PROG Holdings, Inc.

Good day, and thank you for standing by. Welcome to the Prague Holdings First Quarter 2025 Earnings Conference Call. At this time, all participants are in listening mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, John Baugh, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to the Prague Holdings first quarter 2025 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 2025 full year outlook and our guidance for the second quarter of 2025, the health of our lease portfolio, and our capital allocation priorities. 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 the 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 today as we report our first quarter results and offer our perspective on how things are shaping up for Q2 with a few important metrics. I'll also touch on how we're executing against our strategy despite a challenging and uncertain macro environment. In the first quarter, revenue approximated the high end of our outlook, while both earnings and non-GAAP diluted EPS exceeded the top end of our outlook. The earnings outperformance was driven by strong growth and improved profitability at four technologies, our BNPL platform, along with slightly better than expected results from progressive leasing. Progressive leasing's GMV for the quarter came in 4% below the same period last year, which we believe reflects a few factors. The impact from the loss of a large retail partner due to bankruptcy in late 2024, our tightening of lease approval rates to manage portfolio performance, and a more challenging retail environment than we anticipated. The quarter started on an encouraging note with low single-digit GMV growth through early February, and the tax season is still ahead of us. But by mid-quarter, there appeared to be a noticeable slowdown in consumer activity, an observation that was reinforced by multiple third-party data sources pointing to ongoing economic volatility and evolving trade policy. These headlines appeared to take a meaningful toll on consumer confidence, And while tax refunds were comparable to last year, it's evident that the financial stress continues to weigh heavily on many households. As a result, we believe many shoppers are delaying discretionary spending, especially in big ticket categories. This shift in behavior played out across several verticals and resulted in a continuation of negative comps for some of our retail partners. Now, if you adjust for the impact of the bankruptcy of the retail partner exiting the business, we actually saw a low to mid single digit growth in GMV. So there is a more encouraging story about our ability to execute in a very challenging environment underneath the headline number. To put it in context, the loss of that partner represented a mid $30 million GMV headwind in Q1 alone. Despite that, our teams are executing at a high level. We're continuing to grow our balance of share with key existing partners, and that momentum is being driven by the strategic initiatives we put in place. Even with the GMV decline, consolidated revenue came in at $684.1 million, which is 6.6% higher year-over-year. The revenue performance was largely driven by progressive leasing having a larger lease portfolio balance entering the year and higher 90-day purchase activity compared to last year. As of December 31, 2024, our lease portfolio balance was up 6.1% year-over-year, compared to a 5.2% decline at the same point in 2023. Adjusted EBITDA was 70.3 million, and non-GAAP EPS was 90 cents, both exceeding the high end of our outlook. Brian will go into the portfolio details in a moment, but I want to highlight that our lease portfolio remains healthy. Q1 write-offs came in at 7.4%, slightly better than we expected. We made some targeted decisioning adjustments in the second half of 2024 and again in early Q1. And we will continue to refine our decisioning throughout the year to ensure performance stays within our 6% to 8% targeted annual write-off range. To sum up the quarter, I'm proud of our ability to deliver strong earnings despite macro headwinds. Our BNPL business for technologies continue to grow revenues at a healthy triple digit rate while achieving its first quarter of positive adjusted EBITDA. And I'm optimistic about our broader ecosystem strategy. We're focused on meeting consumer needs through both leasing and BNPL products, driving more cross-sell opportunities and strengthening the Prague brand across every touch point. Before we shift into our strategic priorities, I want to take a moment to talk about the broader environment and how it's shaping our updated outlook. Since we shared our initial guidance in February, it's become clear that the macro environment has deteriorated. Inflation, tariff concerns, and broader uncertainty, including the potential for a recession, are creating additional pressure on both our direct consumer and retail partner channels. That said, we are not sitting still. We've successfully navigated through challenging environments before, and we know how to execute in periods of uncertainty. We're confident in our ability to grow share by staying focused on what we can control. That includes making smart investments in marketing and technology and continuing to optimize how we decision and manage risk. Our Q1 results exceeded expectations, and that's a direct reflection of the team's discipline and ability to drive growth while maintaining a healthy portfolio. We continue to have confidence in our long-term strategy and expect to deliver sustainable, profitable growth. Our revised revenue outlook accounts for the GMV headwinds we are seeing, but we still expect our least portfolio performance to remain within our 6 to 8 percent targeted annual range. And as we move through the remainder of the year, we'll stay disciplined with SG&A spend and capital investments, remaining agile while making sure we prioritize areas that will have the greatest impact. We've shown time and again that we can operate effectively in changing environments and will continue to adapt as the macro conditions evolve. Brian will get into the specifics of our revised 2025 outlook. Turning to our strategic priorities, starting with the grow pillar, we saw encouraging traction in Q1. Excluding the impact of big lots, we grew GMV and expanded our active door count by nearly 5% year over year. These results reflect the progress we're making with both existing partners and new accounts, and we're seeing early success from the initiatives we put in place to drive greater engagement across our retail network. Our direct consumer marketing efforts, including targeted lifecycle campaigns and digital personalization, supported application volume and increased repeat and reactivated active customer metrics at Progressive Leasing, up 3.8% and 5.5% respectively. On the digital front, our direct consumer offering, Prague Marketplace, had another solid quarter and continues to scale. It's allowing our customers to shop anytime, anywhere through our mobile app, which drives incremental traffic and sales for our retail partners and also supports GMV growth in our leasing business. Marketplace delivered double-digit growth in Q1, and it is on track to drive over 75 million in GMV this year. Under our enhanced pillar, we made meaningful strides in improving both the customer and retailer experience. We launched a deeper e-commerce integration with a long-standing national partner and advanced several initiatives aimed at streamlining application flow and simplifying checkout, both of which are critical to improving conversion and reducing friction. As for our expand pillar, we're seeing momentum build across our multi-product ecosystem. 4 Technologies continues to gain traction, delivering triple-digit GMV growth for the sixth consecutive quarter. Products like 4 are helping us strengthen customer relationships while also opening new paths for growth. Importantly, our cross-sell initiatives are starting to show real traction and are contributing to progressive leasing GMV. As we look ahead, here's where we will be focused for the rest of 2025. We're staying close to the macro landscape and will respond quickly as our retail partners and consumers navigate the year. We'll continue our disciplined approach to spending while making selective capital investments that position us to accelerate when the demand environment improves. On the strategic investment front, we're continuing to build out our direct consumer channel. That includes enhancing the Prague marketplace, improving the user experience on our website and mobile app, and advancing our personalization efforts to drive customer acquisition, engagement, and retention. At the same time, we're investing in technology that supports our retail partners, whether that's faster onboarding, smarter tools to serve Leaf customers, or integrations that deepen our partnerships and make us easier to do business with. Finally, on the topic of capital allocation, our priorities haven't changed. We'll continue to invest in the business to fund growth, pursue strategic M&A opportunities, and return excess cash to shareholders through dividends and share repurchases. I want to close by emphasizing the strength of our business. Even in periods with little or no incremental GMV growth, we have generated significant cash flow, and we believe we will continue to do so through this cycle. To be clear, growth remains a top priority, but our model is built to endure, and we've shown that even in challenging environments, we can control unit economics, align costs with revenue, and continue to deliver strong cash flow. With that, I'll turn it over to Brian for more detail on Q1 results and updated 2025 outlook. Brian?