PROG Holdings Inc Stock

Hello, and welcome to PROG Holdings Second Quarter 2026 Earnings Conference Call. [Operator Instructions].

I would now like to hand the conference over to John Baugh. Sir, you may begin.

Thank you, and good morning, everyone. Welcome to the PROG Holdings Second Quarter 2026 Earnings Call. Joining me this morning are Steven Michaels, PROG Holdings Chairman, President and Chief Executive Officer; and Brian Garner, our Chief Financial Officer.

Many of you have already seen a copy of our earnings release issued this morning, which is available on our Investor Relations website, investor.progholdings.com. During this call, certain statements we make will be forward looking, including comments regarding our 2026 full year outlook and our outlook for the third quarter of 2026. Listeners are cautioned not to place undue emphasis on forward-looking statements we make today, all of which are subject to risks and uncertainties and which could cause actual results to differ materially from those contained in the forward-looking statements. We undertake no obligation to update any such statements.

On today's call, we will be referring to certain non-GAAP financial measures, including adjusted EBITDA and non-GAAP EPS, which have been adjusted for certain items which may affect the comparability of our performance with other companies. These non-GAAP measures are detailed in the reconciliation tables included with our earnings release. The company believes that these non-GAAP financial measures provide meaningful insight into the company's operational performance and cash flows and provides these measures to investors to help facilitate comparisons of operating results with prior periods and to assist them in understanding the company's ongoing operational performance.

With that, I would like to turn the call over to Steven Michaels, PROG Holdings President and Chief Executive Officer. Steve?

Thanks, John, and good morning, everyone. I appreciate you all joining us today.

Let me begin with the headline. This is a strong quarter for PROG Holdings. Revenue came in toward the higher end of our outlook, while adjusted EBITDA and non-GAAP EPS exceeded the top of our range. Importantly, every product in our ecosystem contributed. At Progressive Leasing, GMV growth, combined with fewer customers choosing to exercise their 90-day purchase option, drove higher gross margin and a 12.7% adjusted EBITDA margin. At Four, robust customer demand, once again translated into profitable triple-digit growth. And at Purchasing Power, we delivered double-digit GMV growth with revenue and margin both ahead of plan. Producing results like these while the consumer is under pressure is a testament to how we have built this business over the years and the discipline with which we run it today.

Before I walk through our strategic priorities, let me add some context on the quarter. Consolidated GMV grew 60% in the second quarter compared to the same period last year. This is an improvement from the 54% growth we posted in Q1. Because our platform generates volume simultaneously across Leasing, Four and Purchasing Power, this consolidated figure is the clearest way to see the true scale of what we're building.

Starting with Progressive Leasing, GMV grew 3.4% year-over-year, a meaningful improvement from the 2.2% decline we saw in Q1 and right in line with our expectations. Recall that for much of last year, Leasing's GMV was held back by 2 things: The tightening actions we deliberately took and the Big Lots bankruptcy. Once we had cycled past both items largely by the end of February, Leasing's GMV turned positive in March, and that momentum carried through the second quarter. The improvement reflects both the lapping of those prior headwinds and the payoff from several growth initiatives we put in place over the past year. Applications grew double digits year-over-year, fueled by stronger top of funnel marketing and an improved user experience. So we remain disciplined about how many of those applicants ultimately convert into funded leases. We believe we are firmly back on a growth footing at Leasing. And notably, we produced that growth in Q2 even as our customer contended with inflation and higher costs.

Four's GMV more than doubled year-over-year, extending its remarkable run of triple-digit growth to 11 quarters. Growth continued to be powered by a healthy underlying consumer demand for BNPL. Four's position as an easy-to-use and highly rated app that shoppers genuinely like, coupled with solid marketing performance, drove both GMV and subscriber growth. Appetite for our BNPL offering stays strong and that appetite keeps converting into attractive economics and profitability, a topic I'll return to shortly.

Purchasing Power posted another quarter of double-digit GMV growth, powered mainly by strength throughout its established employer relationships. I want to be clear about the quality of the growth across the businesses because it's an important point. This growth is coming from expanded distribution, share gains with our retail partners and genuine customer demand, not from loosening our decisioning posture. In fact, our leasing approval rates are down year-over-year, which is the clearest evidence that we remain disciplined regarding our portfolio performance.

Consolidated revenue came in at approximately $720 million, up 22% year-over-year and toward the higher end of our outlook. This growth was driven primarily by the addition of Purchasing Power together with excellent momentum at Four, partially offset by a revenue decline at Progressive Leasing, where a smaller average portfolio through the quarter created a headwind. With GMV growth continuing and portfolio growth resuming, we expect Leasing to return to positive year-over-year revenue comps in the second half of the year. Consolidated adjusted EBITDA from continuing operations of $88.4 million and non-GAAP EPS of $1.19, both came in above the high end of our outlook range. Brian will take you through the details, but the headline is that we delivered profitable growth while investing in the business.

Now to portfolio performance at Progressive Leasing, where the takeaway is that disciplined execution delivered strong profitability this quarter. Lease merchandise write-offs came in at 8.4% of total Progressive Leasing revenue, which was largely within our expectations as of the April earnings call. The second and third quarters are seasonally our 2 highest write-off periods, and with this quarter's GMV growth, some elevation is expected. The sequential increase from the first quarter was modestly above our normal seasonal step-up, and we believe that was caused by cost pressures, including gas prices, which weigh on the budgets of our core customer.

The key point is that this reflects a choice we made from a position of strength. With Leasing gross margins healthy, we made a deliberate decision to focus on driving higher portfolio yield and maximizing adjusted EBITDA dollars. Our decisioning posture remains dynamic and we make appropriate adjustments that keep us well positioned to finish the year inside our 6% to 8% targeted annual range as we have successfully done in prior years when unfavorable macro factors have had an impact on Leasing write-offs. The payoff of our approach is evident in the results.

The Progressive Leasing segment delivered an adjusted EBITDA margin of 12.7% and our highest second quarter margin since exiting COVID. Achieving that level of profitability in a seasonally high write-off quarter underscores the underlying earnings power of the segment. Let me also offer a brief perspective on the broader environment and our consumer. Despite a favorable tax refund season, our customer is feeling the effects of prolonged inflation and the recent increases in gas prices, which remains a headwind for discretionary budgets. Even so, they remain resilient and overall demand has held up well, though it is expressing itself differently from one business to the next.

At Four, our smaller ticket pay-and-for offering, demand is still showing strength and contributing to a significant growth rate. At Progressive Leasing, the pressure has been most pronounced in bigger ticket need-based categories such as furniture and appliances. We have partially offset that softness with continued strength in electronics and on our direct-to-consumer PROG marketplace platform. And at Purchasing Power, we are seeing year-over-year GMV growth in nearly every category with furniture and jewelry the 2 exceptions. This is the benefit of a diversified ecosystem, one customer, multiple needs and products with the flexibility to lean in where demand is robust and tighten where prudence calls for it.

With that, let me move to the 3 pillars of our strategy: Grow, Enhance and Expand. Under Grow, Progressive Leasing returned to year-over-year GMV growth of 3.4% and with applications up double digits and monthly trends continuing the positive GMV trajectory we established in March. Our direct-to-consumer efforts in marketing and digital channels were again meaningful contributors. PROG Marketplace was a particular standout with its exceptional trajectory since inception. On an annual basis, the marketplace has achieved a GMV CAGR of nearly 200% from 2022 to 2025. And on a Q2 basis, it has expanded GMV roughly 13 fold over the past 3 years. Our e-commerce channel also advanced, helped by an improved digital checkout experience, reaching 25.6% of total progressive leasing GMV in the quarter, up from 20.9% a year ago and our highest second quarter mix to date.

At Four, we delivered 111% GMV growth compared to the same period last year, powered by strong customer engagement and repeat purchasing. The team rolled out AI-driven product enhancements that simplify the shopping experience and average order values increased year-over-year. On the marketing side, we deployed spend efficiently, maintaining a healthy balance between paid and organic customer acquisition. We are also pleased with the subscription-oriented promotion launched around Amazon Prime Days and plan to use similar approaches elsewhere to drive subscribers and GMV.

And at Purchasing Power, we signed several new employer clients during the quarter. And just after the quarter ended, added a large new client with more than 80,000 eligible employees, bringing a meaningful number of new potential customers onto the platform to support future growth. We are integrating the business more deeply into our ecosystem while testing new growth levers. In the second quarter, that included a series of improvements to the customer experience, a faster, more intuitive mobile interface, the launch of Vita, Purchasing Power's AI shopping assistant, which makes it easier for customers to find what they are looking for and surfaces personalized product recommendations and a new bundling feature that curates attractive assortments for one-click purchases. We also broadened our merchandise categories, including new automotive services, such as wheel alignment opening additional avenues for expansion.

Under Enhance, our investments in customer and retailer experiences delivered measurable results. Rather than cataloging every individual initiative I want to frame this the way we think about it internally, which is in terms of outcomes. Our work this quarter focused on driving better search results, higher checkout conversion, faster decisioning and a lower cost to serve. We launched an AI-powered search capability at purchasing power and for the logged in customers who chose to use it, site conversion roughly doubled, an early but powerful proof point on how AI is improving the shopping experience and driving real commercial outcomes throughout the ecosystem. AI underpins much of this. It is embedded in dozens of smaller improvements in customer experience and operational efficiency that individually may not warrant a headline, but that collectively move conversion, retention and unit economics in the right direction.

Under Expand, Four's scale profitability and purchasing power integration is progressing well. Four's Q2 revenue was $35.1 million, up 118% year-over-year, and it generated adjusted EBITDA of $8.7 million. As signaled on the Q1 call, adjusted EBITDA margin moderated to 24.8%, down from Q1's seasonally elevated 37%, but consistent with the full year trajectory we have guided to. Four's take rate, defined as revenue generated as a percentage of GMV over the trailing 12-month period, held steady at approximately 10%. Performance was powered by customer engagement and repeat purchasing. Average purchase frequency held at roughly 5 transactions per quarter. Active shoppers grew nearly 80% year-over-year and quarterly average monthly active users nearly doubled compared to a year ago, reflecting sustained consumer interest. Four's subscription model remains a key driver with 4-plus subscribers contributing approximately 80% of total GMV.

On Purchasing Power, integration is advancing well, and revenue and margin contribution are tracking in line with our expectations. Adjusted EBITDA rose sequentially from $800,000 in the first quarter to $10.6 million with margin improving 730 basis points to 8.1% of revenue. As Brian will discuss, several factors drove the step up and they were all largely anticipated.

Beyond the segment results, the cross-sell opportunity of Purchasing Power and across our businesses is significant and increasingly tangible. Our ecosystem's first approach is gaining traction as a growing number of customers transact with multiple PROG Holdings products. Customer overlap deepened in the second quarter, driven by cross-product marketing and activations that build momentum. Among the promising signals we see is Four's growth rate. which serves as a primary driver of shared customers throughout our businesses, increasingly functioning as an important entry point to our broader ecosystem. Notably, the relationship between Progressive Leasing and Four customers represents our strongest and fastest-growing overlap. We are also encouraged by the early momentum we are seeing with Purchasing Power as we deepen its connectivity with other offerings in our portfolio.

Looking ahead, we expect our activation infrastructure with scale, with automated programs, spanning digital outreach channels, in product placement and increasingly within the product flows themselves. We believe the trajectory we saw in Q2 is a good signal that these initiatives are beginning to compound.

Before I turn it over to Brian, let me touch on our capital allocation priorities, which remain unchanged. Reinvest in the business, pursue strategic M&A and return excess capital to shareholders through share repurchases and dividends. A combination of debt paydown, which strengthened the balance sheet, and an improving adjusted EBITDA trajectory resulted in a net leverage ratio of 1.7x as of June 30. That progress, together with our disciplined cash management, allowed us to resume share repurchases during the quarter, buying back 280,000 shares. Resuming repurchases reflects both our improved leverage profile and our confidence in the future of the business.

To summarize the quarter, we delivered earnings results ahead of the high end of our outlook, powered by growth in every one of our businesses. Progressive Leasing extended the GMV growth trajectory it established in March and delivered a post-COVID high adjusted EBITDA margin. Four delivered another quarter of profitable triple-digit growth and Purchasing Power contributed double-digit profitable GMV growth. We accomplished all of this while managing portfolio risk with our usual discipline in a stressed but resilient consumer environment.

With that, I'll turn it over to Brian. Brian?

Thanks, Steve, and good morning, everyone. Q2 was a successful quarter and every segment contributed to the earnings beat. At Leasing, we generated healthy margins through a higher portfolio yield, driven in part by more customers choosing to keep their leases active longer, and we delivered that against a consumer that is challenged but resilient. Four continued its impressive growth trajectory, driving triple-digit GMV and revenue growth, and Purchasing Power exceeded expectations, delivering double-digit GMV growth and strong margins. Taken together, it was a quarter defined by disciplined execution and momentum building across the businesses.

I'll now walk through the operating segments in more detail before turning to consolidated results and our revised full year 2026 outlook. Starting with Progressive Leasing. Second quarter GMV was $428.1 million, up 3.4% year-over-year and an improvement from the 2.2% decline in Q1. As Steve mentioned, these results reflect the lapping of last year's tightening actions and the residual big lots volume, combined with the growth initiatives we've deployed over the past year. Revenue for the Leasing segment was $550.3 million, down 3.4% year-over-year and a sequential improvement compared to Q1, which was down 8.4%. The gross leased asset balance headwind that pressured revenue early in the year eased as the portfolio rebuilds behind improving GMV.

As a reminder, we began the year with the Leasing portfolio down 9.4% compared to last year. And as of Q2, the gross leased asset balance is roughly flat year-over-year, marking the progress we have made in improving the underlying revenue driver, and we expect the revenue comp to inflect positive in the back half. Similar to Q1, we saw a continuing trend of a smaller proportion of our customers choosing to exercise their 90-day early purchase options compared to last year. In the quarter, this dynamic of fewer customers exercising that option is a modest drag on revenue, but it builds a higher-margin portfolio. And over time, we expect it to work in our favor on both total revenue and gross margin.

Progressive Leasing's gross margin was 33.8%, up 143 basis points year-over-year, reflecting that improved portfolio yield. Brought us from a period were 8.4% of total progressive leasing revenue as we consider slightly higher delinquencies in the context of strong portfolio yield, driven in part by customers staying their leases longer. I will mention that in a normalized environment, we would expect Q2 write-offs to increase sequentially from the Q1 period, which is a large part of the Q1 to Q2 increase we observed. With Leasing's gross margins healthy, up 143 basis points to 33.8%, we are managing this portfolio to an annual result and allowing the quarters to fluctuate within reason. Modestly higher lease merchandise write-off rate in a seasonally high period with improved margins is entirely consistent with that approach does not change how we are running the portfolio or our expectation of achieving our annual write-off target.

We aim to optimize for absolute earnings rather than any single quarter's write-off rate, monitoring payment behavior, delinquencies and vintage level performance continuously and we expect full year 2026 leasing write-offs to land within our long-held targeted annual range of 6% to 8%. Progressive Leasing's SG&A for the quarter was $82.8 million or 15% of revenue. We're keeping a tight grip on cost while still funding select investments such as technology modernization, customer experience and AI initiatives that underpin long-term growth. Progressive Leasing generated adjusted EBITDA of $69.9 million or 12.7% of revenue an improvement of more than 50 basis points year-over-year. Delivering that level of profitability, even with modestly higher write-offs, speak to the earnings power of the segment. I'm proud of the team's operational execution, including managing portfolio performance in line with our expectations.

Turning to Four Technologies. It's Q2 GMV grew 111% year-over-year to $315 million, and revenue grew 118% to $35.1 million. Adjusted EBITDA was $8.7 million or 24.8% of revenue. As a reminder, the first quarter is seasonally Four's best margin period as holiday GMV converts into revenue with a lower credit loss provision. As expected, Q2 margins moderated from that peak while remaining consistent with the range implied in our outlook. We're highly encouraged by Four's performance on both growth and profitability. For MoneyApp, our cash advanced product, revenue was up 34% year-over-year, driven by new revenue streams. MoneyApp remains an important engagement and cross-sell driver within our ecosystem with a meaningful contribution to leasing GMV.

Finally, Purchasing Power delivered GMV of $158.8 million, representing double-digit year-over-year growth against its pre-acquisition base. Revenue was $130.4 million, and adjusted EBITDA reached $10.6 million or 8.1% of revenue, up from $0.8 million in the first quarter. The driver of the sequential improvement were operating leverage on seasonally higher volume, favorable product mix and improved pricing, which lifted margin and lower interest expense on securitized debt after we pay down the warehouse facilities with excess cash in Q1. As a reminder, we treat that ABS interest expense as a form of cost of operations, so Purchasing Power's segment adjusted EBITDA is burdened by that cost. Purchasing Power was acquired at the start of the year, so it did not contribute to the prior year consolidated base in our financial reporting. Integration is on track, and we remain encouraged by the progress on both front and back-end synergies.

Moving to consolidated results. GMV grew 60% year-over-year to $902 million, and revenue from continued operations grew 22.3% year-over-year to $79.7 million. This revenue performance was driven by the addition of Purchasing Power and triple-digit growth at Four, partially offset by Progressive Leasing. Consolidated adjusted EBITDA was $88.4 million, representing a 12.3% margin. Non-GAAP diluted EPS was $1.19, both exceeding the high end of our April outlook.

Turning to the balance sheet. We ended the quarter with approximately $85.2 million of unrestricted cash and total available liquidity of $435.2 million, including our revolving credit facility. Recourse debt was $600 million, down $50 million from the end of Q1. Since closing the Purchasing Power acquisition, we have paid down $260 million of recourse debt, including $50 million in Q2, bringing our net leverage ratio to 1.7x trailing 12 months adjusted EBITDA. That's down from roughly 2.5x right after the acquisition and 2x at the end of Q1. The combination of our resilient business model and disciplined cash management fueled that deleveraging, moving us comfortably within our long-term target range of 1.5 to 2 turns. As a reminder, this ratio excludes nonrecourse ABS debt used to fund Pershing Power operations, does not add back the associated interest expense to adjusted EBITDA and only includes the Purchasing Power adjusted EBITDA since the acquisition.

We returned capital to shareholders through our quarterly dividend of $0.14 per share. Importantly, with net leverage comfortably within our targeted range, we also resumed share repurchases, buying back 280,000 shares at an average price of $36.34. We will keep evaluating opportunities to return additional capital while funding GMV growth throughout the business.

I'll now touch on some key aspects of our revised full year outlook provided in this morning's release. Despite the macroeconomic pressures, we believe our consolidated GMV momentum will carry through the remainder of the year. A rebuilding leasing GMV feeds the gross leased asset balance, which is a forward indicator of future revenue. Four continues its meaningful growth and Purchasing Power is building towards a seasonally best fourth quarter.

On the leasing portfolio performance, we expect full year 2026 leasing write-offs to remain within our targeted annual range of 6% to 8%, albeit near the high end of that range, reflecting the dynamic way we're managing the portfolio to full year economics and normal seasonality. Our revised outlook balances the second quarter outperformance against caution on the impact of inflation on higher costs of our customer, while staying optimistic about Progressive Leasing's return to growth, the ongoing momentum of Four and Purchasing Power and our ability to execute on the opportunities within our control. Accordingly, we have increased the outlook of our financial targets.

Our revised consolidated outlook for continued operations in 2026 calls for revenues in the range of $3.025 billion to $3.1 billion, adjusted EBITDA in the range of $355 million to $375 million and adjusted non-GAAP EPS in the range of $4.75 to $5. This outlook assumes an operating environment with no change in the current financial pressures and uncertainties for our customers, no material changes in company's decisioning posture, no meaningful increase in the unemployment rate of our consumer base and effective tax rate for non-GAAP EPS of approximately 26% and no impact from additional share repurchases.

In summary, this was a strong quarter across every one of our segments. The rest of Leasing returned to GMV growth or sustained its rapid and profitable expansion and Purchasing Power kept building momentum, all while we ran the portfolio in a disciplined manner and kept the balance sheet healthy with the net leverage ratio comfortably inside our targeted range.

Looking ahead, we will stay focused on profitable growth and portfolio performance as we execute against our strategic priorities against a challenging macro backdrop, and we believe that focus will allow us to deliver on our increased full year outlook.

I'll turn the call back over to Steve to address the 8-K that went out this morning. Steve?

Thanks, Brian. On July 25, the company was informed of the passing of Doug Curling, a member of the company's Board of Directors. Mr. Curling, who is 72 years old, has served on the Board since 2016 and most recently served as Chair of the Compensation and Human Capital Committee and as a member of the Audit Committee. Doug made extraordinary contributions to the company over his years of service. His financial expertise, sound judgment and unwavering commitment to shareholders helped guide the company through significant periods of growth and transformation. He will be deeply missed by his colleagues on the Board, the management team and all who have the privilege of working with him. On behalf of the Board, management and our employees, I want to extend our heartfelt condolences to Mr. Curling's family.

I'll now turn the call back over to the operator for questions. Operator?

[Operator Instructions] Our first question comes from the line of Kyle Joseph with Stephens.

Our Steve, I just kind of want to get a sense for -- I know you guys discussed it a lot, but kind of the health of the consumer. Obviously, there's a lot of moving parts, but just kind of weighing less lower or early buyout activity, but also kind of the strong demand you're seeing or at least recovery in demand. So just kind of balancing those 2 and see what's kind of driving that? Are we kind of at the point where demand has recovered kind of post-COVID from the post-COVID pull forward?

Yes. Thanks, Kyle. Yes, there's a lot there. Certainly a focus across our portfolio of products as it relates to the consumer. So I'll start with the health. And as we've talked about, we talked about in April, I think it's continuing. The consumer is stressed, but resilient. And so that's the environment that we're operating in across the products. And we've seen certainly, the lower buyout activity is, I think, a signal on how the consumer is feeling about their liquidity position and whether they want to use some of that liquidity to pay off early. And I would say, unlike 2023, which we talked about a lot, where we saw lower 90 days, but then the folks who didn't do it 90 days is kind of ended up paying or paying off or doing an early buyout later in the lease. We've seen a little less of that this year. So some of the 90 days that didn't happen did result in delinquencies and ultimately some charge-offs. But you put all that in the mixing ball for the Leasing segment, and it results in higher gross margins and higher underlying EBITDA margins, which is a positive thing for us.

So we're monitoring it closely. The write-offs in the leasing segment are something we take very seriously. We did expect a seasonal step up from Q1 to Q2 that you see pretty much every year. You can't really look at last year as a comp because we did a material tightening in Q1, and so it kind of obfuscated the normal seasonal step up. But I would reiterate that, that 6% to 8% targeted range that we have held to for over a decade is an annual range. It's not a quarterly range. So we're confident in our ability to manage the portfolio to that range for this year, and do that in the context of higher margins. So being near the higher end of the range is not a negative outcome necessarily. So I have utmost confidence in our data science teams. We are seeing some areas where we have trimmed. We have taken a few actions on our decisioning posture, but nothing aggressive or material. So it's something we're watching. I wouldn't say necessarily that the demand has rebounded from the post-COVID lows of the demand pull forward. I think we're still facing a soft demand environment for the large ticket consumer durables. What we have seen is strength in our product marketplace and our direct-to-consumer and e-com platforms, coupled with some initiatives that we've done with retailers to help to be able to grow our leasing GMV.

And then obviously, as we said, the lapping of the 2 discrete headwinds that we had for basically all of '25. So those things help to get us back to a growth posture and we expect that will continue, even though we're not guiding to GMV. But I would just click up a level and talk about the portfolio as a whole because we do have the ecosystem that serves a very similar customer across the products. And we're seeing -- in Purchasing Power, the provision was largely as expected in the quarter. And in our Four business, which is experiencing tremendous growth, we're seeing pretty flat year-over-year actually performance from a provision standpoint. So we're pleased with where we are. We're confident in our ability to manage the portfolio because we understand that's job one. And we're also pleased that while we're managing that portfolio, we are growing all of our products.

Really helpful. And then just one follow-up for me. On Four, obviously, seeing really good growth there. Can you just give us a little bit more of a sense for that consumer? I know you said there is overlap, obviously, with the Leasing book. But I mean, whether it's talking about FICO, I know you don't underwrite on FICO or -- but just where are you gathering those consumers from, like were they previously debit, credit card users or where that consumer is coming from and what they look like?

Yes, you're right. We don't even capture FICO in the 4 business, so we don't really look at it. But there's a pretty material overlap with the rest of our products. And I would just call it -- I would say the heart of the melon is near prime and below, but we certainly have prime customers that are utilizing the Four product and our repeat users. And so -- but I do believe the whole industry is just basically taking share from credit card users and some community banks and some other sources of this type of payment plan. And we believe that's where the 4 customers coming from as well.

Our next question comes from the line of Harold Goetsch with B. Riley Securities.

My question is on Four Technologies as well. Could you share with us the investments you're making in terms of like personnel, technology and your path to like higher, higher margins.

And the next one is, could you provide like how many active users you have right now or how many active subscribers you have right now if you didn't do that before.

Yes. Thanks, Harold. Yes. Four is a very efficient operation with a very lean team that is comprised of employees as well as contractors that are kind of placed globally around the world. And we are growing that, but at a much lower rate than the growth of the business. And the reason that the team is able to do that is because they're just an AI-native AI-forward shop. And so they are capturing great efficiencies from day 1 adoption of -- maybe not day 1, but adoption of AI, and they're able to release new product innovations, release new releases of the apps, improve customer service while actually reducing heads in that department. And so it is a is a small shop, Four, and the revenue per employee is very, very robust, let's say. And they are confident that they can continue to grow at these levels, and there'll be a deceleration as you'd expect with the law of big numbers, but without actually having to add too many resources because of their their use of AI.

And so really, really proud and look at them as a model for what we can do in the rest of the organization with AI. And we have not given the numbers on monthly active users. Although I think in our Investor Day, we did say that in December, we had hit like 3 million monthly active users, but it's not something that we have updated every quarter. We may consider doing that in the future, but I don't have those numbers right in front of me, Harold.

Our next question comes from the line of Bobby Griffin with Raymond James.

Congrats on good upside here this quarter. Steve, you touched on the progressive write-offs a little bit. I'm just hoping maybe we can double-click again further into it. And I guess just asking the context is probably the one area of slight that you could pick on a little bit this quarter, them being above 8%. So maybe unpack kind of how it played out during the quarter for us. And this -- kind of what you're seeing to give the confidence to be back in the 7s on the annual basis, and that probably does imply a little bit of a step down from where we are today. I think people focus on these write-offs as you guys do very intently given the economic environment.

Yes. I mean, yes, we would expect that, that will get some attention, and that's why we gave it such airtime in the prepared remarks because it is a deliberate management, I'll say, of the portfolio. I think I would say that we could have made decisions that would have delivered write-offs for Q2 with a 7 handle. It just would not have been the right decision for the business because of the underlying margins that we are seeing in the overall portfolio yield. And so knowing that the 6% to 8% is an annual range, we allowed this quarter to fluctuate a little bit. And Q3 might be higher than normal as well because the Q2 and Q3 are seasonally high quarters. But we look at all the early indicators. We look at delinquencies and FPBs, first pay balances and a whole suite of KPIs and we believe and have confidence in that team to be able to deliver for the year.

And like I said earlier, we have made some cuts because we're -- in pockets, we are seeing some things that would lead -- the data would lead us to the decision to make some cuts. And approval rates are down year-over-year in the quarter even though we've lapped the tightening last year in Q1 of '25. So just an active dynamic management of that portfolio, Brian and I -- Brian, that team reports in Brian, and we have meetings if not weekly, we have a set meeting every other week to review the inventory of items that could be tightening, could be loosening, depends on what the data say. So we're hands on the wheel, like we always are. We understand that this number is not a number that you're used to seeing from us, but it was a deliberate action.

And I would recall back to the fact that understanding last year was an aberration because we had a material tightening in Q1. There is usually a 60 or 70 basis point increase sequentially from Q1 to Q2. And so we were in the 7.3%, 7.4% range in Q1. And so normal sequential number would have put us at the top. And then we do admit that there's some gas price pressure due to the ore and the oil prices. So we're watching that, and -- but to your question about what gives us the confidence. So just the decade of execution and performance that this team has delivered never having been outside that 8% range on the top end in any trailing 12-month period is what I would lean on there.

The only thing I'd add, I think Steve nailed it. But remember, the 8% that we referred to or 6% to 8%, that's an annual range. And here in the quarter, slightly above it, but we did reiterate for the year, we expect to be kind of near the high end of that range. The other thing I would say is we've talked previously about Progressive Leasing being kind of in the range of 11% to 13% target margins, and here, we're at 12.7% for the quarter. And so near the high end, 2 things are happening at the same time. You've got near the high end of our write-off range and near the high end of our margin range. And that has everything to do with this interplay that is happening with customers staying in their leases longer. And so that benefit is more than offsetting the delinquencies being kind of at that 8.4% level.

And so the decision point, as Steve indicated is, okay, do we pull back on tightening -- do we pull back on approval rates and tighten at the expense of bottom line? Or do we manage to -- with the bottom line context, given what we're seeing in the data. And so we have elected the latter in this quarter. And as we move throughout the year, we'll continue to put that lens. So your question about do you come back to 7% or 6%. I think doing so in the current dynamic would come at the expense of bottom line just given what we're seeing. So it is by design, and we'll continue to make those decisions in real time, but understand also the importance of consistency and managing that portfolio, which we understand is job number one.

And then Brian, as a follow-up, it's actually on that interplay if people stay on the leases longer. That's one of the probably -- I don't know, there's a lot of things that are tough to forecast in this type of business. It's probably one of the aspects that forecasting now that's tough. So like for the back half, what have you assumed there? It looks like you guys kind of beat the midpoint and then kind of flow that through for the year? And then it looks like maybe the back half EBITDA was rough roughly about the same. So just help me understand what's assumed from the overall environment in the back half of '26 and the guide in that interplay of early -- or staying on leases longer, sorry.

Yes, it's a good question. So if you do the math, imputed in the back half margin -- imputed in the back half, margins are slightly down with Progressive Leasing from the front half. And that's driven in large part to the dynamic you just referenced. So we had exceptional margin performance in Q1, again, really strong here in Q2. But the 90-day dynamic that we've been seeing, we are not banking on we're not automatically assuming that, that is going to continue at the same level of a tailwind. And so we've got some moderation happening there. We've got a step down in Q3 and Q4 on that tailwind embedded in the outlook.

So to the extent that it stays at current levels or the amount of time that they're in the lease lengthens from the current [indiscernible] that's upside to the base case. And that is a hard shot to call. It's obviously very fluid. In any given day, you read a different headline about where gas prices are going, et cetera, and we think that has at least something to do with the current trends that we're seeing. So just being like we said in our remarks, being cautious about the current environment, managing that portfolio and not counting on the 90-day tailwind that we've seen to continue with the same level of strength. But still a tailwind year-over-year, still a tailwind year-over-year, but not at the strength that we saw in the first half.

Very good. Makes perfect sense. I appreciate the expanded details and good luck here in the back half.

Our next question comes from the line of Brad Thomas with KeyBanc Capital Markets.

And let me add my congrats on a solid quarter here as well. Steve, I was hoping you could maybe talk a little bit more about the GMV trends, again, really encouraging to see that inflecting positive this quarter after a number of exogenous headwinds that you've had in recent years. Wondering if you could give us any color on maybe how does GMV trends get affected by things like spikes in gas prices that we've seen earlier in the quarter. And then just with easier comparisons but also still perhaps some consumer confidence overhangs from the macro environment. Just curious about how you're thinking about the GMV growth in the back half.

Yes, Brad. Yes, we're pleased to have all the products growing at the same time. It certainly makes a nice powerful engine and leasing is the biggest part of that engine. So I'm not sure we see like specific demand signals in a shorter acute period of gas price spikes. It happens over time. And this year was maybe even more muted because the gas price spike happened kind of during, albeit at the tail end of tax season. And so I think I said if there was a time that it could happen, tax season is the best time because the customer is most equipped to deal with it. And the further you get away from that, the harder it gets and the more the stressed compounds. We certainly are looking at it and looking to see signals of it in the delinquency picture. But from a demand standpoint, I'm not sure that we've observed a direct correlation with a spike in gas prices.

But we're pleased to be beyond these 2 things that we had to talk about all of last year, and we don't want to talk about any more. We did say last year that absent those 2 things, we were kind of a low-ish single-digit GMV grower. And so we've lapped those things. We're seeing strength in certain retailers, other retailers, we've got work to do to overcome some of their trends. But e-com, as we pointed out in the prepared remarks, is almost 26% of total GMV, but Q2 high. The PROG Marketplace is outstanding and continues its really nice growth. And we've got some other things that we just reviewed 2 days ago, that we feel like we can put in place for the back half.

We have not guided Leasing GMV necessarily. But as you know, we have guided revenue. And in order to hit that revenue, you'd have to assume that the GLA and we will flip back to positive in the back half, which will then feed into revenue and be positive in the back half. So we're pleased with where we are. We've certainly got work to do, but we've got things that we know we can work on. And we're also optimistic, I would say, about some biz dev opportunities. Not going to break tradition and talk about specific pipeline opportunities, but we do see some green sheets there and hoping we can get some things over the goal line before things shut down for holiday, which is within the next kind of 75 days. So more to come on that, hopefully. And we're really pleased with how Four is doing, Purchasing Power is coming along on plan and really has a lot of upside. And with Leasing contributing as well, where we feel like we're well positioned even in a tough consumer environment.

That's really helpful. And then I just wanted to follow up on the point you were making for Bobby's question, that difference between the profitability range versus the write-off? Are there elements that might be more sustainable over time? Or are there dynamics that just maybe seen transitory here for the quarter? Because obviously, if that delta seems to be widening, perhaps it opens the gate for you guys to bump up the long-term target range for write-offs in support of GMV and leases and EBITDA. Just curious to get about that.

Yes. Brad, this is Brian. I think, obviously, I feel like we've talked so much about the 6% to 8% range over the years that it has become a staple of the business. And I think it also relates confidence and credibility with our ability to manage the portfolio. But you're exactly right. This is, I think, a good case point where you don't completely put the blinders on with respect to an absolute number. You've got to consider it in the context of the other data that you are seeing, and that is what we've done here. So moving that range at any given point in time in the future, obviously, would be taken very seriously, and we wouldn't do that lightly, and it would have to be data-driven and more -- and the confidence in a more sustained dynamic than just an individual quarter or a couple of quarters. And so that's probably what I would say to it.

But I think what you've heard from us is just the broader context, trying to evaluate all variables. And here, we've updated guidance for the remainder of the year in large part because of this element, and the tailwinds are outweighing the headwinds of the slightly higher delinquencies. And I would say that these delinquencies were not well outside our internal expectations. We evaluated along the way. And as Steve mentioned, we were watching early indicators. So it's well in hand. It's just a constant system that were made. And whether we change anything to your question about the ranges going forward would have to be grounded in confidence about a long-term dynamic that we felt was in place.

Thank you. Our next question comes from the line of Hoang Nguyen with TD Cowen.

I think, I mean, a couple of quarters ago, you mentioned that when people get into delinquencies, maybe they are not able to get out, but they continue to make payment and those customers can be very profitable for you guys, even though they remain in line maybe in light of the higher write-off rate this quarter, I mean, are you seeing a change in that kind of roll rate dynamic from delinquency to charge-off? And I have a follow-up.

It was a little tough to hear, but I think you're referring to roll rates and what's happening with roll rates. Yes. So I think, as expected, the write-off trend also is aligned with what you're seeing just slightly higher, I would call it slightly higher roll-offs and roll rates in certain buckets, but not outside of parameters that we're comfortable with, but it's slightly higher delinquencies, which are coming from those roll rate dynamics. But I will say that the average life of a lease, how long a lease is sticking around with us is increasing. And so that's the -- I think that's also a key dynamic to make sure we're embracing because that does provide the economics even in the face of just a slight uptick in delinquencies and a slight uptake in roll rates.

Got it. And maybe on the Four business, obviously, very strong results there and very strong guidance raise. In terms of the guidance, I think I the entire raise in revenue is passed through to the bottom line for Four. So maybe can you talk about the strength there and maybe the operating leverage that this business has given that it is also your highest margin business among the 3.

Yes. I mean, as we said before, we're extremely pleased with the position that Four is in and the position that it puts itself in for the next several years. We have material growth along with margin expansion, which is very difficult to do. And so we're proud of that and excited about the opportunities. And yes, we had a nice raise in our expectations for the full year, and that will set us up for future years. We haven't necessarily guided, but if you look at the 3-year targets that we put out at Investor Day for Four, it can point you to adjusted EBITDA margins north of 30%, which is certainly where we're going. So there's a lot of flow-through when it comes to operating leverage based on really Hal's question, which is a lean team that can deliver a lot of growth and without having to increase its size that much. And so there's there's good leverage off the fixed costs. And as we continue to grow, we look for opportunities on the provision and the loss rates of our cohorts not only from improvements of our data science and our collections operations, but also composition of the GMV with increasingly more GMV coming from Four Plus subscribers that are kind of, by definition, repeat customers. So a lot of good tailwinds there. But not done on autopilot. The team is crushing it.

Yes. See, no, I was just going to quickly add, I mean, to Steve's point, implied in our guidance is just shy of 22% on the midpoint for Four, which is representing that expansion. And that is happening in the face of increased investment in marketing and some other revenue-generating activities. And so like Steve said, well on the path to improving those margins.

Our next question comes from the line of Casey Coates with Loop Capital Markets.

Good quarter. I just wanted to touch on you guys resume your share repurchases? And do you guys have any idea of how aggress you guys plan to be?

Casey, yes, we have been an aggressive acquirer over the years. We took a little pause because of the purchasing power acquisition, and we always look at our capital return initiatives through the lens of a leverage ratio. And so we were able to delever very quickly, which shows the power of the business from a cash flow generation standpoint. We did get back in the market in Q2, and our leverage ratio is at 1.7% as of the end of June. We don't guide to the level of activity or what our plans are there. But we do look to return excess as we define excess, excess capital to shareholders, and it's generally through share repurchases because the dividend is kind of set. We do have a quarter coming up here in Q4 where we expect to generate a lot of GMV, and that will need to be funded with working capital. And so that will come into our into our calculus as well.

And just a quick follow-up. Could you guys give any updates on your retail partner pipeline for Progressive.

Yes, I mentioned that, like we don't talk about individual names, but I mentioned that we're optimistic on biz dev, but we've got work to do because when it comes to the large retailers, the window shuts here in the next kind of 60 to 75 days because of holiday preparedness. So that's really all we'll comment on that.

Our next question comes from the line of Vincent Caintic with BTIG.

First question, going back to credit, but instead of leasing, I do want to ask about how write-off rates are trending for the for business and purchasing power. I know we usually have to wait until the 10-Q, but I'm assuming that since the leasing business, the write-off rates were a conscious decision that the four and the Purchasing Power businesses are likely more stable. So if you could talk about that and maybe any macro factors or any things that are driving the write up rates for those segments.

Yes. I can start and Steve can fill in any blanks. On the Four segment, so what you'll see in the Q, Vincent, that's coming out later today is that Four's provision as a percentage of this GMV was effectively flat from a year-over-year perspective. And there are some things to consider when you're comparing and contrasting that offering versus Leasing and Purchasing Power in that. At the top of that list is the ticket sizes, call it, in $150 range. And so it's a smaller ticket size. So that's one element.

The customer is largely the same. But Four is on the on the front end of the curve in terms of their ability to improve their decisioning model and the operational enhancements that they are making on collections. And so that's, I think, an important thing to note. And they've made some -- that team has made some of those improvements along the way. And so you've got certainly a stressed consumer from a year-over-year perspective and gas prices are feeding into that. But they've been able to deliver this growth in the context of effectively flat provision as a percentage of GMV.

On the Purchasing Power side, and this is not going to be overly satisfying, but we did not -- you won't see Q2 of last year presented it with Purchasing Power given that we acquired the business early this year, and they were not a public company prior to that, and so they didn't have quarterly reviews. But what I will say is that their provision was within our expectations. And the margins that we saw were slightly better than we expected from a bottom line perspective. And so we're in -- I think we're in a good place with Purchasing Power, similar ticket size, similar customer, slightly different mechanics in terms of how the offering works. But the credit side is an area of focus certainly for us, and we're comfortable about where they came in. We think there's upside as we get better operationally and deploy some of our expertise in improving that motion and purchasing power. So stay tuned on that, but that's probably the color I would offer.

Okay. That's super helpful. And then second quick one. So you mentioned on purchasing power, you won an account that had over 80,000 eligible potential customers. I'm wondering how quickly you can onboard those customers or sell and onboard to those customers? Like is that something that potentially could drive up GMV significantly quickly? Or does it -- is there like a 2- or 3-year sales cycle just kind of from your experience or from past experience, how should we expect that 80,000 plus to translate into GMV?

Yes, Vincent, on that, it's kind of similar to the Leasing business in that it depends on the approach of the retail partner in this case, the employer client, how quickly they want to communicate with their employees about offering this benefit. If it dovetails with open enrollment benefits fares and sessions that they have to get the word out, I mean it will be -- we stand ready to support to get the penetration to grow as fast as possible. And in this case, it will be important to get the word out in front of this all-important holiday season. But I think generally, it's a 2 to 3 kind of year ramp to get knowledge and awareness and get registrations and get first-time buyers that then become repeat buyers.

Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Steve Michaels for closing remarks.

Thank you all for joining us this morning. I'm really proud of this team. We delivered strong results across the board with revenue, EBITDA and EPS. Leasing returned to growth, and we ran the portfolio with discipline in a tough environment. And when I look at what we've built and what we're building, it's an ecosystem that gives customers more ways to transact with us, distribution mode that it's hard to replicate, we've got healthy margins and decisioning that gets smarter with every data point. So I feel very good about where we're headed, and I firmly believe the best chapters of PROG story are still ahead of us. And as our friend, Doug Curling, would end all of his e-mails and texts. Go Braves.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.

Good day, and thank you for standing by. Welcome to the PROG Holdings Q1 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, John Baugh, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to the PROG Holdings First Quarter 2026 Earnings Call. Joining me this morning are Steve Michaels, PROG Holdings' President and Chief Executive Officer; and Brian Garner, our Chief Financial Officer. Many of you have already seen a copy of our earnings release issued this morning, which is available on our Investor Relations website, investor.progholdings.com.

During this call, certain statements we make will be forward looking, including comments regarding our revised 2026 full year outlook and our outlook for the second quarter of 2026. Listeners are cautioned not to place undue emphasis on forward-looking statements we make today, all of which are subject to risks and uncertainties, which could cause actual results to differ materially from those contained in the forward-looking statements. We undertake no obligation to update any such statements.

On today's call, we will be referring to certain non-GAAP financial measures, including adjusted EBITDA and non-GAAP EPS, which have been adjusted for certain items which may affect the comparability of our performance with other companies. These non-GAAP measures are detailed in the reconciliation tables included with our earnings release. The company believes that these non-GAAP financial measures provide meaningful insight into the company's operational performance and cash flows and provides these measures to investors to help facilitate comparisons of operating results with prior periods and to assist them in understanding the company's ongoing operational performance.

With that, I would like to turn the call over to Steve Michaels, PROG Holdings' President and Chief Executive Officer. Steve?

Thanks, John. Good morning, everyone, and thank you for joining us. I'll start by saying we delivered a strong first quarter. We are very happy with the start to the year and the momentum we're seeing in the business. Our results came in at the high end of our revenue outlook and exceeded the top end of our outlook for earnings and non-GAAP EPS. This outperformance reflects the discipline of our operating model and strong execution across the organization, supported by higher-than-expected GMV with improved economics at Four, as well as better portfolio yield at Progressive Leasing primarily due to lower-than-expected utilization of 90-day purchase options.

In an environment where the geopolitical and macroeconomic situation presents challenges, including from rising gas prices, our model performed as designed. This consistency is a direct result of how we built and manage this business over time.

Let me provide some additional color on the quarter before walking through our strategic priorities. As I mentioned in February, we have begun framing growth through the lens of consolidated GMV which grew 54% in Q1 compared to the same period last year. These results reflect the addition of purchasing power and the triple-digit growth of Four. As our portfolio of solutions expands, GMV is generated through multiple products across leasing Four and purchasing power, and this consolidated view better reflects the full scale of our platform. It's a great example of how we are deploying an integrated ecosystem of solutions to better reach underserved individuals and families.

Starting with Progressive Leasing. GMV for the first quarter came in at 2.2% below the same period last year. However, trends improved meaningfully as the quarter progressed, with January down high single digits, February down low single digits and March up low single digits. As a reminder, throughout last year, our leasing business faced GMV headwinds from deliberate tightening actions and the bankruptcy of Big Lots. As we lap both of those headwinds, particularly through February, leasings GMV trends inflected positively in March.

From a GMV standpoint, the quarter played out largely as expected, and we are excited to exit the quarter on a growth trajectory. Four's GMV for the quarter was 134% higher year-over-year. Customer demand for our BNPL product remains robust, and importantly, we are seeing that growth translate into attractive economics and profitability, which I'll discuss in more detail shortly.

Purchasing Power's Q1 GMV grew double digits at 10.3% year-over-year. This growth was due to favorable performance within existing employer accounts. We also added several new employer clients during the quarter, bringing tens of thousands of new eligible employees onto the platform and supporting future growth. Consolidated revenue came in at $743 million, representing 11% year-over-year growth. This performance was primarily as a result of the addition of Purchasing Power, along with growth at Four and partially offset by a revenue decline at Progressive Leasing due to a lower portfolio size throughout the quarter.

Consolidated adjusted EBITDA was $90.3 million and non-GAAP EPS was $1.24, both exceeding the high end of our outlook. This outperformance was fueled by better-than-expected portfolio yield and customer payment performance at Progressive Leasing as well as increased customer demand and profitability at Four.

To summarize the quarter, we delivered results above expectations, saw improving GMV trends while maintaining portfolio health at leasing drove profitable triple-digit growth with improving economics at Four achieved double-digit GMV growth at Purchasing Power and continue to execute against our ecosystem strategy.

Before we shift into our strategic priorities, I want to briefly address the broader environment and how it informs our updated outlook. The consumer we serve remains resilient, but they are facing real challenges. Gas prices are elevated, and there is increased uncertainty in the macro backdrop. We remain committed to continue to deliver consistent portfolio performance across all our businesses and managing costs prudently to achieve our earnings outlook. Our track record demonstrates our ability to adapt quickly, and we will do so as conditions evolve. Let me now turn to our 3 strategic pillars, grow, enhance and expand to share some highlights from the quarter. Starting with the grow pillar. We saw encouraging traction at Progressive Leasing and Purchasing Power with remarkable growth at Four, which collectively resulted in consolidated GMV being up 54% year-over-year.

For leasing, Q1 applications grew double digits year-over-year and GMV trends improved sequentially month-over-month, with March up low single digits compared to the prior year. In addition to lapping the tightening actions from early 2025, these results reflect our investments in technology to enhance customer experience and in marketing to promote engagement across both new and existing customers. You heard about many of these initiatives at our recent Investor Day, we're pleased to say that they are continuing to have a positive impact on our business.

Our long-term distribution base of exclusive retail partners with approximately 70% of Progressive Leasing GMV secured into the 2030s provides a durable foundation for growth as we also gained balance of share within existing key retail partners. Additionally, our direct-to-consumer efforts spanning both marketing and digital channels have been meaningful drivers of growth. Within Marketing and Progressive Leasing, we leaned into customer acquisition, partner marketing and cross-product campaigns, which drove increased engagement and incremental GMV. We focus further up the funnel while maintaining flat acquisition costs year-over-year.

At the same time, our outreach channels, including e-mail, SMS and push notifications, generated incremental GMV, reinforcing healthy consumer demand and improving return on ad spend. On the digital front, PROG Marketplace delivered another notable quarter, growing at 169% year-over-year. We are scaling this channel through ongoing product enhancements, increased traffic and improved conversion. Our e-commerce channel also grew meaningfully due to deeper integrations with retail partners and improved digital checkout experiences.

Q1 e-commerce GMV was 25.7% of total Progressive Leasing GMV up from 16.8% in the same period last year and the highest first quarter mix to date.

Shifting to Four. We delivered another triple-digit growth quarter, our tenth in a row, with performance powered by both customer acquisition and engagement. The team rolled out AI-driven product enhancements that simplify the shopping experience and average order values increased year-over-year. Monthly active users more than doubled compared to a year ago, reflecting growing consumer interests.

On marketing side, spend was deployed efficiently to support growth maintaining a healthy balance between paid and organic customer acquisition. Finally, Purchasing Power delivered double-digit GMV growth, reinforcing the strength of its model and its strategic role within our ecosystem. Its payroll deduction model represents a differentiated distribution mode, serving employees who value predictable, convenient purchasing options through their paycheck. We remain in the early stages of deeper integration including introducing Purchasing Power to our retail partner employee bases and leveraging addressable employer relationships to expand leasing distribution. Over time, we believe this opportunity represents a meaningful incremental growth lever.

From a marketing perspective, early media testing and purchasing power is showing encouraging results, demonstrating our ability to improve penetration within the eligible population. Under the enhanced pillar, our investments in improving both customer and retailer experiences are progressing with several initiatives beginning to deliver positive results. Our AI-driven lease eligibility engine is scaling meaningfully. We've expanded our leasing product catalog and improved response times from 3 seconds down to 1/10 of a second. At the same time, we are advancing customer experience enhancements that are driving higher conversion. We deployed multiple AI-driven improvements across our marketplace, including an AI chatbot assistant, enhanced payments navigation and a new AI-powered checkout flow that simplifies and streamlines the transaction process. These marketplace enhancements have delivered an approximately 20 percentage point improvement in checkout conversion versus the prior experience while also lowering cost to serve and improving operational efficiency.

The focus remains clear: enhance the customer experience to support higher customer lifetime value while improving the economics of the business. Under the expand pillar, Four is scaling and Purchasing Power is growing double digits, in line with expectations as integration efforts advance. We remain intensely focused on strengthening our ecosystem. Four executed at a high level delivering 142% revenue growth in Q1 2026, the tenth consecutive quarter of triple-digit GMV and revenue growth. Q1 GMV reached $280 million, more than doubling Q1 2025 and March 2026 GMV of $108 million was the second highest month in company history.

Customer engagement trends remained favorable with average purchase frequency of approximately 5 transactions per quarter and more than 130% growth in active shoppers year-over-year. New shoppers grew approximately 80% year-over-year, representing expansion of the platform's customer base. Four subscription model remains a key driver with Four Plus subscribers continuing to contribute approximately 80% of total GMV.

Four's take rate defined as revenue generated as a percentage of GMV over the trailing 12-month period remained consistent at approximately 10%, indicating positive monetization efficiency as the business scales. From a profitability standpoint, Four generated adjusted EBITDA of $12.9 million in Q1 2026, already exceeding full year 2025 adjusted EBITDA of $9.9 million. Q1 adjusted EBITDA margin was 37%, reflecting the benefits of scale. While Q1 is seasonally the highest margin quarter, following elevated GMV from the holiday period, the business continues to demonstrate meaningful operating leverage.

MoneyApp, our cash advanced product grew revenue over 50% in the first quarter and continues to play an important role as both an engagement and cross-sell driver within our ecosystem. Growth as a result of higher average advanced sizes as well as early traction from a new product we introduced in December called Pop-Ups, which allows qualifying customers to responsibly access additional funds on top of an existing advance. While still early, Pop-Ups are beginning to generate incremental revenue and represent another avenue for us to deepen customer engagement and expand the platform over time.

Our ecosystem strategy is gaining traction. At our Investor Day in March, I highlighted that cross product engagement is a strategic priority because we believe it is a key component of long-term growth and value creation. We are seeing progress from our ecosystem first approach with customers increasingly engaging across multiple products, driving higher lifetime value and improved acquisition efficiency. Four is currently our most connected product often serving as an entry point and engagement driver across our platform. Progressive Leasing showed the most meaningful improvement in cross product engagement during the quarter with more of its customers interacting with other offerings. Notably, we also drove the largest overlap and fastest growth in overlap between Progressive Leasing and Four customers.

Before turning it over to Brian, let me touch on capital allocation. Our priorities remain unchanged: invest in the business, pursue strategic M&A and return excess capital to shareholders through share repurchases and dividends. In February, I told you that in the near term, we will focus on prioritizing debt reduction as we work toward our long-term net leverage target of 1.5 to 2x, and we did.

During the quarter, we paid down $210 million in recourse debt ending Q1 with a net leverage ratio of 2x. To summarize the quarter, we delivered results above expectations led by consistent execution and improving demand trends across the business. Importantly, these results were achieved while continuing to invest in our strategic priorities, advancing our direct-to-consumer capabilities, scaling our digital channels and deepening integration across our platform. Overall, our distribution moat, diversified ecosystem and data-driven decisioning capabilities position us well to perform across a range of environments. I firmly believe the best chapters of PROG story are still ahead of us.

With that, I'll turn the call over to Brian. Brian?

Thanks, Steve, and good morning, everyone. Our strong performance in the first quarter was broad-based and reflects disciplined execution across each of our businesses as well as some margin favorability from consumer behavior in the leasing segment. In a short period of time, we made significant progress against our goal of deleveraging following the Purchasing Power acquisition. And as we exit the quarter, we are within our target net leverage range of 1.5 to 2x.

I'll begin with our Q1 results of Progressive Leasing, followed by Four Technologies, Purchasing Power and then move to consolidated results. I'll close with an update on our balance sheet, capital allocation and our revised full year 2026 outlook. While more broadly, consumer demand across several discretionary categories remains pressured, our teams executed well on the areas within our control, including targeted growth initiatives, decisioning, expense discipline and capital deployment, enabling us to deliver results ahead of expectations and reinforcing the underlying opportunities within the business.

Starting with Progressive Leasing. First quarter GMV came in at $393 million, representing a 2.2% decline year-over-year, which was in line with our expectations. As Steve outlined, this performance reflects 2 primary factors in the first half of the quarter. The tightening actions we implemented last year to preserve portfolio performance and the lapping of remaining GMV from Big Lots following their bankruptcy.

As we progress through the quarter and move past these headwinds, GMV trends improved sequentially, returning to low single-digit growth in March. Revenue for the Progressive Leasing segment was $597 million in the first quarter down 8.4% year-over-year, primarily a result of a smaller average lease portfolio throughout the quarter. The lower gross leased asset balance, which is down 9.4% entering the quarter compared to a year ago, created a headwind to Q1 revenue. We ended the first quarter with a portfolio size down 5.4% year-over-year.

As we executed against our growth initiatives of Progressive Leasing, we expect this portfolio headwind to subside and the revenue compare will become less difficult as the year progresses. Additionally, utilization of the 90-day early purchase option, which is seasonally high in Q1 due to tax refund season came in lower than expected for the quarter and below 2025, while an environment where fewer customers are electing to exercise their 90-day purchase option represents a revenue headwind in the period, over time, we expect total revenue, gross profit and margins to trend favorably.

Gross margin for Progressive Leasing was 31.5% in the quarter, up 210 basis points year-over-year. Margin expansion stem from improved portfolio yield and a higher proportion of customers choosing to remain in their lease agreements longer, which, in part, ties to a lower 90-day purchase option activity. Lease merchandise write-offs came in at 7.3% of lease revenue within our targeted annual range of 6% to 8% and a 10 basis point improvement from the Q1 2025 rate of 7.4%. This result reflects the benefits of the tightening actions taken a year ago, and we have been largely comfortable with the trends we have seen since those changes.

As we've consistently emphasized, protecting portfolio health remains our top priority, and we are closely monitoring payment behavior, delinquencies and vintage level performance, and we are pleased with what we have seen year-to-date. Progressive Leasing's SG&A for the quarter was $81.3 million or 13.6% of revenue compared to 12.6% in Q1 of 2025 and was flat in total SG&A dollars spent even as we invest selectively in areas to support long-term growth, including technology modernization, customer experience and AI initiatives.

As we've demonstrated over time, we remain focused on balancing near-term expense discipline with investments that enhance the durability and scalability of the business. Adjusted EBITDA for Progressive Leasing was $77 million or 12.9% of revenue at the high end of our long-term target range of 11% to 13% representing a 260 basis point improvement year-over-year. This performance was primarily the result of operational execution, including managing portfolio performance and yield partially offset by the revenue headwind of a smaller lease portfolio throughout the quarter.

Turning to Four Technologies. Q1 GMV reached $280 million, representing growth of 134% year-over-year and marking the tenth consecutive quarter of triple-digit GMV growth. March alone generated $108 million in GMV, the second highest month in company history. Revenue of $35 million exceeded expectations, growing 142% year-over-year. Adjusted EBITDA was $12.9 million, representing a margin of 37%. I would note that Q1 is the strongest margin period for Four and throughout the remainder of the year, I expect margins to moderate to the range implied in the revised outlook for the segment. Underlying economics are improving, and we remain highly encouraged by the performance of the business across both growth and profitability metrics.

Finally, switching to Purchasing Power. Q1 GMV was $132.7 million, representing 10.3% growth. Revenue for Purchasing Power was $107.1 million in first quarter with adjusted EBITDA of $0.8 million, consistent with the near breakeven results we expected. As a reminder, Purchasing Power seasonally generates a greater proportion of its revenue and earnings in the back half of the year, particularly in the fourth quarter.

Integration efforts are on track and we remain encouraged by the progress we are making across both front-end and back-end synergies as well as its strategic fit within our broader ecosystem. Transitioning to consolidated results. We delivered strong GMV growth with continuing operations increasing 54% year-over-year to $806 million, driven by the addition of Purchasing Power and growth at Four.

Revenue from continuing operations grew 11.1% year-over-year to $742.7 million, reflecting the addition of Purchasing Power and triple-digit growth at Four Technologies partially offset by the revenue decline in Progressive Leasing. From an earnings perspective for continuing operations, consolidated adjusted EBITDA was $90.3 million or 12.2% of revenue and non-GAAP diluted EPS was $1.24, both exceeding the high end of our February outlook and delivering 29% and 38% year-over-year growth, respectively.

Turning to the balance sheet. We ended the first quarter with $69.4 million of unrestricted cash and total available liquidity of $419.4 million, including our revolving credit facility. We ended the quarter with $650 million of recourse debt. Since closing the acquisition, we paid down recourse debt by $210 million, resulting in a net leverage ratio of 2x trailing 12-month adjusted EBITDA.

As a reminder, this ratio excludes the nonrecourse ABS debt used to fund Purchasing Power operations does not add back the associated interest expense to adjusted EBITDA and only includes the Purchasing Power adjusted EBITDA since the acquisition. Importantly, net leverage was approximately 2.5x immediately following the acquisition on January 2 of 2026. Since then, our focus has been on integrating Purchasing Power and driving meaningful deleveraging and we have made material progress in the quarter, bringing net leverage back within our long-term target range of 1.5 to 2x.

As we move through the balance of the year, we expect to remain below 2 turns. We returned capital to shareholders in the first quarter through our quarterly dividend, paying $0.14 per share, a 7.7% increase from the prior year quarter.

I would now like to touch on a few key aspects of our second quarter and revised full year outlook, which was provided in this morning's earnings release. Despite their macroeconomic challenges, we believe our GMV momentum at a consolidated level will carry into the remainder of the year. Improving leasing GMV trends positively impact the gross lease asset balance which is a leading indicator of future period revenue. Four is delivering strong growth with improving economics and Purchasing Power is just being started on realizing its GMV and margin potential.

Portfolio performance at leasing is expected to remain healthy as we actively manage yields while balancing GMV growth. We expect full year 2026 lease merchandise write-offs to remain within our targeted annual range of 6% to 8%. Our revised consolidated outlook for 2026 raises expectations on both revenue and earnings from continuing operations, reflecting the Q1 outperformance and our confidence in executing at a high level through the rest of the year.

We are already making progress against the 3-year 2028 compound annual growth rate framework we outlined in the Investor Day. Q1 was a strong and encouraging start to this journey. Our revised consolidated outlook for continuing operations for 2026 calls for revenues in the range of $3 billion to $3.1 billion, adjusted EBITDA in the range of $343 million to $370 million, non-GAAP EPS in the range of $4.40 to $4.80. This outlook assumes an operating environment with no change in the current financial pressures and uncertainties for our customer, no material changes in the company's decisioning posture, no meaningful increase in the unemployment rates for our customer base, an effective tax rate for non-GAAP EPS of approximately 26% and no impact from additional share repurchases.

To summarize, Q1 was a great start to the year with broad-based outperformance across our businesses and disciplined execution in the areas within our control. We delivered improving trends of Progressive Leasing, sustained high growth and expanding profitability of Four and early progress with Purchasing Power as integration continues. At the same time, we strengthened the balance sheet, bringing net leverage back within our target range while maintaining a prudent approach to capital allocation.

As we look ahead, we remain focused on driving profitable growth, managing portfolio performance while executing against our strategic priorities and navigating a still uncertain macro environment.

I'll turn the call back over to the operator for questions. Operator?

[Operator Instructions] And our first question comes from the line of Kyle Joseph of Stephens.

Congrats on a really strong start to the year. Steve, would love to kind of pick your brain on macro. Obviously, a lot of moving parts throughout the quarter. Initially, we're expecting higher tax refunds and then you get into March and higher gas prices. But just kind of walk us through the moving parts of macro and maybe how those impact your businesses differently. We're no longer just focused on leasing. Obviously, Four had a really good quarter and we're obviously new on the Purchasing Power side of things. So just a little bit of macro kind of evolution through the quarter and different impacts across the businesses.

Yes. Thanks, Kyle. I guess I would start by saying that we do have this multiple product ecosystem, but they do have connections in that. They serve a very similar customer across the products. So to the extent that the macro overlay has an impact, it's not identical, but it's directionally similar across the products. And we have the benefit of being able to see it -- see the customer behavior and the influence on the customers across those products and can use that to help as insights into all the products.

As the quarter played out, and you called out a few of those things. We're always used to preparing for a tax season. We thought the tax season was going to be higher. Tax season actually played out about as we expected. It was higher, but not maybe as high as some people were reporting back in August, September, October time frame for our customer. Certainly, refunds were up across the board. But for our customers, they were up somewhere in the whatever high singles to low doubles range, and that was about what we were planning for.

And as Brian said in his remarks, we did see in the leasing business less or fewer customers choosing to exercise their 90-day purchase option, and we've seen that in over time in different cycles when customers might be making different decisions about the liquidity the tax season brings, they're making payments to stay current, but not necessarily accelerating a payoff of an obligation. And that played out.

Some of the other products don't exactly have that kind of accelerated repayment early -- during the tax season. So less of an impact outside of leasing. Certainly, gas prices during the month of March became a bigger story. The consumer is stressed but resilient. I mean I think that's the common refrain. We're watching all of our early indicators intensely. And we're seeing basically evidence of that stress really. And so we feel good about where we're positioned. The tightening in the leasing that we did in the first quarter of '25 has, I think, served us well and positioned the portfolio to be able to withstand some of the stress, so we saw a really good first quarter. And we're watching the numbers closely and watching the early indicators, but poised for some good momentum to continue.

Got it. That was broad-based, but I appreciate you covering it all. Just one follow-up for me. Obviously, a tough retail environment even going into the year and then layering in gas prices. Just kind of want to get an update on your discussions with retail partners kind of given now you have a bigger suite of products and given, call it, some more incremental headwinds for retailers?

Yes. I mean, that's kind of more of the same on the retail, especially in consumer durables that the leasing business addresses. And our biz dev teams are doing a good job. They've -- they had some wins in the back half of 2025 and have a very, very good pipeline of retailers of all sizes that we think we're making progress with from a sales age progression standpoint.

So we continue to believe that our suite of products with leasing at the retail level being the largest one are things that can help retailers. We are having increased conversations about a multiple product solution with various retailers, bringing forward into the mix or on the Purchasing Power side, bringing other products to employers to be able to offer additional value to their employees on that voluntary benefit platform. So we look forward to continuing to really dive into that ecosystem strategy and business development in our B2B2C businesses, specifically leasing and purchasing power is a big part of it.

Our next question comes from the line of Bobby Griffin of Raymond James.

Congrats on a good start to the year. I guess, Steve, I wanted to first ask like when you've seen that customer behavior before with a lower expected 90-day buyouts. Has that historically given you kind of any insights into what the customer does for the back half of the year? Is there anything to like learn or kind of how that plays out and what the health of that customer is when you see that?

Yes, I'll start and Brian can certainly fill in the gaps. But there's no perfect kind of corollary, but we have seen in the past, specifically in 2023, coming off of a really tough '22 from an inflation standpoint but also a pretty material tightening that we did in the leasing business. We saw a very low 90-day buyout take rate on our customers. And then what we saw was those customers kind of just -- they stayed in their leases longer, which is a theme that we've talked about for a couple of quarters here on the leasing business. So not doing a 90-day in that time period, '23 did not indicate or necessarily mean that the customer was going to do a straight roller through the buckets and end up having elevated charge-offs, they end up paying deeper into their lease and maybe doing an early buyout, maybe later in the lease or going to full term. Certainly, some do end up in charge-offs, but we saw from a margin standpoint that this was a margin positive kind of trade-off because, as you know, 90 days, a very low margin outcome for us and the deeper they go in the lease is better.

So -- we're watching that closely to see what the kind of the next action is. If the 90-day window expires, which a lot of it did in March because of the holiday -- the holiday uptick in leasing activity, and it expires on exercise what happens and how do those customers continue to pay us. And so far, we're pleased with the roll rates and other indicators in the portfolio health. And it's not -- we're not expecting a mirror of '23, but we are looking to that period to help with our forecasting.

Yes. And I would just add, I mean, it is the right question. As you just kind of evaluate consumer health overall. And we talked about 210 basis points improvement in gross margin at leasing in the quarter, primarily driven by this dynamic. And I think what's reflected in our outlook is a view that this is going to be a net positive for us, the tailwinds from lower 90 days. You might see some pressure and maybe some potentially some delinquency trends that you watch, but I'm not anticipating that there are anything significant. We saw write-offs come down 10 basis points year-over-year. So as you see us increase our outlook, and at least in specifically, we expect this kind of disposition dynamic and a shift towards lower 90 days to be a net positive for the P&L over the course of the year.

Okay. That's helpful. I appreciate the details. And then maybe lastly for me, just on the actual GMV trends within Progressive leasing side, flip back positive in the quarter. Can you unpack a little -- is that just a function of the comparisons? Or is that actually in a sign of kind of inflections in consumer trends or whatnot. I guess I'm just asking it in context, I believe you did call out double-digit growth in apps, which would probably reflect some of the comparisons dynamic too with the Big Lots. So just trying to understand what is more comparison driven or if it's an inflection on that consumer engagement with the product and maybe seeing -- start to see a little trend improvement.

Yes. We're pleased with the trends as we exited the quarter. Specifically, as the quarter progressed, like we talked about, it was kind of down high singles in January when we had both of those 2 discrete headwinds still in force. And then improved to down low singles in February as we lap that those things during the month and then up low singles in March. And if you remember kind of through most of 2025, we called out what the GMV trends would have been were it not for those 2 headwinds. And we were in kind of the low to mid-singles as air quotes the rest of the business that did actually decline in Q4 down to only up 1% absent those headwinds.

So a lot -- much of it is kind of what the business has -- how the business has been performing, absent those headwinds over the last several quarters, but we're also seeing some strength in our digital channels. We talked about marketplace being up again 169%, e-commerce as a percentage of total leasing GMV up at 25.7% and the highest first quarter mix to date and also some various projects that we got over the goal line with existing retailers to help to improve that integration and improved balance of sale.

So there's a mix of freeing up from the lapping. It also some things are positively trending in our execution. The apps are a strong point, but apps have to turn into approvals that have to turn into conversions and that those things can vary by channel. So -- but we're pleased with how we exited the quarter and how it sets us up for the rest of the year.

Our next question comes from the line of Hoang Nguyen of TD Cowen.

And congrats on the quarter. Just a quick one for me. So you mentioned about some of the cross-selling synergies between leasing and purchasing power. I think you're still in the early days, but can you give us some of the flavor of the conversation that you're having? Are you seeing a lot of inbound engagement from both sides of the enterprises? And I have a follow-up.

Sure. Yes. I mean that's definitely part of our plan. It was identified during diligence, and we plan to execute on it. We talked a little bit about it during Investor Day. But we believe that the deep and long relationships that we have with retailers on the leasing side are fertile ground for us on the biz dev side for Purchasing Power and those efforts are underway. Purchasing Power has several employer clients that happen to be retailers that we believe could benefit from offering leasing to their customers, and those discussions are happening as well as augmenting the Purchasing Power offering with additional products that our intelligence says their employees are already consuming in the broader market. And so if we can deliver that to them as a voluntary benefit, we think that's a big benefit and differentiator for Purchasing Power to help with the sales motion in those employer clients. So we're pleased, and we're excited about the opportunity. But as you called out, we're very early in the integration because we're still just a few months post closing.

Got it. Maybe one for Brian. So you guys have now returned back to your targeted leverage range, although at the high end. I think historically, you guys have done opportunistic buybacks. So I guess, I mean, when can we expect you guys to kind of get back to the market and buy back shares at these prices?

Yes. We haven't given any plan specifically to our buyback cadence. I think what I'd offer is you saw here in Q1 with the highly cash generative period, our ability to deploy capital against the deleveraging. And as we look forward over the course of the year, into Q2 and Q3. I think you continue to see some cash generation during those periods. What I think is on the horizon in Q4 is now you have these 3 businesses and progressively seeing Purchasing Power and Four that are seasonally heavy in Q4 in terms of the GMV concentration in the fourth quarter and the utilization of cash in that in that period.

So I think the calculus is just kind of going through our capital allocation priorities of investing in the business first before we look to those kind of share repurchase type options. We're sizing up that fourth quarter and just kind of assessing the cash needs during that period. But that's really the calculus. And to the extent that we have excess capital, we'll go through that decision-making process, obviously, we're bullish on where we think this business is going and the share repurchases have been part of our RevPAR in the past, and we'll continue to evaluate them.

Got it. And congrats on the quarter.

And our next question comes from the line of Anthony Chukumba of Loop Capital Markets.

Let me have my congrats on a strong start to the year as well. So I just had a question on Four, incredibly impressive performance there. As I look at the revised guidance, so if I take kind of the midpoint of the adjusted EBITDA and the revenue, it would imply that the EBITDA margin was -- in the previous outlook was calling about 15.1%, and that goes up now to about 18.2%. Given the fact that the take rate is consistent, I'm assuming that, that's just greater scale in terms of that higher EBITDA margin? Or is there something else there as well?

Yes. Thanks, Anthony. Yes, we're very pleased with Four, it's the start to the year, but also the position it's in and what we think we can accomplish with it. And you're right, we did increase our view as to the margin expansion that we could achieve this year versus last year as we set about executing on that path towards a more mature state that we think is materially north of where we'll be in '26. And it is largely due to scale, but I would say that this team at Four is doing an outstanding job of doing more with the same and in some cases, doing more with less. They have leaned into AI in a very aggressive way and are not only achieving customer-facing improvements and innovation but also back office savings. And so we -- it is a scale play, but it's also an efficiency play and just the subscription strength and stickiness or said another way, lack of churn has been a bright spot and that revenue is very high-quality revenue that flows through to earnings in a meaningful way.

Got it. Okay. And then I just have to ask my obligatory question in terms of the retail partner pipeline and Progressive Leasing.

Yes. Thank you. Yes, I mean, as I think I was saying to Kyle, the biz dev team is really doing a great job. They're out there. They're talking. They had some wins in the in the back half of '25 that will pay us dividends here in '26 and the pipeline is full with retailers of all sizes. We're constantly getting new doors out in the SMB space. And that's kind of a different team than the folks that are hunting the super regionals and the enterprise accounts, but we're very pleased. We've got a great offering and a great way to tell the story. The ecosystem strategy reinforces that story, even though it might be a leasing conversation. We have more earned authority around this customer and have more products. So those are all helping us have some successes, and it's our expectation that we'll have some more wins here this year in '26.

Our next question comes from the line of Hal Goetsch of B. Riley Securities.

Congratulations on a quarter. With the acquisition of Purchasing Power, and I think hitting the asset back market for some of their receivables, you've got some new items on your income statement, gain of sale based receivables came on changes or value of receivables. And I'm wondering if you could just give us some color on how we should think about any thumb-rule we should use in modeling for those types of line items in your income statement going forward since you've got this new business, and it's a little bit of flow for us to help us predict the future with it.

Yes, I'll start, and then I'll turn it over to the expert, Brian, but you're right, and we appreciate that. I will call out the difference in the 2 things that you specifically mentioned. The gain of sale of aged lease receivables is not purchasing power related. That's on the leasing side. And we did that in Q4 of last year and again in Q1 of this year, and I would -- we had not done that historically, but I would point that to be -- to you that is not a onetime thing. That is going to be a recurring motion that we're in. It's probably not going to be to the same quantum as Q4 and Q1 moving forward, but we do have an inventory of items that -- or not items, but charge on leases that we have been working internally that we will then turn to sell into the open market. So that would be something that would be -- we consider to be a recurring item. The -- I'm going to let Brian talk about the Purchasing Power side because there is some purchase price accounting and fair value stuff that is -- that we have excluded out of -- or we've not had in adjusted EBITDA for the reasons of -- it's not kind of an ongoing thing.

Yes, it's -- really, that line item is related to the acquired receivables from purchasing power and they were fair valued on the data acquisition and really what that line represents. It's just a continued evaluation of the fair value of those receivables. And you might see a few million bucks in any given period. But like Steve said, this is really more of a technical accounting dynamic and bleeding through from the fair value on the acquisition date.

And so we've made the decision to adjust it out of -- or added back to adjusted EBITDA to -- for more of a consistent presentation. So -- it's hard to give you any guidance on exactly how that's going to move. A lot of that has to do with collection activity and what actually occurs relative to what we thought was going to be the value at acquisition date. But I don't expect it to be material in any given period. It should be speed slight adjustments each quarter.

Okay. Terrific. And then the first point, as Steve mentioned, is this -- are these more like money is received on basically a recovery basis from selling past due accounts. Is that basically what it is, I hear that correct? And...

Particularly aged -- age lease receivables. So receivables that we charged off in some cases years ago, and we sell them to a third party and it's not the dollars are sizable, but the percent -- the pennies on the dollar are not that big, but then they go out and they attempt collection efforts. It's not a consignment, it's actual sale where they -- we don't like share in the -- we get our money up front and then they go out and do their attempt to collect.

Understood. Okay. If I could ask you -- I know I understand like on the Buy Now, Pay Later, Q1 is a very big quarter because a lot of the payments from a very heavy holiday season come in the first quarter you have the subscriptions to your take rate is good. But your margins in the first quarter are like -- were better than most people in the industry already. And I was just wondering if there's like a -- if this is -- our margin reflected maybe not being fully burdened with the corporate overhead. Does that make sense? If the margins are quite high, and I'm just trying to figure out like this was a stand-alone comp may be lower because there'll be more corporate overhead associated with it.

Yes. I mean if it was -- I think that's fair. But the margins are high. I mean, 37% EBITDA margin is impressive. But as you pointed out, Q1 is the seasonally high quarter. And as Anthony pointed out, like our guide implies something in the range of half of that for the full year. And so that shows that we're still in the scaling phase and haven't reached the maturity of some of the pure-play competitors that are out there, but we believe that the progression from loss-making in '24 to low teens in '25 with margin expansion at '26, but paints a nice picture of our ability to get up to those margin levels of the pure-play competitors.

Our next question comes from the line of Brad Thomas of KeyBanc Capital Markets.

Congrats on the next quarter here, guys. I wanted to just follow up on the GMV growth that you're seeing at the end of the quarter within Progressive Leasing. And just curious if you could speak to perhaps the -- your confidence level that we may be at an inflection point here and may be able to continue to drive growth in that GMV in 2Q and through the balance of the year. And then just how we should think about the timing potentially of the portfolio flipping to growth again and when PROG leasing then flip to growth again?

Yes. Thanks, Brad. I'll start and Brian can talk about the gross lease assets portfolio. But actually, the GLA is part of my answer. We don't guide specifically to GMV on a quarter-by-quarter basis. But I think that in order to achieve the revenue guide that we did put out for the leasing business, it would need to imply that we followed similar trends coming out of Q1 into the balance of the year. And -- but on the revenue side, a lot of that will the exactly what you called out the portfolio size. And we made some good progress here this quarter, but I'll let Brian kind of chime in on that.

Yes. I think what I'd highlight there is starting the quarter, Brad, we were -- our portfolio size, which is the key driver of revenue was down 9.4% start, and we made progress as Steve has articulated, kind of step functioning up our GMV trajectory. And so we ended the quarter down 5.4%. And the net -- sorry, 9.4% to 5.4%. The net impact of revenue in the period was revenue was down 8.4%. And so there's a pretty good corollary between kind of the average portfolio size year-over-year and where revenue is trending. And so you kind of extend that trend line into Q2 and Q3 and what we've got kind of implied in our revenue for Progressive Leasing for the rest of the year.

I think what you said would really have to play out, which is we have to see a continued improvement in that trajectory. The gross lease asset balance continuing to make progress towards growing year-over-year as the year moves on in order for us to hit that revenue target. And so I like the trend there. I think it's -- we're taking month by month and we continue to make progress. But I think as we now pass these difficult comps that I feel like we've been talking about forever, what they lost and the tightening action. I think we can now have an easier conversation just about the apples-to-apples periods, year-over-year, and I think they're trending favorably. So I don't think it's too far down the road before we're seeing that portfolio size larger year-over-year.

That's very helpful. And if I could ask a follow-up around the cash flow generation. Brian, I apologize if I missed it in your prepared remarks, but what does the guidance imply for free cash flow this year? Can you remind us if there's anything that's sort of maybe onetime that wouldn't repeat as we look to cash flow next year? And then it seems like you could boost margins nicely if you paid off some of this funding debt, are you considering paying that off?

Yes, it's a good question. So just a couple of things. We haven't provided free cash flow guidance, but what I will say is if you just kind of take it quarter-by-quarter here, here in the first quarter, post acquisition on January 2, we were able to pay down total debt of $254 million. And so very heavy cash generative quarter, it gives us a lot of optionality. And as we stated out the gate here, our prioritization is deleveraging back to our targets.

As we look forward to Q2 and Q3, I think both of those quarters will be slightly cash generative and give us additional optionality around either further deleveraging or evaluating -- putting the cash elsewhere. Q4 is -- and I mentioned this to Hoang is where there's going to be a net cash need I anticipate just with the growth that really these 3 businesses are demonstrating right now and not talking about MoneyApp, which has also shown some encouraging trends.

And so I think we've kind of got that lens that we're looking through and the cash decisions that we're making. But net-net highly cash generative even in a growth -- heavy growth anticipation for Four and then Purchasing Power double digits and Progressive Leasing turning the corner on growth. So the onetime aspect that I would just highlight, and we've spoken about it on prior calls, and that's with respect to the BBA, and that's -- I wouldn't even call that necessarily onetime because given that, that is permanent in the law, that's going to continue to benefit us. But we did have a a $20 million tax refund at just under $20 million that we ended up getting here in Q1 really to 2025, that was additive, and the BBA is going to continue to benefit the rest of the year just as it reduces our overall tax liability, and we sized that rough benefit of about $100 million for the 2026 period. So those are -- that's, I think, a tailwind, obviously, from a cash perspective. But going forward, I think we've got a lot of optionality.

You asked about the funding debt, the ABS debt that's tied to Purchasing Power. Our view is that, that is an important tool for Purchasing Power right now. I think it's an efficient model for them to be able to borrow against the receivables that they're generating and help us from just a capital efficiency standpoint. So obviously, as long as the ABS market is favorable to us and the rates that we disclosed here in our Q, you can see them by tranche. They're relatively favorable for us. And I think we continue marching down that path. No plans to pull those back meaningfully in the near term at least.

This concludes the question-and-answer session. I will now turn it back to Steve Michaels, President and CEO, for closing remarks.

Thank you very much for joining us today. We delivered a strong first quarter with improving trends across the businesses, and we're entering the balance of the year with real momentum. I want to thank all of the team members across PROG Nation for the execution we've seen as well as our retail partners and employer clients and our customers for trusting us. I firmly believe the best chapters of PROG story are still ahead of us.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Good morning. Welcome to the PROG Holdings 2026 Investor Day. It's great to see so many familiar faces here today, and a warm welcome to those who have joined us via the webcast.

My name is John Baugh. I'm the Vice President of Investor Relations at PROG Holdings. I joined the company in the fall of 2020, that was about 3 months before the Aaron's business was spun. Before that, I spent 37 years on Wall Street as an equity research analyst, covering multiple industries, including furniture, bedding, floor carving, building products, hardline retailers and the predecessor company to Progressive Aaron's.

A couple of housekeeping items before we get underway. This is the safe harbor statement. We will be making forward-looking statements today. I urge you to read the safe harbor statement. I will spare you reading it myself. We do have our entire senior leadership team here today. And if there's anything I'm excited about, it's for you to get a chance to meet them for the first time. I also need to tell you that we're going to webcast this event. It will be taped and there will be an archived replay available after the event concludes.

I'm going to walk you through the agenda very quickly before we turn it over to Steve. So Steve will lead us off. Steve is our CEO and President. And what he's going to do is sort of set the table. He's going to talk about our product ecosystem and how the products that we've assembled under the product holdings umbrella has set us up for growth with both our consumers and our partners. After Steve, we'll get presentations from our 2 largest businesses, the first being Progressive Leasing, that will be delivered by Nate Roe. Nate Roe is our Chief Commercial Officer. And I'm really excited part of his program will involve a fireside chat with 2 of our retail partners.

Following Nate will be a purchasing power presentation. This is the business we just bought in January. That discussion will be led by Lee Wright, and he's going to talk about the opportunities in front of us to grow both the top and the bottom line of that business. At that point, we'll have the first of what will be 2 Q&A sessions, followed by a brief break. When we reconvene after the break, we'll bring up to the front John Trainor. John Trainor is the President of Four Technologies, our fastest-growing business, which is the BNPL business. A lot of runway there, an exciting story. You're going to look forward to hearing from John.

Following that, we'll bring Lee Wright back up to the stage. Lee Wright runs MoneyApp. MoneyApp is our short-term financial solution product, which we are scaling rapidly. Then we'll bring up Sridhar Nallani. Sridhar is our Chief Technology Officer, and Sridhar is going to sort of tie these presentations together from a tech perspective. He's going to discuss how what we are doing on investments, both historically and prospectively has set us up to enhance both the consumer experience, our partner experience and help us grow.

At that point, our CFO, Brian Garner, will come up, and he'll tie together the presentations from a financial perspective, including giving for the first time ever, a 3-year financial outlook. That point, Steve will come back up, wrap things up. We'll have the second of our 2 Q&A sessions, and then we'll promptly conclude at 12 noon.

So with that, I'd like to get started, turn the presentation over to our President and CEO, Steve Michaels. Thank you.

Thanks, John, and good morning, everyone. It's great to be here with you this morning. And on behalf of our entire team, we really appreciate you spending the morning with us. We know how valuable your time is.

So like John said, I see a lot of familiar faces throughout the room as well. But for those who don't know me, let me give you a brief introduction before we get into the PROG story. I'm Steve Michaels, and I've been my 31st year with this company. The first 25 of those years was spent with the previous parent, the Aaron's Company before we separate the businesses in 2020. While at Aaron's over those 25 years, I spend a lot of different functions. I spent time in franchising, in operations, in strategy, in finance, in analytics and e-commerce before spending my last 5 years there as the CFO.

During the spin transaction, I was fortunate to be offered the role of leading PROG into its next phase as a stand-alone public company. So as you can imagine, over these 30 years, a lot has changed. But there's been one constant, our customer. And this customer deserves to be treated with respect and provided with solutions that solve real problems in their lives. And we are certainly proud of the service we provide and the lives we've had a positive impact on.

So we're excited to share the PROG story with you today, the first of our -- first-ever Investor Day for us. And I look forward to you hearing from sort of the broader team, not just about where we've been, but where we're going. This is a business with a long runway for growth, built on durable demand, a set of distinctive capabilities and a clear focused strategy.

So everything we do is rooted in our mission to create a better today and unlock the possibilities of tomorrow through financial empowerment. We build tools and systems that serve everyday real people. These are people that I have had the pleasure of serving for over 30 years now. I've visited their homes. I have delivered furniture or a new refrigerator and I have worked out a payment plan with a family that experienced an unexpected bump in the road. These are folks just looking for transparent and flexible ways to get the things they need. And these are the solutions that we provide. So this mission grounds us. And as we scaled, it's what attracts talent, drives innovation and builds trust with our customers and our partners.

So there are 4 key themes I want to share with you today as I kick this off. First, we're building an integrated industry-leading ecosystem to serve the near and below prime individual families. Historically, credit challenged customers have had to navigate a fragmented landscape, patching together opaque, high-cost solutions or, in some cases, just going without. We're changing that, and we're meeting real people where they are with tools that offer flexibility, clarity and trust.

Second, we're expanding access and reach through direct-to-consumer, through retail channels and now with the addition of purchasing power through employers, all to drive profitable growth. Together, these platforms allow us to meet the customer before they even start shopping, which we believe helps -- this access helps us drive lower customer acquisition costs and stronger lifetime value. Now throughout this presentation, you'll hear more from the team about these products in this platform and the ecosystem that we're creating.

Third, we're leaning into data, AI and technology. not just as buzzwords, but as differentiators that make us faster, more intelligent and more precise. Over the last 3 years, we've made strategic investments into our technology stack with the results being faster decisions, higher conversion, more personalization at scale.

And then finally, we have a clear focused strategy around our 3 pillars: grow, enhance and expand. This is how we prioritize how we hold ourselves accountable on how we operate. Now I'll dig into that a little bit more here shortly. But you'll see throughout today's presentation that these themes reoccur and there why we believe PROG is positioned for long-term sustainable value creation.

So what is PROG today? Well, we're a publicly traded company with over $2.5 billion of consolidated GMV on a trailing 12-month basis, a growing platform of customers and an integrated set of products, Progressive Leasing, Four Technologies, MoneyApp and Purchasing Power. Each serves a different use case, but they're unified in mission and we're working hard to unify them operationally as well. As we scale these products come together to create real network effects. One customer might start with the lease and then return to us for a cash advance or a BNPL transaction. And the important thing here is that we're not just building and talking about cross-sell. We're talking about creating a lifelong relationship with a trusted partner.

So it's been quite a journey. Over the last few years, PROG has been on a transformation journey. And it started with the successful spin of Aaron's in 2020, giving us the independence and focus to evolve our strategy into -- and be more agile to create a scalable organization. But we not have the luxury of a stable macro backdrop. We face pressures across the board, consumer headwinds, GMV volatility, inflation, shifts in retail traffic. But through all of it, we stay disciplined. We tightened our decisioning posture, we invested in our risk infrastructure, and we began modernizing our technology stack. This was all to lay the foundation for something much bigger than a single product business, because we knew that to reach more customers and be more meaningful and unlock more durable growth, we needed to evolve, because we're building a financial ecosystem that brings together data decisioning and access, all tailored to serve the financial realities of a consumer base that's 100 million strong. And all of this is possible by our shared infrastructure, cross-product data that improves risk accuracy, personalization and marketing a harmonized decision engine that gets smarter with every transaction and omnichannel distribution from in-store to mobile to employer portals.

We're also embedding more intelligence into the customer journey from smart preapprovals to reengagement, which help drive conversion and improve lifetime value. But it's important to know that we're not trying to be all things to all people. We are leaning into the areas where we have a right to win. And that means scaling and investing in the businesses where we've proven product market fit and the data support profitable growth. This is what gives us the confidence in the opportunity ahead, not because it's easy, but because we've done the hard work to be ready for it.

Well, for those of you that have tuned into our earnings calls over the last couple of years, this slide could look and sound familiar because our 3-pillar strategy of grow, enhance, expand has been our strategy for a couple of years now. And we consistently reinforce it because we believe it works. It's not just a slogan. It's how we operate, how we prioritize and how we hold ourselves accountable across the organization.

Let me break it down a little bit for you. Grow is about scaling the business. It's about growing new customers, onboarding new retailers, expanding employer reach and scaling our direct-to-consumer channels. Enhance is all about the experience, but it's not just about the consumer experience. It's about our retailer experience, our employer experience and internal teams. It's from personalization from AI to streamlining application flows to creating more digital-first interfaces. The goal is to deliver a faster, smarter experience across the board.

And expand speaks to innovation. It's entering new -- or creating new products, entering new verticals and leveraging our platform in new ways. And this includes the addition of purchasing power. The robust growth of Four Technologies, the organic development of MoneyApp and the ongoing build-out of our PROG marketplace, our direct-to-consumer experience that allows consumers to shop when and where they want. It's not about complexity. It's about consistent, repeatable execution.

So it all starts with the customer. So let's talk about who we serve. Roughly 40% of the U.S. population either lacks access to traditional credit or is underserved by the current financial system. These are hard-working families just navigating financial constraints. Many are managing low incomes with limited short-term savings and access to emergency liquidity and credit histories vary. Some have thin credit files or no file at all. Others have had a life event or some event that has damaged their traditional bureau score. But at the same time, these consumers are still making essential purchases. They're starting families, they're moving homes, they're replacing broken appliances, they're living their lives. And they just need reliable access to products and services to support that.

But as we said -- as I've said, traditional financing models often don't meet their needs or they come with financial obstacles or barriers that are difficult to navigate. And so that's where we step in. We built an ecosystem designed for these realities and one that offers flexible path to ownership, short-term installment options, low-friction liquidity solutions or employer-sponsored purchase options -- purchase platforms. So this is about addressing a gap with products that are transparent, tech enabled and built for the way real people live.

So what's powerful about the ecosystem is that while the entry point across the products may differ, the profile is remarkably consistent. We see strong commonalities across our platform. Most are earning under $100,000 annually, many are navigating credit constraints, as I said, but they're digitally confident mobile first and they value transparency and control. And they're often making purchase necessities not just discretionary splurges. So while their core attributes are shared, their entry point can differ. What starts as a $100 cash advance, could -- the customer could return for a $300 BNPL transaction could evolve into a larger ticket purchase through Progressive Leasing or Purchasing Power. That's the power of the unified ecosystem, one customer, multiple products and a single relationship that deepens over time.

So think of this as a portfolio of financial tools. We're not trying to fit every customer into a single product. Instead, we're aligning the right solution to the right need based on purchase size, timing, income cycle and customer preference. So let's walk through this a little bit.

For larger essential items like electronics, furniture, appliances, Progressive Leasing offers a flexible lease-to-own solution without the need for traditional credit. It offers customers access to new high-quality merchandise, often from national retailers with clear, flexible terms and early purchase options that create quick path to ownership. Four Technologies, our Buy Now Pay Later solution is for smaller ticket, digitally native transactions, often in lifestyle, fashion or electronics and it's preferred by younger customers who value control and transparency and speed, but want to avoid the high interest credit cards.

MoneyApp helps consumers navigate cash flow gaps, whether we're talking about covering gas or groceries or an unexpected expense, allowing immediate access to short-term liquidity at a much lower cost than traditional bank overdraft fees delivers immediate value. And finally, Purchasing Power provides access to a wide selection of products and services through a benefit at work. It's simple, it's convenient and for many, a more manageable way to handle midsize purchases often tied to family needs or home upgrades.

So all of these products bring something different to the table, but what they have in common is transparency, ease of use, and a commitment to serving customers in a way that fits their financial reality not works against it. So each of our products plays a unique role in the ecosystem. And when they come together, they create value for the customer, but also for us. First, we see lower customer acquisition costs. When we acquire a customer through one product or channel, we can reengage them through another often without incremental spend. And this is a huge efficiency driver, especially as we scale up our direct-to-consumer efforts.

Second, we have data sharing across our products, which improves our decisioning, whether it's understanding repayment patterns on a MoneyApp, cash advance transaction or identifying positive behavior on a lease. That insight is fed back into the system improving decision accuracy across the board.

Third, we can get more personalized cross-product marketing, which leads to higher engagement, stronger conversion and ultimately, better retention. And finally, the ecosystem model gives us more strategic relevance, but it's not just with customers. It's with retailers, it's with employers and with affiliate networks. The more value we create and deliver the more essential we become. And as we grow each of these businesses, it's important to know we're not just building silos, we're building connections. And that's where the real compounding value comes in.

So let me step back for a minute and kind of talk about how this is already playing out throughout the system. Historically, PROG has been a leasing centric leasing first model. And when we've talked about cross-sell, it's been in that context. It has largely been other products supporting leasing. And over the last couple of years, we've been working on this and we've been tracking it and driving it. And so in 2024, starting from effectively 0, we drove about $22 million worth of GMV into the leasing business by marketing to customers of Four and MoneyApp.

Last year, in 2025, that more than doubled to $45 million. That's real GMV, and that's a great outcome. But it's still a leasing first leasing centric model. Where we're going is fundamentally different. We're evolving into an omnidirectional ecosystem where customers can enter through any product for leasing, MoneyApp, Purchasing Power, and we can serve them with the next right solution across the platform.

In that future -- this is important. In that future, no single product sits at the center. Instead, the ecosystem and more importantly, the customer do, they're at the center. And to make the shift more real and less aspirational, we've made cross-product engagement, a strategic initiative within the company, including having it as part of the executive compensation plans because we feel like it is unlock to future growth. So a key part of enabling that omnidirectional ecosystem is expanding access for our core customer. And that's exactly what the addition of purchasing power did for us as a complementary product to the rest of the products.

So let's talk about Purchasing Power for a minute. Most of you will have seen that we closed on the acquisition in early January. It's a leading provider of voluntary benefit purchasing platform.

Stepping back for a minute. For those of you who know us, you'll know that while we evaluate a lot of M&A opportunities, the bar for us to act is very high. Purchasing Power easily cleared our very disciplined M&A framework. And it was a very highly strategic move for us, one that adds scale, growth and profitability. Now Lee is going to give you much more of a deep dive into Purchasing Power here in a minute, but I'll just give you a primer. So Purchasing Power, embedded upstream at the employer level gives us access to over 7 million eligible employees through payroll relationships.

We entered the conversation earlier in a trusted setting which leads to lower customer acquisition costs and higher conversion potential. But importantly, it also adds important diversification to our model in both revenue and risk. The repayment structure for purchasing power through payroll deduction or payroll allotment has historically resulted in lower loss rates and more predictable cash flows. And excitingly, the cross-sell potential is significant. We've already started discussing with some of our leasings retail partners, adding Purchasing Power as a benefit for their employees, as well as approaching some of the partners that Purchasing Power has that happen to be retailers about offering leasing as a solution for their customers.

These so far untapped revenue synergies are an exciting aspect of the acquisition, especially when you consider that there is limited overlap between Purchasing Power's customers and the customer's PROG served prior to the acquisition. But I want to leave you with this on this one. It's not just an acquisition. It's an accelerator. And it expands our reach, strengthens our economics and fits hand in glove with our mission of providing inclusive financial access.

So now that I've talked about our products and our consumer, let's talk about skating to where the puck is going. We're seeing 4 major trends shape the financial lives of our consumers. First, there's rising demand for inclusive alternative payment options. As I've said, traditional credit is not available for a large part of the population, especially as prices stay high. Our ecosystem is built to meet that need with flexible products that provide access, not obstacles.

Second, BNPL is becoming a mainstream financial budgeting tool, and Four Technologies is built for this. And it's not just for big purchases. It's for everyday spending. We offer simple interest-free payments with a digital experience that younger customers prefer.

Third, there's explosive demand for cash advance products, but there's also a growing concern around pricing and transparency. MoneyApp offers a low friction, low-cost, fast and consumer-friendly solution without any hidden fees or any tipping feature. And finally, customers expect a mobile-first embedded financial experience. And because our platform share data and infrastructure, we can deliver just that, smarter decisioning seamless access across channels and personalization at scale. PROG is well positioned to lead in all of these areas.

So what sets us apart? What makes us hard to replicate? I'll talk about a couple of these 6 key advantages. First, our unified proprietary data engine allows us to make faster, more accurate decisions as well as drive personalized engagement that resulted in stronger conversion and continuous improvement across every customer interaction. Second, our award-winning customer care team provides solutions that are responsive, empathetic and tailored to each customer's needs. And lastly, our reputation as the gold standard for regulatory and compliance excellence makes us the go-to partner for national retailers and large employers alike. These strengths allow us to be the leader in addressing consumer needs through an inclusive financial ecosystem.

And we've made strategic investments over the last several years to strengthen these advantages. We modernized our lease engine. We've added AI into our decisioning, marketing and customer service, and we've scaled new brands and entered new channels. And we've done all of that while maintaining a healthy balance sheet and strong cash flow.

So we all know that execution starts with people. And at PROG, we built a leadership team with the right blend of industry experience, operational depth and strategic alignment. We bring together executives with strong backgrounds in finance, technology, operations, compliance, product, commercial growth, all with operating around a shared -- with accountability around a shared mission. But what's most important is this team has led through both challenge and transformation. We scaled new platforms. We've entered new businesses, and we've done it while staying focused and disciplined. I'm really happy to have this team here today, and you'll hear more from some of them throughout this morning's presentation.

We're aligned, we're ambitious and we're just getting started. We're also very fortunate to be guided by a great and diverse, highly engaged Board of Directors. Our Board members bring deep expertise across financial services, entrepreneurship, product, marketing, compliance, capital markets, and they've been strong partners as we've evolved PROG into the ecosystem business you see today. They provide the oversight, governance and long-term perspective that make sure that we're not just growing but we're growing responsibly, sustainably and with shareholders' interest front and center. It's a board we work very closely with and one that shares our vision of what this platform can become. Several of our board members are here today as well, and I thank them for their guidance and support.

So let me bring it together for you as I tee up the next couple of hours for us. We built a business that is fundamentally different from where we started. And importantly, it's meaningfully differentiated from others in the market. We're delivering structural cost advantages through AI and technology modernization. We're unlocking compounding growth through a multiproduct ecosystem. We're activating proprietary data to drive smarter decisions and stronger personalization, and we're doing it all through a distribution model that is deeply embedded with long-term exclusive retailer contracts, employer access, including many of the large Fortune 500 companies and a fast-growing direct-to-consumer footprint.

So our platforms are more connected. Our teams are more aligned and our strategy to grow, enhance and expand our delivering results. This is a business positioned to scale efficiently, grow profitably and create long-term value for shareholders. We're incredibly excited about where we are, but even more confident in where we're going.

So with that, I'll get it started on the deep dives, and I'll turn it over to Nate Roe, Progressive Leasing's Chief Commercial Officer. Thank you.

Thanks, Steve. Good morning, everybody. Thanks for spending time with us today. It's good to be with you. Like Steve said, I'm Nate Roe, the Chief Commercial Officer here at Progressive Leasing. And I've spent 19 years at the company, been in a lot of different roles that have put me in front of our retailers, our partners and my favorite, our customers. I've spent a lot of time on retail showroom floors with sales associates and a lot of time in the boardroom, working on our product, what it looks like and execution plans to launch that product with all of our national retail partners.

Why I am still here after 19 years is pretty simple. The industry and our customer, they really matter. Progressive Leasing creates a win-win for everybody involved. And as an example of that, in retail, when Progressive Leasing is offered, retailers sell a significantly more large amount of retail products. Our customers -- they gain access they otherwise didn't have and shareholders, they benefit. So I'm excited today to walk you through our leasing business, what it is, where it's headed and why it's important.

As the largest commercial engine inside PROG Holdings, understanding our leasing business is essential to understanding long-term shareholder returns. So before I go any deeper, I want to anchor us on a few things that actually matter, because everything else I'm going to say is going to ladder back to a few of these core ideas.

So if you remember nothing else from my section today, remember these 4 things. First, at Progressive Leasing, we're capitalizing on the growing consumer need for flexible, transparent lease-to-own options. Second, we're building on our leadership position as the leasing partner of choice for large and national retail partners. Third, we're expanding availability and accessibility through our D2C platform called PROG Marketplace. And fourth, we're investing in advanced technology capabilities, for simple, frictionless easy-to-use products and a future-ready business.

So I want to talk a little bit about Progressive and how it shows up in the real world, what it looks like. We were founded in 1999, so while our products fill modern, if you're out in the marketplace, you'd see a very -- very modern product, but it's built on decades of experience, data and operational excellence. You can see here on the screen, there are some of the largest names in retail in America today. And those are some of our large national retail partners that we have exclusive relationships with. Retailers that trust us with their customers and trust us with their brand. You can see on the screen as well, some of our product mix, really strong representation in furniture, electronics and appliances and strong representation from mobile phones, jewelry and mattresses. Now this is a diverse product mix. But if you can think about what it means, these are large products that are generally coming with large tickets and usually at a time of need.

If you were to go into a store and see a set of parents but are looking at a refrigerator and they're going to use Progressive Leasing it's probably because they have kids at home and the refrigerator went out last night. That's a need that was probably unexpected. And that's where we show up. And that's why our partners and our customers trust us to be the leading in-store app-based and e-commerce lease-to-own payment solutions provider.

So scale and history, they matter, but they only matter if they translate into results. So I want to talk about why this matters for everyone involved. For our retailers, they get to expand total sales and access to customers they otherwise couldn't serve. They get integrations into their marketing systems and their point-of-sale systems with -- for an easy-to-use product, and all of the Progressive Leasing transactions go through normal payment rails and don't have any merchant discount rate attached to them.

For customers, they get to shop at the largest brands in retail, and they get to shop for products inside those large brands. We provide them with credit record with leasing power, Purchasing Power right when it's not available, flexible payment options when they need it, and we allow customers to make purchases timely and simply. We also provide a seamless mobile experience that fits the world today and is easy and simple to use. So the value only works if it is delivered simply, anyone in retail will tell you, complexity kills conversion, and simplicity is what matters. And that's where we win in Progressive Leasing.

So I'm going to play a little demo here of what our product looks like, so you can see it and how it shows up in the world. But before I do, I want to read a testimonial. Like I said earlier, one of my favorite parts of my job is I get to spend a lot of time with customers that actually use our product. And at Progressive, we survey our customers all the time to get even more feedback. This is a very easy one to read, simple and fast, it literally took less than 5 minutes for the whole process. You'll see in this demo, that's not marketing copy or words on a slide. That's our product truth. So as I play this video, keep that in mind.

At Progressive Leasing, everything starts with a simple application. Customers can apply online, through our mobile app or in-store where leasing is available. After an application is submitted, instant decision is rendered. That provides an approval for customers but they can then start to shop for the merchandise that their need of. And those approvals, they last for up to 90 days, so customers can make the best decision for themselves. At the time of purchase, a lease agreement is signed and a small initial payment, the first payment is taken. At that point, the customer can take their merchandise home or they can arrange for delivery if that's bad for them.

Going forward, auto payments are set up and can be managed online over the phone or through the Progressive Leasing app. Like I said, and like the testimonial said simple and fast. And that's again where Progressive Leasing wins. So behind every transaction is real people, so today, I want to tell you a story about Maria, one of our customers. Now Maria is a persona, but her story is real. Maria is a single mother. She's about 40 years old, and she has a daughter that's approaching their teenage years and they've lived together the majority of their life in the same room in the same home.

Now Maria, as her daughter started approaching her teenage years, started to get anxious, started to get nervous. She knew her daughter needed to place a privacy and a place to grow. And she had not been able to make that happen for her daughter. So she decided she would gather the funds that she could and go out into the world and try and fix this problem. So she went out, she found herself at a mattress firm talking with a sleep expert. She realized pretty quickly, but she didn't have the funds to fix the problems she was trying to provide a solution for. But the sleep back mattress firm gave her a menu of payment options for people that didn't have the money to pay cash that day. Maria knew her credit wasn't fantastic, so she wasn't overly excited to a buy, but as a last ditch effort she decided to apply for Progressive Leasing's no credit needed solution.

To her astonishment, in seconds, she was approved for up to $2,000. Maria never experienced an approval like this before in her life. So you can imagine the transaction was pretty emotional. Tears were shed, tears of happiness, tears that allowed access to replace limitation. It was a special day for Maria. When she went home, her daughter's life changed that day as well. She now had a place of privacy, a place to grow, a place to sleep and rest and recover. But most importantly, Maria's daughter now had a place to dream. And that's what we do at Progressive, and that's what's important to us. We're not just enabling purchases. We're showing up for customers and creating possibilities at moments in life that really matter.

So Maria's story. Well, it's true, it's not unique. Maria represents mainstream America, millions of customers that we serve each and every year. You can see the age of our customer goes from young to old and everything in between, household income of about $50,000 a year, subprime credit scores, skew a little bit on the female side, but most importantly, they're all out there looking for something that they need, and that's where we show up for them. That's our goal. That's our passion. Serving the needs of an underserved population with simple, transparent, easy-to-use payment solutions at a time of need.

So when you zoom out, the opportunity is pretty substantial, and we believe we're well positioned to capitalize on the growth drivers that are ahead of us right now. Earlier, Steve mentioned, 40% of America, over 100 million Americans are credit underserved. And we see that group growing each and every year, growing because more people are falling into those buckets and the younger generation that's unbanked and traditionally does not like normal financial tools. They want simple, transparent, easy-to-understand solutions.

We continue to see interest in national and large retailers alike. These retailers have a lot of shoppers in their stores, but not everybody is buying right now. They're looking for ways to help convert those customers. They're on their web pages and on their showroom floors, with the need ready to buy. There's a lot of pent-up demand tied to some replacement cycles right now. If you look at furniture and mattress and appliances, those industries have had some headwinds in recent years. And we stand at the ready to help our customers as those replacement cycles come through. And our retailers trust us to be there at the time that those products need to be replaced.

And finally, I've said it a couple of times now. I really like to hear from our customers. One of the main things I always hear from them is how do I use the ability to buy with Progressive at more places. We continue to see expanding utilization in emerging verticals that are nontraditional lease-to-own categories. And that's really exciting to me and really exciting for our customer.

So our strategy is built to capture these opportunities. I'm going to walk through kind of these 4 pillars so that you can see how we plan to execute. Because strategy is great, but you got to be able to execute it. And given the opportunity that we have in front of us, our strategy is very intentionally focused. First, we're going to continue to drive existing retail partner adoption and win new pipeline opportunities. Second, we're passionate about elevating consumer and retailer experiences. And we're going to talk a little bit about that in a minute. Third, we're going to expand our D2C model. We've created PROG Marketplace, an exciting place where people can shop for things that they need when they want, where they want outside of retail if need be. And finally, we're executing a technology road map that has our product in a really good place today and our business ready for the future.

So strategy only matters if you can execute on it, like I said, so let's take each of these a little bit deeper, go through them one by one. First, we're continuing to solidify our leadership position with leading national retailers. It's one of our greatest strengths to have these partners, and they look to us because we're of our unmatched compliance and operational excellence, our ability to have full stack consumer-friendly payment capabilities and deep integrations into their systems as well as account teams across the country that support their business and ours.

One of my favorite stats from this last year is about 70% of our GMV is now contracted into the 2030s, exclusively with our national retail partners. That doesn't happen unless things are working operationally, commercially and reputationally. In fact, I think one of our retailers said at best, you're not just the best partner in financial services you're the best partner period. So this foundation allows us not just to retain partners, but to accelerate momentum across our ecosystem. Still focusing on our existing relationships, we've got great products and decades-long relationships with our national partners, that allows early transactions into our ecosystem and cross-sell opportunities. It allows us to focus on what we can do in the future together.

In the new large regional and national space, we continue to sign up new partners each and every year. And one of my favorite stats from last year with one of our large retailers is over 75% of the applicants that came to Progressive were net new, net new customers to PROG. And in the SMB space, we continue to target organic growth, and we continue to see more and more people in that SMB space, look to us for our differentiating qualities, and we are investing in firepower in that space to grow the SMB business each and every day.

You can see our position as the payment solution partner of choice continues to grow, not just for large retailers, but retailers of all sizes. Second, and more passionate about this one, elevating consumer and retailer experiences. On the customer side, customers get streamlined application experiences, the reduced friction enhancements each and every year. Smart decisioning capabilities accelerating approval flow, so that's more approvals for more dollars today, not in future quarters and improved web and in-store experiences, the reduced friction and make that our navigation and design simple to use.

From a retail standpoint, we're transforming how retailers work with PROG. We're modernizing our retailer experiences, making it easier to use, faster to launch. For our existing partners, we have faster and easier integrations, enabling retailers to pilot things in days, not quarters, not years. They can try things quickly. These areas are a big reason why we have 5- to 7-year contracts, and those 5- to 7-year contracts enable us to invest in long-term capabilities for our customer and for our retail partners.

Third, we're expanding our D2C model through like what we call PROG Marketplace. Like I said earlier, this allows customers to shop for what they want, when they want in leasable categories. This increases the frequency and personalization with which we can communicate with our customer. And I think most importantly, this allows customers to view Progressive Leasing as an extension of their existing wallet. We want to be comfortable, and we want to be able to shop just like they shop for anything else, and the marketplace is growing in adoption, and we're really excited about where it's headed in the future.

Our last strategic pillar, technology. Underneath everything you've seen and heard today is a platform built to scale. Our faster partner integrations allow for consumers to transact now rather in future quarters, our AI-driven decisioning and customer service allow more focus on our cross product ecosystem and our enhanced internal productivity allows us to continue to refine and capture new growth opportunities. Together, these priorities drive durable growth for us, for our retail partners and give our consumers more access.

So stepping back and looking at the leasing business, I want to circle around to what I said matters most. At Progressive Leasing, we're passionate and we're capitalizing on the growing consumer need for transparent, simple-to-use payment solutions. Second, we're building on our leadership position as the leader in the space and the leader in the LTL provider of choice for the large and national retailers. Third, we're expanding availability and accessibility through PROG Marketplace, our D2C platform; and fourth, we're investing in advanced technology capabilities that have a modern, simple, easy-to-use product today, and a future-ready business.

With that, I'm excited to have 2 of our national retail partners join me up here on the stage today for a discussion about Progressive Leasing and why it matters to them. So please help me welcome Jody Putnam and Lisa Walker up to the stage. Thank you.

Okay. Jody, Lisa, thanks so much for being here with us today. Really appreciate -- we appreciate your partnership and excited to be able to have a little chat today about Progressive Leasing. So we'll start off with some easy questions. If you could each just introduce yourself, your role at the company and how Progressive fits into your role. Jody, we can start with you.

Jody Putnam, Chief Retail Officer of Mattress Firm, oversee our retail stores, our web business, our direct-to-consumer business, business. So that's a lot of businesses there. .

Yes. And how it's PROG fits into your role?

It helps us drive conversion, it's one of the payment options we have for customers, as you mentioned, and see that can't use traditional financing.

Great. Lisa? .

Good morning. I'm Lisa Walker. I'm the President of Jewelry Services for Signet Jewelers. We are the parent company of Kay, Zales, Jared, Blue Nile and other brands. And I am the President of Jewelry Services, and that includes all of our payment products, our repair business, our warranty business and our repair network of over 1,600 jewelers around the country. And how Progressive fits in? We believe at Signet, our mission is to celebrate life and help customers celebrate life and express love. And for many of those customers, our products are out of reach financially unless they have a payment solution like Progressive Leasing.

Great. Thank you. Jody will start another question for you. Before partnering with Progressive Leasing, what customer market challenge were you trying to solve? And what does Progressive Leasing due to enable a solution to that problem?

At the time, this was I mean 16 years ago. We were -- we had another competitor in the space that was using Progressive, and we thought it was a conversion play because we would have customers that we believe left our store and purchase from them. And that turned out to be true. What we didn't realize before partnering was that it wasn't just a conversion play because Progressive did drive conversion, but also average order volume. Our average order volume was about 40% higher with Prog Leasing than it was with crack hard hat remains through today. And then it also drove traffic because once you put signs in the windows, the Progressive name, people knew what it was, the idea of lease-to-own, which I didn't know what was at the time. Our customers certainly did.

Appreciate that. Lisa, how about on the Signet side?

Somewhat similar to what Jody said. But for us, we have an in-house credit solution. And when we decided to get out of that business, we were looking for payment partners that could help us service the entire credit spectrum because we want to make sure that we can close sales for customers regardless of their credit score. And so Progressive Leasing offered that to us.

What -- I'll build on what Jody said, which is the signs in the window, et cetera, gave people confidence that they could come in and complete a purchase and not be embarrassed that they couldn't -- they didn't have the funds to be able to purchase the item for their spouse, their partner, their mother, et cetera.

Appreciate that. So you talked a little bit about how Progressive is fit into your businesses. I wanted to ask what drove the decision to partner with Progressive Leasing. Obviously, there was conversion, there were different things, but why Progressive and what drove that decision? And how does it align with your strategic priorities around customer access and growth? Yes. Go ahead.

So I think you touched on it and Steve touched on it earlier. The innovation, the technology, the compliance, all of those things were very important to us as we got out of our own credit business and this whole idea of being able to bring in customers across the credit spectrum. And we stay with Progressive, one, because we have a long-term contract, but more importantly, it's about the innovation that Progressive is bringing to our business. And for a lot of our customers, they've used a Progressive Leasing either with us or somewhere else, and they come back and that drives loyalty for us.

Thank you. Jody, on the match term side?

I think there's really 2 reasons. One, any partner that you're going to have, particularly in this space, you want to make sure that they live up to the customer service expectations. And we believe that Progressive would that's turned out to be monumentally true. I think the best version of that was in 2020. It's not the recent version, but the best version in 2020. Obviously, a lot of customers in this space -- they -- many of them lost their jobs or furloughed or what have you and progressives. For those of you who don't know, Progressive reached out to all the customers during that time frame and extended terms as necessary to help them through it that certainly drove loyalty to Progressive from that customer, but it also helps with the retailer partner.

The other is that our mission is to improve lives through sleep. And having Progressive on the floor, at lease-to-own option in general, democratizes that. The -- we often talk about health being a 3-legged stool of sleep, diet and exercise and it's in the U.S., we're the 34th most healthy country on earth. But we shouldn't be. We have another access to food. We have -- we exercised more than most, but we also were not sleeping like a badge of honor. And so that is starting to change. What's happened is that many use financing as an option to help that because fortunately for us, I guess, unfortunately, I don't know how you say it, but the better products cost more. They do help you sleep better, but they call them and Progressive has helped democratize that. It's allowed more people to buy the product that will help them be healthier.

Love that. Okay. A couple more questions here. What impact have you seen since working with Progressive, whether that's customer satisfaction, sales going up, the ability to serve a broader customer base. I think we've touched on a little bit any specifics that you -- we haven't touched on that you want to call out, Lisa, we can start with you.

I think Jody mentioned it, our AOV with this customer cohort has increased by giving customers access to Progressive. One of the things that we did in partnership with Progressive this past year was we enabled something called split tender, which is a customer had $500 that they could use to buy an engagement ring. And so enabling split tender, the customer was able to use their $500 and then also add a lease to that. and that has really helped. Customer satisfaction is high. I mentioned that earlier, people have come back, repeat strong NPS scores. So our customers are happy with the product once they've once they've engaged in it.

And the other thing I would say is it gives confidence to our sales associates. And so our sales associates know when a customer comes in, if they don't have open a buyer on their traditional credit card that they still can close a sale. And that that's huge. That's huge for us. And one of the things that Progressive has done is they have a strong field sales support system. And so it creates a flywheel with our sales associates. They feel confident selling. They close more sales, and that creates that flywheel.

Great. Jody, on the match room side?

Yes. I mean I mentioned earlier the AOV conversion and traffic. It's also a really good margin wise because it's a less expensive financing option for us. And so that helps us. And Lisa mentioned the rep force that's been incredibly important. We built it together, right? It was the -- I guess, it was about 13 years ago. The idea of not just selling new clients, but teaching the existing teams, how to use the product, wildly important. We've asked other of our partners in the same space, not lease-to-own, but in the financing space to do that as well. And they've all stepped up and begin to do it too because it's so important for what Lisa mentioned that confidence on the self.

Great. Okay. We've both been partners for a long time, over a decade, near a decade. What advice would you have for a retailer who doesn't have lease-to-own provider today and trying to make that decision to do lease-to-own and who to do it with, knowing that we've been partners for a long time and knowing that competitors in our space have talked to you multiple times, what advice do you have about lease-to-own and how to choose a partner? Lisa, do you want to go first?

Me go first. Again, I think, lease-to-own, I said this earlier, lease-to-own, create -- fills a gap in our payment solution suite because it attracts and converts customers that wouldn't otherwise be able to complete a purchase. And so I think lease-to-own is a really important piece of our payments ecosystem. And I said it earlier, the partnership that we have with Progressive is second to none, which is why we're here to -- Jody and I are both here today to support PROG at their Investor Day. But again, it's about innovation, quality, support. I think that's what Progressive brings to us.

Yes. I think my first answer would be definitely get a lease-to-own partner. The second one, make sure you find one that you can trust the -- the -- if you go back to how do you bring to life, there's pretty significant systems integrations that at least at my experience have gotten better every year as we work together longer. The training that we do with associate stacks year after year. So the longer they're here the better they get because the more training they've had. Those are things that make the relationship sticky, and it's because they're hard unwind. So you want to make sure that you have a partner that you can trust because you're better off if you are in a long-term partnership.

Great. Okay. Last question. Looking ahead, what do you value most about your relationship with Progressive Leasing, and how do you see it evolving and we'll get you excited for the future. Jody, we can start with you and then Lisa will wrap it up.

I think the partnership in general, every quarter we get together and we do a business review that's important we do that with most partners. I think from an evolving standpoint, is continuing to lean in with marketing. Since Andy's joined your team, we've spent more time looking for ways to partner together to drive traffic to whether it's new traffic or repeat traffic. So I would imagine that the evolution will come there and how do we get more feet in the door, how many you get more eyes on our website.

So I mentioned it earlier, it's the partnership, it's the innovation. It's the willingness to try things and our ability to try those quickly based on technology. And I would agree with what Jody said about the marketing, the PROG Marketplace, we think is really exciting because it will bring new traffic and new eyeballs into our stores, people that didn't know that they could complete a purchase of that scale, now it's enabled by PROG through the marketing.

Great. Well, thank you both for being here. Thanks for joining us today. Thank you for the time. If you could help me one more time applause for Jody and Lisa. Thank you. Appreciate it. .

And with that, I'll turn it over to Lee. Lee Wright. Thank you.

Good morning, and thank you for joining us today. I'm Lee Wright, President of Purchasing Power. Before I begin my overview of the company, I wanted to walk you through and as the newest member of the PROG team walk through both my personal and professional background. On a personal standpoint, I grew up as [indiscernible] across the country. And I certainly know what it's like to live paycheck to paycheck. However, I can assure you, my family is much more fortunate than others that I grew up with.

Many of my best friends lived in trailer parks, and their trailers weren't double wides. And I can tell you, I saw firsthand the financial stress that they went through every single day as a family, and I'm proud to be part of PROG that focuses on this underserved consumer.

On a professional standpoint, I started my career in investment banking and quickly moved into private equity. I was there for almost 2 decades and focus on 4 core industry verticals: financial services with a focus on the subprime consumer, retail, industrial and energy. After I left private equity, I went into operations, and ran an energy company as CEO and quickly then was recruited into Conn's HomePlus, a publicly traded consumer durable retail company with a focus on the subprime consumer. While there I was both the Chief Financial Officer and then ultimately Chief Operating Officer, where I had responsibility for both the in-store and online retail segment of the business as well as the credit and collections segment of the business.

I left there in early 2021, did some consulting for both retail and financial services companies and most recently, was CEO of The Vitamin Shoppe before leaving the middle of last year. So as you can see, I have a long background in both retail and financial services.

I ultimately -- originally got to know Progressive while I was at Conn's HomePlus, because while they actually brought in Progressive Leasing as our virtual lease-to-own option for our customers who either didn't qualify for Conn's in-store financing or simply one of the flexibility of a lease. So it was there that I saw firsthand the way that Progressive Leasing treated their customers in a flexible, transparent way and where I saw the leadership team of PROG. So when the opportunity came up to join Steve and the team at PROG and run Purchasing Power, I was incredibly excited.

So with that, let's walk through Purchasing Power, which has a long track record, a powerful moat and is a highly strategic acquisition for PROG's growth story. You see purchasing power is not just a differentiated business. It's a platform for strong growth, which can scale across a massive underpenetrated employee market. So there are 3 key messages I want to leave you with today. The acquisition of Purchasing Power represents an expansion into a very large employee market through a nationwide employer-based network which provides millions of underserved customers access to needed products and services. Purchasing Power delivers a differentiated payment solution, of payroll deduction and allotment which provides better repayment outcomes and delivers a positive risk profile for the PROG portfolio.

You see we're leveraging integrated data, access and ecosystem relationships to generate organic growth while serving as a cross-pollination engine across PROG's B2B and B2C channels. Purchasing Power is not just a stand-alone asset. It truly is a strategic multiplier. So at its core, Purchasing Power is an e-commerce retail purchasing platform built automotive B2B2C platform. We provide employees with the ability to purchase brand name products and services and pay over time through payroll deduction. This is a triple win all the way around. It's a financial wellness benefit for employees, it's a no risk, no cost offering from employers, and it provides predictable repayment behavior for PROG.

Now Purchasing Power is primarily distributed through a national network of benefit brokers in addition to a small but mighty direct sales force. We have over 360 established employer clients. We have 7 of the top 30 U.S. employers. We have 48 Fortune 500 companies as partners, and that creates over 7 million eligible employees for us to target. We have approximately 98% client revenue retention, which shows the sticky relationships that we have in repeat buyer behavior. With the revenue base, it truly serves as a revenue diversifier and a risk mitigator for PROG.

So let's walk through how this works. And before I do, I want to talk about Dan's quote because I love it, I absolutely love Purchasing Power because I can shop from home. It's convenient, and they take payments directly from my paycheck. So I don't have to worry about making a payment. I've never had a problem with any purchases. You see this is a set and forget an option for a consumer. They can make the purchase and then it's just deducted from their paycheck.

Purchasing Power's payment solution eliminates friction, reduces financial stress and increases likelihood of repayment. So let's walk through exactly how this works. First, employees register create the account online or on the app by selecting their employer and pay frequency, there's no credit check or approval process required employees due to be employee-specific eligibility requirements.

From here, they receive a personalized spending limit based on salary, tenure and other factors. They now have the opportunity to browse more than 100,000 brand name products. And upon checkout, they see the total cost, payment schedule, delivery estimate and provide an estimated delivery date. In Purchasing Power places the order with the vendor and the vendor ships directly to the consumer. Payments are automatically deducted from paychecks and installments primarily over 12 months.

So the employer value proposition, the employee value proposition is incredibly compelling and differentiated. We provide customers with immediate spending power with no credit checks repayments and transparent fixed installments and a broad selection of branding products and services. So within the PROG ecosystem, Purchasing Power plays a critical role as it reaches a stable employed customer base, with strong repayment behavior.

Within the ecosystem, Purchasing Power creates cross-product opportunities and improves risk outcomes and ultimately deepens customer lifetime potential. So I love the illustration for one here because it shows in different ways that Purchasing Power as a platform is offered to various employees and members. However, I want to walk you through a real-life example that I think is even more powerful. I was walking on to our United flight one night, and I had my branded quarters it on this said Purchasing Power. And as I walked on the flight, the flat tenant, he was friendly to normal. She said, "I love Purchasing Power" I said, well, that's fantastic. I'm glad you love this. I don't know why you love us because, I mean, I want United as a partner, but we don't have United as a partner yet. We've got your competitor down the street in Atlanta. That's our partner not Untied yet. So again, how do you know, well, mother-in-law actually uses you and she loves you guys. She walked me through how to shop all that. He says fantastic. She said, "So I went on, I logged on and I said, okay, let me get I got denied. And she has and as well. So we talked about the business and it was a great conversation.

Anyway, well, I got busy on the plane. I'm doing work. And as I get off, she stops me he says, "Hey, I just want to hand you something. So she hands me card, got the wings on and everything. And I read it and I said, "Wow, so thank you. I said, do you mind if I talk about this. She said, absolutely, please use it. She said, because I really want to be able to use this product. This is a great product. It's a platform -- Purchasing platform that Purchasing Power has -- is amazing.

And here's what she said. Mr. Wright, it's a pleasure having you on the flight tonight. Purchasing Power is an amazing program for government employees my mother-in-law, a New York City school teacher, shared the program with me. I signed up, but unfortunately, I am unable to use it. It would be really nice to extend the program to fellow flight attendants. Thank you for hearing me out Houston-based Morgan. That's the kind of power and level of desire that people have to have this program because they know that it helps them. It's not the first first I've heard, but it's the first where the hand me a card like that, which I thought was fantastic.

So let's talk about how Purchasing Power is distributed because we do have a unique channel to access the market. We do partner with benefit brokers which are typically a subset of the typical insurance brokerage firms. You think Aon, Willis, Mercer, I mean there are voluntary benefit insurance brokers that just do that solely and we do have a direct, like I said, a small but mighty direct sales force, but this is a really unique channel for us because it provides us with significant distribution scale. It's a sales amplifier without the fixed cost. And benefit brokers are incentivized to sell this product as well. It's something that really solves a problem for the employers. And it's definitely something new. It's not your standard disability insurance, identity theft protection, pet insurance, and it really does resonate with the underserved segment of the population.

And there's true alignment as well with our brokers that are distributing this product. You see they don't get paid by just bringing a new client that we sign up. They don't get paid when a customer makes an order purchase with us, they only get paid as payments are made and deducted from their paycheck. So the alignment is there with us and the brokers. And the alignment is clearly there for the employers as well because, again, it creates real value for them. It's no risk, no cost. It provides a holistic solution to the stress that many of their employees are facing so it helps improve employee loyalty. And we truly believe there's significant growth potential in the untapped employee benefits market.

So now that you have a better understanding of the business and our go-to-market strategy, let's discuss the near-term industry drivers. There's growing demand for predictable low-friction payment methods, especially as employees have continued to endure economic pressure. And we're seeing an expansion of voluntary benefit marketplaces, making it easier for employers to adopt new programs, and there's increasing interest from brokers. You see Purchasing Power sits at the intersection payment solutions, financial wellness and employer benefits, and we believe that convergence is accelerating.

So we have 4 key levers to advance PROG's growth strategy. The top 2 chevrons, over here on the left, our levers, the Purchasing Power could have done on its own as a stand-alone entity. The bottom 2 chevrons, I'm going to walk through and show you the power of being part of the PROG ecosystem. So the first chevron, look, as I talked about, we have over 7 million eligibles today. But not all eligibles are our target demographic. But if you go back to Steve's slide early, he talked about 40% of the population being credit constrained underserved. Well, that's fine, let's say 40% of 7 million. I mean 2.8 million, what I would view as my eligible true target demographic customers, we have less than 300,000 active users today.

So I'm an approximately 10% penetration of my target market. I have a massive opportunity through better marketing, making sure I've got the right retail catalog that meets the needs of these employees to grow my revenue, without even trying to do the second Chevron, and that's adding new clients. Of course, I want to add new clients. I mean, look, it's -- and we will continue to work on that. I mean -- but -- because if you think about it, I've got 7 of the top 30 U.S. employers. That means I don't have 23 of the top 30 U.S. employers. 48 of the Fortune 500, I've got 452, it is still available to me. And we truly believe that Purchasing Power is the only company of our scale and size can handle these enterprise relationships. So we think this is ours to win.

So the third Chevron, by being part of the PROG ecosystem, we can leverage shared data to improve decisioning. We can also cross promote to our existing retail partners you heard from these wonderful firms, a Signet mattress firm. Look, obviously, we want to make sure we introduce this as a voluntary benefit and those discussions are underway. And there's other amazing enterprise relationships that PROG already has, and we want to make sure that we're offering the voluntary benefit of Purchasing Power within their companies. And we have other products, clearly, for MoneyApp.

Well, employees of these companies that are already our partners, I guarantee they're already using these other products. So if they're going to use them, why don't they use the PROG products and how do we cross-promote those? And finally, we truly believe that we can use payroll lots as a strategic direct-to-consumer lever, which is a whole another broader opportunity here. All of these initiatives compound over time, creating a durable, multiyear growth engine for PROG.

So let's walk through the key takeaways again. First, purchasing power gives PROG access to a large attractive employee market. Second, our payroll deduction and allotment payment solution provides PROG with a differentiated lower-risk repayment model. And finally, Purchasing Power is truly a catalyst. It's enabling organic growth fueling cross-pollination and deepening our ecosystem advantage. This business is proven, it's defensible and is positioned for meaningful, sustainable growth. I hope you can tell how excited we are and then I am about the future of this business, and I look forward to discussing the opportunities ahead.

Now I'd like to welcome John Baugh, Vice President of Investor Relations back up to the stage to kick off the Q&A portion of the presentation. Thank you.

I'm going to -- Steve are going to come up. And then if I could assistance. Let me walk you through the Q&A process very quickly. So I've got 2 teammates who have microphones, and they'll be available when we're ready for questions, I'd ask you to raise your hand and state your name and your firm's name, and then if we can keep it to one question and a follow-up, we'll try to get more questions in that way. Before, though, we get started, you may have seen early this morning, we issued a press release. It relates to Purchasing Power and revenue recognition. And I'd like to give Steve the opportunity before we start the Q&A to address that press release. Steve?

Sure. Thanks, John. So in my previous life, like I said, I was a CFO and I had an active CPA license for about 20 years, and I found when you start talking about technical accounting, you lose the room pretty quickly unless it's a very special group. But -- but we do want to talk about it kind of just to get it out of the way. This -- I'll start with the end. There's really no change to the financial results of broader Purchasing Power for that matter, like happens from time to time when you buy a private company, you get in and you start kind of doing your work and checking your boxes and our teams are the best there is. And so they start papering the file and talking to our auditors. And we discovered on a small portion of the revenue base that when applying 606, which is revenue recognition policy, we have to basically recognize the revenue at net of certain direct costs as opposed to gross.

And so what the press release did this morning because we knew we're going to be -- this has really been fast moving over the last 4, 5, 6 days, but we know we're going to be up here this morning in front of you. We wanted to get that information out publicly so we could talk freely. And as you saw from the release, there's absolutely no change to Purchasing Power's adjusted EBITDA or other earnings metrics there's no change to PROG Holdings earnings metrics or EPS metrics. The changes that we brought the revenue down by $70 million at the low end and the high end of the range for Purchasing Power and ultimately for the Holdings group.

As you can imagine, if you bring the revenue down and EBITDA the same kind of increases the expected EBITDA margin of Purchasing Power. But it's really just a geography lesson on the P&L from taking some COGS and moving it up and netting it out against revenue. Importantly, we said back when we announced the acquisition and on February 18 that we expected Purchasing Power to have a low double-digit growth rate from a revenue standpoint. And when applying 606 consistently across the periods that still is true. So I just want to hit on a few of those things that nothing has really changed here except for a little bit of revenue presentation, but the -- the growth opportunities are still as excited about them and the earnings power is still the same, unchanged.

Thanks for that, Steve. And just to point out again, we've got 2 Q&A sessions. So the first one here if you can limit the questions to the 3 presentations we've had so far, we'll have plenty of time later to do the financials and address the entire team then. So we're ready for questions. First question here from Bobby.

It's Bobby Griffin from Raymond James. Nate, I guess I wanted to start with you on Progressive side. You guys have some impressive retail partners, but it's been a while since we've seen a new partner of scale sign-up. And I'm curious now, as we've gone through the kind of COVID digestion and all this stuff kind of what do you hear from partners when you're out pitching it, given the success we've heard about today from 2 notable retailers? And kind of what do you think the outlook is in the hurdle to get some of these larger ones to the finish line?

Yes. Thanks for the question, Bobby. They're really long sales cycles. I think you heard from both Mattress Firm and Signet today that there's an investment that comes with doing lease-to-own. And those sales cycles can be a little bit long.

Coming -- you mentioned out -- coming out of COVID, everyone is trying to figure out how to keep the lights on and how to go to market in a new world. And so that may be delayed some of those sales cycles even a little bit further. We continue to talk to everyone out there about Progressive Leasing and what leasing can do for their businesses, you haven't seen anybody really adopted at the large scale. We haven't necessarily commented on those specific retailers in the past. And I don't think that's going to change. But we continue to believe there's excitement and opportunity with larger national retailers for leasing.

And I guess to follow up, say that from the large scale, the opportunity say, still distance out from building. What -- when you look at your small and medium business opportunity today, compare it to peers or I guess just kind of across the country, what's out there today? Like how long do you think that runway of door growth is on a small, medium-sized business perspective? .

A lot of the small mediums use lease-to-own today. I think there is definitely still growth there in the years to come. We had a forage number of sign-ups in the small, medium space last year. We expect to continue to accelerate that, like I mentioned earlier we're putting firepower -- more firepower into that space. So I think there's a growth opportunity there in your traditional furniture mattress retailers, but also in expanding markets as well. I think there's good growth in that SMB space in the future as well.

I would just add on that, that the SMB -- we talk a lot about SMB, and it's really jockeying physician. It's fairly well mature across the small and medium-sized businesses and you're -- and there's multiple providers in there. And we perform well there, but it's jockeying for physician. And first up and get their app and there's a lot of movement within that space. We're focused on it, that's got a good team and a strategy this year for -- certainly for growth where we think we are the clear leader and have the right to win is in the larger retailers. And that doesn't mean the A accounts that everybody talks about that are kind of individually needle moving, but there's dozens and dozens of really large ones that are not the size of, let's just say, Walmart.

And we have really we believe we have a right to win there, and we're very referenceable, and we have great ambassadors and validators in our existing retail partners. So clearly, we want to have pipeline conversion. It's part of our growth strategy. We have given up on predicting the timing of that because we will be always wrong, but it's a big focus of ours.

A question in the middle here from Kyle.

Great. Yes. Kyle Joseph with Stephens. Thanks for the presentation today. Good to see you again, Lee. I just want to talk about kind of the evolution. PROG has obviously evolved a lot in the last 5, 10 years. And then we understand what's going on in terms of furniture and mattress demand. But kind of moving over to the supply side, talk about the evolution of kind of the payment waterfall for consumers and retailers. Historically, it was primary, secondary, tertiary, but talk about how that's evolved in the last 10 years with other products and how PROG competes?

Yes, I can start and Nate sees it every day. But yes, I mean, we have the traditional finance stack, as you referred to, is still a predominant way, especially at in-store that people work through the system like Best Buy, we've got the -- my Best Buy card and then there's a flow to Progressive. We've done a lot better, and our technology has helped and we've really instituted waterfalls quite nicely and harmonize applications with the primary providers and to the extent a second look exists and then with lease-to-own being tertiary.

We've really improve there and help funnel dynamics across the stack there. There are certainly some other providers that are out there and have a brand name that drive traffic and -- but our retailers are very keen on making sure that, that doesn't divert apps from the traditional flow because they want to make sure that to the extent that there are apps coming in a different flow that they still have an opportunity for the declines to be offered up a Progressive leasing option. So those things are evolving. And in fact, our partners are probably our best ally in that to help make sure that we're getting as many bets as possible.

And then yes, a follow-up, Dave, you've obviously been there a long time and kind of thinking back to pre-COVID when it was part of Aaron's Progressive was one of the most kind of predictable companies I covered in terms of top line growth and whatnot. Obviously, kind of COVID really turned things upside down, not just for Progressive, for a lot of things. But it kind of gives us a sense for the outlook. You talked a bit about the pull forward of demand in terms of furniture mattress specifically. But I'm a finance guy, I don't cover those companies, but in your discussions with retail partners, the outlook for growth, particularly furniture and mattress.

Yes. It's a tough industry when they've had the headwinds that they've had, right? And I think they all certainly expect a tailwind from those replacement cycles to come around and to come around quickly. You've certainly seen some players really struggle through coming out of COVID in furniture and mattress specifically. But the partners that we have, we're really confident in their ability to execute on those replacement cycles and I think their confidence in us to help make sure that's a tailwind and a positive for them and us is pretty strong.

We look forward to that day, right? We've been finding only headwinds for the last several years as it relates to demand in certain categories and having it go to calm wins and then eventually a tailwind will be a welcome trend.

Thanks, Kyle. Vincent, if you can wait for a mic.

All right. Vincent Caintic, BTIG. I wanted to focus on Purchasing Power. So you gave a lot of great statistics for a new business to us. I appreciate that. I wanted to maybe paint a blue sky scenario on the business. So you talked about you have 7 million employees right now that you can access of that 2.8 million is kind of the addressable market. When you think about the total opportunity set, how big can that 2.8 million get to when you think about maybe the U.S. economy? And then what does it take to get to that scale? Like how does the sales cycle look like? What does it take to eventually capture all of that?

Yes. No, thank you. Look, the overall opportunity is incredibly exciting. But I think let's just start with our first opportunity, which, as I said, hey, we want to make sure that we're doing a great job penetrating our 2.8 million addressable audience. And how do we make sure we do that. At the same time, clearly, we have a sales team that's through our broker network as well as for direct. And it is a longer sales cycle. You do need to make sure that you go in, you're working with the Chief People Officer, CHRO, Total Rewards, they're busy. They have a lot going on.

So as much as I believe and I could talk about how important this is for them, they're trying to do so many different things. So again, they absolutely understand the benefit, but they were trying to balance a lot. So the sales cycle itself does take a little bit of time, and we're consistently working on that. So I mean the opportunity is absolutely massive, we believe, for us to do this because it really is an innovative payment solution with our purchasing platform that we can apply.

So I mean I don't want a little people's minds here, but it's huge. If we execute well and it goes back to what Steve said earlier, you've got to execute well. You've got to make sure you're disciplined and continue to focus on that sales cycle and grow, but it is a very, very large opportunity. And again, I know we're going to walk through the financials later and the projections, but we're very bullish on the growth here of Purchasing Power.

One of the things that we observed about Purchasing Power was its similarities to the leasing business and how it's a B2B2C channel. And we we feel like we do a couple of things really well here. We assess risk in this below prime consumer very well, and we service this consumer very well. But we also serve our partners very well as well. And so Nate and his team do a great job of -- on the B2B side at leasing, technology plays a big role in it, and that's going to be an unlock event, we think, in landing new pipeline opportunities and convincing additional retailers to adopt the product.

Same thing is true on Purchasing Power. We have -- we do have a broker network, but we also have a direct sales team, and we're out selling to the Chief People Officer or the total rewards leader. And we need to work on making it easier to integrate with us because there is some payroll integration to get the census data and the payroll feeds. So those are some of the kind of expertise and the learnings that we can bring to the party in order to to help the sales cycle. It is a longer sales cycle. I don't think it's actually longer than leasing, it's longer than some of the other ones, but I think we can have an influence on that. And -- but the the opportunity as far as this 100 million consumers, they're working somewhere. And if we can partner with those employers, it will be positive for us.

Okay. Great. And a follow-up, actually, focusing on the leasing side. So you spoke a little bit about the direct-to-consumer channel, and that's growing. When I look at the landscape, it does seem -- and there's not many competitors directly on leasing, but when I look at Buy Now Pay Later, including with 4 direct-to-consumer, it seems to be growing a lot and they can look at Buy Now Pay Later, maybe if you could talk about that growth opportunity, what's driving that? And is there perhaps more to go -- I know you spoke some on the top merchants, but just going direct to to consumer accessing that and driving some of that business?

Yes. Like Steve said, multi-times and I say, well, 100 million consumers. How do we help them understand what's available to them. And then I think you heard from our retail partners today as well, their excitement in our platform because it reaches more people. And so when you start thinking about our exclusive network of large national retailers as well as affiliates, you can go to any customer that's looking for something that's in a leasable range price point, and bring them into that D2C platform and give them the opportunity to shop for what they need, not just that I have an open to buy at a specific place but I can use that leasing power everywhere. And so that's really our goal is to try and bring people into that platform and help grow the accessibility of lease-to-own and whether we have a direct relationship or not and really build around that customer and what their need is and provide a solution to it. So we think it just helps us reach customers faster. And we think it brings even more customers to our existing national partners that anchor us but also gives the customer the ability to shop elsewhere if needed, but really builds that brand loyalty. And like I said, the extension of their wallet is really what we're going for.

We haven't talked about Four, MoneyApp yet, but those products, the velocity of the product is much more quick. So they -- we see them more frequently. They engage with our digital products more often, and it gives us more opportunities to be relevant to them do need that $1,500 or $1,200 to $1,500 thing and Marketplace is a great way to direct them in order to get those things that they need. .

Thanks, Vincent. Yes, Hoang.

Hoang Nguyen from TD Cowen. So maybe a question for Nate. And Steve, I want to dig a little bit deeper into your efforts to go after SMB in Progressive Leasing. So I think historically, you have been more focused on the enterprise level merchants and maybe your competitors were more focused on SMB. So can you talk a little bit about, I guess, the resources that you guys have been investing in going after SMB? And does it involve more boots on the ground and how should we measure your success in doing so going forward?

Yes. So going forward, we've added some firepower into that space. We continue to see retailers of all sizes and especially in SMB, looking to us for differentiation. I think our marketplace plays a part in that our technology that allows people to work with us faster and more efficiently plays a part into that. And we've seen success where we've invested. And so we obviously want to replicate that success. We have put more boots on the ground and we've restructured some things to kind of break that business up a little bit differently than we have maybe in the last 5 years. But it's a space where we've always played, I been here for 19 years, were no national partners back then, and then that SMB space is a space that I'm very familiar with and our teams are very familiar with.

So we wouldn't be investing in it if we didn't think that there was an opportunity for success, meaningful success, I'm very confident the team we have and the group that we have focused on that segment of the business. It's an important one to us. And again, we want to reach customers where they want to shop, not any one specific place, but what do they need and where can we help them. So we're excited about the future in that space.

And maybe a follow-up for Lee. So on the purchasing power side, I think you guys are one of the most dominant players in the employee benefit program space. So can you talk a little bit about your competitive advantage there? What makes you guys beat out your competitors? And -- can you talk about the stickiness of the relationship there with the employers as well?

Yes. Thank you. So first of all, as you said at the end, they are very sticky relationships. Once you are integrated with their payroll system, they understand that, look, anyone can move to someone else, but it's very difficult because they value the relationship. We do a great job. And the employees certainly value what we provide to them. So it is sticky.

With regards to the competitive landscape, as I mentioned in my presentation, we do think we have the right to win. We're the largest out there. We certainly have the trust of very large companies. If you think about Progressive Leasing with fantastic enterprise-level clients, it's very similar first and foremost, we have the large enterprise companies out there. But we're not just satisfied with that because we think we have the right to win across the board because we think we've got the right scale, the right payment rails, the right expertise to ensure that we can dominate this space. So our plans to continue to do so.

So there are smaller competitors, but they are, again, I would say, much smaller, and what we want to make sure we do is keep the gas on push really hard, don't get complacent. And again, we think we have a very large opportunity, as we discussed earlier, to continue to grow.

Question here.

David [indiscernible] Sterling Pine. I'm just trying to understand the commercial synergy side of the Purchasing Power acquisition. So what's the cross-sell opportunity look like for Purchasing Power to win business from PROG's retail base? Is that a lever you're pulling on? And is there any color you can give on penetration there already?

Yes. So again, as I discussed, certainly, look, you heard from from Signet and the relationship they have Progressive Leasing being able to come in here. So it's certainly an easy entree and we've already had those discussions with some other great enterprise relationships. Best Buy, Lowe's. Of course, we want to make sure that we're making those introductions and working on that. So we think it's a unique relationship that we can get that entree. To be honest with one of the hardest things to do is have someone trust you as a partner and make an introduction elsewhere in the organization. So it's a very -- from our standpoint, Purchasing Power, it's a very valued insight and hand off to be able to go in and talk to people where they already have a trusted partner. So we think that that's a really unique advantage we have on some of those enterprise retail partners already.

I'd just add that our ecosystem is exciting to our partners. And whether it's Purchasing Power or anything, we've built trust and confidence, it's that innovation, you heard us talk about earlier. So when we have something new to add, I think our retailers are really good at listening and seeing how it can provide value to them. And I think there's a lot of excitement about the ecosystem in general. And obviously, Purchasing Power is a big part of that.

Got it. And just a follow-up for Lee. What are some of the reasons? You mentioned 7 of the 30 top employers in your book of business, what are some of the reasons that the other 23 aren't currently working with you guys?

Well, look, as I said, it's a huge opportunity, and we've got to make sure that we show them the value proposition as well as making sure that they take the time because it does take a little bit of time as we've got to bring them on, they've got to integrate the payroll systems, et cetera. So making sure that we truly show them the value proposition and win them over and say, "Hey, this is worth doing that. And again, we believe once we get in front of them, that we can actually prove if it makes sense for them to bring this on as an employee benefit.

Thanks, David. Yes, if we can hand the microphone to Harold?

Harold Goetsch from B. Riley. I wanted to ask about the pace and cadence of in purchasing power when you bring on a new employer like -- how do revenues ramp over time? Like I mean imagine if you're an employee this is a novel way of buying things. You've never used it. And then I imagine it builds over a period of years. Could you tell us how it goes, the pace and cadence of adoption?

No, that's exactly right. And as I talked about, one of the things that we view as our most important lever is, hey, we've only got 10% penetration. So we continue to build. It's really making sure that we get the awareness. So early when you bring someone on it getting the awareness for the employees to your point to say, "Hey, this is a unique way they can purchase, get that awareness in front of them, and grow that base. I will tell you what we have traditionally seen from a ramp perspective is a little over 3 years. They sort of get to kind of more of a steady state. It grows pretty quickly in the first 3 years and gets to a steady state. But again, as I mentioned I don't think that steady state is where we want to be. We need to make sure we continue to get awareness and get that penetration even higher amongst our existing eligible base because that really is -- if you think about the opportunity in front of us in the near term, it's that penetration rate getting that up. Of course, I want new clients, but it takes time to ramp. It's like a layer cake. Yes, the first year is good, and then it grows quickly again, that's further out in 2026, 2027, how can I increase that penetration? So it's a combination of the 2, but it is roughly a 3-plus year ramp.

I guess one follow-up on credit performance in the business. What are the predominant personas of, say, delinquencies or defaults in that space in that segment of credit?

Great question. We just did our ABS offering, as you're aware. So we got a lot of questions from the ABS investors of hey, what does cause if you're getting payroll deduction, well, why does anyone ever not pay? Well, the biggest thing that happens is through termination of the employee, whether it's voluntary or involuntary. So if you have turnover, whatever sort. As I mentioned during the video presentation, we always ask for a backup payment method. So to the extent that we can't use a payroll deduction that we can hit that to make sure we get paid. But to the extent that, that then they'll say they've canceled their account or done whatever, there's insufficient funds. Well, then we've got to go after them, then we're the traditional collections method to do that. So that is the leading reason for why we will have delinquency or defaults.

Thanks, Harold. So I've got time for one more question. I'm going to sneak one in here from the webcast. It looks like it's directed to you, Lee. I took a quick look ahead. Not a financial question, but a purchasing power question. How much of your sort of 3-year CAGR that you talked about in the deck, is comprised of landing a new employer partner versus scaling with the existing?

Yes. That's a good question. Look, the majority of our opportunity really is scaling with our existing eligible base and getting better penetration. Again, as I talked about, it's a layer cake. So we will -- and we do have some very exciting new clients in the pipeline, we'll be excited to bring on. But again, it takes time to ramp. So the majority is going to be better penetration, but with really the cherry on top on these new clients.

Right. Okay. At this point, we're going to take a quick break, and then we'll reconvene in about 10 or 15 minutes. Thank you.

[Break]

Thank you so much. Really excited to kick off the start of the second half of the program with our fastest-growing business, which is our BNPL business, Four Technologies, and we're going to hear from the President of Four Technologies, John Trainor.

Thank you, John. So hello, everyone. I'm John Trainor, President of Four Technologies. I've been with Four for about 10 months now, and I bring a fresh set of eyes to this business. With that fresh perspective, I can't tell you how excited we are for what we're building.

Before joining Four, I was Chief Technology Officer, Wahoo Fitness, a leading fitness technology brand. And before that, I was Chief Information Officer for 20 years at Aaron's, where I did things like help lead Progressive Leasing acquisition, and help build out the e-commerce business.

And just like Steve, I too have been in the homes of our customers, whether it was delivering appliances in Detroit or working through payment flexibility in Farmington, New Mexico. So I know these customers, and I know who we serve. Over the next few minutes, I'm going to show you why Four is the most exciting growth opportunity in all of PROG Holdings. We are a rapidly growing highly profitable, lean organization with a high-caliber team, phenomenal technology and a large market in front of us.

So there are going to be 3 things that I'm going to cover that I want you to leave with, if you remember only 3 things. We are scaling a proven growth engine. We scaled from our app launch in 2021 to over $736 million in GMV last year alone, and we are just getting started. Additionally, we are profitable and capital efficient, which should be near and dear to everyone's heart right here. We are not chasing growth at any cost. We will not do that. We have built a business that balances growth with profit improvement, showed that last year when we went for our first year of positive adjusted EBITDA. Not only that, we went from a year before where we were losing to a 13.5% adjusted EBITDA margin.

And third, Four is uniquely positioned in the Buy Now Pay Later space. We have found the right customer. And very importantly, this is easy to miss so pay close attention to it. We have a proven direct-to-consumer model. That is a key differentiator for our product. And then you couple that with the massive market runway that Buy Now Pay Later has and there is a phenomenal combo.

Let me show you how this works. So what is Four? Four is a direct-to-consumer Buy Now Pay Later platform, we connect seamlessly with almost any retailer, so they're all wide open to us. Customer split purchases into 4 equal payments over the course of 6 weeks, about 2 weeks apart. We are more though than just a payment method like some of our competitors. We are a consumer engagement platform. We use intelligent analytics, personalized marketing and generative AI to drive engagement and retailer brand visibility. This past holiday season alone, we experienced 3 million monthly active users on an app that has 100,000 reviews and a very positive 4.8 rating. That engagement drove over $736 million in GMV, as I just told you.

And here's a number that I'm incredibly excited about and you should be as well. 80% of our GMV comes from our subscribers. These are customers who are paying for the Four Plus membership to gain access to premium retailers and premium support and other benefits. These are not onetime shoppers. I want to be very clear about that. They are engaged repeat consumers who see enough value in our service to actively pay for it. That subscriber base is also in part what powers our economics.

Our take rate is about 10% of GMV, and that is from a series of a diversified set of revenue items. So we have our subscriber revenue, affiliate revenue, platform revenue and interchange. That plus what we do with that take rate creates really strong and durable revenue.

So let's talk about now how we make money and how we manage our risk. On a dollar of GMV, we immediately collect 25% of it at the time of the order. The remaining balance, as I mentioned before, is collected over 3 more payments spaced about 2 weeks apart. The full amount is collected within 6 weeks. This means our capital turns over every 6 weeks, we recycle the same dollar 8 to 9x in the course of the year. And here's what makes that powerful from a risk management perspective. I have visibility into our cohorts within 19 days. I have early indicators that allow me to manage my business as early as 19 days. We do not wait months to find out whether or not our underwriting and collections are performing. Instead, we measure that feedback loop in days, not months.

Combine that with the diversified revenue model that I talked about in the last slide, this short collection cycle returns strong returns on capital without taking on long-duration credit risk.

So let's talk about how people find Four. Most of our customers are finding us organically. They're searching in app stores on ways to manage their spending. They're looking for alternatives to credit cards, especially our demographic and Four shows up with those 100,000 reviews in that strong 4.8 rating. With targeted marketing activity, we have been as high as #4 in Apple's app store in the shopping category right alongside retailers, all of you know.

We also go viral in social media, last year alone on TikTok when people were posting about how Four helps them, we had 4 videos that organically, I'm not even talk about what we boost, but organically each achieved more than 1 million views. There's customers telling people what they like about our product and that is people reacting positively to it through views.

We complement the organic strength though, through retail partnerships and most importantly, diversified paid marketing sources across social media. All of this happens at a very disciplined and low cost per app install. So I told you how customers find us. Now let me tell you why they choose us. It is simplicity. Customers love our product and the simplicity that we offer. No credit needed, a decision within seconds and access to hundreds of retailers. It's simple, it's transparent and it's in the customer's control.

So I suspect most of you here are not my target market. I don't know how many of you have Four loaded on your phone, unless you're an employee of PROG Holdings that I may do it. So I'm going to explain to you how the app works because you may not fully understand how it works. So I'm going to walk through a video and show this to you interactively.

So first, you're going to download the ad from the app store, like I described. You bring it down, and then you just simply connect your bank account. When you connect your bank account, we use decisioning and within seconds, we know what your spending limit is. Then you go into the app, knowing what your spending limit is and you pick out a retailer. You go find one of your favorite retailers and you shop for what you need right then.

Once you shopped, then you have the amount, the amount is very simple. And then you get that total, you split it into Four payments, as I mentioned, and then you apply it back to the retailer. Very simple, very easy and people understand it. Once you've done that, and you manage it within the app, you stay engaged in the app. You can see all your previous transactions with us. And when you are ready, you're able to become a Four Plus subscriber, that unlocks premium merchants and order tracking eventually and other items that are important.

So I've talked about that, let me say a review of what the actual customer is saying about our product because it's vital to know what the customer is saying. They say really helps. When you're on a fixed income and you need extra cash, Four really helps, better than using a credit card, spending thousands of dollars and paying $25 a month with no end in sight, with Four, you split into 4 payments and you're done, a quick payoff when you need it most. So it's a real review from back in December, and it captures what a lot of our customers are thinking.

As I move forward -- sorry. I want to talk to you about not only how works Four our customers, but how it helps PROG Holdings because that's a key piece to what you're investing in. Four is a vital part of the PROG Holdings ecosystem and a great complement to what you've already heard about. And in many -- for many customers, it's the easiest way into our ecosystem. First, we offer a very low friction entry point, as you saw. We use non-FICO underwriting, and that's key to our customers. You simply connect your bank and get a decision within seconds. This lets us say yes to customers that a lot of traditional offerings may not approve.

Second, we build a direct-to-consumer relationship. I mentioned that's a big differentiator. Customers start in our app, they build loyalty in our app and they continue to grow with Four over time. Other Buy Now Pay Later competitors are moving in this direction, we are already there and have been there.

As customer needs evolve, though, the PROG ecosystem is there to help them. Let me put a face to this. This is Nicole. Nicole is a real person, but this is not her real picture. She works at a restaurant near our office, I'd probably see her once every couple of weeks. And I've talked to her about our product. She's 23, she works 2 jobs. She does not like credit cards like a lot of her peers. She just doesn't like him. She doesn't want high interest credit cards and frankly doesn't want credit cards in general, but she can absolutely manage a flexible installment plan, and that's why she likes what Four offers.

Before Four, Nicole maybe was never introduced the PROG ecosystem. Now she's in. And as her needs evolve, we are there to serve her across the entire ecosystem. Let's zoom out and talk about the market opportunity, which is what you probably care about if you're going to invest in this business. The BNPL industry is still in early innings, very early innings, and there are a lot of tailwinds as you can see if you look at the market.

What I want you to understand, however, is not just that those tailwinds exist but we have the team to capture those tailwinds. First, consumer comfort with BNPL is increasing. More and more consumers prefer just like Nicole, splitting payments rather than having credit cards. And BNPL is being embedded in every transaction. Once again, you're probably not my target consumer. But if you think of all of the transactions you've done online in ads, et cetera, almost all is now there is a Buy Now Pay Later option that is because it is now table stakes for retailers.

Second, agentic AI commerce is emerging. It's maybe not fully there yet, but it is definitely emerging. That is the concept of AI assistant, shopping on your behalf, finding deals and actually completing purchases, and that's where Buy Now Pay later comes in. BNPL is a natural fit for that type of transaction. And Four is building the rails to make all of that work and be embedded directly in there.

And third, we use AI to personalize that shopping experience. As I mentioned, that direct-to-consumer model is important. This is where our personalization shines. We are developing the ability to properly curate that relationship with that customer and streamline how they discover retailers and purchase from us. This creates the ability for us to expand our monetization opportunities significantly.

And here is why I'm confident that we can capture these opportunities. Four has a lean exceptional team that is able to deliver. If you compare our revenue per employee, we outpace our competitors by multiples. And it's because we are an AI-driven cloud native business that is able to execute. We've been using AI to operationalize our business, and I don't just mean technology. I mean true operationalization of our entire business. And that gives us a strong competitive edge to be able to seize on these. It's one of the most exciting things I've seen in the last 10 months is how well this team performs and how well they use tools like AI to win.

So how do we capture that opportunity? Let me walk you through 4 strategic priorities. The most obvious one probably to all of you, and similar to what Lee was talking about, we need to increase repeat usage to increase our lifetime value for our customers. We have this engagement, now let's get a higher lifetime value. Over 80% of our GMV comes from our subscribers. We're already demonstrating that we have repeat usage. Now it's time for us to do even more with that, drive strong lifetime value. We know how it's created. We measure it and we track it. And this goes down to not just making sure that we extract more, we actually decision on every single transaction that the customer does. Why do we do that? We want the customer set up for success with this Buy Now Pay Later transaction every time they do business with us.

Priority number two, innovate in the product and product features around subscriptions and the rest of the product. We have a very loyal user base that is incredibly vocal about what they want. It's why we launched travel last year with partnerships with Travelocity, Expedia. We listen very closely to our customers and we bake that rapidly into our product. This year, we launch Tap to Pay within this year with the Four card. We're expecting to release Four Plus that include, as I mentioned earlier, order tracking, opt-in credit reporting, loyalty programs, et cetera. Each of these expands our market and deepens that engagement that we're already seeing.

Priority number three, develop scalable marketing capabilities. When I arrived, we were really relying heavily on organic marketing. We have changed that radically. We are already acquiring customers efficiently at scale. As I mentioned, we have a low cost for app install. Now what we're doing is we're focusing on targeting those lowest cost, highest stability customers and using that to promote that lifetime value that I mentioned, we additionally have all of this rich data, and we've already been doing this, but drive more and more people into the BOG ecosystem.

And then priority four, enhance customer support and communications. Customer support, great customer support is a true competitive advantage. We all know that based upon who we work with. We will lead the way in how we handle customer support. Already, I'm happy to say, in the past year, we dropped resolution time by 78%, and we are currently doing 73% AI-driven touchless resolution of support. Our customers love how quickly problems are solved when they have them. They notice it, and it builds that loyalty over time.

So when I started, I told you there were 3 things that I wanted you to leave with. So if you ignored everything else, just leave with these 3 things because they're vital to the value proposition of Four within Prog Holdings. Number one, we are a proven growth engine. This is not hypothetical. We launched the app in 2021. We've been growing steadily. We will continue to grow. And we went from app launch in 2021 to $730 million in GMV last year alone.

Second, we are profitable and capital efficient. Our take rate is approximately 10%. Our capital turned over every 6 weeks, as I mentioned, and we scale without meaningfully scaling our cost, which is vital. We are not chasing growth at any cost. We have built a business that balances growth with meaningful profit improvement, and we just demonstrated that, and we plan to do that in the future.

And third, Four is uniquely positioned. So even if the other 2 don't get you excited, know that we are uniquely positioned in the Buy Now Pay Later space. We have found the right customer, we have a proven direct-to-consumer model, and we have a massive market runway ahead of us. Four is a growth engine for PROG Holdings, and we are just getting started.

And with that, let me turn it back over to Lee Wright. Thank you.

Great to be back up in front of all of you again this morning. So when I walked you through my professional background previously, what I didn't tell you is that I've actually been a very active investor as well as intimately involved with the short-term liquidity space. So when Steve offered me the opportunity to lead MoneyApp, I absolutely jumped at the opportunity. I was incredibly excited. And I'm even more excited to share the progress that we're making with MoneyApp a dynamic growth engine within the PROG portfolio.

So as a quick backdrop, MoneyApp was started in 2022 as a new service that arose out of the efforts of PRG Ventures, an entity whose sole purpose is to develop new products and services focused on the core PROG customer to see if these new product and services could be built into long-term accretive and viable businesses. And I'm pleased to show you today why we believe that MoneyApp is the first successful compact birthed by these efforts. So MoneyApp was built with a simple intention, provide hard-working budget-constrained consumers with a fast transparent, responsible way to access short-term liquidity.

MoneyApp is becoming a powerful platform within PROG that advances our mission of providing inclusive financial solutions at scale. So let's walk through what we've built, what we're learning and how we're positioning the business for long-term profitable growth. So the 3 key messages I want to leave you with today are: first, we're scaling a highly dynamic solution that addresses a real and persistent need for short-term liquidity. Second, we believe we built one of the fastest, most frictionless user experience is available in the market today. Our onboarding, decisioning and delivery processes are not just competitive, we believe that they are industry-leading.

Third, our pricing model is simple, transparent and economically competitive. No tips, no hidden fees, no complexity, just a clear consumer line structure that builds long-term trust. So these principles form the foundation of MoneyApp and position it as a differentiated durable asset within the PROG portfolio. The short-term liquidity solution provides assistance to consumers who have steady income and bank accounts. However, many of these consumers are underserved and/or overcharged by traditional financial institutions. Alternatives for short-term liquidity are often costly, inconvenient or simply unavailable. Our goal is to deliver a simple, responsible experience that meets an essential need with speed and clarity.

In just a short time, we've built a product with meaningful scale while still being early in its long-term potential and you can see the traction. Even though we formed in 2022, we really didn't launch the platform to less than 2 years ago. And in the short time frame, we have over 2 new sign-ups over 280,000 transacting customers. We delivered over 1.5 million cash advances, we have over 350,000 monthly active users. And in 2025, we delivered almost $13 million in revenue.

Our value proposition is rooted in speed, simplicity and responsible decision. All decisions are made empowered by AI cash flow underwriting models, not traditional credit scores. The flow is intuitive and easy. I'll walk you through the video in a second. But I do want to point out, if you look to the right of the screen, the customer there ultimately proved does have a choice in how they want to get their money delivered to them. If they need it quickly, and they can get as little as 8 seconds, they will pay an express fee. To the extent that they can wait for a standard delivery of 2 to 3 business days, it's free to that consumer.

So let's walk through how this works. So the consumer will download the app, and they'll enter in their personal information. From there, they're going to connect with their bank account as well as providing a debit card. They will also then indicate what their date of their next direct deposit and the amount that they're going to receive, then we will verify their account and make a decision on whether they're approved or not for cash advance.

Then the consumer, if they're approved, ultimately chooses the cash advance amount, they may qualify for up to $250. And then again, they make the choice whether they want express delivery, which has a fee or standard 2 to 3 business days for free. Once they make that choice, the money is delivered, and they've got the money in their account. The flow is simple, intuitive and easy.

So the consumer need here is real and urgent. Millions of Americans need flexible cash solutions for essential expenses, rent, medical bills, car repairs and other unplanned life events that simply happens is consumer. So let's walk through Jon and illustrative persona, but a very real person, very real things that happen in life for people. She's a 28-year-old personal assistant. She's done everything right. She's got a good job. She's got a budget that she sticks to. She's got insurance, but what she didn't expect when she woke up that morning was a searing tooth ache. Well, she goes to the dentist, it's absolutely, well, we all say $50 for your co-pay, okay? Well, that was not in her budget. She's got a decision to make. She could overdraw on her bank account for approximately $35 or she could do a cash advance with MoneyApp for much less than that. The choice is pretty simple.

And if you think about it within the overall PROG ecosystem, we've got a single customer that's going to have multiple financial needs that can be banked with either Progressive Leasing for Purchasing Power and MoneyApp. So we're building a more complete inclusive financial ecosystem that provides the customer with multiple solutions depending upon their needs and situation.

We're operating in a large, highly fragmented market with significant white space, and there's a tremendous need for this product by a large number of consumers. And why is that? Well, again, let's look over here on the left. 67% of American consumers say they live paycheck to paycheck. 37% of Americans can't afford an unexpected expense over $400. And there's over 100 million low-end financially constrained Americans. So modern cash advance products are rapidly displacing store-based liquidity providers due to better user experiences and lower costs and are increasingly capturing additional volume from bank overdraft fees, due to the lower cost, depending on the circumstance. And all of this is possible due to the use of digital decision, rapid funding capabilities and app-based engagement, which provides us multiple levers to capture market share.

So our growth strategy is clear and actionable. We're clearly focused on expanding the total number of active users through paid marketing and ecosystem cross-promotion, we've talked about so much today. We also want to increase responsible repeat usage to drive higher customer lifetime value. I'm pleased to talk about 2 new features we recently introduced. The first is an extension. So think about Jon, so she took out the $50 cash advance, but her next paycheck is really already budgeted, fully budgeted, she's got her rents due, her car payments due. It doesn't work in my budget, she can simply apply for an extension to repay that amount in our next pay cycle. We've also launched a feature called top-ups. So again, you think about Jon, well, okay, great. She took $50 out, she made her co-payment, but what she didn't realize was that she was going to get prescribed antibiotics. Well, now she had another copayment which she went to the pharmacy to buy that. Okay. Well, now we're going to do that. Well, if she's preapproved for a top-up, she can get more on that. So we're seeing that lifetime responsible usage happening here.

What else do we have? We're offering graduation products on an affiliate basis. So again, you think about Jon, hey, she went to college, she got multiple student loans, which you might want to consolidate those. That's not what we do. But on an affiliate basis, we can make a referral and get revenue from that. And finally, we're exploring data monetization opportunities to scale here within the overall ecosystem. So all of these strategic priorities reinforce our commitment to building a profitable, durable multiyear growth engine for PROG.

So let me close with 3 key takeaways. First, we're scaling a dynamic solution to provide short-term liquidity for budget-constrained consumers. Second, we're delivering one of the most fastest, most frictionless consumer experiences. And third, our transparent, no tipping, no surprise fee model is resonating with consumers and strengthening long-term trust.

So let me close with this. MoneyApp is not just a product. It's a platform, one that's unlocking new growth for PROG, create meaningful customer impact in giving us a differentiated advantage in a multibillion dollar market.

So with that, I'd like to welcome Sridhar Nallani, Chief Technology Officer of PROG, up to the stage. Thank you for your time.

Thank you, Lee. Hi, everybody. I'm Sridhar Nallani, the Chief Technology Officer here at PROG Holdings. Let's bring in some energy who doesn't love tech, right? A bit about myself. Before joining PROG, I led many large-scale digital transformation as the CIO, CTO, Head of Technology in retail and financial services. Some of the companies you might know Macy's, Charlotte Russe, Gap and Old Navy, Back Country. I was at Microsoft early on got to see what scale truly is.

Among all these companies, there's one pattern that stuck with me, which was a big deal. When you unify technology around the customer, everything accelerates, speed, scale, stability, customer trust. And you heard from Steve and all the business leaders today, we're applying the same principles here. Same thing. We're building a unified digital and data ecosystem that powers every team, every product, every customer experience across Prog Leasing for MoneyApp and now Purchasing Power. Our mission is simple, and these are 5 words are live by still do for the customer, remove friction, deliver great experiences, you do this, everything else will work itself out. That's it.

I'm going to walk you through today how our technology and product road map is enabling all this growth. Before we dive in, I want to frame up what today is about. Everything Steve and all the business leaders are trying to do for our customers. Technology is the driver. And I will say this. We're not a technology company, but we are driving everything that's happening at PROG. Four things which are of importance, the ecosystem that you heard about today. First thing, we're building a platform that's stable, scalable and built for the long term. We had to solve this before we get to speed to market and many other things. That's the most critical component. We're improving experiences for our customers and our retail partners by designing and building our products together and not in silos. We're learning from our portfolio. When one product gets smarter, we're opening it up to the ecosystem. So all the products benefit. It's the compounding effect, and we'll get into it in a little bit.

And finally, we're truly now operating on a modern tech foundation. How some of the game-changing companies are driving modern commerce today. We're there. One theme among all 4, build once, validate and extend into the ecosystem. Before we get into the strategy and some of the proof points, and I want you to keep an eye on the pace of transformation that's going on in tech at PROG. I want to take you back just a few years, where tech was, what we were doing.

When I arrived here at PROG in 2023 -- February of 2023, the landscape looked quite different. In fact, I would say, dramatically different, 17 different tech stacks, multiple customer applications, long delivery times, lots of friction. But you'd see this in many high-growth companies in different phases of their journey. I've been there. I've seen this enough times. The key is this, though. What you do is a setup in those times is what sets you up for the growth ahead. And we did exactly that here. We invested a ton. We built a high-performing tech team, of whom I'm extremely proud of. I mean everything you see today it's because of them. And we've got to work.

So what transform? What changed, on one unified stack now on leasing, our biggest tension, our driver. One code base. We're operating as a true SaaS platform, and we're pulling in all the other pieces as appropriate. An improved customer experience that connects the dots for all the products we talk about, enterprise platforms, powering CX and the back end. Most of the critical apps are on cloud now AWS, eliminating the tech debt and enabling the growth, a global operating model, which scales up with the business, smarter buy versus build decisions, this is where you get to speed to market the fastest. There's many other things.

Why is this important, because the heavy lifting is kind of done. Now we're set up for serious growth. Let's look at one key proof point, stability. As I was saying, you got to solve that so you can go fast without compromising things. As many of you know, holidays are when volumes go through the roof. It was the same case for us last year. Last Black Friday, we saw volumes spiked up 5x, we were able to scale our infra 5x, and we're ready for more. 0 issues that day and the rest of the holiday.

See this is what our customers feel, the smooth of journeys, the reliability and now we're investing a ton into AI and bringing in smarter and more intuitive kind of journeys.

So how is this driving our strategy? Quickly going to go over 3 pillars. The first thing, we want to extend our digital and data capabilities across the ecosystem. We can do that now because everything is set up on the same enterprise-grade building blocks, right, the platforms powering everything.

Laser-focused on customer conversion. There's many things we're doing here today, but 2 key areas of importance, universal decisioning, and we'll talk about it in a second and a unified data layer. These are the 2 big ones. And we can go with speed and flexibility with AI now because everything is API first. It's auto scale. I'm throwing some tech terms at you, but tested on peak load that we just talked about.

Let's get into it. Let's talk about our first pillar. This is an important one. Our strategy is this, connect to all the products with the same foundations underneath, data, decisioning, personalization at scale that Steve talked about, delivery capabilities, AI workflows, all the same thing. And this is not theoretical or some visionary thing. A lot of pieces are already in place. Take -- yes, the customer data platform, CDP, it's already powering leasing and for those experiences. Capabilities in leasing, we're extending now to the rest of the ecosystem, like decisioning, AI workflows.

And that is what we call the flywheel effect, right? Tested in, let's say, leasing or another product. I mean Steve talked about the customer can come through any product now. So one product gets smarter, as I mentioned earlier, we're opening it up and all of the portfolio gets lifted. That's a big deal. And now the customers are seeing all of this directly with the capabilities, both our retail partners as well, reaching them faster.

So let's look at what the customers are feeling and seeing in terms of these capabilities. The truth is this, the bar has raised, especially for younger shoppers. I'm sure there are many parents in the room, you know it, Gen Z is not going through a manual application anymore. I see some -- yes, Ed, sitting through a clunky workflow application, that's not happening. What's expected is something as straightforward as downloading an app, setting up a profile. That's what everybody is expecting in terms of experience.

Simple and intuitive. Anything other than that is what's friction. When I spent decades in retail, this is how we look at it. Any block is friction. And at PROG, our laser focus is to remove all of that. I've listed a few here, personalization, yes, personalizing the cart, eliminates the uncertainty. Universal decisioning. We can now match the right product for what the customer is looking for in the fastest and the more accurate way.

AI checkout assisted, it unblocks anybody on the path to purchase funnel before they get stuck. And raise your hand if any of you are looking forward to calling a support line. So we're putting the power of a mature chatbot through our app on the phone for our customers to solve many things themselves.

So this is on the experience side. That's great. But we got to convert our customers now, right? So let's get into our second pillar on how we're doing that, decisioning. We're doing that today by increasing the access and reducing complexity. You heard from Nate a little while earlier, complexity kills conversion. It's simplicity. That's got to be the driver.

So we're doing that and leasing decisioning is a very mature product, battle-tested across millions of applications already. Now we're extending that to money app and for the right use cases for Purchasing Power. It used to be multiple onboarding flows, possibly giving conflicting outcomes earlier. Now we assess once, and we're using that intelligence across the ecosystem.

Again, when you remove these friction points, customers convert, and we're seeing that. I want to get to another example, and this is a big one. Extending our D2C to PROG marketplace. You heard from Lisa a little while earlier, our retailer partner from Signet, how this is making a difference. This, by far, is one of our biggest competitive advantages. We started with leasing and the complexity and scale of leasing kind of gave us a lot of insights on where customers were dropping off and what our retail partners were looking for.

And tons of effort went into this area last year, especially, a lot of A/B testing, multivariate experience pivots when we didn't see something working out. But we got to see some good things. See the results. As of December 2025, plus 23% uplift in the funnel. Anybody in retail, you would know this is such a big deal, and we're just getting started there. But this is the key. Leasing -- marketing on leasing was not our only strategy. This literally, the way we're looking at it is going to be the multiproduct digital front door to all of our ecosystem, and we are scaling it up.

Let's look at one more example, how this is all coming together, the modernization, the experience and then getting to conversion lease modernization. Think leasing is the heart of one of our core engines. But leasing is very complex. And for years, we pushed that complexity to all of our retailers. And this was the state where our retail partners had to figure out what products were leasable and which were non-leasable. And they manage all of this through exceptions over thousands of SKUs. We also pushed the same complexity to our customers, and they would see some non-leasables in their card at the very end of checkout.

This is friction, and we had to transform this, and we did. There's some more work left on the lease platform, but look at the results already. It's 1 million-plus lease eligibility evaluations per day on the platform already. Item blocking accuracy went through the roof significantly. 90% reduction in non-leasables making it to signing now. If you remove the friction, customers convert, and they're doing it now.

It is precisely at this point of my presentation, it would look suspicious if I don't talk about AI. But AI is not a headline at PROG. It's not experimental. I'm not going to go through all of the numbers here, but look at the first column, way faster decisions, more accurate, that plus 23% number, again, a big deal, and it's growing by the day.

Higher returns in marketing, lower cost per acquisition lead. Operations, I want to highlight something here, 75,000-plus transactional chats per month. This is the line you care about, the last one, less than 9%, making it to a live agent. That means our agent is now able to help our customer who is truly in need of human help.

AI is delivering today, not someday for sure. So where are we taking all of this? From isolated projects, pilots and projects, we're moving to full-on AI workflow integration into all the products. We're empowering 600-plus knowledge workers with secure AI tools, Copilot, ChatGPT, Claude, Figma Connectors, many more. It's a full no-code automation drive going on in tech.

And we're scaling up our AI center of excellence, which is what is driving all of the strategy under the PROG Market Labs. We truly want to make each of our employees a super employee. That's the drive. And we do talk about it things this way. I know everything is going at light speed. You're all looking at all sorts of streams, but we got to keep up with this light speed pace. And we do talk about things this way internally. It's not who can do this, but which agent should do this.

I know it was a compressed thing in a brief time, but I'll say this, I've been through many transformations and some really impactful ones, but this one is special because of the purpose, the team, and as Steve mentioned, our ambition and intensity, it's coming together. We're set up for serious growth.

But when you step back, even for the brief time we talked about things here, the story is straightforward. What we built is a modern unified platform. There's more work here, of course, but that -- which compounds every time we build the platform, the data, the decisioning, personalization, AI workflows, all of these are not separate efforts at PROG. They have one system working across the ecosystem, removing those friction points and delivering those great experiences.

Behind the scenes, it is getting very powerful. For the customer, it's getting simpler. You see that's the advantage of building an ecosystem, not a collection of products. It gives us speed. It gives us optionality, and it lets us grow with far less incremental cost. I'm going to hand it over now to our CFO, Brian Garner. Thank you for your time.

Good morning, everyone. It's great to be with you. And it's good to see so many familiar faces as you came on in. I appreciate the continued interest in the story. My name is Brian Garner. I'm the company's Chief Financial Officer. I started my career in public accounting with Ernst & Young in the Bay Area and serve technology clients primarily.

I had the opportunity in 2012 to come back to my home state of Utah and join an organization in Progressive Leasing that was just getting started on tackling the growth opportunity in front of it. As we sit here today, just completing out 2025, a $2.5 billion top line, served over 10 million customers, delivered consistent margins over the years and effectively managed its balance sheet risk.

There's much that I'm proud of to be part of the team and the delivery that's occurred over the years. You've heard from others today, and I share the view wholeheartedly that the company has significant growth opportunities in front of it. In fact, I would say it's never been greater as we sit here today, particularly with the acquisition of Ford and Purchasing Power and the momentum that we're seeing there.

So what I'd like to do is just spend a few minutes and walk you through how we're digesting the financial drivers and how we're thinking about this opportunity and boil it down into our long-term outlook, which I trust no one has looked at in this room on you numbers people. I know this will be the first time you're seeing it, but I'm happy to walk through.

No, there we go. Starting at the top, as you're winding the clock a few years on this business, we've really evolved from a single-threaded lease-to-own construct. And now with the acquisition of Purchasing Power and four, we're much better positioned to serve our customer across a broad array of products, services and ticket sizes.

The second thing I'm going to hit on today is we understand that managing our portfolio of risk in this industry is job #1. And I'm extremely proud of the -- our track record in delivering consistent yields. Next, Steve mentioned, and I'll highlight as well, we're just getting started on the ecosystem, the realization of the synergies that exist between the businesses.

While we've had some early results that are encouraging, the best is yet to come. Fourth, we're well suited to drive margin expansion. And the most direct line of sight we have to driving margin expansion is through scale. And you see that across our businesses. And hopefully, you've had a chance to look at our 2026 guidance, and you'll see in the long-term outlook, we expect scale along the way.

And in tandem with that, we understand the expectations around disciplined cost management along the way. And the consistent yields that we've had and the margins that we've had on the Progressive Leasing side, I think, demonstrate our ability to control that and to focus on it. And finally, we have some very cash-generative products that have a very quick conversion cycle that gives us free cash flow and our ability to take that free cash flow and explore opportunities across our capital allocation priorities.

It provides us optionality and flexibility as we move forward. So as you think about the last few years, and it's tough without bringing up too many tough memories, you go back to our spin and you think about the operating environment that we've been operating in. And admittedly, it's been challenging. The early days of COVID, the demand destruction that occurred gave way to $6 trillion stimulus. And for our customer, what that meant was they got the $6 trillion, they got their stimulus checks. They went and acquired the furniture mattress or TV, laptop that they needed.

It created a multiyear pull forward of demand. And now as we're looking at the current economy and the K-shaped recovery that is playing out, our consumer continues to be pressured. And you're asking, we talked about earlier about the replacement cycle. When is that going to come back around? When is that going to turn into a tailwind? That's a very difficult shot to call.

And I highlight those challenges not as a crutch or to focus on the negative, but I want to contrast some of the very -- the highly value-add actions that this management team and this company has taken against that backdrop. Since our split, we've acquired over 40% of our shares outstanding at prices that we view as opportunistic and below our intrinsic value. We've acquired four in Purchasing Power, adding fuel to the growth trajectory and diversifying our platform.

We've managed our portfolio and our decisioning posture effectively and delivered consistent yields. We've restructured our costs, focusing more on high ROI initiatives and less on the routine, removing inefficiencies from the processes. And finally, we freed up underperforming capital with the sale of our Vive segment and redeployed that capital into Purchasing Power, which has a much stronger growth trajectory and value-add proposition.

So what we have now is a stronger foundation, a more diversified base and the team and platform capable of delivering significant results. Just a quick snapshot of our 2025 results, $2.5 billion in GMV, just shy of that in revenue, call it, $270 million in adjusted EBITDA and over $200 million in free cash flow.

Note that free cash flow number is after the capital that has been deployed for to grow that business. You see the revenue headwinds, but along the way, we have driven margin expansion from the depths of the post-COVID recovery and also increased adjusted EBITDA by approximately 50%. So I want to make sure that landed, and let me reemphasize this point. In one of the most challenging operating environments in the last 100 years, this company and this management team delivered a 160 basis point increase in EBITDA margins and over a 50% increase in adjusted EBITDA.

The actions we took around share repurchases, cost management and portfolio management helped turn the depths of the post-COVID recovery into something that we're proud of, although there's work to do on the top line admittedly. Our long-term growth algorithm is fairly straightforward.

We're focused on growing the business on the top line while achieving margin expansion along the way, and that's what's incorporated in the long-term outlook. I mentioned the highly cash-generative businesses. We talk about progressive leasing as being a short cash conversion cycle as we've come up along the way and a typical lease will stick around for 6 months.

But now you've got with MoneyApp and four, you've got that in spades and much quicker conversion. And so now the challenge then becomes as you manage the P&L and you manage margins, what do you do with that cash? And where does it go? Gives us opportunity to delever the balance sheet from the most recent acquisition, gives us the ability to invest in the business, gives us the ability in the pretty near term to reevaluate share repurchases, and we've got a dividend that we just increased.

So our aim here is to compound value for shareholders over time consistently, efficiently and profitably. So let's break the revenue opportunity down just a bit further, and some of this is just reemphasizing what you've heard already today. At Progressive Leasing, we're going to look to achieve growth across all logos of all sizes, both within our current partnerships as well as the nurturing of our pipeline opportunities.

And there's plenty of greenfield that remains. We expect the ecosystem to be fueled by synergies with our cross-sell opportunities and enhancements in our technological capabilities. At our Purchasing Power and MoneyApp, we're just getting started on the growth opportunities that exist. And as you've heard from the other leaders today, we are in the early stages of development with high growth potential as we leverage core strengths.

Expanding a bit on cross-sell opportunity, and this is a repeat of the slide that Steve showed, but I think it's important to the financial picture and how we're sizing up the optimal cross-sell motion. Progressive Leasing posted $45 million of GMV from a simplistic unidirectional cross-sell motion, taking MoneyApp and four customers and matching up against the leasing opportunity.

And as you look forward, that really represents the floor as the more omnidirectional strategy takes hold and there's data sharing and cross-functional selling across the platform. But even as we scale revenue and diversify the business, we remain grounded in the discipline around portfolio performance across every product.

As I mentioned, since 2012, the Decision Sciences team is what we call it internally. It's a group of folks, highly intelligent individuals that we have leaned on to help us develop an algorithm that gives insight into this customer, early indicators of stress and also chart a path forward to as we need to make adjustments with macro shifts, how do we keep the portfolio on the rails.

And what we have today, and I'm proud of what we have is a best-in-class offering that has insights that nobody has. Nobody else has. And our ability to take that and scale it across the rest of the ecosystem is very powerful. And just to back up their performance because I think it's worth noting, in 2016, we gave guardrails around our portfolio of 6% to 8%.

As we talked to many of you and other investors on the road, the conversations around, okay, you're serving the subprime consumer. How do we get comfortable that this story isn't going to end well for us, and we're going to be end up holding a portfolio that's deteriorating. And so in 2016, we gave those guardrails.

Not a single time on a trailing 12-month basis through all the ups and downs of COVID, through all the craziness that we've all lived through, not a single time have we been above that 8% mark. And that hasn't happened with the hands off the wheel. We've been actively managing, meeting often, leveraging those core strengths to make that happen.

So I just want to iterate this point again. Through all the twists and turns of the last few years and continued pressure on subprime consumer, we have an unblemished record of delivering portfolio performance within our stated guardrails, not a single miss. We have the best-in-class expertise and consumer insight to navigate choppy waters, and we're well suited to leverage these capabilities to Purchasing Power and four.

So let's turn to cost. And our view on cost is really two-pronged. And I think it's played out over the years. But it's really to -- we understand the mandate of minimizing waste, being as efficient as possible. And we often get asked the question, well, okay, that's great. Get rid of cost and let's watch margins increase significantly. And that very well, if you want to run the business that way, you could drive even better margin expansion than what we're painting in the long-term outlook.

But we believe our best years are still in front of us, and we need to invest ahead of that growth. And so what you're observing within SG&A is a shift out of some of the more routine functions into technology, into sales, into marketing that we know we have high confidence is going to drive ROI -- positive ROI going forward.

We have our hands firmly on the wheel. We understand the mandate, and we'll align costs in the context of revenue trajectory. So taking a quick look at the balance sheet as we wrapped up the year, $600 million in total debt, $308 million in cash. One note about the debt that I think is worth making. That was the result of a levered recap that we did in 2021. That was not incurred as a result of any internal cash needs. In fact, this business as constituted historically has generated more cash than it needed along the way. And so there was no need to lean on the leverage front.

$658 million in total liquidity, and that liquidity position puts us in the driver's seat to capitalize on opportunities and to weather choppy waters. Cash generation is a staple of the business historically, and we expect to continue going forward, and we'll look to deploy that capital in a manner that maximizes shareholder value.

Just one key item that I would note as you look at historical leverage, post acquisition, which was on January 2 of this year of Purchasing Power, that leverage ratio bumped up to 2.5x. You may have heard me say on the last earnings call that by the end of 2026, we will be under that 2 turns target, the 1.5 to 2x target. So that gives you some insight into here, we've made the largest acquisition in our history, and we're able to quickly delever with organic internal cash flows to bring our leverage target down within 1.5 to 2x, which then gives us optionality across the capital allocation spectrum.

Speaking of which just historical versus the go-forward on capital allocation. We emphasize delevering in the immediate term, as we've mentioned. And you see our historical focus on share repurchases, which after internal investments has really been where we've channeled the dollars. We instituted a dividend a couple of years back, and we increased that by $0.01 here this last quarter. And so that continues to be a lever that we use to return value to shareholders.

So I'm not going to rehash much of what Steve has shared on outlook, but this remains unchanged with the exception of the accounting requirements around revenue recognition for Purchasing Power, which is really just a net presentation of their revenue on a small proportion of their revenue rather than the gross presentation that was in the original outlook.

So no change to the prospect or the value proposition of this business in our view from -- since the acquisition. Our guidance calls for revenue between $3 -- sorry, $3 billion and $3.1 billion, adjusted EBITDA between $320 million and $350 million and non-GAAP EPS between $4.45. It assumes margin expansion across every one of our products. Improvement in EPS is coming from organic growth as well as the addition of Purchasing Power, which we expect to be accretive here in 2026.

We expect a challenging but stable macro environment, consistent decisioning posture and continued execution against our strategic priorities. We are not baking in additional share repurchases in this view. We're excited to execute against this plan, and we have the right team to do it.

So stepping to the long-term targets, and this is the first time this business has put out long-term targets. This outlook, as you look at it on a consolidated basis, and I'll share the consolidated view here shortly, but it calls for a significant inflection in GMV growth, fueled by impressive momentum of Purchasing Power and MoneyApp, while Progressive Leasing continues to expand its best-in-class offering within the virtual lease-to-own space.

Progressive Leasing is expected to grow mid-single digits for GMV and adjusted EBITDA against an already large approximately $2 billion installed base. We aim to accomplish this through increased penetration within our existing business as well as the continued pursuit of pipeline opportunities.

What I will say about this mid-single-digit outlook for Progressive Leasing, this does not incorporate an enterprise win. So this is middle of the fairway for us in terms of the opportunity that exists. As Nate said, these are long sales cycles on the enterprise side. They're difficult, and they're hard -- that's a hard shot to call and get the timing right on it. So we are excluding that from this guidance.

And when that comes, we will keep you posted. Four, as you see there, 50% to 60% growth in revenue, and that represents a deceleration from where they're at today. That's more of a law of big numbers coming into play. And the adjusted EBITDA margin expansion, I think, is a huge opportunity for four. As you look at other pure-play providers that are public, and there's really only one, you can start to get an appreciation for what the margin profile can be.

And what we have done in this business from an economic standpoint, like John said, we have not grown at all costs at four. We've tried to take an approach of let's prove out the economic model, let's get the decisioning right and then let's scale. And as we scale, let's keep costs under control.

And the shift right now, as you look at the composition of the four customer, it skews very heavily towards new customers, customers that we haven't seen before. You look at more mature players, they skew very heavily towards existing. And as that composition shifts from new to existing, your margins become much, much better along the way.

And so we think we're in the early innings of margin achievement with roughly 13.5% therefore. And then the Purchasing Power, low double digits on the revenue growth rate and significant, I think, improvement from a synergy perspective. So 25% to 35% on the adjusted EBITDA CAGR for Purchasing Power. So just taking a look at the consolidated view and how it rolls up. And you'll hear us talk more about this consolidated GMV concept as we move forward.

We have historically just talked about GMV really in the context of Progressive Leasing, but it makes more sense now with this ecosystem to talk about a consolidated GMV, 20% to 25% on an already $2 billion base and growing revenue, adjusted EBITDA and adjusted EPS along the way.

The point that I would make, and again, I'm trying to steer away from accounting lessons here, but I think in this instance, it makes sense to point this out. Not all GMV converts to revenue at the same ratio. As John talked about, four converts $1 GMV to roughly $0.10 of revenue. Adjusted EBITDA and EPS track more closely with consolidated revenue -- or sorry, consolidated GMV.

But that dynamic is four is expanding, becoming a larger proportion of our business, you're going to see more and more separation between the consolidated GMV number and the revenue picture.

So I hope this presentation was helpful. And just to kind of recap the things that are driving -- or the areas that are driving the financial picture on a go-forward basis. We're delivering a consistent diversified revenue picture over the next 3 years. We've got more opportunity than ever before. And you size that opportunity, whether it's in four, leasing, MoneyApp or Purchasing Power, there's more greenfield than there's ever been.

Second, we're going to deploy the same mentality and the same discipline that we have had around credit all along the way. We are going to are not going to let our portfolios slip from the rails. And hopefully, our track record in doing that from an investor perspective gives some credibility to our ability to manage it and keep it at acceptable yields. Third, we've got a direct line of sight to margin expansion, and it's strongest at four, but we're going to maintain discipline across the rest of the business. And I think with Purchasing Power, we're able to leverage some cost synergies that we're looking to deploy.

We're going to generate free cash flow like we always have. And that's not going to change, which gives us optionality against our capital allocation strategy, which focus on deleveraging in the near term and allocation to internal investment as well as driving capital to shareholders along the way. What we've got is a business model that's resilient, scalable and designed to create long-term value. So I appreciate your time, and I'm going to hand the meeting back over to Steve to close out the day.

We're almost done, I promise. I'm going to back up because this slide is pretty impactful, right? We've never done 3-year targets before. I just noticed something, so I want to just perfect the record here. It's actually 26% to 28% growth rates, not 25% to 28%. It's a 3-year CAGR. And importantly, this footnote at the bottom, these CAGRs include Purchasing Power in the base year. If we were to like just take credit for the inorganic growth of buying Purchasing Power, these CAGRs would be much higher. So this includes Purchasing Power in the base year, and these are the CAGRs that we expect to be able to achieve. And we -- as Brian said, the consolidated GMV is a nice picture that translates into aggressive EBITDA growth and adjusted EPS growth.

So yes. Well, we've been through -- we've done a lot here today. So thanks for sticking with us. We talked about our evolution beyond the leasing-centric business, our growth across the ecosystem that we've observed and will achieve and those 3-year CAGRs that were -- that reflect our confidence in the strategy. At the foundation of it all is a business that is structurally stronger. Sridhar talked about our technology modernization. It's resulting in meaningful cost efficiencies. Our lease modernization and flexible lease engine are resulting in better customer experience and improved operational efficiencies.

We're seeing growth across the ecosystem itself with multiple products and multiple expanding relationships across the customer base. What once was primarily a leasing-driven business is now an omnichannel engagement across the platform. So we've done all this with a -- or we are in a position with a deeply embedded distribution channel that's med, right? We've talked about our exclusive retail contracts. Both Lisa and Jody had to leave for the airport, but I think that tells you the depth of our relationships on the leasing side that they would take time out of their busy schedules to travel to New York and get down here to the NYSE in order to help us tell our story. And we had a host of other retail partners that would have been willing to do it if they were unavailable.

And we have these contracts locked up into the 2030s. So 70% of our GMV into the 2030s on the leasing side. I know there's some questions sometimes about the concentration risk, but those retailers that are in our top 5 that represent that GMV are public. And you guys can look at their public financials and see whether there's any financial strain out there. We obviously had a fairly high-profile bankruptcy last year, but the rest of the stable of partners looks very good.

Lee talked about the large employer access like -- and 7 million eligibles, 48 of the Fortune 500, but there's a lot to go get, right? And we're excited about that. And then the direct-to-consumer channels, and we're kind of using that generally as a concept of both the PROG Marketplace and our four technologies business is really taking off. So we're a multiproduct business with improving economics, expanding reach and a clear path to long-term value creation. So we truly believe that PROG's best growth story lies in front of us. So we thank you guys for your time today, and we are going to go into our final Q&A session.

Okay. Well the presenting team assembles upfront will go through the same process as the first Q&A session where you'll raise your hand, and we'll get a microphone in front of you. I think I saw Bobby.

Yes. I guess, Steve, I wanted to actually circle back. I think it was early in your start of this day, you talked about, I think, the data opportunity or data sharing opportunity across products. And I'm just curious kind of where that is today? What's embedded in that algo to make it successful? And then is that an opportunity on basically GMV unlock? Or is that an opportunity on better loss ratios or both?

Yes. That's -- I mean that's -- yes, to both of those. It's really a big opportunity. And where we are. So we've got kind of a harmonized data lake with all -- with the data together, and we're able to make multi-decisions with an application. We're not actually like currently serving like if somebody applies through one front door, we're not like serving an offer across all products to them currently. But certainly, that's on the road map.

But the opportunity is absolutely both offense and defense. It's on the GMV front. It's on the ability to have visibility into what they're consuming other products that we have, like Lee brought up, we know that leasing customers are using BNPL and we'd rather them use four. We know that BNPL customers are using cash advance, and we'd rather them use MoneyApp. So we're looking to drive growth in originations with our shared data infrastructure. But clearly, it's a loss mitigator as well because we can continue to build and enhance our proprietary data set and kind of observations around payment behavior to make sure that we're making good decisions and hopefully say yes to people that might be more incrementally yes because we have better data.

And then, Brian, just a quick follow-up on the financial algo. I think you mentioned share repurchases are not in 2026 guidance. Are they in the 3-year algo for...

They are not in the 3-year algo. And so the -- we've never guided to share repurchases or made that commentary. I think how I would frame it up is it's been the primary way that we have been able to distribute capital to shareholders historically. The near-term focus is to delever under the 2 turns. And then I think the world opens up a little bit more in terms of working through your capital allocation stacks and additional internal investment, M&A opportunities and share repurchases along the way, but it was absent from either guide.

But in the 3-year guide, one of the reasons that the non-GAAP EPS has a higher growth rate than the adjusted EBITDA is really because of that delevering function. And we will generate cash. So we're not baking share repurchases in. So we'll have a cash balance growing in this model, which then also kind of reduces your net interest expense.

Another question here from Kyle.

Yes. Very helpful. Since we have you guys all on stage, I think it might be helpful to just get a competitive update kind of across products. Obviously, you guys have highlighted leasing has been tough sledding for the last 5 years. So interesting to see how the competitive environment has evolved.

And then since we have Nate and John, I love to hear your take -- or sorry, one of you can cover leasing. And then, John, your perspective on kind of the BNPL competitive environment and then Lee, your 2 products as well.

Yes. On the leasing side, there's competition out there. Like Steve mentioned, in the SMB space, there's a lot of jocking for position. We're the only partner out there with any real national footprint and exclusive partnership, and we've talked about the length of those contracts. We're very excited about that. But there's still a lot of greenfield to go get.

And we mentioned, I think, in the remarks, 3 notable wins at the end of last year, and those were competitive wins. So the competition is out there, but we still feel like we're the leader in the space, and we're the best option not only for the customer, but for the retailer as well to build a dependable business model around and that compliance, the algorithm from a decisioning standpoint that they can depend on. When you start doing different things, it can get tough to depend on your partner. And you heard from Lisa and Jody, how important that is. So we're still out there. Competition is out there, but we still feel like we're winning, and we'll continue to win.

And with buy now, pay later, obviously, it's a really large addressable space. As I mentioned in my talk, we're still in early innings. I think there's a lot of growth there. We have some really strong competitors in there, like really good, strong companies. And frankly, we look to a lot of them because they run some really good plays. That being said, we're going to -- we plan on continuing to grow like we have been growing as the law of big numbers kicks in, obviously, that percentage maybe changes a little bit.

But there is a lot for us to get after, and we are proving that we're doing that, and we intend to continue to do that. We do think that our strategic focus on that direct-to-consumer engagement is the right one, and it has proven to be successful, and we'll continue to do that because it is something we're good at and something that's demonstrated growth. So yes.

So Kyle, for my 2 businesses, so we'll start with Money app. Obviously, we are a smaller player in what's a very large market, and there are multiple competitors in that space. But we think our model, again, we're doing it organically. We think our no tipping, no hidden fees, et cetera, is slightly different. And within the ecosystem, we think we can grow that very nicely. And the overall pie is growing as well. So we're not just trying to take share from others because the pie is growing. So we think we have an opportunity. But we're obviously, as we talked about, one of the smaller players in that market. And then to turn to Purchasing Power, look, we are the #1 player, we believe, in the space by far. And again, our view is we want to continue to dominate that space and not just focus on a larger enterprise. We think across the spectrum, we have the right to win and maintain that #1 position.

Got it. Really helpful. And then a follow-up, Brian, just I haven't had a chance to run everything through the model, but I appreciate the long-term outlook. But just looking for -- thinking about the cadence of revenue growth, obviously, you guys gave a CAGR. But when you factor in kind of all the moving parts, right, in terms of 4, obviously facing the law of large numbers, but growing very quickly, but also becoming a more meaningful part of the whole, how you're just thinking about the revenue -- the cadence of revenue growth versus the CAGR?

Yes. I think -- well, when you take revenue growth overall, I think one of the key things you have to consider where Progressive Leasing is. And obviously, with the portfolio down a bit year-over-year, it will take a little bit of recovery there. And so that will be a little bit of a near-term revenue headwind.

But I think the four because of the conversion rate is going to be less about moving the revenue needle massively and more about earnings and GMV. And so from a cadence perspective, we haven't given any specific guide on that. But I think it's safe to say we're coming out really strong with 4 right now. Purchasing Power is just getting started, a little bit of an offset for Progressive Leasing just kind of the near term. But as we catch that stride and build that portfolio back up, that's going to be adding to the picture as we go forward.

As you can think about like in a 3-year CAGR, having year 1 be a negative revenue number kind of has a sizable impact on that CAGR for the leasing business. So that mid-single digits is informed by kind of by year 1, right?

Hoang?

Hoang from TD Cowen. So maybe if you can give some updates maybe on the tax refund season. Obviously, we are probably 3 or 4 weeks in. I mean, anything that you are seeing that may be different from what you provided maybe during earnings call?

Yes. I mean, I guess I would start with we're not really updating anything past 12/31 because we're in the middle of the quarter. But I would say our observations are what you guys are kind of writing, right? The tax season is slightly above average. It's about 10-ish percent, whereas there was reports of 30% or more as an expectation.

I think that when you peel the layers back, that's less addressable for our customer because of some of the refunds being impacted by things that aren't necessarily available to our customer. So it's slightly bigger than average. We were predicting slightly delayed, and that really hasn't come through. The last week, the -- no, 2 weeks ago, the week that included February 24 was like the biggest ACH drop, and that was the same week as the previous year. So we thought maybe that last week with the March 2 date would have been the bigger one. It was big, but it wasn't as big as the February 24 one. So about the same, slightly bigger.

Got it. And maybe a follow-up for John on the four business. So how do you think about maybe the impact of state regulations given you guys serve the more low-end consumers? And can you talk about, I guess, the mix of an ancillary revenue at , everything that may be outside of subscription revenue and how they may or may not be impacted by regulation, I guess, namely the recent proposal from New York.

So regulatory is obviously something we care a lot about. One thing that I love and part of the reason that I was excited to join PROG Holdings is, as mentioned earlier, PROG Holdings has always been the gold standard when it comes to regulatory and compliance. That is no different at 4. We will maintain that through the all holdings companies, and I'm very proud of that.

That being said, when New York or any other regulator comes out with a proposal, we want to be involved in that conversation, obviously. We have a point of view. We also know that we come in from a position where we already have a very strong compliance function that comes from PROG Holdings.

And so while we want to be part of that conversation, nothing concerns us significantly. Impact on revenue, obviously, the proposals are out there. A lot of work that needs to be done still has to happen to know if there is anything. There's nothing immediately that scares us in that. We have a very healthy mix of diversified revenue, which is really valuable, and it makes us a little bit stronger when it comes to anything that might affect us. So I don't see any major problems. Once again, we want to be part of that conversation as much as we can, and we're working to do that. But yes.

Vincent?

A lot of great information. First thing, I just wanted to clarify on that Slide 97. So a lot of useful information there. Just to clarify, since I think I might have gotten some of the numbers wrong. But for the 2025, if you can maybe help us what the pro forma Purchasing Power was? Or alternatively, with that 2026 to 2028, should we be taking the 2026 guidance and growing it based off of that CAGR? Or if you could provide any help on that because I know Purchasing Power is pro forma for that.

Yes. So Purchasing Power is included in '25, and there hasn't been any disclosures on actual purchasing power '25 results yet. The 8-K/A will be coming out, I think, in the next 10 days or so. You can take the revenue guide that we provided for Purchasing Power and say that kind of we've said low double digits. So that can kind of get you into what the revenue was for '25 to build it into.

And we've said kind of -- I think we've said over -- since -- in some form since December when we announced the transaction that they were kind of in the mid-single-digit adjusted EBITDA range margin. And so I think that can be helpful directionally. But it is important to have those CAGRs be off of that pro forma base, not the actual reported results.

Okay. Great. Very helpful. And a follow-up question actually maybe to all the businesses, if you can talk about the investments that you'd like to make going forward. I think the discussion about EBITDA margins expanding has been great. But I know there's a lot of growth to be had. It sounds like with all these businesses are great. So if you could talk about that. And then maybe from the high level, how are you thinking between the GMV growth and the CAGR of 20% to 25%, that's great acceleration versus the EBITDA margins, which are also doing well. Like how do you toggle between the 2? Do you want to start, John?

Yes. If you look at those strategic priorities that I laid out, the theme there is investing in areas where we can deepen the engagement that we already have. We're really happy with the engagement. We have a great story to tell when it comes to our subscribers and the percentage of GMV. However, we think there are way more opportunities to continue to personalize, continue to make the retailers relevant, promote retailers that are really important to our consumer and make it a higher engagement app.

So we'll definitely see investments there. We will see investments in features that our customers are demanding. We obviously are a little bit earlier than some of the bigger players of buy now, pay later space. So we have features within our product that we want to continue to implement. I'm able to do it really well because I have a lean, high-caliber team, as I mentioned, that uses AI to build the technology.

And so we're already seeing some good results there. And so some of the things that I laid out that are coming this year will be representative of things that our customers are demanding and asking for, and that's what we'll invest in.

On the leasing side, similar to John, customer is everything, how can we get in front of more customers. So whether that's being investing in marketing or our retail relationships, but also once we get in front of that customer, the experience that they have.

We want them to have a smooth, frictionless experience. Like I mentioned with our marketplace, we want people to find us, more people to find us and find us quickly. We want them to be able to transact anywhere that they have a need. And so continue to invest in those areas, I think, is super important.

And then just as well as taking our marketplace to the next level. We've got great adoption in our marketplace right now on the product marketplace and just being able to continue to invest in that. And then I think the last one that I'll mention would be our technology to use Progressive. The long sales cycle of lease-to-own, these point-of-sale systems that we integrate into with large retailers are old, like really, really old and really difficult to integrate into. And so making that easier is definitely a priority for the future, and our teams have done an awesome job going down that path and some of the recent wins that we have had have gone really, really smoothly compared to a historical integration cycle.

Yes. For Purchasing Power, look, we're an e-commerce retail company. We want to make sure that we have the best user experience possible on that. Obviously, we're the leader in the space. We want to make sure that we do the right investments to have that user experience be best-in-class.

So we'll continue to work on that. And for Money app, obviously, look, we want to make sure we're continuing to be that app-based effort and for that consumer experience, again, drive that value creation.

At the top level, I mean, as Brian says so frequently, we're very fortunate in that we've -- we're going to generate cash, right? And so we don't have to have fist fights about this product is going to get capital and this product is not because there's a better return on capital profile. We're fortunate in that regard to have that box of capital allocation check organic investment.

Now we do have to balance -- we have this thing called -- we have pesky profit, right? We used to joke we were burdened by profit. And so we still have to balance our margin expansion and deliver that we're doing a needle threading exercise on four and looking for that efficient frontier of how fast can we grow it while still proving that we're on a path to that really healthy adjusted EBITDA margin that some of the pure-play peers have demonstrated.

And I think the team has done an awesome job of threading that needle. We're growing fast while still showing margin expansion. And so you guys have heard of LFG, right? -- stands for let four go. Well, it actually stands for let four grow. So that's what we do. We have a neon sign in the office in Miami in Aventura that says LFG. And so we're trying to grow as fast as possible, but not at any cost. We're not going to try and get to $4 billion of GMV by taking EBITDA negative for 3 years. That's just not our philosophy. It's not our DNA. So we're going to grow it quickly, and we're going to show that we have that path to healthy EBITDA margins.

My team challenged me to weave in LFG in my talk.

I did.

I did not have on my bingo card that you would be the one to drop. But thank you.

All right. I think we have time for one more question maybe from...

On MoneyApp and four, have you seen how many customers cross-shop both apps and I haven't checked.

We have. Yes. We've got -- without talking too much about the secret sauce or the inner workings, we've got good visibility into customers and what they're consuming and what products they're using and how to attack them from a -- Andy's back there from a marketing standpoint. So that's something back to Bobby's question, that's why the data sharing is a GMV initiative, not just the loss mitigator.

Can you share any details on what that cross shop is?

It's pretty significant.

One last question. What was the GMV kind of on the marketplace? I might have missed that in that.

Yes. We didn't say it today, so it's a good question, but we did say it on the earnings call, and I think it was around $85 million in 2025.

Any growth rate on that?

Yes. Well, it grew almost tripled in Q4, but it basically doubled for the year.

Okay. Thank you all for hanging in there and being with us today. We really appreciate your attendance. I hope you share the excitement that we have about our growth prospects. We've outlined an ambitious program here, and we plan to execute on it. With that, we'll bring the formal program to a close. Thank you again.

Thank you all.

Good day, and thank you for standing by. Welcome to the PROG Holdings Q4 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, John Baugh, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to the PROG Holdings Fourth Quarter 2025 Earnings Call. Joining me this morning are Steve Michaels, PROG Holdings President and Chief Executive Officer; and Brian Garner, our Chief Financial Officer. Many of you have already seen a copy of our earnings release issued this morning, which is available on our Investor Relations website, investor.progholdings.com.

During this call, certain statements we make will be forward looking, including comments regarding our 2026 full year outlook and our outlook for the first quarter of 2026. The listeners are cautioned not to place undue emphasis on forward-looking statements we make today, all of which are subject to risks and uncertainties, which could cause actual results to differ materially from those contained in the forward-looking statements. We undertake no obligation to update any such statements.

On today's call, we will be referring to certain non-GAAP financial measures, including adjusted EBITDA and non-GAAP EPS, which have been adjusted for certain items which may affect the comparability of our performance with other companies. These non-GAAP measures are detailed in the reconciliation tables included with our earnings release. The company believes that these non-GAAP financial measures provide meaningful insight into the company's operational performance and cash flows and provides these measures to investors to help facilitate comparisons of operating results with prior periods and to assist them in understanding the company's ongoing operational performance.

In addition, I encourage you to participate in our Investor Day meeting being held at the New York Stock Exchange and webcast live on Tuesday morning, March 10 at 8:30 a.m. Eastern Time. Please reach out to me it's [email protected] for details on how to participate.

With that, I would like to turn the call over to Steve Michaels, PROG Holdings' President and Chief Executive Officer. Steve?

Thanks, John. Good morning, everyone, and thank you for joining us as we review our fourth quarter and full year 2025 results. which met or exceeded the outlook we provided in late October. I'll start with a high-level view of the year, provide some context around the environment we operated in and then talk about how our strategy and execution position us as we move into 2026.

2025 was a year that required balance, discipline and focus. The retail and consumer environment remain challenging, particularly in the categories we serve, and we navigate meaningful disruption following the bankruptcy of a large retail partner. At the same time, we took deliberate actions to tighten decisioning in our Progressive Leasing business to protect portfolio performance. Those dynamics weighed on leasing GMV, which was down 8.6% year-over-year. Adjusting for the Big Lots bankruptcy and the intentional tightening, underlying GMV in 2025 grew in the mid-single digits, reflecting operational execution and healthy demand across other areas of the business.

We gained balance of share with key partners, ramped new partner activity, expanded e-commerce penetration and build momentum at PROG Marketplace, our direct-to-consumer motion. While leasing faced some headwinds, we saw important tailwinds at our Buy Now, Pay Later platform Four Technologies. Four delivered triple-digit GMV and revenue growth throughout the year. Four continues to scale organically with strong consumer engagement and improving unit economics and is playing an increasingly important role in our ecosystem. We also made meaningful progress in cross-selling our products. Money App, our direct-to-consumer mobile cash advance business and Four, drove approximately $45 million of incremental leasing GMV in 2025, up from $23 million in 2024 as customers who engage with these products increasingly opted into leasing when it was the right fit. This cross-product engagement is a central element of our long-term strategy and an important offset to macro pressure in any single product.

Alongside this execution, during 2025, we took a strategic step to sharpen our focus by selling our Vive portfolio, a decision that aligns with our long-term priorities around capital efficiency. Vive is reflected in discontinued operations at year-end, and this transaction allows us to redeploy capital toward opportunities with stronger strategic alignment and return potential. In January 2026, we completed the acquisition of purchasing power, expanding our offerings into a differentiated channel and adding a complementary growth platform that aligns with our long-term strategy. So while 2025 presented real challenges it was also a year where our diversified platform mattered. We leaned into the areas of the business with momentum, strengthened portfolio health and leasing, accelerated our strategy and took deliberate actions to position PROG for sustainable profitable growth.

Before I address consolidated full year results, I want to take a step back and introduce how we are increasingly thinking about growth through the lens of consolidated GMV, rather than viewing GMV solely through the Progressive Leasing segment. As our ecosystem expands, GMV is being generated across multiple products, most notably leasing and Four today with purchasing power becoming part of that picture as we move into 2026.

Looking at GMV on a consolidated basis, provides a more complete view of customer engagement, transaction volume and the overall scale of commerce flowing through the PROG platform. Importantly, as leasing Four and purchasing power each represent distinct reportable segments for external reporting, we will continue to provide GMV results at the segment level to main transparency and comparability over time. We believe this broader view of GMV will become increasingly relevant in understanding how customers engage with PROG across multiple entry points and how that engagement ultimately drives long-term value creation.

For the full year 2025, consolidated GMV, which includes Progressive Leasing and Four grew 12.1%, supported by Four's triple-digit growth at approximately 144%. Turning back to Progressive Leasing for a moment, the intention of tightening to protect portfolio performance achieve the intended benefit. Full year write-offs remained within our annual targeted range of 6% to 8% and gross margin expanded year-over-year as portfolio yield improved. This reflects the effectiveness of our dynamic decisioning models and our willingness to make proactive data-driven trade-offs. At a consolidated level, adjusted EBITDA from continuing operations for 2025 was $269 million, which beat the high end of the outlook we provided in October, was essentially flat to last year, and importantly, landed within the original adjusted EBITDA range we guided to back in February 2025 despite the volatility and disruption we navigated during the year.

Non-GAAP diluted EPS from continuing operations at $3.51 beat both the October outlook and the original guidance we provided in February. Together, these results reflect a year where we balance near-term pressure with long-term value creation and generate strong free cash flow to reinvest in the business and return capital to shareholders.

Moving to strategy. As our business has evolved, so is the way we think about our 3 strategic pillars: Grow, Enhance and Expand. While the pillars themselves remain the foundation of our strategy, the way we execute against them is increasingly shaped by our multiproduct platform. Rather than viewing leasing for Money App and purchasing power as stand-alone products, we operate the business as a connected platform, where growth customer experience and product innovation, reinforce one another. This ecosystem first mindset is becoming a meaningful accelerant across all 3 pillars.

Under our Grow pillar, our focus is on expanding the company by strengthening our industry-leading partnerships and scaling our direct-to-consumer channels with growth accelerated by customer engagement across our products. In 2025, at Progressive Leasing we grew balance of share with some existing retail partners by deepening integrations and executing joint initiatives across marketing, digital and in-store workflows. Even in a soft retail environment, these efforts allowed us to capture incremental GMV within existing doors by improving application flow, waterfall execution and conversion across channels.

Direct-to-consumer was another key growth driver. PROG Marketplace expanded meaningfully in 2025, delivering approximately $82 million in GMV, nearly doubling year-over-year and exceeding our previously communicated target. Additionally, our e-commerce channel scaled with e-commerce GMV reaching an all-time high of approximately 30% of total Progressive Leasing GMV in the fourth quarter of 2025 and 23% for the full year compared to 17% in 2024, reflecting the shift towards digital engagement and the strength of our omnichannel strategy. Marketing is central to this pillar and our approach has evolved.

In 2025, we expanded partner marketing programs with retailers while also scaling across product marketing, using shared customer data and insights to engage customers more intelligently. A clear example of this is the previously mentioned $45 million of Leasing GMV generated through marketing to Four and Money App customers during the year, which on a stand-alone basis would rank as a top 10 retailer within the PROG leasing platform, underscoring the power of a connected approach. Under the enhanced pillar, our priority is delivering an industry-leading consumer experience, one that is simple, efficient and intuitive across every interaction.

In 2025, we made meaningful progress improving how customers interact with PROG through digital channels. We expanded self-service capabilities within our mobile app, allowing customers to manage accounts, make payments and engage with our products more seamlessly. A critical enabler of these improvements has been our work to eliminate and consolidate technical debt. In 2025, we continued modernizing core platforms. This work is not always visible externally, but it is foundational. For example, we have improved the scalability of our back-end systems through an ERP implementation, optimize our usage of cloud-based resources, and enabled faster product generation, delivering more consistent experiences and better use of customer and decisioning data. Additionally, our innovation team at PROG Labs is at the forefront of customer experience through the use of AI.

As we look back on 2025, I want to highlight how AI has moved from an area of experimentation to one of real impact across the business. This was a year where AI became embedded into several aspects of how PROG operates, not as a separate initiative but as a set of capabilities directly supporting growth, efficiency and execution. The focus was simple: apply AI where it improves speed, decision quality and outcomes for customers, retailers and our teams. In 2025, we embedded AI across operations and customer engagement. [ Piper Plus ], our internal AI assistant resolved over 18,000 inquiries with more than half handled on first interaction, approving efficiency and reducing friction. Our AI-enabled flexible lease engine improved decision speed by approximately 75% and lifted marketplace conversion, while AI-driven marketing delivered stronger returns and lower acquisition costs, all supported by robust governance and human oversight.

Equally important, in 2026, we are focused on enabling our people. More than 600 knowledge workers have access to secure AI tools for everyday use and the development of digital agent employees. We're not building AI for specialists. We're making it accessible across the organization. Our focus is on scaling these capabilities, including the deployment of more autonomous digital agents to drive productivity, quality and function level efficiency. We view this as a continuation of the same strategy, disciplined execution, practical application and long-term value creation. Using AI as a lever to make PROG faster, smarter and more scalable. Enhancing the experience is not just about usability. It's about trust, repeat engagement and creating relationships that extend beyond a single transaction.

Under our Expand pillar, we are focused on growing our offerings through new product innovation and added capabilities. In 2025, refinement of our decisioning posture was a clear example of this approach. We tightened approvals where necessary to protect portfolio health while simultaneously progressing on capabilities with improved data and analytics to match customers with the right product, whether that was leasing Four or Money app. This allows us to preserve access responsibly by improving overall outcomes.

Four scale rapidly, delivering approximately 132% revenue growth in Q4 and 170% for the year. Q4 was the ninth consecutive quarter of triple-digit GMV and revenue growth and engagement trends remained strong throughout the year with average purchase frequency of approximately 5 transactions per quarter and more than 164% growth in active shoppers year-over-year. New shoppers grew approximately 168% year-over-year, representing a healthy leading indicator of platform expansion. Additionally, our Four+ subscription model is a key driver staying consistent with over 80% of GMV coming from active subscribers. Four's take rate of approximately 10%, defined as revenue generated as a percentage of GMV over the trailing 12-month period, is an indicator of monetization efficiency.

From a profitability standpoint, Four generated adjusted EBITDA of $9.9 million in 2025, representing a 13.5% margin on revenue. Money App approached breakeven adjusted EBITDA as it exited the year, reflecting improving stand-alone economics while also driving incremental leasing volume through cross-sell. With profitability improving, we can increasingly focus on scaling the product responsibly to drive greater customer engagement and generate incremental value for PROG.

Finally, the sale of the Vive portfolio in early Q4 2025 was a strategic realignment of capital and not an exit from serving our customers. We freed up resources to reinvest in products with better strategic fit and return potential. Looking ahead, purchasing power further extends this pillar, expanding reach into a differentiated channel and customer base. The business aligns with our long-term vision of delivering flexible, inclusive financial solutions while improving customer lifetime value across the platform. As purchasing power integrates into the PROG ecosystem, we see opportunities to drive cross product engagement leverage shared data and decisioning capabilities and enhanced partner value.

What ties Grow, Enhance and Expand together is the ecosystem. Growth is enhanced because products feed one another. Experience is better because systems and data are being unified. Innovation is more impactful because access is deliberate and connected. This is how we are building a more resilient, scalable PROG, one that we believe can perform across cycles to create long-term value for customers, partners and shareholders.

While Brian will provide more detail on our 2026 outlook, I'd like to share our perspective on the macroeconomic backdrop as we enter the year. As we look ahead to 2026, we plan for an operating environment that remains challenging. particularly for the consumer segments that our products serve. While the rate of inflation has moderated, elevated prices for essential goods and services continue to pressure discretionary income. Big ticket retail categories, such as furniture and appliances, remain under pressure. And in our Leasing segment, we began the year with a smaller lease portfolio, down 9.4% year-over-year, which creates revenue headwinds. That said, we also see offsets, higher expected tax refunds in 2026 should provide incremental liquidity and near-term support for demand and repayment behavior. Our pipeline with large retail brands and employers remains active.

PROG Marketplace and our direct-to-consumer channels, including Four continue to scale, expanding customer reach and long-term strategic optionality. Importantly, we began 2026 with a linear cost structure following SG&A reductions in the leasing business, preserving our ability to invest in high ROI initiatives while improving downside protection and operating leverage. The reality of this operating environment are reflected in our 2026 planning assumptions. However, our strategy is clear. We will reinvest in the business following our 3-pillared strategy to Grow, Enhance and Expand with an emphasis on our multiproduct offering. We believe this approach spanning leasing Four, Money App and purchasing power positions PROG to serve customers more holistically, improve lifetime value and deliver sustainable profitable growth over time.

From a capital allocation perspective, our priorities remain consistent with what we previously outlined, which is investing in the business, pursuing targeted M&A opportunities and returning capital to shareholders through share repurchases and dividends. In the near term, we will focus on prioritizing debt reduction as we work toward our long-term net leverage ratio of 1.5 to 2x.

Before I close, I'd like to welcome Lee Wright to the PROG leadership team as President of Purchasing Power. Lee brings more than 3 decades of leadership experience across retail and consumer finance, including his most recent position as CEO of the Vitamin Shoppe. He has deep expertise in credit collections and capital markets. Lee's operating discipline and experience scaling consumer finance platforms make him well suited to lead Purchasing Power's next phase of growth for PROG. We're excited to have him on the team as we integrate the business and unlock its long-term potential.

In summary, 2025 was a year of discipline and progress. We navigated disruption, made deliberate trade-offs to protect portfolio health, delivered strong margin performance, executed a strategic divestiture, announced an acquisition and delivered exceptional growth in Four. We entered 2026 with a resilient foundation, clear focus and growing momentum across our ecosystem. I'm proud of our team's execution as we strive to create long-term value for our customers, partners and shareholders.

With that, I'll turn the call over to Brian for more detail on the Q4 financial results and 2026 outlook. Brian?

Thanks, Steve, and good morning, everyone. Before I get into the financial details, I want to echo Steve's comments and acknowledge the team's execution in 2025. Delivering essentially flat adjusted EBITDA for the year and within the original outlook range of $260 million to $280 million provided in February reflects disciplined management of the factors within our control alongside ongoing investment in the long-term earnings power of the business.

I'll start with a summary of the fourth quarter results, then cover consolidated performance for the year, discuss the balance sheet and capital allocation and finish with a few comments on our 2026 outlook. As a reminder, Vive, which we sold in October is reflected as discontinued operations in both the fourth quarter and full year results.

We are pleased to highlight that for continuing operations Q4 consolidated revenues were within our outlook range provided in October and our adjusted EBITDA of $61.5 million, along with a non-GAAP EPS at $0.74 exceeded the high end of this outlook. Our fourth quarter results were consistent with the trends we saw throughout 2025, disciplined portfolio management and leasing and execution across our diversified platform with triple-digit growth of Four Technologies. Despite GMV and revenue headwinds in our leasing segment, we delivered margin expansion through healthy portfolio performance, partially offset by investment in strategic growth initiatives.

Beginning with the Progressive Leasing segment, fourth quarter GMV declined 10.6% year-over-year driven primarily by 2 factors: the impact of the Big Lots bankruptcy and our intentional tightening actions. Excluding approximately $40 million associated with Big Lots and $30 million related to decisioning, underlying GMV grew 1% year-over-year despite ongoing pressure on our consumer. Digital channels continue to be a bright spot with PROG Marketplace GMV increasing 187% year-over-year, reinforcing the value of our investments in direct-to-consumer and omnichannel capabilities.

Progressive Leasing's Q4 revenue of $545 million declined 8.1% year-over-year, reflecting the smaller portfolio throughout the quarter. Despite this headwind, gross margin expanded approximately 90 basis points driven by higher portfolio yield and a greater proportion of customers remaining in their leases longer. Provision for lease merchandise write-offs was 7.6% of revenue in the fourth quarter an improvement from last year and within our targeted annual range of 6% to 8%. For the full year, write-offs were 7.5%, reflecting our visibility and expertise that informed our tightening actions and disciplined portfolio management.

For resolutions SG&A was $91.4 million or 16.8% of revenue in the quarter. The year-over-year increase was primarily driven by approximately $5 million of onetime costs related to a partner bankruptcy and incremental investments in technology and infrastructure to support future growth. Adjusted EBITDA for the Progressive Leasing segment at $63.9 million declined modestly, reflecting the impact of a smaller portfolio partially offset by margin expansion of 90 basis points, driven by higher portfolio yield and a sale of aged receivables. Q4 adjusted EBITDA margin for Progressive Leasing came in at 11.7% and 11.4% for the year, which is within our 11% to 13% annual margin target.

Turning to our other businesses. Four delivered another quarter of triple-digit GMV and revenue growth. While Four reported an expected adjusted EBITDA loss of $1.2 million in the fourth quarter due to seasonal dynamics and upfront provisioning for holiday originations, performance for the full year was strong. In 2025, Four generated approximately $736 million of GMV, representing 144% growth year-over-year and delivered approximately $10 million of adjusted EBITDA, a meaningful improvement from a loss in 2024. These results reflect improved unit economics, disciplined underwriting and increased scale across the platform.

Money App also performed in line with expectations, reaching approximately adjusted EBITDA neutral performance for the quarter and play an increasingly important role as an engagement and cross-sell engine. Money App drove significant incremental lease in GMV in 2025, reinforcing the value of our ecosystem approach.

At the consolidated level, fourth quarter revenues from continuing operations declined 5.2% year-over-year to $574.6 million reflecting the smaller leasing portfolio, partially offset by triple-digit growth at Four. Consolidated gross margins improved 284 basis points to 36.3% driven by margin expansion of Progressive Leasing and a shift towards higher margin for revenue. Consolidated SG&A from continuing operations for the quarter increased to 19% of revenue, reflecting investments in technology and the previously mentioned onetime partner-related costs. Consolidated adjusted EBITDA declined 4% year-over-year to $61.5 million or 10.7% of revenue as lower leasing profitability weighed on consolidated results.

For the full year, consolidated adjusted EBITDA from continuing operations totaled approximately $269 million or 11.2% of revenue and non-GAAP diluted EPS was $3.51 both exceeding the high end of our outlook we provided in October.

Turning to the balance sheet. We ended 2025 with $308.8 million of cash and total available liquidity of approximately $659 million including our revolving credit facility. Net leverage at December 31, 2025, was 1.1x trailing 12 months adjusted EBITDA. As previously disclosed, following the acquisition of Purchasing Power on January 2 of '26 net leverage increased to approximately 2.5x. Importantly, these leverage methods exclude the nonrecourse ABS debt used to fund Purchasing Power's operations.

In 2025, we generated healthy operating cash flow and return capital to shareholders through dividends and share repurchases. We repurchased approximately 1.8 million shares at an average price of [ $28.20 ] and paid dividends totaling $0.52 per share for the year. We did not repurchase shares in the second half of 2025 due to advanced discussions related to the divestiture of the Vive portfolio and purchasing power acquisition.

Our capital allocation priorities remain unchanged, investing in the high return growth initiatives, pursuing strategic M&A opportunities and returning excess capital to shareholders. Near term, our focus is on integration and execution following the purchasing power acquisition alongside meaningful progress towards bringing net leverage back into our long-term target range of 1.5 to 2x. This target excludes nonrecourse ABS debt used to fund purchase power operations.

Let me now touch on some key aspects of our 2026 outlook as outlined in this morning's earnings press release. For Progressive Leasing, both first quarter and full year 2026 results will be influenced by the 9.4% lower gross leased asset balance entering the year, which will pressure revenue, particularly in the first half of 2026. As the year progresses, we expect revenue trends to improve as portfolio growth resumes and the benefits of our strategic initiatives compound. For resolutions portfolio performance is expected to remain within targeted yields as we actively manage decisioning dynamics. We anticipate modest gross margin expansion, driven by higher yield trends exiting the back half of 2025, and we expect lease merchandise write-offs to deliver another year of consistent performance within our targeted annual range of 6% to 8%. We expect Progressive Leasing SG&A to remain flat to 2025 as a percentage of revenue and EBITDA margins to expand, reflecting our deliberate effort to align expenses with the revenue trajectory while continuing to prioritize high-return initiatives.

Our approach remains disciplined, eliminating unnecessary costs and managing spend through a portfolio lens to optimize return on investment.

Turning to our other segments. Purchasing Power is expected to contribute $680 million to $730 million of revenue and $50 million to $60 million of adjusted EBITDA for the full year. While we typically do not provide quarterly outlook for our operating segments, purchasing power is new to our portfolio, and we think it's important to highlight the seasonal dynamics of this e-commerce business. Historically, Q1 is the lowest revenue and earnings quarter of the year. And as such, we expect Purchasing Power's first quarter to be roughly breakeven on an adjusted EBITDA basis.

For the balance of the year, it follows similar trends as holiday-centric retailers with fourth quarter contributing the most revenue and earnings. We expect Four Technologies to deliver another year of significant revenue growth alongside expanding adjusted EBITDA margin as the platform continues to scale.

Turning to 2026 consolidated outlook for continuing operations. We expect revenues to be in the range of $3 billion to $3.1 billion, adjusted EBITDA in the range of $320 million to $350 million and non-GAAP EPS in the range of $4 and $4.45. This outlook assumes a difficult operating environment with soft demand for consumer durable goods, no material changes in the company's decisioning posture, an effective tax rate for non-GAAP EPS of approximately 26%, no material increases in the unemployment rate for our consumer and no impact from additional share repurchases.

In closing, 2025 demonstrated resilience of our business model and the benefits of disciplined execution. Despite meaningful headwinds, we protected portfolio performance, invested for the future strengthened our ecosystem and improve the long-term earnings power of the company. As we enter 2026, we remain confident in our ability to navigate a challenging environment while continuing to build long-term shareholder value.

I'll now turn the call back over to the operator for questions. Operator?

[Operator Instructions] And our first question will be coming from Kyle Joseph of Stephens.

A lot of positive things going on. And yes, welcome back -- or welcome Lee. But yes, I wanted to dig in on purchasing power a little bit. Obviously, that's one of the businesses we're at least familiar with, but just give us a sense for how you expect that segment to perform maybe versus '25. I appreciate the color you gave on seasonality. But kind of how you're thinking about that business in terms of growth versus '25 and then what sort of levels of synergies you expect in '26? And if there's any incremental juice to squeeze beyond that?

Yes, we're excited about Purchasing Power. Obviously, we closed it here 45 days or so ago. The outlook that we provided this morning was consistent with what we gave when we did the announcement back on December 1. I think it was the date. That that revenue outlook implies a low double-digit revenue growth for the business. And so we'll continue to push on that and hope that the combination in the PROG ecosystem can help to drive growth -- that growth and then hopefully beyond on the earnings front on the adjusted EBITDA front, we're looking at a kind of 7-ish, 7% to 8% adjusted EBITDA margin. Just a reminder, that adjusted EBITDA is burdened by the interest expense from the ABS transactions or the ABS facilities.

And we look for opportunities to expand that EBITDA margin over time. We believe that we can get it into kind of the low double-digit range similar to leasing, but that's not a '26 commentary and probably not even in '27. It depends on how successful we are at growing the business because scale is really the way that we're going to drive the EBITDA margin. There's also some efficiencies and some opportunities from a synergy standpoint that by being part of PROG from a data and tech and other shared services type stuff. But we really are looking to grow the business and take advantage of the revenue synergies, which we didn't really include in 2026 outlook because you have to capture them first.

And so -- but there's, we believe, tons of tons of opportunity across the retail partners that we serve, the employer clients that happen to be retailers that Purchasing Power serves as well as cross marketing different products within the purchasing power system. So we're excited about the opportunity that we're hitting the ground running and moving as fast as we can. It's not going to be straight up into the right as it never is with integrating an acquisition. But we're excited about what we can accomplish there.

Great. Really helpful. And then shifting to the credit for the outlook. I know you guys talked about at least on leasing remaining within your kind of your goalpost in terms of loss expectations, but just walk us through some of the puts and takes. Obviously, macro isn't perfect. By any means, you guys tightened underwriting there, a lot of headlines about elevated tax refunds. And I think historically, we focused on leasing. I think if you could give us kind of your sense for credit outlook by product given some of the other contributions, particularly Four and Purchasing Power, I think that would be helpful.

Yes, I can start, and Steve, if anything you want to add. Yes, I think you're starting with Progressive Leasing and what's baked into our view for '26 from a credit perspective. So we're encouraged by what we're seeing thus far in terms of the outcome of our tightening efforts a year ago. And we have not had the need or seen the data reason to tighten substantially or make more significant move. So I like where we're sitting and I like what we saw here in Q4 with the 7.6% write-off for leasing. That's improved from a year-over-year perspective, about 30 basis points.

And I think as we're watching these early indicators, whether it's news on the student loan front or pressure on the subprime consumer more broadly. We're watching as you see in auto delinquencies and elsewhere. Those are all data inputs that we're actively managing, and we're feeling comfortable about our current decisioning posture and -- but we will continue to watch it.

I think just kind of stepping through to Four there -- you have observed kind of -- I just want to draw your attention to and maybe everyone's attention to some additional details on Four that are provided here as we've reported out as a separately as a segment for Four for all of 2025. And you can -- there's additional details in the [indiscernible] that will be forthcoming here this morning. But here in the earnings release as well, you're able to see kind of the provision that is attributed directly to Four, and you can see the performance there.

The biggest driver for Four under CECL accounting and the short-term duration of their instruments, really what's going to be driving that is growth to a large degree, particularly in Q4 as they accelerate. And that's what you see in the tables that we provided, there's kind of a Q4 buildup of the other provision. I think what is implied in our guidance, and this is very directly tied to the credit picture is we're expecting improvement in overall EBITDA margins for Four. The midpoint of our guidance is right just over 15% for Four and that's up from about 13.5% in 2025. And so that's going to -- a couple of scale. Scale is going to drive that, efficiency is going to drive that. But the credit performance side is as we get smarter with the [indiscernible], smarter with underwriting. So I don't want to commit to a specific number with Four. We haven't given guidance on that.

I would just say that, that team has been finding ways to drive margin expansion and we'll maintain credit discipline along the way with Four in order to hit our targets here. And so we're moving EBITDA margin the right way for and the credit picture is obviously part of that formula.

And then Purchasing Power. There is not -- we have not provided any details on the loan loss provision around Purchasing Power. That's kind of a short-term situation here next -- middle of next month, you're going to see some required disclosures that we need to make around the historical financials of Purchasing Power and you'll see kind of 2024 out of the financials pro forma year-to-date as 9/30, you're going to see some information. So you'll be able to get a better picture of kind of how their P&L is built up. But obviously, we're reporting on Q4, so we don't have any the financials rolled up here. But I would just say that's a controllable dynamic for us we -- and we are -- at a starting point where we feel there is a tremendous amount of opportunity for us to overlay our expertise. We feel that we've developed over the years to that business and leverage our knowledge around this consumer and how best to serve them. And so I think there's plenty of upside on that front is what I would say.

Thanks, Brian. Really helpful. Last one for me, and I can get back in the queue. I was going to -- given where we are in the year, I'm going to ask the obligatory pipeline question, and I'm still curious to hear your perspective there. But I also want to ask about kind of the evolution of the sales process now that you guys have so many different products available.

Yes. Kyle, maybe I'll let somebody else ask the pipeline question. But I mean you're talking about the biz dev, the pipeline with the different products. Yes. I mean we're incorporating Four and Money app into our discussions as it relates to our existing relationships, and we expect, as we move forward, Purchasing Power will we'll have additional products on its voluntary benefits platform that will help with landing new employer clients as well. So that it continues to evolve as our overall ecosystem strategy, and we'll certainly talk more about that at the Investor Day.

And our next question will be from Harold Goetsch of B. Riley Securities.

Thanks for the all the information and detail. I wanted to ask about Purchasing Power and the ABS transactions they do, they are embedded in the cost of sales. Like how long is Purchasing Power [indiscernible] ABS issuer? And what kind of interest rates are they charged -- I mean are they basically -- what's their cost of capital and for those transactions historically been and what you think you can do embedded in you with a larger company?

They've been in the market for, I'll say, many years. I don't know the exact number of years, but they are a seasoned issuer. We are actually in the market right now to replace an expiring facility, the 2024 A facility. And we expect that we can improve on those economics, but we can't commit to anything until the deal is closed.

Okay. And in the BNPL segment, the growth is just best-in-class. Maybe you could just give us qualitatively basically growing 2x even the next closest year maybe from a smaller base, but maybe you could share with us your thoughts on qualitatively, quantitatively how this growth has been outstanding and any commentary on losses and merchants that you're having success with?

Yes. And kudos to the team, they're doing an awesome job, and I don't want to take anything away from the team, but I would point to what you said, which is kind of -- it's from a smaller base. But we do -- we're very excited about the about the ability to acquire customers, both organically and then through a paid marketing motion. And we saw a very strong acceptance, if you will, of the product in the back half and expect that to continue in 2026.

Our Four+ subscription service is why wide acceptance and actually exceeding our expectations as it relates to active subscribers. It does have churn, like all subscription providers do, but we -- but it's below what we had forecast. And we basically executed through the holiday season with a higher base which helps for us to outperform our internal forecast for the quarter. We're having -- it's a direct-to-consumer model, right? So it's not really based on merchant traffic out there in their checkout card. It's flowing through the Four app, which has great user reviews, star ratings, it's highly ranked in the app store, depending on where we are in the market from a paid marketing standpoint. And we're really seeing a nice balance of customer acquisition, repeat usage and broadening that platform.

So when the law of big numbers kicks in, I do expect that the growth rate will decelerate, but it will decelerate from a very high level, to your point, and we put out some guidance this year that implies a growth rate and it's -- that team is highly motivated to even beat those growth rates, and we'll do it in a disciplined way. we are continuing to tweak and optimize the underwriting and -- but there are some seasonal dynamics to that where you do take on some more risk in the fourth quarter. But that is still a high ROI action because you turn many of those new customers into derisked repeat customers, and it helps to drive GMV as the rest of the year goes on. So we look forward to continuing to update you on the on the progress, and we expect the progress to be impressive throughout '26 and beyond.

And our next question will be coming from Brad Thomas of KeyBanc Capital Markets.

A lot of exciting things happening over there to ask about. But I maybe wanted to start with GMV, if I could. And I think if I've tracked the numbers right, you said the underlying business ex the tightening and Big Lots was up about 1%. I think that was a little softer than where you had been tracking in recent quarters. Just curious if there was any color on how things were trending by category or with partners or anything else that you've seen here in the quarter?

Yes, Brad, thanks. And yes, as it relates to Leasing GMV for the quarter, I would say that we -- it was a little softer than our internal expectations. And it's always difficult to forecast GMV on the third week of October before the holiday season kicks in. But what we saw is really weakness in kind of late October, in the first 3 weeks of November. And it's difficult to pinpoint it exactly, but the one kind of data point that was out there was this government shutdown. And it just seemed like there was maybe a little bit of hesitation on behalf of the consumers to enter into new deals and take on new originations. And that's not a commentary on us having much exposure in the leasing business to government employees because we don't. And to the extent we do, it's mostly military, and we're not even aware that they were impacted from a pay standpoint.

It just seemed to have kind of like a negative headline effect on trading because what we saw is the Black Friday to [ Cyber ] Monday period was actually okay. And we had a decent -- actually a nice rebound in December and had the best performance of the quarter and actually best performance for a month in quite a while for 2025. So there was -- the quarter came in a little bit below where we expected and that was the cadence of it. It was a weak October, weekish October, a weakish first 3 weeks of November and then slight rebound in the holidays and into -- through Christmas.

That's really helpful, Steve. And as we think about GMV for 2026, a bright spot will be that Big Lots headwinds start to get out of the system as we go through the first half but I know you've had at least one other retail partner that's gone bankrupt. Can you help us maybe size such of a headwind that will be?

Yes. Thanks. Yes, we -- so as we sit here in this first quarter, we expect by the end of February, we will have kind of lapped both the Big Lots GMV headwind as well as the decisioning tightening that we kind of reported on all last year. And so it's our expectation that as we get into a clean quarter kind of in Q2, we'll see improving GMV trends.

We're not going to be talking about that other -- we're not going to have a repeat of '25 or every quarter, we're talking about the headwind related to the bankruptcy of that other partner because we're just going to execute against it and covered up with hopefully growth elsewhere. So we look forward to getting into some calm waters, lapping those 2 discrete items that we talked about all of '25 and delivering some improving results certainly in the first half. And then better than that in the second half.

I appreciate that color. Maybe moving on to cash flow. I apologize if I missed it. I know you guys are usually a very capital-light business. But any color on where CapEx may be now that you own Purchasing Power? And particularly as we consider the impact of the One Big Beautiful Bill, how are you thinking about free cash flow for this year considering the EBITDA guidance?

Yes. I'll -- I can start. I think we're feeling good about the cash flow dynamic. You mentioned the One Big Beautiful Bill. That's -- the impact of that, that bill had about, call it, $25 million impact in terms of incremental cash impact in '25, and we expect -- we talked about 9 figures, so right around, call it, $100 million in '26. And so the cash generation there is certainly positive.

As I just kind of think about the what I expect in '26, you kind of worked on the cash flow statement. I think the Progressive Leasing segment is going to do what it's really always done, which has generated a lot of cash that gives a lot of optionality and growth rates will impact that. But I think as you kind of look at what historical cash flow from operations has been largely that's generated by the Progressive Leasing segment. And I think those are -- will stay within a reasonable range of what we've generated historically kind of at these projected growth levels.

And I think -- so the question is what do you do with that cash flow, like Steve mentioned, we're going to emphasize delevering our balance sheet. So we came out of the Purchase Power acquisition with about 2.5x, excluding nonrecourse debt. we've got an emphasis on paying down that debt. And I think it's not a stretch to say we'll be kind of approaching that 2x turn pretty quickly. So here this year. So I think there's an emphasis on that.

And then you look at what we're doing with cash flow from investing, and you see the channel of cash flow into new loans at -- and that's -- we are pleased to send as much their way as we're able to originate with discipline. And so if we were to use up a meaningful portion of that cash flow from Progressive Leasing to and channel it to Four, I think that means we're doing the right things over there. And so there could be some cash usage there at Four and that purchasing power is largely going to -- they have optionality around their ABS facilities. And I think we'll kind of reassess and look to optimize where it makes sense, how we're utilizing cash versus [indiscernible] on the ABS, but the ABS picture will be -- will continue to be a meaningful part of how they're financing their business. And they have a strong cash flow profile as well. So that's why I say just as you're thinking through the gives and takes in cash. But the net-net is we're going to have more than we need here this year to run the business, invest in new business and also make other decisions.

And our next question will be coming from Bobby Griffin of Raymond James.

This is Alessandra Jimenez on for Bobby. I first wanted to follow up on Kyle's earlier question. What do you think is the largest synergy opportunity within the Purchasing Power segment? And what do you expect to benefit the P&L over kind of the early integration period versus a multiyear opportunity?

Yes. I mean the largest opportunity is to accelerate the growth rate of the business. We've got a great -- even before we bought them, they have a great installed base of client partners but we believe we can help get better penetration into the existing eligibles, which are basically the employer partners employees as well as add new partners to the platform.

And also help with the direct-to-consumer channel, what they call the PPC Select or the PPC Direct. So there's lots of scale opportunities. That's the largest opportunity, and that's what we're going to be driving. At the same time, just like we always do, we're going to look for opportunities on the cost side and improvements in the data side and on the collection side, and we certainly underwrote some of that in our diligence process, but the growth side is where the most exciting synergies are.

Okay. That's helpful. And I understand it's still early in kind of the tax return season, but are there any reads on how the tax returns are progressing so far this year?

No, it's really early. I mean there was one report from the IRS last week that many people warranted to just kind of ignore, but we expect next week and potentially that first week of March to be when all the action happens. So we're standing by as well.

And our next question will be coming from Anthony Chukumba of Loop Capital Markets.

So my first question, this $5 billion write-off of assets due to retail bankruptcy, what exactly did that consist of? Was that like money that they owed you? Or is that like -- if you can just give a little color on that?

Yes. I mean sometimes not in every case, but in some cases, when you initiate a new retail partnership that multiyear exclusivity. There is either an upfront payment or prepayment of some type of rebate or something. And then obviously, if that chain goes into liquidation, then you're not going to be able to generate any business from that chain anymore, and you have to take the unamortized portion of that -- those economics through the P&L.

Got it. Okay. And then just in terms of the higher income tax refunds, my assumption would be that, that -- your expectation would be that, that would lead to a higher degree of early lease buyouts, [indiscernible] buyouts. Is that a reasonable assumption in terms of what your expectation is?

Yes. I mean history would say that, that is what could happen and has happened in previous tax seasons. So early -- but also outside of early buyouts that also helps with just regular repayment behavior and kind of some healing of the portfolio and some demand signals, hopefully. But increased liquidity in the customers' hands generally turn into some payoffs, which is healthy for the portfolio also. We have observed in previous years when the payments were delayed that it actually had a behavioral impact on the consumer, and there weren't quite as many buyouts as we might have expected, but we'll have to see what happens over the next 3 weeks or so.

And our next question will be coming from Hoang Nguyen of TD Cowen.

So I want to ask about the EPS guide. It looks like it's very, very strong. So you're guiding almost to almost 20% growth in EPS. But I understand that the product leasing business is kind of shrinking in '26. So can you talk about that mix of improvement in profitability between Purchasing Power coming in and maybe the improvement that you are seeing in Four. I guess that's whether the improvement in profitability comes from.

Yes. I think -- I mean, you could look at the segment outlook that we gave and the leasing business is pretty flat on an adjusted EBITDA basis. I mean depending on what point you pick in the guide. And then Four is up and a smaller adjusted EBITDA loss and other. And then Purchasing Power, we've said we believe it's a double-digit accretive acquisition for 2026. So I think those are kind of the building blocks to the EPS guide.

Got it. And maybe I want to ask on the tax refund season because I take over the past maybe 3 or 4 years, there were years when you guys kind of saw the goldilocks environment, right, where people have the money, but they kind of stay in the lease for longer and when they have a flush with cash and then they kind of pay down and that kind of crush the gross margin.

So I mean, I guess -- I mean, how should we think about it this year because we're seeing average refind actually up 10% based on the earliest data. So how should we think about which direction it's going?

Yes. I mean that's -- we have -- we don't know, right? We'll see how the customer behaves, like I mentioned earlier, we have observed in the past that when refunds are delayed several weeks, we see less 90-day buyout activity, we're not predicting goldilocks, which was kind of a repeat of 2023 maybe where people just stay in the leases longer. We are seeing people stay in leases longer, but we don't think tax refunds are necessarily going to be a driver of that. And it really depends on how the -- there's a lot of reports on what the average size or the size of the average refund is and how that slices and dices between kind of someone making 40,000 to 100,000 versus someone over 100,000, which generally isn't our customer, not always, but generally isn't.

So we'll see if that 10% -- if it stays at 10% higher, I don't think it will change behavior all that much. If it comes in at 30% higher than I think it could potentially cause some more 90-day buyouts, which would have an impact on gross margin.

Our next question will be coming from [ Yuna Sun ] of Jefferies.

You mentioned a switch to or switch in how you view the business to consolidate GMV in addition to color around the segment GMV. Could you expand a little more on that? And how would that change, how you or we should think about the drivers of the business, seasonality momentum, segment contribution? Anything will be helpful.

Yes. I mean, I think the statement that we believe that with Four in leasing and now Purchasing Power, kind of all having the equivalent of GMV we believe that a consolidated GMV is a more holistic way to measure the amount of commerce going through the PROG platform. It doesn't change the fact that we're going to be tracking leasing GMV and tracking for GMV because all GMV is not created equal, and they have different paths, they have different conversion into revenue and different pass through the P&L.

And so while we think it's a useful metric that we will be talking about, you shouldn't and we will not get away from tracking the individual segment GMV results. And I think that the fact when we give revenue guide for each individual segment, implied in that is an expectation around GMV. So it's not a departure. It's just a click up on the kind of global view and we think it's helpful.

And my next question is on expense cadence throughout 2026. Is there any cadence or investments throughout the year that we should think about? And how would that impact segment margin dynamics, especially for Four where it is -- where the margin is right now versus where the guide is?

Yes. This [indiscernible] segment by segment. On Progressive Leasing side, I think we indicated that our expense cadence or our expense overall will be consistent with last year in terms of percentage of revenue. there's not much in the way of lumpiness along those lines, and there's variable costs tied to revenue. And so as revenues seasonal, so will some of those costs. But there's not a significant bullet at any point in time to put on your radar.

I think the same case with Four, there's always -- there was continued investment, but nothing that jumps out is significant. I think the biggest margin drivers there again are going to be obviously, optimization and growing EBITDA margin over the course of the year just as they get more efficient and better able to manage the portfolio. And then nothing really to point out in Purchasing Power. Obviously, there's any time you acquire a private company and you're going through getting them ready to be public. There might be some front-end costs, that's -- so maybe there's a little bit more front way to slightly, but nothing that I would say materially you should factor in.

And our next question will be coming from Vincent Caintic of BTIG.

I wanted to follow up sort of on the seasonality discussion again in terms of the guidance. Strong full year 2026 guidance. First quarter guidance is a little bit more mixed. Someone sort of wondering, so you just gave the expenses, that's really helpful. How should we think about the revenue side and the inflection through the year? I think you've already Provided Purchasing power has that seasonality, which you discussed in terms of revenues. For Four, should we kind of be expecting this continued acceleration as you've been experiencing? And then for the leasing business, so you talked about you're lapping both the loss of the partner as well as tightening underwriting in February. Is there sort of any way to kind of get a sense of what under lung GMV would have been without that? I know you said without Big Lots that would have been 1% higher, but I'm sort of thinking like how does the cadence look like from the second quarter onwards.

Yes. I mean I'll try and help you there. I mean you talked about purchasing power. With it being new to the platform, we want to give that quarterly color. And so it's roughly kind of breakeven in Q1. And then obviously, we're guiding to 50 million to 60. So in Q4, it's a holiday-centric retailer. So Q4 will be the strongest quarter from a revenue and earnings standpoint.

Four has seasonal dynamics as well. Q1 will be a strong profitability quarter because of the revenue and fees generated off of the really high GMV from December that got provisioned in December and hasn't had a chance to generate the revenues as much yet. We'll continue to -- at our growth rates that we're projecting we'll have another big fourth quarter next year -- or this year, sorry. And we'll see if it -- like last year, it caused us to swing to a loss, although a small loss, but a loss in Q4 from an adjusted EBITDA standpoint we'll see what happens this year based on scale and other factors. But Q1 is a strong earnings quarter for that business.

I mean, Leasing is starting, I would say, more so from -- versus the GMV front, it's starting at a 9.4% smaller portfolio than it had at the beginning of the year due to the GMV from 2025. So from a revenue standpoint and an earnings standpoint, there's kind of an uphill climb there that in the first half that hopefully gets better in the second half.

From a GMV perspective, we are lapping those 2 discrete items, and hopefully, those are behind us. Well, those will be behind us here at the end of February. And so we'll see some improvements in GMV performance as we get out of the first quarter into the second quarter and into the back half. So that's -- I guess that's the color we can provide on the quarterly version of the annual guide.

Okay. That's helpful. And last one for me. So we thought tax refunds a little bit already, but maybe if you could talk about just broadly what your expectations are for tax refunds and what's built into the guidance?

Yes. Similar to what I said, I mean, there's lots of reports that they're going to be 30% higher this year, not positive that our customer base is going to see that type of a percentage increase because of some of the things that are available in that tax bill are not available to our customer at their income level. However, we do expect it to be higher and so somewhere between probably 10% and 30%. And if that's the case, we'll see an inflow of cash, which is always good. Hopefully, we'll see some demand signals on the GMV front and it remains to be seen just what the GMV -- I'm sorry, the 90-day buyout activity will be. So we have some estimates that it's a little more active tax season than the past, which I think is reasonable based on the fact that we think the liquidity position will be higher.

And I would now like to turn the conference back to Steve for closing remarks.

Thank you, everyone. I appreciate you bearing with us here as we went a little long. But we're proud of the year -- the 2025 that we delivered and excited about our plans for '26. I want to take an opportunity to again welcome the Purchasing Power team to PROG. We're excited to be working with you and to unlock the potential of that great business, but also to thank all of our team members for their continued hard work and commitment to serving our customers and in retail and employer partners.

I'd like to reiterate John's invitation for you to participate in our upcoming Investor Day on March 10. We have a great presentation lined up and look forward to laying out the PROG story in more detail. And I look forward to you all hearing from a broader part of the leadership team as opposed to just Brian and I. So please reach out to John on how to participate in that Investor Day.

We appreciate your time and we look forward to updating you on our progress at the Investor Day and after Q1 in April. Thank you.

And this concludes today's program. Thank you for participating. You may now disconnect. Goodbye.

Good day, and thank you for standing by. Welcome to the PROG Holdings Business Update Conference Call. [Operator Instructions] Please be advised today's conference is being recorded.

I would now like to hand the conference over to your speaker today, John Baugh, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone, and welcome to our conference call to provide additional color on yesterday's announcement that the company has entered into a definitive agreement to acquire Purchasing Power. Statements in this presentation regarding PROG Holdings, Inc., the Company, and its expected acquisition of Purchasing Power 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. We encourage you to carefully review the forward-looking statements disclaimer on Slide 2 of the investor deck that we have posted to our investor website for more information. The slide deck, which we will be speaking to this morning can be found under our Events and Presentation tab on our investor website, which can be found on investor.progholdings.com.

With that, I'll now turn the call over to Steve Michaels PROG Holdings' President and CEO, to provide more details on the acquisition. Steve?

Thanks, John, and good morning, everyone. I'm excited to discuss our agreement to acquire Purchasing Power, the latest addition to the PROG ecosystem, a business that is highly aligned with PROG's mission and the customers we serve.

We believe this acquisition adds new capabilities, established partners and millions of eligible customers to the PROG ecosystem while also creating meaningful opportunities for revenue and cost synergies across our platforms. Purchasing Power fits squarely within our mission of providing transparent, flexible and inclusive payment options to underserved consumers. We look forward to combining the strengths of both organizations to unlock long-term value.

As John said, we will be walking through the deck that was posted to our investor site earlier this morning, and you are encouraged to download it and follow along. Beginning on Slide 4, we highlight that our 3-pillar strategy of grow, enhance and expand continues to guide how we operate and allocate resources. We seek to grow our GMV with existing merchant partners, new partners and direct-to-consumer initiatives, enhance the consumer experience with industry-leading service and technology and expand our ecosystem to deliver greater financial access and value to our customers.

Purchasing Power contributes meaningfully to our 3-pillar strategy. It expands our partner base into more than 25 industries nationwide, including 48 Fortune 500 companies and 7 of the top 30 U.S. employers, and introduces a differentiated payment capability that reduces payment default risk.

Importantly, while Purchasing Power uses a differentiated customer acquisition strategy, its B2B2C operating model closely mirrors Progressive Leasing's partner-led approach, enabling us to leverage our strengths, run familiar processes and minimize acquisition costs. While we will provide more color in February about our 2026 outlook, based upon the current trajectory of the Purchasing Power business, we expect 2026 revenue in the range of $680 million to $730 million and adjusted EBiTDA to be in the range of $50 million to $60 million. Note, the "i" referenced in this metric reflects the burden of interest expense from Purchasing Power's nonrecourse funding debt.

Turning to Slide 5. We provide an overview of Purchasing Power as an e-commerce-based platform that enables customers to purchase goods and services and pay over time through direct payroll deduction or payroll allotment. With relationships across over 360 established employers, Purchasing Power provides access to over 7 million employees nationwide. The business benefits from exceptionally high client revenue retention of approximately 98% and strong customer repeat rates, demonstrating the value and stickiness of the offering.

I'll now turn the call over to Brian Garner, our CFO, to walk us through the next several slides.

Thanks, Steve. Moving to Slide #6. This slide outlines the Purchasing Power operating model. Process begins when an employer adopts Purchasing Power as a voluntary benefit. Employees then register on the platform, shop from a large catalog of over 70,000 SKUs and make purchases directly through the website or mobile app. Once the transaction occurs, Purchasing Power places the order with the vendor and the vendor ships directly to the customer. Payments are then deducted automatically from the customer's paycheck and the employer or a third-party administrator remits those payments to Purchasing Power. This payroll deduct structure is a unique strength. It reduces payment risk and creates more predictable portfolio performance.

Moving to Slide 7. We highlight Purchasing Power's scalable go-to-market model. With a relatively small direct sales force, Purchasing Power leverages a network of more than 100 brokers, partners and distribution channels to efficiently access established employers across the U.S.

What's especially compelling is the quality of this access. Purchasing Power already successfully partnered with some of the largest employers in the country, including 48 Fortune 500 companies and 7 of the top 30 U.S. employers. That level of penetration is extremely difficult to build organically and represents a powerful accelerant for PROG. Through these relationships, Purchasing Power can reach millions of eligible employees efficiently and cost effectively. As we move forward, we believe this creates a meaningful opportunity for cross-selling and introducing the broader PROG ecosystem to a new, highly complementary customer base.

Turning to Slide 8. This slide demonstrates the compelling value proposition for both Purchasing Power's clients and customers. For clients or employers, Purchasing Power helps improve employee morale, productivity and retention at no cost to the employer. These benefits help explain the business' 98% client revenue retention. For customers, the platform provides transparent, affordable payments, upfront spending power, access to brand name products and a convenient payroll-deducted payment method that helps reduce financial stress.

The demographic profile is highly aligned with the consumer segments PROG already serves, with approximately 80% of customers having credit scores below 650 and household incomes around $78,000 per year. Yet there is a minimal overlap in actual customers, creating meaningful opportunity for cross-selling and revenue synergies across our product suite.

Slide 9 illustrates the breadth and depth of Purchasing Power's product catalog. The platform provides access to leading brands across categories like electronics, furniture, travel, appliance, fitness and fashion supported by a robust supplier network. This broad assortment attracts repeat usage and strengthens Purchasing Power's value as an employer-sponsored benefit.

Up here as we move on to Slide 10, which shows how Purchasing Power strengthens PROG's ecosystem. With the addition of a payroll-deducted payment model and a large employer-based customer population, PROG becomes one of the most diversified payment solutions -- payment solutions provider to the near and subprime market. We believe this solidifies the foundation for sustained multiyear growth.

Importantly, as I mentioned earlier, Purchasing Power introduces a customer base with a minimal overlap with our existing products, positioning us to expand both current offerings and future innovations across a much larger audience.

On Slide 7 (sic) [ Slide 11], we summarized the key benefits we anticipate from the acquisition. Expanded reach into a large underserved employee ecosystem, a differentiated payroll-deducted payment model, broader B2B distribution, strong financial contribution with meaningful EPS accretion and rapid deleveraging, enhanced competitive positioning with complementary products and stable portfolio performance supported by an employment-based data and payroll integration.

On Slide 12, I want to reiterate that our capital allocation priorities remain unchanged following this acquisition. Our first priority is continuing to invest in and scale our product offerings to drive organic growth. Significant growth opportunities remain within our existing products and services, and we are confident we have the right team to execute against these initiatives. Second, we will continue to evaluate M&A opportunities that meet our strategic and financial criteria as Purchasing Power does. I have said in prior calls that we would consider levering up temporarily for the right acquisition and believe Purchasing Power meets that description.

We remain committed to returning excess capital to shareholders while managing towards our long-term net leverage targets of 1.5x to 2x, excluding nonrecourse funding debt and intend to move quickly in that direction post acquisition.

Our combined businesses led by Progressive Leasing drive significant cash flow and thus, we expect to have the ability to delever relatively quickly while remaining committed to our dividend and having optionality around share repurchases.

Finally, on Slide 13, we provide details on the transaction terms. As mentioned in yesterday's press release, the purchase price is $420 million in cash and approximately $330 million of Purchasing Power's nonrecourse ABS funding debt will remain in place after the close of the transaction. We will fund the purchase and related transaction costs through approximately $175 million of cash on hand and roughly $260 million in incremental borrowing on new or existing debt facilities. The transaction is expected to close in early 2026.

We are very excited to bring Purchasing Power into our existing suite of products and services. This acquisition strengthens our mission to provide transparent, flexible and inclusive payment options to underserved customers.

I want to extend a warm welcome to the Purchasing Power team, its clients, partners and brokers, and we look forward to the opportunities ahead as we unite our organizations. With that, I'll turn the call over to the operator for Q&A.

[Operator Instructions] Our first question comes from Bobby Griffin with Raymond James.

I guess, first, Steve, can you talk a little bit about just the growth trajectory of the business and how it's grown over the last couple of years? And I guess what I'm trying to kind of understand is just the embedded growth to get to the estimates for 2026?

Yes, sure. So the company has been around since 2001, Atlanta-based, and obviously, it's had some -- it had quite a long history. It had a low double-digit CAGR growth rate from basically 2011 to up until the pandemic, and then understandably had some pause and shrank a little bit during some COVID years and then rebounded to that same low double-digit growth rate from '21 to '24. Implied in our -- 2025 is not over yet, right? So -- and we're only a day removed from the all-important Black Friday to Cyber Monday time frame as well as a very impactful full month of December to execute through. So we don't know exactly where they're going to end up for 2025. But based on the team's estimates, the implied growth rate that -- from the revenue range we gave for '26 is back in that low double-digit growth rate range.

Okay. That's helpful. And then maybe secondly for me, and I'll turn it over to some others. But I think in your prepared remarks, you referenced some meaningful -- I forget how the words you used, but meaningful revenue and cost synergies across the organization. So can you maybe unpack that a little bit? Does that involve the integrated payroll deduction model or anything there for us?

Yes. We do think there's very exciting revenue synergy opportunities across the businesses. We do address a similar customer, but there is fairly limited overlap currently. There's -- the list of things that we will be pursuing include offering the Purchasing Power offer to the -- some of the larger employers that Progressive Leasing already partners with. Purchasing Power partners with some very high-quality retailers, and they have great relationships with those employer retailers. So we'd look to see if that's an in for -- to help the biz dev efforts on the leasing business, complementary products like Four or Money App, being offered as part of the voluntary benefit package are things that we've discussed.

Purchasing Power is very keen on financial wellness and education. Our build product fits into that and helping consumers improve their credit scores. So there's lots of opportunities bidirectionally or omnidirectionally across the products in the ecosystem, which is why we believe this is such a good fit to add to the PROG ecosystem.

I appreciate the details and best of luck here closing out the holiday season.

Our next question comes from Brad Thomas with KeyBanc Capital Markets.

Congratulations on the transaction. I just wanted to follow up maybe on the revenue side of things and Bobby's question. And curious if you have any more details on how their growth has been in terms of business partners, in terms of companies that they partner with. And then what you see, if anything, over time, as the awareness maybe grows within those partners?

Yes, Brad, I mean, we'll provide more color on that as we -- once we get past closing and are in there on a day-to-day basis. But I can tell you, it's similar to the leasing business. They have a growth algorithm from getting more penetration and more adoption within their installed base with the number of what they call eligibles, which are basically employees of the employers that they already partner with. And then there's obviously a biz dev and pipeline component to the growth. And so both of those, we believe, have lots of opportunity, and we'll be working with the team to try and accelerate that.

That's helpful. And then if I could just ask a clarifying question around the funding debt. So is it right to think of the business, keeping it at this $330 million level or is it better to think of it perhaps staying in the, what is it about half of revenue for the business going forward? Just how to think about that? And then as we tie it to EBiTDA, is it right that we are including the cost of the interest expense associated with that funding debt in the cost -- basically the cost of operations as we get to that kind of $50 million to $60 million number. I just want to make sure we're thinking about all this right.

Yes, Brad, just with respect to the ABS debt, I think it's a fair way to think about that debt level really aligning with growth in revenue on a go-forward basis. Obviously, as new originations occur, we're going to be leaning on the ABS facility to provide that working capital. And so it's not necessarily a steady state, 330. It's more aligned to the volume driven by the business on the demand side.

Yes, we're thinking about the interest expense generated by that nonrecourse debt is really effectively, it's a -- it's a cost of doing business and that's why we're adjusting the EBiTDA to burden it for that. And that's how we expect to view the business on a go-forward basis. We think that it's more appropriate to burden it, and that's why we're introducing this EBiTDA metric.

That's great. Do you have a sense of what the interest rate is on that warehouse...

Yes, blended all in, I think it's right around 6.5%.

Great. And then maybe just a last one from me. Any sense of where margins overall are tracking for them from sort of a historic perspective? And where you think maybe they could go over time? It would seem to me that revenue growth would be the top priority for you all, but just curious about the margin side of things?

Yes, Brad, I mean certainly, revenue growth is, I think, something we're going to be pushing. And currently, the margin profile on that adjusted EBiTDA is kind of high -- mid- to high single digits. We think there's opportunities to increase that even in a growth scenario. In fact, growth helps because of scale. And so we believe that we're going to be able to get that into the low double digits kind of in the same ballpark as the leasing business in that 11% to 13% range. Not overnight, of course, but we'll be working towards improving that margin profile over the next 24 months or so.

Our next question comes from Anthony Chukumba with Loop Capital Markets.

So I guess my first question, I just want to make sure I understand the Purchasing Power business model. So the employee selects, let's just say, some Ashley Furniture. Purchasing Power is purchasing that from Ashley, I'm assuming they're paying a wholesale price for that. And then just in terms of the MSRP on the loan, is it just what you would pay if you just went to an Ashley store? Or is there -- have they kind of marked that up over what the regular MSRP would be?

Yes. Thanks, Anthony. Yes, it's correct. Using the Ashley example, Purchasing Power would buy it on a wholesale basis. And then the price, the retail price would be actually higher than the market retail price. And that's fully disclosed to the employee or to the potential customer, and then it is a 0 interest. It's a retail installment contract, so it's not a loan. And so it's just that stated retail price spread over normally 26 biweekly pay periods depending on when that -- that employer's payroll cycle.

Got it. Okay. And the -- and that's coming directly out of their -- out of their paycheck, right? So it's almost like you're garnishing their wages, right? So the only sort of -- I guess the only potential that you don't get paid back is if, let's say, they lose their job or something, right? I mean I'm assuming in that case, obviously, there's no paycheck with that employer to garnish, right? But I mean, in that scenario, is there a way that you can continue to try to collect those payments?

Yes. So the lion's share of the business is through payroll deduct. There is a portion of the business, which is through payroll allotment, which is similar, but different. It's more like a split direct deposit, if you will, as opposed to a payroll deduct. And -- but the lion's share is payroll deduct. And like you said, we have -- the Purchasing Power's integrations with their clients so that -- Purchasing Power is paid kind of first out of that paycheck along with other payroll deduct slots.

And you're right, the portfolio risk or the credit risk really is levered to turnover of the employee base. And so -- and they do -- the customers do have to put a backup payment plan, a debit card or a credit card on file. And -- but to the extent that there is losses, it usually derives from a separation of employment. When they're on the payroll deduct, it's very consistent and very good collection records.

Got it. And Steve, I guess just 2 more real quick ones. I don't mean to completely blow out the cords, so I just want to make sure I completely understand. So you said -- you normally repay over 26 paychecks. So that's assuming they get a paycheck every couple of years. So generally, the loan life is about 12 months. And then the second thing is what is the historical, I guess, write-off rate?

Yes. No, I think you -- I think you have the cadence right in terms of the payments. The write-off rate is -- just to differentiate a little bit the way we talk about leasing, we talk about that 6% to 8% write-off rate. That's a lease construct versus here a retail installment construct. So they're not directly comparable, but what I would guide you towards is what you will see on our financials post acquisition is that there's going to be a provision for credit loss, it's adherent to CECL. And that rate typically is in the mid-9s is what you would expect to see as a percentage of revenue, so a little over 9%, mid-9s.

Historically, that's -- it's ebb and flow and obviously, throughout the COVID and stimulus periods, but I think that's pretty representative of where they've been historically. So embedded within the outlook that we provided there for '26, it was just a little over 9% is what's included there.

Our next question comes from Vincent Caintic with BTIG.

I appreciate all the detail here. But I had a follow-up on the 2026 guidance. If you could help us additionally by providing what your expectations are for GMV and where the portfolio balances are, that would be helpful or maybe interest rates or how to think about like a revenue yield on -- that's driving the revenue guide. And does the guidance that you did provide in terms of revenue and EBITDA, does that include synergies with PRG's other businesses? Or is that just Purchasing Power?

Yes, Vincent. So in this business, because it's a retail business, revenue is basically GMV. So that's how we're thinking about that moving forward. The revenue is recognized -- the retail value of the sale is recognized in the period that it's transacted. So those things are moving forward are basically the same thing. And the -- there really are no revenue synergies baked into that revenue range. We certainly anticipate that we will execute on some of those, but it's difficult to know the exact timing of that. We did include some cost synergies from some consolidation, but it certainly is not a full run rate amount because those will also happen throughout '26, and we won't get the full year impact. So in the $50 million to $60 million includes some cost synergy assumptions and little to no revenue assumptions.

Okay. Great. Perfect. And should -- I guess, to that, the amount of outstanding receivables that you might still have, should we think about it as basically being say, funded by the ABS? So there's maybe about $330 million or a little bit more than $330 million of outstanding receivables?

Yes. Vincent, I think that's roughly the range. And like we said before, we're going to -- on a go-forward basis, continue to leverage this ABS facility. And so yes, you're in the ballpark there in terms of where the receivables are at.

Okay. Great. Perfect. And last one for me, actually just following up, Steve, on that expense commentary. If you can maybe talk about the synergies. You talked -- I think, to an earlier question about the scale opportunities and that expanding EBITDA margin. Maybe if you could talk about other ways, like it does seem like maybe the underwriting of this business is similar. Is it -- maybe if you can compare the existing operations of Purchasing Power versus other businesses and where you can consolidate or enhance some of your other businesses using the technologies of Purchasing Power, that would be great.

Yes. I mean we'll be providing more color on areas of opportunity as we talk more about the business post closing. But certainly, the businesses are similar in the B2B2C model, as I mentioned. And both businesses have very big good track records of attracting and supporting enterprise size, partner/clients. And so we look forward to taking best practices from both teams to accelerate our success in that regard. The data is very rich as it relates to this customer base. Progressive has a long history, Four has a very growing database and lots of data and Purchasing Power has access to a lot of data as well. So there's certainly opportunities there that we're very much looking forward to acting on and improving the operations across the ecosystem.

And -- so cost synergies will be there. But the thing that's most exciting is the ability to grow the mutual businesses and have the ecosystem strategy continue to play out and provide multiple products into this customer base such that we have more share of wallet and higher lifetime values.

Ladies and gentlemen, this does conclude the Q&A portion of today's conference. I'd like to turn the call back over to Steve for any further remarks.

Thank you very much. I just want to again warmly welcome the team from Purchasing Power. We look forward to getting past closing, and working alongside you to achieve great things together for the benefit of all of our stakeholders. Thank you.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.

Good day, and thank you for standing by. Welcome to the PROG Holdings Third Quarter Earnings Conference Call. [Operator Instructions] Please note that today's conference is being recorded.

I will now hand the conference over to your speaker host, John Baugh, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to the PROG Holdings Third Quarter 2025 Earnings Call. Joining me this morning are Steve Michaels, PROG Holdings' President and Chief Executive Officer; and Brian Garner, our Chief Financial Officer. Many of you have already seen a copy of our earnings release issued this morning. which is available on our Investor Relations website, investor.progholdings.com.

During this call, certain statements we make will be forward looking, including comments regarding our revised 2025 full year outlook and our guidance for the fourth quarter of 2025. The health of our lease portfolio and our capital allocation priorities and the benefits we expect from our sale of the Vive Financial portfolio to Atlanticus Holdings Corporation, such as improving our capital efficiency and improving our profitability profile.

Listeners are cautioned not to place undue emphasis on forward-looking statements we make today, all of which are subject to risks and uncertainties, which could cause actual results to differ materially from those contained in the forward-looking statements. We undertake no obligation to update any such statements.

On today's call, we will be referring to certain non-GAAP financial measures, including adjusted EBITDA and non-GAAP EPS, which have been adjusted for certain items which may affect the comparability of our performance with other companies. These non-GAAP measures are detailed in the reconciliation tables included with our earnings release. The company believes that these non-GAAP financial measures provide meaningful insight into the company's operational performance and cash flows and provides these measures to investors to help facilitate comparisons of operating results with prior periods and to assist them in understanding the company's ongoing operational performance.

With that, I would like to turn the call over to Steve Michaels, PROG Holdings' President and Chief Executive Officer. Steve?

Thanks, John, and good morning, everyone. Thank you for joining us today as we report our third quarter results and share our perspective on how we're positioned heading into the final stretch of 2025. I'll also provide context around the recently announced sale of our Vive portfolio and how that decision aligns with our long-term strategic priorities.

In the third quarter, we surpassed the high end of our outlook for revenue and earnings. These results were driven by continued strength in portfolio performance and strong momentum within our BNPL business for technologies. Non-GAAP diluted EPS of $0.90 exceeded our outlook range of $0.70 to $0.75 per share, marking our third consecutive earnings beat this year. This quarter's outperformance reflects the discipline of our team the strength of our business model and our ability to execute through macroeconomic volatility. Throughout the quarter, we navigated persistent consumer challenges marked by ongoing inflationary pressures, growing financial stress among lower-income households and early signs of labor market softening, all of which impact discretionary spend in our leasable verticals.

While the overall unemployment rate is still low, the heightened financial stress and greater caution among the lower-income consumers across our leasable categories is a headwind to GMV. As I shared in July, 2 primary factors weigh on Progressive Leasing GMV this year including in the third quarter. The first is the previously disclosed Big Lots bankruptcy, which created a significant GMV headwind. The second is our intentional tightening actions of lease approvals, a necessary step to preserve portfolio health in an unpredictable environment. Adjusting for these 2 discrete items, underlying GMV in Q3 grew in the mid-single digits, reflecting strong operational execution and healthy demand across other areas of the business.

We are growing balance of share with key retail partners, strengthening existing relationships and scaling our omnichannel ecosystem. As Brian noted in July, we expected approval rate comparisons to ease slightly in Q3, and they did. Our progressive leasing 2-year GMV stack improved from negative mid- to low single digits in the first half of the year to flat in Q3, which had the toughest year-over-year compare given the strong growth in Q3 2024. These trends give us confidence in the durability of our go-to-market strategy and the long-term scalability of our platform.

Progressive Leasing's portfolio performance remained strong and within our targeted 6% to 8% annual write-off range. Q3 write-offs of 7.4% improved both sequentially and year-over-year. These results reflect the success of our ongoing refinements to our decisioning posture and risk analytics. We are encouraged by the early-stage performance indicators and believe we can deliver consistent portfolio outcomes while driving profitable GMV.

Consolidated revenue came in at $595.1 million, which reflects a slight decline compared to the same period last year. This result was driven by the impact of the Big Lots GMV loss and a smaller portfolio entering the quarter for our leasing business, offset by another standout quarter from 4 technologies, which again delivered triple-digit revenue growth. Consolidated adjusted EBITDA was $67 million and non-GAAP EPS was $0.90, both exceeding the high end of our outlook.

Before diving deeper into the Q3 business results, I want to take a moment to address today's announcement regarding the sale of our Vive financial credit card receivables portfolio to Atlanticus Holdings Corporation. This transaction represents a meaningful step in our long-term strategy to improve our capital efficiency as we focus on opportunities with the greatest economic returns. While Vive has been part of our ecosystem since 2016, we believe this decision enhances our overall profitability profile and positions us to deploy capital more effectively.

We're pleased to be partnering with Fortiva, the second look credit offering of Atlanticus to ensure continuity for our retail partners and consumers, allowing us to maintain access to a comprehensive set of flexible payment options to underserved consumers while aligning our resources with the future of the PROG platform. The sale of the Vive receivables portfolio strengthens our balance sheet, giving us additional flexibility to invest in strategic priorities. Brian will speak to the capital implication shortly. but I want to underscore that we are committed to deploying capital in ways we believe will drive sustainable shareholder value through investments in growth, strategic M&A and disciplined return of capital through share repurchases and dividends.

I want to take a moment to thank the entire Vive team for their contributions. Their hard work and commitment played a critical role in helping us serve customers who may not have otherwise had access to credit, and we're proud of the positive impact they've made. We made every effort to support Vive team members through this transition, including identifying some opportunities within the broader PROG Holdings organization. We wish them all the best as they move into this next chapter.

Moving back to the business. We made significant progress in our strategic pillars of grow, enhance and expand in Q3. Under Grow, we continue to ramp direct-to-consumer performance saw strong returns from our omnichannel partner marketing initiatives and increasing e-commerce penetration. Our marketplace team also onboarded additional affiliate and e-commerce partners. E-commerce GMV is at 23% of total progressive leasing GMV in Q3 2025, up from 20.9% in Q2 and 16.6% in Q3 2024. Additionally, we launched or signed 3 recognizable new retail partners since our last earnings call, each representing GMV expansion opportunities. These exclusive partnership wins were all earned through a competitive selection process. Progressive Leasing prevailing in each of these competitive processes underscores our leadership position, the strength of our value proposition and our ability to drive incremental sales.

Our pipeline is healthy with a focus on converting near-term opportunities and deepening engagement with existing accounts as we expand our footprint across both national and regional segments. We strengthened our position within existing retail relationships by extending long-term exclusive agreements with several of our major national partners, reinforcing our role as their exclusive lease-to-own provider. We have successfully renewed nearly 70% of our Progressive Leasing GMV to exclusive contracts reaching to 2030 and beyond. With these additional renewals in place, we can focus on integration, accelerating our initiative road map with these partners to drive future growth.

As I've mentioned previously, Millennials and Gen Z make up a growing share of our customer base, and we're evolving our marketing, product design and engagement strategies to meet the expectations of these digitally savvy consumers. Their strong preference for mobile and self-service is driving increased adoption of our digital application flows and mobile platform, emphasizing our omnichannel strategy and validating the investments we made in personalization and seamless user experiences. PROG Marketplace, our direct-to-consumer platform remains a meaningful growth engine delivering another quarter of strong double-digit GMV expansion. This channel not only broadens our reach beyond traditional retail partnerships, but also plays an increasingly important role in building relationships with consumers and enabling us to direct consumers to our POS partners through a new channel.

We're investing in brand building, personalization and life cycle marketing to increase customer engagement and we're seeing encouraging trends in repeat usage and retention as a result. PROG Marketplace is helping us create a more durable and self-sustaining customer ecosystem, one that supports growth across our leasing, BNPL and cash advance offerings alike. Under our enhanced pillar, we made strategic investments in technology that improve both customer and employee experiences across the progressive ecosystem. Our innovation team at PROG Labs is at the forefront of this effort. Our AI-powered transactional consumer chat platform has now handled over 100,000 customer interactions, supporting customers from the approval stage through conversion and into the servicing of their lease agreements. We're proud of how this tool is already enhancing our ability to deliver timely, personalized support and it's reducing friction in our service model.

With new capabilities introduced in Q3, customers can now make payments, request approval amount increases and inquire about the account status directly within this chat platform. These initiatives are already proving valuable, but we believe we're still in the early innings of what's possible. We expect these AI-driven capabilities to be a key differentiator as we scale customer personalization, drive efficiencies and set the bar for digital innovation and lease-to-own. Under our expand pillar, our multiproduct ecosystem is maturing with growing connectivity between offerings. Our cross marketing campaigns between 4 and Progressive Leasing have proven effective in increasing repeat usage and driving incremental GMV.

Turning to our BNPL platform. Core technologies has exceeded expectations once again, delivering its eighth consecutive quarter of triple-digit GMV and revenue growth. As we first shared last quarter, engagement trends are strong with average purchase frequency of approximately 5 transactions per quarter for the last year and more than 160% growth in active shoppers year-over-year. We are seeing strong momentum in unique shoppers and merchant relationships, driving high engagement across the platform, contributing to overall GMV. Additionally, our Four+ subscription model continues to be a key driver with over 80% of GMV coming from active subscribers. Importantly, Four's take rate of approximately 10% and defined as revenue generated as a percentage of GMV over the trailing 12-month period is a strong indicator of monetization efficiency.

Four has operated profitably year-to-date and its role in our broader ecosystem is expanding meaningfully, not just as a stand-alone business, but as a cross-sell driver for Progressive Leasing and as a catalyst for customer acquisition. From a profitability standpoint, Four generated year-to-date adjusted EBITDA of $11.1 million through Q3 2025, representing a 23% margin on revenue. As we look ahead to Q4, we are forecasting an adjusted EBITDA loss, driven by seasonal dynamics that require an upfront provision for credit losses for new originations. Despite this anticipated Q4 loss, we believe Four will have positive adjusted EBITDA for the year.

Given that the peak holiday season will account for more than 20% of Four's full year GMV, this provision creates a timing impact on profitability. This pattern is well understood and consistent with our operating model as these holiday originations generate the majority of their revenue in Q1, we expect to see a meaningful rebound positioning Four to deliver its highest quarterly adjusted EBITDA margin of the year in Q1 of 2026. Looking ahead, we're closely monitoring the macro environment, especially as consumers face ongoing liquidity constraints and shifting spending behavior. The demand environment remains soft across many durable goods categories, which will likely continue in Q4.

That said, we're not waiting for the environment to improve. We're leaning into the areas we can control, portfolio health, disciplined spending, deepening partner engagement and driving sustainable profitable revenue through our multiproduct ecosystem. Our capital allocation priorities are unchanged. We're investing to drive long-term growth through sales initiatives, marketing investments, AI and other innovation, digital infrastructure, exploring strategic M&A opportunities that strengthen our ecosystem and returning excess cash to shareholders through share repurchases and dividends. We did not repurchase shares during the quarter due to ongoing discussions with Atlanticus regarding the sale of the Vive portfolio. Those discussions, which began in January, progressed to a stage in Q3 that restricted our ability to be in the market until the transaction was publicly announced.

As Brian will outline, we ended Q3 with a strong cash position and generated meaningful free cash flow reinforcing our capability to fund growth while maintaining financial flexibility. To close, we are confident about how we're executing across the business. We delivered strong earnings, improved portfolio performance and successfully executed the strategic divestiture of a portfolio business, allowing us to reallocate capital towards our highest conviction opportunities. At the same time, we are building momentum in our fastest-growing segment for technologies. I'm proud of what we've accomplished this quarter and confident in our ability to sustain this momentum into the future, which we expect will create long-term value for our customers, partners and shareholders.

With that, I'll turn the call over to Brian for more details on Q3 results and our 2025 outlook. Brian?

Thanks, Steve, and good morning, everyone. Our third quarter results highlight execution and innovation across our product offerings. Once again, we exceeded the high end of our guidance on revenue and earnings despite pressures on consumer demand across our key categories. Non-GAAP diluted EPS of $0.90 per share will be the high end of our outlook by $0.15 and was up approximately 17% compared to the same period last year.

This outperformance reflects a combination of 3 key factors: strengthen our portfolio performance, mostly monitoring levels of spend and momentum from our Buy Now, Pay Later and direct-to-consumer initiatives. We are focused on profitable growth and actively managing the business to optimize returns while staying agile in a dynamic operating environment.

Let me start with Progressive Leasing segment. GMV came in at $410.9 million, which represents a year-over-year decline of 10%. However, as Steve noted, the underlying performance tells a more compelling story. Adjusting for the loss of GMV related to the Big Lots bankruptcy and the impact of our deliberate tightening of approval rates, the business would have delivered mid-single-digit growth, driven by solid balance of share gains within key retail relationships and growing traction among e-commerce and direct-to-consumer channels. Prog Marketplace, our direct consumer channel delivered 59% year-over-year GMV growth for the quarter.

Q3 revenue for Progressive Leasing was down approximately 4.5% at $556.6 million compared to $582.6 million in the prior year. Revenue benefited from slightly better to better customer payment performance. This tailwind, however, was offset by GMV headwinds, primarily driven by the big loss bankruptcy and tightening actions we took in the second half of 2024 and early 2025. Portfolio performance remains strong with write-offs coming in at 7.4%, and representing an improvement sequentially and year-over-year. This result reflects the impact of our deliberate tightening actions. As always, we are actively monitoring early performance indicators to ensure our decisioning posture is consistent with delivering write-offs within our targeted annual range of 6% to 8%.

Progressive Leasing gross margin in Q3 came in at 32%, representing an approximately 80 basis point improvement year-over-year. This margin expansion was driven in part by a higher proportion of customers staying in their lease agreements longer as well as higher year-over-year yield from our lease portfolio. Progressive Leasing's SG&A for the quarter was $79.3 million or 14.2% of revenue compared to 13.1% in Q3 of 2024. As we've discussed in prior quarters, we've made targeted investments to support long-term growth, focused on customer-facing capabilities, technology modernization and partner enablement while maintaining cost discipline across the organization.

Adjusted EBITDA for Progressive Leasing came in at $64.5 million or 11.6% of revenue, landing within our 11% to 13% annual margin target and improving by 20 basis points year-over-year. This performance underscores our ability to deliver consistent profitability through disciplined execution even in the face of challenging year-over-year GMV comps and a softer demand environment.

Turning to consolidated results. Q3 revenue was $595.1 million, which reflects a slight decline compared to the same period last year at $606.1 million that came in at the high end of our guidance range. The year-over-year decline is driven by the impact of the Big Lots GMV loss and smaller lease portfolio entering the quarter largely offset by another triple-digit revenue growth quarter at Four Technologies. Consolidated adjusted EBITDA was $67 million or 11.3% of revenue compared to $63.5 million or 10.5% of revenue in Q3 of 2024. This year-over-year improvement reflects strong adjusted EBITDA performance of Four and year-over-year margin improvement at Progressive Leasing.

Non-GAAP diluted EPS came in at $0.90, exceeding the top end of our outlook, driven primarily by strong underlying earnings performance. As Steve noted, we did not repurchase shares during the quarter due to the ongoing discussions with Atlanticus related to the Vive portfolio sale, which restricted our ability to be in the market until the transaction was finalized.

Let me now turn to the divestiture of the Vive portfolio, which was announced earlier this morning. The transaction will be reflected in our Q4 financial results and classified as discontinued operations. As I'll discuss later, our updated outlook reflects the impact of the divestiture. The proceeds of approximately $150 million provide incremental liquidity and strengthens our balance sheet, creating greater flexibility as we assess opportunities through our capital allocation framework. In the near term, we will continue our investments across our ecosystem of products.

As always, we remain disciplined in our capital allocation approach. Our priorities are unchanged. We're focused on funding impactable growth initiatives pursuing selective high-return M&A opportunities that complement our ecosystem strategy and returning excess capital to shareholders through our ongoing share repurchases and quarterly dividends. These actions reflect our commitment to driving long-term profitability and delivering sustained shareholder value.

Moving to the balance sheet. We ended Q3 with $292.6 million in cash and $600 million of gross debt, resulting in a net leverage ratio of 1.1x, which is comfortably within our target range. We maintained ample liquidity during the quarter and had no borrowings outstanding on our $350 million revolver. In Q3, we paid a quarterly cash dividend of $0.13 per share. As of quarter end, we had $309.6 million of unused authorization under our $500 million repurchase program. For our 2025 consolidated outlook, in light of this morning's announcement regarding the Vive divestiture, we have removed Vive from our outlook for both the fourth quarter and full year 2025. Our revised outlook has consolidated revenues in the range of $2.41 billion to $2.435 billion, adjusted EBITDA in the range of $258 million to $265 million and non-GAAP EPS in the range of $3.35 to $3.45. This outlook assumes a difficult operating environment with soft demand for consumer durable goods, no material changes in the company's current existing posture an effective tax rate for non-GAAP EPS of approximately 27% and no impact from additional share repurchases.

To summarize, Q3 was a strong quarter across the board. We delivered earnings above expectations, maintained healthy portfolio performance, advanced key initiatives aimed at supporting long-term growth and subsequent to the quarter and executed a strategic divestiture. With a solid balance sheet, scalable cost structure, profitable growth in our Buy Now, Pay Later business at a proven multiproduct ecosystem, we are well positioned to deliver sustained value for our customers, retail partners and shareholders.

With that, I'll turn the call back over to the operator for questions. Operator?

[Operator Instructions] Our first question coming from the line of Kyle Joseph with Stephens.

Given all the headlines we've seen around the consumer, I was just looking to get an update, and I recognize there are some moving parts, but we're looking at write-offs coming down for you guys, even though you guys have headwinds from big lots on that front. And then it sounds like GMV ex Big Lots are underwriting, there's some positive trends there. And then just weighing that with some of your commentary in terms of macro data and some of the headlines we've seen in the consumer finance arena. Just kind of looking for an update on the pulse of the consumer in your opinion.

Yes. Thanks, Kyle. Yes, it's certainly been in the headlines, and it's something that we are constantly battling and analyzing.

But to your point, we're pleased with where the portfolio is. I'm really proud of our data science teams, they do a great job delivering that consistent portfolio in a very dynamic environment. The write-offs did improved both sequentially and year-over-year due to the -- our deliberate actions that we took earlier this year, for the most part, some late last year. But we're watching it very closely. I mean, we feel pretty good about where we are right now, but we are seeing some stress in the consumer. And as you said, there's lots of headlines around liquidity pressures and just macro pressures on the consumer, especially in our -- in the cohort that we serve.

Our DQs are elevated at this time compared to previous years, including last year, and we're watching it very closely. We haven't found the need or seen the need to tighten additionally yet. I'm not saying that, that won't happen based on how the data comes in the door, and that's one of the great aspects of our short-duration portfolios across our products and the fact that we get quick feedback loop that we can adjust very quickly to trends we're seeing in the data. So I mean we're defensively postured and kind of braced for potentially having to tweak additional dials, but we have not done that in any material way since earlier in this year.

We always are looking for -- we're always adjusting dials, some positive and some negative, but in what I would call a tightening action. We haven't had to do that since earlier this year. But we're not ruling it out based on what we see for the rest of the year.

Got it. Really helpful. And then in terms of the GMV outlook for the rest of the year, I think, Steve, you highlighted that 3Q was a tough comp in terms of 3Q '24 growth. But just factoring in the timing of big lots and the timing of underwriting changes, should we think about 3Q as kind of the bottom point or similar headwinds into 4Q before things really ease up into 2026.

I think the comp's really don't clear up until Q1. We put out that supplemental slide page with Big Lots and Q4 is a similar headwind to the previous quarters this year and the tightening while we did do some of it in late last year, most of what we're referring to was in Q1 of this year. So from a comp standpoint, I don't -- I think the pressures are still roughly the same.

I will say that our Q3 GMV did come in slightly below where we expected it to when we were updating you in July, I think, a lot to do with some of those pressures that you are referring to on the consumer. And so we've adjusted some of our view on Q4 as well. we're continuing to fight every day. And we have big plans for the holiday season, but there's mixed reports out there about what to expect from a consumer discretionary spend during holiday as well. So we've got some internal initiatives, some things we're trying to get across the goal line with existing retail partners before we go into code freeze for the holidays. And we're pleased with where we are, but the macro is a challenge and has been impacting GMV in addition to the 2 discrete headwinds that we've called out.

Got it. One last one for me. Just on -- in terms of the guidance on other, it looks like better revenue guidance and then marginally lower profitability. Is that just a function of timing and growth math really?

Yes. We tried to address that in the prepared remarks. Our Four business is -- we're very pleased with how -- what it's doing and how it's growing and its profitability year-to-date. And then there's just a very understandable seasonal dynamic in Q4 and more specifically in kind of late November, December with the surge of GMV that we have observed in last year as well as are predicting for this year and how that upfront provisioning with very little revenue recognition will cause Four to swing to a loss for Q4. Nothing to be concerned about. It's just a dynamic of the model, and it will swing back in Q1 of next year.

But the strength of the BNPL business year-to-date is undeniable and it's going to continue, but there will be some P&L dynamics, which have been reflected in the other segment and are impacting our PROG Holdings level guidance for the full year or implied for the fourth quarter because of that swing to an adjusted EBITDA loss.

Our next question coming from the line of by Bobby Griffin with Raymond James.

Steve, I wanted to just maybe talk more on the current environment. Your comments on the low end and some of the pressure makes a lot of sense. I didn't hear much on trade down. So can you maybe just touch on that as part of what's going on here, you guys are having to be a little bit tighter or incrementally tighter as we did this year. You're not seeing that happen in the tiers above you. Just trying to get a sense on how this environment might be evolving versus some of the earlier trade down we saw when everybody started tightening together?

Yes, it's a good call out, Bobby. And we certainly saw the impacts of the supply above us tighten in 2024 and then kind of stayed static while they saw what their portfolios were doing. Earlier this year, I think the recalls that folks may be loosening here in the back half of 2025. I think providers are reevaluating that potential strategy. But based on the headlines that we've seen over the last, I don't know, 6 to 12 weeks, which would indicate some stress out there in auto portfolios and elsewhere, we have not yet seen or observed in the credit stacks where we participate and have good visibility any trade down or any tightening in the supply above us.

So we are -- we did have to tighten earlier this year. We have not seen any additional benefit from supply above us tightening so far, I think it's just my opinion is it's unlikely that they will loosen here in the holiday season, but I'm not -- we haven't seen any evidence of them tightening and creating more of that trade down for us.

Okay. That's helpful. And then maybe on just the GMV cadence through the quarter, I mean, anything interesting or notable kind of how the months played out? And anything in October to help us think about kind of the early I know we're still a little early for holiday, but just anything in October as well?

Yes, nothing on holiday yet. Obviously, it's difficult right now, but this is the case every year that so much of the quarter is made in the 5 weeks between Black Friday or the 7 days of Black Friday, whatever you want to call it, to Christmas for the leasing business. The quarter for Q3, it was -- it's fairly similar, but it did -- September was lower than August and July from a negative standpoint. But I don't know if the headlines and the psychology from the pending government shutdown and all those things kind of played into people's confidence and sentiment. But we did see some softness.

Okay. And then lastly for me, Brian, I hate to be the guy to ask about '26, but I'm going to do that here just because there's a lot of moving parts. But when you think about '26 and just want to maybe level set the model, I'm not asking for guidance, of course, but like you got biflowing out, you've got a smaller portfolio because of this GMV, but then you have the big loss headwind coming off. So just help us frame up kind of all those moving parts and to keep kind of expectations in line with the smaller portfolio, but potentially GMV actually starting to show growth again?

Yes. I think starting with the tailwinds, as you look at '26 and again, not providing guidance, but just as things are shaping up, I think you're right. So from a decisioning standpoint, as Steve alluded to, the biggest relief from a year-over-year comp comes in Q1. That was the most meaningful tightening that we did here in Q1 of 2025. So as that rolls off, you should start to see some relief there along with that and obviously getting past the Big Lots comp, which we've provided information about in our supplemental deck, and I think the other positives or portfolio is being managed effectively.

So we've -- as we talked about, we're down year-over-year and sequentially with the 7.4% that we posted this year. So I think a similar kind of write-off posture is probably appropriate. You've also got this growth in forward that's really siding and booing the results here in the quarter. And I think we've got a trajectory there that's encouraging. And I think the offset or what we're paying attention to a little bit is this macro and the impact on leasing just more broadly, that will, I think, continue to serve a challenge here in Q4, and we'll see what 2026 holds.

But I think that's how it's shaping up from a -- we talked about this 11% to 13% EBITDA margin target for the leasing segment. There's no not an intent to revisit that at least at this point in time. So that's our mandate is to actively manage the cost structure in light of what our top line allows. And that's -- those are really the inputs as I shape up 2026. The buy portfolio, as you said, is really not consequential to earnings. It's about a $65 million haircut off of revenue from a run rate perspective. And so that's how I'd size that up.

Perfect. That's very helpful. Appreciate the detail here, and congrats on the transaction and the portfolio management.

Our next question coming from the line of Anthony Chukumba with Loop Capital Markets.

I guess my first question, you mentioned the 3 new retail partners. Can you tell us who those retail partners are?

Anthony, I had money that you would be the one that noticed that and talked about that. So I'm glad I appreciate that. Yes, we're not going to name them. We just wanted to highlight because our business teams are out there working their tails off all the time and they can't control the timing of when we get things across the goal line, but it's not for a lack of effort and/or success, quite frankly. So we were pleased with the results in the quarter and actually, one of them was subsequent to the quarter end.

But we use the term recognizable retail logos on purpose because while they may not have been stand-alone press releases, they are logos that you would recognize. And so we're pleased with those wins, those competitive processes and prevailing in those processes. And while they'll have very minimal impact in 2025, they will be part of the building blocks of how we're building the GMV picture and profile for 2026. And the teams also have a number of other opportunities in the pipeline that we're excited about. And unfortunately, as you've observed with us for many years, the timing is very choppy on when those things come across.

Got it. Okay. So I guess that's a new project from my research associate to figure out who those retailers are. Second question, okay. So you got $150 million for the Vive portfolio. That's more than 10% of your market cap. And then you've got this 9-figure windfall coming from the one big beautiful bill, which makes me feel dumber every time I have to say that. I guess my question then becomes how do you think about capital allocation, right? You mentioned you're at 1.1x leverage. You're very comfortable with that. I would say, particularly given where your stock is that you would back up the truck in terms of buying back stock. But how do you sort of think about that?

Yes. You're right. And that 1.1x times leverage was previous to the sales of Vive portfolio, so point taken. Yes. I mean you kind of -- you said it up there. We look at it through the lens of net leverage ratio, right, which we think is kind of a 1.5 to 2 turns is kind of a comfort level. But then we look at our capital allocation priorities and growing the business is priority one. And obviously, we're in a negative GMV situation currently with leasing, but we don't expect that to be the case forever. So hopefully, we'll have some working capital requirements to grow GMV within the leasing business, Four is obviously a juggernaut. And while very short duration transactions, we'll need some capital here, especially in the fourth quarter. And so -- but we're fortunate in that our business models do allow us to kind of check that box when it comes to organic growth and reinvesting in the business.

Second, we have said that strategic or opportunistic M&A is something that's on our radar, and we would look for something synergistic to our ecosystem, and that fits into our strengths of serving this below prime and underserved customer and assessing risk. And then absent those 2 first things, then we would define excess capital and look to return it to the shareholders. And our history has been through repurchases and obviously, we initiated a dividend about 2 years ago. So the capital lens and capital allocation priorities haven't changed. We just have a high-level problem of having more of it on the balance sheet right now. And so we'll look to look to check those 3 boxes and be good stewards of capital.

Our next question coming from the line of from Hoang Nguyen with TD Cowen.

I guess you're now seeing some softness from maybe the consumers, the lower end consumers. So -- but then you haven't tightened yet. So can you talk about the difference between now and maybe this time a year ago when you guys started to tighten. What's the difference that I haven't met you guys, I guess, that haven't made you guys do additional tightening at this point in the pressures that's starting to surface?

Yes. I mean, I think the difference is that the portfolio is in a different place than it was last year because of the tightening. So as you know, it turns over fairly quickly. And so the actions that we took in the back half of '24, but more specifically in Q1 of '25 have helped to make the portfolio more healthy. We are seeing some elevated DQs, the delinquencies. But one of the good achievements of our data science teams are there, some of the changes they made to the approvals and approval amounts is that we have been able to choke off, if you will, kind of some of the straight rollers or the no pays that roll right to charge-off or write-off. So the idea that you can have some elevated delinquencies but not negative dispositions or negative outcomes, those things can be true at the same time.

And so we are -- again, we're white-knuckled like we always because portfolio is job one, we're watching the portfolio and poised if we have to do something, but the early indicators are showing us things that we should be paying attention to, but have not told us that we need to do additional tightening at this point.

Yes. I would just add to that. What dynamic Steve just illustrated is coming through in that 80 basis points of gross margin expansion. And so you asked what from a year-over-year perspective, what's the dynamic? We're certainly seeing a more favorable mix in the way that this play now and those changes we made from a decisioning science standpoint are playing through. And so I think that's an important element comparing contrasting last year to this.

Got it. And my follow-up is on the Vive sales. Given that you guys are getting $150 million and you guys didn't do buyback in 3Q, I mean, should we expect catch-up buyback in 4Q and what you plan to do with this proceed going forward?

Yes. I mean, I guess I would just kind of refer to the answer previously about what we're going to do with the capital and just kind of go back to our capital allocation priorities. And then we don't we don't really guide or speak to what we're going to do in the future about repurchases in any given quarter, and we would just look to the 3-pillar strategy on capital allocation.

Our next question coming from the line of Brad Thomas with KeyBanc Capital Markets.

I wanted to follow up on Four. And first of all, congratulations on the nice momentum in that business, a really exciting outlook that I think is still underappreciated by many investors.

I was curious, Steve, as you continue to grow that business, there's this sort of ongoing question of does BNPL compete with lease to own. And so I was curious as you have success cross marketing, what your new learnings are as you have more overlap as where those customers are?

Yes. Thanks, Brad. And yes, we're very excited about Four and its current state, but also its potential and where we're going to -- where we think we can take it.

Yes, I mean, it's been interesting to have that product in our ecosystem to be able to watch it because I -- before -- well, we've had it for 4 years, but it is very small in '21, '22 and '23. And the view has always been that BNPL and more specifically, the pay and Four providers, not some of the longer installment sales that people call BNPL are not really a competitor leasing most -- very simply because of the average order value, right? And the average order value is still in the $125 to $140 range, which is materially different than an $1,100 average ticket for our leasing business.

Also, the categories that are predominant in the -- in our 4 businesses are different, right? You have consumables and cosmetics and apparel and sneakers and it's provided us a nice insight into those shopping patterns. And I think that is also a reason why they have diverging growth rates currently because people are still consuming those things that I mentioned on a $140 purchase, but they're maybe more reluctant or deferring purchases of the larger ticket durable goods that are traditionally in the leasing business. We are excited and encouraged by our cross-sell motions and developing those further because there is overlap in the consumer.

Four will serve a below prime consumer all the way up to a super prime consumer but there is considerable overlap with the leasing customer. And to the extent that they can come to us if they need a new refrigerator from Samsung versus shoe drop on a Saturday afternoon for some new Jordan and use that our different products for that is, we think, a big opportunity for us and we're doing that currently, and we have plans to do it more and better in the future. But we don't really see the [ Pay ] in Four as a competitor to Leasing. It's -- and we believe that it can be complementary.

That's very helpful. And maybe a follow-up for Brian. I know you're not giving 2026 guidance, and Bob, you already took a stab at this. But as we think about the margin side of things, I guess, is there anything you would call out? Again, as you talked about with Bobby, it does feel like the revenue outlook at the beginning of next year would be challenging if the GMV is down at the end of this year. Outside of the leverage side of things, are there any broad that we should keep in mind as we think about margins?

Yes. No, it's a good question. It's something that we're very focused on and trying to make decisions internally to balance the investments that need to get made in this business that have high ROI potential. And also adhering to this 11% to 13% for the -- certainly for the leasing segment that we have set as a standard for prior years.

And as implied in our guidance, I think we're right around the bottom end of that 11% to 13%. And as we look into 2026, the factor that really breed some oxygen into the room is getting GMV moving in the right direction. You've got this right now in part of the head or faces a bit of the deleveraging just from a revenue perspective. And so that's task number one is to reinject positive of a more favorable trend in GMV and working towards that end. And that's not stating anything for '26. That's just obviously the mission as we try to improve that result.

I think the other factor that I would point to and Steve offered some color in the prepared remarks, which was Four is north of 20% here in the quarter in terms of EBITDA margin. And so the ability to grow that business profitably in the contributions that we believe it can offer particularly as it gets scale, I think, is really encouraging. As you go kind of down the P&L, gross margin, we obviously had a really strong gross margin print here for the quarter. And I think there are some things that we have done internally around decisioning and trying to optimize that. And so I think that may very well be something that we can maintain into next year, which is encouraging.

So all that being said, I think there are certainly the building blocks for us to maintain that 11% to 13% is the North Star and try to work against this deleveraging component build for and keep our costs in line while addressing the investments that need to get made, I think that's the task it had. But we understand the mandate of not growing costs substantially faster than revenue, but we think we've got some good things in the hopper that will help GMV going forward.

Our next question coming from the line of John Hecht with Jefferies.

I guess just a little bit more into Four just because I know Steve, you gave us some of the seasonality factors and so forth. But it's had very quarters of really good kind of growth patterns. Maybe can you give us some insight as to a customer acquisition and Steve you mentioned like the opportunity to cross-sell. Maybe just a little bit more into that opportunity?

Sure. Yes. And one of the really nice things about Four so far, and we think it can continue is just the organic growth that it's seeing in its MAUs, it's installed, the app downloads and ultimately, the GMV is really been driven primarily by referrals and word-of-mouth and user-generated content that wasn't paid for. We have a lot of good ambassadors out there that are really happy with Four and getting their friends and family to use it. And that's evidenced by sometimes the Four app in the App Store for iOS will be a top 10 shopping app for a period of time because of some tick-tock video or something that we didn't pay for.

We are leaning into some marketing as much to prove that we have the sophistication of that muscle in case we need it, not really to sustain or to juice the growth rates. And so far, we're very pleased with the cost per download and the cost of customer acquisition in the small dollars that we're spending. But we believe that that's a lever that we can that we can pull in the future, if necessary. So the referral rate, the word of mouth has been really strong. Four+ has been a very pleasant adoption rate. We introduced it in early 2024. And we have a very growing subscriber base. And as we said, about 80% of our GMV coming from Four+ subscribers, which certainly helps that take rate metric that's prevalent in the industry.

The cross-sell is an exciting area as well. It's an internal initiative for all of our teams, and we're doing some marketing primarily from the Four acquired customers to the leasing business, but there's certainly opportunities to go bidirectional, and those are things that we'll be looking at for 2026 as well to go in both directions across the ecosystem of products. But Four is really becoming a standout in the ecosystem and getting more integrated. And we think that there's a lot of opportunities across the products. But one of the really nice things has been this organic word of mouth and referral marketing -- or sorry, customer acquisition without paid marketing that we've been able to achieve and it's kudos to the brand that the team have built and the user acceptance in the frictionless experience.

Okay. That's super helpful. And then I guess, a follow-up maybe, Brian, I think you mentioned if you correct for Big Lots and some of the tightening that your GMV growth is mid-single digits. I think I heard in a normal environment, and I know that's a tough question to define what's the normal environment. But maybe if you think about the period of '15, 2015 to '20 or something, what do you perceive as kind of normal secular growth trends for GMV growth relative to that mid-single-digit number?

Yes. I appreciate you directed that at me versus Steve, but that is a tough question. And look, the period that you're referring to for 50 to 20, that was an environment where I think it was certainly, there was a lot of momentum on the enterprise level retailers in 2019, launching Lowe's and Best Buy was certainly a high-growth period. So it's tough to normalize for.

I guess what I would say is as we're looking at the GMV opportunity, we see a pipeline as strong, we see conversations with meaningful retailers that while the sales cycle is long, we are engaging them. And we think there's a lot of opportunity still within our current installed base. As we look at the metrics across the board, whether it's levels of conversion, or leases per door, productivity-type metrics, there's a lot of opportunity there. And so I'm not giving a [indiscernible] answer about a specific range that you could take, say into '26 and beyond. I would just say that if we're growing mid-single digits with the headwinds that are existing today, when you adjust for decisioning and the Big Lots bankruptcy it gives -- it's encouraging to me to think about what still leverage still exists for us to penetrate the existing book and beyond and it makes me feel comfortable that we should be able to drive that north.

And that's -- our best days are not behind us. And I think we've got a lot of opportunity ahead. So that's probably a color out offer and welcome any boss you might have on that.

No. I mean that we've got good growth available to us from -- with our installed base. And we'd love to rerun the '15 to '20 time frame because it was a growth period of our retailers had positive comps, and we are adding new retailers to the platform all the time. So that's certainly what we're rooting for now.

Our next question coming from the line of Vincent Caintic with BTIG.

Kind of first one on GMV and I guess a 2-part question. We talked earlier about the underwriting posture and that feel the need to tighten yet. I'm just kind of wondering if you can give us some sort of framework for what your underwriting posture, I guess, currently can absorb and maybe in terms of how we think about the macro or consumer deterioration? And maybe what would cause it to have to tighten further? And then second part, so you mentioned those retailers that you signed up. And if you could maybe disclose like what the potential opportunity is in terms of the GMV size, that would be very helpful.

Yes. I mean, Vincent, on the decisioning side, I mean we've got all kinds of indicators that we look at from first pay bounces to 4-week delinquencies to roll rates from bucket to bucket all the things that you would imagine we're looking at. And we don't just look at one. We look at all of them because, as I mentioned, DQs are elevated, but it's not something that is impacting overall portfolio yield or negative disposition outcomes currently. So it's a mosaic, if you will, of all those things. And we know what we need to see in order to tighten.

And I want to be clear, though, when we say -- like we may see something tighten, but it won't be like a broad brush stroke, changing internal risk scores across every retailer. It could be pockets. It could be it could be in a particular vertical. It could be in a particular retailer. It could be in a particular geography. It's very dialed in credit to the team for that. So those are the things we're looking at, and we look at them very, very frequently with a lot of folks around the room and on the Teams meeting weighing in.

So the 3 retailers, I would say that we would look at those, they're recognizable logos so they're not some 2-store mattress chain in Denver. And 2 of the 3, it's new to them. So as you probably remember from previous when someone adopts a new payment type, it doesn't go from 0 to 60 overnight, it kind of ramps up through training and productivity gains. And so we will be working with the counterparts of those retailers to make sure that we move up that productivity curve as fast as possible. I guess you kind of look at them as like a super regional, if you will, from a sizing standpoint.

Okay. Perfect. That's super helpful. And then last question, I wanted to go back to Four. So great GMV results over the past 8 quarters. And then it was nice to see the that strong EBITDA margin this quarter. I know there's variability as you're growing that business significantly. But I'm just wondering if you can maybe talk about how you think of that business at some point in the future when it reaches maturity. What sort of -- what's the economics, what's the -- maybe the EBITDA margins of that business? Because I guess when I look at it, I'm making comparisons to some of the other public Buy Now, Pay Later companies like Sezzle and [indiscernible] and seeing their high EBITDA margin. So I'm just kind of wondering how you're thinking about that framework, if you can help us out.

Yes, Vincent. I mean I think that the public comps are certainly a place to look. And Four has pivoted over the last several years to a direct-to-consumer model. So probably similar, but several years behind Sezzle. And so if you think about where we were year-to-date with -- from an EBITDA margin standpoint and even though it's going to it will swing to a loss here in Q4, which, like I said, is not a surprise to us. And there's nothing to be worried about, but it will bring probably that full year EBITDA margin down into the mid to mid-ish single digits.

But we do expect with 2 dynamics scale, as you mentioned. And then with that scale comes more GMV coming from repeat shoppers. So scale and improving loss rates over time, we believe, can will result in margin improvement over the next several years. And the unknown is just the rate of growth, right? So we've been growing north of 150% GMV each quarter this I guess it was like 147% in Q1, but it's been over 160% in Q2 and Q3. Just from the law of numbers, you would expect that to decelerate in 2026. But whether there's an opportunity for us to -- if it decelerates a lot, then you'd have more margin expansion. But if we keep the growth there in an effort to get to that scale faster than we'll have margin expansion, but not as much as you would if you really throw all the growth.

So we're not in the business of throttle loan growth as long as we feel good about the unit economics of each deal we're putting out. And so -- but over the next several years, we see no reason why we can't look more like those public comps that you're citing there, and that's an exciting opportunity.

And I'm showing no further questions in the queue at this time. I will now turn the call back over to Mr. Steve Michaels for any closing remarks.

Yes. Thank you very much. Appreciate everybody joining us today and your interest in PROG. We delivered another strong quarter and are excited about the -- our opportunity to finish the year strong and a setup for 2026, which we'll talk more about here in February. So thanks so much, and have a great day.

This concludes today's conference call. Thank you for your participation, and you may now disconnect. Goodbye.