PROG Holdings Reports Fourth Quarter 2020 Results

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  • Revenues of $605.7 million, up 6.5%
  • Diluted EPS of $0.62; Non-GAAP Diluted EPS $0.95, up 46.2%
  • Earnings before taxes of $66.3 million; Adjusted EBITDA of $90.0 million, up 35.9%
  • Progressive Leasing earnings before taxes of $88.1 million; Adjusted EBITDA of $96.7 million, up 25.4%
  • Board of Directors authorizes new $300 million share repurchase program

PROG Holdings, Inc. (NYSE:PRG), a FinTech holding company operating Progressive Leasing, a leading provider of virtual in store, e-commerce and app-based point-of-sale lease-to-own solutions, and Vive Financial, an omni-channel provider of second-look revolving credit products, today announced fourth quarter 2020 results for the first time as a stand-alone public company.

“Our Progressive Leasing segment delivered record revenue, earnings before taxes, and adjusted EBITDA for the fourth quarter period, in spite of challenges posed by the pandemic”, said Steve Michaels, PROG’s Chief Executive Officer. “During our first quarter as a stand-alone FinTech company, the PROG team provided exceptional service to our customers and point-of-sale retail partners while also completing the spin-off of our former Aaron’s Business segment. We continued to navigate challenging economic conditions, as changes in customer behavior, supply chain disruptions, and broader economic uncertainty negatively impacted gross merchandise volume (GMV) in the period. During 2021, we expect to achieve strong GMV growth by expanding our e-commerce business and driving increased sales for our existing and new point-of-sale retail partners.”

Consolidated Results

For the fourth quarter of 2020, consolidated revenues were $605.7 million, an increase of 6.5% from the fourth quarter of 2019.  The increase was primarily driven by continued strong customer payment performance across both the Progressive Leasing and Vive business segments, as well as elevated buyout activity in the period.  These revenue drivers were partially offset by lower levels of GMV growth in the second and third quarters that had an unfavorable impact on fourth quarter revenue growth. Progressive Leasing’s GMV for the fourth quarter of 2020 declined 3.4% compared to the prior year period, as strong growth in new national retailers and e-commerce was offset by the effects of pandemic-related challenges experienced by our point-of-sale retail partners.

The provision for lease merchandise write-offs was 4.5% of revenues in the fourth quarter of 2020 compared with 6.6% in the same period of 2019, below our annual target range of 6% to 8% of revenues. The lower write-offs resulted from lower delinquencies and customer payment performance exceeding prior year results.

The Company reported net earnings from continuing operations for the fourth quarter of 2020 of $42.3 million compared to a net loss from continuing operations of $138.1 million in the prior year period (which was burdened by one-time legal and regulatory expenses of $179.3 million). Net earnings in the fourth quarter of 2020 included $15.5 million of transaction expenses related to the spin-off of our former Aaron’s Business segment, as well as $3.6 million of unallocated overhead costs that was previously allocated to that segment.

Adjusted EBITDA for the Company was $90.0 million for the fourth quarter of 2020, compared with $66.2 million for the same period in 2019, an increase of $23.8 million, or 35.9%. As a percentage of revenues, adjusted EBITDA was 14.9% in the fourth quarter of 2020 compared with 11.6% for the same period in 2019.

Diluted earnings per share from continuing operations for the fourth quarter of 2020 were $0.62 compared with diluted loss per share of $2.06 in the year ago period. The fourth quarter 2019 diluted loss per share was impacted by one-time legal and regulatory expenses of $179.3 million. On a non-GAAP basis, diluted earnings per share from continuing operations were $0.95 in the fourth quarter of 2020 compared with $0.65 for the same quarter in 2019, an increase of $0.30 or 46.2%.

Liquidity and Capital Allocation

The Company ended 2020 with a net debt position of $13 million and had $300 million of unused capacity on its $350 million revolving credit facility. In addition, the Company’s Board of Directors has authorized a new $300 million share repurchase program and determined to discontinue paying dividends for the foreseeable future.

“The Board’s decision to authorize a new repurchase program and discontinue the dividend, reflects our new positioning. With the spin-off behind us, our business is now high-growth and asset light.  We have substantial capital to grow, through both re-investment in our business and potential opportunities to acquire innovative and scalable technologies or businesses.  At the same time, we expect our strong cash flows will provide us the opportunity to return excess capital to shareholders through opportunistic buybacks,” said Mr. Michaels.

The Company expects to repurchase shares under its new $300 million program from time to time, subject to its capital plan, market conditions and other factors.  The timing and exact amount of repurchases under the new repurchase program will be determined by the Company’s management.  The Company is not obligated to acquire any particular number of shares and the new program may be suspended or discontinued at any time.

2021 Outlook

The Company is providing outlook for the first quarter of 2021, but will not be providing annual guidance at this time, as the economic uncertainty created by the pandemic, and uncertainty regarding the amount, nature and timing of any government stimulus, continues to impact our POS partners and our customers in a manner that limits its visibility into its full-year performance for 2021.

Q1 2021 Outlook

(In thousands, except per share amounts)

Low

High

PROG Holdings – Total Revenues

$

650,000

$

670,000

PROG Holdings – Net Earnings

55,000

58,000

PROG Holdings – Adjusted EBITDA1

85,000

90,000

PROG Holdings – Diluted EPS

0.81

0.87

PROG Holdings – Diluted Non-GAAP EPS

0.89

0.95

Progressive Leasing – Total Revenues

638,000

657,000

Progressive Leasing – Earnings before taxes

72,000

75,000

Progressive Leasing – Adjusted EBITDA1

84,000

87,000

Vive – Total Revenues

12,000

13,000

Vive – Earnings before taxes

1,000

3,000

Vive – Adjusted EBITDA1

1,000

3,000

1

The Q1 2021 Adjusted EBITDA outlook excludes stock-based compensation expense.  See GAAP to Non-GAAP reconciliation below for further details.

Conference Call and Webcast

The Company will hold a conference call to discuss its quarterly results on Thursday, February 25, 2021 at 8:30 a.m. Eastern Time. The public is invited to listen to the conference call by webcast accessible through the Company’s investor relations website, investor.progleasing.com. The webcast will be archived for playback at that same site.

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