PROG (PRG) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements The company's financial statements for the period ended June 30, 2025, show a decrease in total assets to $1.45 billion, driven by lower lease merchandise balances. Net earnings for the first six months increased to $73.2 million from $55.7 million year-over-year, with diluted EPS rising to $1.78 from $1.26. Cash from operations significantly increased to $279.8 million, contributing to a higher cash balance of $222.0 million Condensed Consolidated Balance Sheets As of June 30, 2025, total assets were $1.45 billion, a decrease from $1.51 billion at year-end 2024, primarily due to a reduction in Lease Merchandise. Cash and cash equivalents more than doubled to $222.0 million. Total liabilities decreased to $785.9 million, mainly from debt repayment, while total shareholders' equity increased to $668.7 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and Cash Equivalents | $222,027 | $95,655 | | Lease Merchandise, Net | $526,303 | $680,242 | | Total Assets | $1,454,596 | $1,513,767 | | Liabilities & Equity | | | | Debt, Net | $594,212 | $643,563 | | Total Liabilities | $785,923 | $863,486 | | Total Shareholders' Equity | $668,673 | $650,281 | Condensed Consolidated Statements of Earnings For the second quarter of 2025, the company reported net earnings of $38.5 million, or $0.95 per diluted share, compared to $33.8 million, or $0.77 per diluted share, in Q2 2024. For the six months ended June 30, 2025, net earnings were $73.2 million, a significant increase from $55.7 million in the prior-year period, driven by higher total revenues and controlled expenses Key Earnings Data (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $604,663 | $592,161 | $1,288,751 | $1,234,031 | | Operating Profit | $60,724 | $55,678 | $117,045 | $95,495 | | Net Earnings | $38,483 | $33,774 | $73,201 | $55,740 | | Diluted EPS | $0.95 | $0.77 | $1.78 | $1.26 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, cash provided by operating activities increased to $279.8 million from $191.1 million in the prior year. Cash used in investing activities was $34.8 million, primarily for investments in loans receivable. Financing activities used $118.7 million, mainly for debt repayment ($50.0 million) and share repurchases ($51.8 million). The period ended with a net increase in cash of $126.4 million Six Months Ended June 30 Cash Flow Summary (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Cash Provided by Operating Activities | $279,820 | $191,127 | | Cash Used in Investing Activities | ($34,789) | ($17,822) | | Cash Used in Financing Activities | ($118,659) | ($78,587) | | Increase in Cash and Cash Equivalents | $126,372 | $94,718 | Notes to Condensed Consolidated Financial Statements The notes detail the company's business structure, comprising Progressive Leasing (lease-to-own), Vive Financial (second-look credit), and Four (BNPL). Key disclosures include segment performance, where Progressive Leasing remains the largest contributor to revenue and profit. The company settled a cybersecurity lawsuit for $3.3 million, fully covered by insurance, and is cooperating with an FTC inquiry. A subsequent event notes the enactment of a law making 100% bonus depreciation permanent, which is expected to reduce future cash taxes - The company operates through two main reportable segments: Progressive Leasing (point-of-sale lease-to-own) and Vive Financial (second-look revolving credit). It also includes Four Technologies, a Buy Now, Pay Later (BNPL) company[15] - For a 2023 cybersecurity incident, the company reached a settlement of $3.3 million, which will be fully paid by its cybersecurity insurance[89] - In Q3 2024, the FTC requested information to evidence compliance with a 2020 settlement. The company is fully cooperating with this request[86] - On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, making 100% bonus depreciation permanent, which is expected to reduce the company's cash paid for taxes[109] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a challenging macroeconomic environment, including the impact of the Big Lots bankruptcy and inflationary pressures on consumers. Despite this, Q2 2025 revenues grew 2.1% to $604.7 million. Gross Merchandise Volume (GMV) for the core Progressive Leasing segment declined 8.9%, but this was offset by strong growth in the Vive (+23.0%) and Other (+166.5%) segments. The company improved its cash position significantly, ending the period with $222.0 million in cash after repaying debt, buying back shares, and paying dividends Business and Macroeconomic Overview The company operates in a challenging macroeconomic environment marked by inflation and high living costs. The bankruptcy of major POS partner Big Lots in late 2024 negatively impacted Progressive Leasing's GMV. In response to elevated delinquencies, the company tightened its decisioning, which improved portfolio health but constrained GMV growth in the first half of 2025 - The company is facing a challenging macroeconomic environment, with the bankruptcy of Big Lots, a major POS partner, unfavorably impacting GMV, revenue, and earnings in H1 2025[117] - The company tightened its decisioning posture in early 2025 to manage elevated customer delinquencies, which benefited portfolio performance but had an unfavorable impact on GMV[118] Key Operating Metrics In Q2 2025, total Gross Merchandise Volume (GMV) increased 11.2% year-over-year to $607.5 million. This was driven by a 23.0% increase in Vive's GMV and a 166.5% surge in the 'Other' category (primarily Four), which offset an 8.9% decline in the Progressive Leasing segment. The active customer count for Progressive Leasing decreased, while Vive and 'Other' saw increases Gross Merchandise Volume (GMV) - Q2 (in thousands) | Segment | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Progressive Leasing | $413,872 | $454,508 | (8.9)% | | Vive | $43,990 | $35,757 | 23.0% | | Other | $149,632 | $56,139 | 166.5% | | Total GMV | $607,494 | $546,404 | 11.2% | Active Customer Count (in thousands) | Segment | As of June 30, 2025 | As of June 30, 2024 | | :--- | :--- | :--- | | Progressive Leasing | 802 | 834 | | Vive | 93 | 85 | | Other | 271 | 127 | Results of Operations For Q2 2025, total revenues increased 2.1% to $604.7 million, and net earnings rose 13.9% to $38.5 million. For the first six months, revenues grew 4.4% to $1.29 billion, and net earnings increased 31.3% to $73.2 million. The growth was driven by the Vive and Other segments. A key factor in improved profitability was the absence of restructuring expenses, which totaled $20.9 million in the first half of 2024 Consolidated Results - Six Months Ended June 30 (in thousands) | Metric | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $1,288,751 | $1,234,031 | 4.4% | | Operating Profit | $117,045 | $95,495 | 22.6% | | Net Earnings | $73,201 | $55,740 | 31.3% | - Restructuring expenses were zero in H1 2025, compared to $20.9 million in H1 2024, significantly contributing to the increase in operating profit[149] - The provision for loan losses increased by $8.7 million in H1 2025 compared to H1 2024, primarily due to the growth of the Four (BNPL) and Vive businesses[147] Liquidity and Capital Resources The company's financial position strengthened, with cash increasing by $126.3 million to $222.0 million in the first half of 2025. This was supported by strong operating cash flow of $279.8 million. Capital was deployed for a $50.0 million repayment on the revolving facility, $51.8 million in share repurchases, and $10.4 million in dividends. As of June 30, 2025, the company had $350.0 million available under its revolving credit facility and was in compliance with all debt covenants - Cash and cash equivalents increased by $126.3 million during the first six months of 2025, reaching $222.0 million[155] - During H1 2025, the company used cash for a $50.0 million repayment of its revolving facility, $51.8 million for share repurchases, and $10.4 million for dividends[159] - As of June 30, 2025, the company had $600.0 million in gross indebtedness from Senior Notes and $350.0 million of availability under its undrawn Revolving Facility[156] Quantitative and Qualitative Disclosures About Market Risk The company reports minimal market risk. As of June 30, 2025, there were no outstanding borrowings under its variable-rate Revolving Facility, thus a hypothetical 1.0% change in interest rates would not affect interest expense. The company does not use significant market risk sensitive instruments for hedging purposes - As of June 30, 2025, the company had no outstanding borrowings under its variable-rate Revolving Facility, exposing it to minimal interest rate risk[177] - The company does not use any significant market risk sensitive instruments for hedging or speculative purposes[178] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025. The company has begun a multi-phase implementation of a new enterprise resource planning (ERP) system, which has led to modifications and the implementation of new internal controls over financial reporting. No other material changes to internal controls were reported for the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the quarter[181] - The company is implementing a new enterprise resource planning (ERP) system, which has resulted in changes to its internal control over financial reporting[182] PART II. OTHER INFORMATION Legal Proceedings The company is party to various legal proceedings arising in the ordinary course of business. It does not believe any outstanding proceedings will have a material adverse impact. Further details are provided in Note 4 of the financial statements - The company does not currently believe that any outstanding legal proceedings will have a material adverse impact on its business, financial position, or results of operations. For more details, see Note 4[184] Risk Factors There are no updates to the company's risk factors from those previously disclosed in the 2024 Annual Report on Form 10-K - The company reported no updates to its risk factors from the 2024 Annual Report[185] Unregistered Sales of Equity Securities and Use of Proceeds During the second quarter of 2025, the company repurchased 899,800 shares of its common stock at an average price that can be inferred from the monthly data. As of June 30, 2025, approximately $309.6 million remained available for future repurchases under the board's authorization Share Repurchase Activity - Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 100,000 | $25.87 | | May 2025 | 525,000 | $28.57 | | June 2025 | 274,800 | $29.36 | | Total | 899,800 | N/A | - As of June 30, 2025, the maximum dollar value of shares that may yet be purchased under the plan is $309,573,987[186] Other Information During the second quarter of 2025, no directors or executive officers adopted, modified, or terminated any Rule 10b5-1 trading plans or any other non-Rule 10b5-1 trading arrangements - No directors or executive officers adopted, modified, or terminated any Rule 10b5-1(c) trading plans during the three months ended June 30, 2025[189] Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from the Chief Executive Officer and Chief Financial Officer as required by the Sarbanes-Oxley Act, and the XBRL data files - Filed exhibits include CEO and CFO certifications pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act, as well as XBRL data files[190]