Q1 2024 PROG Holdings Inc Earnings Call
Operator: Good day, and thank you for standing by. Welcome to the PROG Holdings first quarter 2024 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message device, and your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would like to end the conference over your speaker today. John Baugh, please go ahead.
Good day and thank you for standing by welcome to the Prague Holdings first quarter 2024 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session I need to press star one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press.
Darwin one again, please be advised today's conference is being recorded I would now like to hand, the conference of your Speaker today, John Bob. Please go ahead.
John Allen Baugh: Thank you and good morning everyone. Welcome to the PROG Holdings first quarter 2024 earnings call. Joining me this morning are Steve Michaels, PROG Holdings President and Chief Executive Officer, and Brian 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, investor.progholdings.com. During this call, certain statements we make will be forward-looking, including comments regarding a revised 2024 full-year outlook and our outlook for the second quarter of 2024, the health of our portfolio, our capital allocation priorities, including our ability to continue paying a quarterly cash dividend and repurchase shares of our stock in future periods, and our expectations regarding GMV for the second quarter and full year 2024.
John Allen Baugh: Thank you and getting boring everyone welcome to the Prague Holdings first quarter 2024 earnings call.
John Allen Baugh: Joining me. This morning are Steve Michaels product Holdings, President and Chief Executive Officer, and Bryan Garner, our Chief Financial Officer.
John Allen Baugh: Many of you have already seen a copy of our earnings release issued this morning, which is available on our Investor Relations website, Investor Dot Prague Holdings Dot com.
John Allen Baugh: During this call certain statements, we make will be forward looking including comments regarding our revised 2020 for full year outlook and our outlook for the second quarter of 2020 for the health of our portfolio our capital allocation priorities.
John Allen Baugh: Including our ability to continue paying a quarterly cash dividend and repurchase shares of our stock in future periods and our expectations regarding <unk> for the second quarter and full year 2024.
John Allen Baugh: Listeners are cautioned not to place undue emphasis on forward-looking statements we make today, and we undertake no obligation to update any such statement. On today's call, we will be referring to certain non-GAAP financial measures, including adjusted EBITDA and Nongap EPS, which have been adjusted for certain items which may affect the comparability of our performance with other companies. These non-GAAP measures are detailed in the reconciliation tables included with our earnings release. 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 to investors to help facilitate comparisons of operating results with prior periods and to assist them in understanding the company's ongoing operational performance. With that, I would like to turn the call over to Steve Michaels, PROG Holdings President and Chief Executive Officer. Steve?
Listeners are cautioned not to place undue emphasis on forward looking statements we make today.
John Allen Baugh: And we undertake no obligation to update any such statements.
John Allen Baugh: On today's call.
John Allen Baugh: We will be referring to certain non-GAAP financial measures, including adjusted EBITDA.
John Allen Baugh: And non-GAAP EPS.
John Allen Baugh: Which have been adjusted for certain items, which may affect the comparability of our performance with other companies.
John Allen Baugh: These non-GAAP measures are detailed in the reconciliation tables included with our earnings release.
John Allen Baugh: 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 to investors to help facilitate comparisons of operating results with prior periods and to assist them in understanding the company's <unk>.
John Allen Baugh: Ongoing operational performance.
With that I would like to turn the call over to Steve Michaels product Holdings, President and Chief Executive Officer, Steve.
Steven A. Michaels: Thank you, John, and good morning, everyone. I appreciate you joining us as we report our first quarter results, which exceeded the high end of the outlook range we provided in February. Today, I'll provide insights into how our first quarter unfolded, along with a few key points on Q2. As a reminder, when we issued our outlook in late February, we were emerging from a slow start to the year for retail, with limited visibility into the tax refund season, and given the macro headwinds, we anticipated Q1 GMV to be down low single digits.
Steven A. Michaels: Thank you John and good morning, everyone I.
Steven A. Michaels: I appreciate you joining us as we report our first quarter results, which exceeded the high end of our outlook range. We provided in February.
Steven A. Michaels: Today, I will provide insights into how our first quarter unfolded along with a few key points on Q2.
Steven A. Michaels: As a reminder, when we issued our outlook in late February we were emerging from a slow start to the year for retail with limited visibility into the tax refund season, and given the macro headwinds, we anticipated Q1 <unk> to be down low single digits.
Steven A. Michaels: However, we were optimistic about our strategic direction, growth initiatives, and the health of our portfolio. For Q1, our revenue and earnings beat the high end of our outlook range. I'm proud of the performance of our teams throughout the company as they helped us deliver a strong start to the year. Q1 GMV rebounded from a soft start to 2024, ending flat year-over-year for the quarter.
Steven A. Michaels: However, we were optimistic about our strategic direction.
Steven A. Michaels: Both initiatives.
Steven A. Michaels: And the health of our portfolio.
Steven A. Michaels: For Q1, our revenue and earnings beat the high end of our outlook range on.
Steven A. Michaels: I am proud of the performance of our teams throughout the company as they helped us deliver a strong start to the year.
Steven A. Michaels: <unk> rebounded from a soft start to 2024, ending flat year over year for the quarter.
Steven A. Michaels: We gain a balance of share with our key partners amidst a challenging retail environment in which sales and key verticals experience negative comps, some in the high single digits. We navigated these Q1 demand headwinds through strong execution across several sales, marketing, and technology initiatives under our strategic pillars of grow, enhance, and expand, while continuing to actively manage portfolio performance. Brian will address the portfolio in more detail, but I want to call out that our Q1 portfolio yield for the progressive leasing segment was slightly better than expected. Consolidated Adjusted EBITDA of $72.6 million, which was 11.3% of revenue, exceeded the high end of our outlook, driven by GMV growth in the second half of the quarter, strong portfolio performance, and disciplined spending.
Steven A. Michaels: We gained balance of share with our key partners amidst the challenging retail environment in which sales in key verticals experienced negative comps some in the high single digits.
Steven A. Michaels: We navigated these Q1 demand headwinds through strong execution across several sales marketing and technology initiatives under our strategic pillars of grow enhance and expand while continuing to actively managed portfolio performance.
Speaker Change: Brian will address the portfolio in more detail, but I want to call out that our Q1 portfolio yield for the progressive leasing segment was slightly better than expected.
Speaker Change: Consolidated adjusted EBITDA of $72 6 million, which was 11, 3% of revenue exceeded the high end of our outlook driven by GMB growth in the second half of the quarter strong portfolio performance and disciplined spending.
Steven A. Michaels: Now I'd like to update you on our strategic pillars of grow, enhance, and expand. Regarding our grow pillar, which focuses on business development efforts with new and existing retail partnerships, I want to emphasize that we remain keenly focused on our strategy to onboard new retailers to our platform in both the regional and national space. In the quarter, we achieved deeper integrations with existing partners, some of whom have been on our platform for many years.
Speaker Change: Now I would like to update you on our strategic pillars of grow enhance and expand.
Speaker Change: Regarding our growth pillar, which focuses on business development efforts with new and existing retail partnerships I want to emphasize that we remain keenly focused on our strategy to onboard new retailers to our platform in both the regional and national space.
Speaker Change: In the quarter, we achieved deeper integrations with existing partners some of whom have been on our platform for many years.
Steven A. Michaels: We believe improved productivity driven by increases in active locations and the number of leases per location with existing retailers as well as expected pipeline conversions will enable us to deliver GMV growth in the near and long term. Also, under our GROW pillar, our efforts are focused on the PROG Marketplace and Direct-to-Consumer Markets. As a reminder, PROG Marketplace allows new and repeat customers to shop when and where they want through our mobile app, allowing us to drive incremental traffic and sales to our network of retail partners.
We believe improved productivity driven by increases in active locations and the number of leases per location with existing retailers as well as expected pipeline conversions will enable us to deliver <unk> growth in the near and long term.
Speaker Change: Also under our grow pillar our efforts are focused on the Prague marketplace and direct to consumer marketing.
Speaker Change: As a reminder, Prague marketplace allows new and repeat customers to shop, when and where they want through our mobile app.
Wowing us to drive incremental traffic and sales through our network of retail partners.
Steven A. Michaels: We also have affiliate partnerships with other leading retailers through our marketplace, which gives our customers more choice. This channel drove significant growth in 2023, and we anticipate doubling our GMV from the PROG marketplace in 2024. In terms of Direct-to-Consumer Marketing, key areas include the customer lifecycle and personalization, which make it easy for consumers to understand and utilize the full spectrum of our products. As it relates to personalization specifically, we are investing in segmentation and automation capabilities to improve the customer experience.
Speaker Change: We also have affiliate partnerships with other leading retailers through our marketplace, which gives our customers more choice.
Speaker Change: This channel drove significant growth in 2023, and we anticipate doubling our <unk> from the product marketplace in 2024.
Speaker Change: In terms of direct to consumer marketing.
Speaker Change: Key areas include the customer lifecycle, and personalization, which make it easy for consumers to understand and utilize the full spectrum of our products.
Speaker Change: As it relates to personalization, specifically, we are investing in segmentation and automation capabilities to improve the customer experience.
Steven A. Michaels: Our direct-to-consumer motion complements our retail partner channel, GMV, and deepens our relationship with new and existing retailers as we drive incremental traffic to them. Under our enhanced pillar, we continue to invest in technology initiatives, which will make customer and retailer experiences as seamless as possible. For example, in direct-to-consumer shopping, we are enhancing the application experience to make onboarding more efficient and increasing shopability through better browse, search, and checkout features on the web, as well as the mobile app.
Speaker Change: Our direct to consumer motion complements our retail partner channel GMB and deepens, our relationship with new and existing retailers as we drive incremental traffic to them.
Speaker Change: Under our enhanced pillar, we continued to invest in technology initiatives, which will make customer and retailer experiences as seamless as possible.
Speaker Change: For example, with direct to consumer shopping we are enhancing the application experience to make onboarding more efficient and increasing shop ability through better browse search and checkout features on the web as well as the mobile app.
Steven A. Michaels: During Q1, we launched the refresh of our consumer-facing progressive leasing website. This new improved site provides a robust platform to increase content and resources to help educate shoppers about our products and highlight and benefit our retail partners. In Q1, the PROG Labs R&D group piloted generative AI initiatives across several consumer-facing areas to seamlessly verify consumer ID, provide multilingual support, and analyze customer feedback. For instance, by leveraging generative AI for customer feedback, we can consume and analyze that information and identify actionable improvements to our offerings, which allows us to incorporate significantly more feedback into our product development cycle much faster than before.
Speaker Change: During Q1, we launched a refresh of our consumer facing progressive leasing website.
Speaker Change: This new improved site provides a robust platform to increase content and resources to help educate shoppers about our products and to highlight and benefit our retail partners.
Speaker Change: In Q1, the Prague Labs, R&D group piloted generative AI initiatives across several consumer facing areas to seamlessly verify consumer I'd.
Speaker Change: Provide multilingual support and analyze customer feedback.
Speaker Change: For instance by leveraging generative AI for customer feedback, we can consume and analyze that information and identify actionable improvements to our offerings, which allows us to incorporate significantly more feedback into our product development cycle much faster than before.
Steven A. Michaels: We believe these initiatives at scale will dramatically improve the customer experience and conversion rates and increase internal productivity to lower our cost to serve and drive operational efficiency. Under our expand pillar, we are focused on our omni-channel marketing strategy to automate cross-promotional consumer journeys. This allows us to further personalize offers at a customer segment level by featuring products in the PROG portfolio that are relevant to each customer's needs.
Speaker Change: We believe these initiatives at scale will dramatically improve the customer experience and conversion rates and increased internal productivity to lower our cost to serve and drive operational efficiencies.
Speaker Change: Under our expand pillar, we are focused on our omnichannel marketing strategy to automate cross promotional consumer journeys.
Speaker Change: This allows us to further personalize offers at a customer segment level by featuring products in the product portfolio that are relevant to each customer's needs.
Steven A. Michaels: We drove incremental progressive leasing GMV in Q1 through customer acquisition and cross-marketing efforts with our other operations, which include Ford Technologies and Build. We expect this GMV to ramp up throughout the year as we make strides to remove friction from our processes and optimize our funnel conversion. To summarize our strong first quarter, I'd like to highlight that we collaborated with existing retail partners on technical integrations and marketing, which helped us gain a balance of share.
Speaker Change: We drove incremental progressive leasing <unk> in Q1 through customer acquisition and cross marketing efforts with our other operations, which include four technologies and build.
Speaker Change: We expect this <unk> to ramp up throughout the year as we make strides to remove friction from our processes and optimize our funnel conversion.
Speaker Change: To summarize our strong first quarter I'd like to highlight that we collaborated with existing retail partners on technical integrations, and marketing, which helped us gain balance of share.
Steven A. Michaels: We also made significant progress on direct consumer initiatives, maintained a healthy lease portfolio, and remained disciplined with spend. While Brian will provide more detail on our revised full-year outlook for 2024, I'd like to provide some high-level thoughts. In terms of the remainder of the year, we expect retail headwinds in the majority of our leaseable categories to persist. However, we are making significant progress across our strategic initiatives under Grow, Enhance, and Expand, and we remain optimistic about Q2 GMV growth in the low single digits. Despite these macroeconomic challenges,
Speaker Change: We also made significant progress on direct to consumer initiatives maintained a healthy lease portfolio and remain disciplined with spend.
Speaker Change: While Brian will provide more detail on our revised full year outlook for 2024, I'd like to provide some high level thoughts.
Speaker Change: In terms of the remainder of the year, we expect retail headwinds and the majority of our leasable categories to persist.
Speaker Change: However, we are making significant progress across our strategic initiatives under grow enhance and expand and we remain optimistic about Q2 GMB growth in the low single digits.
Speaker Change: Despite these macroeconomic challenges.
Steven A. Michaels: Our updated full-year revenue outlook reflects the GMV outperformance in the first half of. We also expect our portfolio performance to remain within our targeted annual range of 6% to 8% as we continue to balance profitability with GMV growth. Finally, on the topic of capital allocation, we paid a quarterly cash dividend of $0.12 per share on March 28. Additionally, we repurchased approximately 781,000 shares during the quarter. In Q1, we generated $136 million in cash flow from operations and expect to generate meaningful cash flow from operations for the full year.
Speaker Change: Our updated full year revenue outlook reflects the <unk> outperformance in the first half of the year.
Speaker Change: We also expect our portfolio performance to remain within our targeted annual range of 6% to 8% as we continue to balance profitability with <unk> growth.
Speaker Change: Finally on the topic of capital allocation, we paid a quarterly cash dividend of <unk> 12 per share on March 28.
Speaker Change: Additionally, we repurchased approximately 781000 shares during the quarter.
Speaker Change: In Q1, we generated $136 million in cash flow from operations and expect to generate meaningful cash flow from operations for the full year.
Steven A. Michaels: Our capital allocation priorities remain unchanged, and we expect to continue to fund growth, look for strategic M&A opportunities, and return excess cash to shareholders through dividends and share repurchase. I will now turn the call over to our CFO, Brian Garner, for more details on Q1 results and the remainder of the year outlook.
Our capital allocation priorities remain unchanged and we expect to continue to fund growth.
Speaker Change: Look for strategic M&A opportunities and return excess cash to shareholders through dividends and share repurchases.
Speaker Change: I'll now turn the call over to our CFO Bryan Garner for more details on Q1 results.
Brian J. Garner: And the remainder of the year outlook.
Brian J. Garner: We are pleased to report that our first quarter 2024 results exceeded our outlook on both revenue and earnings, despite a soft demand environment to begin the quarter. This performance was driven by growth initiatives, resilient demand for our flexible payment solutions, and our management of portfolio performance and spend levels. Beginning with the progressive leasing segment, as Steve mentioned, GMV for progressive leasing exceeded our expectations of a low single-digit decline as we ended the quarter flat year over year. We continue to invest in our sales and marketing efforts and deliver it on direct-to-consumer initiatives, which contributed to the overall result.
Brian J. Garner: Brian.
Brian J. Garner: Thanks, Steve.
Brian J. Garner: We are pleased to report that our first quarter 2024 results exceeded our outlook on both revenue and earnings despite a soft demand environment to begin the quarter.
This performance was driven by growth initiatives, Brazil demand for our flexible payment solutions and our management of portfolio performance and spend levels.
Brian J. Garner: Beginning with progressive leasing segment.
Brian J. Garner: As Steve mentioned <unk> for progressive leasing exceeded our expectations of a low single digit decline as we ended the quarter flat year over year.
Brian J. Garner: We continue to invest in our sales and marketing motions and delivered on direct to consumer initiatives, which contributed to the overall results.
Brian J. Garner: Our gross leased asset balance at the end of Q1 2024 was down 4.7% compared to the same period last year, which was an improvement from the 5.2% decline entering the period. Q1 revenues for our progressive leasing segment declined 2.6% from $637.1 million to $620.6 million, primarily driven by the gross leased asset balance being down 5.2% as we entered this year, partially offset by higher 90 day early purchase. Revenue exceeded our expectations, largely due to a benefit from the favorable GMV lift we experienced in the back half of Q1 and a larger than expected portfolio size.
Brian J. Garner: Our gross leased asset balance at the end of Q1 2024 was down four 7% compared to the same period last year, which was an improvement from the five 2% decline entering the period.
Brian J. Garner: Q1 revenues for a progressive weakened segment declined two 6% from $637 1 million to $626 million, primarily driven by the gross leased asset balance being down five 2% as we entered this year, partially offset by higher 90 day early purchases.
Brian J. Garner: Revenue exceeded our expectations largely due to a benefit from the favorable <unk>, we experienced in the back half of Q1, and a larger than expected portfolio size.
Brian J. Garner: U1 portfolio performance for Progressive Leasing came in better than expected, which contributed to earnings exceeding the high end of our outlook, while the percentage of customers choosing to exercise their 90-day purchase options has returned to pre-pandemic levels. For a year-over-year comparison, our gross margin of 30.5% in Q1 of 2024 was 120 basis points lower compared to Q1 of 2023. This was primarily driven by normalized levels of 98 purchases during this period compared to historic lows in Q1 of 2020.
Brian J. Garner: Q1 portfolio performance for progressive leasing came in better than expected, which contributed to earnings exceeding the high end of our outlook, while the percentage of customers choosing to exercise their 90 day purchase options have returned to pre pandemic levels.
Brian J. Garner: For a year over year comparison, our gross margin of 35% in Q1 of 2024 was 120 basis points lower compared to Q1 of 2023.
Brian J. Garner: This was primarily driven by normalized levels of 90 day purchases this period compared to historic lows in Q1 of 2023.
Brian J. Garner: The provision for leased merchandise write-offs was 7%, and we expect our full year 2024 write-offs to be within our annual targeted range of 6 to 8%. Progressive Leasing's SG&A expenses as a percentage of revenue increased slightly year over year to 12.3% in Q1 of 2024 from 11.9% in Q1 of 2023, driven by ongoing investments in sales, technology, and marketing.
Brian J. Garner: The provision for lease merchandise write offs were 7% and we expect our full year 2024 write offs to be within our annual targeted range of 6% to 8%.
Brian J. Garner: Progressive Leasing's SG&A expenses as a percentage of revenue increased slightly year over year to 12, 3% in Q1 of 2024 from 11, 9% in Q1 of 2023.
Brian J. Garner: Driven by ongoing investments in sales technology and marketing.
Brian J. Garner: The period results benefited from the restructuring actions taken in January as we managed costs in line with revenue expectations. Adjusted EBITDA for progressive leasing declined from $90.4 million in Q1 of 2023 to $74.1 million in Q1 of 2024. Adjusted EBITDA margins of 11.9% were at the midpoint of our 11 to 13% annual margin target for the progressive lease. Pivoting to Consolidated Results.
Brian J. Garner: The period's results benefited from the restructuring actions taken in January as we manage costs in line with revenue expectations.
Brian J. Garner: Adjusted EBITDA for Progressive leasing declined from $90 4 million in Q1 of 2023% to $74 1 million in Q1 of 2024.
Brian J. Garner: Adjusted EBITDA margins of 11, 9% was at the midpoint of our 11% to 13% annual margin target for the progressive leasing segment.
Brian J. Garner: Pivoting to consolidated results.
Brian J. Garner: Our Q1 2024 non-GAAP EPS came in at $0.91, exceeding the top end of our outlook, primarily due to the earnings beat and part due to a lower share count from our share repurchase program. Q1 2024 consolidated revenues declined 2% to $641.9 million compared to $655.1 million in the same quarter last year, driven by the smaller portfolio at the progressive leasing segment, offset partially by higher 90 day purchases year over year. Consolidated adjusted EBITDA was $72.6 million compared to $89.7 million in the year-ago period.
Brian J. Garner: Our Q1 2024, non-GAAP EPS came in at 91.
Brian J. Garner: Exceeding the top end of our outlook primarily.
Brian J. Garner: Primarily due to the earnings beat in part due to lower share count from our share repurchase program.
Brian J. Garner: Q1, 2024, consolidated revenues declined 2% to $641 9 million compared to $655 1 million in the same quarter last year, driven by a smaller portfolio at progressive leasing segment.
Brian J. Garner: Offset partially by higher 90 day purchases year over year.
Brian J. Garner: Consolidated adjusted EBITDA was $72 6 million compared to $89 7 million in the year ago period.
Brian J. Garner: Looking at our balance sheet, we ended the first quarter of 2024 with $252.8 million in cash and gross debt of $600 million, resulting in a net leverage ratio of 1.24 times our trailing 12 months adjusted EBITDA. We remain undrawn on our $350 million revolver at the end of the quarter.
Brian J. Garner: Looking at our balance sheet. We ended the first quarter of 2024 with $252 8 million in cash and gross debt of $600 million.
Brian J. Garner: Resulting in a net leverage ratio ratio of 124 times, our trailing 12 months' adjusted EBITDA.
Brian J. Garner: We remain undrawn on our $350 million revolver at the end of the quarter.
Brian J. Garner: In the first quarter, we paid a quarterly cash dividend of $0.12 per share, and we repurchased 781,000 shares of our common stock at a weighted average price of $31.31 per share. We have $475.6 million remaining under our recently authorized $500 million share repurchase program. To summarize, Q1 2024 financial results exceeded our outlook range, with GMV and portfolio yield coming in slightly better than internal expectations. We continue to invest in GMV growth initiatives while delivering our targeted portfolio performance. Finally, we remain disciplined on spend and are on track to deliver on our full-year SG&A expectations. With our healthy free cash flow generation, we were able to return capital to shareholders through dividends and share reports.
Brian J. Garner: In the first quarter, we paid a quarterly cash dividend of <unk> 12 per share and we repurchased 781000 shares of our common stock.
Brian J. Garner: At a weighted average price of $31 31 per share.
Brian J. Garner: We have $475 6 million remaining under our recently authorized $500 million share repurchase program.
Brian J. Garner: To summarize Q1, 2024 financial result exceeded our outlook range with <unk> and portfolio yield coming in slightly better than internal expectations.
Brian J. Garner: We continue to invest in <unk> growth initiatives, while delivering our target targeted portfolio performance.
Brian J. Garner: Finally, we remain disciplined on spend and are on track to deliver on our full year SG&A expectations.
Brian J. Garner: With our healthy free cash flow generation, we were able to return capital to shareholders through dividends and share repurchases.
Brian J. Garner: I would now like to touch on a few key aspects of our second quarter and revised full year outlook, which was provided in this morning's earnings report. As Steve mentioned, despite the macroeconomic challenges, we believe our GMV momentum will carry into the second quarter, and we will end Q2 with low single-digit growth year-over-year. The improving GMV positively impacts the gross fleet stash up balance, which is a key driver of future period revenue.
Speaker Change: I would now like to touch on a few key aspects of our second quarter and revised full year outlook, which was provided in this morning's earnings release.
Speaker Change: As Steve mentioned, despite the macroeconomic challenges, we believe our <unk> momentum will carry into the second quarter and we will end Q2 with low single digit growth year over year.
Speaker Change: The improving GMB.
Speaker Change: <unk> impacts the gross leased asset balance, which is a key driver of future period revenue.
Brian J. Garner: Portfolio performance is expected to remain strong as we actively manage yields while balancing GMV growth. Similar to Q1, second quarter gross margins will have a difficult comparison to Q2 of 2023 for the progressive leasing segment with 90-day purchases normalized to pre-pandemic levels. We expect leased merchandise write-offs to increase in the second quarter compared to Q1 of 2024, driven by normal seasonality.
Speaker Change: Portfolio performance is expected to remain strong as we actively manage yields while balancing <unk> growth.
Speaker Change: Similar to Q1 second quarter gross margins will have a difficult comparison to Q2 of 2023 for the progressive leasing segment with 90 day purchases normalized to pre pandemic levels.
Speaker Change: We expect lease merchandise write offs to increase in the second quarter compared to Q1 of 2024 driven.
Speaker Change: Driven by normal seasonality.
Brian J. Garner: However, as previously mentioned, we expect a full year 2024 to remain within the targeted annual range of six to eight. We remain disciplined on spending and are on track for Q2, as well as the full year 2024, to deliver SG&A as a percentage of progressive leasing revenue at a level that should be flat to last. Our revised Consolidated Outlook for 2024 raises expectations of both revenue and earnings. It assumes adjusted EBITDA margins for the back half of the year that are slightly lower than the first.
However, as previously mentioned, we expect our full year 2024 to remain within the target of annual range of 6% to 8%.
Speaker Change: We remain disciplined spending and are on track for Q2 as well as the full year 2024 to deliver SG&A as a percentage of progressive leasing revenue at a level that should be flat to last year.
Our revised consolidated outlook for 2024 races expectations on both revenue and earnings.
Speaker Change: It assumes adjusted EBITDA margins for the back half of the year that are slightly lower than the first half.
Brian J. Garner: Our revised consolidated outlook for 2024 calls for revenues in the range of $2.285 to $2.360 billion, adjusted EBITDA to be in the range of $240 to $255 million, and non-GAAP EPS in the range of $2.85 to $3.10. This outlook assumes a difficult operating environment with current trends of soft demand for leasable consumer goods. No material changes in the company's decisioning posture. Also, no meaningful increase in the unemployment rates for our consumer base.
Speaker Change: Our revised consolidated outlook for 2024 calls for revenues in the range of $2 <unk> five to $2 36 billion adjusted EBITDA to be in the range of 240 to 255 million and non-GAAP EPS in the range of $2 85 to.
Speaker Change: The $3 10.
Speaker Change: This outlook assumes a difficult operating environment with current trends of soft demand for Lisa will consumer goods.
Speaker Change: No material changes in the Companys decision posture.
Speaker Change: No meaningful increase in the unemployment rates for our consumer base.
Brian J. Garner: An effective tax rate for non-GAAP EPS of approximately 30%, and no impact from additional share repurchase. Additionally, our revised outlook does not assume further economic downturn or material benefit from an improving demand environment within our leasable category.
Speaker Change: An effective tax rate for non-GAAP EPS of approximately 30%.
Speaker Change: And no impact from additional share repurchases.
Speaker Change: Our revised outlook does not assume further economic downturn or a material benefit from an improving demand environment within our leasable categories.
Brian J. Garner: To conclude, I want to emphasize that we strive to meet the needs of our customers as we empower them on their financial journey by providing them with transparent offerings that include a seamless end-to-end experience. We also enable our retail partners to drive incremental sales, and we expect to deliver significant value to our shareholders. We are optimistic about our strategic efforts to drive growth while we remain committed to discipline, decision-making, and spending. I will now turn the call back over to the operator for the Q&A portion of the call. Operator. Thank you, ladies and gentlemen.
Speaker Change: To conclude I want to emphasize that we strive to meet the needs of our customers as we empower them on their financial journey by providing them with transparent offerings that include a seamless end to end experience.
Speaker Change: We also enable our retail partners to drive incremental sales and we expect to deliver significant value to our shareholders.
Speaker Change: We are optimistic about our strategic efforts to drive growth, while we remain committed to disciplined decisioning and spending.
Speaker Change: I will now turn the call back over to the operator for the Q&A portion of the call.
Speaker Change: Operator.
Operator: Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 11 on your telephone. If your question hasn't been answered and you wish to move yourself from the queue, please press star 11 again. We'll pause for a moment while we compile our Q&A list. Our first question comes from Kyle Joseph on Jefferies. Your line is open.
Operator: Thank you ladies and gentlemen, if you have a question or a comment at this time. Please press star one on your telephone. If your question has been answered it with some of yourself from the queue. Please press star one again, we will pause for a moment, while we compile the Q&A roster.
Operator: Our first question comes from Kyle Joseph with Jefferies. Your line is open.
Kyle Joseph: Hey, good morning, guys. Nice start to the year. Steve, just wanted to backtrack a bit on GMB and give us a sense for the cadence in the first quarter. Obviously, it seemed to accelerate, really.
Kyle Joseph: Hey, good morning, guys.
Kyle Joseph: <unk>, yes.
Kyle Joseph: Steve just wanted to check a bit on <unk> and just get a sense for the cadence in the first quarter obviously.
Steven A. Michaels: Was that in February or March? And then on your outlook, I think you talked about low single-digit growth going forward. Is that kind of an annual thing, or is that just kind of the second quarter outlook?
Kyle Joseph: Accelerate really was that February and March and then on your outlook I think you talked about low single digit growth.
Kyle Joseph: Going forward is that kind of an annual or is that just kind of the second quarter outlook.
Steven A. Michaels: Yeah, Kyle. Good morning. Yeah, the GMB trends through through the quarter certainly had some ebbs and flows. We started off sluggish in January as most retailers got off to a slow start. We did see some rebounding in the second half of February, and we had some calendar dynamics in the first quarter. So you had a leap day in February, which never hurts to have an extra day. But then the Easter holiday shifted into March this year and landed on the 31st of March.
Speaker Change: Yes, hi, good morning.
Speaker Change: Yes, the <unk> trends through through the quarter.
Speaker Change: Certainly has some ebbs and flows we started off sluggish in January is.
Speaker Change: Most of retail got off to a slow start.
Speaker Change: We did see a little rebounding in the second half of February and we had some calendar dynamics in the first quarter. So you had a leap day in February which never hurts to have an extra day.
Speaker Change: But then we but then the Easter Easter holiday shifted into March this year and landed on the 31 March so the calendar kind of.
Steven A. Michaels: So the calendar kind of had some puts and takes, but it did rebound, because as we talked about it on Feb 21 or when we released earnings, we were predicting low singles negative for GMB, and we did manage to get back to flat. So we're pleased with that. As it relates to April, we've got a little bit of a positive Easter holiday shift comping going on. But, and that gives us not just that, but our performance month to date gives us confidence to talk about low singles growth in the second quarter.
Speaker Change: Had some puts and takes but it did it did rebound.
As we've talked about it on fab 21, or when we released earnings we were predicting low singles negative.
Speaker Change: For <unk> and we did manage to get back to flat. So we're pleased with that.
Speaker Change: <unk>.
Speaker Change: As it relates to April we've got a little bit of a positive Easter holiday shift comping.
Speaker Change: But and that gives us not just that but our performance month to date gives us confidence to talk about.
Speaker Change: Low singles growth in the second quarter as it relates to <unk> kind of outlook.
Steven A. Michaels: As it relates to GMV, you know, kind of outlook, we've been in the practice lately of giving our GMV view for the current quarter that we're in, so that would be Q2, but not for the full year. So that was not a full year's commentary, but we look forward to getting you some more information on that in July, but also doing everything we can to make sure that these trends continue and, hopefully, accelerate.
Speaker Change: We have been in a practice lately of giving <unk> view for the current quarter that we're in so.
Speaker Change: So that would be Q2, but not not for the full year. So that was not a full year commentary, but we look forward to giving you some more information on that in July but also.
Speaker Change: <unk>.
Speaker Change: Doing everything we can to make sure that these trends continue and hopefully accelerate.
Steven A. Michaels: And just one follow-up question for me, you know, in your discussions with retail partners, any kind of sense they've given you for the potential impacts of the CFPB late fee proposal and how that's going to impact the POS financing world, and any kind of inclination if there would be some accelerated or more of a trade down impact. I mean, I know we're still waiting for when, if, and how it goes into place, but just any, you know, what your retail partners are saying on that front.
Speaker Change: Got it thanks for the clarification and just one follow up for me.
Speaker Change: Discussions with retail partners.
Speaker Change: Any kind of sense they give any.
Speaker Change: Any sort of potential impact.
Speaker Change: The CFPB late fee proposal, and how thats going to impact the pls financing world and any kind of inclination if that would mean.
Speaker Change: Accelerated or more of a trade down impact.
Speaker Change: We're still in the table.
Speaker Change: When and how the in place.
Speaker Change: What are your retail partners are saying on that front.
Speaker Change: Yeah, a lot of a lot of unknowns there as you mentioned, but we have a view from really both sides of the table in that regard we've got.
Steven A. Michaels: Yeah, a lot of lots of unknowns there, as you mentioned, but we have a view from really both sides of the table. In that regard, we've got our VIVE business, which will be impacted by that. Obviously, it's a small part of our business, but it will be impacted by that. So VIVE is having conversations with its retail partners.
Speaker Change: Our vive business, which will be impacted by that obviously, it's a small part of our business, but it will be impacted by that survive as having conversations with its retail partners.
Speaker Change: And.
Speaker Change: On the leasing side, our retail partners are certainly having conversations with their <unk>.
Speaker Change: Primary and secondary credit providers.
Steven A. Michaels: And There will be changes, to the extent that it goes into effect, and the timing of that is uncertain, but there will be changes to the economic model of the providers. It's my belief that that will include an unknown amount but some reduction in credit supply above us in the stack. So that, coupled with just general tightening and the trade-down effect that we've been talking about, we believe is positive for the leasing business. However, the timing of that is very difficult to predict.
Speaker Change: Yes.
Speaker Change: There is there will be changes to the extent that it goes into effect.
Speaker Change: And the timing of that is uncertain, but there will be changes to the.
Speaker Change: The unit the economic model of the providers.
Speaker Change: It's my belief that that will include.
Speaker Change: Unknown amount, but some reduction in credit supply.
Speaker Change: All of us in the stack, so that coupled with just general.
Speaker Change: Tightening in the trade down effect that we've been talking about we believe is a.
Speaker Change: As a positive for the leasing business.
Speaker Change: The timing of that is very difficult to predict though.
Kyle Joseph: Got it. Helpful. Thanks very much for taking my questions. Thanks, Kyle.
Speaker Change: Got it helpful. Thanks, very much for taking my questions.
Operator: We'll take a moment for our next question. Our next question comes from Brad Thomas with KeyBank Capital Markets. Your line is open.
Speaker Change: Thanks, Kyle one moment for our next question.
Speaker Change: Our next question comes from Brad Thomas with Keybanc capital markets. Your line is open.
Bradley Bingham Thomas: Hi, good morning, Steve, Brian, and John. Maybe we wanted to ask a bigger picture question and then something more specific, maybe starting initially with just the competitive landscape. Steve, you know, first of all, putting it into context. I mean, I think your results look very strong when we look at the growth rates that we're seeing in the end markets that you play in. So that's really encouraging. But by the same token, we continue to get a lot of questions around the cross-currents and competitive landscape.
Bradley Bingham Thomas: Hi, Good morning, Hey, Brian and John.
Bradley Bingham Thomas: Maybe I wanted to ask a bigger picture question and Thats something more specific.
Bradley Bingham Thomas: Maybe starting initially with just the competitive landscape Steve.
Bradley Bingham Thomas: First of all putting into context, I mean, I think your results look very strong when we look at the growth rates that we're seeing in the end markets that you plan, so thats really encouraging.
Bradley Bingham Thomas: But by the same token we continue to get a lot of questions around across time.
Bradley Bingham Thomas: And I'm wondering if you could just talk a little bit about what pressure share gains you feel like you're seeing as you look at other e-filling providers, what's happening with buy now, pay later, and what, if anything, is happening as you look at what's happening in the subprime and other financial alternative space.
Bradley Bingham Thomas: Competitive landscape I'm wondering if you could just talk a little bit about what pressure share gains just feel like we are seeing as you look at other providers.
Bradley Bingham Thomas: Providers, what's happening in buy now pay later.
Bradley Bingham Thomas: And what if anything is happening.
Bradley Bingham Thomas: You look at what's happening in the subprime other cash alternatives space.
Steven A. Michaels: Yeah, Brad, thanks. From a competitive environment, and we've said this before, but it's really a bifurcated market. There's the In Leastone specifically, there are the enterprise accounts, and then there's the SMB, or the regional space. And the regional space has always been very, very competitive and continues to be. And we are; we have a big business there. Some of our competitors have certainly outgrown us recently in that space. But that is a focus of ours; we can focus on both things, and certainly are doing that, and we'll, and we'll continue to do that.
Speaker Change: Yes, Brad thanks.
Speaker Change: From a competitive <unk>.
Speaker Change: <unk> and we've said this before but it's really a bifurcated market.
Speaker Change: At least one specifically there is the enterprise accounts and then there's the SMB or the regional space.
Speaker Change: And the regional space has always been very very.
Speaker Change: Very competitive and continues to be.
Speaker Change: And we are we have a big business there.
Speaker Change: Some of our competitors have certainly outgrown us recently in that space, but.
Speaker Change: That is a focus of ours, we can we can focus on both things.
Speaker Change: And certainly are doing that and we'll continue to do that as it relates to other forms of <unk>.
Steven A. Michaels: As it relates to other forms of supply, if you will, you know, I think that those things will be impacted by the things that we just talked about, whether it be just delinquency trends, portfolio performance, provisioning, those types of things. We're seeing a little bit of tightening there. BNPL continues to be, There's plenty of demand there, obviously, very different categories from what we do on the leasing side, but our four technologies business could basically grow at whatever rate it chooses to grow at because the demand is there.
Speaker Change: Supply if you will.
Speaker Change: I think that those things will be impacted by.
Speaker Change: By the things that we just talked about whether it would be just delinquency trends.
Portfolio performance provisioning those types of things, we're seeing seeing a little bit of tightening there.
Speaker Change: The NPL continues to be.
There's plenty of demand there, obviously very different categories from what we do on the leasing side, but our four technologies business can put.
Speaker Change: Basically grow at whatever rate it chose to grow at because of the demand is there we are throttling that growth for profitability reasons.
Steven A. Michaels: We are throttling that growth for profitability reasons, but we're pleased where things are going there. And the other subprime supply. You know, I think the trend is neutral to tightening. So that's not a neutral or positive for us from a setup standpoint. And we look forward to, you know, making share gains in the regions, not only on the enterprise side.
Speaker Change: And but we're pleased with where things are going there.
Speaker Change: And the other the other subprime.
Speaker Change: Supply.
Speaker Change: I think the trend is neutral to tightening.
Speaker Change: So that's it.
Speaker Change: It's neutral to positive for us from a setup standpoint, and we look forward to.
Speaker Change: Making share gains in the regions not only in the in the enterprise side.
Brian J. Garner: That's very helpful, Steve. Thank you. And as a follow-up, more specifically on the 90-day buyouts, I know that that's been a factor that's affected comparability year over year and the gross margin, in particular, but could you just give us an update on where that's tracking from a historical perspective and again, how you think that's going to play out in the next few quarters?
Speaker Change: That's very helpful. Steve Thank you.
Speaker Change: And as a follow up more specifically on the 90 day buyouts.
Speaker Change: I know that Thats been.
Speaker Change: The factor Thats affecting comparability year over year in the gross margin in particular, but could you just given give us an update on where that's tracking from a historic perspective, and again I do think that's going to play out in the next few quarters.
Brian J. Garner: Yeah, Brad, hey, it's Brian. Yeah, I think you're right. When we look at the comparison from last year, we articulated in Q1 of last year that we were at a record low 90 days and that the expectation was we'd see that normalize over time. As we look at Q1 results, what's incorporated in that gross margin is really a normalized level, pretty right in line with Q1 of 2019. Now, it's been a few years now since we had a normal period, but that's effectively in line.
Speaker Change: Yes, Brad Hey, it's Brian.
Brian: You're right when we look at the comp.
Brian: The comparison from last year, we articulated in Q1 of last year that we will record low 90 days.
And the expectation was we'd see that normalize over time as we as we look at Q1 results. What's incorporated in that gross margin is really a normalized level pretty pretty right in line with Q1 of 2019 now it's going back a few years now since <unk>.
Brian: Yes, we had a normal period, but that's that's effectively in line. So on a go forward basis.
Brian J. Garner: So on a go forward basis, what's incorporated in our outlook is a continuation of that normal trend, if you will. And that'll put difficult margin comparisons here for at least Q2 as we look at year over year, but more in line with what we would have seen back in 2019.
Brian: It's incorporated in our outlook is a continuation of that.
Brian: Normal trend if you will.
Brian: And that will put that will put.
Brian: Margin.
Brian: Difficult margin comparison here for at least Q2.
Brian: As we look out year over year, but more in line with what you would've seen back in 2019.
Operator: That's very helpful. Thank you so much. One moment for our next...
Speaker Change: That's very helpful. Thank you so much.
Operator: One moment for our next question. Our next question comes from Hank Nguyen with TD Cowen. Your line is open.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from hanging you win with TD Cowen Your line is open.
Hoang Manh Nguyen: Hey guys, and congrats on the call. Just a quick one from me. So in terms of the GMV, just want to dig a little bit deeper into that. I mean, the rising outlook. Is it more a function of increasing penetration or using sort of like a slightly improved outlook from your partner? And maybe if you could dig into the cadence from March to April, I mean, did you guys see an acceleration in GMV?
Speaker Change: Hey, guys and congrats on the call.
Speaker Change: Just a quick one from me so in terms of the GMB.
Robert Kenneth Griffin: Just wanted to dig a little bit deeper into that I mean, the raising outlook I mean is it more a function of increasing penetration.
We're seeing slightly improved outlook from your partner and maybe if you could dig into the cadence from three from March.
Robert Kenneth Griffin: To April I mean did you guys see an acceleration in GMT.
Steven A. Michaels: Yeah, thank you. Yeah, as it relates to our, uh... Our enterprise partners. You know, we're not expecting a material rebound in the demand environment within 2024, but we are having success in, as I mentioned in the prepared remarks, in partnering and achieving deeper integrations with our partners, which many of whom have been on the platform for quite a while, so these demand pressures, are causing reprioritization of projects, whether that be marketing or waterfalls or a tech integration for transactional e-comm cart, which we haven't been able to get done to date.
Speaker Change: Yes. Thank you.
Speaker Change: Yes, as it relates to our.
Speaker Change: Our enterprise partners.
Speaker Change: We're not expecting a.
Speaker Change: A material rebound in the demand environment within 2024.
Speaker Change: But we are having success in as I mentioned in the prepared remarks in partnering and achieving deeper integrations with with our partners, which many of whom have been on the platform for quite a while so.
Speaker Change: These demand pressures.
Speaker Change: Are causing.
Speaker Change: Re prioritization of projects.
Speaker Change: Whether that be marketing or <unk>.
Speaker Change: Our waterfalls or a tech integration for transactional E com cart, which we haven't been able to get done to date and so those are those are positive ways that we're gaining balance of share within it within our partners.
Steven A. Michaels: And so those are positive ways that we're gaining a balance of share within our partners. We also believe that we'll continue to add new retailers to the platform, small e-com retailers, omni-channel retailers, as well as, you know, larger brick-and-mortar with the e-com as well. We were optimistic about our ability to grow, to grow GMV, and it'll be a, It'll be, you know, a joint impact from existing retailers as well as some new ones.
Speaker Change: We also believe that we will continue to add new retailers to the platform.
Speaker Change: Small E comm retailers.
Speaker Change: Omi channel retailers as well as.
Speaker Change: Larger larger brick and.
Speaker Change: <unk>.
Speaker Change: With the E com as well so.
Speaker Change: We are optimistic about our ability to that.
Speaker Change: To grow to grow <unk> and it will be.
Speaker Change: It will be.
A joint impact from existing retailers as well as.
Speaker Change: Some new ones.
Steven A. Michaels: As it relates to April, as I mentioned before, we started April well. Part of that is from the shift of the Easter holiday, but we're pleased with the trajectory and it gave us the confidence to predict and forecast GMB growth, albeit in a lot of singles, but GMB growth in Q2, and we're pleased with that.
Speaker Change: As it relates to April as I mentioned before we have we started April well part of that is from the shift of the Easter holiday, but we're but we're pleased with the with the trajectory.
Speaker Change: Gave us a confidence to predict and forecast.
Speaker Change: GMB growth, albeit in the low singles, but GNP growth in Q2, and we're pleased with that.
Steven A. Michaels: Gotcha. And just a quick follow-up from me. One of the reasons that your competitors have cited for the, I guess, faster growth in the SMB, probably the largest sales force, I guess, could you give us some color about your plan to win back, I guess, in that space? Anything that you guys are planning? I'm just curious. Thank you.
Speaker Change: Got you and just a quick follow up for me I think one of the reasons.
Speaker Change: Your competitors have cited for the I guess faster growth in the SMB.
Speaker Change: Probably the largest sales force I guess I mean.
Speaker Change: Could you give us some color about your plan to win back I guess in that space anything that you guys are planning and just curious thank you.
Steven A. Michaels: Yeah, there are a lot of factors on how you, you know, how you create urgency and partnership in the regions. And some of it is touch points, whether that be people in stores or in the field or people on the phones. And we have that as well. As we've talked about many times, in most of the regional space, the SMB space, there are multiple providers. But there could be a hierarchy. One person, one provider, could get more applications than someone further down the stack.
Speaker Change: Yes, there are a lot of factors on how ya.
Speaker Change: How are you.
Speaker Change: Create.
Speaker Change: Urgency and partnership in the regions and some of it is touch points, whether that'd be.
Speaker Change: People in stores or in the field or people on the phones.
We have that as well.
Speaker Change: As we've talked about many times most of the regional space the SMB space Theres multiple providers.
Speaker Change: And.
Speaker Change: But there could be a hierarchy one person one provider it could get.
Speaker Change: The app more applications and someone further down the stack so it's.
Steven A. Michaels: So it's a multi-pronged strategy of getting better prioritization within doors that we're already doing business in and making those doors more productive through the number of leases per month, as well as adding new retailers to the platform. And, you know, we have a long history of supporting regional players very well and have a lot of relationships out there. So I think you will, and you should expect to see us make some real progress there in the near and intermediate terms.
Speaker Change: It's a multi pronged strategy of <unk>.
Speaker Change: Getting better prioritization within doors that we're already doing business in and making those doors more productive through number of leases per month, as well as adding new retailers to the platform.
Speaker Change: And we have a long history of supporting regional players.
Speaker Change: Very well.
Speaker Change: And have a lot of relationships out there. So I think you will you should expect to see us make some make some real progress there in the near and intermediate terms.
Operator: Gotcha, and thank you. One moment for our next question.
Speaker Change: Gotcha.
Speaker Change: <unk>.
One moment for our next question.
Speaker Change: Okay.
Operator: Our next question comes from Bobby Griffin with Raymond James. Your line is open.
Speaker Change: Our next question comes from Bobby Griffin with Raymond James Your line is open.
Bobby Griffin: Good morning, everybody. Thanks for taking my question. I guess, Steve, I first wanted to circle back on the GNV growth. Really nice to see it flip here during the quarter. You gave us some great detail on the progression, but can you maybe unpack a little bit of what drove the upside? Was it ticket, you know, volume as in more people requesting to use the progressive product, or is it just a mix, like you called out, mixing up as a balance of share inside your retailers, just trying to get a little bit better view on kind of the underlying revenue builders or building blocks of that metric?
Bobby Griffin: Good morning, Brian Thanks for taking my questions.
Bobby Griffin: I guess, Steve I first want to circle back on the GMB growth really nice to see it slip here during the quarter you gave us some great detail on the progression, but can you maybe unpack a little bit of what drove the upside was it ticket volume as in more people requesting to use the progressive product or is it just the mix like you caught out mixing up as a balance of share in <unk>.
Youre retailers, just trying to get a little bit better view on kind of the underlying build revenue builders are building blocks of that metric.
Steven A. Michaels: Yeah, Bobby, I'll give you what I can. It's not a ticket. I'll start with that. Ticket is kind of flat. I mean, it's not a story.
Bobby Griffin: Yes.
Steven A. Michaels: I'll give you what I can.
Steven A. Michaels: It's not take it I'll start with that ticket is kind of flat to I mean, it's not a story, let's put it that way it might be down a few dollars, but it's not the story.
Steven A. Michaels: Let's put it that way. It might be down a few dollars, but that's not the point. You know, we've talked about demand or traffic weakness, but I do believe that the traffic that is occurring has more of a need for a flexible payment option than, you know, over the last several years. And many of those will be served by the primaries above us, which is appropriate for them if that's what they qualify for. But for all the reasons that we talked about, fewer of those people are even being approved in the stack. So that's a help.
Steven A. Michaels: Okay.
Steven A. Michaels: We've talked about demand.
Steven A. Michaels: Our traffic weakness, but I do believe that the traffic that is occurring.
Steven A. Michaels: Has more of a need for a flexible payment option.
Steven A. Michaels: Over the last several years and many of those will be served by the primaries above us which is appropriate for them if thats.
Steven A. Michaels: What they qualify for but.
Steven A. Michaels: For all the reasons that we talked about fewer of those people are even being approved in the in the stack. So that's a help.
Steven A. Michaels: It's a little difficult to quantify, you know, as we broadly call that trade down, but I would say a bigger part of it is what I referred to as our partnering with our retailers and, you know, getting waterfalls done so that we can make sure that the that the apps are having multiple opportunities to be approved, and reinforcing training with the retail sales associates. So they're very educated and knowledgeable about the product and put the customer in the most appropriate product.
Steven A. Michaels: It's a little difficult to quantify.
Steven A. Michaels: As we broadly call that trade down but.
Steven A. Michaels: I would say a bigger part of it is what I, what I referred to on our partnering with our retailers.
Steven A. Michaels: Getting waterfalls done so that we can make sure that the.
Steven A. Michaels: The apps or are having multiple opportunities to be approved.
Steven A. Michaels: Reinforcing training with the retail sales associates. So they are very educated and knowledgeable about the product and putting the customer in the in the most appropriate product.
Steven A. Michaels: You know, the obvious one is transactional e-comm and getting a cart, where we might have had what we call LOPIS, lease online pickup and store. But that was only half of the measure because the customer would actually have to go into the store to sign the lease agreement, getting that fully transactional and being delivered to their home. Those are the types of things that are helping us not only gain a balance of share, support our retailers, but also make our partnership stickier and more valuable.
Steven A. Michaels: <unk>.
Steven A. Michaels: Obviously, one is transactional E com and getting a card where we might have had what we call Lopez lease online pickup in store.
Steven A. Michaels: But that is the.
Steven A. Michaels: Half of our measure because the customer would actually have to go in the store to sign the lease agreement.
Steven A. Michaels: Getting that into fully transactional.
Steven A. Michaels: And being delivered into their home those are the types of things that are that are helping us not only gain balance of share.
Steven A. Michaels: Support our retailers.
Steven A. Michaels: But also make our partnership.
Stickier and more valuable so.
Steven A. Michaels: So we're pleased with where we are, and this didn't start this quarter; this started, you know, in 22 and 23, and it's paying dividends now. And we look forward to the results that it will produce in the future.
Steven A. Michaels: We're pleased with.
Steven A. Michaels: And this didn't start this quarter that started.
Steven A. Michaels: In 'twenty, two and 'twenty, three and it's paying dividends now and we look forward to the results that it will print in the future.
Steven A. Michaels: Thank you. That's helpful. And then, on the vertical side, you did mention you're still seeing some comp down in the high single digits. Can you kind of maybe break that out or provide any more color?
Speaker Change: Thank you that's helpful. And then I guess on the vertical side you did mention you're still seeing some comp down high single digits is there is there any can you kind of maybe break that out or provide any more color is it one or two verticals in particular that are still dragging and if those flip we see actually a lot stronger GMB growth or is it still across a handful of variables just trying.
Steven A. Michaels: Is it one or two verticals in particular that are still dragging? And if those flip, we'd see a lot stronger GMV growth, or is it still across a handful of verticals? Just trying to get a sense from you guys, give us good detail on the 10K about the different product categories, but is there one in particular that is outsize, weighing down GMV?
Speaker Change: To get a sense on you guys gave us good detail on the 10-K about the different product categories, but is there one in particular that is outsized weighing down D&B.
Steven A. Michaels: Well, broadly, I would say that furniture mattresses are still a drag. And as we've talked about the demand pull forward during the pandemic, those replacement cycles are longer, right? And so and, and with a little bit of stagnation in the housing market, there might not be as many, you know, people moving out or household formation. So the furniture mattress is still a little bit of a drag.
Speaker Change: Well broadly I would say that furniture and mattresses are still still a drag.
Speaker Change: And as we've talked about the demand pull forward during the.
Speaker Change: Pandemic.
Speaker Change: Those replacement cycles are longer right and so.
Speaker Change: And with a little bit of a stagnation in the housing market there might be not as many.
Speaker Change: People moving out our house household formation, so the furniture and mattresses still a little bit of a little bit of a drag we've seen some oh.
Steven A. Michaels: We've seen some, some rebound, I'd call it, in consumer electronics, which makes a little bit of sense because of the shorter replacement cycle. Smartphones have pretty much stayed strong throughout. And jewelry has its challenges as well, but we're looking forward to a rebound there. So there are some puts and takes, but I would say furniture and mattresses are the larger drags.
Speaker Change: Some.
Speaker Change: Rebound I'd call it in consumer electronics, which makes a little bit of sense because of the shorter replacement cycle.
<unk> phones have pretty.
Speaker Change: Pretty much stayed strong throughout.
Speaker Change: And.
Speaker Change: Jewelry has it has its challenges as well, but we're we're looking forward to a rebound there. So there's some puts and takes but I would say furniture and mattress or the.
Speaker Change: Are the larger drags.
Bobby Griffin: Very helpful. Congratulations on navigating a challenging course. Thanks, Bobby.
Speaker Change: Very helpful. Congrats on navigating a challenging quarter.
Speaker Change: Thanks, Bobby.
Operator: One moment for our next question. Our next question comes from Anthony Chukumba with Loop Capital Markets. Your line is open.
One moment for our next question.
Speaker Change: Our next question comes from Anthony <unk> with loop capital markets. Your line is open.
Anthony Chinonye Chukumba: Good morning, and thanks for taking my question. So, and this is somewhat related to some of the earlier questions, but you mentioned that you gained GMV balance and sales through key retail partners and specifically called out technical integrations and marketing. I was just wondering if you could just provide a little bit more color, particularly on the marketing side, just in terms of, you know, what you're able to do there that has been so successful for you.
Anthony: Good morning, Thanks for taking my question.
Anthony: So some are somewhat related to some of the earlier questions but.
Anthony: You mentioned that you gained <unk> balance of sales with key retail partners need specifically called out technical integrations and marketing I was wondering if you can just provide a little bit more color.
Anthony: Particularly on the marketing side, just in terms of what Youre able to do there that that was so successful for you.
Steven A. Michaels: Yeah, I mean, on the marketing front, we've, we've, we've been partnering well with what we call our partner marketing department within our marketing function. And they're doing a really good job of being almost embedded in our retailers' marketing departments and having joint marketing campaigns, drip campaigns, nurture campaigns, promotional campaigns, even sometimes, well, many times, joint campaigns with another retailer of ours that is not a competing logo. And our retailers are seeing the value of being part of the progressive network, the preferred partner network. And, so they're leaning into that. And we're leaning into it, and we're happy to do that because it benefits both of us.
Speaker Change: Yeah on the marketing we've been partnering well, what we call our partner marketing department within our marketing function.
And they are doing a really good job of.
Speaker Change: Being almost embedded in our retailers marketing departments.
Speaker Change: Having joint marketing campaigns drip campaigns nurture campaigns promotional campaigns, even sometimes well many times.
Speaker Change: Joint campaigns with another retailer of ours that is not a competitive logo and.
Our retailers.
Speaker Change: Are seeing the value of being part of the Progressive network the preferred partner network.
Speaker Change: And so they are leaning into that.
Speaker Change: And we're leaning into it and we are happy to do that because it benefits both of US were also.
Steven A. Michaels: We're also leaning into and getting more sophisticated in direct consumer marketing, which helps to grow our partner, GMV, because we can drive not only repeat customers but new customers into our partners' environments, either in-store or online. A decent amount of work going on in the marketing side on direct to consumer. When the 10 Q hits, you'll see some increase, not massive, not earth shattering numbers, but an increase in marketing expense.
Leaning into and getting more sophisticated on the direct to consumer marketing, which helps to.
Speaker Change: To grow our or our partner <unk>, because we can drive.
Speaker Change: Not only repeat customers, but new customers into our partners' environments, either in store or online and so there is there is.
Speaker Change: <unk>.
Speaker Change: A decent amount of work going on in the marketing side on direct to consumer.
Speaker Change: When the 10-Q hits Youll see some some increase not massive not not.
Earth shattering numbers, but increase in marketing expense, we expect that to continue.
Steven A. Michaels: We expect that to continue as we continue to see really healthy and positive ROAS, or return on ad spend. We think marketing and on the direct consumer side, as a compliment to our retail partner channel, customer acquisition efforts can be a big driver for us in the future. And on the technical integrations, I've pretty much covered those, but it's it's credit stack waterfalls and e-com cards and things like that.
Speaker Change: As we continue to see really healthy and positive ROE as our return on AD spend so.
Speaker Change: We think marketing and on the direct to consumer side.
Speaker Change: As a complement to our retail partner channel.
Speaker Change: Customer acquisition efforts can.
Speaker Change: It can be a big driver for us in the future.
Speaker Change: The technical integration of <unk>.
Speaker Change: The much cover those but its credit snack waterfalls and E com.
Speaker Change: E comm cards and things like that.
Steven A. Michaels: Got it. That's helpful. And then, just as a quick follow-up, sort of like my obligatory question, any update on the retail partner pipeline, particularly at the enterprise level?
Speaker Change: Got it that's helpful. And then just as a quick follow up sort of like my obligatory question.
Speaker Change: Any update on the retail partner pipeline, particularly.
Speaker Change: At the enterprise level.
Steven A. Michaels: Yeah, nothing specific other than it's a big focus of ours across the spectrum, whether it be in the long tail of the regions, the super regionals, and on the enterprise side. And It's certainly part of our strategy and part of our focus, and we'll continue to continue to work on it and look forward to, you know, hopefully announcing something someday.
Speaker Change: Yeah, no nothing nothing specific other than it's a big focus of ours across the spectrum, whether it would be in the low.
Speaker Change: The long tail of the regions, the superregionals and on the enterprise side and.
It's certainly part of our part of our strategy and part of our focus.
Speaker Change: We will continue continue to work on it and look forward to.
Speaker Change: Hopefully announcing something someday.
Anthony Chinonye Chukumba: That's helpful. Thanks and congrats on the strong start to the year. Thanks, everybody.
Speaker Change: That's helpful. Thanks, and congrats on the strong start to the year.
Speaker Change: Thanks Anthony.
Operator: And I'm not showing any further questions at this time. I'd like to turn the call back over to Steve Michaels for any closing remarks.
Im not showing any further question at this time I'd like to turn the call back over to Steve Michaels for any closing remarks.
Steven A. Michaels: Thank you. I'd like to thank you again for joining us this morning and for your continued interest in PROG. Our teams did a great job and delivered a strong start to the year. We feel good about returning to growth and the positioning of our portfolio. We look forward to updating you again in July with our Q2 results, and we hope you have a great day.
Steven A. Michaels: Thank you I'd like to thank you again for joining US this morning and for your continued interest in Prague. Our teams did a great job and delivered a strong start to the year, we feel good about returning to <unk> growth and the positioning of our portfolio.
Steven A. Michaels: We look forward to updating you again in July with our Q2 results and we hope you have a great day.
Operator: Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day.
Speaker Change: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.
Speaker Change: Goodbye.
Speaker Change: [music].