PROG (US:PRG)2022-10-26 18:50Financial Data and Key Metrics Changes - Q3 revenue for PROG Holdings was $625.8 million, a decrease of 3.8% compared to $650.4 million in the year-ago period [24] - Adjusted EBITDA for Q3 was $65 million, or 10.4% of revenues, down from $93.6 million, or 14.4% of revenues in the same period last year [24] - GAAP diluted EPS was $0.32, while non-GAAP EPS came in at $0.68 [25] - The accounts receivable provision increased to $104.3 million for Q3 2022 from $61.5 million for Q3 2021, reflecting higher delinquencies year-over-year [21] Business Line Data and Key Metrics Changes - Q3 GMV for the Progressive Leasing segment was down 11.3% year-over-year, primarily due to macroeconomic factors and tighter decisioning [20] - Progressive Leasing revenue was $606.6 million in Q3, a 4.5% decrease from $635 million in the year-ago period [21] - Progressive Leasing write-offs were $43.5 million, or 7.2% of revenues, compared to $34.2 million, or 5.4% of revenues in the year-ago period [22] Market Data and Key Metrics Changes - E-commerce accounted for 16.5% of total Q3 GMV, up from 14.5% for the same period last year [10] - Retail traffic remains down, with several large partners posting double-digit negative comps [12] - The company experienced weak consumer demand across most retail verticals, contributing to the negative GMV comp [11][13] Company Strategy and Development Direction - The company is focused on increasing its balance of share with key retailers and expanding its e-commerce partnerships [10][11] - Management emphasized the importance of technological innovations and pipeline conversions to mitigate macroeconomic headwinds [15][17] - The company has lowered its full-year 2022 financial outlook due to ongoing challenges in the macro environment [26] Management's Comments on Operating Environment and Future Outlook - Management noted that the operating environment remains challenging, with expectations for Q4 GMV to be similar to Q3's year-over-year percentage decline [16] - The company is optimistic about converting more retail partners from its pipeline over the next several years [11] - Management highlighted the strength of the business model, demonstrating effective portfolio management and cash flow generation even in a difficult environment [18] Other Important Information - The company ended September with a cash position of $222 million and has reduced its outstanding share count by 27% since the beginning of 2021 [16][25] - During Q3, the company repurchased 588,000 shares, with $373.5 million remaining under its $1 billion share repurchase program [25] Q&A Session Summary Question: Impact of GMV Deceleration - Management indicated that GMV pressures were primarily due to macroeconomic weakness and decisioning changes made throughout Q2, with more than 50% of Q3's decline attributed to decisioning [29][30] Question: Prospects for GMV Recovery - Management expressed that recovery in consumer demand is difficult to predict, but they remain encouraged by their ability to execute growth initiatives despite the challenging retail environment [31][34] Question: Competitive Environment - Management noted that the challenging environment provides opportunities to demonstrate the strength of their business model and to capture market share from smaller competitors facing funding issues [35][36] Question: Accounts Receivable Provision Dynamics - Management explained that the accounts receivable provision is still heavily weighted towards the old portfolio, but they expect relief as newer decisioning practices take effect [41][42] Question: Write-off Rates and Future Expectations - Management stated that they expect write-offs in Q4 to be similar to Q3 levels, aiming for the high end of their annual target range of 6% to 8% [76][77] Question: Retail Partner Pipeline - Management confirmed that the current retail environment is conducive for their flexible payment solutions, and they are optimistic about converting their pipeline into partnerships [51][52] Question: Operating Expenses and Flexibility - Management indicated that while SG&A expenses may tick up in Q4 due to seasonal factors, they maintain a highly variable cost structure that allows for flexibility [66][68]