PROG Holdings, Inc. (NYSE:PRG) reported impressive second quarter 2024 results, surpassing expectations on both the top and bottom lines. The company delivered consolidated revenue of $592.2 million and non-GAAP diluted EPS of $0.92, exceeding the high end of its guidance range. This strong performance was driven by robust growth in the company's Progressive Leasing segment, which saw a 7.9% year-over-year increase in Gross Merchandise Volume (GMV).

The company's success in the quarter can be attributed to its strategic initiatives under the "Grow, Enhance, and Expand" framework. Under the "Grow" pillar, PROG Holdings made significant progress in both regional and national markets, onboarding new retailers and extending relationships with existing ones. The company's PROG Marketplace platform also delivered over 250% growth year-to-date through June 30th, exceeding full-year expectations.

Under the "Enhance" pillar, PROG Holdings invested in technology projects, partnering with new and existing retailers to create seamless customer interactions. The company also implemented generative AI solutions to boost productivity and improve retailer and customer experiences.

In terms of the "Expand" pillar, PROG Holdings focused on its omni-channel marketing strategy, automating cross-promotional consumer journeys and driving incremental Progressive Leasing GMV through cross-marketing efforts.

For the full year 2024, PROG Holdings expects to generate revenue in the range of $2.4 to $2.45 billion, adjusted EBITDA between $265 million and $275 million, and non-GAAP EPS of $3.25 to $3.40. This updated outlook reflects the company's strong Q2 performance and the anticipated benefits from the tightening of the credit supply above PROG Holdings, offset by the current challenges posed by the macroeconomic environment.

Business Overview

PROG Holdings, Inc. is a financial technology holding company that provides transparent and competitive payment options to consumers. The company has two reportable segments: (i) Progressive Leasing, an in-store, app-based, and e-commerce point-of-sale lease-to-own solutions provider; and (ii) Vive Financial, an omnichannel provider of second-look revolving credit products.

Progressive Leasing partners with traditional and e-commerce retailers to offer lease-purchase solutions to customers who may not have access to traditional credit-based financing options. Vive primarily serves customers that may not qualify for traditional prime lending offers, offering customized programs with services that include revolving loans through private label and Vive-branded credit cards.

The company's ecosystem of financial technology offerings also includes Four Technologies, Inc., a Buy Now, Pay Later company that allows shoppers to pay for merchandise through four interest-free installments.

Financials

For the second quarter of 2024, PROG Holdings reported consolidated revenue of $592.2 million, up from $592.8 million in the prior-year period. This was driven by a 7.9% year-over-year increase in GMV for the Progressive Leasing segment, partially offset by a decline in Vive's GMV due to lower customer demand for products offered by certain Vive POS partners.

The company's Progressive Leasing segment generated revenue of $570.5 million in Q2 2024, down 0.8% from $574.8 million in the same period last year. This decline was primarily due to a smaller lease portfolio at the beginning of the quarter, partially offset by an increase in customers exercising early purchase options.

Vive's revenue decreased to $15.4 million in Q2 2024 from $17.2 million in the prior-year quarter, reflecting a smaller loan portfolio due to decreased customer demand for products offered by certain Vive POS partners.

PROG Holdings' consolidated adjusted EBITDA for the second quarter of 2024 was $72.3 million, representing a margin of 12.2%, compared to $75.0 million and 12.7% in the same period last year. The decrease in adjusted EBITDA margin was primarily due to an increase in the provision for loan losses within the company's other operations, higher provision for lease merchandise write-offs, and higher restructuring costs, partially offset by lower personnel costs resulting from cost reduction initiatives.

Liquidity

As of June 30, 2024, PROG Holdings had $250.1 million in cash and cash equivalents and $600 million in gross debt, resulting in a net leverage ratio of 1.26 times trailing 12 months adjusted EBITDA. The company remained undrawn on its $350 million revolving credit facility at the end of the quarter.

During the second quarter of 2024, PROG Holdings paid a quarterly cash dividend of $0.12 per share and repurchased 1,030,000 shares of its common stock at a weighted average price of $35.67 per share. The company has $438.8 million remaining under a recently reauthorized $500 million share repurchase program.

Risks and Challenges

PROG Holdings operates in a highly regulated industry, which exposes the company to potential legal and regulatory risks. The company closely monitors its regulatory environment and works to maintain transparency and flexibility in its solutions to customers.

The company also faces macroeconomic challenges, such as elevated inflation and interest rates, which have the potential to impact consumer demand for the types of merchandise offered by its key POS partners. To mitigate these risks, PROG Holdings has executed a number of cost reduction initiatives to align its cost structure with the near-term revenue outlook.

Conclusion

PROG Holdings delivered an outstanding second quarter, exceeding expectations on both the top and bottom lines. The company's strategic initiatives under the "Grow, Enhance, and Expand" framework, coupled with the tightening of the credit supply above PROG Holdings, have positioned the business for continued success in the second half of 2024 and beyond. With a healthy balance sheet, disciplined capital allocation, and a focus on innovation, PROG Holdings appears well-equipped to navigate the current macroeconomic environment and drive long-term shareholder value.