PROG Holdings Inc.
04/29/2026 | Press release | Distributed by Public on 04/29/2026 07:26
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Information: Except for historical information contained herein, the matters set forth in this Form 10-Q are forward-looking statements. These statements are based on management's current expectations and plans, which involve risks and uncertainties. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as "delivering," "driving," "advancing," "expectation," "target," "uncertainty," "outlook," "assumes" and similar expressions. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the filing date of this Quarterly Report and which involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. These risks and uncertainties include factors that could cause our actual results and financial condition to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include, among others, those discussed in "Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the "2025 Annual Report") and in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2026. Except as required by law, the Company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances after the filing date of this Quarterly Report.
The following discussion should be read in conjunction with the condensed consolidated financial statements as of and for the three months ended March 31, 2026 and 2025, including the notes to those statements, appearing elsewhere in this report. We also suggest that management's discussion and analysis appearing in this report be read in conjunction with the management's discussion and analysis and consolidated financial statements included in our 2025 Annual Report.
Business Overview
PROG Holdings, Inc. ("we," "our," "us," the "Company," or "PROG Holdings") is a financial technology holding company that provides transparent and competitive payment options to consumers. PROG Holdings has three reportable segments as of March 31, 2026: (i) Progressive Leasing, an in-store, app-based, and e-commerce point-of-sale lease-to-own solutions provider; (ii) Purchasing Power, a voluntary employee benefit program provider, allowing employees to purchase brand-name products and services from Purchasing Power and then pay for those purchases through either automatic payroll deductions or allotments; and (iii) Four Technologies, Inc. ("Four"), which offers Buy Now, Pay Later ("BNPL") payment options to consumers through the Four platform.
Vive Financial ("Vive"), an omnichannel provider of second-look revolving credit products, had been an operating segment prior to October 20, 2025. On that date, the Company sold substantially all of Vive's loan receivables portfolio and began the process of discontinuing its remaining operations. Vive is reported as discontinued operations in our condensed consolidated financial statements for all periods presented. All of Vive's revenues and expenses, other than allocated corporate overhead, are excluded from the results of continuing operations.
Our Progressive Leasing segment provides consumers with lease-purchase solutions through its point-of-sale partner locations and e-commerce website partners (collectively, "POS partners"), as well as through its direct-to-consumer app, PROG Marketplace. 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 Purchasing Power segment is a voluntary employee benefit program that allows employees of participating employer-clients to purchase brand-name products and services and pay for those purchases over time through payroll deductions or allotments. Products available through the platform include consumer electronics, home goods, furniture, appliances, and other merchandise, as well as certain services. Millions of employees nationwide have access to Purchasing Power's purchasing solutions. We acquired Purchasing Power on January 2, 2026, and its results are included in our condensed consolidated financial statements beginning on the acquisition date.
Four allows shoppers to pay for merchandise through four interest-free installments. Four's proprietary platform capabilities and its base of customers and retailers expand and diversify PROG Holdings' ecosystem of financial technology offerings by introducing another payment solution to its customers. Shoppers use Four to purchase furniture, clothing, electronics, health and beauty products, footwear, jewelry, and other consumer goods from retailers across the United States. The average ticket size of a Four transaction is significantly smaller than a transaction with Progressive Leasing or Purchasing Power.
PROG Holdings also owns MoneyApp, a mobile application that offers customers interest-free cash advances. MoneyApp is not a reportable segment in 2026 as its financial results are not expected to be significant to the Company's condensed consolidated financial results. MoneyApp's financial results are reported within "Other" for segment reporting purposes.
Acquisition of Purchasing Power
On January 2, 2026, we completed the acquisition of Purchasing Power for $424.2 million in cash. In addition, Purchasing Power had approximately $338.6 million of non-recourse funding debt that remained in place following the closing of the acquisition. The results of Purchasing Power are included in our condensed consolidated financial statements beginning on the acquisition date. Results for periods prior to the acquisition date are not included in this MD&A. See Note 2 of the condensed consolidated financial statements for additional information.
Macroeconomic and Business Environment
We believe the increased cost of living and recent rise in fuel costs has continued to have a disproportionate negative effect on our customers' disposable income, negatively affecting demand for many products offered by our businesses, as well as in customer payment performance. We believe the significant increase in inflation resulting from the war in Iran and related geopolitical disruption has further pressured our customers' budgets and unfavorably impacted consumer confidence within our customer base, resulting in a decrease in demand for the types of larger-ticket, durable consumer goods offered by many of our retail partners and by our Purchasing Power business.
Progressive Leasing
Progressive Leasing entered 2026 with a smaller lease portfolio, as measured by its gross leased asset balance, compared to 2025, which resulted in a decrease in lease revenues when compared to the first quarter of 2025. The Company continues to operate in a challenging macroeconomic environment due to the factors described above. In addition, American Signature, Inc., one of Progressive Leasing's POS partners, filed for bankruptcy in November 2025, which will result in the permanent closure of many of its stores in 2026, which has had and will continue to have an unfavorable impact on Progressive Leasing's GMV, revenue, and earnings from continuing operations before income tax in 2026.
Customer payment delinquencies were elevated at the end of 2024 and during the first quarter of 2025, which prompted us to tighten our decisioning posture to maintain a healthy lease portfolio during the quarter ended March 31, 2025. That tighter decisioning posture remained in place during the full first quarter of 2026. While that action benefited our lease portfolio performance and helped us achieve a provision for lease merchandise write-offs of 7.3% of lease revenues in the first quarter of 2026, it also had an unfavorable impact on Progressive Leasing's GMV during the periods subsequent to the change.
Purchasing Power
We believe customer demand for the larger-ticket products and services sold by Purchasing Power also has been adversely impacted by the macroeconomic headwinds affecting Progressive Leasing's performance. However, we expect that Purchasing Power's recent focus on improving eligible employee-customer penetration, and its addition of several new employer-clients, will help offset the impacts of such decreases in demand.
While customer payment delinquencies and write-offs for Purchasing Power are generally lower than those of Progressive Leasing due to Purchasing Power's payroll deduction and allotment repayment model, the recent federal government workforce disruptions, including DOGE workforce reductions and multiple government shutdowns, have resulted in elevated delinquencies and write-offs with Purchasing Power's current and former federal government employee-customers. We continue to monitor these conditions, as well as any potential additional layoffs impacting Purchasing Power's customers, as prolonged fiscal uncertainty at the federal government level or such layoffs could pose additional risk to Purchasing Power's receivables performance.
Four
Due to the average ticket size of a BNPL transaction with Four being significantly lower than a transaction with Progressive Leasing and Purchasing Power, we believe demand for products purchased through the use of Four is not as impacted by the macroeconomic headwinds discussed above to the same degree as demand for larger-ticket products.
Highlights
The following summarizes significant financial highlights from the three months ended March 31, 2026:
•We reported consolidated revenues of $742.7 million, which was an 11.1% increase compared to the $668.4 million we reported for the first quarter of 2025. The increase in consolidated revenues was primarily due to the $107.1 million of total revenues contributed by Purchasing Power, which we acquired on January 2, 2026. Additionally, revenues at Four increased by $20.5 million due to continued growth in BNPL transactions at Four. These increases were offset by a $54.7 million decrease in revenue at Progressive Leasing, which was driven primarily by a smaller gross leased asset balance throughout the first quarter of 2026 when compared to the same period in the prior year.
•GMV from Four increased by $160.1 million, due to an increase in Four loan originations in the first quarter of 2026 compared to the first quarter of 2025, as a result of the continued growth in that business. GMV decreased by $9.0 million for Progressive Leasing in the first quarter of 2026, compared to the same period in the prior year. The decrease in GMV for Progressive Leasing was due to several factors, including the tightening of our decisioning posture, which was reflected for the full first quarter in 2026 compared to only a portion of the first quarter in 2025. We believe the reduction in GMV was also driven by inflationary pressures, elevated cost of living and fuel costs, and an uncertain macroeconomic outlook, all of which have negatively impacted consumer confidence and demand for our lease-to-own offering. GMV relating to Purchasing Power was included for the first time, as the acquisition was completed on January 2, 2026.
•Earnings from continuing operations before income taxes increased to $47.6 million compared to $47.3 million in the same period in 2025. The increase was primarily driven by increased earnings at Four and Progressive Leasing, partially offset by higher interest expense and transaction expenses relating to the acquisition of Purchasing Power during the quarter.
Key Operating Metrics
Gross Merchandise Volume. We believe GMV is a key performance indicator of our Progressive Leasing, Purchasing Power and Four segments, as it provides the total value of new leases, transaction orders, and loans written into our portfolio over a specified time period. GMV does not represent revenues earned by the Company, but rather is a leading indicator we use in forecasting revenues the Company may earn. Progressive Leasing's GMV is defined as the retail price of merchandise acquired by Progressive Leasing, which it then expects to lease to its customers. GMV for Purchasing Power is defined as the total value of merchandise and services purchased and delivered to customers through its platform. GMV for Four is defined as gross loan originations.
The following table presents our GMV from continuing operations for the Company for the periods presented:
|
Three months ended March 31, |
Change | ||||||||||||||||||||||
|
(unaudited and in thousands)
|
2026 | 2025 | $ | % | |||||||||||||||||||
| Progressive Leasing | $ | 392,970 | $ | 401,962 | $ | (8,992) | (2.2) | % | |||||||||||||||
|
Purchasing Power
|
132,678 | - | 132,678 | nmf | |||||||||||||||||||
|
Four
|
279,990 | 119,863 | 160,127 | 133.6 | |||||||||||||||||||
|
Total
|
$ | 805,638 | $ | 521,825 | $ | 283,813 | 54.4 | % | |||||||||||||||
nmf - calculation is not meaningful
Progressive Leasing's GMV decreased compared to the first quarter of 2025 due to a lower gross leased asset balance resulting from tightened decisioning in 2025 and retail partner bankruptcies. We believe the reduction in GMV was also driven by inflationary pressures, an elevated cost of living, and an uncertain macroeconomic outlook, all of which have negatively impacted consumer confidence and demand for our lease-to-own offering. E-commerce channels generated 25.7% of Progressive Leasing's GMV in the first quarter of 2026 compared to 16.8% in the first quarter of 2025. The increase in Four's GMV is primarily attributable to the continued expansion of the Four BNPL platform, reflecting growth and higher transaction volumes from existing and new customers over the period.
Active Customer Count. Our active customer count represents the total number of customers that have an active lease agreement with Progressive Leasing, an active receivable with Purchasing Power, or an active loan with Four. Active customer counts include customers that may have an active agreement with more than one segment. The following table presents our active customer count from continuing operations for each segment:
|
As of March 31 (unaudited and in thousands)
|
2026 | 2025 | |||||||||
|
Active customer count from continuing operations:
|
|||||||||||
| Progressive Leasing | 763 | 828 | |||||||||
|
Purchasing Power
|
263 | - | |||||||||
|
Four
|
350 | 151 | |||||||||
The number of active customers for Progressive Leasing decreased due to the tightening of our decisioning posture, and a decrease in consumer demand for many of the durable leasable goods offered by our retail partners, due to the continued elevated costs of living and inflationary pressures facing our customers. The increase in the number of customers for Four was the result of continued growth in BNPL transactions, which have a significantly smaller transaction size, as compared to our Progressive Leasing business.
Key Components of Earnings from Continuing Operations Before Income Tax Expense
In this MD&A section, we discuss the key components of our condensed consolidated results. For the three months ended March 31, 2026 and the comparable prior year periods, some of the key revenue, cost and expense items that affected earnings before income taxes were as follows:
Revenues. We separate our total revenues into three components: (i) lease revenues and fees, (ii) product and service revenues and (iii) other revenues. Lease revenues and fees include all revenues derived from lease agreements from our Progressive Leasing segment. Lease revenues are recorded net of a provision for uncollectible renewal payments. Product and service revenues represent Purchasing Power's sales of products and the commission earned relating to arranging for services, net of estimated returns. Other revenues represents transaction income, subscription revenues, and annual and other fees earned relating to loans in our Four segment and our other strategic businesses, as well as imputed interest income recognized on a portion of Purchasing Power's receivables portfolio.
Depreciation of lease merchandise. Depreciation of lease merchandise reflects the expense associated with depreciating merchandise leased to customers by Progressive Leasing.
Cost of product sales. Cost of product sales represents the cost of merchandise purchased by Purchasing Power from third-party vendors for resale, along with associated fulfillment and distribution costs.
Provision for lease merchandise write-offs. The provision for lease merchandise write-offs represents the estimated merchandise losses incurred but not yet identified by management and adjustments for changes in estimates for the allowance for lease merchandise write-offs.
Operating expenses. Operating expenses include primarily personnel costs, stock-based compensation, occupancy costs, advertising, decisioning expense, professional services expense, sales acquisition costs, computer software expense, bank charges and processing fees, fixed asset depreciation expense, intangible amortization expense, and restructuring expenses, among other expenses.
Provision for credit losses. The provision for credit losses reflects the expected lifetime credit losses on Purchasing Power's, Four's and other strategic operations receivables, determined using the CECL framework and incorporating historical loss experience, current conditions, and reasonable and supportable forecasts. The provision for credit losses on Purchasing Power's receivables are net of estimated recoveries from its program of selling portfolios of charged-off receivables to third parties.
Gain on sale of lease receivables. Gain on sale of lease receivables reflects income recognized by Progressive Leasing from its program of selling portfolios of charged-off lease receivables to third-parties.
Gain on change in fair value of receivables. Receivables associated with the Purchasing Power acquired portfolio are measured at fair value on a recurring basis pursuant to the Company's election of the fair value option under ASC 825. Changes in fair value attributable to the passage of time, credit performance, discount rates, and other assumptions, are recognized as a gain or loss on changes in fair value of the receivables.
Interest expense. Interest expense consists of interest incurred on the Company's debt.
Interest income. Interest income consists of interest earned on the Company's deposits in cash and cash equivalents.
Results of Operations - Three months ended March 31, 2026 and 2025
|
Three months ended March 31, |
Change | ||||||||||||||||||||||
|
(in thousands)
|
2026 | 2025 | $ | % | |||||||||||||||||||
|
Revenues
|
|||||||||||||||||||||||
|
Lease revenues and fees
|
$ | 596,864 | $ | 651,557 | $ | (54,693) | (8.4) | % | |||||||||||||||
|
Product and service revenues
|
106,406 | - | 106,406 | nmf | |||||||||||||||||||
|
Other revenues
|
39,404 | 16,871 | 22,533 | 133.6 | |||||||||||||||||||
| 742,674 | 668,428 | 74,246 | 11.1 | ||||||||||||||||||||
|
Costs and expenses
|
|||||||||||||||||||||||
|
Depreciation of lease merchandise
|
409,010 | 460,443 | (51,433) | (11.2) | |||||||||||||||||||
|
Cost of product sales
|
62,506 | - | 62,506 | nmf | |||||||||||||||||||
|
Provision for lease merchandise write-offs
|
43,651 | 48,018 | (4,367) | (9.1) | |||||||||||||||||||
|
Operating expenses
|
150,200 | 98,124 | 52,076 | 53.1 | |||||||||||||||||||
|
Provision for credit losses
|
24,167 | 5,501 | 18,666 | nmf | |||||||||||||||||||
| 689,534 | 612,086 | 77,448 | 12.7 | ||||||||||||||||||||
| Gain on sale of lease receivables | 6,457 | - | 6,457 | nmf | |||||||||||||||||||
|
Gain on change in fair value of receivables
|
5,712 | - | 5,712 | nmf | |||||||||||||||||||
|
Operating profit
|
65,309 | 56,342 | 8,967 | 15.9 | |||||||||||||||||||
| Interest expense | (18,389) | (9,963) | (8,426) | 84.6 | |||||||||||||||||||
| Interest income | 643 | 873 | (230) | 26.3 | |||||||||||||||||||
|
Earnings from continuing operations before income tax expense
|
47,563 | 47,252 | 311 | 0.7 | |||||||||||||||||||
|
Income tax expense
|
11,345 | 12,662 | (1,317) | (10.4) | |||||||||||||||||||
|
Net earnings from continuing operations
|
36,218 | 34,590 | 1,628 | 4.7 | |||||||||||||||||||
|
(Loss) earnings from discontinued operations, net of tax
|
(164) | 128 | (292) | nmf | |||||||||||||||||||
|
Net earnings
|
$ | 36,054 | $ | 34,718 | $ | 1,336 | 3.8 | % | |||||||||||||||
nmf - Calculation is not meaningful
Earnings (Loss) from Continuing Operations Before Income Tax Expense
Information about our earnings (loss) from continuing operations before income tax expense by reportable segment is as follows:
|
(in thousands)
|
Three months ended March 31, |
Change | |||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||
|
Earnings (loss) before income tax expense
|
|||||||||||||||||||||||
| Progressive Leasing | $ | 51,960 | $ | 48,625 | $ | 3,335 | 6.9 | % | |||||||||||||||
| Purchasing Power | (7,500) | - | (7,500) | nmf | |||||||||||||||||||
| Four | 11,390 | 1,970 | 9,420 | 478.2 | |||||||||||||||||||
| Other | (8,287) | (3,343) | (4,944) | nmf | |||||||||||||||||||
|
Total earnings (loss) before income tax expense
|
$ | 47,563 | $ | 47,252 | $ | 311 | 0.7 | % | |||||||||||||||
nmf - Calculation is not meaningful
Progressive Leasing
|
Three months ended March 31, |
Change | ||||||||||||||||||||||
|
(in thousands)
|
2026 |
% of revenue
|
2025 | % of revenue | $ | % | |||||||||||||||||
|
Gross merchandise volume
|
$ | 392,970 | $ | 401,962 | $ | (8,992) | (2.2) | % | |||||||||||||||
| Lease revenues and fees | $ | 596,864 | $ | 651,557 | $ | (54,693) | (8.4) | % | |||||||||||||||
| Depreciation of lease merchandise | 409,010 | 460,443 | (51,433) | (11.2) | |||||||||||||||||||
|
Gross margin
|
187,854 | 31.5 | % | 191,114 | 29.3 | % | (3,260) | (1.7) | |||||||||||||||
| Provision for lease merchandise write-offs | 43,651 | 7.3 | 48,018 | 7.4 | (4,367) | (9.1) | |||||||||||||||||
| Selling, general and administrative | 81,260 | 13.6 | 82,180 | 12.6 | (920) | (1.1) | |||||||||||||||||
|
Other expenses
|
5,837 | 1.0 | 5,128 | 0.8 | 709 | 13.8 | |||||||||||||||||
| 130,748 | 21.9 | 135,326 | 20.8 | (4,578) | (3.4) | ||||||||||||||||||
| Gain on sale of lease receivables | 6,457 | 1.1 | - | - | 6,457 | nmf | |||||||||||||||||
|
Operating profit
|
63,563 | 10.6 | 55,788 | 8.6 | 7,775 | 13.9 | |||||||||||||||||
|
Interest expense, net
|
11,603 | 1.9 | 7,163 | 1.1 | 4,440 | 62.0 | |||||||||||||||||
| Earnings from continuing operations before income tax expense | $ | 51,960 | 8.7% | $ | 48,625 | 7.5% | $ | 3,335 | 6.9 | % | |||||||||||||
nmf - Calculation is not meaningful
The decrease in leasing revenues was primarily due to a lower gross leased asset balance as a result of the tightening of our decisioning posture during 2025, and a decrease in demand for the durable leasable products offered by many of our retail partners. We believe the inflationary and other macroeconomic factors had a disproportionate negative effect on our customers' disposable income, negatively affecting demand for many products offered by our retail partners.
Gross margin is a key performance measure for our Progressive Leasing segment, which generates lease revenue from transactions that include associated depreciation of the merchandise on lease, making gross margin a meaningful indicator of profit. The increase in Progressive Leasing's gross margin percentage reflects a decline in customers' electing early purchase options, as macroeconomic conditions contributed to customers choosing to extend lease terms rather than exercising early purchase options, which generally result in lower margin realization.
The provision for lease merchandise write-offs decreased $4.4 million compared to the same period in 2025. The provision for lease merchandise write-offs as a percentage of lease revenues decreased to 7.3% during the first quarter of 2026 from 7.4% in the same period in 2025. The decrease was due to a tighter decisioning posture in 2026 as compared to the same period in 2025, as the Company tightened its decisioning during the first quarter of 2025. Given the significant uncertainty regarding the impacts of the war in Iran and related geopolitical disruptions, inflation, tariffs, elevated interest rates, and unemployment rates on our business, and the potential effects of such developments on Progressive Leasing's POS partners, customers, and business going forward, a high level of estimation was involved in determining the allowance as of March 31, 2026. Actual lease merchandise write-offs could differ materially from the allowance for those write-offs.
Selling, general and administrative expense decreased resulting from the following:
-Personnel costs, advertising, and occupancy costs decreased by an aggregate $2.3 million due to cost reduction initiatives during 2025; partially offset by:
-Computer software expense increased $1.6 million relating to platform enhancements and other technology initiatives.
Other expenses increased primarily due to restructuring-related employee severance of $0.5 million.
In February 2026, Progressive Leasing sold a portfolio of charged-off lease receivables to a third-party for $6.5 million in cash and recognized a gain of $6.5 million as the carrying amount of the charged-off receivables had been reduced to zero. There were no similar sales during the three months ended March 31, 2025.
Interest expense, net for the three months ended March 31, 2026 was higher than the same period in 2025 due to an increase in debt used for the acquisition of Purchasing Power on January 2, 2026.
Purchasing Power
|
Three months ended March 31, |
Change | ||||||||||||||||||||||
|
(in thousands)
|
2026 |
% of revenue
|
2025 | % of revenue | $ | % | |||||||||||||||||
|
Gross merchandise volume
|
$ | 132,678 | $ | - | $ | 132,678 | nmf | ||||||||||||||||
|
Product and service revenues
|
$ | 106,406 | $ | - | $ | 106,406 | nmf | ||||||||||||||||
|
Other revenues
|
729 | - | 729 | nmf | |||||||||||||||||||
|
Total revenues
|
107,135 | - | 107,135 | nmf | |||||||||||||||||||
|
Cost of product sales
|
62,506 | - | 62,506 | nmf | |||||||||||||||||||
|
Gross margin
|
44,629 | 41.7 | % | - | 44,629 | nmf | |||||||||||||||||
| Provision for credit losses | 12,961 | 12.2 | - | 12,961 | nmf | ||||||||||||||||||
| Selling, general and administrative | 28,385 | 26.7 | - | 28,385 | nmf | ||||||||||||||||||
|
Other expenses
|
11,428 | 10.7 | - | 11,428 | nmf | ||||||||||||||||||
| 52,774 | 49.6 | - | 52,774 | nmf | |||||||||||||||||||
| Gain on change in fair value of receivables | 5,712 | 5.4 | - | 5,712 | nmf | ||||||||||||||||||
|
Operating loss
|
(2,433) | (2.3) | - | (2,433) | nmf | ||||||||||||||||||
|
Interest expense, net
|
5,067 | 4.8 | - | 5,067 | nmf | ||||||||||||||||||
|
Loss from continuing operations before income tax expense
|
$ | (7,500) | (7.0)% | $ | - | $ | (7,500) | nmf | |||||||||||||||
nmf - Calculation is not meaningful
Selling, general and administrative expenses include $1.8 million of costs incurred related to the acquisition of Purchasing Power.
Other expenses include restructuring expense related to employee severance of $3.3 million resulting from cost reduction initiatives that occurred shortly after the Company's acquisition of Purchasing Power.
The gain on change in fair value of receivables of $5.7 million reflects changes in the estimated fair value of Purchasing Power's receivables under the fair value option, including the impact of the passage of time, changes in credit performance, discount rates and other valuation inputs.
Four
|
Three months ended March 31, |
Change | ||||||||||||||||||||||
| (in thousands) | 2026 | % of revenue | 2025 | % of revenue | $ | % | |||||||||||||||||
|
Gross merchandise volume
|
$ | 279,990 | $ | 119,863 | $ | 160,127 | 133.6 | % | |||||||||||||||
|
Four revenue
|
$ | 34,967 | $ | 14,429 | $ | 20,538 | 142.3 | % | |||||||||||||||
| Provision for credit losses | 9,597 | 27.4% | 4,146 | 28.7% | 5,451 | 131.5 | |||||||||||||||||
| Selling, general and administrative | 12,654 | 36.2 | 6,688 | 46.4 | 5,966 | 89.2 | |||||||||||||||||
| Other expenses | 253 | 0.7 | 392 | 2.7 | (139) | (35.5) | |||||||||||||||||
| 22,504 | 64.4 | 11,226 | 77.8 | 11,278 | 100.5 | ||||||||||||||||||
|
Operating profit
|
12,463 | 35.6 | 3,203 | 22.2 | 9,260 | 289.1 | |||||||||||||||||
| Interest expense, net | 1,073 | 3.1 | 1,233 | 8.5 | (160) | (13.0) | |||||||||||||||||
| Earnings from continuing operations before income tax expense | $ | 11,390 | 32.6% | $ | 1,970 | 13.7% | $ | 9,420 | 478.2 | % | |||||||||||||
Revenues at Four increased due to the continued significant growth in BNPL transactions, including growth in the Four+ subscription customers.
Provision for credit losses increased resulting from the growth in new BNPL transactions. Provision for credit losses as a percentage of revenue decreased resulting from improved decisioning and growth in subscription revenues.
Selling, general and administrative costs increased resulting from the following:
-Bank charges and processing fees increased $4.9 million related to higher customer payment transaction volumes; and
-Advertising expense increased $1.4 million resulting from additional marketing efforts to support the continued growth of Four.
Other Operations
Other operations incurred $8.3 million of losses before income tax expense, which is primarily related to costs incurred related to the successful acquisition of Purchasing Power on January 2, 2026.
Income Tax Expense
Income tax expense decreased to $11.3 million for the three months ended March 31, 2026 compared to $12.7 million in the prior year comparable period. The effective income tax rate was 23.9% for the three months ended March 31, 2026 compared to 26.8% for the same period in 2025. The decrease in the effective tax rate was primarily due to the discrete tax benefit related to stock-based compensation vestings in March 2026.
Overview of Financial Position
The major changes in the condensed consolidated balance sheet from December 31, 2025 to March 31, 2026 were driven by the acquisition of Purchasing Power on January 2, 2026, as discussed below:
•Cash and cash equivalents decreased $239.4 million from $308.8 million to $69.4 million during the three months ended March 31, 2026, due primarily to the cash consideration paid in connection with the acquisition of Purchasing Power. For additional information, refer to the "Liquidity and Capital Resources" section below.
•Accounts receivable, net of allowances and unearned interest income, increased $313.4 million compared to December 31, 2025 primarily due to the addition of Purchasing Power's receivable portfolio acquired on January 2, 2026.
•Lease merchandise, net of accumulated depreciation and allowances, decreased $77.7 million during the first quarter of 2026, primarily due to lower Progressive Leasing GMV which reduced lease originations and the related lease merchandise balance.
•Goodwill and other intangible assets, net increased $417.8 million, reflecting preliminary purchase accounting associated with the Purchasing Power acquisition, including the recognition of goodwill and identifiable intangible assets.
•Accounts payable and accrued expenses increased $40.5 million, primarily due to liabilities assumed in the Purchasing Power acquisition. Purchasing Power had $56.0 million of accounts payable and accrued liabilities as of March 31, 2026.
•Deferred income tax liabilities increased $26.7 million resulting from the recognition of deferred income tax liabilities with the acquisition of Purchasing Power.
•Income tax receivables decreased $21.3 million primarily due to federal tax refund received during the quarter ended March 31, 2026, resulting from enactment of tax legislation permitting 100% federal bonus depreciation.
•Debt, net increased $341.3 million primarily due to incremental borrowings incurred in connection with the acquisition of Purchasing Power and non-recourse funding debt of Purchasing Power that remained in place following the acquisition, partially offset by debt repayments during the period.
Overall, the changes in the Company's financial position during the period were primarily driven by the acquisition of Purchasing Power, which resulted in significant increases in assets, liabilities, and debt, partially offset by the use of cash to fund the transaction.
Liquidity and Capital Resources
General
We expect that our primary capital requirements will consist of:
•Reinvesting in our business, including acquiring merchandise to lease to our Progressive Leasing customers, purchasing products and services for resale through installment sales agreements with our Purchasing Power customers, and originating new BNPL transactions with our Four customers. Because we believe these businesses will continue to grow over the long-term, we expect that the need for additional merchandise will remain a major capital requirement;
•Making merger and acquisition investment(s) to further broaden our product offerings; and
•Returning excess cash to shareholders through periodically repurchasing stock and/or paying dividends.
Other capital requirements include (i) expenditures related to software development; (ii) expenditures related to our corporate operating activities; (iii) personnel expenditures; (iv) income tax payments; and (v) servicing our outstanding debt obligations.
Our capital requirements historically have been financed through:
•cash flows from operations;
•private debt offerings;
•bank debt; and
•stock offerings.
As of March 31, 2026, the Company had $69.4 million of cash, $350.0 million of availability under the Revolving Facility, and $943.7 million of gross indebtedness.
Cash Provided by Operating Activities
Cash provided by operating activities was $171.7 million and $209.9 million during the three months ended March 31, 2026 and 2025, respectively. The $38.2 million decrease in operating cash flows was driven by changes in working capital, primarily a decrease in accounts payable and accrued expenses, which reflects the timing of payments. This was partially offset by improved collections of accounts receivable, which reduced the use of cash compared to the prior year. Other changes in cash provided by operating activities are discussed above in our discussion of results for the three months ended March 31, 2026.
Cash Used in Investing Activities
Cash used in investing activities was $385.9 million and $4.1 million during the three months ended March 31, 2026 and 2025, respectively. The $381.8 million increase in investing cash outflows was primarily the result of the $391.8 million of cash paid for the acquisition of Purchasing Power, net of cash acquired.
Cash Used in Financing Activities
Cash used in financing activities was $15.1 million during the three months ended March 31, 2026 compared to $88.2 million during the same period in 2025. Cash used in financing activities during the three months ended March 31, 2026 was primarily $546.2 million of proceeds from borrowings, offset by $541.1 million of repayments on debt and $5.6 million paid for cash dividends. Cash used in financing activities during the three months ended March 31, 2025 was primarily the repayment of $50.0 million that was drawn on our revolving credit facility during the fourth quarter of 2024, the Company's repurchase of $26.1 million of its common stock and $5.3 million paid for cash dividends.
Share Repurchases
We purchase our stock in the market from time to time as authorized by our Board of Directors. Effective February 21, 2024, the Company's Board of Directors reauthorized the repurchase of Company common stock at an aggregate purchase price of up to $500 million under the Company's existing share repurchase program, with such reauthorized share repurchase program to be extended for a period of three years from February 21, 2024, or until the $500 million aggregate purchase price of Company common stock purchased pursuant to the reauthorized share repurchase program has been met, whichever occurs first.
The Company did not repurchase any of its shares during the three months ended March 31, 2026. As of March 31, 2026, we had the authority to purchase additional shares up to our remaining authorization limit of $309.6 million.
Dividends
On February 25, 2026, our Board of Directors declared a quarterly cash dividend in the amount of $0.14 per share of outstanding common stock, which was paid on March 24, 2026. Aggregate dividend payments during the three months ended March 31, 2026 were $5.6 million. While we expect to continue paying quarterly cash dividends in future periods, the future payment of dividends, if permitted, will be at the sole discretion of our Board of Directors and will depend on our capital allocation strategy at that time as well as other factors, including our earnings, financial condition, and other considerations that our Board of Directors deems relevant.
Debt Financing
The Company's debt structure includes a combination of corporate-level borrowings and asset-backed financing arrangements of non-recourse funding debt. Our corporate-level borrowings increased to fund part of the purchase price we paid for the acquisition of Purchasing Power. Purchasing Power's asset-backed financing arrangements remained in place following our acquisition of Purchasing Power on January 2, 2026.
Corporate Debt
The Company maintains a $350.0 million senior revolving credit facility (the "Revolving Facility") that matures on November 15, 2029. Borrowings under the Revolving Facility bear interest, at the Company's election, at either a base rate or term SOFR plus an applicable margin based on the Company's leverage ratio, and the facility includes a commitment fee on unused capacity. As of March 31, 2026, there were no outstanding borrowings under the Revolving Facility and $350.0 million remained available for borrowing. During the three months ended March 31, 2026, borrowings under the Revolving Facility, which were repaid prior to the end of the quarter, were primarily utilized to support short-term liquidity needs in connection with the Purchasing Power acquisition and related transactions.
In connection with the acquisition of Purchasing Power, the Company entered into a Fourth Amendment to its existing credit agreement, which among other changes provided for a new $125.0 million term loan ("Term Loan A") maturing November 15, 2029. Term Loan A bears interest at a variable rate based on SOFR plus an applicable margin determined by the Company's leverage ratio and amortizes through quarterly principal payments, with the remaining balance due at maturity. During the three months ended March 31, 2026, the Company voluntarily repaid $75.0 million of the term loan, resulting in an outstanding balance of $50.0 million at period end.
The Company also has $600.0 million aggregate principal amount of senior unsecured notes due November 2029, which bear interest at a fixed rate of 6.0%. The remaining principal amount of those notes remained unchanged during the period.
Asset-Backed Financing
The securitization and warehouse funding arrangements utilized by Purchasing Power remained in place following the Company's acquisition of Purchasing Power. Those arrangements are structured as non-recourse, asset-backed financings secured by underlying receivables and related cash flows. These arrangements are accounted for as secured borrowings, as the related receivables remain on the Company's balance sheet.
Following its acquisition of Purchasing Power, the Company repaid and terminated certain of those securitization and warehouse facilities, while continuing to utilize asset-backed financing as a key funding source. On February 26, 2026, a wholly-owned securitization entity issued $220.0 million aggregate principal amount of asset-backed notes in a private placement transaction. These notes are secured by receivables held by the securitization entity, with collections applied through a customary priority of payments structure.
As of March 31, 2026, total asset-backed debt was $291.4 million, net of unamortized debt issuance costs. These arrangements include customary performance-based triggers and covenants, and if certain thresholds are not met, may result in rapid
amortization of the outstanding debt. As of March 31, 2026, no such events had occurred and we do not expect any such event to occur in future periods.
Debt Activity and Liquidity
Total debt, net increased to $936.1 million as of March 31, 2026 from $594.9 million as of December 31, 2025, primarily driven by (i) borrowings incurred to finance the Purchasing Power acquisition, (ii) the asset-backed non-recourse funding debt that remained in place following the acquisition, and (iii) the issuance of new securitization debt, partially offset by repayments of both corporate and asset-backed borrowings during the period.
The Company's asset-backed financing arrangements are non-recourse to the general credit of the Company and are secured solely by the underlying receivables and related assets held within the securitization entities. Accordingly, these assets are restricted and not available to satisfy the claims of the Company's general creditors.
Covenants
The Company's debt agreements contain customary financial and operating covenants, including leverage and interest coverage requirements. As of March 31, 2026, the Company was in compliance with all such covenants and believes it will continue to be in compliance in the future.
Commitments
Income Taxes
During the three months ended March 31, 2026, we received net income tax refunds of $17.7 million. Within the next nine months, we anticipate making estimated net tax payments of $5.8 million for United States federal income taxes and state income taxes. That expectation includes anticipated favorable impacts on the Company's cash taxes resulting from the One Big Beautiful Bill Act, which was signed into law on July 4, 2025.
Deferred income tax liabilities as of March 31, 2026 were $147.9 million. Deferred income tax liabilities are calculated based on temporary differences between the tax basis of assets and liabilities and their respective book basis, which will result in taxable amounts in future years when the liabilities are settled at their reported financial statement amounts. The results of these calculations do not have a direct connection with the amount of cash taxes to be paid in any future periods.
Leases
We lease management and information technology space for corporate functions under operating leases expiring at various times through 2029. Our corporate and segment management office leases contain renewal options for additional periods ranging from two to five years.
Contractual Obligations and Commitments
Future interest payments on the Company's variable-rate debt are primarily based on the Secured Overnight Financing Rate ("SOFR") plus an applicable margin determined by the Company's leverage ratio. Following the Fourth Amendment to the Company's credit agreement, borrowings under the Revolving Facility and Term Loan A bear interest, at the Company's option, at either (i) SOFR plus a margin generally ranging from 1.5% to 2.8%, or (ii) a base rate plus a margin that is lower than the applicable SOFR-based margin. In addition, the Company is subject to commitment fees on unused revolving commitments, which range from 0.25% to 0.50% based on the Company's total net leverage ratio. The Revolving Facility and Term Loan A mature in November 2029.
As of March 31, 2026, the Company had no outstanding borrowings under the Revolving Facility. Accordingly, future interest obligations under the Revolving Facility will depend on future borrowing activity and prevailing interest rates.
The Company's $600.0 million aggregate principal amount of Senior Notes bear a fixed annual interest rate of 6.0%, payable semi-annually, and mature in November 2029.
In addition, the Company has asset-backed financing arrangements associated with its securitization activities, which are secured by underlying receivables and related cash flows. These arrangements include contractual obligations for interest and principal payments based on the performance and collections of the underlying receivables originated by Purchasing Power and are generally non-recourse to the Company's other assets.
The Company has no long-term contractual obligations to purchase merchandise or other commitments requiring minimum purchases beyond its normal course of business.
Critical Accounting Policies
Our critical accounting policies are described in our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to those policies during the three months ended March 31, 2026, except as described below.
During the three months ended March 31, 2026, we adopted new accounting policies related to our acquisition of Purchasing Power, including revenue recognition, receivables, and debt-related policies. A detailed description of these policies is included in Note 1 in the accompanying condensed consolidated financial statements.
Recent Accounting Pronouncements
Refer to Note 1 to the condensed consolidated financial statements for a discussion of recently issued accounting pronouncements.
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