PROG Holdings, Inc. (NYSE:PRG), the fintech holding company for
Progressive Leasing, Vive Financial, and Four Technologies, today
provided an estimate of several second quarter performance metrics
as well as an update to its 2022 full year outlook. These estimates
reflect a challenging operating environment as U.S. inflation
levels, particularly in gas, food, and housing, create pressure on
the Company’s lease portfolio performance and GMV production.
Since the Company issued its first quarter results on April 27,
2022, the macro environment has deteriorated further, resulting in
increased delinquencies and higher write-offs within Progressive
Leasing’s lease portfolio. Because the Company anticipates a
challenging and volatile macro environment for the remainder of the
year, it has further tightened its lease decisioning, which the
Company expects will adversely impact GMV in the second quarter and
full-year 2022. Progressive Leasing has made decisioning changes
several times since the beginning of February, resulting in a
reduction in approval rates of several hundred basis points.
“Rampant inflation is imposing significant pressure on our
customers, who are feeling the pain of higher gas, food, and
housing costs more significantly than those with higher incomes, as
a larger portion of their paychecks are now being consumed by
necessities. As a result, key national and regional point-of-sale
partners are seeing a decrease in demand from our customer base,”
said PROG Holdings President and CEO Steve Michaels. “While much
remains uncertain about the near term, we intend to aggressively
manage our lease portfolio performance within historical targeted
annual ranges. Our businesses are well-positioned to help both
consumers and retailers during challenging economic periods, so we
remain excited about the opportunity to grow our businesses over
the long term,” said Mr. Michaels.
In light of sustained headwinds in the macro environment and
rapidly changing operating conditions, the Company has begun
executing on a number of cost reduction initiatives to drive
efficiencies and right-size variable costs while minimizing the
negative impact on growth-related initiatives.
Outlook
PROG Holdings expects its quarterly and full-year financial
results to reflect the recent deterioration across the retail and
consumer environment and is providing an update on second quarter
performance along with revising its full-year 2022 consolidated
outlook.
Based upon quarterly performance to date, the Company expects
second quarter consolidated revenues between $645 and $655 million,
and adjusted EBITDA between $45 and $50 million, as reserves are
expected to increase with elevated delinquencies. GMV is expected
to decline in the low single digits year-over-year, and the second
quarter provision for lease merchandise write-offs is expected to
be in the mid 9 percent range.
For the full-year 2022, the Company expects the annual provision
for lease merchandise write-offs will be near the high end of the 6
to 8 percent targeted annual range, trending lower exiting the year
as recent decisioning changes impact the portfolio. The Company’s
revised consolidated annual outlook for 2022 is as follows: revenue
between $2.59 and $2.69 billion, adjusted EBITDA between $255 and
$275 million, GAAP diluted EPS in the range of $2.09 to $2.33, and
non-GAAP diluted EPS between $2.50 and $2.75.
Safe Harbor Statement
Statements in this news release regarding our business that are
not historical facts are “forward-looking statements” that involve
risks and uncertainties which could cause actual results to differ
materially from those contained in the forward-looking statements.
Such forward-looking statements generally can be identified by the
use of forward-looking terminology, such as “estimates”, “outlook”,
“anticipates”, “expects”, “intends”, and similar forward-looking
terminology. These risks and uncertainties include factors such as
(i) continued volatility and challenges in the macro environment
and, in particular, the unfavorable effects on our business of the
rapid increase in the rate of inflation currently being experienced
in the economy, which has not been seen in more than forty years,
and its impact on: (a) consumer confidence and customer demand for
the merchandise that our POS partners sell; (b) our customers’
disposable income and their ability to make the lease and loan
payments they owe the Company; (c) the availability of consumer
credit; (d) our labor costs; and (e) our overall financial
performance and outlook; (ii) a further deterioration of the macro
environment and/or additional macro-economic headwinds (iii) the
impact of the COVID-19 pandemic, including new variants,
subvariants or additional waves of COVID-19 infections, on: (a)
demand for the lease-to-own products offered by our Progressive
Leasing segment, (b) Progressive Leasing’s point-of-sale or “POS”
partners, and Vive’s and Four’s merchant partners, (c) Progressive
Leasing’s, Vive’s and Four’s customers, including their ability and
willingness to satisfy their obligations under their lease
agreements and loan agreements, (d) Progressive Leasing’s POS
partners being able to obtain the merchandise their customers need
or desire, (e) our employees and labor needs, including our ability
to adequately staff our operations, (f) our financial and
operational performance, and (g) our liquidity; (iv) changes in the
enforcement of existing laws and regulations and the adoption of
new laws and regulations that may unfavorably impact our
businesses; (v) increased focus by federal and state regulators on
businesses that serve subprime consumers, such as our Progressive
Leasing, Vive Financial and Four Technologies businesses, and other
types of legal and regulatory proceedings and investigations,
including those related to consumer protection, customer privacy,
third party and employee fraud and information security; (vi) a
large percentage of the Company’s revenues being concentrated with
several of Progressive Leasing’s key POS partners; (vii) the risks
that Progressive Leasing will be unable to attract new POS partners
or retain and grow its business with its existing POS partners;
(viii) the risk that our capital allocation strategy, including our
current share repurchase program, will not be effective at
enhancing shareholder value; (ix) Vive’s business model differing
significantly from Progressive Leasing’s, which creates specific
and unique risks for the Vive business, including Vive’s reliance
on two bank partners to issue its credit products and Vive’s
exposure to the unique regulatory risks associated with the laws
and regulations that apply to its business; (x) adverse
consequences to Progressive Leasing, including additional monetary
penalties and/or injunctive relief, if it fails to comply with the
terms of its 2020 settlement with the FTC, as well as the
possibility of other regulatory authorities and third parties
bringing legal actions against Progressive Leasing based on the
same allegations that led to the FTC settlement; (xi) increased
competition from traditional and virtual lease-to-own competitors
and also from competitors of our Vive segment; (xii) our increased
level of indebtedness; (xiii) our ability to protect confidential,
proprietary, or sensitive information, including the personal and
confidential information of our customers, which may be adversely
affected by cyber-attacks, employee or other internal misconduct,
computer viruses, electronic break-ins or “hacking”, or similar
disruptions, any one of which could have a material adverse impact
on our results of operations, financial condition, and prospects;
(xiv) the effects of any increased expenses or unanticipated
liabilities incurred as a result of, or due to activities related
to, our acquisition of Four Technologies; (xv) Four Technology’s
business model differing significantly from Progressive Leasing's
and Vive’s, which creates specific and unique risks for the Four
business, including Four’s exposure to the unique regulatory risks
associated with the laws and regulations that apply to its
business; and (xvi) the other risks and uncertainties discussed
under “Risk Factors” in the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2021, filed with the SEC on
February 23, 2022. Statements in this press release that are
“forward-looking” include, without limitation, statements about (i)
the impact of Progressive Leasing tightening its lease decisioning,
including on our GMV for the second quarter and full year 2022;
(ii) Progressive Leasing’s lease portfolio performance; (iii) our
ability to grow our businesses over the long-term; (iv) the impact
of our cost reduction initiatives on our performance and
businesses, including our growth-related investments; (v) our
estimates for consolidated revenues, Adjusted EBITDA, and GMV for
the second quarter of 2022, as well as our estimate for provision
for lease merchandise write-offs for the quarter; and (vi) our
revised full-year 2022 outlook. You are cautioned not to place
undue reliance on these forward-looking statements, which speak
only as of the date of this press release. Except as required by
law, the Company undertakes no obligation to update these
forward-looking statements to reflect subsequent events or
circumstances after the date of this press release.
Use of Non-GAAP Financial Information
The revised outlook for non-GAAP diluted earnings per share and
adjusted EBITDA set forth in this press release are supplemental
measures of our projected performance that are not calculated in
accordance with generally accepted accounting principles in the
United States (“GAAP”). Non-GAAP diluted earnings per share for the
Company's revised full year 2022 outlook exclude restructuring
expenses related primarily to severance charges associated with the
Company’s cost reduction initiatives, intangible amortization
expense, and accrued interest on an uncertain tax position related
to Progressive Leasing's $175.0 million settlement with the FTC in
2020. The amounts for these after-tax non-GAAP adjustments, which
are tax effected using our estimated statutory income tax rate of
26%, can be found in the reconciliation of projected earnings per
share assuming dilution to non-GAAP earnings per share assuming
dilution table below.
Adjusted EBITDA for the Company’s second quarter 2022 update and
the revised full year 2022 outlook presented in this press release
are calculated as the Company’s projected net earnings before
interest expense, net; income taxes; depreciation on property,
software, and equipment; and amortization of intangible assets.
Projected adjusted EBITDA also excludes stock-based compensation
expense and restructuring expenses related primarily to severance
charges associated with the Company’s cost reduction initiatives.
The amounts for these pre-tax non-GAAP adjustments can be found in
the table below.
Management believes that projected non-GAAP diluted earnings per
share and projected adjusted EBITDA provide relevant and useful
information, and are widely used by analysts, investors, and
competitors in our industry as well as by our management in
assessing both consolidated and business unit performance. These
non-GAAP measures also provide management and investors with an
understanding of the projected results from the primary operations
of our business by excluding the effects of certain items that
generally arose from larger, one-time transactions or expenses that
are not reflective of the ordinary earnings activity of our
operations or transactions that have variability and volatility in
terms of their amounts. We believe the exclusion of stock-based
compensation expense provides for a better comparison of our
operating results with our peer companies as the calculations of
stock-based compensation vary from period to period and company to
company due to different valuation methodologies, subjective
assumptions, and the variety of award types. This measure may be
useful to an investor in evaluating the underlying operating
performance of our business.
Adjusted EBITDA also provides management and investors with an
understanding of one aspect of earnings before the impact of
investing and financing charges and income taxes. These measures
may be useful to an investor in evaluating our operating
performance because the measures:
- Are widely used by investors to measure a company’s operating
performance without regard to items excluded from the calculation
of such measure, which can vary substantially from company to
company depending upon accounting methods, book value of assets,
capital structure and the method by which assets were acquired,
among other factors.
- Are used by rating agencies, lenders, and other parties to
evaluate our creditworthiness.
- Are used by our management for various purposes, including as a
measure of performance of our operating entities and as a basis for
strategic planning and forecasting.
Non-GAAP financial measures, however, should not be used as a
substitute for, or considered superior to, measures of financial
performance prepared in accordance with GAAP, such as the Company’s
GAAP basis net earnings and diluted earnings per share. We caution
investors that amounts presented in accordance with our definitions
of non-GAAP diluted earnings per share and adjusted EBITDA may not
be comparable to similar measures disclosed by other companies,
because not all companies and analysts calculate these measures in
the same manner.
Reconciliation of Revised Full
Year 2022 Outlook for Earnings Per Share
Assuming Dilution to Non-GAAP
Earnings Per Share Assuming Dilution
Revised Full Year 2022 Range
Low
High
Projected GAAP Earnings Per Share Assuming
Dilution
$
2.09
$
2.33
Add: Projected Intangible Amortization
Expense
0.31
0.31
Add: Projected Restructuring Expense
0.06
0.07
Add: Projected Interest on the FTC
Settlement Uncertain Tax Position
0.04
0.04
Projected Non-GAAP Earnings Per Share
Assuming Dilution
$
2.50
$
2.75
Reconciliation of Consolidated
Second Quarter 2022 Update and Revised Full-Year 2022 Outlook for
Adjusted EBITDA
(In millions)
Q2 Update and FY Revised Outlook
Range
Three Months Ended June 30,
2022
Year ended December 31, 2022
Projected Net Earnings
$14 - $16
$111 - $124
Income Taxes
5 - 6
43 - 48
Projected Earnings Before Income Taxes
19 - 22
154 - 172
Interest Expense, Net
9
38
Depreciation
2
11
Amortization
5
22
Projected EBITDA
35 - 38
225 - 243
Stock-Based Compensation
6 - 7
26 - 27
Restructuring Expense
4 - 5
4 - 5
Projected Adjusted EBITDA
$45 - $50
$255 - $275
About PROG Holdings, Inc.
PROG Holdings, Inc. (NYSE:PRG) is a fintech holding company
headquartered in Salt Lake City, UT, that provides transparent and
competitive payment options to consumers. The Company owns
Progressive Leasing, a leading provider of e-commerce, app-based,
and in-store point-of-sale lease-to-own solutions, Vive Financial,
an omnichannel provider of second-look revolving credit products,
and Four Technologies, provider of Buy Now, Pay Later payment
options through its platform Four. More information on PROG
Holdings' companies can be found at
https://www.progholdings.com.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220616005366/en/
Investor Contact John A. Baugh, CFA VP, Investor
Relations john.baugh@progleasing.com
Media Contact Mark Delcorps Director, Corporate
Communications media@progholdings.com
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