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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 ________________________________
 FORM 10-Q
________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED September 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                      TO                     
COMMISSION FILE NUMBER 1-39628
 ________________________________
 PROG HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
 _________________________________
Georgia
85-2484385
(State or other jurisdiction of
incorporation or organization)
(I. R. S. Employer
Identification No.)
256 W. Data DriveDraper,Utah84020-2315
(Address of principal executive offices)(Zip Code)
(385) 351-1369
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading SymbolName of each exchange on which registered
Common Stock, $0.50 Par ValuePRGNew York Stock Exchange

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
 ___________________________________

    Indicate by check mark whether registrant (l) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of l934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No  
    Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes     No 
    Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated FilerAccelerated Filer
Non-Accelerated Filer(Do not check if a smaller reporting company)Smaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act
    Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 
    Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Title of Each Class
Shares Outstanding as of
October 21, 2022
Common Stock, $0.50 Par Value50,032,640

1


PROG HOLDINGS, INC.
INDEX
 
2


PART I – FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
PROG HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30,
2022
December 31,
2021
(In Thousands, Except Share Data)
ASSETS:
Cash and Cash Equivalents$221,886 $170,159 
Accounts Receivable (net of allowances of $85,734 in 2022 and $71,233 in 2021)
56,543 66,270 
Lease Merchandise (net of accumulated depreciation and allowances of $510,217 in 2022 and $463,929 in 2021)
566,148 714,055 
Loans Receivable (net of allowances and unamortized fees of $54,031 in 2022 and $53,300 in 2021)
130,136 119,315 
Property and Equipment, Net24,871 25,648 
Operating Lease Right-of-Use Assets12,448 17,488 
Goodwill296,061 306,212 
Other Intangibles, Net120,135 137,305 
Income Tax Receivable10,968 14,352 
Deferred Income Tax Assets2,760 2,760 
Prepaid Expenses and Other Assets49,535 48,197 
Total Assets$1,491,491 $1,621,761 
LIABILITIES & SHAREHOLDERS’ EQUITY:
Accounts Payable and Accrued Expenses$137,575 $135,954 
Deferred Income Tax Liabilities140,517 146,265 
Customer Deposits and Advance Payments33,952 45,070 
Operating Lease Liabilities22,341 25,410 
Debt590,642 589,654 
Total Liabilities 925,027 942,353 
Commitments and Contingencies (Note 4)
SHAREHOLDERS' EQUITY:
Common Stock, Par Value $0.50 Per Share: Authorized: 225,000,000 Shares at September 30, 2022 and December 31, 2021; Shares Issued: 82,078,654 at September 30, 2022 and December 31, 2021
41,039 41,039 
Additional Paid-in Capital335,642 332,244 
Retained Earnings1,118,150 1,055,526 
1,494,831 1,428,809 
Less: Treasury Shares at Cost
Common Stock: 32,046,014 Shares at September 30, 2022 and 25,638,057 at December 31, 2021
(928,367)(749,401)
Total Shareholders’ Equity566,464 679,408 
Total Liabilities & Shareholders’ Equity$1,491,491 $1,621,761 
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
3


PROG HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
(In Thousands, Except Per Share Data)
REVENUES:
Lease Revenues and Fees$606,585 $635,025 $1,930,843 $1,989,055 
Interest and Fees on Loans Receivable19,236 15,380 54,886 42,322 
625,821 650,405 1,985,729 2,031,377 
COSTS AND EXPENSES:
Depreciation of Lease Merchandise422,589 435,857 1,358,713 1,380,572 
Provision for Lease Merchandise Write-offs43,537 34,174 155,655 84,072 
Operating Expenses112,733 102,053 337,997 289,994 
Impairment of Goodwill10,151  10,151  
589,010 572,084 1,862,516 1,754,638 
OPERATING PROFIT 36,811 78,321 123,213 276,739 
Interest Expense(9,463)(444)(28,700)(1,392)
EARNINGS BEFORE INCOME TAX EXPENSE27,348 77,877 94,513 275,347 
INCOME TAX EXPENSE 11,343 20,464 31,889 69,609 
NET EARNINGS $16,005 $57,413 $62,624 $205,738 
EARNINGS PER SHARE
Basic$0.32 $0.87 $1.18 $3.07 
Assuming Dilution$0.32 $0.86 $1.18 $3.06 
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic50,461 66,092 52,896 66,938 
Assuming Dilution50,547 66,385 53,053 67,319 
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
4


PROG HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
20222021
(In Thousands)
OPERATING ACTIVITIES:
Net Earnings$62,624 $205,738 
Adjustments to Reconcile Net Earnings to Cash Provided by Operating Activities:
Depreciation of Lease Merchandise1,358,713 1,380,572 
Other Depreciation and Amortization25,446 21,954 
Provisions for Accounts Receivable and Loan Losses318,314 152,523 
Stock-Based Compensation13,930 14,803 
Deferred Income Taxes(5,748)16,948 
Impairment of Goodwill10,151  
Non-Cash Lease Expense838 708 
Other Changes, Net(5,785)(2,715)
Changes in Operating Assets and Liabilities, Net of Effects of Acquisitions:
Additions to Lease Merchandise(1,369,388)(1,446,046)
Book Value of Lease Merchandise Sold or Disposed158,582 87,005 
Accounts Receivable(280,096)(143,970)
Prepaid Expenses and Other Assets(1,077)(3,864)
Income Tax Receivable and Payable3,411 (18,529)
Operating Lease Right-of-Use Assets and Liabilities1,133 (1,411)
Accounts Payable and Accrued Expenses3,220 37,973 
Customer Deposits and Advance Payments(11,118)(6,799)
Cash Provided by Operating Activities283,150 294,890 
INVESTING ACTIVITIES:
Investments in Loans Receivable(147,711)(139,980)
Proceeds from Loans Receivable115,226 97,158 
Outflows on Purchases of Property and Equipment(7,488)(6,815)
Proceeds from Property and Equipment18 55 
Proceeds (Outflows) from Acquisitions of Businesses6 (22,942)
Cash Used in Investing Activities(39,949)(72,524)
FINANCING ACTIVITIES:
Acquisition of Treasury Stock(187,361)(128,233)
Tender Offer Shares Repurchased and Retired(274) 
Issuance of Stock Under Stock Option Plans663 3,133 
Shares Withheld for Tax Payments(2,902)(5,123)
Debt Issuance Costs(1,600) 
Cash Used in Financing Activities(191,474)(130,223)
Increase in Cash and Cash Equivalents51,727 92,143 
Cash and Cash Equivalents at Beginning of Period170,159 36,645 
Cash and Cash Equivalents at End of Period$221,886 $128,788 
Net Cash Paid During the Period:
Interest$17,306 $1,093 
Income Taxes$31,087 $43,985 
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
5


PROG HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1. BASIS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
As described elsewhere in this Quarterly Report on Form 10-Q, the Coronavirus Disease ("COVID-19") pandemic and the rampant increase in inflation has led to significant market uncertainty and disruption and has impacted many aspects of our businesses and operations, directly and indirectly. Throughout these notes to the condensed consolidated financial statements, the impacts of the COVID-19 pandemic and inflation on the financial results for the three and nine months ended September 30, 2022 and 2021 have been identified under the respective sections. For a discussion of customer payment trends and significant estimates made by management regarding allowances for lease merchandise, accounts receivable, and loans receivable, as well as the impacts COVID-19 and supply chain disruptions had on generating new lease and loan originations during the three and nine months ended September 30, 2022 and 2021, see Item 2. "Management’s Discussion and Analysis of Financial Condition and Results of Operations," including the "COVID-19 Pandemic," "Results of Operations," and "Liquidity and Capital Resources" below.
Description of Business
PROG Holdings, Inc. ("we," "our," "us," the "Company," or "PROG Holdings") is a financial technology holding company that provides leading financial solutions to empower consumers and retailers. PROG Holdings has two reportable segments: (i) Progressive Leasing, an e-commerce, app-based, and in-store point-of-sale lease-to-own solutions provider; and (ii) Vive Financial ("Vive"), an omnichannel provider of second-look revolving credit products.
Our Progressive Leasing segment provides consumers with lease-purchase solutions through its point-of-sale partner locations and e-commerce website partners in the United States (collectively, "POS partners"). It does so by purchasing merchandise from the POS partners desired by customers and, in turn, leasing that merchandise to the customers through a cancellable lease-to-own transaction. Progressive Leasing has no stores of its own, but rather offers lease-purchase solutions to the customers of traditional and e-commerce retailers.
Our Vive segment primarily serves customers that may not qualify for traditional prime lending offers who desire to purchase goods and services from participating merchants. Vive offers customized programs, with services that include revolving loans through private label and Vive-branded credit cards. Vive's current network of POS partner locations and e-commerce websites includes furniture, mattresses, home exercise equipment, and home improvement retailers, as well as medical and dental service providers.
On June 25, 2021, the Company completed the acquisition of Four Technologies, Inc. ("Four"), an innovative Buy Now, Pay Later company that allows shoppers to pay for merchandise through four interest-free installments. Four’s proprietary platform capabilities and its base of customers and retailers expand PROG Holdings’ ecosystem of financial technology offerings by introducing a payment solution that further diversifies the Company's consumer fintech offerings. Shoppers use Four to purchase furniture, clothing, electronics, health and beauty products, footwear, jewelry, and other consumer goods from retailers across the United States. Four is not a reportable segment for the three and nine month periods ended September 30, 2022 and 2021 as its financial results are not material to the Company's condensed consolidated financial results.
Basis of Presentation
The preparation of the Company's condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information requires management to make estimates and assumptions that affect the amounts reported in these condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Management does not believe these estimates or assumptions will change significantly in the future absent unidentified and unforeseen events, such as possible direct or indirect impacts associated with the COVID-19 pandemic and/or increasing inflation.
The accompanying unaudited condensed consolidated financial statements do not include all information required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for a fair presentation have been included in the accompanying unaudited condensed consolidated financial statements. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 Annual Report") filed with the United States Securities and Exchange Commission on February 23, 2022. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of operating results for the full year.
6


PROG HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Principles of Consolidation
The condensed consolidated financial statements include the accounts of PROG Holdings, Inc. and its subsidiaries, each of which is wholly-owned. Intercompany balances and transactions between consolidated entities have been eliminated.
Accounting Policies and Estimates
See Note 1 to the consolidated financial statements in the 2021 Annual Report for an expanded discussion of accounting policies and estimates.
Earnings Per Share
Earnings per share is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. The computation of earnings per share assuming dilution includes the dilutive effect of stock options, restricted stock units ("RSUs"), restricted stock awards ("RSAs"), performance share units ("PSUs") and awards issuable under the Company's employee stock purchase plan ("ESPP") (collectively, "share-based awards") as determined under the treasury stock method. The following table shows the calculation of dilutive share-based awards:
Three Months Ended September 30,Nine Months Ended September 30,
(Shares In Thousands)2022202120222021
Weighted Average Shares Outstanding50,461 66,092 52,896 66,938 
Dilutive Effect of Share-Based Awards86 293 157 381 
Weighted Average Shares Outstanding Assuming Dilution50,547 66,385 53,053 67,319 
Approximately 1,622,000 and 1,418,000 weighted-average share-based awards were excluded from the computation of earnings per share assuming dilution during the three and nine months ended September 30, 2022, respectively, as the awards would have been anti-dilutive for the periods presented.
Approximately 725,000 and 464,000 weighted-average share-based awards were excluded from the computation of earnings per share assuming dilution during the three and nine months ended September 30, 2021, respectively, as the awards would have been anti-dilutive for the periods presented.
Revenue Recognition
Lease Revenues and Fees
Progressive Leasing provides merchandise, consisting primarily of furniture, appliances, electronics, jewelry, mobile phones and accessories, mattresses, automobile electronics and accessories, and a variety of other products, to its customers for lease under terms agreed to by the customer. Progressive Leasing offers customers of traditional and e-commerce retailers a lease-purchase solution through leases with payment terms that can generally be renewed up to 12 months. Progressive Leasing does not require deposits upon inception of customer agreements. The customer has the right to acquire ownership either through early buyout options or through payment of all required lease payments. The agreements are cancellable at any time by either party without penalty.
All of Progressive Leasing's customer agreements are considered operating leases. The Company maintains ownership of the lease merchandise until all payment obligations are satisfied under the lease ownership agreements. Initial lease payments made by the customer upon lease execution are recognized as deferred revenue and are amortized as lease revenue over the estimated lease term on a straight-line basis. All other customer lease billings are earned prior to the lease payment due date and are recorded net of related sales taxes as earned. Payment due date terms include weekly, bi-weekly, semi-monthly and monthly frequencies. Initial lease payments and other cash collected in advance of being due or earned are recognized as deferred revenue within customer deposits and advance payments in the accompanying condensed consolidated balance sheets. Revenue recorded prior to the payment due date results in unbilled receivables recognized in accounts receivable, net of allowances, in the accompanying condensed consolidated balance sheets. Lease revenues are recorded net of a provision for uncollectible renewal payments.
Initial direct costs related to lease purchase agreements are capitalized as incurred and amortized as operating expense over the estimated lease term. The capitalized costs have been classified within prepaid expenses and other assets in the accompanying condensed consolidated balance sheets.
7


PROG HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Interest and Fees on Loans Receivable
Interest and fees on loans receivable is primarily generated from our Vive segment. Vive extends or declines credit to an applicant through its bank partners based upon the applicant's credit rating and other factors. Qualifying applicants receive a credit card to finance their initial purchase and to use in subsequent purchases at the merchant or other participating merchants for an initial 24-month period, which Vive may renew if the cardholder remains in good standing.
Vive acquires the loan receivable from its third-party bank partners at a discount from the face value of the loan. The discount is comprised of a merchant fee discount and a promotional fee discount, if applicable.
The merchant fee discount represents a pre-negotiated, nonrefundable discount that generally ranges from 3% to 25% of the loan face value. The discount is designed to cover the risk of loss related to the portfolio of cardholder charges and Vive's direct origination costs. The merchant fee discount and origination costs are presented net on the condensed consolidated balance sheets in loans receivable. Cardholders generally have an initial 24-month period that the card is active. The merchant fee discount, net of the origination costs, is amortized on a net basis and is recorded as interest and fee revenue on loans receivable in the condensed consolidated statements of earnings on a straight-line basis over the initial 24-month period.
The discount from the face value of the loan on the acquisition of the loan receivable from the merchant through the third-party bank partners may also include a promotional fee discount, which generally ranges from 1% to 8%. The promotional fee discount is intended to compensate the holder of the loan receivable (i.e., Vive) for deferred or reduced interest rates that are offered to the cardholder for a specified period on the outstanding loan balance (generally for six, 12 or 18 months). The promotional fee discount is amortized as interest and fee revenue on loans receivable in the condensed consolidated statements of earnings on a straight-line basis over the promotional interest period (i.e., over six, 12 or 18 months, depending on the promotion). The unamortized promotional fee discount is presented net on the condensed consolidated balance sheets in loans receivable.
The customer is typically required to make monthly minimum payments of at least 3.5% of the outstanding loan balance, which includes outstanding interest. Fixed and variable interest rates, typically 27% to 35.99%, are compounded daily for cards that do not qualify for deferred or reduced interest promotional periods. Interest income, which is recognized based upon the amount of the loans outstanding, is recognized as interest and fees on loans receivable when earned if collectibility is reasonably assured. For credit cards that provide deferred interest, if the balance is not paid off during the promotional period or if the cardholder defaults, interest is billed to the customers at standard rates and the cumulative amount owed is charged to the cardholder account in the month that the promotional period expires. For credit cards that provide reduced interest, if the balance is not paid off during the promotional period, interest is billed to the cardholder at standard rates in the month that the promotional period expires or when the cardholder defaults. The Company recognizes interest revenue during the promotional period based on its historical experience related to cardholders that fail to pay off balances during the promotional period if collectibility is reasonably assured.
Annual fees are charged to cardholders at the commencement of the loan and on each subsequent anniversary date. Annual fees are deferred and recognized into revenue on a straight-line basis over a one-year period. Under the provisions of the credit card agreements, Vive also may assess fees for missed or late payments, which are recognized as interest and fee revenue in the billing period in which they are assessed if collectibility is reasonably assured. Annual fees and other fees are recognized as interest and fee revenue on loans receivable in the condensed consolidated statements of earnings.
Accounts Receivable
Accounts receivable consist primarily of receivables due from customers of Progressive Leasing and amounted to $56.5 million and $66.3 million, net of allowances, as of September 30, 2022 and December 31, 2021, respectively.
The Company maintains an accounts receivable allowance, which primarily relates to its Progressive Leasing operations and, to a lesser extent, receivables from Vive's POS partners. The Company’s policy is to record an allowance for uncollectible renewal payments based on historical collection experience. Other qualitative factors are considered in estimating the allowance, such as current and forecasted business trends including, but not limited to, the potential unfavorable impacts of the significant increase in inflation and the COVID-19 pandemic on our businesses. Given the significant uncertainty regarding the impacts of increasing inflation and the COVID-19 pandemic on our business, a high level of estimation was involved in determining the allowance as of September 30, 2022. Therefore, actual future accounts receivable write-offs may differ materially from the allowance. If the recent increase in inflation, which has risen at a greater pace than seen in decades, continues in future periods, or if the current level of inflation does not decrease, such developments may further adversely impact our customers' ability to continue to make payments to the Company. The provision for uncollectible renewal payments is recorded as a reduction of lease revenues and fees within the condensed consolidated statements of earnings. For customer lease agreements that are past due, the Company's policy is to write-off lease receivables after 120 days.
8


PROG HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Vive's allowance for uncollectible merchant accounts receivable, which primarily relates to cardholder returns and refunds, is recorded as bad debt expense within operating expenses in the condensed consolidated statements of earnings. See below for discussion of Vive's loans receivable and related allowance for loan losses.
The following table shows the components of the accounts receivable allowance:
Three Months Ended September 30,Nine Months Ended September 30,
(In Thousands)2022202120222021
Beginning Balance$81,898 $48,459 $71,233 $56,364 
Net Book Value of Accounts Written Off(109,203)(56,507)(302,945)(164,518)
Recoveries8,736 7,085 27,623 30,933 
Accounts Receivable Provision104,303 61,541 289,823 137,799 
Ending Balance$85,734 $60,578 $85,734 $60,578 
Lease Merchandise
Progressive Leasing's merchandise consists primarily of furniture, appliances, electronics, jewelry, mobile phones and accessories, mattresses, automobile electronics and accessories, and a variety of other products, and is recorded at the lower of depreciated cost or net realizable value. Progressive Leasing depreciates lease merchandise to a 0% salvage value generally over 12 months. Depreciation is accelerated upon early buyout. All of Progressive Leasing's merchandise, net of accumulated depreciation and allowances, represents on-lease merchandise.
The Company records a provision for write-offs using the allowance method. The allowance method for lease merchandise write-offs estimates the merchandise losses incurred but not yet identified by management as of the end of the accounting period based on historical write-off experience. Other qualitative factors, such as current and forecasted customer payment trends, are considered in estimating the allowance. Given the significant uncertainty regarding the impacts of inflation, which has increased at a greater pace than seen in decades, and the COVID-19 pandemic on our business, a high level of estimation was involved in determining the allowance as of September 30, 2022. Actual lease merchandise write-offs may differ materially from the allowance as of September 30, 2022. If the recent increase in the rate of inflation continues in future periods, or if the current level of inflation does not decrease, such developments may further adversely impact our customers' ability to continue to make payments to the Company. For customer lease agreements that are past due, the Company's policy is to write-off lease merchandise after 120 days.
The following table shows the components of the allowance for lease merchandise write-offs, which is included within lease merchandise, net in the condensed consolidated balance sheets:
Three Months Ended September 30,Nine Months Ended September 30,
(In Thousands)2022202120222021
Beginning Balance$70,579 $45,627 $54,367 $45,992 
Net Book Value of Merchandise Written off(56,810)(30,340)(157,376)(85,240)
Recoveries2,329 2,361 6,989 6,998 
Provision for Write-offs43,537 34,174 155,655 84,072 
Ending Balance$59,635 $51,822 $59,635 $51,822 
Vendor Incentives and Rebates Provided to POS Partners
Progressive Leasing has agreements with some of its POS partners that require additional consideration to be paid to the POS partner, including payments for exclusivity, rebates based on lease volume originations generated through the POS partners, and payments to the POS partners for marketing or other development initiatives to promote additional lease originations through these POS partners. Payments made to POS partners as consideration for them providing exclusivity to Progressive Leasing for lease-to-own transactions with customers of the POS partner are expensed on a straight-line basis over the exclusivity term. Rebates are accrued over the period the POS partner is earning the rebate, which is typically based on quarterly or annual lease origination volumes. Payments made to POS partners for marketing or development initiatives are expensed on a straight-line basis over the period the POS partner is earning the funds or the specified marketing term. Progressive Leasing expensed $6.2 million and $19.0 million for such additional consideration to POS partners, during the three and nine months ended September 30, 2022, respectively, compared to $3.9 million and $13.5 million during the three and nine
9


PROG HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
months ended September 30, 2021. Expenses related to additional consideration provided to POS partners are classified within operating expenses in the condensed consolidated statements of earnings.
Loans Receivable, Net
Gross loans receivable primarily represents the principal balances of credit card charges at Vive's participating merchants that remain due from cardholders, plus unpaid interest and fees due from cardholders. The allowance and unamortized fees represent uncollectible amounts; merchant fee discounts, net of capitalized origination costs; promotional fee discounts; and deferred annual card fees. Loans receivable, net also includes $2.7 million and $1.5 million of outstanding receivables from customers of Four as of September 30, 2022 and December 31, 2021, respectively.
Economic conditions and loan performance trends are closely monitored to manage and evaluate exposure to credit risk. Trends in delinquency rates are an indicator of credit risk within the loans receivable portfolio, including the migration of loans between delinquency categories over time. Charge-off rates represent another indicator of the potential for future credit losses. The risk in the loans receivable portfolio is correlated with broad economic trends, such as current and projected unemployment rates, stock market volatility, and changes in medium and long-term risk-free rates, which are considered in determining the allowance for loan losses and can have a material effect on credit performance.
Expected lifetime losses on loans receivable are recognized upon loan acquisition, which requires the Company to make its best estimate of probable lifetime losses at the time of acquisition. Our credit card loans do not have contractually stated maturity dates, which requires the Company to estimate an average life of loan by analyzing historical payment trends to determine an expected remaining life of the loan balance. The Company segments its loans receivable portfolio into homogenous pools by Fair Isaac and Company ("FICO") score and by delinquency status and evaluates loans receivable collectively for impairment when similar risk characteristics exist.
The Company calculates Vive's allowance for loan losses based on internal historical loss information and incorporates observable and forecasted macroeconomic data over a twelve-month reasonable and supportable forecast period. Incorporating macroeconomic data could have a material impact on the measurement of the allowance to the extent that forecasted data changes significantly, such as higher forecasted inflation and unemployment rates, and the observed significant market volatility associated with the COVID-19 pandemic. For any periods beyond the twelve-month reasonable and supportable forecast period described above, the Company reverts to using historical loss information on a straight-line basis over a period of six months and utilizes historical loss information for the remaining life of the portfolio. The Company may also consider other qualitative factors in estimating the allowance, as necessary. For the purposes of determining the allowance as of September 30, 2022, management considered other qualitative factors such as the unfavorable impact of the rapid increase in the rate of inflation in recent months and the beneficial impact of government stimulus measures to our customer base in 2020 and 2021 that were not fully factored into the macroeconomic forecasted data and resulted in internal historical loss rates incorporated in Vive's baseline allowance estimate being lower than current forecasted loss rates. We believe those stimulus measures may have contributed to the favorable cardholder payment trends experienced at Vive in 2020 and 2021. The allowance for loan losses is maintained at a level considered appropriate to cover expected future losses of principal, interest and fees on active loans in the loans receivable portfolio. The appropriateness of the allowance is evaluated at each period end. If the recent increase in inflation continues in future periods, such a development may adversely impact our customers' ability to continue to make payments to the Company. To the extent that actual results differ from estimates of uncollectible loans receivable, including the significant uncertainties caused by rapidly increasing inflation and the COVID-19 pandemic, the Company's results of operations and liquidity may be materially affected.
Vive's delinquent loans receivable includes those that are 30 days or more past due based on their contractual billing dates. Vive's loans receivable are placed on nonaccrual status when they are greater than 90 days past due or upon notification of cardholder bankruptcy, death or fraud. The Company discontinues accruing interest and fees and amortizing merchant fee discounts and promotional fee discounts for Vive's loans receivable in nonaccrual status. Loans receivable are removed from nonaccrual status when cardholder payments resume, the loan becomes 90 days or less past due and collection of the remaining amounts outstanding is deemed probable. Payments received on nonaccrual loans are allocated according to the same payment hierarchy methodology applied to loans that are accruing interest. Loans receivable are charged off no later than the end of the following month after the billing cycle in which the loans receivable become 120 days past due.
10


PROG HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Vive extends or declines credit to an applicant through its bank partners based upon the applicant's credit rating and other factors. Below is a summary of the credit quality of the Company's loan portfolio as of September 30, 2022 and December 31, 2021 by FICO score as determined at the time of loan origination:
FICO Score CategorySeptember 30, 2022December 31, 2021
600 or Less7.4 %7.7 %
Between 600 and 70076.2 %78.0 %
700 or Greater13.8 %12.7 %
No Score Identified2.6 %1.6 %
Prepaid Expenses and Other Assets
Prepaid expenses and other assets consist of the following:
(In Thousands)September 30, 2022December 31, 2021
Prepaid Expenses$27,596 $28,283 
Prepaid Software Expenses8,664 7,102 
Unamortized Initial Direct Costs on Lease Agreement Originations5,781 5,326 
Prepaid Insurance1,073 40 
Other Assets6,421 7,446 
Prepaid Expenses and Other Assets$49,535 $48,197 
The Company incurs costs to implement cloud computing arrangements ("CCA") that are hosted by third-party vendors. Implementation costs associated with CCA are capitalized when incurred during the application development phase and are recorded within prepaid software expenses above. Amortization is calculated on a straight-line basis over the contractual term of the arrangement and is included within computer software expense as a component of operating expenses in the condensed consolidated statements of earnings.
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following:
(In Thousands)September 30, 2022December 31, 2021
Accounts Payable$9,379 $13,741 
Accrued Salaries and Benefits21,095 25,861 
Accrued Sales and Personal Property Taxes14,463 14,851 
Income Taxes Payable2,809 2,782 
Uncertain Tax Positions1
51,509 48,451 
Other Accrued Expenses and Liabilities38,320 30,268 
Accounts Payable and Accrued Expenses$137,575 $135,954 
1 The uncertain tax positions as of September 30, 2022, and December 31, 2021 are primarily related to the Company’s tax treatment of the $175.0 million settlement payment made in 2020 to the FTC as discussed in Note 10 and Note 11 to the consolidated financial statements in the 2021 Annual Report.
11


PROG HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Debt
On November 24, 2020, the Company entered into a credit agreement with a consortium of lenders providing for a $350.0 million senior revolving credit facility (the "Revolving Facility"), under which revolving borrowings became available at the completion of the separation and distribution transaction through which the Company's historical Aaron's Business segment was spun-off into a separate company, and under which all borrowings and commitments will mature or terminate on November 24, 2025. The Company expects that the Revolving Facility will be used to provide for working capital and capital expenditures, to finance future permitted acquisitions, and for other general corporate purposes. If the Company's total net debt to EBITDA ratio as defined by the Revolving Facility exceeds 1.25, the Revolving Facility becomes fully secured for the remaining duration of the Revolving Facility term. As of June 30, 2022, the Company exceeded the 1.25 total net debt to EBITDA ratio and the Revolving Facility became fully secured. The Company had no outstanding borrowings and $350.0 million total available credit under the Revolving Facility as of September 30, 2022 and December 31, 2021.
On November 26, 2021, the Company entered into an indenture in connection with an offering of $600 million aggregate principal amount of its 6.00% senior unsecured notes due 2029 (the "Senior Notes"). The Senior Notes were issued at 100% of their par value. The Senior Notes are general unsecured obligations of the Company and are guaranteed by certain of the Company’s existing and future domestic subsidiaries.
The net proceeds from the Senior Notes were used to fund the purchase price, and related fees and expenses, of the Company’s tender offer to purchase $425 million of the Company’s common stock as discussed in Note 12 to the consolidated financial statements in the 2021 Annual Report. The Company intends to use any remaining proceeds for future share repurchases or, to the extent the Company determines not to repurchase additional shares, for general corporate purposes.
At September 30, 2022, the Company was in compliance with all covenants related to its outstanding debt. See Note 9 to the consolidated financial statements in the 2021 Annual Report for further information regarding the Company's indebtedness.
Goodwill
Goodwill represents the excess of the purchase price paid over the fair value of the identifiable net tangible and intangible assets acquired in connection with business acquisitions. Progressive Leasing and Four are the only reporting units with goodwill as of September 30, 2022. Impairment occurs when the reporting unit's carrying value exceeds its fair value. The Company’s goodwill is not amortized but is subject to an impairment test at the reporting unit level annually as of October 1 and more frequently if events or circumstances indicate that an impairment may have occurred. Factors which could necessitate an interim impairment assessment include a sustained decline in the Company’s stock price, prolonged negative industry or economic trends and significant underperformance relative to historical results, projected future operating results, or the Company failing to successfully execute on one or more elements of Progressive Leasing and/or Four's strategic plans.
The Company concluded an interim goodwill impairment test was triggered for the Four reporting unit as of September 30, 2022. Factors that led to this conclusion include: (i) a significant decline in valuations and related market multiples for peers in the Buy Now, Pay Later industry; (ii) an increase in Four's forecasted losses; and (iii) projected negative cash flows for the reporting unit in future periods.
As of September 30, 2022, the Company determined the Four goodwill was partially impaired and recorded an impairment of goodwill of $10.2 million during the three months ended September 30, 2022. The Company engaged the assistance of a third-party valuation firm to perform the interim goodwill impairment test for the Four reporting unit. This included an assessment of the Four reporting unit's fair value relative to the carrying value that was derived using a market approach. The market approach, which includes the guideline public company method, utilized pricing multiples derived from an analysis of other publicly traded companies that operate in the Buy Now, Pay Later industry. We believe the comparable companies we evaluate as marketplace participants serve as an appropriate reference when calculating fair value because those companies have similar risks, participate in similar markets, provide similar products and services for their customers and compete with Four directly. As of September 30, 2022, Four's goodwill balance was $7.3 million. Additional goodwill impairment charges may occur in future periods if the Company fails to execute on one or more elements of Four's strategic plan, Four's actual or projected results are unfavorable compared to the current forecasted operating results, and/or there are further declines in the Buy Now, Pay Later peer market multiples.
The Company completed its annual goodwill impairment test for Progressive Leasing as of October 1, 2021 and concluded that no impairment had occurred. The Company determined that there were no events or circumstances that occurred during the nine months ended September 30, 2022 that would more likely than not reduce the fair value of Progressive Leasing below its carrying amount.

12


PROG HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Shareholders' Equity
Changes in shareholders' equity for the nine months ended September 30, 2022 and 2021 are as follows:
 Treasury StockCommon StockAdditional
Paid-in Capital
Retained EarningsTotal Shareholders’ Equity
(In Thousands)SharesAmountSharesAmount
Balance, December 31, 2021(25,638)$(749,401)82,079 $41,039 $332,244 $1,055,526 $679,408 
Stock-Based Compensation— — — — 6,587 — 6,587 
Reissued Shares177 5,260 — — (7,776)— (2,516)
Repurchased Shares(2,200)(78,080)— — — — (78,080)
Net Earnings— — — — — 27,135 27,135 
Balance, March 31, 2022(27,661)$(822,221)82,079 $41,039 $331,055 $1,082,661 $632,534 
Stock-Based Compensation— — — — 2,484 — 2,484 
Reissued Shares47 1,380 — — (716)— 664 
Repurchased Shares(3,899)(98,395)— — — — (98,395)
Net Earnings— — — — — 19,484 19,484 
Balance, June 30, 2022(31,513)$(919,236)82,079 $41,039 $332,823 $1,102,145 $556,771 
Stock-Based Compensation— — — — 4,960 — 4,960 
Reissued Shares56 1,755 — — (2,141)— (386)
Repurchased Shares(589)(10,886)— — — — (10,886)
Net Earnings— — — — — 16,005 16,005 
Balance, September 30, 2022(32,046)$(928,367)82,079 $41,039 $335,642 $1,118,150 $566,464 

 Treasury StockCommon StockAdditional
Paid-in Capital
Retained EarningsTotal Shareholders’ Equity
(In Thousands)SharesAmountSharesAmount
Balance, December 31, 2020(23,029)$(613,881)90,752 $45,376 $318,263 $1,236,378 $986,136 
Stock-Based Compensation— — — — 4,163 — 4,163 
Reissued Shares216 3,671 — — (8,400)— (4,729)
Repurchased Shares(589)(28,102)— — — — (28,102)
Net Earnings— — — — — 79,488 79,488 
Balance, March 31, 2021(23,402)$(638,312)90,752 $45,376 $314,026 $1,315,866 $1,036,956 
Stock-Based Compensation— — — — 3,973 — 3,973 
Reissued Shares61 1,751 — — 912 — 2,663 
Repurchased Shares(911)(49,094)— — — — (49,094)
Net Earnings— — — — — 68,837 68,837 
Balance, June 30, 2021(24,252)$(685,655)90,752 $45,376 $318,911 $1,384,703 $1,063,335 
Stock-Based Compensation— — — — 6,667 — 6,667 
Reissued Shares16 347 — — (269)— 78 
Repurchased Shares(1,125)(51,037)— — — — (51,037)
Net Earnings— — — — — 57,413 57,413 
Balance, September 30, 2021(25,361)$(736,345)90,752 $45,376 $325,309 $1,442,116 $1,076,456 

13


PROG HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Stock-Based Compensation
During the nine months ended September 30, 2022, the Company issued 539,085 restricted stock units and 264,132 stock options to certain employees, and 389,529 performance share units to certain employees and third-parties, which vest over one to three-year periods for certain units and upon the achievement of specified performance conditions for other units. The weighted average fair value of the restricted stock and performance share awards was $28.00, which was based on the fair market value of the Company’s common stock on the dates of grant. The weighted average fair value of the stock option awards was $10.89, which was based on a grant date value using a Black-Scholes-Merton option pricing model. The Company will recognize the grant date fair value of the restricted stock units and stock options as stock-based compensation expense over the requisite service period of one to three years. The Company will recognize the grant date fair value of the performance units as stock-based compensation expense over the estimated vesting period based on the Company's projected assessment of the performance conditions that are probable of being achieved in accordance with ASC 718, Stock-based Compensation.
Fair Value Measurement
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:
Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3—Valuations based on unobservable inputs reflecting the Company's own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
The Company measures a liability related to its non-qualified deferred compensation plan, which represents benefits accrued for plan participants and is valued at the quoted market prices of the participants' investment election, at fair value on a recurring basis. The Company maintains certain financial assets and liabilities that are not measured at fair value but for which fair value is disclosed.
The fair values of the Company's other current financial assets and liabilities, including cash and cash equivalents, accounts receivable and accounts payable, approximate their carrying values due to their short-term nature. The fair value of any revolving credit borrowings also approximate their carrying amounts.
Recent Accounting Pronouncements
Pending Adoption
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848) ("ASU 2020-04"). The standard provides temporary guidance to ease the potential burden in accounting for reference rate reform primarily resulting from the discontinuation of the London Interbank Overnight ("LIBO") rate or another reference rate expected to be discontinued. Entities may apply the provisions of the new standard as of the beginning of the reporting period when the election is made. The provisions of this update have been extended to December 31, 2024, when the reference rate replacement activity is expected to have completed. The Company's Revolving Facility currently references the LIBO rate for determining interest payable on outstanding borrowings. The amendments in ASU 2020-04 are elective and apply to all entities that have contracts referencing the LIBO rate. The new guidance provides an expedient which simplifies accounting analyses under current U.S. GAAP for contract modifications if the change is directly related to a change from the LIBO rate to a new interest rate index. The Company plans to amend the Revolving Facility agreement to change the reference rate from LIBO to the Secured Overnight Financing Rate ("SOFR"). The Company does not expect the adoption of ASU 2020-04 to have a material impact to the Company's condensed consolidated financial statements or to any key terms of our Revolving Facility other than the discontinuation of the LIBO rate.
14


PROG HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2. FAIR VALUE MEASUREMENT
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table summarizes financial liabilities measured at fair value on a recurring basis:
(In Thousands)September 30, 2022December 31, 2021
 Level 1Level 2Level 3Level 1Level 2Level 3
Deferred Compensation Liability$ $2,023 $ $ $2,423 $ 
The Company maintains the PROG Holdings, Inc. Deferred Compensation Plan, which is an unfunded, nonqualified deferred compensation plan for a select group of management, highly compensated employees and non-employee directors. The liability is recorded in accounts payable and accrued expenses in the condensed consolidated balance sheets. The liability represents benefits accrued for plan participants and is valued at the quoted market prices of the participants’ investment elections, which consist of equity and debt "mirror" funds. As such, the Company has classified the deferred compensation liability as a Level 2 liability.
Financial Assets and Liabilities Not Measured at Fair Value for Which Fair Value is Disclosed
Vive's loans receivable are measured at amortized cost, net of an allowance for loan losses on the condensed consolidated balance sheets. In estimating fair value for Vive's loans receivable, the Company utilized a discounted cash flow methodology. The Company used various unobservable inputs reflecting its own assumptions, such as contractual future principal and interest cash flows, future loss rates, and discount rates (which consider current interest rates and are adjusted for credit risk, among other factors).
Four's loans receivable, net of an allowance for loan losses and unamortized fees, are included within loans receivable, net on the condensed consolidated balance sheet as of September 30, 2022 and approximated fair value based on a discounted cash flow methodology.
The Company's Senior Notes are carried at amortized cost on the condensed consolidated balance sheets and are measured at fair value for disclosure purposes. The fair value of the Senior Notes was estimated based on quoted market prices in less active markets and has been classified as Level 2 in the fair value hierarchy.
The following table summarizes the fair value of the Company's debt and loans receivable held by Vive and Four: 
(In Thousands)September 30, 2022December 31, 2021
Level 1Level 2Level 3Level 1Level 2Level 3
Senior Notes$ $478,320 $ $ $616,080 $ 
Loans Receivable, Net$ $ $165,371 $ $ $157,070 
15


PROG HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3. LOANS RECEIVABLE
The following is a summary of the Company’s loans receivable, net:
(In Thousands)September 30, 2022December 31, 2021
Loans Receivable, Gross$184,167 $172,615 
   Unamortized Fees(11,729)(12,511)
Loans Receivable, Amortized Cost172,438 160,104 
   Allowance for Loan Losses(42,302)(40,789)
Loans Receivable, Net of Allowances and Unamortized Fees1
$130,136 $119,315 
1 Loans Receivable, Net of Allowances and Unamortized Fees, attributable to Four was $2.7 million and $1.5 million as of September 30, 2022 and December 31, 2021, respectively.
The table below presents credit quality indicators of the amortized cost of the Company's loans receivable by origination year:
(In Thousands)
As of September 30, 2022
20222021202020192018PriorTotal
FICO Score Category:
600 or Less$6,456 $4,924 $1,223 $336 $95 $35 $13,069 
Between 600 and 70065,751 45,295 13,984 3,792 1,004 1,840 131,666 
700 or Greater14,938 5,537 1,686 356 161 403 23,081 
No Score Identified4,622      4,622 
Total Amortized Cost$91,767 $55,756 $16,893 $4,484 $1,260 $2,278 $172,438 
Included in the table below is an aging of the loans receivable, gross balance:
(Dollar Amounts in Thousands)
Aging CategorySeptember 30, 2022December 31, 2021
30-59 Days Past Due6.1 %6.3 %
60-89 Days Past Due3.6 %3.1 %
90 or More Days Past Due5.6 %4.0 %
Past Due Loans Receivable15.3 %13.4 %
Current Loans Receivable84.7 %86.6 %
Balance of Credit Card Loans on Nonaccrual Status5,004 3,527 
Balance of Loans Receivable 90 or More Days Past Due and Still Accruing Interest and Fees$ $ 
The table below presents the components of the allowance for loan losses for the three and nine months ended September 30, 2022 and 2021:
Three Months Ended September 30,Nine Months Ended September 30,
(In Thousands)2022202120222021
Beginning Balance$40,797 $45,151 $40,789 $42,127 
Provision for Loan Losses12,031 3,868 28,491 14,724 
Charge-offs(11,612)(5,381)(30,286)(15,031)
Recoveries1,086 1,012 3,308 2,830 
Ending Balance$42,302 $44,650 $42,302 $44,650 

16


PROG HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4. COMMITMENTS AND CONTINGENCIES
Legal and Regulatory Proceedings
From time to time, the Company is party to various legal and regulatory proceedings arising in the ordinary course of business.
Some of the proceedings to which the Company is currently a party are described below. The Company believes it has meritorious defenses to all of the claims described below, and intends to vigorously defend against the claims. However, these proceedings are still developing and due to the inherent uncertainty in litigation, regulatory and similar adversarial proceedings, there can be no guarantee that the Company will ultimately be successful in these proceedings, or in others to which it is currently a party. Substantial losses from these proceedings or the costs of defending them could have a material adverse impact upon the Company’s business, financial position and results of operations.
The Company establishes an accrued liability for legal and regulatory proceedings when it determines that a loss is both probable and the amount of the loss can be reasonably estimated. The Company continually monitors its litigation and regulatory exposure and reviews the adequacy of its legal and regulatory reserves on a quarterly basis. The amount of any loss ultimately incurred in relation to matters for which an accrual has been established may be higher or lower than the amounts accrued for such matters.
At September 30, 2022 and December 31, 2021, the Company had accrued $0.7 million and an immaterial amount, respectively for pending legal and regulatory matters for which it believes losses are probable and the amount of the loss can be reasonably estimated. The Company records its best estimate of the loss to legal and regulatory liabilities in accounts payable and accrued expenses in the condensed consolidated balance sheets. The Company estimates that the aggregate range of reasonably possible loss in excess of accrued liabilities for such probable loss contingencies is immaterial. Those matters for which a probable loss cannot be reasonably estimated are not included within the estimated ranges.
At September 30, 2022, the Company estimated that the aggregate range of loss for all material pending legal and regulatory proceedings for which a loss is reasonably possible, but less likely than probable (i.e., excluding the contingencies described in the preceding paragraph), is immaterial. Those matters for which a reasonable estimate is not possible are not included within estimated ranges and, therefore, the estimated ranges do not represent the Company's maximum loss exposure. The Company’s estimates for legal and regulatory accruals, aggregate probable loss amounts and reasonably possible loss amounts, are all subject to the uncertainties and variables described above.
Regulatory Inquiries
In January 2021, the Company, along with other lease-to-own companies, received a subpoena from the California Department of Financial Protection and Innovation (the "DFPI") requesting the production of documents regarding the Company’s compliance with state consumer protection laws, including new legislation that went into effect on January 1, 2021. Although the Company believes it is in compliance with all applicable consumer financial laws and regulations in California, this inquiry may lead to an enforcement action and/or a consent order, and substantial costs, including legal fees, fines, penalties, and remediation expenses. While the Company intends to preserve defenses surrounding the jurisdiction of DFPI in this matter, it anticipates cooperating with the DFPI in responding to its inquiry.
Litigation Matters
In Stein v. Aaron's, Inc., et. al., filed in the United States District Court for the Southern District of New York on February 28, 2020, the plaintiff alleged that from March 2, 2018 through February 19, 2020, the Company made certain misleading public statements about the Company's business, operations, and prospects. The allegations underlying the lawsuit principally relate to the FTC's inquiry into disclosures related to lease-to-own and other financial products offered by the Company through its historical Aaron's Business and Progressive Leasing segments. The United States District Court for the Northern District of Georgia, the Court to whom the case was transferred, granted the Company's motion to dismiss the case on September 29, 2022. Plaintiff has agreed that it will not appeal the matter and the Company has agreed that it will not pursue attorneys' fees and costs from Plaintiff. The United States District Court for the Northern District of Georgia entered a judgment dismissing the action on October 20, 2022.
17


PROG HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On August 25, 2022, the Pennsylvania Attorney General filed a complaint against Progressive Leasing in the Philadelphia County Court of Common Pleas alleging, among other things, that Progressive Leasing was operating in the Commonwealth of Pennsylvania in violation of the Pennsylvania Rental Purchase Agreement Act by failing to disclose certain terms and conditions of rent-to-own ("RTO") transactions on "hang tags" physically attached to RTO merchandise. The complaint seeks, among other things, to convert all RTO agreements entered into by Progressive Leasing prior to September 9, 2022 into retail installment contracts for which the maximum interest rate is 6% per annum, civil penalties in the amount of $1,000 for each violation of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (and $3,000 for each such violation involving a consumer age 60 or older) and unspecified investigation and prosecution costs. Progressive Leasing believes the Pennsylvania Attorney General’s claims are without merit and intends to vigorously defend itself in this matter.
Other Contingencies
Management regularly assesses the Company’s insurance deductibles, monitors the Company's litigation and regulatory exposure with the Company's attorneys and evaluates its loss experience. The Company also enters into various contracts in the normal course of business that may subject it to risk of financial loss if counterparties fail to perform their contractual obligations.
Off-Balance Sheet Risk
The Company, through its Vive segment, had unconditionally cancellable unfunded lending commitments totaling approximately $505.8 million and $467.6 million as of September 30, 2022 and December 31, 2021, respectively, that do not give rise to revenues and cash flows. These unfunded commitments arise in the ordinary course of business from credit card agreements with individual cardholders that give them the ability to borrow, against unused amounts, up to the maximum credit limit assigned to their account. While these unfunded amounts represent the total available unused lines of credit, the Company does not anticipate that all cardholders will utilize their entire available line at any given point in time. Commitments to extend unsecured credit are agreements to lend to a cardholder so long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.
18


PROG HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5. SEGMENTS
As of September 30, 2022, the Company has two reportable segments: Progressive Leasing and Vive.
Progressive Leasing partners with traditional and e-commerce retailers, primarily in the furniture and appliance, jewelry, mobile phones and accessories, mattresses, and automobile electronics and accessories industries to offer a lease-purchase solution for customers who may not have access to traditional credit-based financing options. It does so by offering leases with monthly, semi-monthly, bi-weekly and weekly payment models.
Vive offers a variety of second-look financing programs originated through third-party federally insured banks to customers of participating merchants and, together with Progressive Leasing, allows the Company to provide POS partners with near-prime and below-prime customers one source for financing and leasing transactions.
As discussed in Note 1 of the 2021 Annual Report, on June 25, 2021, the Company completed the acquisition of Four, an innovative Buy Now, Pay Later company that allows shoppers to pay for merchandise through four interest-free installments. Four is not a reportable segment for the three and nine month periods ended September 30, 2022 and 2021 as its financial results are not material to the Company's condensed consolidated financial results. The revenues, loss before income taxes, and assets within "other" below is primarily comprised of the operating activities of Four.
Disaggregated Revenue
The following table presents revenue by source and by segment for the three months ended September 30, 2022 and 2021:
Three Months Ended September 30, 2022Three Months Ended September 30, 2021
(In Thousands)Progressive LeasingViveOtherTotalProgressive LeasingViveOtherTotal
Lease Revenues and Fees1
$