Q3 2024 PROG Holdings Inc Earnings Call

October 23, 2024

Okay.

Speaker Change: Good day and thank you for standing by welcome to Park Holdings third quarter earnings Conference call. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need the bus star one one on your telephone you will down here in automatic message and fighting Yohanan suite.

Speaker Change: Please note that today's conference is being recorded.

Speaker Change: I will now hand, the conference I'll, let you speak of House Jon Barker. Please go ahead.

Jon Barker: Thank you and good morning, everyone welcome to the Prague Holdings third quarter 2024 earnings call.

Jon Barker: Joining me. This morning are Steve Michaels Public Holdings, President and Chief Executive Officer, and Bryan Garner, our Chief Financial Officer.

Jon Barker: 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 product holdings Dot com.

Jon Barker: 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 fourth quarter of 2024.

Jon Barker: The health of our portfolio and our expectations for write offs for our progressive leasing segment for the full year 2024.

Our expectations regarding <unk> for the fourth quarter and full year 2024.

Jon Barker: And our capital allocation priorities, including our ability to continue returning capital to shareholders.

Jon Barker: Listeners are cautioned not to place undue emphasis on forward looking statements. We make today all of which are subject to risks and uncertainties, which could cause actual results to differ materially from those contained in the forward looking statements.

We undertake no obligation to update any such statements.

Jon Barker: On today's call, we will be referring to certain non-GAAP financial measures, including adjusted EBITDA and non-GAAP EPS, which have been adjusted for certain items, which may affect the comparability of our performance with other companies.

Jon Barker: These non-GAAP measures are detailed in the reconciliation tables included with our earnings release.

Jon Barker: 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 operations.

Jon Barker: Performance.

Speaker Change: With that I'd like to turn the call over to Steve Michaels product Holdings, President and Chief Executive Officer, Steve.

Steve Michaels: Thanks, John Good morning, everyone and thank you for joining us as we discuss our third quarter results provide insights into Q4 and share updates to our full year 2024, our financial outlook.

Steve Michaels: As announced earlier today, we delivered another great quarter, surpassing expectations for <unk> growth and approximating the high end of our revenue earnings and non-GAAP diluted EPS outlook.

Steve Michaels: Our Q3 results highlight the effectiveness of our strategy and the strong execution by our team.

Steve Michaels: With a relentless focus on enhancing both customer and retailer experiences we successfully maintain top line momentum and gained balance of share.

Steve Michaels: Our direct to consumer efforts continued to deepen customer engagement fueling growth.

Steve Michaels: Additionally, external factors such as tighter approval rates from lenders higher up in the credit stack also contributed to the Q3 <unk> growth for the progressive leasing segment.

Steve Michaels: I'm incredibly proud of our team for delivering consecutive quarters of accelerating <unk> with progressive Leasing's Q3, GMB growth coming in at 11, 6%.

Steve Michaels: Our strategic focus on the grow enhance and expand pillars is driving meaningful improvements across key performance metrics.

This year over year growth has been fueled by higher application volume.

Steve Michaels: Improved customer conversion.

And an increase in active doors and better productivity per door across both national and regional accounts.

Steve Michaels: We're excited about what this return to growth means for our team.

Steve Michaels: Our retail partners and our shareholders.

Steve Michaels: In Q3, we achieved consolidated revenue of $606 1 million, representing 4% growth compared to Q3 2023.

Steve Michaels: Our consolidated adjusted EBITDA reached $63 5 million, resulting in a 10, 5% margin driven by GMB growth and supported by stable portfolio performance and disciplined spending.

Steve Michaels: Looking ahead, we expect this momentum to carry through the remainder of 2024.

Steve Michaels: Our <unk> outperformance throughout the year has led to a three 8% increase in our gross leased asset or GLA balance as of the end of Q3 2024 compared to the same period last year, which is the key indicator of future revenues.

For context, we started the year with a five 2% year over year decline in GLA, and we entered Q3 close to flat.

Steve Michaels: This positive trend in our GLA balance positions us well for a successful 2025.

Steve Michaels: In July we shared that we expected our Q2 write off rate of seven 7% to Mark the peak of quarterly write offs and in Q3 write offs remained at seven 7% consistent with pre pandemic Q3 2019 levels.

Steve Michaels: Our dynamic Decisioning posture supported.

Steve Michaels: Supported by a short four to six week feedback cycle allows us to swiftly adjust to customer and portfolio health trends.

Steve Michaels: Our proprietary machine learning Decisioning models rapidly incorporate real time information, enabling us to fine tune, our approval rates and amounts.

Steve Michaels: While Brian will provide further details I am confident we are on track to maintain 2024 write offs within our targeted annual range of 6% to 8%.

Steve Michaels: As part of our focus on the grow enhance and expand strategy. We've made significant progress on our 2024 priorities.

Steve Michaels: These efforts have driven our year to date GMB growth and will fuel our success moving forward.

Steve Michaels: Execution in these areas is essential to achieving our financial targets for 2025 and beyond.

Steve Michaels: Sustainable and profitable growth remains at the core of our three pillared strategy.

Steve Michaels: Under our grow pillar I'm pleased to share that we signed a long term exclusive partnership with American signature, Inc. A top 15 retailer and furniture to today's top 100 list.

Steve Michaels: Further strengthening our regional market positioning alongside our national accounts.

Steve Michaels: Our regional business delivered another impressive quarter of GMB growth in the low double digits.

We're driving growth across several dimensions to include investing in existing partnerships expanding through new partnerships, increasing brand awareness to acquire new customers engaging.

Customers through targeted marketing efforts and strengthening our direct to consumer business in E Commerce penetration.

Steve Michaels: Our investments in sales marketing and technology have delivered significant value to our retail partners and firmly position progressive leasing as a market leader.

Steve Michaels: Key evidence of the value of our retailers find and partnering with progressive leasing is there a willingness to enter and renew long term exclusive contracts with us that give us both the ability to focus on deepening our partnerships and integrations and prioritizing our initiative roadmaps.

Steve Michaels: At the end of Q3 over 75% of our progressive leasing GMB is under multiyear exclusive contracts with approximately half of all <unk> under contract into the 2030.

Steve Michaels: We take great pride in our track record of renewing and extending exclusive agreements with key retail partners further solidifying our leadership in the industry.

Steve Michaels: As part of our direct to consumer initiatives, the product marketplace platform, which allows customers to shop anytime anywhere through our mobile app continued to gain significant traction in Q3.

Steve Michaels: Year to date the platform has delivered over 300% growth and is on track to exceed our 2024 <unk> target to roughly double <unk> year over year.

Steve Michaels: I'm excited about this growth is the broad marketplace channel complements our retail partners by driving incremental traffic and sales for them as well as <unk> for progressive leasing.

Steve Michaels: Simultaneously direct to consumer marketing efforts drove Prague branded campaigns, taking advantage of seasonal opportunities like Amazon Prime day, as well as launching multichannel promotions coordinated with partner offers to drive additional traffic.

Steve Michaels: Overall, as we execute on our sales marketing and product initiatives are marketable database of highly engaged customers is growing.

Steve Michaels: E Commerce remains a focus as we strive to meet customers wherever and however, they choose to shop.

Steve Michaels: The two custom E Commerce integrations completed in Q2 drove material growth, bringing e-commerce JV to 16, 6% of total progressive leasing <unk> in Q3 2024 up from 14, 4% in Q2, 2024, and 14, 8% in Q3 2023.

Steve Michaels: Under the enhanced pillar product and tech investments have improved customer experience and conversion rates.

Steve Michaels: These advancements contributed to a three 4% year over year increase in the total number of customers with active leases for a progressive leasing segment as of the end of Q3.

Steve Michaels: We segment customer activity into three groups, new repeat and reactivated.

Steve Michaels: For clarification, we define reactivated customers.

Steve Michaels: Those that last funded the lease more than 24 months ago.

Steve Michaels: This segmentation allows us to tailor, our marketing strategies to each group's unique needs and behaviors.

Steve Michaels: For instance, new customers require more introductory information in incentives to try our product while repeat customers benefit from personalized marketing as we gather deeper insights into their purchasing patterns.

Steve Michaels: New and reactivated customers increased approximately 20% and 12% year over year, respectively. In Q3, while we maintained repeat customer contributions to <unk>.

Steve Michaels: Our ability to expand our customer base, while retaining loyal repeat customers, who deliver a higher lifetime value is a critical driver of our business.

Steve Michaels: By focusing on growth across all three customer segments of new repeat and reactivated we are working to capture a larger share of our underserved addressable market in a cost effective manner.

Steve Michaels: We are innovating with AI, driven solutions rolling out enterprise wide and consumer facing AI tools that enhance both operational efficiency and customer satisfaction.

Steve Michaels: We implemented an AI assistant to enable employee self service for all inquiries related to policies and benefits information.

Steve Michaels: Additionally, we launched our first consumer facing AI assistant pilot program designed to enhance customer satisfaction by providing immediate assistance, marking a key step in transforming our customer support experience.

Steve Michaels: I want to take a moment to thank our entire team for their tremendous efforts in not only driving short term results, but also embracing change to set the stage for our future through growth, maintaining a healthy portfolio and remaining disciplined with spending.

Steve Michaels: Our performance is a direct result of their hard work and dedication to our mission.

Steve Michaels: Creating a better today and unlocking the possibilities of tomorrow through financial empowerment.

Steve Michaels: Given the performance and momentum we've seen this year, we're pleased to update our full year 2024 outlook with both revenue and earnings now expected to exceed our prior expectations.

Steve Michaels: This outperformance is being driven by increased <unk> for our progressive leasing segment.

Steve Michaels: Selecting in our efforts to deepen existing retail partnerships onboard new partners enhanced technology attract new customers through targeted marketing and expand product marketplace.

Steve Michaels: For the fourth quarter, we expect GMB growth to be in the range of high single to low double digits driven by the positive momentum we've observed while we monitor a dynamic consumer environment.

Steve Michaels: So far in October we're off to a strong start though as with every year at this time, we still have in front of us. The all important holiday season, where we have historically generated approximately 50% of the quarter's DMV and the five week period spanning Black Friday to Christmas Eve.

Steve Michaels: We remain focused on executing our strategy to carry this momentum into the end of the year and position ourselves for success in 2025.

Steve Michaels: Finally on the topic of capital allocation, our 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 repurchases.

Speaker Change: I'll now turn the call over to our CFO Bryan Garner for more details on Q3 results and remainder of the year outlook.

Brian.

Bryan Garner: Thanks, Steve and good morning, everyone.

Bryan Garner: We are pleased to report that our third quarter 2024 results exceeded <unk> expectations and came in near the high end of the range for revenues earnings and non-GAAP diluted EPS that we provided in late July.

Bryan Garner: I'd like to begin by thanking our team for delivering another successful quarter.

Bryan Garner: I'll now take you through a more detailed breakdown of our results.

Starting with progressive leasing segment <unk> exceeded expectations with an 11, 6% year over year increase surpassing our anticipated high single digit growth rate.

Speaker Change: As Steve mentioned that we've successfully implemented multiple strategic initiatives that have boosted both applicant flow and conversion rates.

Speaker Change: Looking ahead, we have several additional initiatives in progress for Q4, which we believe will sustain this momentum.

Speaker Change: Our JV growth again outpaced most of our larger retail partners comparable store sales materially.

Speaker Change: Additionally, we are benefiting from the tightening of credit supply above us and we expect this environment to persist at least through the end of 2024.

Speaker Change: As a result, one of the highlights this quarter is the growth of our gross leased asset balance a primary driver of future revenue, which is now three 8% higher than the <unk>.

Speaker Change: Same period last year, driven by two consecutive quarters of accelerating <unk> growth.

Speaker Change: This year over year growth marks the first time since Q3 of 2022, and we ended the quarter with a larger portfolio size.

Speaker Change: We expect the GLA balance to improve for the remainder of the year contributing to revenue growth implied in our revised outlook.

Speaker Change: Q3.

Speaker Change: <unk> for a progressive leasing segment increased three 3% from $564 2 million in Q3 of 2023 to $582 6 million driven by the growth in our leased portfolio.

Speaker Change: And higher 90 day early purchases compared to the same period last year.

Speaker Change: This return to growth as exciting as it reflects the effective execution of our strategy the strength of our partnerships and the demand for our product.

Speaker Change: We believe this momentum positions us well for sustained success moving forward.

Speaker Change: The Q3 portfolio performance for progressive leasing remained within our targeted annual right offerings.

Speaker Change: The provision for lease merchandise write offs were seven 7% in Q3, which is consistent with our pre pandemic period of Q3 of 2019, however, slightly higher than our expectations due to higher delinquencies and an increase in the provision for lease merchandise write offs relating to the strong <unk> growth in the period.

Speaker Change: We are confident in our ability to continue to manage the lease portfolio of real time with our dynamic Decisioning models supported by a short duration portfolio, which turns over on average every six months to seven months.

Speaker Change: This allows us to swiftly adjust approval rates in amounts that customer and portfolio health trends, while still maintaining growth.

Speaker Change: We anticipate full year write offs to be within our targeted range of 6% to 8%.

Speaker Change: 90 day early purchases remained elevated compared to historic lows in 2023.

Speaker Change: Bolstered by higher than expected new customer growth rates.

Speaker Change: As expected our gross margin of 31, 2% in Q3 of 2024 was 110 basis points lower than prior year.

Speaker Change: Progressive weakens SG&A expense in Q3 was $76 5 million a decrease of approximately 700000 or 9% compared to $77 2 million in the same quarter last year.

Speaker Change: As a percentage of revenue SG&A expenses decreased by 60 basis points year over year from 13, 7% of revenues in Q3 of 2023 to 13, 1% of revenues in Q3 of 2024.

Speaker Change: As a reminder, this improvement was primarily due to the restructuring actions taken in Q1 of this year.

Speaker Change: Despite these cost cutting measures we've maintained our investment in sales marketing and technology to drive profitable <unk>.

Speaker Change: Adjusted EBITDA for Progressive leasing in Q3 was $66 5 million and 11, 4% of revenue is within our 11%, 13% annual margin target for the progressive leasing segment.

Speaker Change: This adjusted EBITDA margin of 11, 4% is 190 basis points lower compared to 13, 3% in Q3 of 2023, driven by headwinds to gross margin with 90 day purchase options and write offs approximating pre pandemic levels, partially offset by SG&A discipline.

Speaker Change: Turning to consolidated results.

Speaker Change: Q3 of 2024 revenues of $606 1 million compared to $582 9 million in the same quarter last year was driven by GDP growth.

Speaker Change: Along with an increase in customers exercising their 90 day purchase options at the progressive leasing segment.

Speaker Change: Consolidated adjusted EBITDA was $63 5 million and 10, 5% of revenue compared to $71 7 million and 12, 3% in the year ago period.

Speaker Change: Looking at our balance sheet. We ended the third quarter of 2024 with $221 7 million cash and gross debt of $600 million, resulting in a net leverage ratio of one four times trailing 12 months adjusted EBITDA.

Speaker Change: We remain undrawn on our $350 million revolver at the end of the quarter.

Speaker Change: We paid a quarterly cash dividend of <unk> 12 per share in September and during the quarter, we repurchased 810000 shares of our common stock at a weighted average price of $45 69 per share.

Speaker Change: We have $401 $8 million remaining under our recently reauthorized $500 million share repurchase program.

Speaker Change: As we look ahead, we remain optimistic about finishing the year strong.

Speaker Change: We believe our Q4 <unk> will maintain its positive trajectory delivering a high single digit to low double digit year over year growth for our progressive leasing segment.

Speaker Change: With economic pressures continued to affect consumers across the credit spectrum.

Speaker Change: We anticipate that the benefits we saw in Q3 from the tightening of the credit supply above us will persist through the rest of the year.

Speaker Change: Contributing to our overall performance.

Speaker Change: Our outperformance with <unk> improved the GLA balance, which was roughly flat going into Q3 and is up three 8% year over year going into Q4.

Speaker Change: This improvement in GLA, along with our anticipated Q4, <unk> growth benefits revenue as reflected in our increased 2020 for revenue outlook.

Speaker Change: Our leasing portfolio performance is expected to remain within our targeted yields to deliver our provision for lease merchandise write offs for the full year within our annual target range of 6% to 8%.

We believe liquidity pressures facing a portion of our consumers will persist for the remainder of the year and trends from these challenges have been incorporated into our Decisioning model and financial forecast.

Speaker Change: Q4 gross margin is expected to be a difficult comparison for Q4 2023 for the progressive leasing segment, primarily due to below average number of customers choosing to exercise their 90 day purchases last year.

Speaker Change: Regarding SG&A, we are maintaining our disciplined approach and remain on track to deliver SG&A as a percentage of revenue in line with our full year expectations for the progressive leasing segment.

Speaker Change: Our revised consolidated outlook for 2024 calls for revenues in the range of $2 four 4% to $2 46 billion.

Speaker Change: Adjusted EBITDA to be in the range of $270 million to $275 million.

Speaker Change: And non-GAAP EPS in the range of $3 32.

Speaker Change: The $3 40.

Speaker Change: This outlook assumes a continuation of the benefits from tightened credit above us.

Speaker Change: A difficult operating environment with soft demand for leasable consumer goods.

Speaker Change: No material changes in the company's Decisioning posture.

Speaker Change: No material changes in the unemployment rate for our consumer base.

Speaker Change: An effective tax rate for non-GAAP EPS from approximately 28%.

Speaker Change: And no impact from additional share repurchases.

Speaker Change: In summary, we are extremely pleased with our team's performance this year.

Speaker Change: We just set us up well for revenue and earnings growth as we head into 2025.

Speaker Change: Combined with our free cash flow generation, we are well positioned to deliver meaningful shareholder value.

Speaker Change: I will now turn the call over to the operator for questions operator.

Speaker Change: Thank you, ladies and gentlemen to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw your question simply press Star one again.

And I will be compiled Kennedy boss.

Speaker Change: Now first question coming from the line of Brad Thomas with Keybanc. Your line is now open.

Brad Thomas: Hi, good morning, and congratulations on the nice momentum in <unk> in particular.

Brad Thomas: I wanted to first follow up on that topic.

Brad Thomas: And Steve I was wondering if you could talk a little bit about some of the puts and takes in GMB, Obviously American signature exciting larger customer you have.

Brad Thomas: By the same token.

Brad Thomas: And the country kind of digesting.

Brad Thomas: Big lots bankruptcy, that's underway right now and some store closures that are happening over there can you just talk about all year.

Brad Thomas: What youre seeing from those customers and how you think about that impacting sales or can be over the next few quarters.

Speaker Change: Yeah. Thanks, Brad Yeah, we're pleased with the <unk> performance in the quarter and our outlook for the closing out the year.

Brad Thomas: Clearly the quarter.

Brad Thomas: Little bit above our expectations nicely above our expectations actually.

Brad Thomas: <unk> kind of played out a little bit the way, we thought it would but there was some marketing campaigns and promos that.

Brad Thomas: <unk> performed maybe a little better than we were anticipating.

And so we're pleased with that and as I mentioned in the prepared remarks October is starting out strong, but it is always difficult.

Brad Thomas: Predict Q4, <unk> because of that holiday season, and it's such an acute period, where in this year from a calendar standpoint, it's very tight between black Friday and.

Brad Thomas: And Christmas Eve.

Speaker Change: You mentioned American signature, we're very proud of that.

Speaker Change: That partnership.

Speaker Change: As we said in the press release.

Speaker Change: It's not really going to impact.

Speaker Change: Q2 thousand 24, all that much because of the because of the launch being late in the year and but we are excited about that for 2025.

Speaker Change: As it relates to the big lots.

Speaker Change: Partnering well with them and it's well known as you said the bankruptcy in there.

Speaker Change: The plan that they're executing.

Speaker Change: They've closed a number of waves of stores and thats starting to accelerate.

Speaker Change: <unk>.

Speaker Change: And will impact Q4, certainly we believe for us it's probably a.

Speaker Change: 100 to 150 basis point headwind for the quarter were not commenting on 2025, obviously, but.

Speaker Change: There's a lot there's a lot to be.

Speaker Change: Excited about as it relates to <unk>, we've got <unk>.

Speaker Change: Really good partnerships really good integrations.

Speaker Change: And marketing partnerships with our retailers.

Speaker Change: The top of the funnel dynamics as it relates to the credit supply above us is certainly helping as well.

Speaker Change: No.

Speaker Change: There's always puts and takes.

Speaker Change: Some customers stress out there as we were as we referred to but.

Speaker Change: Net net we're pleased with the.

Speaker Change: Yes.

Speaker Change: The various tailwind that we've helped to create as well as a little bit of help from the macro on the on the credit supply side.

Great that's helpful. Steve and if I can just ask a follow up on the on the write offs.

Speaker Change: Part of the equation.

No that the consumer in the U S is on the stretch side in extent that settings more customers to you.

Speaker Change: <unk> typically is your seasonally highest.

Speaker Change: Quarter for write offs do you think that will still be the case here in <unk> and to what degree do you think you maybe need to taken a little bit on the law and they range from a decisioning standpoint. Thanks.

Speaker Change: Hey, Brian it's Brian.

Speaker Change: And just with the <unk>.

Speaker Change: Seasonality aspect of it.

Speaker Change: We actually expect Q4 to step down from Q3 here and that's not different than what we would've seen in a typical year normally what you what youre looking at is as you look forward to tax season, and the high cash collections during that time your reserves reflect that strong payment performance.

Speaker Change: In Q1, so so from the 77 that we expect a step down.

Speaker Change: And on the write offs that you've got you've got you've got a couple of dynamics you've got some of this trade down.

Speaker Change: I do.

Speaker Change: We will refer to in our prepared remarks and at the bottom end of the funnel, we've got a little bit of stress as we indicated that we are actively managing and I'll, let I'll, let steve speak to that.

Decisioning aspect of it.

Steve Michaels: Yes, I mean from a decisioning standpoint, Brad as we always say, we are constantly monitoring and adjusting that posture based on what we're seeing in the data and we have a.

Steve Michaels: Very quick feed that feedback loop. So we can react quickly we did do some tightening throughout the third quarter kind of as the quarter progressed.

Steve Michaels: And I would like to use the scalpel terminology because it wasn't like wholesale.

The changes it was pockets and looking for opportunities to to just trim a little bit so.

Steve Michaels: As we ended the quarter and as we sit here today, we're probably 100 to 150 basis points lower on approval rate than we were this time last year.

Steve Michaels: And we'll continue to monitor that and see.

Steve Michaels: See what we think is necessary.

Steve Michaels: And.

Steve Michaels: We're squarely confidently in that in that in our portfolio performance range that we've been in for the last.

Steve Michaels: Eight years, or so of that 6% to 8% on an annual basis.

Speaker Change: Great very helpful and again exciting inflection building in the business.

Speaker Change: Yes, Thanks, Brad.

Speaker Change: Thank you and our next question coming from the line of John Hecht with Jefferies. Your line is open.

John Hecht: Good morning, guys. Thanks, very much for taking my questions and congratulations on a good quarter.

Speaker Change: First one.

John Hecht: Just trying to understand the dynamics at the early stage buyouts and the write offs.

Speaker Change: But is it as straightforward as that.

John Hecht: <unk>.

The increase in EPS during the quarters is coming from maybe some of the newer higher quality higher income cohort customers, whereas the write offs are more contained to the lower income bands or is there. Some other dynamic there that we should think about.

Brian Garner: Hey, John its Brian I think youre thinking about it right.

Brian Garner: Specifically with that would that trade down population, we look at that in isolation.

Brian Garner: What we're seeing.

Brian Garner: Some of the early indicators as they have a higher propensity to do a 90 day buyout.

Not surprising given given.

Brian Garner: They are on average stronger credit profile.

Brian Garner: And they tend to keep in check.

Brian Garner: There.

Brian Garner: The write offs and so youre going to have some youre going to have some margin.

Brian Garner: Gross margin consideration as you have higher propensity for 90 days from that trade down population.

Brian Garner: They also tend to skew new these are customers that.

Brian Garner: Okay.

Brian Garner: We largely have not seen before and thats.

Brian Garner: New customer versus existing customer will tend to be slightly lower from a margin standpoint.

Brian Garner: But as you think about the long term.

Brian Garner: Prospect of this customer we're looking at it was very favorable because here, we've got an opportunity to.

Brian Garner: We have the customer be a repeat lifetime value prospect is very strong and so you might see.

Brian Garner: Some initial I would say slight gross margin pressures relating to the trade down population. It's early.

Brian Garner: And there are not a majority of the story and so it's I would characterize it as relatively small but it is something that.

Brian Garner: May play out over the course of the next few quarters and we'll keep folks updated on that but it is relatively small.

Speaker Change: Okay. That's very helpful. And then just another question on the GMB growth can.

Speaker Change: Can you any I apologize if you mentioned this but can you bifurcate it by existing merchants versus new merchants.

Speaker Change: No John we didn't we didn't say that and we generally don't don't give that out, but we did say that.

Speaker Change: Overall was 11 six in our regions were low double digits. So we saw nice.

Speaker Change: Nice growth across the across the platform.

Speaker Change: Okay and then final question is there any update on the.

Speaker Change: <unk> marketplace.

Speaker Change: From a revenue growth and a pipeline potential.

Speaker Change: For merchant etch for merchant adds in that initiative.

Yes, we're excited and pleased with progressive marketplace with product marketplace, it's up over 300%.

Speaker Change: Year to date, and we had put out a guide earlier this year for it to kind of double so we're clearly ahead of that.

Speaker Change: Few of the drivers of the outperformance.

Speaker Change: We're really getting sophisticated on our targeted marketing efforts and our tech and product teams are improving the customer experience.

Speaker Change: In the checkout, because simplifying that checkout experience.

Speaker Change: Is super important to get conversion in that in that direct consumer motion.

Speaker Change: We were proud to have really good retailers that we're partnered with and they are participants in the marketplace and we've also got some affiliate partnerships.

Speaker Change: That are helping us give more choice to our customers.

Speaker Change: But that that product tech and marketing.

Kind of a combination or are working very nicely together.

Speaker Change: Continue to look forward to to growth on in the marketplace, and we'll probably give a little bit more color on on sizing it for 2025, but not not this quarter.

Speaker Change: Great well I appreciate the update thanks very much.

Speaker Change: Thanks, John.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: And our next question coming from the line of Anthony <unk> with loop capital markets. Your line is now open.

Speaker Change: Good morning, Thanks for taking my question.

Speaker Change: Congrats on a strong quarter a lot of positive signs in the quarter.

Speaker Change: So.

Speaker Change: Kind of related question a couple questions have come up before you are seeing the credit trade down which is great to see.

Speaker Change: Certainly waited a long time for that.

Speaker Change: And you said that that's leading to.

Speaker Change: Higher 90 day, buyouts, which makes sense, because that's more well heeled customer.

Speaker Change: But also as you're saying that customers more likely or less likely to be.

Speaker Change: Resulting in a lease merchandise write off so I guess I'm trying to figure out is if that trade down is happening and it's clearly happening and it is impacting your gross margin shouldn't we shouldnt, we be also seeing lower lease merchandise write offs.

Speaker Change: One is to sort of understand that dynamic.

Brian Garner: Hey, Anthony Brian.

Speaker Change: Two dynamics so the trade down is happening and they do generally tend to be a strong credit profile, but at the same time.

Speaker Change: As we indicated our prepared remarks, we have we have seen.

Speaker Change: A slight.

Speaker Change: The increase in delinquencies just from the portfolio overall and stopped the statement independent of the trade down population and that's not unlike that not unlike a factor the rest of the credit stack across the board has seen so our job is to stay on top of that and monitor it and decision. Accordingly, I would just I would just point out that at some point.

Speaker Change: 7% for Q3.

Speaker Change: Is is where we were at pre pandemic for the same period Q3. So it is not a it is not a level that we're uncomfortable with or that we see is.

Speaker Change: Expanding in.

Speaker Change: Into Q4, so should we expect a step down.

Speaker Change: Relatively normalized levels here, but we're pointing out kind of the dynamics within the write off population both both the benefit from a trade down perspective, and also also at the bottom of the funnel some some level of weakness, but as we've demonstrated in our course of the last few years through the ups and downs.

Speaker Change: Hopefully hopefully what's been observed is our strong ability to control.

Speaker Change: That number on our P&L.

Speaker Change: Yeah.

Speaker Change: And we fully intend to do so and if we have to if we have to.

Speaker Change: It makes small iterative changes in decision and we will do that but it's not at the level that were viewed as unusual.

Speaker Change: Got it fair enough.

Speaker Change: Helpful and then some.

Speaker Change: Tori question and you guys never give us super specific answer, but I'm going to ask it anyway any update in terms of the large retail partner pipeline.

Speaker Change: Yes, Anthony good morning, I would be disappointed if you didn't ask that question. So thank you.

Speaker Change: Yes.

Speaker Change: Not a specific update.

We were pleased with.

Speaker Change: Some of the traction that we've gotten year to date.

Speaker Change: Certainly.

Speaker Change: Sigh when was it was a nice.

Speaker Change: Nice momentum.

Speaker Change: Sure.

Speaker Change: We're continuing we think that our partnership.

Speaker Change: Our.

Speaker Change: The profile of <unk>.

Speaker Change: The recent Mag a conference with <unk>.

Speaker Change: Partners from Lowe's and best buy on the panel with our Chief commercial officer really with some really nice retail representatives in the audience listening to the.

Speaker Change: How at least one can can help financial inclusion and how partnering with progressive.

Speaker Change: Is a big part of that those those things land and they are they are helpful for setting up that next conversation. So we're encouraged by.

Speaker Change: The progress but nothing.

Specifics to update you on.

Speaker Change: Fair enough.

Speaker Change: For taking my questions keep up the good work.

Speaker Change: Thank you Anthony.

Speaker Change: Thank you and our next question coming from the line of Guan Lan with Gd Colin Your line is open.

Speaker Change: Hi, guys and congrats on the quarter, sorry for keep beating on.

Speaker Change: The credit side, but I mean, you talk about delinquency being a little bit pressure.

Speaker Change: And we know that wage growth has outpaced inflation for a while which theoretically should help lower income consumers that you serve I guess I mean, what would it take for I guess charge offs to trend back to maybe the middle of the range and I have a follow up.

Speaker Change: Well I'll start and Brian can add but I would just say that when we gave the range of 6% to 8%, we're not trying to stick the landing at 7% right in the middle of the range is in the range just like where we are now so well.

Speaker Change: We're very comfortable we feel like we've proven over time that we can manage this portfolio to.

Speaker Change: The range that we've provided in.

Speaker Change: And we're constantly adjusting things so I won't I don't want to give the impression that 7% is our is our north star. The range is fluid and has a lot of impacts whether it would be mix shift or.

Speaker Change: From a retailer standpoint from a mark from a vertical standpoint also.

Speaker Change: Consumer shift.

Speaker Change: So the.

Speaker Change: I would just guard against.

<unk>, 7%.

Speaker Change: So we're comfortable where we are as far as the consumer I mean, there's been a lot of evidence across.

Speaker Change: Consumer exposed portfolios of stress and delinquencies and so it's not we're certainly not.

Speaker Change: Alone in that battle.

Speaker Change: <expletive> user Ncos might be in line, but early stage <unk> are seem to be rising which could cause some some.

Speaker Change: Different results in kind of in the first quarter for some of the card providers.

And we're seeing some of that as well and so we're doing some trimming appropriate.

Speaker Change: Appropriate trimming, but we are.

Speaker Change: The message should be that we're.

Speaker Change: I'm confident in <unk> and <unk>.

Speaker Change: Trolling continuing to control of the portfolio.

Speaker Change: Got it and maybe a follow up maybe for Brian I think it's seasonally your EPS tends to be down in <unk> versus <unk> I guess, given the <unk> performance in your new guidance, it looks like you're implying a stronger than seasonal.

Speaker Change: <unk> this year and so I mean, maybe can you talk about the drivers of that.

Speaker Change: Yes, it's hard to it's hard to go back in.

Speaker Change: <unk>.

Speaker Change: Remember that last normal Q4 that we've had but I think generally.

We're thinking about.

Speaker Change: The earnings profile going into Q4 were.

Speaker Change: We're encouraged by.

Speaker Change: The the <unk> production.

Speaker Change: We have here. It is it is going to bleed into revenue as our as our.

Speaker Change: Portfolio sizes increase okay. So Q4 from a top line perspective is is looking strong weeks.

Speaker Change: We expect write offs as I indicated as a percentage of revenue to step down from the seven 7% level. So that should that should assist us there and then we will keep our will keep our spend in check there is going to be an increase in dollars of SG&A just from.

Speaker Change: Seasonal aspect of some of those variable costs tied to tighter <unk> production tick up.

Speaker Change: But overall as you're as you're indicating we're looking forward to a strong Q4.

Speaker Change: And a good launching point into 2025, so there's not any kind of one time.

Speaker Change: Yeah.

Speaker Change: Anomaly incorporated into our outlook does it just ordinary course with a larger portfolio spin off.

Speaker Change: What we think will be good gross margins and cost control and Thats what resulted in EPS guide.

Speaker Change: Got it and I guess I mean based on your early conversations with your partners. I mean are you seeing anything different in terms of promotional outlook for the holiday season, this year versus last year.

Speaker Change: I mean.

Speaker Change: We've been planning for holiday for months with our with our retailers and.

Speaker Change: Partnering with them in that.

Speaker Change: In some cases, there are other credit providers for promotional activity.

Speaker Change: We saw it last year in holiday season.

Speaker Change: More customers that came in and needed a payment plan in that.

Speaker Change: That in order to the benefit of the primary provider as well as us.

Speaker Change: I don't think anything is going to change change there.

Speaker Change: From a holiday standpoint, I think it's probably going to be.

Speaker Change: Fairly promotional and it'll probably it seems like it always starts early but because of that calendar shift between.

Speaker Change: Thanks, giving and Christmas it will probably start.

Speaker Change: Early earlier.

Speaker Change: And be more pronounced earlier so.

Speaker Change: We feel like we're in good position.

Speaker Change: And but we're not.

Speaker Change: Not calling for like Sony inflection in underlying demand in our retail categories.

Speaker Change: Our <unk> growth is coming from the things that we've talked about the initiatives and the.

Speaker Change: And some of the trade down.

Speaker Change: Got it thank you guys.

Speaker Change: Thank you.

Speaker Change: Thank you and our next question coming from the line of Bobby Griffin with Raymond James Your line is open.

Speaker Change: Good morning, Thanks for taking my questions and congrats on a good quarter here.

Speaker Change: Yes.

Speaker Change: Last question for me is kind of just when you think about the long term EBITDA guide progressive kind of as a whole is tricky.

Speaker Change: Trending quite in the middle right now at 12%, what's the pathway. If we continue this healthy GMB growth towards the upper end is that something that's in your control or is it more just a function of kind of customer mix or.

Speaker Change: 90 day buyouts, so what consumers are using the product just trying to get a sense of what could drive it towards the upper end if we stay on this healthy GMB growth path.

Speaker Change: Yes, I think.

Brian Garner: Hey, Bob It's Brian I think what I, what I would say there is the disposition mix in terms of the outcomes that customers choose on their on their leases is always going to be a big factor and overall EBITDA margins and Thats always been true with this business and so we're starting to see some.

Speaker Change: Hi.

Speaker Change: So there's some slight shifts there with a higher propensity for 90 days, but generally speaking as you grow revenue youre going to have opportunities for operating leverage over the long term I think the the.

Speaker Change: The question, we have to ask ourselves internally is there.

Speaker Change: Or are there are there initiatives and an opportunity to growth growth initiatives and opportunities for us to to reinvest in the business and rather than kind of seeking a margin harvesting mode.

Speaker Change: To push us towards the high end, so I think the opportunity would be there in a growth scenario.

Speaker Change: For higher margins.

Speaker Change: All else being equal, but I think as long as we as long as we feel like we've got the ability to.

Speaker Change: Lean into GMB growth profitable <unk> over the course of time, that's where we're going to look first.

Speaker Change: And.

Speaker Change: That's that's really been our philosophy.

Speaker Change: Since our inception.

Okay, Yes, that's not to say that 12% is not healthy is great.

Speaker Change: Cash is starting to get a sense of.

Speaker Change: What's in your control versus just the dynamics in the customer mix I appreciate that and then Steve I.

Speaker Change: I was just curious we're seeing the trade down we're seeing a lot of the macro things help you guys out in the space itself.

Speaker Change: What is your view of the category just like pure category side things are they starting to actually stabilize and improve have you seen any of the category that maybe take the first dive down post the COVID-19 over earnings start to improve from a category standpoint or is this GMB growth is really a function.

Speaker Change: All kind of progressive initiatives as well as just the macro side of things with the trade down in tightening at the credit stacks above.

Speaker Change: Yes, Bobby Thanks, I think.

Speaker Change: As we sit here currently it's pretty much the latter.

Speaker Change: It's the the improvement in our.

Speaker Change: Our execution and our partnerships with the retailers, adding new doors.

Speaker Change: But also the credit supply dynamic in the trade down as manufacturing, the GMB growth, which which is which is nice to see.

Speaker Change: Clearly there is a couple of categories that are getting I would say less bad and.

Less bad and maybe the new up right now.

Speaker Change: So.

Speaker Change: Smartphones and has been fairly strong for a while and never really saw a major dip.

Speaker Change: Compute and some home technology might.

Speaker Change: I'm starting to be inflicting a little bit there are some retailers out there that are kind of guiding to.

Speaker Change: Hoping for a flat comp here in the holiday quarter.

Speaker Change: And that makes sense from a replacement cycle standpoint, the further we get away from the pandemic.

Speaker Change: Demand pull forward the more youre going to have that.

Speaker Change: The replacement cycle, but on the furniture and mattress side, which is so important for for us and for the industry quite frankly.

Speaker Change: It's still pretty pretty tough out there.

Speaker Change: Less bad is probably the label I would put on that as well, but its still pretty bad so and as we think about 2025, we're not expecting any kind of inflection in those categories.

Speaker Change: Alright, that's helpful. And then I guess, there's going to be a tough one to answer but I'm curious kind of your crystal ball.

And your history of thinking when the categories start to approved at the macro tailwind then go.

Speaker Change: Against you, but they're just not as favorable as they are now they are actually scenarios that you've seen over historical time, where the categories actually start to improve in the macro tailwind stay there. So you could even see a further acceleration of what we're seeing today in trends.

Speaker Change: Theres not a lot of cycles that have repeated over the last 25 years, where that progressive has existed.

Speaker Change: I think there could be an overlap of.

Of acceleration in demand for the categories, while supply is tight but I don't to your point I don't what's your I don't think that it persists for very long.

Speaker Change: But I think I've said previously.

Speaker Change:

Speaker Change: I would take strong consumer demand as a macro tailwind.

Over tighter credit supply if I had to choose one of them because the stronger consumer demand is a bigger.

Speaker Change: Force multiplier in our view for our business than the tighter credit supply, while we don't have it.

Speaker Change: The strong consumer demand I'm pleased that we have the credit trade down that we've been anticipating for quite a while.

Speaker Change: But all things being equal I'd love them to both of them for two exist simultaneously, but I don't think that last for very long, but if we have a orderly transition from tighter credit supply to a stronger demand and I think will be good in that.

Speaker Change: Scenario.

Speaker Change: Perfect I appreciate the details there and best of luck to you guys on the holiday selling season.

Thanks, Bobby.

Speaker Change: Thank you.

Speaker Change: Last question is coming from the line of Vincent <unk> with <unk>. Your line is now open.

Speaker Change: Hi, good morning, Thanks for taking my questions.

Speaker Change: One question, but kind of a broad theme about focusing on the GMB.

Speaker Change: Basically wondering what you think of when you think about the medium or longer term GNP growth potential. There is in the business I appreciate the fourth quarter guidance of high single to low double digits and understanding there's probably some.

Speaker Change: Near term impacts to that you mentioned, the big lots impact as well as.

Speaker Change: I think Theres five list holiday sales basis. This particular fourth quarter, but when you think about kind of the medium and long term in your execution of winning.

Speaker Change: Winning where merchants and executing within the merchants that you already have.

Speaker Change: And further if you could help us understand that GDP growth potential that would be helpful. Thank you.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: We haven't really given a long term algorithm on on GMB growth, but clearly the market is.

Speaker Change: Underpenetrated and not being served.

Speaker Change: Fully.

We are fortunate that within our existing retailers we have.

Speaker Change: Built in our pent up however, you want to think about it growth because of various.

Speaker Change: Tools and initiatives and as I've referred to as Roadmaps that we haven't fully deployed and are partnering with our retailers to get those deploy we've had a lot of success over the last two years to do that and in some of the growth is in.

Speaker Change: And the progress has come from that so we've got some some built in growth.

Speaker Change: From just the installed base, but over if you are talking about.

Speaker Change: Intermediate and longer term clearly, we need to add new retailers to the platform to keep that type of growth going but we're pleased with the acceleration that we've seen here.

Speaker Change: And as.

Speaker Change: As we said some of it is macro but I want to I want to reinforce that just having trade down dump apps into the into the top of our funnel. It does not necessarily mean that we are.

Speaker Change: Guaranteed new funded leases or new <unk>, we have to have a good.

Speaker Change: Process, we have to have a good customer experience, we have to treat the customer well and and improve our products continually in order for those apps, especially new customers that are not.

Speaker Change: <unk> familiar with <unk> and maybe getting offered in MTO product when they are used to getting approved above us in the stack.

Speaker Change: That's a new.

Speaker Change: That's a new customer challenge for us to get that conversion so.

Speaker Change: The macro is helping open up the top of the funnel but.

Speaker Change: Our funnel optimization.

Speaker Change: <unk> are really helping convert that into into funded <unk> and so we expect that will continue over time into 'twenty five and potentially through 25, so that is going to be a help for a while.

Speaker Change: But as far as long term growth.

Speaker Change: We can grow with our existing retailers, but we will we will need to and intend to.

Speaker Change: Add to the base.

Speaker Change: Okay, Great. That's very helpful. Thanks very much.

Speaker Change: Thanks Vince.

Speaker Change: Yes.

Speaker Change: Thank you and I will now turn the call back over to Mr. Steve Michaels for any closing remarks.

Steve Michaels: I'd like to again, thank you guys for joining us this morning and for your continued interest in Prague. Our teams are executing well excited about our growth and ready to finish the year strong. We look forward to updating you again once this year is wrapped up have a great day.

Speaker Change: Ladies and gentlemen that does conclude our conference for today. Thank you for your participation and you may now disconnect.

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Speaker Change: Good day and thank you for standing by welcome to Park Holdings third quarter earnings Conference call.

Speaker Change: This presentation, there will be a question and answer session to ask a question. During this session you will need to press star one on your telephone you will Danielle automated message and fighting Yohanan suite.

Speaker Change: Please note that today's conference is being recorded.

Speaker Change: I will now hand, the conference over to your Speaker host John <unk>. Please go ahead.

John Hecht: Thank you and good morning, everyone.

I'll come to the Prague Holdings third quarter 2024 earnings call.

Speaker Change: Joining me. This morning are Steve Michaels product Holdings, President and Chief Executive Officer, and Bryan Garner, our Chief Financial Officer.

Speaker Change: 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 product holdings Dot com.

Speaker Change: 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 fourth quarter of 2020 for.

Speaker Change: The health of our portfolio and our expectations for write offs for our progressive leasing segment for the full year 2024.

Speaker Change: Our expectations regarding <unk> for the fourth quarter and full year 2024.

Speaker Change: And our capital allocation priorities, including our ability to continue returning capital to shareholders.

Speaker Change: Listeners are cautioned not to place undue emphasis on forward looking statements. We make today all of which are subject to risks and uncertainties, which could cause actual results to differ materially.

Speaker Change: Seriously from those contained in the forward looking statements.

Speaker Change: We undertake no obligation to update any such statements.

Speaker Change: On today's call, we will be referring to certain non-GAAP financial measures, including adjusted EBITDA.

Speaker Change: And non-GAAP EPS, which have been adjusted for certain items, which may affect the comparability of our performance with other companies.

Speaker Change: These non-GAAP measures are detailed in the reconciliation tables included with our earnings release.

Speaker Change: 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.

Speaker Change: <unk> performance.

Speaker Change: With that I'd like to turn the call over to Steve Michaels product Holdings, President and Chief Executive Officer, Steve.

Steve Michaels: Thanks, John.

Steve Michaels: Morning, everyone and thank you for joining us as we discuss our third quarter results provide insights into Q4 and share updates to our full year 2024, our financial outlook.

Steve Michaels: Our Q3 results highlight the effectiveness of our strategy and the strong execution by our team.

Steve Michaels: With a relentless focus on enhancing both customer and retailer experiences we successfully maintained topline momentum and gained balance of share.

Steve Michaels: Our direct to consumer efforts continue to deepen customer engagement fueling growth.

I'm incredibly proud of our team for delivering consecutive quarters of accelerating <unk> with progressive Leasing's Q3, GMB growth coming in at 11, 6%.

Steve Michaels: Our strategic focus on the grow enhance and expand pillars is driving meaningful improvements across key performance metrics.

Steve Michaels: This year over year growth has been fueled by higher application volume improve.

Improved customer conversion.

Steve Michaels: And an increase in active doors and better productivity per door across both national and regional accounts.

Steve Michaels: We're excited about what this return to growth means for our team.

Steve Michaels: Our retail partners and our shareholders.

Steve Michaels: In Q3, we achieved consolidated revenue of $606 1 million, representing 4% growth compared to Q3 2023.

Our consolidated adjusted EBITDA reached $63 5 million, resulting in a 10, 5% margin driven by GMB growth and supported by stable portfolio performance and disciplined spending.

Steve Michaels: Looking ahead, we expect this momentum to carry through the remainder of 2024.

Steve Michaels: For context, we started the year with a five 2% year over year decline in GLA, and we entered Q3 close to flat.

Steve Michaels: This positive trend in our GLA balance positions us well for a successful 2025.

Steve Michaels: Our dynamic Decisioning posture.

Steve Michaels: Supported by a short four to six week feedback cycle allows us to swiftly adjust to customer and portfolio health trends.

Steve Michaels: Our proprietary machine learning Decisioning models rapidly incorporate real time information, enabling us to fine tune, our approval rates and amounts.

Steve Michaels: While Brian will provide further details I am confident we are on track to maintain 2024 write offs within our targeted annual range of 6% to 8%.

Steve Michaels: As part of our focus on the grow enhance and expand strategy. We've made significant progress on our 2024 priorities.

These efforts have driven our year to date GMB growth and will fuel our success moving forward.

Steve Michaels: Execution in these areas is essential to achieving our financial targets for 2025 and beyond.

Steve Michaels: Sustainable and profitable growth remains at the core of our three pillared strategy.

Steve Michaels: Under our grow pillar I'm pleased to share that we signed a long term exclusive partnership with American signature, Inc. A top 15 retailer and furniture to today's top 100 list.

Steve Michaels: Further strengthening our regional market positioning alongside our national accounts.

Steve Michaels: Our regional business delivered another impressive quarter of GMB growth in the low double digits.

Steve Michaels: We're driving growth across several dimensions to include investing in existing partnerships expanding through new partnerships, increasing brand awareness to acquire new customers engaging.

Steve Michaels: Customers through targeted marketing efforts and strengthening our direct to consumer business in E Commerce penetration.

Steve Michaels: Our investments in sales marketing and technology have delivered significant value to our retail partners and firmly position progressive leasing as a market leader.

Steve Michaels: At the end of Q3 over 75% of our progressive leasing GMB is under multiyear exclusive contracts with approximately half of all <unk> under contract into the 2030.

Steve Michaels: We take great pride in our track record of renewing and extending exclusive agreements with key retail partners further solidifying our leadership in the industry.

As part of our direct to consumer initiatives, the product marketplace platform, which allows customers to shop anytime anywhere through our mobile app continued to gain significant traction in Q3.

Steve Michaels: Year to date the platform has delivered over 300% growth and is on track to exceed our 2024 <unk> target to roughly double <unk> year over year.

Overall, as we execute on our sales marketing and product initiatives are marketable database of highly engaged customers is growing.

E Commerce remains a focus as we strive to meet customers wherever and however, they choose to shop.

Steve Michaels: Under the enhanced pillar product and tech investments have improved customer experience and conversion rates.

Steve Michaels: These advancements contributed to a three 4% year over year increase in the total number of customers with active leases for our progressive leasing segment as of the end of Q3.

Steve Michaels: We segment customer activity into three groups, new repeat and reactivated.

Steve Michaels: For clarification, we define reactivated customers.

Steve Michaels: Those that last funded a lease more than 24 months ago.

Steve Michaels: This segmentation allows us to tailor, our marketing strategies to each group's unique needs and behaviors.

Speaker Change: New and reactivated customers increased approximately 20% and 12% year over year, respectively. In Q3, while we maintained repeat customer contributions to <unk>.

Our ability to expand our customer base, while retaining loyal repeat customers, who deliver a higher lifetime value is a critical driver of our business.

Speaker Change: By focusing on growth across all three customer segments of new repeat and reactivated we are working to capture a larger share of our underserved addressable market in a cost effective manner.

Speaker Change: We are innovating with AI, driven solutions rolling out enterprise wide and consumer facing AI tools that enhance both operational efficiency and customer satisfaction.

Speaker Change: We implemented an AI assistant to enable employee self service for all inquiries related to policies and benefits information.

Additionally, we launched our first consumer facing AI assistant pilot program designed to enhance customer satisfaction by providing immediate assistance, marking a key step in transforming our customer support experience.

Speaker Change: I want to take a moment to thank our entire team for their tremendous efforts in not only driving short term results, but also embracing change to set the stage for our future through growth, maintaining a healthy portfolio and remaining disciplined with spending.

Speaker Change: Our performance is a direct result of their hard work and dedication to our mission.

Speaker Change: Creating a better today and unlocking the possibilities of tomorrow through financial empowerment.

Speaker Change: Given the performance and momentum we've seen this year, we're pleased to update our full year 2024 outlook with both revenue and earnings now expected to exceed our prior expectations.

Speaker Change: This outperformance is being driven by increased <unk> for our progressive leasing segment.

Speaker Change: Selecting our efforts to deepen existing retail partnerships onboard new partners enhanced technology attract new customers through targeted marketing and expand product marketplace.

Speaker Change: For the fourth quarter, we expect GMB growth to be in the range of high single to low double digits driven by the positive momentum we've observed while we monitor a dynamic consumer environment.

Speaker Change: So far in October we're off to a strong start though as with every year at this time, we still have in front of us. The all important holiday season, where we have historically generated approximately 50% of the quarter's DMV and the five week period spanning Black Friday to Christmas Eve.

Speaker Change: We remain focused on executing our strategy to carry this momentum into the end of the year and position ourselves for success in 2025.

Speaker Change: Finally on the topic of capital allocation, our 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 repurchases.

I'll now turn the call over to our CFO Bryan Garner for more details on Q3 results and remainder of the year outlook.

Speaker Change: Brian.

Brian Garner: Thanks, Steve and good morning, everyone.

Bryan Garner: We're pleased to report that our third quarter 2024 results exceeded <unk> expectations and came in near the high end of the range for revenues earnings and non-GAAP diluted EPS that we provided in late July.

Brian Garner: Like to begin by thanking our team for delivering another successful quarter.

Brian Garner: I'll now take you through a more detailed breakdown of our results.

Brian Garner: Starting with progressive leasing segment <unk> exceeded expectations with an 11, 6% year over year increase surpassing our anticipated high single digit growth rate.

As Steve mentioned that we've successfully implemented multiple strategic initiatives that have boosted both applicant flow and conversion rates.

Brian Garner: Looking ahead, we have several additional initiatives in progress for Q4, which we believe will sustain this momentum.

Brian Garner: Our JV growth again outpaced most of our larger retail partners comparable store sales materially.

Brian Garner: Additionally, we are benefiting from the tightening of credit supply above us and we expect this environment to persist at least through the end of 2024.

Brian Garner: As a result, one of the highlights this quarter is the growth of our gross leased asset balance a primary driver of future revenue, which is now three 8% higher than the same period last year, driven by two consecutive quarters of accelerating <unk> growth.

Brian Garner: This year over year growth marks the first time since Q3 of 2022, and we ended the quarter with a larger portfolio size.

Brian Garner: We expect the GLA balance to improve for the remainder of the year contributing to revenue growth implied in our revised outlook.

Brian Garner: Q3 revenues for a progressive leasing segment increased three 3% from $564 2 million in Q3 of 2023 to $582 6 million driven by the growth in our leased portfolio.

Brian Garner: And higher 90 day early purchases compared to the same period last year.

Brian Garner: This return to growth as exciting as it reflects the effective execution of our strategy the strength of our partnerships and the demand for our product.

Brian Garner: We believe this momentum positions us well for sustained success moving forward.

Brian Garner: The Q3 portfolio performance for progressive leasing remained within our targeted annual right offerings.

Brian Garner: The provision for lease merchandise write offs were seven 7% in Q3, which is consistent with our pre pandemic period of Q3 of 2019, however, slightly higher than our expectations due to higher delinquencies and an increase in the provision for lease merchandise write offs relating to the strong <unk> growth in the period.

Brian Garner: We are confident in our ability to continue to manage the lease portfolio of real time with our dynamic Decisioning models supported by a short duration portfolio, which turns over on average every six months to seven months.

Brian Garner: This allows us to swiftly adjust approval rates in amounts that customer and portfolio health trends, while still maintaining growth.

Brian Garner: We anticipate full year write offs to be within our targeted range of 6% to 8%.

Brian Garner: 90 day early purchases remained elevated compared to historic lows in 2023.

Brian Garner: Bolstered by higher than expected new customer growth rates.

Brian Garner: As expected our gross margin of 31, 2% in Q3 of 2024 was 110 basis points lower than prior year.

Brian Garner: Progressive weakens SG&A expense in Q3 was $76 5 million a decrease of approximately 700000 or 9% compared to $77 2 million in the same quarter last year.

Brian Garner: As a percentage of revenue SG&A expenses decreased by 60 basis points year over year from 13, 7% of revenues in Q3 of 2023 to 13, 1% of revenues in Q3 of 2024.

Brian Garner: As a reminder, this improvement was primarily due to the restructuring actions taken in Q1 of this year.

Brian Garner: Despite these cost cutting measures we've maintained our investment in sales marketing and technology to drive profitable <unk>.

Brian Garner: Adjusted EBITDA for Progressive leasing in Q3 was $66 5 million and 11, 4% of revenue is within our 11%, 13% annual margin target for the progressive leasing segment.

Brian Garner: This adjusted EBITDA margin of 11, 4% is 190 basis points lower compared to 13, 3% in Q3 of 2023, driven by headwinds to gross margin with 90 day purchase options and write offs approximating pre pandemic levels, partially offset by SG&A discipline.

Brian Garner: Turning to consolidated results Q.

Brian Garner: Q3 of 2024 revenues of $606 1 million compared to $582 9 million in the same quarter last year was driven by GDP growth <unk>.

Brian Garner: Along with an increase in customers exercising their 90 day purchase options at the progressive leasing segment.

Brian Garner: Consolidated adjusted EBITDA was $63 5 million and 10, 5% of revenue compared to $71 7 million and 12, 3% in the year ago period.

Brian Garner: Looking at our balance sheet. We ended the third quarter of 2024 with $221 7 million cash and gross debt of $600 million, resulting in a net leverage ratio of one four times trailing 12 months adjusted EBITDA.

Brian Garner: We remain undrawn on our $350 million revolver at the end of the quarter.

Brian Garner: We paid a quarterly cash dividend of <unk> 12 per share in September and during the quarter, we repurchased 810000 shares of our common stock at a weighted average price of $45 69 per share.

Brian Garner: We have $401 $8 million remaining under our recently reauthorized $500 million share repurchase program.

Brian Garner: As we look ahead, we remain optimistic about finishing the year strong.

Brian Garner: We believe our Q4 <unk> will maintain its positive trajectory delivering a high single digit to low double digit year over year growth for our progressive leasing segment.

Brian Garner: With economic pressures continued to affect consumers across the credit spectrum.

Brian Garner: We anticipate that the benefits we saw in Q3 from the tightening of the credit supply above us will persist through the rest of the year contributing.

Brian Garner: Contributing to our overall performance.

Brian Garner: Our outperformance with <unk> improved the GLA balance, which was roughly flat going into Q3 and is up three 8% year over year going into Q4.

Brian Garner: This improvement in GLA, along with our anticipated Q4, <unk> growth benefits revenue and is reflected in our increased 2020 for revenue outlook.

Brian Garner: Our leasing portfolio performance is expected to remain within our targeted yields to deliver our provision for lease merchandise write offs for the full year within our annual target range of 6% to 8%.

Brian Garner: We believe liquidity pressures facing a portion of our consumers will persist for the remainder of the year and trends from these challenges have been incorporated into our Decisioning model and financial forecast.

Brian Garner: Q4 gross margin is expected to be a difficult comparison for Q4 2023 for the progressive weakness segment, primarily due to below average number of customers choosing to exercise their 90 day purchases last year.

Brian Garner: Regarding SG&A, we are maintaining our disciplined approach and remain on track to deliver SG&A as a percentage of revenue in line with our full year expectations for the progressive leasing segment.

Brian Garner: Our revised consolidate outlook for 'twenty 'twenty four calls for revenues in the range of $2 four 4% to $2 46 billion.

Brian Garner: Adjusted EBITDA to be in the range of $270 million to $275 million.

Brian Garner: And non-GAAP EPS in the range of $3 30 to.

Brian Garner: The $3 40.

Brian Garner: This outlook assumes a continuation of the benefits from tightened credit above us.

Brian Garner: A difficult operating environment with soft demand for leasable consumer goods.

Brian Garner: No material changes in the company's Decisioning posture.

Brian Garner: No material changes in the unemployment rate for our consumer base.

Brian Garner: An effective tax rate for non-GAAP EPS from approximately 28%.

Brian Garner: And no impact from additional share repurchases.

Brian Garner: In summary, we are extremely pleased with our team's performance this year.

Brian Garner: We just set us up well for revenue and earnings growth as we head into 2025.

Brian Garner: Combined with our free cash flow generation, we are well positioned to deliver meaningful shareholder value.

Brian Garner: I will now turn the call over to the operator for questions operator.

Speaker Change: These standby will be completely Kennedy boss.

Speaker Change: Now first question coming from the line of Brad Thomas with Keybanc. Your line is open.

Brad Thomas: Hi, good morning, and congratulations on the nice momentum in <unk> in particular.

Brad Thomas: I wanted to first follow up on that topic.

Brad Thomas: Steve I was wondering if you could talk a little bit about some of the puts and takes and GMB, obviously American signature exciting larger customer you have.

Brad Thomas: By the same token.

Brad Thomas: And the country kind of digesting.

Brad Thomas: Big lots bankruptcies is underway right now and some store closures that are happening over there can you just talk about all year.

Brad Thomas: What youre seeing from those customers and how you think about that impacting sales or can be over the next few quarters.

Speaker Change: Yeah. Thanks, Brad Yeah, we're pleased with the <unk> performance in the quarter and our outlook for the closing out the year.

Brad Thomas: Clearly the quarter.

Brad Thomas: Little bit above our expectations nicely above our expectations actually.

Brad Thomas: <unk> kind of played out a little bit the way, we thought it would but there was some marketing campaigns and promos that.

Brad Thomas: <unk> performed maybe a little better than we were anticipating.

Brad Thomas: And so we're pleased with that and as I mentioned in the prepared remarks October is starting out strong, but it's always difficult to predict Q4, <unk> because of that holiday season, and it's such an acute period, where in this year from a calendar standpoint, it's very tight between black Friday and in.

Brad Thomas: And Christmas Eve, but.

Brad Thomas: You mentioned American signature, we're very proud of that.

Brad Thomas: That partnership.

Brad Thomas: As we said in the press release it's.

Brad Thomas: It's not really going to impact.

Brad Thomas: <unk> 2024, all that much because of the because of the launch being late in the year and but we were excited about that for 2025.

Brad Thomas: As it relates to big lots.

Brad Thomas: Certainly partnering well with them and it's well known as you said the bankruptcy in there.

Brad Thomas: The plan that they're executing.

Brad Thomas: They've closed a number of waves of stores and thats starting to accelerate.

Brad Thomas: <unk>.

Brad Thomas: And will impact Q4, certainly we believe for us it's probably a.

Brad Thomas: 100 to 150 basis point headwind for the quarter were not commenting on 2025, obviously, but.

Brad Thomas: There's a lot there's a lot to be.

Brad Thomas: Excited about as it relates to <unk>, we've got really good partnerships really good integrations.

Brad Thomas: And the marketing partnerships with our retailers.

Brad Thomas: The top of the funnel dynamics as it relates to the credit supply above us is certainly helping as well so.

Brad Thomas: There's always puts and takes.

Brad Thomas: Some customers stress out there as we were as we referred to but net net we're pleased with the.

Brad Thomas: The various tailwind that we've helped to create as well as a little bit of help from the macro on the on the credit supply side.

Speaker Change: Great that's helpful. Steve and if I can just ask a follow up on that on the write offs.

Speaker Change: Part of the equation.

Speaker Change: <unk>.

Speaker Change: No.

Speaker Change: <unk> in the U S is.

On the stretch side.

Speaker Change: As more customers to you.

Speaker Change: <unk> typically is your seasonally highest.

Speaker Change: Quarter write offs do you think that will still be the case here in <unk> and to what degree do you think you may.

We need to tighten a little bit on the loan and they range from a decision standpoint. Thanks.

Speaker Change: Hey, Brian it's Brian.

Speaker Change: And just what's wrong with it.

The seasonality aspect of it.

Speaker Change: In Q1, so so from the 77 that we expect a step down.

And on the write offs that you've got you've got you've got a couple of dynamics you've got some of this trade down.

Speaker Change: Hi.

Steve Michaels: The decisioning aspect of it.

Yes, I mean from a decisioning standpoint, Brad as we always say, we are constantly monitoring and adjusting that posture based on what we're seeing in the data and we have.

Steve Michaels: A very quick feed that feedback loop. So we can react quickly we did do some tightening throughout the third quarter kind of as the quarter progressed.

Steve Michaels: I would like to use the scalpel terminology because it wasn't like wholesale.

Steve Michaels: Changes it was pockets and looking for opportunities to to just trim a little bit so.

As we ended the quarter and as we sit here today, we're probably 100 to 150 basis points lower on approval rate than we were this time last year, and we'll continue to monitor that and see.

See what we think is necessary.

Steve Michaels: And.

Steve Michaels: We're squarely confidently in that in that in our portfolio performance range that we've been in for the last.

Steve Michaels: Eight years, or so of that 6% to 8% on an annual basis.

Speaker Change: Great very helpful and again exciting inflection building in the business.

Speaker Change: Yes, Thanks, Brad.

Speaker Change: Thank you and our next question coming from the line of John Hecht with Jefferies. Your line is now open.

John Hecht: Good morning, guys. Thanks, very much for taking my questions and congratulations on a good quarter.

John Hecht: First one is I guess.

John Hecht: Just trying to I think I understand the dynamics of the early stage buyouts and the write offs.

John Hecht: But is it as straightforward as that.

Yes.

John Hecht: <unk>.

John Hecht: The increase in EPS during the quarters is coming from maybe some of the newer higher quality higher income cohort customers, whereas the write offs are more contained to the lower income bands or is there. Some other dynamic there that we should think about.

Brian Garner: Hey, John its Brian I think you are thinking about it right.

Specifically with that would that trade down population, we look at that in isolation.

Brian Garner: What we're seeing.

Brian Garner: Some of the early indicators as they have a higher propensity to do a 90 day buyout.

Brian Garner: That's not surprising given given.

Brian Garner: They are on average stronger credit profile.

Brian Garner: And they tend to keep in check there.

Brian Garner: <unk>.

Brian Garner: The write offs and so youre going to have some youre going to have some margin.

Brian Garner: Gross margin consideration as you have higher propensity for 90 days from that trade down population.

Brian Garner: They also tend to skew new these are customers that.

Brian Garner: We largely have not seen before and thats, a new customer versus existing customer will tend to be slightly lower from a margin standpoint.

Brian Garner: But as you think about the long term prospect.

Prospect of this customer we're looking at it was very favorable because here, we've got an opportunity to.

Brian Garner: We have the customer be a repeat lifetime value prospect is very strong and so you might see.

Some initial I would say slight gross margin pressures relating to the trade down population. It's early.

Brian Garner: And there are not a majority of the story and so it's I would characterize it as relatively small but it is something that.

Brian Garner: May play out over the course of the next few quarters and we'll keep folks updated on that but it is relatively small.

Speaker Change: Okay. That's very helpful. And then just another question on the GMB growth can.

Speaker Change: Can you I apologize if you've mentioned this but can you bifurcate it by existing merchants versus new merchants.

Speaker Change: No John we didn't we didn't say that and we generally don't don't give that out, but we did say that.

Speaker Change: Overall was 11 six in our regions were low double digit so we saw nice.

Speaker Change: Nice growth across the across the platform.

Speaker Change: Okay and then final question is there any update on the progressive marketplace.

Speaker Change: From a revenue growth and a pipeline potential for.

Speaker Change: Merchant etch for merchant adds in that initiative.

Speaker Change: Yes, we're excited and pleased with progressive marketplace with product marketplace, it's up over 300%.

Speaker Change: Year to date, and we had put out a guide earlier this year for it to kind of double so we're clearly ahead of that.

Speaker Change: A few of the drivers of the outperformance.

Getting sophisticated on the on our targeted marketing efforts and our tech and product teams are improving the customer experience.

Speaker Change: In the checkout, because simplifying that checkout experience.

Speaker Change: Is super important to get conversion in that in that direct consumer motion.

Speaker Change: We're proud to have really good retailers that we're partnered with and they are participants in the marketplace and we've also got some affiliate partnerships.

Speaker Change: That are helping us give more choice to our customers.

Speaker Change: But that that product tech and marketing.

Speaker Change: Kind of combination or are working very nicely together.

We continue to look forward to to growth on in the marketplace, and we'll probably give a little bit more color on <unk>.

Speaker Change: On sizing it for 2025, but not not this quarter.

Speaker Change: Great well I appreciate the update thanks very much.

John Hecht: Thanks, John.

Thank you.

Speaker Change: Question coming from the line of Anthony <unk> with loop capital markets. Your line is now open.

Speaker Change: Good morning, Thanks for taking my question.

Speaker Change: Congrats on a strong quarter a lot of positive signs in the quarter.

Speaker Change: No.

Speaker Change: Kind of related question a couple of questions have come up before you are seeing the credit trade down which is great to see.

Speaker Change: Certainly waited a long time for that.

Speaker Change: And you said that that's leading to.

Speaker Change: Higher 90 day, buyouts, which makes sense, because thats more well heeled customer.

Speaker Change: But also as you're saying that that customer is more likely or less likely to.

Speaker Change: Resulting in a lease merchandise write off so I guess I'm trying to figure out is if that trade down is happening and it's clearly happening and it is impacting your gross margin shouldn't we shouldn't we be also seeing lower lease merchandise write offs, just I just wanted to sort of understand that dynamic.

Speaker Change: Yeah, Anthony Brian.

Brian Garner: Two dynamics, so the trade down is happening.

Brian Garner: And they do generally tend to be a strong credit profile, but at the same time.

Speaker Change: As we indicated our prepared remarks, we have we have seen.

Speaker Change: A slight.

An increase in delinquencies just from the portfolio overall and stopped the statement independent of the trade down population and that's not unlike that not unlike a factor the rest of the credit stack across the board and has seen so our job is to stay on top of that and monitor it and decision. Accordingly, I would just I would just point out that some.

Speaker Change: 7% for Q3 is as where we were at pre pandemic for the same period Q3. So it is not a it is not a level that we're uncomfortable with or that we see is.

Speaker Change: Expanding.

Speaker Change: Into Q4, so should we expect a step down where it relatively normalized levels here, but we're pointing out kind of the dynamics within the write off population both both the benefit from a trade down perspective, and also also at the bottom of the funnel some some level of weakness, but as we've demonstrated in our.

Speaker Change: Of course of the last few years through the ups and downs.

Speaker Change: Hopefully.

Speaker Change: What's been observed is our strong ability to control.

Speaker Change: That number on our P&L.

Speaker Change: Yes.

Speaker Change: And we fully intend to do so and if we have to if we have to.

Speaker Change: It makes small iterative changes in decision and we'll do that but it's not at the level that were viewed as unusual.

Speaker Change: Got it fair enough.

Speaker Change: Helpful and then some.

Speaker Change: Laboratory question and you guys never give us super specific answer, but I'm going to ask it anyway any update in terms of the large retail partner pipeline.

Speaker Change: Yes, Anthony good morning, I would be disappointed if you didn't ask that question. So thank you.

Speaker Change: Yes.

Speaker Change: Not a specific update.

Speaker Change: We're pleased with.

Speaker Change: Some of the traction that we've gotten year to date.

Speaker Change: Certainly.

Speaker Change: ASI win was.

Speaker Change: <unk>.

Speaker Change: Nice momentum.

Speaker Change: We are.

Speaker Change: We're continuing we think that our partnership.

Speaker Change: Our.

Speaker Change: The profile of.

Speaker Change: The recent Mag a conference with <unk>.

Speaker Change: Partners from Lowe's and best buy on the panel with our Chief commercial officer really with some really nice retail representatives in the audience listening to the.

Speaker Change: How at least one can can help financial inclusion and how partnering with progressive.

Speaker Change: <unk> is a big part of that those those things land and they are they are helpful for setting up that next conversation. So we're encouraged by the.

Speaker Change: The progress but nothing.

Speaker Change: Specifics to update you on.

Speaker Change: Fair enough. Thanks for taking my questions keep up the good work.

Speaker Change: Thank you Anthony.

Speaker Change: Thank you.

Speaker Change: Our next question coming from the line of Juan Lin with Gd Cowen Your line is open.

Juan Lin: Hi, guys and congrats on the quarter, sorry for keep beating on.

Juan Lin: The credit side, but I mean, you talk about delinquency being a little bit pressure.

Juan Lin: And we know that which growth has outpaced inflation for a while which theoretically should help and the lower income consumers that you serve I guess I mean, what would it take for I guess charge offs to trend back to maybe the middle of the range and and I have a follow up.

Juan Lin: Yeah.

Speaker Change: I'll start and Brian can add but I would just say that.

Speaker Change: When we gave the range of 6% to 8%, we're not trying to stick the landing at 7% right.

Speaker Change: Middle of the range is in the range just like where we are now so we're very comfortable we feel like we've proven over time that we can manage this portfolio to.

Speaker Change: The range that we provided.

Speaker Change: From a retailer standpoint from a mark from a vertical standpoint also.

Speaker Change: Consumer shift.

Speaker Change: So the.

Speaker Change: I would just guard against.

Speaker Change: <unk>, 7%.

Speaker Change: So we're comfortable where we are as far as the consumer I mean, there's been a lot of evidence across.

Speaker Change: Consumer exposed portfolios of stress and delinquencies and so it's not we're certainly not.

Speaker Change: Alone in that battle.

Speaker Change #100: <expletive> user Ncos might be in line, but early stage <unk> are seem to be rising which could cause some some.

Speaker Change: <unk>.

Speaker Change: Different results in kind of in the first quarter for some of the card providers.

Speaker Change: And we're seeing some of that as well and so we're doing some trimming appropriate.

Appropriate trimming, but we are.

The message should be that we're.

Speaker Change: I'm confident in.

Speaker Change: Trolling continuing to control of the portfolio.

Speaker Change #101: Got it and maybe a follow up maybe for Brian I think seasonally your EPS tends to be down at foggy versus <unk> I guess, given the <unk> performance in your new guidance, it looks like you're implying a stronger than seasonal.

Speaker Change #101: <unk> this year and so I mean, maybe can you talk about the drivers of that.

Speaker Change #101: Yes, it's hard to it's hard to go back in.

Speaker Change #101: <unk>.

Speaker Change #101: Remember that last normal Q4 that we've had but I think generally.

Speaker Change #101: We're thinking about.

Speaker Change #101: The earnings profile going into Q4 were.

Speaker Change #101: We're encouraged by.

Speaker Change #101: The <unk> production that we have here. It is it is going to bleed into revenue as our as our.

Portfolio sizes increase so Q4 from a top line perspective is is looking strong weeks.

Speaker Change #101: We expect write offs as I indicated as a percentage of revenue to step down from the seven 7% level. So that should that should assist us there and then we'll keep our we will keep our spend in check there is going to be an increase in dollars of SG&A just from a seasonal aspect of some of those <unk>.

Speaker Change #101: <unk> costs tied to <unk> production tick up.

Speaker Change #101: But overall as you're as you're indicating we're looking forward to a strong Q4.

Speaker Change #101: And a good launching point into 2025, so there's not any kind of one time.

Speaker Change #101: Hi.

Speaker Change #101: Anomaly incorporated into our outlook does it just ordinary course with a larger portfolio spin off.

Speaker Change #101: What we think will be good gross margins and cost control and Thats what resulted in EPS guide.

Speaker Change #102: Got it and I guess I mean based on your early conversations with your partners. I mean are you seeing anything different in terms of promotional outlook for the holiday season, this year versus last year.

Speaker Change #101: I mean.

Speaker Change #101: Yes.

Speaker Change #103: We've been planning for holiday for months with our with our retailers and.

Speaker Change #101: Partnering with them in that.

Speaker Change #101: In some cases, there are other credit providers for promotional activity.

Speaker Change #101: We saw it last year in holiday season.

Speaker Change #101: More customers that came in and needed a payment plan in that.

Speaker Change #101: That in order to the benefit of the primary provider as well as us.

Speaker Change #101: I don't think anything is going to change change there.

Speaker Change #101: From a holiday standpoint, I think it's probably going to be.

Speaker Change #101: Fairly promotional and it'll probably it seemed like it always starts early but because of that calendar shift between.

Speaker Change #101: Thanks, giving and Christmas it will probably start.

Speaker Change #101: Early earlier.

Speaker Change #101: And be more pronounced earlier so.

Speaker Change #101: We feel like we're in good position.

Speaker Change #101: <unk> and <unk>.

Speaker Change #101: But we're not.

Speaker Change #101: Not calling for like sort of an inflection in underlying demand in our retail categories.

Speaker Change #101: Our <unk> growth is coming from the things that we've talked about the initiatives in <unk>.

Speaker Change #101: And some of the trade down.

Speaker Change #101: Got it thank you guys.

Speaker Change #101: Thank you.

Speaker Change #104: Thank you and our next question coming from the line of Bobby Griffin with Raymond James Your line is now open.

Speaker Change #105: Good morning, Thanks for taking my questions and congrats on a good quarter here.

Speaker Change #106: So I guess the first question for me is kind of just when you think about the long term EBITDA guide progressive kind of as a.

Speaker Change #105: As a whole is.

Speaker Change #107: Trending quite in the middle right now at 12%, what's the pathway. If we continue this healthy GMB growth towards the upper end is that something that's in your control or is it more just a function of kind of customer mix or.

Speaker Change #107: 90 day buyouts, so what consumers are using the product just trying to get a sense of what could drive it towards the upper end if we stay on this healthy GMB growth path.

Speaker Change #108: Yes, I think.

Brian Garner: Hey, Bob It's Brian I think what I, what I would say there is the disposition mix.

In terms of the outcomes that customers choose on their on their leases is always going to be a big factor and overall EBITDA margins and Thats always been true with this business and so we're starting to see some.

Brian Garner: Hi.

Brian Garner: Some see some slight shifts there with a higher propensity for 90 days, but generally speaking as you grow revenue youre going to have opportunities for operating leverage over the long term I think the the.

Brian Garner: The question, we have to ask ourselves internally is there.

Brian Garner: Or are there are there initiatives and an opportunity to growth growth initiatives and opportunities for us to to reinvest in the business and rather than kind of seeking a margin harvesting mode.

Brian Garner: To push us towards the high end, so I think the opportunity would be there in a growth scenario.

Brian Garner: For higher margins.

Brian Garner: All else being equal, but I think as long as we as long as we feel like we've got the ability to.

And the GMB growth profitable <unk> over the course of time, that's where we're going to look first.

Brian Garner: And.

Brian Garner: Thats.

Brian Garner: That's really been there our philosophy.

Brian Garner: Since our inception.

Brian Garner: Okay, Yes, that's not to say that 12% is not healthy it's great.

Speaker Change #109: Just trying to get a sense of what would what's in your control versus just the dynamics in the customer mix I appreciate that and then Steve.

Steve Michaels: I was just curious we're seeing the trade down we are seeing a lot of the macro things help you guys out in the space itself.

Speaker Change #109: What is your view of the category.

Speaker Change #109: <unk> category side things are they starting to actually stabilizing through have you seen any of the categories and maybe take the first dive down post the COVID-19 over earnings start to improve from a category standpoint or is this GMB growth is really a function.

Speaker Change #109: All kind of progressive initiatives as well as just the macro side of things with the trade down in tightening at the credit stacks above.

Speaker Change #110: Yes, Bobby Thanks, I think.

Speaker Change #109: As we sit here currently it's pretty much the latter.

Speaker Change #109: It's the.

Speaker Change #109: The improvement in our AR.

Speaker Change #109: Our execution and our partnerships with the retailers, adding new doors.

Speaker Change #109: But also the credit supply dynamic in the trade down.

As manufacturing, the GMB growth, which which is which is nice to see.

Speaker Change #109: Clearly there is a couple of categories that are getting I'd say less bad.

Speaker Change #109: And less bad and maybe the new up right now.

Speaker Change #109: So.

Speaker Change #109: Smartphones and have.

Speaker Change #109: <unk> have been fairly strong for a while and never really saw a major dip.

Compute and some home technology might.

Speaker Change #109: Starting to inflect, a little bit there are some retailers out there that are kind of guiding to and hoping for a flat comp here in the holiday quarter.

Speaker Change #109: And that makes sense from a replacement cycle standpoint, the further we get away from the pandemic does.

Speaker Change #109: Demand pull forward the more youre going to have.

Speaker Change #109: Replacement cycle, but on the furniture and mattress side, which is so important for for us and for the industry quite frankly.

Speaker Change #109: It's still pretty pretty tough out there.

Speaker Change #109: Less bad is probably the label I would put on that as well, but its still pretty bad so and as we think about 2025, we're not expecting any kind of inflection in those categories.

Speaker Change #111: Alright, that's helpful. And then I guess, it's going to be a tough one to answer but I'm curious kind of your crystal ball.

Speaker Change #111: And your history of thinking when the categories start to approved at the macro tailwind then go.

Speaker Change #111: Against you, but they're just not as favorable as there is theyre actually scenarios that you've seen over historical time, where the categories actually start to improve in the macro tailwind stay there. So you could even see a further acceleration of what we're seeing today in trends.

Speaker Change #111: Yeah, Theres not a lot of cycles that have repeated over the last 25 years, where that progressive has existed.

I think there could be an overlap of.

Speaker Change #111: Of acceleration in demand for the categories, while supply is tight but to your point I don't yes, I don't think that it persists for very long.

Speaker Change #111: But I think I've said previously.

Speaker Change #111:

Speaker Change #111: I would take strong consumer demand as a macro tailwind.

Speaker Change #111: Over tighter credit supply if I had to choose one of them because the stronger consumer demand is a bigger.

Speaker Change #111: Force multiplier in our view for our business than the tighter credit supply, while we don't have it.

Speaker Change #111: The strong consumer demand I'm pleased that we have the credit trade down that we've been anticipating for quite a while.

Speaker Change #111: But all things being equal I'd love them to both of them for two exist simultaneously, but I don't think that last for very long, but if we have a orderly transition from tighter credits applied to a stronger demand and I think will be good in that.

Speaker Change #111: Scenario.

Speaker Change #112: Perfect I appreciate the details there and best of luck to you guys on the holiday selling season.

Speaker Change #112: Thanks, Bobby.

Speaker Change #114: Thank you.

Speaker Change #115: Our last question is coming from the line of Vincent <unk> with <unk>. Your line is now open.

Speaker Change #116: Hi, good morning, Thanks for taking my questions.

Speaker Change #117: One question, but kind of a broad theme about focusing on the GMB.

Speaker Change #117: Basically wondering what you think of when you think about the medium or longer term GNP growth potential. There is in the business I appreciate the fourth quarter guidance of high single to low double digits and understanding there's probably some.

Speaker Change #117: Near term impacts to that you mentioned.

Lots of impact as well as.

Speaker Change #117: I think theres five less holiday sales basis. This particular fourth quarter, but when you think about kind of the medium to long term in your execution of.

Speaker Change #117: Winning where merchants and executing within the merchants that you already have.

Speaker Change #118: And further if you could help us.

Speaker Change #118: I understand that GDP growth potential that would be helpful. Thank you.

Speaker Change #118: Yes.

Speaker Change #119: We haven't really given a long term algorithm on on GMB growth, but clearly the market is.

Speaker Change #119: Underpenetrated and not being served.

Speaker Change #119: Fully.

We are fortunate that within our existing retailers we have.

Speaker Change #119: Built in our pent up however, you want to think about it growth because of various.

Speaker Change #119: Tools and initiatives and as I've referred to as Roadmaps that we haven't fully deployed and are partnering with our retailers to get those deploy we've had a lot of success over the last two years to do that and in some of the growth is in.

Speaker Change #119: And the progress has come from that so we've got some some built in growth.

Speaker Change #119: From just the installed base, but over if you're talking about.

Speaker Change #119: Intermediate and longer term clearly, we need to add new retailers to the platform to keep that type of growth going but we're pleased with the acceleration that we've seen here.

Speaker Change #119: And as.

Speaker Change #119: As we said some of it is macro but I want to I want to reinforce that just having trade down dump apps into the into the top of our funnel. It does not necessarily mean that we are.

Speaker Change #119: Guaranteed new funded leases or new <unk>, we have to have a good.

Speaker Change #119: Process, we have to have a good customer experience, we have to treat the customer well and and improve our products continually in order for those apps, especially new customers that are not.

Speaker Change #119: <unk> familiar with <unk> and maybe getting offered in MTO product when they are used to getting approved above us in the stack.

Speaker Change #119: That's a new.

Speaker Change #119: That's a new customer challenge for us to get that conversion so.

Speaker Change #119: The macro is helping open up the top of the funnel but.

Speaker Change #119: Our funnel optimization.

Speaker Change #119: <unk> are really helping convert that into into funded <unk> and so we expect that will continue over time into 'twenty five and potentially through 25, so that is going to be a help for a while.

But as far as long term growth.

We can grow with our existing retailers, but we will we will need to and intend to.

Speaker Change #119: Add to the base.

Speaker Change #120: Okay, Great. That's very helpful. Thanks very much.

Speaker Change #120: Thanks Vince.

Speaker Change #122: Thank you and I will now turn the call back over to Mr. Steve Michael for any closing remarks.

I'd like to again, thank you guys for joining us this morning and for your continued interest in Prague. Our teams are executing well excited about our growth and ready to finish the year strong. We look forward to updating you again once this year is wrapped up have a great day.

Ladies and gentlemen that does conclude our conference for today. Thank you for your participation and you may now disconnect.

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