So I wouldn’t call it a catch-up period. We’re managing it strongly. We’ve seen some wage inflation this year, but certainly look for other opportunities for efficiencies and this is the time when we have to actively manage the business in order to deliver the results and SG&A is a massive focus for us.
Bobby Griffin: Okay. That’s helpful. And then I appreciate the comments on 2024, at least the first part. That makes sense from the revenue perspective, given what’s going on with the size of the portfolio. As profits have flown through the P&L, is there anything that we should keep in mind that took place this year as we calibrate our models for next year? Just large items that either were a good guy this year or could end up being a headwind next year. I know we talked about less early buyouts, but it still appears early buyouts are above pre-COVID levels, right?
Brian Garner: Yeah. They’re starting to normalize with pre-COVID levels. And I think, Bobby, you’re hitting on it. I think I draw your attention to just really — particularly the first half gross margins that we recorded here in 2023 and I think what represents a bit of a difficult comp is we look at 2024. And so we have been cautious all throughout this year and it’s part of what has resulted in our outperformance versus outlook about how this consumer is going to behave and their resilience and wherewithal in this challenging environment and that’s what’s really boosted the gross margins above our expectations. And so whether that persists next year, I think, is a key input to the model. And certainly the first half, this Goldilocks scenario we were referring to was very strong in terms of the EBITDA, sorry, the gross margin performance.
So I think I would just be cautious about assuming we’re going to be able to replicate that to that degree as the base case. So that’s the other area I would draw you to. You’re hitting on SG&A. There’s always going to be an element of fixed costs within our business, even though we’re highly variable. So deleveraging is a potential when you’re starting from a lower GLA balance, gross lease asset balance, entering next year. So that’s something to watch. But to Steve’s point, this is an area that’s actively managed and it’s always going to be informed by our topline performance. So as we face these headwinds, we’re going to be looking at inefficiencies and discretionary spend to a higher degree of scrutiny to ensure that we’re able to land within this 11%, 13% Progressive Leases segment long-term EBITDA margin target.
So we’re having a great year from a margin perspective. I’d expect maybe a bit of softening in terms of the bottom line margin and gross margin, perhaps, as we look at 2024.
Bobby Griffin: Thank you, Brian. That’s helpful. I guess last one for me, predicting how the student loan impact flows through is highly uncertain. So I get that, we’ve had a couple of months of student loans returning. So have you seen anything interesting in your data set to kind of help us think about the behavior and what that could do or is it still too early in terms of the payments returning?
Brian Garner: Yeah. I think it’s too early. I mean, we obviously are watching folks in our portfolio that have student loan trade lines also in our applicant pool as well. The data are muddled a little bit because there are various programs available for relief or deferments and I would guess that our consumer is probably the largest beneficiaries of those. The payments, I believe, restarted in October. So it’s too early to tell how that’s going to affect performance. But we are watching it. And to the extent that other providers above us in the stack are also watching it and making adjustments, it could also further the opening of the top of the funnel that we’ve been anticipating and talking about for several quarters now.
Bobby Griffin: Okay. Thank you for the details and congrats on the upside this quarter, the strong operation quarter.
Brian Garner: Thanks, Bobby.
Operator: Thank you. I’m seeing no further questions in the queue. I would now like to turn the conference back to Steve Michaels for closing remarks.
Steve Michaels: Thank you again for joining us this morning and for your continued interest in PROG Holdings. Our teams did a great job and delivered another strong quarter. We feel good about the positioning of our portfolio. We’re making the right investments in people and technology to further our three-pillared strategy of grow, enhance, expand. We look forward to updating you on the full year, as well as a more detailed view on our 2024 thoughts when we have our next call in February. Have a great day.
Operator: This concludes today’s conference call. Thank you all for participating. You may now disconnect and have a pleasant day.
