PROG Holdings, Inc.

Hello, and welcome to Prague Holdings' second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will 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. I would now like to hand the conference over to John Baugh. Sir, you may begin.

Thank you, and good morning, everyone. Welcome to the Prague Holdings second quarter 2026 earnings call. Joining me this morning are Steve Michaels, Prague Holdings chairman, 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 2026 full-year outlook and our outlook for the third 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, and good morning, everyone. I appreciate you all joining us today. Let me begin with the headline. This was a strong quarter for Prague Holdings. Revenue came in toward the higher end of our outlook, while adjusted EBITDA and non-GAAP EPS exceeded the top of our range. Importantly, every product in our ecosystem contributed. At progressive leasing, GMV growth, combined with fewer customers choosing to exercise their 90-day purchase option, drove higher gross margin and a 12.7% adjusted EBITDA margin. Robust customer demand once again translated into profitable triple-digit growth. And at Purchasing Power, we delivered double-digit GMV growth with revenue and margin both ahead of plan. Producing results like these while the consumer is under pressure is a testament to how we have built this business over the years and the discipline with which we run it today. Before I walk through our strategic priorities, let me add some context on the quarter. Consolidated GMV grew 60% in the second quarter compared to the same period last year. This is an improvement from the 54% growth we posted in Q1. Because our platform generates volume simultaneously across leasing, for, and purchasing power, this consolidated figure is the clearest way to see the true scale of what we're building. Starting with progressive leasing, GMV grew 3.4% year over year. a meaningful improvement from the 2.2% decline we saw in Q1 and right in line with our expectations. Recall that for much of last year, Leasing's GMV was held back by two things, the tightening actions we deliberately took and the Big Lots bankruptcy. Once we had cycled past both items, largely by the end of February, Leasing's GMV turned positive in March, and that momentum carried through the second quarter. The improvement reflects both the lapping of those prior headwinds and the payoff from several growth initiatives we put in place over the past year. Applications grew double digits year-over-year, fueled by stronger top-of-funnel marketing and an improved user experience, though we remain disciplined about how many of those applicants ultimately convert into funded leases. We believe we are firmly back on a growth footing at leasing and, notably, We produced that growth in Q2, even as our customer contended with inflation and higher costs. Ford's G of E more than doubled year over year, extending its remarkable run of triple-digit growth to 11 quarters. Growth continued to be powered by healthy underlying consumer demand for BNPL. Ford's position as an easy-to-use and highly-rated app that shoppers genuinely like, coupled with solid marketing performance, drove both GMV and subscriber growth. Appetite for our BNPL offerings stays strong, and that appetite keeps converting into attractive economics and profitability, a topic I'll return to shortly. Purchasing Power posted another quarter of double-digit GMV growth, powered mainly by strength throughout its established employer relationships. I want to be clear about the quality of the growth across the businesses.