PROG (PRG) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Non-GAAP diluted EPS increased by 41.2% year-over-year to $3.67, benefiting from a lower share count due to the share repurchase program [6][30] - Consolidated revenues declined by 5.7% from$ 612.1 million to $577.4 million, primarily driven by the decline in the Progressive Leasing segment [29][57] - Adjusted EBITDA for Progressive Leasing decreased from$ 80.4 million to $65.8 million, resulting in an adjusted EBITDA margin of 11.8% [28][60] - Gross margin improved by 210 basis points year-over-year to 32.9% [12][27] Business Line Data and Key Metrics Changes - Progressive Leasing GMV increased by 1.2% year-over-year, exceeding expectations, with strong performance during the holiday season [43][56] - E-commerce represented approximately 20% of total leasing GMV, with significant growth in new e-commerce retail partners [44] - SG&A expense as a percentage of revenue increased to 15% in Q4 2023 from 13.2% in Q4 2022, primarily due to increased marketing spend [58] Market Data and Key Metrics Changes - The company anticipates continued GMV headwinds in 2024, with a projected low-single-digit decline in Q1 GMV [81][50] - The macroeconomic environment remains challenging, with expectations of soft demand for consumer durable goods [33][18] Company Strategy and Development Direction - The company is focused on a three-pillar strategy: Grow, Enhance, and Expand, with resources allocated to various initiatives across these pillars [21][53] - The PROG Marketplace aims to double GMV in 2024, enhancing direct-to-consumer efforts [15] - The launch of PROG Labs R&D group is intended to improve productivity and customer experience through generative AI [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the health of the portfolio and cost structure despite ongoing economic pressures [7][20] - The company expects a challenging operating environment in 2024, with continued soft demand for leasable categories [18][33] - Management noted that tax refund season impacts GMV and customer liquidity, with expectations for a clearer picture by late March [19] Other Important Information - The Board approved a quarterly cash dividend of$ 0.12 per share and increased the share repurchase program to $500 million [30][52] - Curt Doman, Co-Founder and Chief Innovation Officer, will retire from his executive role but will remain as a senior adviser and Board member [23][24] Q&A Session Summary Question: What are the dynamics of write-offs in Q4? - Management indicated that write-offs were at the midpoint of their annual targeted range of 6% to 8%, with no significant degradation in portfolio quality [70][72] Question: How did January perform compared to e-commerce versus in-store? - January saw low-single-digit declines, with weather impacting in-store performance more than online [74] Question: What is the outlook for GMV in 2024? - The company expects GMV headwinds to continue, with a low-single-digit decline projected for Q1 [81][50] Question: How is the company managing SG&A expenses? - Management expects SG&A as a percentage of revenue to remain flat in 2024 due to restructuring actions taken [63] Question: What is the expected cash flow generation for 2024? - The relationship between EBITDA and free cash flow is expected to remain consistent, with GMV being a significant variable [110]