PROG Holdings, Inc.

Good day and thank you for standing by. Welcome to the Prague Holdings first quarter 2024 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised today's conference is being recorded. I would like to end the conference over your speaker today. John, Bob, please go ahead.

Thank you, and good morning, everyone. Welcome to the Prague Holdings first quarter 2024 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 a revised 2024 full year outlook and our outlook for the second quarter of 2024, the health of our portfolio, our capital allocation priorities, including our ability to continue paying a quarterly cash dividend and repurchase shares of our stock in future periods, and our expectations regarding GMV for the second quarter and full year 2024. 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 EPS, 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 would like to turn the call over to Steve Michaels, Prague Holdings President and Chief Executive Officer. Steve? Thank you, John, and good morning, everyone.

I appreciate you joining us as we report our first quarter results. which exceeded the high end of our outlook range we provided in February. Today, I'll provide insights into how our first quarter unfolded, along with a few key points on Q2. As a reminder, when we issued our outlook in late February, we were emerging from a slow start to the year for retail, with limited visibility into the tax refund season, and given the macro headwinds, we anticipated Q1 GMV to be down low single digits. However, we were optimistic about our strategic direction, growth initiatives, and the health of our portfolio. For Q1, our revenue and earnings beat the high end of our outlook range. I'm proud of the performance of our teams throughout the company as they helped us deliver a strong start to the year. Q1 GMV rebounded from a soft start to 2024, ending flat year over year for the quarter. We gained balance of share with our key partners amidst a challenging retail environment in which sales and key verticals experienced negative comps, some in the high single digits. We navigated these Q1 demand headwinds through strong execution across several sales, marketing, and technology initiatives under our strategic pillars of grow, enhance, and expand, while continuing to actively manage portfolio performance. Brian will address the portfolio in more detail, but I want to call out that our Q1 portfolio yield for the progressive leasing segment was slightly better than expected. Consolidated adjusted EBITDA of $72.6 million, which was 11.3 percent of revenue, exceeded the high end of our outlook, driven by GMV growth in the second half of the quarter, strong portfolio performance, and disciplined spending. Now I'd like to update you on our strategic pillars of grow, enhance, and expand. Regarding our grow pillar, which focuses on business development efforts with new and existing retail partnerships, I want to emphasize that we remain keenly focused on our strategy to onboard new retailers to our platform in both the regional and national space. In the quarter, we achieved deeper integrations with existing partners, some of whom have been on our platform for many years. We believe improved productivity, driven by increases in active locations and the number of leases per location with existing retailers, as well as expected pipeline conversions, will enable us to deliver GMV growth in the near and long term. Also under our Grow pillar, our efforts are focused on the Prague Marketplace and direct-to-consumer marketing. As a reminder, Prague Marketplace allows new and repeat customers to shop when and where they want through our mobile app, allowing us to drive incremental traffic and sales to our network of retail partners. We also have affiliate partnerships with other leading retailers through our marketplace, which gives our customers more choice. This channel drove significant growth in 2023, and we anticipate doubling our GMV from the Prague marketplace in 2024. In terms of direct-to-consumer marketing, Key areas include the customer lifecycle and personalization, which make it easy for consumers to understand and utilize the full spectrum of our products. As it relates to personalization specifically, we are investing in segmentation and automation capabilities to improve the customer experience. Our direct-to-consumer motion complements our retail partner channel, GMV, and deepens our relationship with new and existing retailers as we drive incremental traffic to them. Under our enhanced pillar, we continue to invest in technology initiatives, which will make customer and retailer experiences as seamless as possible. For example, with direct-to-consumer shopping, we are enhancing the application experience to make onboarding more efficient and increasing shopability through better browse, search, and checkout features on the web, as well as the mobile app. During Q1, we launched a refresh of our consumer-facing progressive leasing website. This new improved site provides a robust platform to increase content and resources to help educate shoppers about our products and to highlight and benefit our retail partners. In Q1, the Prague Labs R&D Group piloted generative AI initiatives across several consumer-facing areas to seamlessly verify consumer ID, provide multilingual support and analyze customer feedback. For instance, by leveraging generative AI for customer feedback, we can consume and analyze that information and identify actionable improvements to our offerings, which allows us to incorporate significantly more feedback into our product development cycle much faster than before. We believe these initiatives at scale will dramatically improve the customer experience and conversion rates and increase internal productivity to lower our cost to serve and drive operational efficiencies. Under our expand pillar, we are focused on our omnichannel marketing strategy to automate cross-promotional consumer journeys. This allows us to further personalize offers at a customer segment level by featuring products in the Prague portfolio that are relevant to each customer's needs. We drove incremental progressive leasing GMV in Q1 through customer acquisition and cross-marketing efforts with our other operations, which include Ford Technologies and Build. We expect this GMV to ramp up throughout the year as we make strides to remove friction from our processes and optimize our funnel conversion. To summarize our strong first quarter, I'd like to highlight that we collaborated with existing retail partners on technical integrations, and marketing, which helped us gain balance of share. We also made significant progress on direct consumer initiatives, maintained a healthy lease portfolio, and remained disciplined with spend. While Brian will provide more detail on our revised full-year outlook for 2024, I'd like to provide some high-level thoughts. In terms of the remainder of the year, we expect retail headwinds in the majority of our leaseable categories to persist. However, we are making significant progress across our strategic initiatives under Grow, Enhance, and Expand, and we remain optimistic about Q2 GMV growth in the low single digits, despite these macroeconomic challenges. Our updated full-year revenue outlook reflects the GMV outperformance in the first half of the year. We also expect our portfolio performance to remain within our targeted annual range of 6 to 8 percent as we continue to balance profitability with GMV growth. Finally, on the topic of capital allocation, we paid a quarterly cash dividend of 12 cents per share on March 28th. Additionally, we repurchased approximately 781,000 shares during the quarter. In Q1, we generated $136 million in cash flow from operations and expect to generate meaningful cash flow from operations for the full year. Our capital allocation priorities remain unchanged, and we expect to continue to fund growth, look for strategic M&A opportunities, and return excess cash to shareholders through dividends and share repurchases. I will now turn the call over to our CFO, Brian Garner, for more details on Q1 results and the remainder of the year outlook. Brian?