA.
Trying to think about you know kind of the puts and takes.
Not from a G and be perspective, but more from just an investment perspective, and technology and anything that you know maybe COVID-19 related.
And it's been in or out of the run rate that will be coming back.
As we reopen.
Yes, I guess I can.
And take that.
Well one of them and the approach we've taken at the Ralph Coffman and one we continue to to and tend to take is protect that investment layer of debt.
While we pulled back on discretionary spend and the technology and that's one of the main throughout 2020.
Continued ramp and and.
That's gonna be and.
Ongoing dynamic into 2020 one so.
And really what I think you'll see us.
And can move back more towards a normalized SG&A as a percentage of revenue.
Did you guys just to step forward and perhaps some discretionary spend and things like that of that pulled back pretty tight.
Of course of last 12 months, but I think the.
SG&A as a percentage of revenue will see probably try and closer to closer to 2019 levels, but the technology product spend has been packed and and we continue to weigh on we've also had.
And we mentioned on prior calls incremental public company costs.
Roughly $10 million yourself, and you'll see wrapped up into that number. So that's what I'd expect from us.
From a opex standpoint.
Moving forward is probably more closely aligned with 2019 levels of spend relative to revenue.
Okay, great. Thanks.
Okay.
And next question in terms of Anthony to comeback of loop capital. Please go ahead.
Good morning, Thanks for taking my question and congrats on a really strong starts at 2021.
So I guess my my first question.
I'm, just sort of reconcile and trying to reconcile for me because I you know I know.
Last year was sort of this perfect storm and everything that could have gone wrong from of GMB growth perspective kind of went wrong and one thing and you talked about was the fact that as all of the spin this fiscal stimulus and it seemed like that was a headwind radio and other words, if I've got this check burn a hole in my pocket, maybe I don't need to do lease to own and maybe you know I make my payment, but maybe I don't originate of new lease and now it seems like you're saying that.
At stimulus.
It's a bit of a tailwind where youre doing sort of mid to high single digit GMP and and the stimulus hit and then and then that got you. Okay. At 10, 4%. So I guess I'm just trying to reconcile those two things. Thank you.
And so that's fair.
I mean, it's not really different than what we experienced last year and it was just its more difficult to parse out because last year. The stimulus was like right and the.
Depths of the pandemic, but we saw a very similar.
And so you get this and for lack of better term, we call of sugar high with one of the checks hit and you can see it through.
And through that we are hourly application trackers and our business intelligence tools and you can see the apps just the spike when when the when the HHS at the account and our contact centers lineup of calls.
And and that happened so apps are leading indicators to the GMB and so you'd see kind of a spike and apps for last year. It was maybe.
For two weeks or three weeks and then earlier this year. It was about 10 days and then in March It was maybe seven day. So it seems to be muted at each time.
What we were talking about from a headwind standpoint from for.
On the back half of of 2020 was less and when we talk about at a stimulus, but it was more about just increase liquidity that the consumer has from the.
Shelter and place for lack of a better term because they didn't have as many.
<unk>.
Things pulling on their disposable income and they werent going to movies and they werent going to Ballgames and they may not have been eating out is off and they weren't traveling and so there and.
Maybe they werent paying their rent, but we don't know, but from a liquidity standpoint, they were just a little bit more flush.
The thing that I think is different this year and it remains to be seen how it plays out as well as stimulus in the face of of reopening of economy and the pressures that are consumer would generally have on on their on their income so.
And built into our outlook is not additional stimulus and we know there's continued enhanced unemployment at that goes through I think August for September and.
And.
And some other things but that.
At that check that landed on top of our normal tax season that was kind of like a of sugar high and then.
We expect the.
The other headwinds that we had facing us in 2020 to dissipate and the reopening and the in store traffic and our.
Of our Decisioning and the things that we control to.
Overcome any lingering effects of less point of sale of payment.
Usage.
To drive of nice GMB growth for us.
Got it and now that's helpful clarification. So so just sort of a related question. So you know and we think about the.
The second quarter and I guess for next few quarters.
And if health conditions get back to normal and people aren't all kind of in their home and they're going out to movie theaters, not going out and the restaurants and maybe they're going on vacation that should help because they have less money to buy stuff and that's.
They're going to have to rely more on lease to own and then obviously if retail stores are open and youre going to be Anniversarying of your biggest quarter of your retail partner stores being closed and that should help as well I mean is that the right way to kind of think about it I mean I know there's other moving parts of is that for any way to think about just those two compare yeah. I mean, I think you've got at like.
We know we thought for a couple of quarters that we're rooting for a return to normal because people they need the flexibility of at least though and they need of paid for type product.
They like the flexibility that it offers and.
And in a normal operating environment point of sale of payment options are.
Uh huh very flexible.
Flexible and convenient way for people to acquire goods and.
And we expect that will basically.
Normal behavior will come back and so that would be of a tailwind for us.
And then we've got the other things like the Decisioning and other things that we have done and and other initiatives like E com and things that were of that we're leaning into that I think would though kind of overlay on top of that.
Okay got it and and at the risk of Bogart and B earnings call at just one quick follow up just because you mentioned at the kind of jumped into my head.
Any sense for you mentioned that that decision and got back to sort of pre pandemic approval rates and if I heard that correctly any sense for how much of a contributor of that was the GMB growth.
Yeah.
I don't think we're going to parse it that way, but we're comfortable where we were comfortable of decision. We made last year, we made the appropriate adjustments to.
And to prudently help with gross this year.
And a good spot right now our approval rates are a little bit higher approval amounts are higher too, which matters and approval of amount as.
And maybe not as but it's very important and the overall portfolio of performance and we've been able to increase of approval about which helps with average ticket with.
Which helps our partners and US we will always look for other or more ways to say, yes to people and say us for more dollars to the right people.
And we.
We look that as a strategic advantage of that our decision science teams brings to us but.
As far as like what it contributed and.
And Q1.
We're not going to comment on that.
Fair enough keep up the good work guys. Thank you so much appreciate it and thank you.
That concludes our Q&A portion I'll now turn the call over to Steve Michaels for closing comments.
Yeah.
Thank you everyone for joining us today.
Certainly appreciate your interest and and.
And pro of holdings and our team is Super excited about our momentum and our opportunity to continue progress is impressive history of growth and innovation.
And thank all of the fraud nation for their tireless efforts to innovate and simplify which is one of our core values on behalf of our customers and retail partners and we look forward to updating you next quarter.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.