PROG Holdings, Inc.

Good day and thank you for standing by. Welcome to the Prague Holdings Q1 Earnings Conference Call. At this time, all participants are in listen-only mode. At this 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 do advise that today's conference be recorded. I would like to hand the conference over to your first speaker today, John Ball, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to the Prague Holdings First Quarter 2026 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 2026 full-year outlook and our outlook for the second quarter of 2026. 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. I'll start by saying we delivered a strong first quarter. We were very happy with the start to the year and the momentum we're seeing in the business. Our result came in at the high end of our revenue outlook and exceeded the top end of our outlook for earnings and non-GAAP EPS. This outperformance reflects the discipline of our operating model and strong execution across the organization, supported by higher than expected GMV with improved economics at four, as well as better portfolio yield at progressive leasing, primarily due to lower than expected utilization of 90-day purchase options. In an environment where the geopolitical and macroeconomic situation presents challenges, including from rising gas prices, our model performed as designed. This consistency is a direct result of how we built and managed this business over time. Let me provide some additional color on the quarter before walking through our strategic priorities. As I mentioned in February, we have begun framing growth through the lens of consolidated GMV, which grew 54% in Q1 compared to the same period last year. These results reflect the addition of purchasing power and the triple-digit growth of four. As our portfolio of solutions expands, GMV is generated through multiple products across leasing, four, and purchasing power, and this consolidated view better reflects the full scale of our platform. It's a great example of how we are deploying an integrated ecosystem of solutions to better reach underserved individuals and families. Starting with progressive leasing, GMV for the first quarter came in at 2.2% below the same period last year. However, trends improved meaningfully as the quarter progressed, with January down high single digits, February down low single digits, and March up low single digits. As a reminder, throughout last year, our leasing business faced GMV headwinds from deliberate tightening actions and the bankruptcy of Big Lots. As we lapped both of those headwinds, particularly through February, leasing's GMV trends inflected positively in March. From a GMV standpoint, the quarter played out largely as expected, and we are excited to exit the quarter on a growth trajectory. Fours GMV for the quarter was 134% higher year-over-year. Customer demand for our BNPL product remains robust, and importantly, we are seeing that growth translate into attractive economics and profitability, which I'll discuss in more detail shortly. Purchasing powers Q1 GMV grew double digits at 10.3% year-over-year. This growth was due to favorable performance within existing employer accounts. We also added several new employer clients during the quarter, bringing tens of thousands of new eligible employees onto the platform and supporting future growth. Consolidated revenue came in at $743 million, representing 11% year-over-year growth. This performance was primarily as a result of the addition of purchasing power, along with growth at four, and partially offset by a revenue decline at progressive leasing due to a lower portfolio size throughout the quarter. Consolidated adjusted EBITDA was $90.3 million, and non-GAAP EPS was $1.24, both exceeding the high end of our outlook. This outperformance was fueled by better than expected portfolio yield and customer payment performance at progressive leasing, as well as increased customer demand and profitability at four. To summarize the quarter, we delivered results above expectations, saw improving GMV trends while maintaining portfolio health at leasing, drove profitable triple-digit growth with improving economics at four, achieved double-digit GMV growth at purchasing power, and continued to execute against our ecosystem strategy. Before we shift into our strategic priorities, I want to briefly address the broader environment and how it informs our updated outlook. The consumer we serve remains resilient. but they are facing real challenges. Gas prices are elevated and there is increased uncertainty in the macro backdrop. We remain committed to continue to deliver consistent portfolio performance across all our businesses and managing costs prudently to achieve our earnings outlook. Our track record demonstrates our ability to adapt quickly and we will do so as conditions evolve. Let me now turn to our three strategic pillars. grow, enhance, and expand to share some highlights from the quarter. Starting with the grow pillar, we saw encouraging traction at progressive leasing and purchasing power, with remarkable growth at four, which collectively resulted in consolidated GMV being up 54% year-over-year. For leasing, Q1 applications grew double digits year-over-year, and GMV trends improved sequentially month-over-month, with March up low single digits compared to the prior year. In addition to lapping the tightening actions from early 2025, these results reflect our investments in technology to enhance customer experience and in marketing to promote engagement across both new and existing customers. You heard about many of these initiatives at our recent investor day, and we're pleased to say that they are continuing to have a positive impact on our business. Our long-term distribution base of exclusive retail partners with approximately 70% of Progressive Leasing GMV secured into the 2030s, provides a durable foundation for growth as we also gain balance of share within existing key retail partners. Additionally, our direct consumer efforts spanning both marketing and digital channels have been meaningful drivers of growth. Within marketing at Progressive Leasing, we leaned into customer acquisition, partner marketing, and cross-product campaigns, which drove increased engagement and incremental GMV. We focused further up the funnel while maintaining flat acquisition costs year over year. At the same time, our outreach channels, including email, SMS, and push notifications, generated incremental GMV, reinforcing healthy consumer demand and improving return on ad spend. On the digital front, Prague Marketplace delivered another notable quarter, growing 169% year over year. We are scaling this channel through ongoing product enhancements, increased traffic, and improved conversion. Our e-commerce channel also grew meaningfully due to deeper integrations with retail partners and improved digital checkout experiences. Q1 e-commerce GMV was 25.7% of total progressive leasing GMV, up from 16.8% in the same period last year, and the highest first quarter mix to date. Shifting to four, we delivered another triple-digit growth quarter, our 10th in a row, with performance powered by both customer acquisition and engagement. The team rolled out AI-driven product enhancements that simplify the shopping experience and average order values increased year over year. Monthly active users more than doubled compared to a year ago, reflecting growing consumer interest. On the marketing side, spend was deployed efficiently to support growth, maintaining a healthy balance between paid and organic customer acquisition. Finally, purchasing power delivered double-digit GMV growth, reinforcing the strength of its model and its strategic role within our ecosystem. Its payroll deduction model represents a differentiated distribution mode, serving employees who value predictable, convenient purchasing options through their paycheck. We remain in the early stages of deeper integration including introducing purchasing power to our retail partner employee bases and leveraging addressable employer relationships to expand leasing distribution. Over time, we believe this opportunity represents a meaningful incremental growth lever. From a marketing perspective, early media testing at purchasing power is showing encouraging results, demonstrating our ability to improve penetration within the eligible population. Under the enhanced pillar, our investments in improving both customer and retailer experiences are progressing, with several initiatives beginning to deliver positive results. Our AI-driven lease eligibility engine is scaling meaningfully. We've expanded our leasing product catalog and improved response times from three seconds down to a tenth of a second. At the same time, we are advancing customer experience enhancements that are driving higher conversions. we deployed multiple AI-driven improvements across our marketplace, including an AI chatbot assistant, enhanced payments navigation, and a new AI-powered checkout flow that simplifies and streamlines the transaction process. These marketplace enhancements have delivered an approximately 20 percentage point improvement in checkout conversion versus the prior experience, while also lowering costs to serve and improving operational efficiency. The focus remains clear, enhance the customer experience to support higher customer lifetime value while improving the economics of the business. Under the expand pillar, four is scaling and purchasing power is growing double digits in line with expectations as integration efforts advance. We remain intensely focused on strengthening our ecosystem. Four, executed at a high level, delivering 142% revenue growth in Q1, 2026, the 10th consecutive quarter of triple-digit GMV in revenue growth. Q1 GMV reached 280 million, more than doubling Q1 2025, and March 2026 GMV of 108 million was the second highest month in company history. Customer engagement trends remain favorable, with average purchase frequency of approximately five transactions per quarter and more than 130% growth in active shoppers year over year. New shoppers grew approximately 80% year-over-year, representing expansion of the platform's customer base. 4's subscription model remains a key driver, with 4-plus subscribers continuing to contribute approximately 80% of total GMV. 4's take rate, defined as revenue generated as a percentage of GMV over the trailing 12-month period, remained consistent at approximately 10%. indicating positive monetization efficiency as the business scales. From a profitability standpoint, Ford generated adjusted EBITDA of 12.9 million in Q1 2026, already exceeding full year 2025 adjusted EBITDA of 9.9 million. Q1 adjusted EBITDA margin was 37%, reflecting the benefits of scale. While Q1 is seasonally the highest margin quarter, Following elevated GMV from the holiday period, the business continues to demonstrate meaningful operating leverage. MoneyApp, our cash advance product, grew revenue over 50% in the first quarter and continues to play an important role as both an engagement and cross-sell driver within our ecosystem. Growth was as a result of higher average advance sizes, as well as early traction from a new product we introduced in December called TopUps. which allows qualifying customers to responsibly access additional funds on top of an existing advance. While still early, top-ups are beginning to generate incremental revenue and represent another avenue for us to deepen customer engagement and expand the platform over time. Our ecosystem strategy is gaining traction. At our investor day in March, I highlighted that cross-product engagement is a strategic priority because we believe it is a key component of long-term growth and value creation. We are seeing progress from our ecosystem-first approach, with customers increasingly engaging across multiple products, driving higher lifetime value and improved acquisition efficiency. Four is currently our most connected product, often serving as an entry point and engagement driver across our platform. Progressive leasing showed the most meaningful improvement in cross-product engagement during the quarter, with more of its customers interacting with other offerings. Notably, we also drove the largest overlap and fastest growth in overlap between Progressive Leasing and four customers. Before turning over to Brian, let me touch on capital allocation. Our priorities remain unchanged. Invest in the business, pursue strategic M&A, and return excess capital to shareholders through share repurchases and dividends. In February, I told you that in the near term, we will focus on prioritizing debt reduction as we work toward our long-term net leverage target of 1.5 to 2 times, and we did. During the quarter, we paid down $210 million in recourse debt, ending Q1 with a net leverage ratio of 2 times. To summarize the quarter, we delivered results above expectations, led by consistent execution and improving demand trends across the business. Importantly, these results were achieved while continuing to invest in our strategic priorities, advancing our direct consumer capabilities, scaling our digital channels, and deepening integration across our platform. Overall, our distribution moat, diversified ecosystem, and data-driven decisioning capabilities position us well to perform across a range of environments. I firmly believe the best chapters of Prague's story are still ahead of us. With that, I'll turn the call over to Brian.