Release Date: April 23, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue for the first quarter approximated the high end of the company's outlook, with both earnings and non-GAAP diluted EPS exceeding expectations.
- The BNPL platform, Four Technologies, showed strong growth and achieved its first quarter of positive adjusted EBITDA.
- Consolidated revenue increased by 6.6% year over year, driven by a larger lease portfolio and higher 90-day purchase activity.
- The lease portfolio remains healthy, with Q1 write-offs at 7.4%, slightly better than expected.
- The company continues to grow its balance of share with key existing partners and has expanded its active door count by nearly 5% year over year.
Negative Points
- Progressive leasing's GMV for the quarter was 4% below the same period last year, impacted by the loss of a large retail partner due to bankruptcy.
- There was a noticeable slowdown in consumer activity mid-quarter, attributed to economic volatility and evolving trade policy.
- Consumer confidence appears to be negatively impacted, with many shoppers delaying discretionary spending, especially in big-ticket categories.
- The macro environment has deteriorated, with inflation, tariff concerns, and broader uncertainty creating additional pressure on consumer and retail partner channels.
- Approval rates for leases were down year over year, partly due to tightening actions and a shift in application quality.
Q & A Highlights
Q: Can you elaborate on the trade-down environment and how it has evolved over the past months?
A: Steven Michaels, President and CEO, explained that trade-down still exists but is more muted than in the back half of 2024. The retail softness and consumer hesitation are larger macro forces, but the top of the funnel is more open today than last year.
Q: How has the retail environment progressed, particularly during the tax refund season?
A: Steven Michaels noted that the quarter started encouragingly, but there was a downshift in sentiment mid-quarter. There hasn't been a significant rebound or continued deterioration since then.
Q: Regarding the $30 million GMV headwind from a lost customer, is this consistent across the year?
A: Brian Garner, CFO, confirmed that the headwind is relatively consistent across the four quarters, with some seasonality. Steven Michaels added that there was some GMV in Q1 from liquidation sales, which will not continue, leading to a slight step up in Q2.
Q: How are inflation and tariffs impacting your retail partners and customers?
A: Steven Michaels stated that modest increases in ticket prices could be positive, but price shocks and demand destruction are not. The impact varies by vertical and category, and the current consumer behavior is more impactful than actual price changes.
Q: What are you seeing from legacy Big Lots customers after their bankruptcy?
A: Steven Michaels mentioned a strategic marketing plan to retain Big Lots customers within the PROG family, directing them to other partners in similar or different verticals. They are seeing success in reactivating these customers.
Q: How has the macro environment affected credit performance and demand?
A: Steven Michaels noted that the portfolio is healthy, with write-offs slightly better than expected. The demand story, rather than portfolio performance, is the main issue, with lower application volume and conversion rates.
Q: Can you discuss the American Signature ramp and the pipeline of new retailers?
A: Steven Michaels reported that the partnership with American Signature is going well, with strong connectivity and training. The challenging environment is conducive to pipeline conversations, and they are in a good position to help more retailers.
Q: How have lease approval rates and application volumes changed?
A: Steven Michaels explained that approval rates were 300 to 400 basis points lower than last year due to tightening actions and channel shifts. Application growth was seen excluding Big Lots, but there was a decline in conversion post-approval.
Q: How are you managing conversations with partners amid tariffs and macro challenges?
A: Steven Michaels stated that discussions with current partners are positive and partnership-oriented. They are working on e-commerce integrations and offering solutions to partners facing tariff-related challenges.
Q: Can you provide more details on the GMV outlook for the rest of the year?
A: Steven Michaels and Brian Garner did not provide a specific GMV guide due to the lack of clarity. They acknowledged the uncertainty and revised their view based on known factors and potential future conditions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
