Q2 2021 PROG Holdings Inc Earnings Call
1 Zero Act.
After today's presentation there'll be an opportunity to ask questions.
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Please note. This event is being recorded I would now like to turn the conference over to John Baugh of V. P.
Investor Relations. Please go ahead, thank you and good morning, everyone and welcome to the Prog Holdings second quarter 2021 earnings call.
Joining me this morning of Steve Michaels Prog Holdings, President and Chief Executive Officer, and Brian and Garner our Chief Financial Officer.
And any of you have already seen a copy of our earnings release issued this morning, which is available on our Investor Relations website, Investor Dot Prog holdings Dot com.
During this call certain statements, we make will be forward looking including the updated outlook for our full year 2020.
On adjusted EBITDA non-GAAP earnings per share and GAAP earnings per share performance.
I want to call your attention to our safe Harbor provision for forward looking statements that can be found at the end of our earnings release.
Safe Harbor provision identifies risks that may cause.
'twenty, 1 result to differ materially from 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.
Of our performance with other companies.
These non-GAAP measures are detailed and the reconciliation tables included with our earnings release the.
The company believes that these non-GAAP financial measures provide meaningful insight into the company's operational performance and cash flows and provides these measures.
And investors to help facilitate comparisons of operating results with prior periods and to assist them and understanding of 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.
<unk> decided to report our Q2 financial results, which reflect an acceleration of growth as we continue to navigate the landscape of the pandemic.
<unk> for our Progressive leasing segment grew 25, 2% over the prior year period, an increase from the 10, 4% GMB growth in Q1.
While this comparison is against retail shutdowns occurring during the depths of the pandemic GMB growth and the second quarter of 2021 was largely driven by the continued scaling of large national accounts and increased penetration and e-commerce.
E Commerce <unk> grew 274.
Percent and the quarter and represented 13% of progressive leasing and <unk>.
We continue to expect e-commerce to be a meaningful driver of growth and the future.
As we recently announced we have enhanced our plug and play capabilities with the deployment of our updated magenta too and will come.
Commerce plug ins.
The enhancements allow 1 click integration by retailers and reduce the time from application to checkout for our consumers.
We've already seen positive momentum from these updates with some of our existing Pos partners and we're engaged in discussions with potential new retailers.
That utilize these e-commerce platforms.
We believe that increasingly the consumers' purchase journey will be a multi channel experience and we offer solutions that allow them to transact when and where they choose.
As I.
And progressive leasing delivered a strong 25, 2%.
Sent GMB growth rate and the quarter as compared to the prior year period.
We expect Q2 will be the peak of our year over year GMB growth rate in 2021 with the back half of the year weighted more heavily towards Q4 gross.
We continue to believe we will deliver mid to high teens GMB growth for the full year 2.
And 1.
We should note that there remain a number of uncertainties, including the impact of monthly child tax credit payments, which we will see through the rest of 2021 and potentially beyond.
While data is very limited our expectation is that we will not see a spike and early purchase.
Purchase options and similar to the Spike we saw following the large single payment stimulus checks that benefited portfolio of performance, but served as a headwind the GMB growth.
We continue to hear from our Baas partners that the use of <unk> financing across the credit spectrum remains below pre pandemic levels.
And our revenues in the second quarter were $660 million compared to $599 million last year and increase of 10, 1%.
Our growth and revenue was driven by our continued improvement and our portfolio size as strong <unk> performance added to our leased asset balance and the period.
90 day buyouts decline from the peak of late Q1, 2021, although they are still higher than pre pandemic levels.
Gross margin benefited from strong portfolio performance.
During the quarter, we continue to experience delinquencies and write offs near historic lows driving our EBITDA.
Above our more typical annual range of 11% to 13%.
Our adjusted EBITDA was $104.9 million versus $73.5 million last year and increase of 42, 7% for a margin of 15, 9% of revenues.
Recently, we.
We completed the acquisition of <unk> technologies and <unk>.
Ami base be NPL company that allows consumers to pay for merchandize through 4 interest free installments.
We are excited about how combining 4 with progressive leasing and vive builds upon our direct to consumer growth strategy and delivers and exceptional value proposition.
To retailers looking to offer their customers additional payment options.
We're pleased at the <unk> team is excited about the opportunity for value creation and has agreed to continue leading 4 technologies as a separate business and subsidiary of Prog Holdings, Inc.
As disclosed in our second quarter 10-Q.
<unk> at $23 million of cash for the business.
There are also several multiyear performance based metrics that could result in additional equity based payments for the <unk>.
Most importantly, we believe the addition of 4 to our digital platform will allow us to grow and leverage our large database of loyal.
We pick tumors as well as increase the value of our offerings to current and potential new retail partners.
We do not expect the transaction to be material to our consolidated financial results and the near term, but strategically we think owning 4 will drive incremental growth and our core <unk> business.
Loyal kind of company also repurchased approximately $50 million of stock during the quarter.
Even with the growth and <unk> and the cash used and the acquisition and buybacks. We ended the quarter with a net cash position of $88 million.
Our capital priorities remain unchanged.
First we.
We will fund organic growth.
Next we will look for strategic M&A opportunities that are largely focused around new products or technical capabilities.
And lastly, we will return excess cash to shareholders.
In Q2, we delivered across all 3 of these capital allocation priorities.
Finally.
Okay I want to thank our employees for their commitment to our customers and partners as we strive to innovate and tailor solutions that will enable consumers to shop, however, wherever and whenever they want.
I will now turn the call over to our CFO, Bryan Garner who will discuss our financial results in more detail.
Brian.
Thanks, Steve.
Second quarter's consolidated financial results reflect strong GMB growth and the period and a continuation of elevated customer payment performance as delinquencies remain at near historic lows driving higher portfolio yield and expanded.
Finally.
I will begin with comments on our progressive leasing segment.
As a result of GMB growth and moderating 90 day buyout activity.
Lease portfolio size measured as gross lease assets on our balance sheet grew and the second quarter reversing from the declining trend we observed.
And throughout the prior periods of the pandemic.
90 day buyouts for the quarter dropped and the stimulus weighted Q1 levels, while remaining consistent.
Year over year.
However, 90 day buyouts are still elevated as compared to pre pandemic levels.
We're encouraged by the quarter is 25% GMB growth.
Mark and the positive trends, we are seeing and portfolio size and performance of.
And the higher levels of liquidity within our customer base May continue to act as a headwind for <unk>.
With respect of portfolio size, which is a key driver of future revenues. We entered Q2 with gross lease assets at 951 million.
And down 6.7% year on year and finished the quarter at $1 billion up 7.9% in short our GMB growth and the second quarter more than offset buyout levels, resulting at a higher portfolio of balance for the quarter.
We expect this trend to continue throughout the remainder of the year.
Revenues from the Progressive leasing segment were $646 million and increase of $56 million or 9.5% compared to the second quarter of 2020 revs.
Revenue benefited from and increased portfolio size and strong payment performance.
Progressive Leasing's gross margin was 31.9.
Percent from the second quarter versus 28, 7% for the same period last year of 320 basis point increase year over year as the impact of strong customer payment performance drove higher gross margins.
SG&A defined as operating expenses, excluding write offs.
Nation for Progressive leasing was 79 million or 12, 3% of revenues in the quarter compared to 10, 5% and the prior year period.
This reflects a return to pre pandemic levels as we expect SG&A to increase for the remainder of the year as we invest in technology.
And <unk> product enhancements and also incur additional public company costs not present in the prior year period.
Progressive leasing to write offs, which historically ranged between 6% to 8% annually as a percentage of revenues were 4.8% and Q2 of 2021 compared.
And to 6.1% and the year ago period.
And this quarter's results benefited from low delinquencies and the period and the strong portfolio performance previously mentioned.
And while we expect 2021 write offs to be below our historical annualized range, we anticipate and increase in the back half of this year and into 2020.
'twenty 2.
Of note and the first quarter of 2020, we recorded $16.1 million and incremental reserves due to the economic challenges and uncertainties arising from the Covid pandemic.
And we continue to evaluate the appropriate levels of our reserves based upon recent results and.
And anticipated payment performance.
And the second quarter, we released $5.3 million of Covid related reserves and we are encouraged by the low delinquency levels, we are seeing.
Adjusted EBITDA for progressive leasing and our second quarter was $100 million.
At 35, 4% increase.
Year over year and of 15, 5% margin.
The margin performance was primarily driven by improved portfolio performance and associated lower write offs.
Pivoting to consolidated results.
Consolidated adjusted EBITDA, including a revised financial segment was 100.
<unk> and <unk> 9 million for the second quarter of 2021 compared to $73.5 million for the same period last year and increase of $31.4 million or 42, 7%.
Adjusted EBITDA was 15, 9% of revenue in the second quarter up 360 basis points from the 12.
<unk>, 3% and the second quarter of the prior year driven by the portfolio performance I previously mentioned.
We expect that as macroeconomic conditions normalize over time EBITDA margin will return to a more typical historic annual range of 11% to 13%.
GAAP diluted.
And for <unk> was $1 <unk>.
Compared to 87.
And the year ago period, and non-GAAP EPS was $1 <unk>.
Compared to <unk> 92 for the same period and 2020.
Now turning to our balance sheet and liquidity profile.
We generated 71.
<unk> $2 million of cash from operations, and Q2, ending the quarter with of cash position of 137 million and debt of $50 million.
We have $300 million available under our revolving credit facility.
During the quarter, we purchased $49 million of shares with $223 million remaining.
1 of our $300 million share repurchase authorization.
Finally as noted in this morning's press release, we are increasing our full year 2021 consolidated outlook for adjusted EBITDA to a range of 390 million to $405 million up from the previous range.
<unk> of 380 million to $400 million due to better than expected portfolio performance.
This outlook assumes a slight deterioration and customer payment activity of 25% tax rate and no additional share repurchases.
It also assumes no negative impacts to our financial performer.
Meaning relating to the child tax credit payments dislocations of the global supply chain or the emergence of additional COVID-19 variance, including potential subsequent and governmental responses to those variance.
With that I'll turn the call over to the operator for the question and answer portion of the call operator.
A form of thank you.
We will now begin the question and answer session.
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At this time, we will pause momentarily.
Lee to assemble on marketing.
Our first question comes from Jason Haas with Bank of America. Please go ahead.
Great. Thanks for taking my question and congrats on the strong results.
So start Steve I think you said in your prepared remarks.
And here that youre expecting fourth quarter GMB growth to be stronger than.
And then <unk>.
If I heard that correctly and I saw on the last call we talked about.
And the compares on a 3 year stack basis being tougher in the fourth quarter. So I'm just curious if you could provide some more color on on what's driving that outlook.
Sure Jason Good morning.
I think we said last time that on a 3 year stack the back half was tougher than the front half just because of some of the launches we had in early 2019.
And that still does remain the case.
Think that the.
And we weighted said the GDP growth and the back half will be more weighted to the fourth quarter's at because of the all important holiday season, and how last year. We were we certainly were impacted by the lack of in store traffic during the Black Friday period, and just generally holiday.
Along with some of the <unk> initiatives that will have for this year.
And the reason counteracting that so.
And we still think we're on track for the overall <unk> guide for 2020, 1, but the back half from a percentage growth rate will be a little bit more weighted to Q4.
Got it so just to clarify that it sounds like you were referring to.
Jim day on a dollar.
Year, it's not not comparing to year over year percentage growth between <unk> and <unk> at that rate.
Well no really both.
The dollars will certainly be higher in Q4.
Percentage growth rates will be will also be higher in Q4 than Q3.
Okay got it that's really helpful. Thanks.
And then as a follow up.
So you beat.
It looks at you beat consensus EBITDA by and it looks like about $20 million or so, but then only rate guidance it looks like hang on.
On whether youll get the higher loan of about $5 million to $10 million.
And I'm curious I know the street estimates don't always match the internal plan on so I am.
Just curious.
If anything has changed.
And your back half outlook on it sounds like maybe there's some incremental cost pressures.
Or I should say investments.
And I think you did mention some new public company costs. So just curious what's what's really changed at the back half outlook.
Yeah, Jason I can take that Bryan let me I.
And I think what might be helpful kind of comparing first half versus.
Jen math is to take a step back and talk.
Talk about the moving dynamics. So if we think about starting with revenue and.
And what's going on there. So we benefited in the first half from higher than typical buyout and rates, which fueled our revenue throughout the first half.
That is.
Second would be of dynamic that we expect to the same degree certainly and the second half. So that's momentum on revenue that will subside. However.
It's been replaced.
2 almost entirely by the fact and our portfolio has grown but we talked about and our prepared remarks that our portfolio was up 8%. So those those 2 swaps.
And not going on.
Are going to equate to roughly the same rough.
Roughly the same revenue.
First half versus second half.
Plus or minus so thats whats going on and that on on that front. So you roll down to SG&A.
Front half versus second half the front half.
Of the year.
For for SG&A, and and we really saw at Q1 and we've.
Had we been pulling the range of been on spending.
And.
A rundown of Covid throughout 2020, and just being.
And being more constrained there and my expectation as we move through the back half and we're going to continue and invest in and if you look back.
And 2019, we were little over 12% SG&A as a percentage of revenue from the rest of leasing segment.
Dropped 11% in 2020 during Covid and so I think it's really just a reemergence on spend.
Back to pre Covid levels, as we hit our stride and see opportunities that have positive ROI that we're and our pursuit.
Pursue and so I think youre going to see spending ramp and the back half.
And then the third element that I think is contributing to whats implied in our guidance of.
And some some margin decline and the second half is we're just not expecting the same level of portfolio performance and the second half as we did and the first half.
We talk about write offs and a 6% to 8% I think of more reasonable.
The expectation is something less and that certainly for the year.
And certainly for the second half of that.
Total of the second half will be below that 6% to 8%, but it's going to be it's going to be a step up that we expect from the first half and what we saw and.
Sure.
And what we saw and kind of the delinquency profile as we move throughout the quarter.
And just just to that point, we started the quarter at really record low delinquencies and we mentioned that on our Q1 call.
And as the months went on and there wasn't very very slight.
And those delinquencies just as the effects of the stimulus we're off and so while the data is really early and there's still a lot of liquidity out there. We're just we're just anticipating and there'll be.
Some level of increase there so I think all of that results in a and.
And at lower margin for the second half versus the first half.
And that's really the dynamics that are at play and our guidance.
Got it that makes sense and.
And then if I could squeeze and another question here.
I saw that you called out.
Both on the press release and on the call of the strong performance of your large national partners.
And is very encouraging I remember on the last fall and.
<unk> talked about.
Launching some more marketing with those partners I'm curious if that was a driver or if anything else you get any other color you can provide on just how those on partnerships of wrapping up and then any color on on the pipeline and could you actually add some more of large partners. Thanks.
The address of the of I mean, and marketing is is definitely a an area of of opportunity for us, but also a bright spot I think we said on the last call that we've seen more of our partners like reaching into the toolkit that we have and partnering well with our marketing teams and that <unk>.
Certainly continued.
And Q2.
And we have a nice calendar for the back half of the year to continue partnering.
With our marketing teams too so hopefully drive more GSV for us and for our partners. So.
That was that is certainly a driver, but but generally it's just the.
The normal productivity gains that we see as at relationship matures and we're still on the very early innings of a few of these relationships, but where we're at.
Continue to be pleased with with what we're seeing.
From the from the gains of there.
That's great and and and on the pipeline how does that look.
Yeah of pipeline is good I mean.
Frustratingly, we don't we don't call out names for you guys, but.
We're really pleased with our conversations and some of the advancements that we've made through the.
Through the sales cycle.
And are encouraged by what that could mean for the future periods for conversion and ultimate growth rates.
Great to hear thank you.
Thanks, Jason.
Our next question comes from Kyle James at Kathleen. Please go ahead and.
A good morning, and guys and and.
Congratulations on and get quarter, and and thanks for taking my questions and you guys catch catch on credit normalization and the outlook for that can you just give us and.
For how you see you know the.
Changing and tile child tax credit impacting the business over the remainder of the year.
And and then going forward, obviously and his credit and normalize you're talking about some of the offsets for the business really in terms of less buyout activity and the potential for increased credit demand.
Oh. Thank you. This is Steve I'll start and I'll, let Brian chime end, but as it relates specifically to the child tax credit on.
Obviously, it's early because it's only been a couple of weeks and we don't have a ton of data, but but having said that we do have.
Pretty good ability to quickly observed changes and our customers behavior through our contact centers as we've said and previous calls and years, you know and the normal tax refund season, and we can see the phones and our contact centres light up on the day that the funds are are received and our customers bank accounts and we saw of similar activity during the previous.
Large 1 time stimulus payments that were dispersed in this particular instance over the last 2 weeks.
We have not seen and miserable uptake at any of those those contact rates and our contact center in terms of.
Increased payments or 90 day buyout executions really really anything and now I will reiterate and it's only been 2 weeks and we'll see how that plays out over time.
And we will continue to look for.
Look for that consumer feedback and the behavioral changes, but nothing so far so we we don't I mean, we can't view it as a negative and we think that it should of.
B b of positive for our customers.
And to the extent of their that they participated and that credit, which we would expect many of them do.
We don't expect it will drive the large 90 day buyout executions that we've seen with the large 1 time stimulus payments, but it could.
To prolong the period of of increase liquidity that our customers of enjoyed over the last 15 to 18 months and and that May show up and continued portfolio of performance of that exceeds our expectation has portfolio performance has exceeded our expectations for the last couple of quarters.
And it remains to be seen if this monthly refundable credit as opposed to a large 1 time stimulus payment will have any impact and <unk> and and the some of the headwind that we've seen from the lack of need for Pos financing.
From from that stimulus so.
I mean lots of say there is or as it relates to child tax credit and we'll just we'll just stay tuned.
All of that Brian chime in on the puts and takes on.
On the write offs and the 90 buyouts, Yeah, no I mean, certainly certainly the child tax credit is kind of.
What would be expected to.
And keep write offs at at at a.
Lower than historical level of maps and that's what we've got and our guide and it's just.
Just so early to know the level of of impact.
And so we continue to watch that and like Steve said, the buyout activity and.
As we as we've referenced and prepared remarks, we've and we saw a normalization.
From a year over year perspective on buyouts, but we were still well below 2019 levels and if credit normalizes.
My expectation would be the buyouts.
Continue to continue to come down.
Is is.
We can return to more normal state because we certainly show are elevated from that normal space. So.
Hopefully that answers your question.
Yep Yep.
And your color and then kind of on on the other side of the coin here and we talked about consumer of liquidity, there, but can you kind of remind us I.
I mean, frankly, and the last time, we are and and an inflationary environment Progressive is probably a private company but.
But how how the business and impacted.
By inflation and really more so on the on consumer.
Consumer credit demand and there is and inflation.
And could you can and give us a sense for half of business is impacted by their.
Yeah kind of you right.
And the last time and there was an inflationary environment.
<unk> of private company, but fortunately for prog and for just the industry generally the business is done well and all economic cycles and.
Over the years, let's call at the most recent 10 years the business his face the opposite which is kind of pressures from deflationary forces and at the extreme even the commoditization of certain items and the categories that we lease so.
The reverse of that or the other and which would be higher prices caused by inflation could result in and more customers needing a payment option at the point of sale for their large ticket purchases versus being able to pay cash so.
As you intimated and your question it could be.
Ah removal of of headwind on <unk>.
Demand for the product as of as prices increase.
Got it and then that last 1 from me on the on that for acquisition and and it sounds like you're going to operate these and kind of independent company. Initially yeah. How is there any sort of synergy.
Synergies or integration potential I'm, just thinking about you know progressive database and underwriting capabilities and kind of morphing that with.
And by now pay later product.
Yeah, I'm glad you asked that question because while they will be a separate business.
We will not operate them and Ah silo and the reason that we wanted to add this capability.
Was so that we could serve both our retail partners and our customers better.
By we can offer of payment option for small dollar transactions.
As well as merchandise at a retail partners offer that is currently not eligible for release.
So as of complement to the existing lease product we believe.
<unk> and of paying for products, specifically has the potential to expand our our town. So yes, I mean of things that you hit whether it would be the decision and capabilities. The database the cross marketing opportunities. We're excited about the ability for 4.2 and to.
Help us grow our.
Our core lease to own capabilities.
And and be a lever for gross so they will be maintained separately, but there will be cooperation and collaboration to make sure that we can add value and create and increase the value of of both businesses and ultimately prog holdings.
Got it very helpful. Thanks, a lot for answering my question.
Scott.
And the next question comes from Anthony check on <unk>, New capital of <unk>.
At.
Oh good morning, let me at my congratulations as well, it's nice to see GMB gross start with the 2 again.
So first question you know and I know, it's probably kind of hard to parse itself, but the 274% he kind of online G. M V. Gross like how much of that you know, even just kind of direction of where he was being better integrated with the online point of sale systems of your large retail.
Partners as opposed to you know these plug ins.
Commerce, and magenta too and maybe any other factors on him, but I might not be considering thanks.
Thanks, Anthony Yeah E. Com is certainly a bright spot and we expect it will continue to be that and the coming quarters.
But.
The plug ins.
R.
Or have tremendous potential, but our early in the game right. So the wound commerce and magenta too where very recent.
We've had we've had some other plug ins that are out there and the wild the majority of the.
Of the gross that we've seen and GMB was from those integrations that you referred to and the larger econ players and I'm sorry, the large of retail partners that we have and supporting their omnichannel.
Go to market strategy, So, we've got big upside and and some smaller retailers and E. Tailers that use these off the shelf e-commerce platforms, but.
The large growth for us currently and I think for awhile, because that's kind of how we are skewed is by continuing to grow E com balance of share.
With our large enterprise accounts.
Got it that's really helpful. And then you say you mentioned that.
U E Commerce G. M V was 13% of progressive leasing GMB, what what was that number I guess and the second quarter of last year, if I, if I recall and the first quarter you sort of you gave sort of the year over year comparisons I was just curious what would that comparable number before the second quarter of 2020.
Yeah. It was like low force 4.2 or 4.3%.
Okay. Okay. So okay. That's that's that's helpful. And then my my from my final question.
And so I'm just trying to think about thinking of this expanded child tax credit a bit you know and I and I.
Heard your comments just in terms of well you know, it's probably not going to lead to a lot of early and 90 day buyouts, because you didn't get on 1 lump sum it makes sense to me, but I mean, how can this not help in the back half of the sea of particularly from a right on perspective right. I mean, if you've got these people and they've got $250 a month for every kid from 6 to 7.
See at 17.300, a month for every kid below the age of cyclic how is that not gonna help from a from a payment I perspective.
And it's a valid at as a valid point and.
I think in a vacuum at you could it would be hard to argue against at helping.
Unknown and the variable out there is like what other.
What other pressures of they having related to.
Just the reopening right and and when I say the reopening obviously, we are closely watching this delta very and and all of the all of the things that are going on there, but with schools reopening and and.
And and potentially going back to the office and things of that nature of there could be other pressures.
The other pressures on their on their income.
Whether it's.
Mortgage or rent moratoriums, and and things of that nature. So there's a lot of variables that go with of mixing Bowl and.
And isolation, yes, it should continue to prolong the period of us having lower than average or better than better than average portfolio performance I should say to that way, but there are other factors at play that will be demands on on our customers.
Supposal income.
Got it that's all very helpful keep off of good work us.
Thank you anything.
Our next question comes from Michael Young and what's your name please.
Please go ahead.
Hey, good morning. Thank you for taking the question Uhm wanted to start kind of following up on the strong credit trends we've seen.
And can you maybe just talk a little bit about sort of the underwriting box that you guys have now or are you kind of of loosening that what should we expect to see going forward or has that already sort of taken place.
Thank you Michael Yes from of Decisioning standpoint.
We and we talked a little bit about this and the previous quarter's but it continues to be of dynamic.
Posture for us right. So we.
We tightened at the onset of the pandemic and then over the course of the summer and the fall we learned from that data and obviously were surprised at the upside on the on the portfolio of performance of starting and call at November of 2020, we started rolling back some of those tightenings, but it wasn't just the rollback at was a more and 4.
Armed.
Adjustment or dial calibrating the dials because we learned from the from the data and so there was a series of of adjustments made from November all the way into early Q2 of 2021 and so as we sit here today. We are our approval rates are higher than they were even prepandemic of.
Trudel amounts are actually higher than they were prepandemic.
And.
And we always are looking for ways to run R&D through the pipes or.
Or other ways to say, yes and a.
Very measured and profitable way so.
The date of science teams does a great job of looking for those opportunities, but right now.
Certainly decisioning has been a removal of of headwind self inflicted I'll admit but a removal of of headwind from from 2020 and and.
And we're in a good spot right now.
We will always err on the side of having control of the portfolio.
As opposed to be and.
What I would refer to as to loose and but.
But we do have good early.
Metrics and indicators because of the portfolio duration is so short that we can we can react to things that are.
That are changing and real time.
Okay. Thanks, that's helpful. And then wanted to just touch on the share buyback. Obviously, you got $300 million proved you were active on at somewhat this quarter about 50 million.
Re purchased and Ah.
Some of higher stock price and where we are the day of the stocks kind of of <unk> lately I would imagine it looks like a good value, how how aggressive or you guys willing to be maybe outside of M&A pursuing.
Pursuing that and and any other thoughtful.
And we were fortunate to have a very capital efficient business model and and will generate cash at at Steven pretty aggressive growth rates. So that leaves us to the decision of what to do with as we define excess capital and we're not going to signal exactly what we're going to do but.
I would.
Echo your comments at the prices are very attractive at these levels and.
We'll put the put the cash to work.
And with the best return the we see is available to us.
Okay. Thank you and maybe 1 just quick last 1 day and the vibe segments done quite well on.
Here recently should we expect kind of that to continue or any other just comment on that segment specifically.
Yeah of I've is certainly a bright spot and.
And has has seen a tremendous amount of growth due to expansion of its.
Of its partner base, not only new logos, but also new doors within existing logos and so the GMB for vive as well as up materially.
As we have said in the past.
5.
Has this cecil accounting so there can be a drag on earnings when you have to provide for all of the estimated losses over the life of of alone upfront when the loan is booked.
And 2021, where we're seeing a benefit from a reduction of provision rates.
Because of high provisions and 2020 due to the unknown uncertainties from from the pandemic and so.
We'll probably see a little bit of of reversal of that assuming we do try and back to normal and.
And the back half of 21 and and to 22.
But the but the growth rates are are strong and we we see vive, we bought vibe as strategic asset for progressive It's certainly proven that use case and now after several years has flipped the profitability and we think that will it'll it'll be influenced by those provision rates, but it will maintain and.
Profitability.
Okay. Thank you.
Okay, and if you'd like to ask a question. Please parents died and 1 our next question comes from Bad Comics Keybanc capital markets. Please go ahead.
Hi, good morning, everybody and good quarter.
A couple of questions if I can.
And I missed the beginning of the call and I apologize at the address and detail already but I was hoping we could just revisit the the way that G. M V flows into revenue, particularly given just how strong and the second quarter GMB number wise.
And.
If you could talk a little bit about how you're expecting these trends to to flow through and and maybe that could mean for potential upside toboggan.
<unk> and the quarters of head.
Yeah.
And I'll I'll take that.
Probably 2 pieces, so so revenue or <unk> certainly of leading indicator for revenue. There is a number of components go into revenue hooting buyout and activity et cetera, like we saw on the first first half, but this this 25, 2% that we saw and the quarter will start to impact revenue.
And Q3 and Q4 certainly.
The day.
The commentary that I made on and earlier question.
And just just to reiterate in front of half of the second half in terms of total revenue will be and the same ballpark.
Just because we're losing the buyout kind of tailwind on revenue I expect given given the 2 trailing stimulus of hidden Lake you want and the buyout fell out of that.
And I and but the portfolio is growing which is which is a function of this GMB that we saw that just adding to the top of the funnel. So those are the moving pieces, but I think thinking about it kind of 50.50 front half of the second half is probably the right way to think about it.
Great and then I imagine this may of been addressed earlier, but.
And any more color you want to share as we finance and our models and of how to think about 3 Q versus 4 Q.
From and earnings perspective give.
Given some of the margin puts and takes.
Yeah, No I think I mean.
From a from a back half perspective at is going to be a we're going to see margins fall off I think of you can see you can see pretty similar level of margins between the 2 quarters I wouldn't expect.
A big swing and and 1 quarter versus the other obviously, we continue to ramp up spend as I mentioned and so that's that's probably the 1 variable that that might be at a higher level and Q4 than it is and Q3 just function as we try to get back to our our baseline level of spend and we saw prepandemic.
Great. Thanks, so much.
Our next question comes from Bobby Beth and I'll play and and gain.
At.
Good morning of your body. Thanks for taking me here at the end and similar to brag apologies and jumps on late here, Brian and I just want to clarify your comments at the second <unk> about the buyout tailwind and maybe I'm, just struggling and kind of conceptualize at but I thought with stimulus consumers would buy out of their contracts early which actually decreases the yield.
On the portfolio. So if we have more normal behavior and less buyouts and the second half <expletive> and the yield on the portfolio and kind of of the revenue growth generate at from the portfolio be stronger.
Yeah. So I guess the question that you got to answer is whether the portfolio of strength will be at the same level that we saw on the front half and I think he expectations of we'll see write offs come on buyouts.
There is there's 2 kind of buyouts.
Our business, there's 90 of buyouts, which are effectively.
Zero margin events for us and there's early buyouts at half and half of that and 90 day period that are profitable for us.
So with those kind of those kind of.
Subsiding and write offs presume to inquiries, that's where along with SG&A continuing to increase that's where you're seeing the margin of attraction.
Bobby This is Steve.
I would just add like you are right and that if a customer pays out to full term the portfolio yield will be higher and it'll just be over a longer period of time, whereas if you do a thousand dollars worth of GMB today, and 60 days from now the customer buys it out it's kind of like a.
Shot to revenue in that period so.
When you have elevated buyouts at can stick and grow.
Grow revenue fairly quickly, but if buyout subside that particular dollar amount of GMB will generate more revenue over time, it just isn't going to influence the near term quarters as as much.
Alright, that's helpful and I guess that can be just maybe to unpack you you I think even referenced Brian and Steve.
<unk> coming up a little here and 3 and 3 and 4 of <unk> is that just and growth and documents or is that still bringing back cost at work temporary pulled out for COVID-19, what other colors, Derek and it looks like the 1 Q on 2 of <unk> Opex, what we're fairly stable once you're back out right out and I think $83 million and 89 million, so modestly higher and the second quarter, but.
The implied numbers with reeking of <unk> pretty notable step up.
Yeah, Yeah. It is and I think it's I think it's both of those components. I think we are continuing to make investments as we see opportunities to to grow GMB and grow the business and working to pursue those but for the year overall.
My expectation is that we're going to be we're going to see SG&A as a percentage of revenue somewhere somewhere in the range of of what we saw in 2019 Prepandemic. So we're really just kind of get back to of Manualize range. That's that's has been suppressed for the last 12 months and so that the step up that you are seeing the 16% margin. So we saw and Q1 and.
Q2, we're just not the steady state margin that the Raymond for and what we expect and her Steve reference the 11th of 13% and and I think that's where we're going to live.
And as we as we move beyond 2021. So that's that's the color I would give you their at his continued investment, but we're keeping of within the confines of what our historical spend rates of Ben Prepandemic. The other thing Bobby that I would say on that as as we said right around and the <unk>.
I'm of the split as we expected at least about $10 million worth of of additional public company cost of that didn't exist. When we were pre split and those take those hiring plans and other things take a little bit of time to layer on and so that would be.
At burden would be more back half weighted then front half.
Okay. That's very helpful. I appreciate all of the details here at the end and our best of luck here and the second half of 21 and thank.
Thank you bye.
Our next question comes from him.
And go and.
Alright, Okay Street day to please guy.
Thank you and good morning, and I've got 1 question for Steve and I was just wondering if you could just.
Come and told at more on the E Commerce gross and penetration you're seeing there and.
Obviously huge huge improvement you of your and sequentially and I'm just wondering what do you think the long term you may percentage, you think that e-commerce should be in your business and and if there's anything we can look at to say Ya at the lower income consumer is maybe getting more comfortable transacting online and then you and maybe they were at <unk>.
Thanks.
Oh, Thank you I'll I'll start with the with the second half of that and.
I mean, I think the arc arc consumer is very comfortable transacting online there there they over index and.
And smartphone adoption and mobile mobile shopping and they're very sophisticated and that regard I think as you as you said and your question.
The prepandemic everybody kind of had a hard shift to online there and pandemic soda accelerated that trend even more.
But.
To the to the root of the question as to where should E com B.
I'm very adamant about the fact that we don't have a target for was the balance of Gnvs should be from econ customer will dictate.
Where that.
Plans I expect that Jim I'm, sorry that E com GMB will grow faster than the overall pie just because that's the trends that are happening in the and.
The shopping public but.
We need to and we'll have.
Solutions that allow a customer to have a cross channel or of multichannel shopping journey, and they're going to determine where.
Where that GMB falls out and in the future I think it will be more difficult to determine how to categorize GMB because more than likely they will participate.
Participate in and.
More than 1 channel I mean, the way we define it currently is that if they check out in the E com shopping cart.
That is considered E com that doesn't mean that they didn't interact with with our app or with our product and the store are taught to retail sales associate it just means that they chose to check out online.
The good news there are decisioning is more than half of our apps.
Do come through digital channels, and so we were able to turn dials and make decisions with the customer and at present.
Situations such that were some were basically margin agnostic as to what channel and the Gnvs drive through so.
In summary, I would say that <unk> will grow faster than overall, GSV and that balance of that composition of GMB will shifts more towards econ, but we don't have a target of where we want to and we just want to have really simple and easy and transparent solutions for the customer and they can tell us how they want to interact with.
<unk>.
And that's a really good color and <unk>. That's all for me you got it. Thank you.
And it can play at that question and answer session and I'd like to turn the conference back and see if that goes for any clothes and goodbye.
Thank you everyone for joining us today and for your interest in Prog holdings. Our team is excited about the opportunity to continue prog impressive history of growth and innovation I'd like to add a special welcome to the team members from 4 we're excited to have you as part of the frog family.
And again I would like to thank all of prog nation for their tyler's tireless efforts to innovate and simplify on behalf of our customers and retail partners.
And we look forward to updating you again next quarter.
And a conference and now concluded. Thank you for attending today's presentation you may now disconnect.
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