PROG (US:PRG)2025-04-23 17:43Financial Data and Key Metrics Changes - In Q1 2025, consolidated revenue reached $684.1 million, a 6.6% increase year over year, driven by a larger lease portfolio and higher ninety-day purchase activity [10][40] - Adjusted EBITDA was $70.3 million, and non-GAAP EPS was $0.90, both exceeding the high end of the company's outlook [15][40] - The lease portfolio balance increased by 6.1% year over year as of December 31, 2024, compared to a 5.2% decline at the same point in 2023 [14][40] Business Line Data and Key Metrics Changes - Progressive Leasing's GMV for Q1 was $402 million, down 4% from the previous year, primarily due to the bankruptcy of a large retail partner and tighter lease approval rates [34][10] - Revenue for the Progressive Leasing segment grew 5% from $620.6 million to $651.6 million, driven by a larger portfolio size and higher levels of ninety-day early purchase activity [35] - Four Technologies, the BNPL platform, achieved triple-digit revenue growth and its first quarter of positive adjusted EBITDA [17][39] Market Data and Key Metrics Changes - The company observed a decline in consumer confidence due to ongoing economic volatility, impacting discretionary spending, particularly in big-ticket categories [11][18] - Despite the challenges, the company reported low to mid-single-digit GMV growth when excluding the impact of the bankruptcy of a major retail partner [12][34] - The company noted that tax refunds were comparable to the previous year, but financial stress continues to affect many households [11][18] Company Strategy and Development Direction - The company is focused on executing its ecosystem strategy, which includes both leasing and BNPL products, to meet consumer needs and drive cross-sell opportunities [17][28] - Strategic investments in marketing and technology are prioritized to optimize decision-making and manage risk [19][28] - The company aims to maintain a disciplined approach to spending while investing in areas that will have the greatest impact on growth [21][28] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the deterioration of the macro environment since the initial guidance in February, citing inflation and tariff concerns as significant pressures [18][44] - The company remains confident in its ability to navigate through challenging environments and expects to deliver sustainable profitable growth [20][47] - Revised revenue outlook for 2025 is projected between $2.425 billion and $2.5 billion, reflecting the impact of GMV headwinds and macroeconomic uncertainties [46][45] Other Important Information - The provision for lease merchandise write-offs was 7.4%, with a gross margin of 29.3%, down about 112 basis points from the previous year [36] - The company ended Q1 with $213.3 million in cash and $600 million in gross debt, resulting in a net leverage ratio of 1.42 times trailing twelve months adjusted EBITDA [41] - The company returned capital to shareholders through dividends and share buybacks, repurchasing 936,000 shares at an average price of $27.87 per share [41] Q&A Session Summary Question: What are the observations regarding the trade-down environment? - Management noted that trade-down behavior still exists but is more muted compared to the latter half of 2024, with no significant tightening in approvals observed [55][56] Question: How has the retail softness progressed since February? - Management indicated that while the quarter started encouragingly, a downshift in sentiment was observed, with no significant rebound noted [60] Question: What is the expected impact of the $30 million GMV headwind from the lost customer? - Management confirmed that the $30 million headwind is expected to be consistent across the four quarters of the year [62] Question: How are inflation and tariffs impacting retail partners and customers? - Management explained that modest price increases could be beneficial, but significant price shocks and demand destruction are concerning [71][72] Question: What is the status of legacy Big Lots customers? - Management is actively directing former Big Lots customers to other partners and tracking the success of these efforts [76][77] Question: What changes have been observed in credit performance? - Management confirmed that while approval rates are down 300 to 400 basis points year over year, the portfolio remains healthy, and early indicators are performing as expected [100][88] Question: Can you discuss the pipeline of new retailers? - Management expressed optimism about the pipeline and noted that the current environment is conducive for discussions with potential new partners [95][96]