PROG Holdings Reports Fourth Quarter 2021 Results

• Progressive Leasing Q4 GMV of $635 million, up 18.3%
• E-commerce grew 45% to 18.2% of Progressive Leasing Q4 GMV
• Q4 consolidated revenues of $647 million, up 6.8%
• Q4 consolidated earnings before taxes of $52.9 million; Adjusted EBITDA of $72.1 million or 11.2% of revenues
• Diluted EPS of $0.59; Non-GAAP Diluted EPS of $0.67 for Q4
• Returned $439 million of capital to shareholders in Q4 through the repurchase of 13.7% of outstanding shares

PROG Holdings, Inc. (NYSE:PRG), the fintech holding company for Progressive Leasing, Vive Financial, and Four Technologies, today announced financial results for the fourth quarter ended December 31, 2021.

"We closed out 2021 with a strong fourth quarter of GMV performance driven by continued growth in our e-commerce channel and with our larger retail partners," said Steve Michaels, President and Chief Executive Officer of PROG Holdings. "In addition, the significant steps we took in the quarter to recapitalize our balance sheet through the issuance of $600 million in senior unsecured notes and the repurchase of $425 million of our stock in a successful modified Dutch auction tender offer are expected to benefit our earnings per share and decrease our cost of capital while maintaining our flexibility to execute on our capital allocation priorities."

"I am excited about 2022 as we continue our investments in existing and new partnerships and products that we expect to drive future growth,” Michaels continued. "We believe we are well positioned to capture an even greater portion of our large addressable market while maintaining strong profitability and generating significant free cash flow."

Consolidated Results

Consolidated revenues for the fourth quarter of 2021 were $646.5 million, an increase of 6.8% from the same period in 2020, primarily due to growth from key large national partners and continued e-commerce penetration.

Adjusted EBITDA for the fourth quarter of 2021 was $72.1 million compared with $94.6 million for the same period in 2020. As a percentage of revenues, adjusted EBITDA was 11.2% in the fourth quarter of 2021, compared with 15.6% for the same period in 2020. The Company reported consolidated net earnings from continuing operations for the fourth quarter of 2021 of $37.8 million compared with $42.3 million in the prior year period.

The year-over-year declines in adjusted EBITDA and net earnings from continuing operations in the fourth quarter were primarily driven by Progressive Leasing's delinquencies and write-offs approaching a more normalized level as compared to the extraordinarily low delinquency and write-off levels in the prior year quarter, which the Company believes were supported by government stimulus. These declines were also due to an increase in SG&A investments compared to the pandemic-related reductions of 2020.

Diluted earnings per share from continuing operations for the fourth quarter of 2021 were $0.59 compared with $0.62 in the year ago period. On a non-GAAP basis, diluted earnings per share from continuing operations were $0.67 in the fourth quarter of 2021 compared with $0.95 for the same quarter in 2020.

Progressive Leasing Results

Progressive Leasing's fourth quarter GMV increased 18.3% to $635 million compared with the same period in 2020. Its e-commerce GMV increased 45.0% year-over-year in the quarter and 150.5% annually, and accounted for 15.2% of its annual GMV. Progressive Leasing's gross leased asset portfolio ended the quarter 15.5% higher than the same period of 2020 due to GMV growth and lower 90-day buyout levels.

The provision for lease merchandise write-offs was 6.8% of lease revenues in the fourth quarter of 2021. While this level is elevated from the stimulus-driven record lows of the prior year, write-offs are in line with the Company's pre-pandemic levels.

Liquidity and Capital Allocation

PROG Holdings ended the fourth quarter of 2021 with cash of $170 million and gross debt of $600 million. The Company repurchased $439 million of its stock in the quarter at an average price per share of $48.86, inclusive of the $425 million of shares repurchased at $49.00 per share through its tender offer. Since the end of 2021, the Company has repurchased an additional $52 million of stock at an average price of $40.65 per share. The Company has approximately $509 million remaining under its previously announced $1 billion share repurchase program.

2022 Outlook

The Company is issuing its full year 2022 consolidated outlook for revenues, net earnings, adjusted EBITDA, GAAP diluted EPS, and Non-GAAP diluted EPS. On a consolidated basis, the Company expects 4-8% annual revenue growth and a return to adjusted EBITDA margins in the 11-13% range while investing in new products, talent, and technologies that will provide meaningful future contributions. This outlook anticipates GMV improving throughout the year after a slow start due to macroeconomic conditions, no further deterioration of those conditions, and no impact of any share repurchases beyond what the Company has completed to date.

Conference Call and Webcast

The Company has scheduled a live webcast and conference call for Wednesday, February 23, 2022, at 8:30 A.M. ET to discuss its financial results for the fourth quarter and full-year 2021. To access the live webcast, visit the company’s investor relations website, https://investor.progholdings.com. To join the conference call via telephone, dial 877-270-2148 and request to join the PROG Holdings, Inc. call. International participants without internet access can join the conference call by dialing 412-902-6510 and requesting to join the PROG Holdings, Inc. call.

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.

Forward Looking Statements:

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 , “expected”, “believe”, “expect”, "outlook", “expectation” and similar forward-looking terminology. These risks and uncertainties include factors such as (i) the impact of the COVID-19 pandemic, including new variants 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 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 point-of-sale partners being able to obtain the merchandise its 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; (ii) changes in the enforcement of existing laws and regulations and the adoption of new laws and regulations that may unfavorably impact our businesses; (iii) 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; (iv) the potential unfavorable effects on our business of the rapid increase in the rate of inflation being experienced in the economy including on customer demand for the merchandise that our point of sale (“POS”) partners sell, and on our customers’ ability to make the lease and loan payments they owe us; (v) a large percentage of the Company’s revenues being concentrated with several of Progressive Leasing’s key POS partners; (vi) the risks that Progressive Leasing will be unable to attract new POS partners or retain and grow its business with its existing POS partners; (vii) the risk that our capital allocation strategy, including our current share repurchase program, will not be effective at enhancing shareholder value; (viii) 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 lending-related laws and regulations that apply to its business; (ix) 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; (x) increased competition from traditional and virtual lease-to-own competitors and also from competitors of our Vive segment; (xi) our increased level of indebtedness; (xii) 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; (xiii) the effects of any increased expenses or unanticipated liabilities incurred as a result of, or due to activities related to, our recent acquisition of Four Technologies; (xiv) 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 (xv) 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, to be filed with the SEC on February 23, 2022. Statements in this press release that are “forward-looking” include without limitation statements about (i) the benefits of the recapitalization of our balance sheet on our earnings per share and cost of capital; (ii) our capital allocation priorities; (iii) increasing our share of the addressable market for our products and services; (iv) our future profitability and free cash flow; (v) the benefits we expect from our investments in existing and new products and partnerships; and (vi) our outlook for 2022. 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:

Non-GAAP net earnings from continuing operations, non-GAAP diluted earnings from continuing operations per share, and adjusted EBITDA are supplemental measures of our performance that are not calculated in accordance with generally accepted accounting principles in the United States (“GAAP”). Non-GAAP net earnings from continuing operations and non-GAAP diluted earnings from continuing operations per share for the three and twelve months ended December 31, 2021 and the Company's full year 2022 outlook, exclude intangible amortization expense, acquisition related transaction costs, and accrued interest on an uncertain tax position related to Progressive Leasing's $175 million settlement with the FTC in 2020. Non-GAAP net earnings from continuing operations and non-GAAP diluted earnings from continuing operations per share for the three and twelve months ended December 31, 2020 exclude intangible amortization expense, restructuring expenses, separation related charges from our spin-off of Aaron's Business, insurance recoveries for legal and regulatory fees incurred related to Progressive Leasing's 2020 FTC settlement, and income tax benefits from our revaluation of net operating loss carrybacks resulting from the CARES Act. The amounts for these after-tax non-GAAP adjustments, which are tax effected using our statutory tax rate, can be found in the reconciliation of net earnings from continuing operations and earnings from continuing operations per share assuming dilution to non-GAAP net earnings from continuing operations and earnings from continuing operations per share assuming dilution table in this press release.

The Adjusted EBITDA figures presented in this press release are calculated as the Company’s earnings from continuing operations before interest expense, net, depreciation on property, plant and equipment, amortization of intangible assets and income taxes. Adjusted EBITDA for the three and twelve months ended December 31, 2021 and 2020 also excludes stock-based compensation expense, restructuring expenses, acquisition related transaction costs, separation related charges from our spin-off of Aaron's Business, and insurance recoveries for legal and regulatory fees incurred related to Progressive Leasing's 2020 FTC settlement. The amounts for these pre-tax non-GAAP adjustments can be found in the three and twelve-month segment EBITDA tables in this press release. Adjusted EBITDA for the Company's full year 2022 outlook is calculated as projected earnings before interest expense, interest income, depreciation on property, plant and equipment, amortization of intangible assets, income taxes, and stock-based compensation.

Management believes that non-GAAP net earnings from continuing operations, non-GAAP diluted earnings from continuing operations per share, and 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.

Non-GAAP net earnings from continuing operations, non-GAAP diluted earnings from continuing operations, and adjusted EBITDA provide management and investors with an understanding of the results from the primary operations of our business by excluding the effects of certain items that generally arose from larger, one-time transactions that are not reflective of the ordinary earnings activity of our operations or transactions that have variability and volatility of the amount. 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 from continuing operations and diluted earnings from continuing operations per share and the GAAP revenues and earnings from continuing operations before income taxes of the Company’s segments, which are also presented in the press release. Further, we caution investors that amounts presented in accordance with our definitions of non-GAAP net earnings from continuing operations, non-GAAP diluted earnings from continuing operations 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.

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