PROG Holdings, Inc.

Good day, and thank you for standing by. Welcome to Prague Holding's second quarter earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. As a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automatic message advising your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, John Buck, BVR Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to the Prague Holdings second 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 our revised 2024 full-year outlook and our outlook for the third quarter of 2024, the health of our portfolio and our expectations for write-offs for our progressive leasing segment for the remainder of 2024, our expectations regarding GMV for the third quarter and full-year 2024, and our capital allocation priorities, including our ability to continue returning capital to shareholders. Listeners are cautioned not to place undue emphasis on forward-looking statements we make today, all of which are subject to risks and uncertainties, which could cause actual results to differ materially from those contained in the forward-looking statements. 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?

Thanks, John. Good morning, everyone, and thank you for joining us. Today, we are reporting our second quarter results, as well as providing some thoughts on Q3 and our increased 2024 full-year financial outlook. Our team delivered a great second quarter, surpassing our expectations for GMV growth and exceeding the high end of our revenue and earnings outlook. Our success is rooted in strong execution, which balances growth with profitability. We've made significant strides in our 2024 priorities, focused on enhancing customer and retailer experiences, deepening integrations with existing partners, marketing directly to consumers, expanding affiliate relationships through our Prague marketplace, and collaborating with retail partners through omnichannel marketing and promotions. Our customers are positively responding to these initiatives, evidenced by an improvement in our conversion rates and a year-over-year increase in leases originated with new and reactivated customers. Our internal efforts were complemented by lenders higher up in the credit stack having tightened approval rates in recent quarters. This has resulted in some higher credit quality applicants entering our funnel. While this shift in credit dynamics doesn't directly convert to GMV one for one, these applicants did contribute to our Q2 GMV. We believe we will continue to benefit from this credit tightening as well as the internal growth initiatives I mentioned throughout the remainder of 2024. As a reminder, When we issued our outlook in late April, we had just reported a flat year-over-year Q1 GMV quarter, which had rebounded from a slow start to the year. We anticipated retail traffic headwinds in most of our leasable categories to persist in Q2. However, we remained confident in our strategic initiatives under grow, enhance, and expand, and despite ongoing macroeconomic challenges, we were optimistic about achieving low single-digit Q2 GMV growth for our progressive leasing segment. I'm proud of our team's performance in delivering better than expected growth of 7.9% in Q2. Our focus on returning to growth has led to three consecutive quarters of flat to positive year-over-year GMV comparisons with a notable improvement this quarter. While Brian will dive into the implications the GMV performance will have on our business and the balance of 2024, our recent GMV trend has resulted in our gross leased asset balance, which is the primary driver of future period revenues, ending the quarter close to flat compared to last year. In the second quarter, we achieved consolidated revenue of $592.2 million, surpassing the high end of our outlook range by $17.2 million. Our consolidated adjusted EBITDA reached $72.3 million, resulting in a 12.2% margin, primarily driven by GMV and supported by a healthy lease portfolio and disciplined spending. We are pleased with the Q2 portfolio yield for the progressive leasing segment. The write-off rate in Q2 was 7.7%, consistent with pre-pandemic Q2 2019, and we expect it to be the peak of quarterly write-off rates in 2024. Our non-GAAP diluted EPS of 92 cents exceeded our expectations, and was bolstered by a reduced share count from our share repurchase program. We are excited about how the strong performance in the first half of the year positions us for the remainder of 2024. Now, let me update you on our strategic pillars, grow, enhance, and expand, which were key contributors to our GMV results in Q2. Under our grow pillar, focusing on business development with new and existing retail partnerships, we made significant progress in both regional and national markets. In the regional space, we onboarded new retailers and extended relationships with existing ones, achieving GMV growth that matched the growth rate of our national accounts. The Q2 results in the regional market showed a year-over-year increase in the number of active doors, coupled with an increase in GMV per door. Furthermore, despite this substantial growth, we maintain stable sales expenses and portfolio health across our regional accounts. Our Prague marketplace, also under the Grow pillar, has delivered over 250% growth year-to-date through June 30th. And we're on track to materially exceed our full-year expectations provided during the February earnings call. As I've mentioned before, this platform allows customers to shop anytime and anywhere through our mobile app. driving incremental traffic and sales to our network of retail partners. Additionally, our affiliate partnerships with leading retailers offer customers more choices. And last week's Amazon Prime Day, for example, was an extremely successful two-day event for our marketplace. In terms of direct consumer marketing, we are creating personalized experiences throughout the customer lifecycle, making it easy for consumers to utilize our full range of products. Our investments in segmentation and automation capabilities are improving the customer experience. Under our enhanced pillar, we invested in technology projects, partnering with new and existing retailers to create seamless customer interactions. Through the first half of 2024, we completed two custom e-commerce integrations, including one with a large and longtime retail partner. We have a robust pipeline of additional integrations with new, and existing retailers for the back half of 2024. Additionally, our search engine optimization efforts are yielding positive results. By consolidating our consumer servicing portal, store locator, and shopping experiences under the same domain as the Progressive Leasing website, we have achieved year-over-year growth in organic search traffic and customer applications. Also under our enhanced pillar, our Prague Labs R&D group implemented generative AI solutions to boost productivity and improve retailer and customer experiences. Prague Labs rolled out OpenAI's Enterprise Chat GPT and developed a number of internal apps to streamline operations, gain productivity, and reduce demand on technology resources, enabling them to focus on higher value opportunities. Additionally, our new AI platform scales internal training and equips our sales team with retailer-specific materials, improving compliance and customer conversion rates. We are piloting several other value-creating generative AI solutions for both internal and consumer-facing areas, which we will share in the near to midterm. In Q2, under our expand pillar, we focused on our omni-channel marketing strategy to automate cross-promotional consumer journeys. This approach allows us to personalize offers at a customer segment level, featuring relevant products from our portfolio. We drove incremental progressive leasing GMV through cross-marketing efforts, which includes successful email campaigns and mobile app integration with 4, our buy now, pay later product. To summarize, our team delivered an outstanding quarter. making considerable strides on our strategic and financial priorities, which resulted in Q2 exceeding the high end of our revenue and earnings outlook. We improved customer metrics, sustained a healthy lease portfolio, exercised disciplined spending, and achieved GMV growth. By collaborating with our retail partners on omnichannel technology and marketing initiatives, we further increased balance of share. Our updated outlook takes into account the impact of our strategic initiatives and the benefits we expect from the tightening of the credit stack above us, offset by the current challenges we see to consumer demand posed by the macroeconomic environment. Our history of successfully navigating dynamic and challenging environments gives us confidence in our ability to adapt as conditions evolve. We expect Q3 GMV to grow in the high single digits and our updated full-year revenue outlook reflects the GMV outperformance. We anticipate our write-offs to remain within our targeted annual range of 6% to 8% while profitably growing GMV. Finally, on the topic of capital allocation, our 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'll now turn the call over to our CFO, Brian Garner, for more details on Q2 results and remainder of the year outlook. Brian?