PROG Holdings, Inc.

Good morning and welcome to Prague Holding Inc's fourth quarter and fiscal year 2021 financial results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask the question, you may press star, then one on your touch-tone phone. To withdraw from the question queue, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to John Ball, Vice President of Investor Relations. Mr. Ball, please go ahead.

Thank you and good morning, everyone. Welcome to the Prague Holdings fourth quarter and year end 2021 earnings call. Joining me this morning are Steve Michaels, Prague Holdings President and Chief Executive Officer, and Brian Garner, our Chief Financial Officer. Many of you have already seen a copy of our earnings release issued this morning, which is available on our investor relations website, investor.progholdings.com. During this call, certain statements we make will be forward-looking, including comments regarding our expectations related to progressive leasing's GMB and customer payment trends for 2022, including levels of payment delinquencies and write-offs, our capital allocation priorities, including potential share repurchases, and our financial performance outlook for the company and its progressive leasing and VIVE segments for 2022, including with respect to revenues, adjusted EBITDA, and for the company, its GAAP and non-GAAP earnings per share. I want to call your attention to our safe harbor provision for forward-looking statements that can be found at the end of our earnings press release that we issued earlier this morning. That safe harbor provision identifies risks that may cause actual results to differ materially from the expectations discussed in our forward-looking statements. There are additional risks that can be found in our 10-K that we are filing today, which we encourage you to read. Listeners are cautioned not to place undue emphasis on forward-looking statements we make today, and we undertake no obligation to update any such statements. On today's call, we will be referring to certain non-GAAP financial measures, including adjusted EBITDA and non-GAAP earnings per share, which have been adjusted for certain items, which may affect the comparability of our performance with other companies. These non-GAAP measures are detailed in the reconciliation tables included with our earnings release. The company believes that these non-GAAP financial measures provide meaningful insight into the company's operational performance and cash flows and provides these measures to investors to help facilitate comparisons of operating results with prior periods and to assist them in understanding the company's ongoing operational performance. With that, I will now turn the call over to Steve Michaels. Steve?

Thank you, John, and good morning, everyone. I appreciate you joining us today as we discuss our Q4 and year-end results for 2021 and provide you with some thoughts around our expectations for 2022. 2021 was an important year for Prague Holdings. For those of you on this morning's call who have been following us for a while, You know that 2021 marked our first full year as a standalone asset-light fintech holding company. You'll also recall at the beginning of 2021, we stated that we believed our new operating profile and the substantial capital we expected to generate would allow us to reinvest in our business, add innovative products and technologies, and return capital to shareholders, all of which I'm proud to report we accomplished during the year. Highlights from 2021 include achieving GMV growth of 15.8% for our progressive leasing segment, more than doubling progressive leasing's e-commerce GMV production, and scaling our Vibe financial operations to profitability. We also entered the buy now, pay later, pay in four space with our acquisition of four technologies and created an R&D group to develop and test new FinTech products. Perhaps just as importantly, our board authorized a $1 billion share repurchase program, and we returned significant capital to our shareholders through the repurchase of approximately 17% of our outstanding common stock. I'm extremely proud of our team's efforts this past year in driving exceptional results while helping to position us for success in both the near and long term. We delivered 18.3% growth in Q4 GMV in our progressive leasing business as compared to Q4 2020. And GMV performance improved for the full year, resulting in a 15.5% year-over-year increase in our gross leased assets portfolio. This larger portfolio should result in continued revenue growth in 2022. Progressive leasing's e-commerce GMV grew 45% in Q4, and 151% for the year, representing 15.2% of its GMV in 2021. We expect strong growth in Progressive Leasing's e-com business to continue as we integrate with existing large point-of-sale partners' online carts and add new partners through our plug-and-play solutions. Our GMV growth in 2021 was driven primarily by our large national POS partners, and we expect that growth to continue in 2022. We believe we are well positioned to drive their sales and our GMV in what will likely be a more challenging year for comp sales. We are encouraged as more of our POS partners recognize and embrace the additional business that we can bring them through joint marketing initiatives. In Q4 alone, we deployed tens of millions of co-branded promotional emails generating traffic to our POS partner stores and websites, which helped them drive sales and us capture additional GMV. Our consolidated Q4 revenues grew 6.8% year-over-year and 7.8% in 2021, due primarily to a larger lease portfolio fueled by strong GMV growth. As the annual outlook we provided in November indicated for Q4, Consolidated adjusted EBITDA margins declined to 11.2% compared to the stimulus-aided margins of 15.6% in the year-ago period. We continued to see a return to pre-pandemic delinquency and write-off trends in the fourth quarter, similar to what we experienced in the third quarter, with progressive leasing write-offs coming in slightly higher than expected at 6.8%, but still in line with pre-pandemic 2019 Q4 levels. We ended the year with adjusted EBITDA of $388.7 million, an increase of 13.9 percent over 2020, and an adjusted EBITDA margin of 14.5 percent. Turning to our balance sheet and capital allocation priorities, we had a very busy Q4. At the end of November, we issued $600 million of senior unsecured notes, which were primarily used to fund our successful $425 million Dutch tender. As we discussed then, there were a number of reasons to take these actions. First, we had a net cash position, which we expected to continue given our business's strong free cash flow generation. Second, it was a good time to take advantage of the low interest rate environment. And finally, we believed our shares represented an attractive value. We also made significant organic investments in Progressive Leasing's technological capabilities. resulting in the launch of plug-ins for many of the largest e-com platforms and enhanced online checkout integrations for a number of our key retailers, which we believe makes for a more valuable and lasting partnership. Progressive Leasing also launched a new retailer management platform, Prague Central, which gives our small and medium-sized POS partners a best-in-class tool to manage individual lease details while helping reduce the time between application and sales. We believe these initiatives will deliver benefits for years to come, and we expect to continue developing complementary fintech products designed to assist our leasing business in capturing a large share of the $30 to $40 billion addressable LTO market. By adding new products, we can broaden our customer base, reach a larger number of consumers on a more frequent basis, and increase the overall TAM for our business. Last, but certainly not least, During 2021, we added several seasoned technology, operational, compliance, and financial executives to round out our management team and deepen our bench. In addition, we are proud that three new independent directors joined our board, each of whom brings significant digital expertise, including experiencing leveraging technology and data to drive meaningful consumer engagement and growth. Before turning to our 2022 outlook, I would be remiss if I did not say that, in the short term, the macroeconomic environment remains challenging due to a whole host of issues, including ongoing supply chain disruptions, the national labor shortage, and a steep increase in inflation to levels not seen in decades, not to mention the continuing effects of COVID. Additionally, an uncertain tax refund season due to potential IRS delays and the unknown impact of the recent expiration of monthly refundable child tax credit payments, alongside a lack of two meaningful government stimulus payments made in early 2021, will likely create headwinds for the business in the near term. In fact, as of today, our first quarter GMV is slightly negative year to date compared to the same period last year. Turning to our 2022 outlook, which, as you may have seen from our earnings release, we are now dividing into three segments. In the progressive leasing segment, we are forecasting revenue growth in the mid to high single digits, driven by the larger portfolio that we had at year end 2021, along with our belief that, despite these early macroeconomic headwinds, we will continue to grow GMV in 2022. The decline in adjusted EBITDA outlook is largely explained by write-offs increasing from 4.8% in 2021 back to our targeted annual range of 6% to 8%. We have been consistent in communicating our expectation that write-offs would trend towards normal levels as we move further away from stimulus payments, which is what we are seeing in our payment rates and delinquencies. Our near prime and below prime customers are currently feeling the impacts of the expiration of stimulus, and the increase in inflationary pressures more than prime consumers. Notwithstanding those challenges, from a performance standpoint, we continue to remain confident in our ability to manage our write-offs in the annual range of 6 to 8 percent, and we are tracking within that range year to date. We also expect SG&A to return to slightly higher than pre-pandemic levels in the high 12s as a percentage of revenue as we continue to invest in technology and product as well as experience higher compensation costs resulting from the tight labor market across the nation. Our VIVE financial segment had record GMV revenue and adjusted EBITDA in 2021, and I'd like to congratulate the entire VIVE team on their great performance. The adjusted EBITDA for 2021 was primarily driven by a release in the provision for credit losses as the reserve rate dropped to pre-pandemic levels. However, in 2022, We don't anticipate having this same tailwind. VIVE's expected revenue growth for 2022 is driven by the higher loans receivable balance that was built up from 2021's strong GMV. The forecasted adjusted EBITDA range shows strong profitability even with the year-over-year reduction due to the 2021 provision release. We expect VIVE to remain profitable going forward. Finally, we are providing outlook for our other operations for the first time. This represents our four technologies business, as well as the development of new FinTech products. The impact of Prague Holdings' adjusted EBITDA from the loss of $15 to $20 million is almost evenly split between these two areas. As you know, we purchased four last summer and spent the last few quarters building up the infrastructure and team while working on portfolio performance and integration into Prague's ecosystem. We believe the pay-in-for BNPL product is complementary to our core leasing business as we look to grow with existing and prospective POS partners. As we announced last March, we hired a leader to build an R&D team to develop innovative products and technologies that we believe will enhance our offerings. One of the pillars of our growth strategy is to broaden our FinTech ecosystem by exploring additional products and technologies that drive frequent customer engagement and loyalty. As I have said before, from a capital allocation standpoint, investing in this type of organic growth through consistent innovation is critical to our long-term success, and our other operations are part of our commitment to that objective. From an overall Prague holding standpoint, we have been clear that government stimulus helped us record above average earnings in the last two years. 2022 is the year we expect to return to our historical pre-pandemic 11% to 13% adjusted EBITDA annual range, which means a pause in the earnings growth we have delivered for many years. Our forecast for the performance of our portfolio across our businesses is an expected and natural result of a return to a more normal operating environment. However, we continue to be excited and optimistic about the opportunity in front of us for 2022 and beyond. Our existing POS partners are committed to our product more than ever before, and our new partner pipeline is robust. We expect strong growth in the number of new e-commerce and brick and mortar partnerships, which we believe will lead to GMV growth in the years to come. We're particularly excited about the initiatives our R&D team is working on, and we believe they have the ability to assist us in capturing more of the large total addressable market. Our people, products, and scale give us an advantage in the marketplace, which is evidenced by the strength of our retail partner network and our best-in-class customer satisfaction and MPS scores. Finally, I want to take a moment to recognize the great work from our entire Prague team over the busy Q4 and for all of 2021. We believe in people above all else, and I'm happy to share Progressive Leasing was named one of the best places to work in both Utah and Arizona, our two largest states from an employee standpoint. I know and appreciate what the entire team accomplished this year, and I'd like to thank you all for your hard work and dedication. I will now turn the call over to our CFO, Brian Garner, who will discuss our financial results in greater detail. Brian?