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PROG Holdings Reports Third Quarter 2021 Results

11/03/2021
  • Progressive Leasing GMV of $493 million, up 9.9%
  • E-commerce grew 192% to 14.5% of Progressive Leasing GMV
  • Consolidated Revenues of $650 million, up 6.4%
  • Consolidated earnings before taxes of $77.9 million; Adjusted EBITDA of $93.6 million or 14.4% of revenues
  • Diluted EPS of $0.86; Non-GAAP Diluted EPS of $0.94
  • Board of Directors authorizes new $1 billion share repurchase program including a modified Dutch auction tender offer to purchase up to $425 million of Company stock, which is expected to commence November 4, 2021

SALT LAKE CITY--(BUSINESS WIRE)-- PROG Holdings, Inc. (NYSE:PRG), the fintech holding company for Progressive Leasing, Vive Financial, and Four Technologies, today announced financial results for the third quarter ended September 30, 2021.

“As we approach our first anniversary as a stand-alone, high-growth, asset-light fintech company, I’m pleased to report our continued progress positioning PROG Holdings for significant, long-term shareholder value creation. At the same time, we continue to successfully navigate pandemic-related volatility in our markets," said Steve Michaels, President and Chief Executive Officer of PROG Holdings. “During the third quarter, portfolio performance continued to return towards more normalized pre-pandemic levels. Against this backdrop, we sustained accelerating growth in our lease portfolio, and we remain on track to deliver mid-to-high teens GMV growth and record adjusted EBITDA."

Michaels added, “Since last November’s spin transaction, we have taken significant steps to align our capital structure and capital allocation strategy with our business’s impressive cash generation and balance sheet. Our Board’s authorization of a $1 billion share repurchase program, which includes a cash and debt-funded tender offer to purchase up to $425 million of our outstanding common stock will lower our cost of capital and further demonstrate our commitment to return excess capital to shareholders while maintaining our ability to invest in organic growth and attractive M&A opportunities.”

Financial Highlights

Consolidated revenues for the third quarter of 2021 were $650.4 million, an increase of 6.4% from the same period in 2020. The increase was primarily due to growth from key large national partners and continued e-commerce penetration. Progressive Leasing's GMV increased 9.9% to $493.3 million compared with the same period in 2020, with e-commerce GMV growing 192% year-over-year. In addition, the Company's lease portfolio ended the quarter 11.5% higher than the same period of 2020.

The Company reported consolidated net earnings from continuing operations for the third quarter of 2021 of $57.4 million compared with $74.6 million in the prior year period. Adjusted EBITDA for the third quarter of 2021 was $93.6 million compared with $110.6 million for the same period in 2020, a decrease of $17.0 million, or 15.4%. As a percentage of revenues, adjusted EBITDA was 14.4% in the third quarter of 2021 compared with 18.1% for the same period in 2020. The year-over-year decline in net earnings from continuing operations and adjusted EBITDA were primarily driven by Progressive Leasing's delinquencies and write-offs approaching a more normalized level as compared to the extraordinarily low delinquency and write-off levels in the prior year quarter. That trend more than offset the benefit of higher revenues and the declining number of customers exercising their 90-day purchase option.

Diluted earnings per share from continuing operations for the third quarter of 2021 were $0.86 compared with $1.10 in the year ago period. On a non-GAAP basis, diluted earnings per share from continuing operations were $0.94 in the third quarter of 2021 compared with $1.17 for the same quarter in 2020.

The provision for lease merchandise write-offs at Progressive Leasing was 5.4% of lease revenues in the third quarter of 2021, compared with 2.1% in the same period of 2020. While this level is elevated from the record lows of the prior year, write-offs remain below the Company's historical 6-8% annual range and are expected to remain at or below that historical range in the near-to mid-term.

Liquidity and Capital Allocation

PROG Holdings ended the third quarter of 2021 with cash of $128.8 million and debt of $50 million. The Company purchased $51.0 million of its stock in the period at an average price per share of $45.40.

The Company’s Board of Directors has authorized a new $1 billion share repurchase program, which replaces the Company’s prior $300 million program. Under the new authorization, purchases can be made from time to time using a variety of methods, which may include tender offers, open market purchases, purchases effected through 10b5-1 trading plans, accelerated share purchase programs, or other transactions. The amount of any shares of the Company’s common stock that are purchased under the new repurchase program and the timing of any such purchases will be determined based on market conditions and other factors, and the program may be suspended or discontinued at any time.

As part of the new repurchase program, the Company expects to commence a “modified Dutch auction” tender offer on November 4, 2021, for up to $425 million in value of its outstanding common stock at an anticipated cash purchase price per share of not less than $44.00 and not more than $50.00, less any applicable withholding taxes and without interest. Further information regarding the tender offer can be found in a separate press release, issued today, available on PROG Holdings’ investor relations page.

Outlook

The Company is updating its full year 2021 consolidated outlook for revenues, adjusted EBITDA, GAAP diluted EPS, and Non-GAAP diluted EPS. The change in outlook reflects increasing reserve requirements due to continued normalization of the portfolio. The revised revenue range for 2021 is $2.68 billion to $2.70 billion, and the revised adjusted EBITDA range is $390 million to $395 million. Non-GAAP diluted EPS is expected to be between $3.90 and $3.99, while GAAP diluted EPS is expected to be between $3.62 and $3.71. The impact of any share reduction from the tender offer is not included in this outlook and is expected to be immaterial to the full-year EPS.

Conference Call and Webcast

The Company has scheduled a live webcast and conference call for Wednesday, November 3, 2021, at 8:30 A.M. ET to discuss its financial results for the third quarter of 2021. To access the live webcast, visit the Company's investor relations website, https://investor.progholdings.com/. To join the conference call via telephone, dial 877-270-2148 and request to join the PROG Holdings, Inc. call. International participants without internet access can join the conference call by dialing 412-902-6510 and requesting to join the PROG Holdings, Inc. call. The webcast will be archived for playback on the investor relations website following the event.

About PROG Holdings, Inc.

PROG Holdings, Inc. (NYSE:PRG) is a fintech holding company headquartered in Salt Lake City, UT, that provides transparent and competitive payment options to consumers. The Company owns Progressive Leasing, a leading provider of e-commerce, app-based, and in-store point-of-sale lease-to-own solutions, Vive Financial, an omnichannel provider of second-look revolving credit products, and Four Technologies, provider of Buy Now, Pay Later payment options through its platform, Four. More information on PROG Holdings' companies can be found at https://www.progholdings.com.

Additional Information Regarding the Tender Offer

The tender offer described in this press release has not yet commenced, and there can be no assurance that PROG Holdings will commence the tender offer on the terms described in this release. The information regarding the tender offer in this press release is for informational purposes only. This press release is not a recommendation to buy or sell shares of common stock or any other securities, and it is neither an offer to purchase nor a solicitation of an offer to sell shares of common stock or any other securities. On the commencement date of the tender offer, a tender offer statement on Schedule TO, including an offer to purchase, a letter of transmittal and related materials, will be filed with the United States Securities and Exchange Commission (the “SEC”) by PROG Holdings. The tender offer will only be made pursuant to the offer to purchase, the letter of transmittal and related materials filed as a part of the Schedule TO. When available, shareholders should read carefully the offer to purchase, letter of transmittal and related materials because they contain important information, including the various terms of, and conditions to, the tender offer. Once the tender offer is commenced, shareholders will be able to obtain a free copy of the tender offer statement on Schedule TO, the offer to purchase, letter of transmittal and other documents that PROG Holdings will be filing with the SEC at the SEC’s website at www.sec.gov or from the information agent for the tender offer.

Forward Looking Statements:

Statements in this news release regarding our business 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. Such forward-looking statements generally can be identified by the use of forward-looking terminology, such as “continue”, “continued”, “expects”, “expected”, "outlook", “intends” and similar forward-looking terminology. These risks and uncertainties include factors such as (i) the impact of the COVID-19 pandemic and related measures taken by governmental or regulatory authorities to combat the pandemic, including the impact of the pandemic and such measures on: (a) demand for the lease-to-own products offered by our Progressive Leasing segment, (b) Progressive Leasing’s POS partners, and Vive’s and Four’s merchant partners, (c) Progressive Leasing’s, Vive’s and Four’s customers, including their ability and willingness to satisfy their obligations under their lease agreements and loan agreements, (d) Progressive Leasing’s point-of-sale partners being able to obtain the merchandise its customers need or desire, (e) our employees and labor needs, including our ability to adequately staff our operations, (f) our financial and operational performance, and (g) our liquidity, including risks arising from the increased level of debt that we expect to incur in connection with the tender offer to purchase up to $425 million of our common stock; (ii) changes in the enforcement of existing laws and regulations and the adoption of new laws and regulations that may unfavorably impact our businesses; (iii) the effects on our business and reputation resulting from Progressives Leasing’s announced settlement and related consent order with the FTC, including the risk of losing existing POS partners or being unable to establish new relationships with additional POS partners, and of any follow-on regulatory and/or civil litigation arising therefrom; (iv) other types of legal and regulatory proceedings and investigations, including those related to consumer protection, customer privacy, third party and employee fraud and information security; (v) our ability to protect confidential, proprietary, or sensitive information, including the personal and confidential information of our customers, which may be adversely affected by cyber-attacks, employee or other internal misconduct, computer viruses, electronic break-ins or “hacking”, or similar disruptions, any one of which could have a material adverse impact on our results of operations, financial condition, and prospects; (vi) increased competition from traditional and virtual lease-to-own competitors and also from competitors of our Vive segment; (vii) increases in lease merchandise write-offs and the provision for returns and uncollectible renewal payments for Progressive Leasing, especially in light of the COVID-19 pandemic, and for loan losses, with respect to our Vive segment; (vii) the possibility that the operational, strategic and shareholder value creation opportunities expected from the spin-off of the Company’s Aaron’s Business segment may not be achieved in a timely manner, or at all; (ix) Vive’s business model differing significantly from Progressive Leasing’s, which creates specific and unique risks for the Vive business, including Vive’s reliance on two bank partners to issue its credit products and Vive’s exposure to the unique regulatory risks associated with the lending-related laws and regulations that apply to its business; (x) the effects of any increased expenses or unanticipated liabilities incurred as a result of, or due to activities related to, our recent acquisition of Four; (xi) Four’s business model differing significantly from Progressive Leasing's and Vive’s, which creates specific and unique risks for the Four business, including Four’s exposure to the unique regulatory risks associated with the laws and regulations that apply to its business; (xii) our ability to consummate the tender offer on the terms and timing described herein, or at all, and to realize the benefits expected from the tender offer; and (xiii) the other risks and uncertainties discussed under “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, which was filed with the SEC on February 26, 2021. Statements in this press release that are “forward-looking” include without limitation statements about (i) our ability to create long-term shareholder value; (ii) our ability to successfully navigate COVID-19 pandemic-related volatility in our markets; (iii) our outlook for GMV growth for 2021; (iv) the execution, amount and timing of, and benefits expected from, our expected tender offer to purchase up to $425 million of our common stock; (v) the nature and amount of any other share purchases under the $1 billion repurchase program authorized by our Board; (vi) our ability to continue to invest in organic growth opportunities and M&A opportunities (vii) the levels of delinquencies and write-offs we expect in future periods; and (viii) our updated 2021 financial performance outlook. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except as required by law, the Company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances after the date of this press release.

 

 

 

(Unaudited)

Three Months Ended

(Unaudited)

Nine Months Ended

 

 

September 30,

September 30,

 

 

2021

 

2020

2021

 

2020

Revenues:

 

 

 

 

 

 

 

Lease Revenues and Fees

 

$

635,025

 

 

$

601,105

$

1,989,055

 

 

$

1,849,388

 

Interest and Fees on Loans Receivable

 

 

15,380

 

 

 

10,232

 

42,322

 

 

 

29,555

 

Total

 

 

650,405

 

 

 

611,337

 

2,031,377

 

 

 

1,878,943

 

 

 

 

 

 

 

 

 

Costs and Expenses:

 

 

 

 

 

 

 

Depreciation of Lease Merchandise

 

 

435,857

 

 

 

405,235

 

1,380,572

 

 

 

1,289,885

 

Provision for Lease Merchandise Write-offs

 

 

34,174

 

 

 

12,578

 

84,072

 

 

 

104,443

 

Operating Expenses

 

 

102,053

 

 

 

95,433

 

289,994

 

 

 

276,935

 

Separation Related Charges

 

 

 

 

 

2,443

 

 

 

 

2,443

 

Total

 

 

572,084

 

 

 

515,689

 

1,754,638

 

 

 

1,673,706

 

Operating Profit

 

 

78,321

 

 

 

95,648

 

276,739

 

 

 

205,237

 

Interest Expense

 

 

(444

)

 

 

 

(1,392

)

 

 

 

Earnings from Continuing Operations before Income Tax

 

 

77,877

 

 

 

95,648

 

275,347

 

 

 

205,237

 

Income Tax Expense

 

 

20,464

 

 

 

21,005

 

69,609

 

 

 

13,915

 

Net Earnings from Continuing Operations

 

 

57,413

 

 

 

74,643

 

205,738

 

 

 

191,322

 

Earnings (Loss) from Discontinued Operations, Net of Income Tax

 

 

 

 

 

34,702

 

 

 

 

(293,605

)

Net Earnings (Loss)

 

$

57,413

 

 

$

109,345

$

205,738

 

 

$

(102,283

)

 

 

 

 

 

 

 

 

Basic Earnings (Loss) per Share:

 

 

 

 

 

 

 

Continuing Operations

 

$

0.87

 

 

$

1.11

$

3.07

 

 

$

2.85

 

Discontinued Operations

 

 

 

 

 

0.51

 

 

 

 

(4.38

)

Total Basic Earnings (Loss) per Share

 

$

0.87

 

 

$

1.62

$

3.07

 

 

$

(1.52

)

Diluted Earnings (Loss) per Share:

 

 

 

 

 

 

 

Continuing Operations

 

$

0.86

 

 

$

1.10

$

3.06

 

 

$

2.82

 

Discontinued Operations

 

 

 

 

 

0.51

 

 

 

 

(4.33

)

Total Diluted Earnings (Loss) per Share

 

$

0.86

 

 

$

1.61

$

3.06

 

 

$

(1.51

)

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding

 

 

66,092

 

 

 

67,398

 

66,938

 

 

 

67,107

 

Weighted Average Shares Outstanding Assuming Dilution

 

 

66,385

 

 

 

68,155

 

67,319

 

 

 

67,849

 

 

 

(Unaudited)

 

 

 

September 30, 2021

 

December 31, 2020

ASSETS:

 

 

 

 

Cash and Cash Equivalents

 

$

128,788

 

 

$

36,645

 

Accounts Receivable (net of allowances of $60,578 in 2021 and $56,364 in 2020)

 

 

67,447

 

 

 

61,254

 

Lease Merchandise (net of accumulated depreciation and allowances of $453,555
in 2021 and $409,307 in 2020)

 

 

588,733

 

 

 

610,263

 

Loans Receivable (net of allowances and unamortized fees of $57,578 in 2021 and
$52,274 in 2020)

 

 

112,784

 

 

 

79,148

 

Property, Plant and Equipment, Net

 

 

25,806

 

 

 

26,705

 

Operating Lease Right-of-Use Assets

 

 

17,862

 

 

 

20,613

 

Goodwill

 

 

306,649

 

 

 

288,801

 

Other Intangibles, Net

 

 

143,029

 

 

 

154,421

 

Income Tax Receivable

 

 

18,890

 

 

 

 

Prepaid Expenses and Other Assets

 

 

44,270

 

 

 

39,554

 

Total Assets

 

$

1,454,258

 

 

$

1,317,404

 

LIABILITIES & SHAREHOLDERS’ EQUITY:

 

 

 

 

Accounts Payable and Accrued Expenses

 

$

116,813

 

 

$

78,249

 

Deferred Income Tax Liability

 

 

145,161

 

 

 

126,938

 

Customer Deposits and Advance Payments

 

 

39,765

 

 

 

46,565

 

Operating Lease Liabilities

 

 

26,063

 

 

 

29,516

 

Debt

 

 

50,000

 

 

 

50,000

 

Total Liabilities

 

 

377,802

 

 

 

331,268

 

SHAREHOLDERS' EQUITY:

 

 

 

 

Common Stock, Par Value $0.50 Per Share: Authorized: 225,000,000 Shares at
September 30, 2021 and December 31, 2020; Shares Issued: 90,752,123 at
September 30, 2021 and December 31, 2020

 

 

45,376

 

 

 

45,376

 

Additional Paid-in Capital

 

 

325,309

 

 

 

318,263

 

Retained Earnings

 

 

1,442,116

 

 

 

1,236,378

 

 

 

 

1,812,801

 

 

 

1,600,017

 

Less: Treasury Shares at Cost

 

 

 

 

Common Stock: 25,360,538 Shares at September 30, 2021 and 23,029,434
at December 31, 2020

 

 

(736,345

)

 

 

(613,881

)

Total Shareholders’ Equity

 

 

1,076,456

 

 

 

986,136

 

Total Liabilities & Shareholders’ Equity

 

$

 

1,454,258

 

 

$

 

1,317,404

 

 

 

Unaudited

Nine Months Ended

September 30,

 

 

2021

 

2020

OPERATING ACTIVITIES:

 

 

 

 

Net Earnings (Loss)

 

$

205,738

 

 

$

(102,283

)

Adjustments to Reconcile Net Earnings (Loss) to Cash Provided by Operating Activities:

 

 

 

 

Depreciation of Lease Merchandise

 

 

1,380,572

 

 

 

1,672,841

 

Other Depreciation and Amortization

 

 

21,954

 

 

 

74,683

 

Provisions for Accounts Receivable and Loan Losses

 

 

152,523

 

 

 

224,959

 

Stock-Based Compensation

 

 

14,803

 

 

 

21,378

 

Deferred Income Taxes

 

 

16,948

 

 

 

(76,885

)

Impairment of Goodwill and Other Assets

 

 

 

 

 

469,782

 

Non-Cash Lease Expense

 

 

708

 

 

 

75,589

 

Other Changes, Net

 

 

(2,715

)

 

 

5,529

 

Changes in Operating Assets and Liabilities, Net of Effects of Acquisitions and Dispositions:

 

 

 

 

Additions to Lease Merchandise

 

 

(1,446,046

)

 

 

(1,687,483

)

Book Value of Lease Merchandise Sold or Disposed

 

 

87,005

 

 

 

263,007

 

Accounts Receivable

 

 

(143,970

)

 

 

(183,807

)

Prepaid Expenses and Other Assets

 

 

(3,864

)

 

 

(1,381

)

Income Tax Receivable

 

 

(18,529

)

 

 

9,180

 

Operating Lease Right-of-Use Assets and Liabilities

 

 

(1,411

)

 

 

(85,073

)

Accounts Payable and Accrued Expenses

 

 

37,973

 

 

 

48,851

 

Accrued Regulatory Expense

 

 

 

 

 

(175,000

)

Customer Deposits and Advance Payments

 

 

(6,799

)

 

 

(2,041

)

Cash Provided by Operating Activities

 

 

294,890

 

 

 

551,846

 

INVESTING ACTIVITIES:

 

 

 

 

Investments in Loans Receivable

 

 

(139,980

)

 

 

(73,208

)

Proceeds from Loans Receivable

 

 

97,158

 

 

 

50,154

 

Outflows on Purchases of Property, Plant and Equipment

 

 

(6,815

)

 

 

(50,867

)

Proceeds from Disposition of Property, Plant, and Equipment

 

 

55

 

 

 

3,829

 

Outflows on Acquisitions of Businesses and Customer Agreements. Net of Cash Acquired

 

 

(22,942

)

 

 

(2,874

)

Proceeds from Dispositions of Businesses and Customer Agreements, Net of Cash Disposed

 

 

 

 

 

359

 

Cash Used in Investing Activities

 

 

(72,524

)

 

 

(72,607

)

FINANCING ACTIVITIES:

 

 

 

 

Proceeds from Debt

 

 

 

 

 

5,625

 

Repayments on Debt

 

 

 

 

 

(61,515

)

Dividends Paid

 

 

 

 

 

(8,035

)

Acquisition of Treasury Stock

 

 

(128,233

)

 

 

 

Issuance of Stock Under Stock Option Plans

 

 

3,133

 

 

 

9,876

 

Shares Withheld for Tax Payments

 

 

(5,123

)

 

 

(11,734

)

Debt Issuance Costs

 

 

 

 

 

(1,020

)

Cash Used in Financing Activities

 

 

(130,223

)

 

 

(66,803

)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

 

 

 

 

(21

)

Increase in Cash and Cash Equivalents

 

 

92,143

 

 

 

412,415

 

Cash and Cash Equivalents at Beginning of Period

 

 

36,645

 

 

 

57,755

 

Cash and Cash Equivalents at End of Period

 

$

128,788

 

 

$

470,170

 

Net Cash Paid (Received) During the Period

 

 

 

 

Interest

 

$

1,093

 

 

$

8,501

 

Income Taxes

 

$

43,985

 

 

$

(19,362

)

 

 

Unaudited

 

 

Three Months Ended

 

 

September 30, 2021

 

 

Progressive Leasing

Vive

Other

Consolidated Total

Lease Revenues and Fees

 

$

635,025

 

$

 

$

 

$

635,025

 

Interest and Fees on Loans Receivable

 

 

15,212

 

168

 

15,380

 

Total Revenues

 

$

635,025

 

$

15,212

 

$

168

 

$

650,405

 

 

Unaudited

 

Three Months Ended

 

September 30, 2020

 

Progressive Leasing

Vive

Other

Consolidated Total

Lease Revenues and Fees

$

601,105

 

$

 

$

 

$

601,105

 

Interest and Fees on Loans Receivable

 

10,232

 

 

10,232

 

Total Revenues

$

601,105

 

$

10,232

 

$

 

$

611,337

 

 

 

Unaudited

 

 

Nine Months Ended

 

 

September 30, 2021

 

 

Progressive Leasing

Vive

Other

Consolidated Total

Lease Revenues and Fees

 

$

1,989,055

 

$

 

$

 

$

1,989,055

 

Interest and Fees on Loans Receivable

 

 

42,154

 

168

 

42,322

 

Total Revenues

 

$

1,989,055

 

$

42,154

 

$

168

 

$

2,031,377

 

 

 

Unaudited

 

 

Nine Months Ended

 

 

September 30, 2020

 

 

Progressive Leasing

Vive

Other

Consolidated Total

Lease Revenues and Fees

 

$

1,849,388 

 

$

— 

 

$

— 

 

$

1,849,388 

 

Interest and Fees on Loans Receivable

 

— 

 

29,555 

 

— 

 

29,555 

 

Total Revenues

 

$

1,849,388 

 

$

29,555 

 

$

— 

 

$

1,878,943 

 

 

Use of Non-GAAP Financial Information:

Non-GAAP net earnings from continuing operations, non-GAAP diluted earnings from continuing operations per share, and adjusted EBITDA are supplemental measures of our performance that are not calculated in accordance with generally accepted accounting principles in the United States (“GAAP”). Non-GAAP net earnings from continuing operations and non-GAAP diluted earnings from continuing operations per share for the three and nine months ended September 30, 2021 and the Company's full year 2021 outlook, exclude intangible amortization expense, acquisition related transaction costs, and accrued interest on an uncertain tax position related to Progressive Leasing's $175 million settlement with the FTC in 2020. Non-GAAP net earnings from continuing operations and non-GAAP diluted earnings from continuing operations per share for the three and nine months ended September 30, 2020 exclude intangible amortization expense, restructuring expenses, separation related charges from our spin-off of Aaron's Business, insurance recoveries for legal and regulatory fees incurred related to Progressive Leasing's 2020 FTC settlement, and income tax benefits from our revaluation of net operating loss carrybacks resulting from the CARES Act. The amounts for these after-tax non-GAAP adjustments, which are tax effected using our statutory tax rate, can be found in the reconciliation of net earnings from continuing operations and earnings from continuing operations per share assuming dilution to non-GAAP net earnings from continuing operations and earnings from continuing operations per share assuming dilution table in this press release.

The Adjusted EBITDA figures presented in this press release are calculated as the Company’s earnings from continuing operations before interest expense, net, depreciation on property, plant and equipment, amortization of intangible assets and income taxes. Adjusted EBITDA for the three and nine months ended September 30, 2021 and 2020 also excludes stock-based compensation expense, restructuring expenses, acquisition related transaction costs, separation related charges from our spin-off of Aaron's Business, and insurance recoveries for legal and regulatory fees incurred related to Progressive Leasing's 2020 FTC settlement. The amounts for these pre-tax non-GAAP adjustments can be found in the three and nine-month segment EBITDA tables in this press release. Adjusted EBITDA for the Company's full year 2021 outlook is calculated as projected earnings before interest expense, interest income, depreciation on property, plant and equipment, amortization of intangible assets and income taxes. Adjusted EBITDA for the Company's full year 2021 outlook also excludes stock-based compensation expense and the acquisition related transaction costs.

Management believes that non-GAAP net earnings from continuing operations, non-GAAP diluted earnings from continuing operations per share, and adjusted EBITDA provide relevant and useful information, and are widely used by analysts, investors and competitors in our industry as well as by our management in assessing both consolidated and business unit performance.

Non-GAAP net earnings from continuing operations, non-GAAP diluted earnings from continuing operations, and adjusted EBITDA provide management and investors with an understanding of the results from the primary operations of our business by excluding the effects of certain items that generally arose from larger, one-time transactions that are not reflective of the ordinary earnings activity of our operations or transactions that have variability and volatility of the amount. We believe the exclusion of stock-based compensation expense provides for a better comparison of our operating results with our peer companies as the calculations of stock-based compensation vary from period to period and company to company due to different valuation methodologies, subjective assumptions and the variety of award types. This measure may be useful to an investor in evaluating the underlying operating performance of our business.

Adjusted EBITDA also provides management and investors with an understanding of one aspect of earnings before the impact of investing and financing charges and income taxes. These measures may be useful to an investor in evaluating our operating performance because the measures:

  • Are widely used by investors to measure a company’s operating performance without regard to items excluded from the calculation of such measure, which can vary substantially from company to company depending upon accounting methods, book value of assets, capital structure and the method by which assets were acquired, among other factors.
  • Are used by rating agencies, lenders and other parties to evaluate our creditworthiness.
  • Are used by our management for various purposes, including as a measure of performance of our operating entities and as a basis for strategic planning and forecasting.

Non-GAAP financial measures, however, should not be used as a substitute for, or considered superior to, measures of financial performance prepared in accordance with GAAP, such as the Company’s GAAP basis net earnings from continuing operations and diluted earnings from continuing operations per share and the GAAP revenues and earnings from continuing operations before income taxes of the Company’s segments, which are also presented in the press release. Further, we caution investors that amounts presented in accordance with our definitions of non-GAAP net earnings from continuing operations, non-GAAP diluted earnings from continuing operations per share, and adjusted EBITDA may not be comparable to similar measures disclosed by other companies, because not all companies and analysts calculate these measures in the same manner.

 

 

Unaudited

 

 

Three Months Ended

Nine Months Ended

 

 

September 30,

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net Earnings from Continuing Operations

 

$

57,413

 

$

74,643

 

$

205,738

 

$

191,322

 

Add: Intangible Amortization Expense

 

 

5,723

 

 

5,565

 

 

16,565

 

 

16,697

 

Add: Separation Related Charges

 

 

 

 

2,443

 

 

 

 

2,443

 

Less: Insurance Recoveries Related to Legal and Regulatory Expenses

 

 

 

 

(835

)

 

 

 

(835

)

Add: Transaction Expense

 

 

 

 

 

 

561

 

 

 

Add: Restructuring Expenses, net

 

 

 

 

 

 

 

 

238

 

Less: Tax Impact of Adjustments (1)

 

 

(1,488

)

 

(1,865

)

 

(4,452

)

 

(4,821

)

Add: Accrued Interest on FTC Settlement Uncertain Tax Position

 

 

1,040

 

 

 

 

1,040

 

 

 

Less: NOL Carryback Revaluation

 

 

 

 

 

 

 

 

(35,540

)

Non-GAAP Net Earnings from Continuing Operations

 

$

62,688

 

$

79,951

 

$

219,452

 

$

169,504

 

 

 

 

 

 

 

Earnings from Continuing Operations Per Share Assuming Dilution

 

$

0.86

 

$

1.10

 

$

3.06

 

$

2.82

 

Add: Intangible Amortization Expense

 

 

0.09

 

 

0.08

 

 

0.25

 

 

0.25

 

Add: Separation Related Charges

 

 

 

 

0.04

 

 

 

 

0.04

 

Less: Insurance Recoveries Related to Legal and Regulatory Expenses

 

 

 

 

(0.01

)

 

 

 

(0.01

)

Add: Transaction Expense

 

 

 

 

 

 

0.01

 

 

 

Less: Tax Impact of Adjustments (1)

 

 

(0.02

)

 

(0.03

)

 

(0.07

)

 

(0.07

)

Add: Accrued Interest on FTC Settlement Uncertain Tax Position

 

 

0.02

 

 

 

 

0.02

 

 

 

Less: NOL Carryback Revaluation

 

 

 

 

 

 

 

 

(0.52

)

Non-GAAP Earnings from Continuing Operations Per Share Assuming Dilution(2)

 

$

0.94

 

$

1.17

 

$

3.26

 

$

2.50

 

 

 

 

 

 

 

Weighted Average Shares Outstanding Assuming Dilution

 

 

66,385

 

 

68,155

 

 

67,319

 

 

67,849

 

(1) Adjustments are tax-effected using an assumed statutory tax rate of 26.0%.

(2) In some cases, the sum of individual EPS amounts may not equal total non-GAAP EPS calculations due to rounding.

 

 

Unaudited

 

 

Three Months Ended

 

 

September 30, 2021

 

 

Progressive Leasing

Vive

Other

Consolidated Total

Net Earnings from Continuing Operations

 

 

 

 

$

57,413

Income Taxes(1)

 

 

 

 

 

20,464

Earnings (Loss) from Continuing Operations Before Income Taxes

 

$

76,435

$

6,354

 

(4,912

)

 

77,877

Interest Expense

 

 

307

 

137

 

 

 

444

Depreciation

 

 

2,627

 

240

 

13

 

 

2,880

Amortization

 

 

5,421

 

 

302

 

 

5,723

EBITDA

 

 

84,790

 

6,731

 

(4,597

)

 

86,924

Stock-Based Compensation

 

 

3,587

 

78

 

3,002

 

 

6,667

Adjusted EBITDA

 

$

88,377

$

6,809

$

(1,595

)

$

93,591

(1) Taxes are calculated on a consolidated basis and are not identifiable by Company Segment.

 

 

 

Unaudited

 

 

Three Months Ended

 

 

September 30, 2020

 

 

Progressive Leasing

Vive

Unallocated
Corporate Expenses

Consolidated Total

Net Earnings from Continuing Operations

 

 

 

 

$

74,643

 

Income Taxes(1)

 

 

 

 

 

21,005

 

Earnings (Loss) from Continuing Operations Before Income Taxes

 

$

106,682

 

$

(2,347

)

$

(8,687

)

 

95,648

 

Depreciation

 

 

2,208

 

 

196

 

 

 

 

2,404

 

Amortization

 

 

5,420

 

 

145

 

 

 

 

5,565

 

EBITDA

 

 

114,310

 

 

(2,006

)

 

(8,687

)

 

103,617

 

Insurance Recoveries Related to Legal and Regulatory Expenses

 

 

(835

)

 

 

 

 

 

(835

)

Stock-Based Compensation(2)

 

 

2,931

 

 

141

 

 

2,345

 

 

5,417

 

Separation Costs

 

 

1,765

 

 

 

 

678

 

 

2,443

 

Adjusted EBITDA

 

$

118,171

 

$

(1,865

)

$

(5,664

)

$

110,642

 

(1) Taxes are calculated on a consolidated basis and are not identifiable by Company Segment.

(2) 2020 quarterly Adjusted EBITDA metrics have been updated to add-back Stock-based compensation to conform to management's 2021 definition of Adjusted EBITDA.

 

Non-GAAP Financial Information

Nine Month Segment EBITDA

(In thousands)

 

 

Unaudited

 

 

Nine Months Ended

 

 

September 30, 2021

 

 

Progressive Leasing

Vive

Other

Consolidated Total

Net Earnings from Continuing Operations

$

205,738

Income Taxes(1)

 

 

 

 

 

69,609

Earnings (Loss) from Continuing Operations Before Income Taxes

 

$

268,128

$

12,131

$

(4,912

)

 

275,347

Interest Expense

 

 

1,062

 

330

 

 

 

1,392

Depreciation

 

 

7,253

 

625

 

13

 

 

7,891

Amortization

 

 

16,263

 

 

302

 

 

16,565

EBITDA

 

 

292,706

 

13,086

 

(4,597

)

 

301,195

Stock-Based Compensation

 

 

11,592

 

209

 

3,002

 

 

14,803

Transaction Expense

 

 

561

 

 

 

 

561

Adjusted EBITDA

 

$

304,859

$

13,295

$

(1,595

)

$

316,559

(1) Taxes are calculated on a consolidated basis and are not identifiable by Company Segment.

 

 

 

Unaudited

 

 

Nine Months Ended

 

 

September 30, 2020

 

 

Progressive Leasing

Vive

Unallocated
Corporate Expenses

Consolidated Total

Net Earnings from Continuing Operations

 

 

 

 

$

 

191,322

 

Income Taxes(1)

 

 

 

 

 

13,915

 

Earnings (Loss) from Continuing Operations Before Income Taxes

 

$

232,502

 

$

(7,873

)

$

(19,392

)

 

205,237

 

Depreciation

 

 

6,508

 

 

623

 

 

 

 

7,131

 

Amortization

 

 

16,262

 

 

435

 

 

 

 

16,697

 

EBITDA

 

 

255,272

 

 

(6,815

)

 

(19,392

)

 

229,065

 

Insurance Recoveries Related to Legal and Regulatory Expenses

 

 

(835

)

 

 

 

 

 

(835

)

Stock-Based Compensation(2)

 

 

8,937

 

 

321

 

 

6,574

 

 

15,832

 

Restructuring Expenses, Net

 

 

 

 

 

 

238

 

 

238

 

Separation Costs

 

 

1,765

 

 

 

 

678

 

 

2,443

 

Adjusted EBITDA

 

$

265,139

 

$

(6,494

)

$

(11,902

)

$

246,743

 

(1) Taxes are calculated on a consolidated basis and are not identifiable by Company Segment.

(2) 2020 quarterly Adjusted EBITDA metrics have been updated to add-back Stock-based compensation to conform to management's 2021 definition of Adjusted EBITDA.

 

 

 

Three Months Ended

 

Year Ended

 

Three Months Ended

 

 

Mar 31,

Jun 30,

Sept 30,

Dec 31,

 

Dec 31,

 

Mar 31,

Jun 30,

Sept 30,

 

 

2020

 

2020

 

2021

 

Progressive Leasing

 

$

462,025

 

$

404,018

 

$

448,843

 

$

536,422

 

 

$

1,851,308

 

 

$

510,046

 

$

505,971

 

$

493,277

 

Vive

 

25,376

 

21,536

 

37,883

 

45,956

 

 

130,751

 

 

55,898

 

51,701

 

49,085

 

Other

 

 

 

 

 

 

 

 

 

 

2,655

 

Total

 

$

487,401

 

$

425,554

 

$

486,726

 

$

582,378

 

 

$

1,982,059

 

 

$

565,944

 

$

557,672

 

$

545,017

 

 

Reconciliation of Full Year 2021 Outlook for Adjusted EBITDA

(In thousands)

 

 

Full Year 2021 Ranges

 

 

Consolidated

Estimated Net Earnings

 

$248,000-$252,000

Taxes

 

84,500-85,000

Projected Earnings Before Taxes

 

332,500-337,000

Interest Expense

 

1,900

Depreciation

 

11,100

Amortization

 

22,500

Projected EBITDA

 

368,000-372,500

Stock-Based Compensation

 

22,000-22,500

Projected Adjusted EBITDA

 

$390,000-$395,000

 

Reconciliation of Full Year 2021 Outlook for Earnings Per Share

Assuming Dilution to Non-GAAP Earnings Per Share Assuming Dilution

 

 

Full Year 2021 Range

 

 

Low

High

Projected Earnings Per Share Assuming Dilution

 

$

3.62

 

$

3.71

 

Add Projected Intangible Amortization Expense

 

0.24

 

0.24

 

Add Acquisition transaction costs

 

0.01

 

0.01

 

Add Projected Interest on FTC Settlement Uncertain Tax Position

 

0.03

 

0.03

 

Projected Non-GAAP Earnings Per Share Assuming Dilution

 

$

3.90

 

$

3.99

 

 

Investor Contact
John Baugh, CFA
Vice President, Investor Relations
john.baugh@progleasing.com

Media Contact
Mark Delcorps
Director, Corporate Communications
media@progleasing.com

Source: PROG Holdings Inc.

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