PROG Holdings, Inc. (NYSE:PRG) Q4 2022 Earnings Call Transcript

Brian Garner: Yes, Jason. Obviously, we don’t like the €“ call it any specific retailer definitely not before they release their Q4 results. But €“ and you have to do a little bit of read through. I know you’re deep in the , but the headline comps that they may report are going to be slightly different than the leasable categories that we participate within their within their stores. And also the price points, whether it be super high-end mattress or super high-end piece of jewelry would potentially perform differently than an opening price point item. So, we were €“ the holiday season was generally weaker than we anticipated when we were going into it in, kind of October, not massively weaker because we were not expecting a strong one, but it was not, it kind of seems to weaken as the quarter went on.

We’re not really commenting on what we’re seeing in €“ since other than to provide that outlook that we expect our GMV to be down in the same neighborhood as we were down in Q4 of 2022.

Jason Haas: Got it. Thanks. That’s fair. And then as a follow-up, I think this question was maybe asked earlier, but I’m going to ask you a little bit differently. So, for the cadence of the margin guidance through the year, I was getting to like about 11.5% for 1Q and then I think there are many of the years closer to 9%. Brian, based on your response to an earlier question, I think the biggest driver of that would be, it sounds like it’s the AR reserve coming through. So, is that €“ is the €“ like effective that that we should see like maybe like outsized gross margins in 1Q and then it, sort of normalizes in the remainder of the year? And sort of along the lines of that, I guess my question more broadly is just for this year for 2023, if I compare your P&L for what’s expected for 2023 versus what we saw like pre-pandemic in 2018 or 2019, I think we’re still, I think margins are still below where you want them to be that like 11% to 13% target.

So, I’m curious what’s the driver of that is of the AR provision? Are write-offs coming in higher? Is it just like wage inflation over the years? So, if you could kind of help compare those two, that’d be helpful too. Thank you.

Brian Garner: Let me take this out in pieces. From a €“ I think your math is roughly correct in terms of the rest of the year margins and bringing it back to my earlier response. In order of magnitude, I’d say the deleveraging aspect of this is real and probably this is not slightly above the AR component that I referenced and it’s €“ as we run internal models, the sensitivity on that is pretty meaningful in terms of, if you’re growing 5%, 10% your margin profile can improve pretty meaningfully and it quickly gets certainly below that 11% to 13%. So, I think the focus on growth and investments and growth are critical to getting that margin where we have typically seen it. And obviously, we’re going to hold ourselves accountable on those investments and making sure that they are bleeding through the margins over time.

I think historically, just to keep in mind, obviously, 2018 and 2019 is progressive reported out, on public half of the time. So, a lot of the costs of being public are there, but when you’re talking about something north of 11% EBITDA margin, I think as Steve had talked about it internally and that’s certainly €“ that’s certainly where we want to be. And I think there is €“ if you think about the of the business, the contribution margin that it generates, it’s attainable. So, we’ve got some execution that we need to see happen to get us to where we want to be there.