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    PROG Holdings (PRG)

    PRG Q4 2024: Margins Hold at 11%-13% Despite $150M Big Lots GMV Hit

    Reported on Jun 9, 2025
    Pre-Earnings PriceN/ADate unavailable
    Post-Earnings PriceN/ADate unavailable
    Price ChangeN/A
    • Excluding the one-time Big Lots impact, core GMV growth is expected to accelerate. Management highlighted that outside Big Lots, GMV is projected to grow in the high single digits, supported by strong relationships with major retail partners and renewals locked in through multiyear exclusivities.
    • Robust increase in application volume strengthens growth prospects. Despite some quality concerns, the rising volume—driven by both online and in-store channels—signals healthy customer demand and an expanding pipeline.
    • Strategic investments in technology and operational efficiencies drive long-term potential. Ongoing enhancements in decisioning algorithms, integration with retail partners, and targeted tech investments are expected to improve conversion rates and margins over time.
    • Big Lots Bankruptcy Impact: The loss of Big Lots, a partner with a high margin and repeat customer base, creates a significant GMV gap and margin headwind that may not be easily offset, potentially depressing overall revenue and profitability in the near-term.
    • Deterioration in Credit Quality: The company has experienced a 350–400 basis point decline in approval rates due to lower-quality applications from new customers and a tighter decisioning process, which could lead to higher delinquencies and impact long-term profitability.
    • Continued Retail Industry Uncertainty: Ongoing challenges in the retail sector—with multiple bankruptcies and shifting customer behavior—pose risks to sustaining and replacing lost GMV, raising concerns over the robustness of future pipeline improvements and net additions.
    1. Margin Outlook
      Q: Margin outlook amid Big Lots impact?
      A: Management expects Progressive Leasing margins to remain in the 11%–13% range despite short‑term headwinds from higher delinquencies and the Big Lots impact.

    2. Big Lots Impact
      Q: How does Big Lots affect revenue?
      A: Executives noted that Big Lots’ bankruptcy creates a gap of roughly $135–$150 million in GMV, though excluding that, growth in most segments is expected to be in the high single digits.

    3. Free Cash Flow
      Q: What is the free cash flow outlook?
      A: Management indicated that free cash flow should mirror historical EBITDA performance, with the timing of GMV production being the key driver.

    4. Approval Rates
      Q: What’s happening with lease approvals?
      A: They reported that approval rates have dropped by about 350–400 basis points year‑over‑year, mainly due to the lower quality of new customer applications.

    5. Long-Term Margin
      Q: What is the long‑term EBITDA margin target?
      A: Despite current pressures, management remains committed to achieving a long‑term margin in the 11%–13% range.

    6. American Signature
      Q: Expectations for American Signature GMV?
      A: The new partnership with American Signature is off to a strong start and should eventually replace the volume of the previous provider in 2025.

    7. Pipeline Growth
      Q: How is the new partner pipeline?
      A: While no major “whale” is expected, conversations are positive, and incremental net additions remain a key focus for 2025.

    8. Partner Stability
      Q: Are key retail partners stable?
      A: Aside from Big Lots, top retail partners are secured by multiyear exclusivities, ensuring a stable revenue base.

    9. Application Volume
      Q: Any changes in application volumes?
      A: Application volumes have increased due to lender trade‑down activity, though the average quality of these applications is lower than last year’s.

    10. Store Pipeline
      Q: What about store closures and closeout sales?
      A: Closeout sales have produced spotty inventory with little extra volume, and the future of Big Lots’ stores remains uncertain.

    11. Customer Behavior
      Q: Any shift in customer behavior?
      A: There has been some stress among new, bottom‑of‑funnel customers, resulting in higher delinquencies that management is addressing as they work to improve overall performance.

    12. Tax Season Effects
      Q: How might tax season affect performance?
      A: Management anticipates a normal tax season with a temporary volume dip around President’s Day, expecting no major long‑term impact.

    13. Category Signs
      Q: Are there signs in specific verticals?
      A: There are modest signs of life in consumer electronics and mobile phones, even though demand overall remains challenging.

    14. Retail Evolution
      Q: Is retail shifting mostly online?
      A: Management maintains that a multichannel approach is essential, with both online and brick‑and‑mortar channels playing important roles.

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