Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- PROG Holdings Inc (PRG, Financial) delivered a strong third quarter, surpassing expectations for GMV growth and reaching the high end of revenue and earnings outlook.
- The company achieved a consolidated revenue of $606.1 million, representing a 4% growth compared to Q3 2023.
- PROG Holdings Inc (PRG) signed a long-term exclusive partnership with American Signature Inc, enhancing its market positioning.
- The PROG Marketplace platform experienced over 300% growth year-to-date, exceeding its 2024 GMV target.
- The company maintained a healthy portfolio with write-offs consistent with pre-pandemic levels, supported by dynamic decisioning models.
Negative Points
- The company faces challenges from the Big Lots bankruptcy, which is expected to impact Q4 GMV by 100 to 150 basis points.
- There is a slight increase in delinquencies within the portfolio, reflecting broader consumer stress.
- The gross margin decreased by 110 basis points year-over-year due to higher 90-day early purchases and new customer growth.
- The furniture and mattress categories remain weak, with no expected inflection in demand for 2025.
- The company anticipates a challenging Q4 gross margin comparison due to below-average 90-day purchases in the previous year.
Q & A Highlights
Q: Can you discuss the impact of American Signature and Big Lots on GMV and how you see this affecting sales in the coming quarters?
A: Steven Michaels, President and CEO, noted that the partnership with American Signature is promising for 2025, though it won't significantly impact 2024. The Big Lots bankruptcy and store closures are expected to be a headwind, potentially impacting Q4 GMV by 100 to 150 basis points. Despite these challenges, the company is optimistic due to strong partnerships and favorable credit supply dynamics.
Q: With the consumer environment being stretched, do you expect Q4 to be your highest quarter for write-offs?
A: Brian Garner, CFO, explained that Q4 is expected to see a step down in write-offs from Q3's 7.7%, consistent with typical seasonal patterns. The company is actively managing the portfolio with dynamic decisioning models to maintain write-offs within the 6% to 8% annual target range.
Q: Can you explain the dynamics between early buyouts and write-offs? Are higher early buyouts linked to higher quality customers?
A: Brian Garner confirmed that higher early buyouts are indeed linked to higher quality customers, who tend to have a stronger credit profile and lower write-offs. This trend is beneficial for long-term customer value, although it may initially pressure gross margins slightly.
Q: What is the outlook for GMV growth from existing versus new merchants?
A: Steven Michaels stated that while specific bifurcation details weren't provided, the company saw growth across the platform, with regional business experiencing low double-digit growth. The focus remains on strengthening existing partnerships and expanding through new ones.
Q: How is the PROG Marketplace performing, and are there plans for further merchant additions?
A: Steven Michaels highlighted that the PROG Marketplace has seen over 300% growth year-to-date, surpassing initial targets. The company is enhancing targeted marketing and customer experience, with plans to continue expanding merchant partnerships and providing more choices to customers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
