Q1 2025 PROG Holdings Inc Earnings Call
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Speaker Change: Good day, and thank you for sending by. Welcome to the PROG Holdings First Quarter 2025 earnings conference call.
Speaker Change: At this time, all participants on a listening mode. After the speaker's presentation, there will be a questioning and for session. To ask a question during the session, you will need to press star 1-1 on your telephone.
Speaker Change: You will then hear an automated message of eyes in your hand is raised. To withdraw your question, please first star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, John Baugh, Vice President of Investor Relations. Please go ahead.
John Baugh: Thank you and good morning everyone. Welcome to the PROG Holdings First Quarter 2025
Speaker Change: Joining me this morning are Steve Michaels, PROG Holdings President and Chief Executive Officer, and Brian 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 Vester Relations website, investor.progholdings.com.
During his call, certain statements we make will be forward-looking.
Speaker Change: Including comments regarding our revised 2025 full year outlook and our guidance for the second quarter of 2025, the health of our least portfolio, and our capital allocation priorities.
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 from those contained in the forward-looking statements.
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 and non-GAAP EPS.
Speaker Change: 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.
The company believes that these non-GAAP financial measures
Speaker Change: Provide meaningful insight into the company's operational performance and cash flows, and provide these measures to investors to help facilitate the comparisons.
Speaker Change: of operating results with prior periods and to assist them in understanding the company's ongoing operational performance.
Speaker Change: With that, I would like to turn a call over to Steve Michaels, PROG Holdings, President and Chief Executive Officer, Steve.
Steve Michaels: Thank you, John , and good morning, everyone. I appreciate you joining us today as we report our first quarter results and offer our perspective on how things are shaping up for Q2 with a few important metrics.
Speaker Change: I'll also touch on how we're executing against our strategy, despite a challenging and uncertain macro environment.
Speaker Change: In the first quarter, revenue approximated the high end of our outlook, while both earnings and non-GAAP diluted EPS exceeded the top end of our outlook.
Speaker Change: The earnings outperformance was driven by strong growth and improved profitability at four technologies, our BNPL platform, along with slightly better than expected results from progressive leasing.
Speaker Change: Progressive leasing's GNV for the quarter came in 4% below the same period last year which we believe reflects a few factors.
Speaker Change: The impact from the loss of a large retail partner due to bankruptcy in late 2024.
Speaker Change: Our tightening of lease approval rates to manage portfolio performance and a more challenging retail environment than we anticipated.
Speaker Change: The quarter started on an encouraging note with low single digit GMV growth through early February and the tax season still ahead of us.
Speaker Change: But by mid-quarter, there appeared to be a noticeable slowdown in consumer activity.
Speaker Change: An observation that was reinforced by multiple third-party data sources pointing to ongoing economic volatility and evolving trade policy.
Speaker Change: These headlines appear to take a meaningful toll on consumer confidence.
Speaker Change: and while tax refunds were culpable to last year, it's evident that the financial stress continues to weigh heavily on many households.
Speaker Change: As a result, we believe many shoppers are delaying discretionary spending especially in big ticket categories.
Speaker Change: This shift in behavior played out across several verticals and resulted in a continuation of negative cons for some of our retail partners.
Speaker Change: Now, if you adjust for the impact of the bankruptcy of the retail partner exiting the business, we actually saw a low-to-mid single-digit growth in GMV.
Speaker Change: So there is a more encouraging story about our ability to execute in a very challenging environment underneath the headline number.
Speaker Change: To put it in context, the loss of that partner represented a mid-30 million dollar GMV headwind in Q1 alone.
Despite that, our teams are executing at a high level.
Speaker Change: We're continuing to grow our balance of share with key existing partners and that momentum is being driven by the strategic initiatives we put in place.
Thank you very much. Thank you.
Speaker Change: Even with the GMV decline, consolidate revenue came in at 684.1 million, which is 6.6% higher year-of-year.
Speaker Change: The revenue performance was largely driven by progressive leasing, having a larger lease portfolio balance entering the year and higher 90 day purchase activity compared to last year.
Speaker Change: As of December 31, 2024, our least portfolio balance was up 6.1% year-over-year, compared to a 5.2% decline at the same point in 2023.
Speaker Change: Adjusted EBITDA with 70.3 million and non-GAPEPS was 90 cents, both exceeding the high end of our outlook.
Speaker Change: Brian will go into the portfolio details in a moment, but I want to highlight that our least portfolio remains healthy.
Speaker Change: Q1 ride-off came in at 7.4%, slightly better than we expected.
Speaker Change: We made some targeted decisioning adjustments in the second half of 2024, and again in early Q1.
Speaker Change: And we will continue to refine our decision throughout the year to ensure performance stays within our 6-8% targeted annual write-off range.
Speaker Change: To sum up the quarter, I'm proud of our ability to deliver strong earnings despite macro headwinds.
Speaker Change: Our BNPL business for technologies continue to grow revenues at a healthy triple digit rate while achieving its first quarter of positive adjusted EBITDA. And I'm optimistic about our broader ecosystem strategy.
Speaker Change: We'll focus on meeting consumer needs through both leasing and BNPL products, driving more cross-cell opportunities, and strengthening the PROG brand across every touch point.
Speaker Change: Before we shift into our strategic priorities, I want to take a moment to talk about the broader environment and how it's shaping our updated outlook.
Speaker Change: Since we shared our initial guidance in February , it's become clear that the macro environment has a period.
Speaker Change: Inflation, tear of concerns, and broader uncertainty including the potential for a recession.
Speaker Change: are creating additional pressure on both our direct consumer and retail partner channels.
That said, we are not sitting still.
Speaker Change: We've successfully navigated through challenging environments before, and we know how to execute in periods of uncertainty.
Speaker Change: We're confident our ability to grow share by staying focused on what we can control.
Speaker Change: That includes making smart investments in marketing and technology and continuing to optimize how we decision and manage risk.
Speaker Change: Our Q1 results exceeded expectations, and that's a direct reflection of the team's discipline and ability to drive growth while maintaining a healthy portfolio.
Speaker Change: We continue to have confidence in our long-term strategy and expect to deliver sustainable, profitable growth.
Speaker Change: Our revised revenue outlook accounts for the GMV headwinds we are seeing, but we still expect our least portfolio performance to remain within our 6-8% targeted annual range.
Speaker Change: And as we move through the remainder of the year, we'll stay disciplined with SG&A spend and capital investments, remaining agile while making sure we prioritize areas that will have the greatest impact.
Speaker Change: We've shown time and again that we can operate effectively in changing environments, and we'll continue to adapt as the macro-conditions evolve.
Speaker Change: Brian will get into the specifics of our revised 2025 Outlook.
Speaker Change: Turning to our strategic priorities, starting with the grow pillar, we saw encouraging traction in Q1.
Brian Garner: Excluding the impact of big lots, we grew GMV and expanded our active door count by nearly 5% year-to-year.
Brian Garner: These results reflect the progress we're making with both existing partners and new accounts, and we're seeing early success from the initiatives we put in place to drive greater engagement across our retail network.
Brian Garner: Our direct consumer marketing efforts, including targeted life cycle campaigns and digital personalization, supported application volume, and increased repeat and reactivated active customer metrics at progressive leasing, up 3.8 and 5.5% respectively.
Brian Garner: On the digital front, our direct consumer offering PROG Marketplace had another solid quarter and continues to scale.
Brian Garner: It's allowing our customers to shop anytime, anywhere through our mobile app, which drives incremental traffic and sales for our retail partners and also supports GNV growth in our
Brian Garner: Marketplace, delivered double digit growth in Q1, and it is on track to drive over 75 million in GMV this year.
Brian Garner: Under our enhanced pillar, we made meaningful strides in improving both the customer and retailer experience.
Brian Garner: We launched a deeper e-commerce integration with a longstanding national partner and advanced several initiatives aimed at streamlining application flow and simplifying checkout, both of which are critical to improving conversion and reducing friction.
Brian Garner: As for our expand pillar, we're seeing momentum build across our multi-product ecosystem.
Brian Garner: Four technologies continues to gain traction, delivering triple-digit GMV growth for the sixth consecutive quarter.
Brian Garner: Products like 4 are helping us strengthen customer relationships while also opening new paths for growth.
Brian Garner: Importantly, our cross-ill initiatives are starting to show real traction and are contributing to progressive leasing GMV.
Brian Garner: As we look ahead, here's where we will be focused for the rest of 2025.
Brian Garner: We're staying close to the macro landscape and we'll respond quickly as our retail partners and consumers navigate the year.
Brian Garner: We'll continue our discipline approach to spending while making selective capital investments that position us to accelerate when the demand environment improves.
Brian Garner: On the strategic investment front, we're continuing to build out our direct consumer channel. That includes enhancing the PROG marketplace, improving the user experience on our website
Brian Garner: and advancing our personalization efforts to draw a customer acquisition, engagement, and retention.
Brian Garner: At the same time, we're investing in technology that supports our retail partners.
Brian Garner: Whether that's faster onboarding, smarter tools to serve leaf customers, or integrations that deepen our partnerships and make us easier to do business with.
Brian Garner: Finally, on the topic of capital allocation, our priorities haven't changed.
Brian Garner: We'll continue to invest in the business to fund growth, pursue strategic M&A opportunities and return access cash to shareholders through dividends and share repurchases.
Brian Garner: I want to close by emphasizing the strength of our business.
Even in periods with little or no incremental GMV growth
Brian Garner: We have generated significant cash flow, and we believe we will continue to do so through this cycle.
To be clear, growth remains a top priority.
Brian Garner: But our model is built to endure and we've shown that even in challenging environments we can control unit economics, align costs with revenue and continue to deliver a strong cash flow.
Brian Garner: With that, I'll turn it over to Brian for more detail on QUnresults and updated 2025 Outlook.
Brian .
Thanks, Steven. Good morning, everyone.
Brian Garner: As Steve mentioned, we seated our first quarter outlook on earnings and approximated the top end of our revenue expectations.
Despite the challenging macro environment we are operating in.
Brian Garner: This performance reflects the possible momentum we're seeing from last year's growth initiatives at Progressive Weasening, the strength for a portfolio management and impressive growth at 4.
Brian Garner: The strategic actions we executed throughout 2024, progressive leasing, help drive improvement in our grossly fast-up balance year-over-year.
Brian Garner: That said, by mid-quarter, we began to see signs that broader macroeconomic uncertainty was starting to weigh on consumer confidence.
Brian Garner: We believe, particularly for our core customer base, this weakening sediment contributed to a pullback and discretionary spending for the categories we serve.
Brian Garner: Shifting to Q1 results, their progressive leaching segments GMV came in at 402 million, which was down 4% from last year.
Brian Garner: The decline was primarily driven by the big lots of bankruptcy announced in 2024, lower approval rates in your year due to the appropriate tightening actions taken over the last week orders, and the broader challenges around the demand environment as consumer sediment overall is declined significantly.
Brian Garner: Despite these headwinds, as Steve mentioned, excluding the impact of big lots, GMV was up low to mid-single digits for the rest of the business, as our team continues to drive balanced share improvements within key retail relationships and makes progress on the number of active doors we serve.
Brian Garner: We also saw a meaningful contribution from our direct consumer as well as cross-selling marking efforts and the growth of the PROG Marketplace.
Brian Garner: Q1 revenues for a progressive leasing segment grew 5% from 620.6 million to 651.6 million, primarily driven by a larger portfolio size year-over-year throughout the period and higher levels of 90-day early purchase activity.
Brian Garner: More follow-up performance in Q1 for progressive leasing was better than expected.
Brian Garner: and that helped push earnings to above the high end of our outlook.
Brian Garner: The provision for least merchandise ride-offs was 7.4% and gross margin was 29.3% down about 112 basis points from last year.
Brian Garner: to offer a bit more clarity on the least portfolio performance.
Brian Garner: As we mentioned previously, we made proactive changes to our decisiony posture beginning in Q3 of 2024 and iterative improvements of the made sense, including during Q1.
Brian Garner: We encourage by what we have seen thus far, as the Lisa's originates after the deployment of these tightening efforts have shown the intended improvement in early performance indicators.
Brian Garner: We are watching early stage delinquencies and other payment behavior metrics to ensure alignment with our targeted 60% annual write-off range.
Brian Garner: We have a track record delivering consistent portfolio performance and remain confident in our ability to stay within this range for 2025.
Brian Garner: Looking ahead to ride off some Q2, seasonally, revenue with lower Q2 is tax season buyout subside.
Brian Garner: We expect write-offs as a percentage of least revenue for the second quarter to approximate the high end of our targeted annual write-off range of 60%.
Brian Garner: This is a function of the denominator of quarterly revenue decreasing sequentially as compared to the first quarter, rather than any further expected degradation of the numerator or right also overall.
Brian Garner: Progressive leasing SNA expenses as a percentage of revenue increased slightly year-over-year to 12.6% in Q1 of 2025, from 12.3% in Q1 of 2024.
Brian Garner: We're keeping a close eye on cost-discipline, while also continuing to invest in key areas like marketing, technology, and sales-enabling to support long-term growth.
Speaker Change: I'm sorry, I'm sorry, I'm sorry, I'm sorry, I'm sorry
Brian Garner: As we've demonstrated in the past, we will continue to seek operational efficiencies and manage our costs in line with revenue expectations.
Speaker Change: Adjusted EBITDA for progressive leasing decline from $74.1 million in Q1 of 2024 to $67.2 million in Q1 of 2025.
Pivoting to consultator results
Speaker Change: For Q1, Non-Dap EPS came in at 90 cents, exceeding the top end of our outlet, primarily do the strong urines and impart to a lower share count from our share repurchase program.
Q1 2025 consolidated revenues grew 6.6% to $684.1 million.
Speaker Change: compared to 641.9 million in the same quarter last year, driven by a larger lease portfolio coming into 2025 and higher 90-day purchases at the Barrest of Leation segment, combined with triple-digit revenue growth at four technologies.
Speaker Change: Consolidated Adjust B-Badal with $70.3 million compared to $72.6 million in the year ago period.
Speaker Change: On a balance sheet, we ended the first quarter with 213.3 million in cash and 600 million gross debt, resulting in a net leverage ratio of 1.42 times our trellis 12 months adjusted
We are under on our $350 million dollar revolver.
Speaker Change: We also return capitalist shareholders through our dividend and share buyback program, paying a quarterly cash dividend of $0.13 per share and repurchasing $936,000 shares of Comestock at a weighted average price of $27.87 per share.
Speaker Change: We currently have $335.2 million remaining under a $500 million share of repurchase program.
Speaker Change: To summarize, I'm pleased with the first quarter performance across both revenue and earnings.
Speaker Change: It was a solid start of the year and I'm proud of how our teams executed [inaudible]
Speaker Change: We took proactive steps to manage portfolio performance and we'll continue to adjust as needed based upon early indicators and insights from our dynamic decision models.
Speaker Change: We've consistently shown we can adjust quickly and effectively in challenging environments and we expect to carry that same approach forward as we move through 2025.
Speaker Change: Looking ahead, we have revised our full year 2025 outlook as reflected in this morning's
Speaker Change: We've attempted to reflect the increase in macro uncertainty and declining consumer confidence that has emerged since we issued our original outlook in February .
Speaker Change: These headwinds are weighing on demand in our key leaseable categories like furniture, electronics, mattress, and jewelry.
Speaker Change: At this point, it's difficult to predict when conditions will normalize.
Speaker Change: However, we believe we can continue gaining balance of share in this environment by executing well and leading into areas we can control such as the health of our portfolio and S-GNA.
Speaker Change: Even with the revised top line expectations, we continue to focus on driving profitable GMV and we expect our least portfolio performance to stay within our targeted 60% annual
Speaker Change: We will remain disciplined on spending, but as noted in February , progressive leasing's SNA is expected to deliver slightly year over year as we continue specific investments
Speaker Change: Our revised Consolidate Outlook for 2025 calls for revenue in the range of 2.425-2.5 billion, adjusted EBITDA on the range of 245-265 million, and non-GAAP EPS in the range of $2.90 to $3.30.
Speaker Change: This outlook assumes a difficult operating environment with a soft demand for consumer, durable goods, no material changes in the company's current decisioning posture, an effective tax rate
Speaker Change: for non-GAAP EPS of approximately 28% and no impact from additional shared
Speaker Change: Additionally, the company is not assumed every session, which among other things...
Speaker Change: Would likely be a company by a rise in the unemployment rate.
Speaker Change: We're staying focused on what we control and remain committed to creating long-term value for shareholders.
Our priorities haven't changed.
Speaker Change: We're helping our retail partners drive incremental sales, they're many focused on our ecosystem strategy, managing our leaf portfolio responsibly, and continuing to invest in areas that support growth.
Speaker Change: At the same time, we're being disciplined with how we manage expenses.
Speaker Change: Our performance over the past few years proved the strength and resiliency of our business model.
even in a tougher consumer environment.
Speaker Change: With that, I'll turn the call back over to the operator for questions. Operator?
Speaker Change: Thank you. As a matter to ask the question, please press star 11 on your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Bobby Griffin with Raymond James. Your line is now open.
Good morning, buddy. Thanks for taking my questions.
Speaker Change: The first time I wanted to touch on maybe was just kind of the trade down environment, separate out the retail soft softness across the durable categories that I think we've talked about. But what are you seeing today, versus three months ago, versus six months ago, and actually trade down? You know, one would think with, um...
Speaker Change: The retail environment, and maybe some, you know, more expensive stuff coming on tariffs that you could see a little acceleration trade down. Has that been stable? Just anything there to help kind of unpack the difference between just general retail softness as well as what we're seeing trade down?
Speaker Change: You know, comp against last year when we really started to see the trade down so from a I can't speak for the prime providers, but what we're observing and what our experience is from a. [inaudible]
Speaker Change: You know, credit stock standpoint is we're not seeing, let's say additional tightening, but we're not seeing any evidence that that there's been additional. You know, uh...
Speaker Change: You know approvals up this back from us in the retail point of sale waterfalls. I think that the so the tray down is still there it's probably a little more muted than it was in the in the back half of 2024. I think the retail softness that you referred to in the. Yeah.
Speaker Change: You know, hesitation if you will is certainly the larger macro force, but the top of the funnel is still I would say more open today than it was last year at the same time.
Speaker Change: Okay, and then on the retail side of things, the softness, I mean, we've kind of, you know, all this year on the call kind of saw some of it in February . It seems like March and April got a little bit better. I wouldn't call it great but maybe bounce a little off the February low. It's just.
Speaker Change: Anything there on just the progression of how you saw things, I mean you guys with tax refund season it becomes a little bit more different than just the general retail trends, but is there any hope that things have firmed up a little here of late in the last couple weeks or is it still pretty weak across all the categories?
Speaker Change: Yeah, I mean, there's a lot of a lot of data out there and you write on it about
Traffic Trends and, you know, Year of Year.
Speaker Change: I guess just trends. You have to kind of really dig into that data and parse it on...
Speaker Change: What does it look like for the prime customer versus the lower income consumer?
Speaker Change: Even just general consumer spending trends where you hear some of the banks say that
Speaker Change: The consumer's still spending and card data show plus 5% year-to-year, whatever that.
Speaker Change: that is less so in big ticket and even I think less so when you drill down into lower income. So we're as we said in the remarks, the quarter start off pretty encouraging. And then when the. Yeah.
Speaker Change: There's a downshift in sentiment and it was reflected in activity. We haven't really seen any inflection point or not a continued deterioration, I would say, but not a rebound or anything.
Speaker Change: Okay, that's helpful. Then one quick model and one Brian is the $30 million headwind of GNV that you guys called out for the lost customers. Is that relatively, you know, consistent across the four quarters of this year?
Speaker Change: Yeah, I think that's a fair way to think about it.
Speaker Change: You know, obviously Steve gave, I think on the Q4 call, some...
Ralph Annual Range.
He was 130 to 150 million for that customer and so.
Speaker Change: You know, there's obviously some level of seasonality inherent in the business overall, but I think you can look at our overall G&V and kind of model that out, but I think you're roughly in the ballpark. I would just add on that we did.
Speaker Change: Bobby, I would just add on that, we did have some GMV in Q1 from the execution of the liquidation sales that is over now and so there will be a slight step up in Q2 but from a headwind standpoint but then that stays fairly consistent in the back half.
Speaker Change: Makes sense. I appreciate the details, best of luck you're navigating a challenging environment. Thank you guys.
Speaker Change: Thank you. Our next question comes from the line of Brett Thomas with Keybank Capital Markets. Your line is now open.
I can want it.
Speaker Change: as they flow to your retail partners and then ultimately onto your customers on the one hand that we think that it could certainly pressure spending power for consumers and be a challenge and headwind on the other hand, you know, higher prices for durable goods.
Speaker Change: Certainly may push for the need for more use of least sound. And so just curious in the last few weeks, as you've been talking to your retail partners, what are you hearing and how do you think your partnership with them may play out going forward here?
Speaker Change: Yeah, thanks, Brad. And you're right. I mean, we've kind of got...
Speaker Change: Two attack vectors here. We've got the impact and the pricing actions from our retail partners and then we have behavioral impact on our end consumers and as you pointed out and we've talked about in the past.
Speaker Change: You know, modest increases in ticket or average selling price, you know, could actually be a positive for us from a, you know, bigger ticket is actually better from a dollars of marginal cash contribution, but also that incremental buyer might need a payment plan.
Speaker Change: But price shocks and demand destruction are certainly not good and so it really depends on where on that continuum or that spectrum we end up and I think that's going to vary. Well it varies by the day or even the hour.
Speaker Change: If you just get caught up reading the headlines, but it will also vary by the vertical and the category.
Speaker Change: So, we're in, we have great relationships with our top partners and we talk to them a lot and we...
are...
Speaker Change: You know, privy to some of their plans that are not necessarily public, so we're not going to break news here, but we're staying in contact but certainly
Speaker Change: The large magnitude of potential tariffs are causing uncertainty and I think that currently the behavior will impact on our consumer and the somewhat kind of...
Speaker Change: Frozen consumer is more of an impact than actually what the prices are going to be. So we'll see how that plays out and if there's any kind of relief or pause or rollback or negotiation which I expect.
Speaker Change: There'll be all of those things, but it has caused a volatile and uncertain situation now that we're all just trying to navigate through.
Speaker Change: I appreciate that. Thank you. And if I can ask follow up just on on how things are playing out with with big lots.
Speaker Change: Demise here. Curious what you're seeing from some of the legacy big lots, customers. You said at GMV Gross, excluding big lots. Are you still growing new customers? Is this because you're doing big and very successful transferring old big lots customers to other retailers?
Speaker Change: Just any more color on how this is kind of flowing through the system since this was such a big partner for you would be greatly appreciated thanks.
Yeah, I mean, we obviously have a very...
Speaker Change: You know, strategic marketing plan to keep the previous big lots of customers in the family, if you will, and have our other partners.
Speaker Change: Benefit from our connectivity to those customers, and that is playing out. We are seeing, well, we're not only seeing but we're. [inaudible]
Speaker Change: Actively directing our database of big lots of customers into other partners, whether that be in a similar vertical, another furniture, or...
Speaker Change: Mattress Retailer, or it could be in a different vertical with an electronics and appliance purchase or lease. So we're seeing that, we're tracking it, we have an internal goal. Obviously not every lease customer repeats.
Speaker Change: You know, every year that we do have high repeat, but it's generally around 18 months.
Speaker Change: But we do have customers from last year and the year before that we're reaching out to and trying to reactivate and so we're having some success there and the folks that are in the system are benefiting from that.
and we'll continue to do that.
Great. Thank you, Steve.
Speaker Change: Thanks, bro. Our next question comes from the line of Kyle Joseph with Steven. Your line is now open.
Hey, good morning, guys. Thanks for taking my questions.
Speaker Change: I just want to talk about kind of the shifts in macro and, you know, obviously you guys have covered it, but to get into it, just want to kind of get the sense.
Speaker Change: It's primarily more on the demand side like have you seen any kind of changes in terms of credit, you know it's probably too early for that but just based on your commentary it sounds like credit actually outperformed in the quarter so no impact there is that am I reading that the right way?
on the on the on the write-offs you mean?
Speaker Change: Yeah, just in terms of kind of really, you know, how credit performance has changed versus mid-February, it sounds like the big change to guidance is really stemming from it.
Yeah, I think that's right. Certainly the impact of the
Speaker Change: Lower GMV and early GMV has a bigger impact on the current year than late GMV obviously, but from a portfolio standpoint, we made some adjustments, iterative adjustments.
Speaker Change: FPVs, first pay balances or early four week delinquencies.
Speaker Change: The pools are performing as we would expect and kudos to our decision science team for pulling the appropriate levers and really demonstrating once again that this short duration portfolio, we have our hands firmly on the wheel and in control of it. So from the story is not really a.
Speaker Change: A portfolio performance story. It is a demand story, and that could be in the form of...
Speaker Change: Just application volume or even conversion after the approval rates are down here every year, but that was expected and we knew that and it was baked into our outlook.
Yeah.
Thank you.
Speaker Change: Thank you for your time, and I'll see you in the next video.
Speaker Change: Hoang Nguyen, your line is open. Please check your mute button.
Speaker Change: Thank you. Our next question comes from the line of John Hecht with Jeffries. Your line is now open.
John Hecht: Thank you for taking my question. Actually, most of my questions have been asked and answered, but I guess one question I have is maybe discuss the American signature ramp. [inaudible]
John Hecht: You know, I know it is a, you know, a topsy-turvy environment, but maybe talk about the pipeline of new retailers and kind of what the environment is around that.
Yeah, I mean, um...
John Hecht: Without getting in too much specifics, the ASI or American signature is going very well. They're a great partner.
They are bought into the program, and we have-
John Hecht: Great connectivity from the top of the bottom and our training and stores and...
John Hecht: and as we talked about in previous calls, they had LTO in the past, so it wasn't a starting from a standing start education process, a little bit of a different motion, but we're really pleased with where we are and what we think we can accomplish this year with them, even in a...
John Hecht: You know, a soft traffic and demand environment as it relates to
Well, just pipeline, you know, as we've talked about before, the...
John Hecht: The challenging environment is a conducive environment for having pipeline conversations.
John Hecht: You know, clearly we don't call it any specific logo kit.
John Hecht: Publicly until it's actually across the goal line, but we're encouraged by some of the conversations we're having and...
John Hecht: We think that we are in a great position to help more and more retailers, you know, just...
Well...
John Hecht: Safe Sales, and we can drive incremental traffic to them during this interesting and challenging time.
Hello, I appreciate the car, thanks very much.
Thank you. Bye.
Thank you.
Speaker Change: Our next question comes from the line of Anthony Chukumba with loop capital markets. Your
Anthony Chukumbo: Good morning. Thanks for taking my question. So you talked about credit tightening and a lower lease approval rate. Can you just give us kind of order of magnitude in terms of the reduction and a lease approval rate? And also maybe you can trust that with, um,
Police Application Volume
. . . . . . .
Speaker Change: Yeah, so the approval rate, and I would start by saying the approval rate is a dynamic metric because we have taken some tightening actions and the result is that the approval rate throughout the quarter was kind of 300 to 400 basis points lower than the same period a year ago, but...
It's not...
Speaker Change: I'm accurate to just assume that all of that is due to the tightening actions that we took. Some of it is due to channel shift because
Speaker Change: We have just lower approval rates online than we do in-store. Some of that is due to just the quality of the application coming in is a little bit...
Speaker Change: Worse this year than last year and so even in the same algorithm or the same model the approval rate would be impacted lower so there's a lot of variables that go into the resulting approval rate but the headline number is it's about 300 to 400 basis points lower.
on the application volume side.
Speaker Change: I mean, we did have application growth excluding big lots. So, if you take out the impact of big lots application growth, but we did see some conversion.
Degradation, and that we believe through...
Speaker Change: Talking to customers and talking to our sales folks and that are out there in the stores and the retail sales says it's just maybe a little less.
Speaker Change: Purchasing Ted from an applicant. Now that doesn't mean that that's going to be...
Speaker Change: That conversion won't come with a lag because our approvals are open for 90 days, but we did see...
a decline in conversion, post-approval, even…
on the ones that we did approve, in the quarter.
Speaker Change: Got it. And then just one quick file, it's just a clarification. You see the gross lease assets were up 6.6% year over year heading into the second quarter. I just wanted to clarify that.
Speaker Change: They're up 6.1 entering the quarter. So that was that Jan 1. Yeah, Jan 1 and they finished, they finished just a couple percent.
Speaker Change: And that's going to be, you know, a dynamic of, you know, obviously the man headwinds that we're talking about, and also 98 buyouts were slightly higher to you over here.
Speaker Change: Okay, so at the end of the quarter, there were a couple, you know, called two two percent year-rear set. Yeah, just a hair over two percent. Got it. Okay. Thank you.
Kyle Joseph: Thank you. Our next question comes from the line of Kyle Joseph with Steven. Your line is now open.
Kyle Joseph: Good morning again, I started about that. Anyway, just one follow-up for me and apologies if you covered it, but just want to talk about the kind of different dynamics between four and the progressive business, you know.
Kyle Joseph: It looks like guidance that other at least in primarily four was maintained, you know, is that a function of kind of a different customer, kind of a different merchandise vertical, you know, what are the different dynamics there and how are they being impacted by macro differently?
Yeah, thanks Kyle. Yeah, we're excited about the four business. It's...
Kyle Joseph: as we said, grown GMV triple digits for six consecutive quarters, and then importantly achieved.
The first quarter of-
Kyle Joseph: you know, basically positive adjusted EBITDA and positive earnings here in Q1. So really happy with the trajectory. It's going to more than double its GMV for the full year 25. And to your point, it's not, I mean, it does serve a different customer, but it also serves an overlapped customer with the leasing, with the leasing segment.
Kyle Joseph: The average order value is $120 and there's apparel and cosmetics and other consumables and so...
Kyle Joseph: It is a different purchase motion and so I think that it has not been impacted as much by, you know, as as the big ticket items.
Kyle Joseph: The Durable Goods. From a certainly break fix on Durable Goods and Replacement are happening, it's the kind of aspirational purchase that might be...
Kyle Joseph: more impacted by being on hold, but four has really good demand signals exceedingly doing great in the app store lots of organic.
Kyle Joseph: Momentum and we're growing the base in a very healthy way with new customers and a lot of repeat customers continuing to transact multiple multiple times a year. So, you know, we're very pleased with the trajectory of four and look forward to.
Kyle Joseph: Continue to report to you guys how it's going over there.
Got it. Thanks for taking my question.
Kyle Joseph: Thank you. Our next question comes from the line of Wang Nguyen with TD Cowan. Your line is open.
Wong Yuen: Hi guys, and I'm sorry for the hiccup earlier. Thanks for taking my questions. Maybe I want to pack on the guidance a little bit. I mean, it looks like your GMV in one queue came in maybe about four points below what you previously guided. So, I mean, I just want to kind of, you know,
Wong Yuen: diving into the guidance. I mean, how much of the guide down? I guess it's because of that lower GMV in one queue and I guess lower exiting gross leads are set versus, you know, how much, if that is further incremental weakening for the rest of the year versus the baseline.
Wong Yuen: and maybe you can talk about the GMB Outlook for the rest of the year and maybe for 2Q and have a follow-up.
Brian Garner: Yeah, Hoang Nguyen, this is Brian , and I'll start, and Steven, certainly overlay any commentary. I think...
Speaker Change: You know, how prolonged the impact of these Matt headwinds will last, I think, as part of the uncertainty.
Speaker Change: But, you know, GMV headwinds early in the year certainly have a portfolio business, has a more pronounced impact on the PNL than say missing it in Q4 and so we've attempted to incorporate
Speaker Change: You know, any other areas of uncertainty I think we talked a great deal about the credit side and how we're feeling about the portfolio performance.
and that's an area that ...
Speaker Change: I understand there's a lot of uncertainty around there, but I think our track record and the team that we have and the visibility we feel like we have
Speaker Change: into keeping that credit side within that 60% range. I think we're comfortable there. And then on the SDNA side, I think we're
Speaker Change: We feel like that's a controllable element that we have visibility into. So really to answer your question, it was a G-M-V, particularly front half of the year G-M-V that were the drove, the revision in guidance.
as we, as we kind of, uh...
Steve Michaels: to work through the motions. Steve, if you have anything to add more broadly about the... No, you covered it. We certainly have a known known which is the GMV that came in during Q1.
Steve Michaels: and it's difficult, more difficult than normal in this environment to predict GMV for the rest of the year.
Steve Michaels: You know, we can hope that that things get more stable and recover, but you know hope is not a strategy and hope doesn't doesn't fill a cell in a spreadsheet to create a to create a forecast. So we
Steve Michaels: We took a shot at what we thought the GMV would be for the rest of the year. It's important to note that we did grow GMV X big lots.
Steve Michaels: We are our major partners. We're up here every year, which is good because my guess is that there on their their headline business was was not up.
We continue to gain balance and share.
Steve Michaels: But admittedly, we weren't up as much as we expected, we would be in Q1 and so all those factors baked into the revised view of the year, which admittedly has more uncertainty, you know, I'd say today than it might have had in previous years.
Steve Michaels: The only one thing that I'd add, and just make sure that it's understood. We mentioned this in prepare remarks. We think about the trajectory of credit throughout the rest of the year on the right offside.
Steve Michaels: That's really a function, not so much as a degradation in any of the trends that we're seeing, but it's just a...
Steve Michaels: Function of the Bayot Revenue that we have here in Q1 and the seasonally high.
Steve Michaels: Q1 Revenue that will step down in Q2 and so it's a denominator dynamic.
Steve Michaels: More than anything, the line item for write offs on the P&L will actually should be flat that may be slightly down as we is going to Q2 and then the back and the Q2 should be the high watermark for write offs.
Steve Michaels: and we should see some relief if that pig moves through the Python on the old portfolio or the portfolio that still exists prior to the decision in action, so that's how we're saving up so it won't be a...
Speaker Change: You know, we won't be surprised when we see just a slide up tick in in right off in Q2 and then and looking at for that to be the high water mark Got it, and maybe I mean the GMB outlook for took you in for the rest of the year sorry if I missed that earlier so
Speaker Change: No, you didn't miss it. We did not provide it. I mean, it's a function of our lack of clarity. So we're not providing a GMV guide for the rest of the year.
We got it.
Speaker Change: And maybe the last one for me, I mean, in a time like this, can you discuss about, you know, what?
Speaker Change: Kind of conversations you're having with your partners. I mean, I guess I mean, you can take the view that the view leads to now is something that would tremendously help with affordability, but you know, at the same time this tariff thing makes this conversation sort of like less of a priority for them. So can you talk about the discussion that you're having with I guess your pipeline. Bye.
Speaker Change: Yeah, I mean, well, with our current partners, I can tell you the discussions are very, very positive and partnership oriented. We alluded to without naming the retailer in the prepared remarks, but we did get across the goal line, an e-commerce integration with a long time national partner, and it's actually outperforming our expectations. So we look forward to continued enhancements to that and helping them continue to continue to continue to work with our current partners.
Speaker Change: You know, I guess move out the productivity curve and do more with us and we become a bigger and deeper partner for them.
Speaker Change: So, and those, you know, that's one instance of these initiatives that we've been talking about for the last two years that have been getting across the goal lining, getting prioritized by our partners. So, really, really plays with the team's efforts and results actually, not just efforts in that regard. And I talked about the pipeline earlier.
Those conversations are positive, and I would say that
Speaker Change: that, yes, tariffs are a, I don't know if it's a distraction, but it's certainly taking up a lot of mind share and strategic planning about how they're going to react and how they're going to adjust and consume and see who along the value change shares the pain.
Speaker Change: But we can be viewed as a potential solution for some of the pain that's being felt and so we're certainly leaning into that and trying to offer our assistance certainly.
Got it, thank you, and best of luck.
Speaker Change: Thank you. Thank you. And I'm currently Sean, no further questions at this time. I like to turn the call back over to Steve Michaels for closing remarks.
Steve Michaels: Thank you and thank you all for joining us this morning and your continued interest in PROG Holdings.
Steve Michaels: We delivered another good quarter and it started to the year, but obviously we're currently dealing with an uncertain macro backdrop, but it's important to remember that the business [inaudible]
Steve Michaels: We expect with continued great execution, we'll successfully navigate this one as well. So thanks again and we look forward to updating you on our progress in July .
Speaker Change: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Goodbye.