PROG HOLDINGS Q3 EARNINGS CONFERENCE CALL - PROG HOLDINGS INC

Good day and thank you for standing by. Welcome to the Prague Holdings Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, John Baugh, Vice President of Investor Relations. Sir, please go ahead. Thank you, and good morning, everyone. Welcome to the Prague Holdings Third Quarter 2026 Earnings Call. Joining me this morning are Steve Michaels, Prague HoldINGS Chairman, President and Chief Executive Officer, and Brian Garner, our Chief Financial Officer. many of you have already seen a copy of our earnings release issued this morning which is available on our investor relations website investor.progholdings.com during this call certain statements we make will be forward-looking including comments regarding our revised 2026 full year outlook and our outlook for the fourth quarter of 2026 Listeners are cautioned not to place undue emphasis on forward-looking statements we make today, all of which are subject to risks and uncertainties, which could cause actual results to differ materially from those contained in the forward- looking statements. We undertake no obligation to update any such statements. On today's call, we will be referring to certain non-GAAP financial measures, including adjusted EBITDA and non-GAAP EPS, which have been adjusted for certain items which may affect the comparability of our performance with other companies. These non-GAP measures are detailed in the reconciliation tables included with our earnings release. The company believes that these non-gap financial measures provide meaningful insight into the company's operational performance and cash flows and provides these measures to investors to help facilitate comparisons of operating results with prior periods and to assist them in understanding the company's ongoing operational performance. With that, I would like to turn the call over to Steve Michaels, Prague Holdings President and Chief Executive Officer. Steve? Thank you, John, and good morning, everyone. I appreciate everyone taking the time to be with us today. I want to start with the quarter highlight. Frog Holdings delivered strong top-line growth, with every business in our ecosystem contributing. At the consolidated level, GMV grew 59% year-over-year, matching the pace we set in the second quarter. Revenue grew roughly 26%, with non-GAAP EPS of $1.06, up 21.8% year-over-year. All of those growth metrics include the contribution of our purchasing power business, which we acquired in January 2026. At Progressive Leasing, we grew GMV in the low single digits, even after tightening our decisioning posture, a sign of real underlying demand. Additionally, our gross lease asset balance, the leading indicator of future revenue, was higher year-over-year at quarter end. At 4, GMV grew triple digits for its 12th consecutive quarter, and it did so profitably, with a quarter-over quarter step-up in adjusted EBITDA margins. And at Purchasing Power, we delivered double-digit GMV growth. this kind of top line growth while deliberately tightening our decisioning is exactly what a diversified disciplined platform is built to do making together that performance put our consolidated results within the outlook ranges we provided for the third quarter with revenue and non-gap eps landing near the midpoint adjusted ebitda came in towards the lower end of its range The drivers landing us at the lower end of that range were concentrated in leasing and largely reflect headwinds we expect to be temporary, as our portfolio quickly turns over following our recent tightening actions. As a reminder, we tightened our decisioning for the leasing business late in the second quarter, and we implemented some additional tightening actions since our last earnings call, as the pressures on our customer persisted and in pockets even intensified. The impact on adjusted EBITDA traces to two factors in our leasing portfolio. The first is a reflection of an improving customer profile. On our newer, post-tightening lease pools, improved payment behavior resulted in more customers exercising their 90-day purchase option than we had expected, which compresses near-term yield. The second factor is on our older, pre-tightened pools. customers have proven remarkably resilient, but a prolonged stretch of elevated inflation exacerbated by higher gas prices since March has worn on their day-to-day liquidity, which creates a headwind to portfolio yield. One framing point before I turn to the businesses. The customer pressure we are seeing is showing up differently across our three segments, and that dispersion is one of the benefits of the ecosystem we are building. It shows up in different ways and to different degrees across leasing, for, and purchasing power, each serving a distinct customer need at a distinct price point. Having a range of products that have the ability to respond differently to the same macro pressures is why the consolidated result held steady, even as one of the businesses, in this case leasing. Work through a headwind. our ecosystem of offerings does two things for us the first is resilience which i just described a range of products that respond differently to the same macro environment the second and increasingly the more powerful one is growth and it's where we believe our durable long-term advantage lies the same customer engaging with more than one of our products The number of customers actively engaged with more than one of our products has grown since January, and these multi-product customers now represent a more meaningful percent of our total active base. We expect to compound this share over time, and it matters more than the number suggests. Customers who use more than 1PROG product tend to transact with us more frequently and stay with us longer. Every shopper we add to four, every client account we bring on through purchasing power, and every lease we originate widens the top of that funnel and creates another opportunity to serve the same customer across more of their financial life. That's the flywheel we've been building, and we are optimistic about the early momentum. The strength of that flywheel comes from each business that feeds it. So let me take you through them, starting with progressive leasing. Progressive leasing GMV grew low single digits year-over-year, with September being the strongest month of the quarter, a trajectory we like heading into the fourth quarter. As I mentioned, an important number is the gross lease asset balance, which turned positive year-ever-year at quarter end for the first time since April 2025. For a business where revenue is a function of the size of its lease book, that is the inflection we've been working toward, and it tells us the revenue comp is set to turn. Let me put that growth in context. We tightened our decisioning late in the second quarter and during the third quarter, and even so, leasing grew despite that pullback. Growing through tightening is exactly the kind of signal we want, because it tells us the expansion is coming from wider distribution, deeper share with our retail partners, and a real customer demand, not a relaxation of our standards. The proof is in our approval rates, which are down nearly 300 basis points year-over-year, both in the quarter and year-to-date. We are increasing share and growing the book while holding the line on who we approve. ON PORTFOLIO PERFORMANCE, LEASE MERCHANDISE WRITE-OFFS CAME IN AT 8.3% OF PROGRESSIVE LEASING REVENUE, A SLIGHT IMPROVEMENT VERSUS LAST QUARTER. AS WE DISCUSSED IN JULY, THE SECOND AND THIRD QUARters ARE SEASONALLY OUR TWO HIGHEST WRITE OFF PERIODS AND WITH THE GMV GROWTH FROM THE LAST TWO QUARTS, SOME ELEVATION IS EXPECTED. AND THAT IS HOW IT PLAYED OUT. We will adjust as needed, and we believe we will land near the high end of our 6-8% targeted annual range. I also want to place today's leasing portfolio in the context of where it was a few years ago. Measured against the last time an inflation spike hit our customer, our leasing gross margin is up, on average, over 200 basis points. The model we are running today is structurally stronger than the one that navigated the last inflation shock. A durable, well-managed business inflecting back to growth, not a declining one. And we continue to invest in the customer experience to keep it that way. Those investments are already showing up in the numbers. In the quarter, we shortened the application process for returning customers by an average of three to four minutes, while continuing to provide applicants with fulsome and transparent disclosures. And on the marketing front, by personalizing the language and messaging customer see, we lifted application submissions by double digits. Our direct-to-consumer and digital efforts across Progressive Leasing's Marketplace app and e-commerce were meaningful contributors, supported by our personalized marketing. Year-over-year, Krog Marketplace GMV grew 85% in the third quarter and approximately 128% year-to-date, continuing to reinforce its role as a complementary channel that strengthens our retail ecosystem and expands customer engagement opportunities. Our e-commerce channel also gained ground supported by an improved digital experience reaching 26.4% of Progressive Leasing GMV in the quarter, up from 23% a year ago. Before I move on from Progressive leasing, a brief word on business development. We feel good about our retail partner pipeline and the progress the team has made this year. We see near-term opportunity, even with the window shortening in which decisions get made ahead of holiday readiness. I like how we are positioned and encouraged by where things stand. We will have more to share when it is appropriate. At four, we delivered the 12th consecutive quarter of triple-digit GMV growth at 103% and did so profitably. Revenue grew 113.8% year-over-year to 37 million. and it generated $11.4 million of adjusted EBITDA, a 30.6% margin that stepped up from the second quarter. The scale here is compounding fast. From under $15 million of total GMV in 2021, Ford is on track to grow roughly 100-fold in just five years. That growth is increasingly powered by returning customers who make up the large majority of Ford's orders, while average order value rose over 10% year-over-year as shoppers bought across newly added categories and we're pairing that loyalty with efficient, organic, and paid acquisition reinforced by this year's investments and engagement, a catalog past 37 million items, and more flexible ways to pay. Importantly, 4 is achieving this growth while responsibly underwriting applicants separately on each transaction. Four's customer engagement is showing up across the metrics that matter. Average purchase frequency held at roughly five transactions per quarter, and active shoppers grew roughly 68% year-over-year. Four-plus subscribers are contributing approximately 80% of total GMV, a clear signal that customers are finding value in the offering. Four's take rate, which we define as revenue as a percentage of GMV over the trailing 12-month period, was 10.8 percent, up from 10.7 percent in the third quarter of last year. Four continues to sharpen its underwriting as well. Its Q3 provision as a percent of GMD decreased approximately 100 basis points compared to the the same period last year. This quarter, we put an enhanced underwriting model into production built on a deeper set of applicant attributes, which in testing caught more potential credit loss without declining additional business. AI is also improving how 4 serves customers. 4Bot, 4's AI support agent, now handles 4 plus cancellations and refunds end-to-end, which is our first support flow that issues refunds automatically within defined eligibility rules. In early September, 4BOT resolved approximately 90% of refund claims without human intervention. And our analysis shows that customers who contact, support, or file a claim keep ordering at the same or higher rates as those who never reach out, a sign that these interactions are building loyalty, not eroding it. unit economics are healthy the business is scaling rapidly and profitably and four is increasingly a front door into the broader prog ecosystem we could not be more pleased with its growth or the quality of what's driving it purchasing power had a strong quarter generating 161.2 million of gmv which is a 12.3 percent growth compared to the same period last year Adjusted EBITDA rose sequentially to $12.9 million, or 9.8% of revenue, which is a step up from the 8.1% achieved in the second quarter, as it moves into its seasonally strongest period. Subsequent to quarter end, purchasing power signed a large new client with over 50,000 eligibles, which we expect to launch in Q1. And as a reminder, purchasing Power signed a large 80,000 eligibles employer in July that we expect to launch in Q4. Purchasing Power is performing as expected when we brought it into the portfolio, adding a resilient, recurring payment business that broadens our reach and deepens the ecosystem. Lastly, we are ahead of schedule in capturing the operational efficiencies we identified during the acquisition and on track with integration of systems and streamlining processes. Now I want to touch on capital allocation. During the quarter, we repurchased 885,000 shares for $36.7 million. We brought debt down again, sequentially, and we ended the quarter with a net leverage ratio of 1.5 times. Returning capital at this pace while continuing to fund growth and improve net leverage reflects both the strength of our balance sheet and our conviction in where this business is headed. Our cap allocation priorities remain unchanged, reinvest in the business, pursue strategic M&A, and return excess capital to shareholders through share repurchases and dividends. Brian will take you through our updated full year outlook in a moment. We have reduced our revenue and earnings outlook ranges to reflect the challenged consumer we saw this quarter, which we expect will continue through the balance of the year. want to put that in perspective because I think it is a very important point. The midpoint of our revised adjusted EBITDA outlook is now at the high end of the initial range we gave in February. When we set that original outlook, we did not anticipate the conflict in the Middle East or its effect on gas and other input prices for our consumers. Even so, after a year of real pressure on our consumer, we still expect to deliver the best case we laid out at the start of the year that reflects this team's execution and the resilience of the platform we've built why i'm confident in where we're headed and we are putting capital behind that confidence this morning we announced our intent to enter into a 100 million dollar accelerated share repurchase program under which we expect to receive an initial delivery of of approximately 2.7 million shares, which will be an immediate benefit to WASO and EPS. The final number of shares repurchased will be determined based on our volume-weighted average share price over the course of the program. In connection with this expected ASR program, our board replenished our share repurchase program, bringing the total amount available for future repurchases to 500 million, giving us substantial capacity to keep returning capital to shareholders in the years ahead. Let me speak to why and why now, because the timing is deliberate. Two things give us both the room and the conviction to act. First, the balance sheet. Having repaid $216 million of recourse debt since the purchasing power acquisition in January and having returned to within our targeted net leverage range, we have the flexibility to return meaningful capital without pulling back on our growth investments. Second, our conviction in this business. Progressive leasing's portfolio is short in duration, which means it turns over quickly and gives us clear current visibility into how it is performing and the ability to adjust in real time. Nothing we have experienced in this environment dampens our optimism for the long-term prospects of that business. If anything, it reinforces that the model is working as intended. The fundamentals are strong, the model is proven, and our ecosystem is contributing. Even as we take a more cautious near-term view on the macro and bring down our adjusted EBITDA range, our belief in the long-term earnings power and cash flow generation of this business is unwavering. Committing to returning capital to shareholders at this scale is a clear indication of that confidence. We believe we remain on track to achieve the three-year compound annual growth targets we laid out at our investor day in March across all metrics. This accelerated share repurchase program is expected to be accretive to our 2027 earnings per share, and we would not be acting at this scale if we were not confident in the earnings power of this business in 2027 and beyond. With that, I'll turn it over to Brian. Brian? Thanks, Steve, and good morning, everyone. Before I move through the results, let me headline the quarter. As Steve said, this is a quarter of strong, profitable top-line growth in the face of intense macro headwinds and further tightening in our decisioning posture. The diversified platform absorbed pressure in the progressive leasing portfolio and still delivered revenue, EBITDA, and EPS within our outlook ranges for Q3. I'll begin with some commentary on the progressive leasing segment before moving through the rest of our results. Starting with progressive leashing, GMV grew 2.3% year-over-year to $420.4 million, a continuation of the positive trajectory that began earlier this year, even after the tightening we deployed late in the second quarter and again since our last earnings call. I'll also note the GMV showed acceleration exiting the quarter, with September posting the strongest month of the quarter. As we analyze the growth trajectory of the business, a key metric turned positive this quarter. Our gross leased asset balance grew for the first time since April of 2025. As revenue follows that asset base, this represents a positive trajectory for progressive leasing's revenue. Revenue for the leasing segment was $552.7 million, down 0.7% year-over-year, compared to down 3.4% last quarter, a clear sequential improvement in the comp, and we expect revenue to comp positively in the fourth quarter as the asset base rebuilds. The rest of leasing's gross margin came in at 31.8%, down 20 basis points year- over-year and step down from the unusually strong gross margin performance we saw in the second quarter. I want to provide some additional color on the headwind we saw on the portfolio yield for the leasing business in the third quarter. As you may recall, in Q2, we experienced favorable portfolio yield dynamics where we saw gross margins and EBITDA margins at elevated levels, even as higher delinquencies driven by macro challenges for our consumer played through the portfolio. The overall mix of lower 90-day buyout rates and customers staying in their leases longer more than offset some of the delinquency pressures we had observed. Further, we deployed iterative tightening measures in Q2 and early Q3 aimed at improving write-off rates. That tailwind subsided during the third quarter, as we began to see the mix of lease outcomes begin to decline from Q2 levels, including 90-day buyouts trending higher on the post-tightening pools. At the same time, delinquencies continue to be impacted by persistent inflation driven in part by higher fuel prices, particularly on the pre-tightning pools. The net result was the pressure on the lease portfolio we saw in the quarter. As Steve mentioned, progressive leasing took incremental tightening steps since the July earnings call but we do not believe these changes alter our ability to deliver gmv growth in q4 and beyond as we remain focused on growing our gross leased asset balance i'll also note the progressive leasing decisioning posture and approval rates are more conservative year-over-year but we are still expecting to grow against that dynamic finally as we have seen over the years the short duration of the leasing portfolio allows us to quickly alter performance to remain within our long-held guardrails we believe we have taken the correct tightening actions and will monitor lease portfolio performance in the periods ahead right off in the quarter came in at 8.3 percent of leasing revenue versus 8.4 percent in the second quarter and 7.4 a year ago the year-over-year comparison looks elevated largely because of the significant tightening in q1 of the year ago and the more intense macro headwinds our customers faced we are monitoring payment behavior delinquencies and vintage level performance continuously we expect full year 2026 leasing write-offs to land near the high end of our targeted annual range of six to eight percent The rest of Leash's SG&A for the quarter was $83 million, or 15.2% of revenue, as we balanced cost control with targeted investment in technology, customer experience, and AI. Turning to four technologies, GMV grew nearly 103% year-over-year to $330.4 million, and segment revenue more than doubled to $37.2 million. The key financial point on 4 is that this growth is both profitable and well-controlled. We recognize expected losses up front as we originate, and loss performance is tracking in line with our seasonal expectations. As Steve noted, the enhanced underwriting model we rolled out earlier this year is already proving out. Four is loss provision as a percentage of GMV improved by roughly 100 basis points year over year while achieving this impressive growth trajectory. Four generated adjusted EBITDA of $11.4 million or 30.6% margin and a step up from the second quarter. So it is pairing rapid scale with healthy and improving unit economics and is increasingly meaningful to the consolidated model. Purchasing power generated GMV of $161.2 million, delivering double-digit growth, revenue of $131.8 million, and adjusted EBITDA of $12.9 million, or 9.8% of revenue, up from 8.1% last quarter. The seasonal strength of the fourth quarter is still ahead of us. The drivers of the sequential improvement were operating leverage as we captured efficiencies. Favorable product mix which lifted margin and lower interest expense on securitized debt as we paid down a portion of the remaining warehouse facility with our excess cash. As a reminder, we treat that ABS interest expense as a form of cost of operations, so purchasing power segment adjusted EBITDA is burdened by that cost. Purchasing power was acquired at the start of this year, so it did not contribute to the prior year consolidated base in our financial reporting. Moving to consolidated results, GMV grew 59% year-over-year to $912 million, and revenue from continuing operations grew roughly 26% to $725.8 million. This year-of-year revenue performance was driven by the addition of purchasing power and triple-digit growth of four, partially offset by progressive leasing. Consolidated adjusted EBITDA was $80 million, representing an 11% margin, and non-GAAP diluted EPS was $1.06, up 21.8% year-over-year. Turning to the balance sheet, we ended the quarter with $108.9 million of unrestricted cash and total available liquidity of $458.9 million, including our revolving credit facility. Recourse debt was at $600 million, and since closing the purchase of power acquisition, we have paid down $260 million of recourse debt, bringing our net leverage ratio to 1.5 times trillion 12 months adjusted EBITDA. We have now operated within our long-term target range of 1.5 to 2 times for three consecutive quarters, having stepped down quickly after the purchasing power acquisition in January of 2026. The result is a balance sheet that gives us real flexibility, the capacity to keep investing in our growth priorities, to pursue selective value-creating opportunities, and to return capital to shareholders, all while preserving the financial strength to navigate a dynamic consumer environment from a position of confidence we also return capitalist shareholders during the quarter we paid our quarterly dividend of 14 cents per share and repurchased 885 000 shares at an average price of 41.47 we continue to evaluate opportunity returned capitalist shareholders while funding gmv growth across the business the intended accelerated share repurchase program steve mentioned reflects the same discipline putting the balance sheet to work while preserving capacity to keep funding growth across the platform i'll now touch on some key aspects of a revised full year outlook providing this morning's release we're taking a prudent view of the consumer as we close out the year the payment and buyout behavior we saw this quarter tells us households are still absorbing the cumulative effect of several years of elevated prices as well as a significant increase in the fuel prices since march of 2026 and we think it's appropriate to reflect that caution rather than count on sharp fourth quarter improvement as a result we're revising down our revenue and adjusted ebitda outlook ranges however our gmv grew across all three segments and we encouraged by the metrics around our recent portfolio vintages. Our revised consolidated outlook for continuing operations in 2026 calls for revenue in the range of 3.015 billion to 3.05 billion, adjusted EBITDA in the range of 345 to 355 million, and non-GAAP EPS in the range of $4.70 to $4 and 85 cents. This outlook assumes an operating environment for the remainder of the year that is consistent with current conditions, including the current financial pressures and uncertainties for our customers. No material changes in the company's decision posture, no meaningful increase in unemployment rates for our customer base, and an effective tax rate for non-GAAP EPS of approximately 26%. This outlook assumes we will enter into an ASR program during the fourth quarter of 2026 to repurchase 100 million of our common stock with our non-GAAP EPS outlook reflecting only the initial delivery of approximately 80% of the shares to be repurchased and excluding the remaining shares, if any delivered a final settlement. However, there can be no assurance that we will enter into the ASR Program as anticipated or at all. To wrap up, the third quarter presented more macro challenges for our customer and leasing work through portfolio challenges, but we delivered the consolidated results within our outlook range. The rest of the leasing portfolio inflected positive in the period. Ford delivered its 12th straight quarter of triple digit growth and purchasing power grew double digits in line with our expectations. We delivered that performance while managing the portfolio with discipline and maintaining a conservative balance sheet with leverage comfortably inside our target range. During the quarter, we continue to return capital through our dividend and share repurchases. We aim to close out the year focused on profitable growth and an improving portfolio. I'll now turn the call back over to the operator for questions. Operator? Thank you. you as a reminder to ask a question please press star 1 1 on your telephone and wait for your name to be announced to withdraw your question please press star one one again we ask that you please limit yourselves to one question and one follow-up one moment while we compile our Q&A roster our first question is going to come from the line of Kyle Joseph with Stevens your line is open please go ahead hey good morning guys thanks for taking my questions um just wanted to touch base on on the consumer health um and just totally understand what's going on you know and obviously it seems like it's impacting the leasing business uh you know particularly when you contrast that with with four is really strong results you know would you call that is that really a function of kind of ending consumers being different or do you think it's more product related and and you know, tied to kind of the size and the duration difference between those two businesses? We'd just like to get your thoughts there, Steve. Yeah, Kyle, good morning. Yeah, I'll start with the consumer. Obviously, it's, you know, all of our products are consumer exposed, I would say, and near prime and below. In July, I said the consumer was stressed but resilient. I think that's still accurate, although I would admit that the longer the stress, particularly this gas price shock and just general input cost shock that's causing things to get more expensive, the longer the stress goes on, the harder it is to maintain resiliency. And that's why we can adjust our portfolio and decisioning processes to make sure that we let the right folks into the portfolio. you. All of our businesses benefit from a very short duration and quick turnover. But to your point about four versus leasing or other products, leasing has a longer duration than four. And one of the benefits that four has is the lower ticket, but also the fact that even on returning customers, we decision or underwrite that customer the next time. So while a lease gets written for 12 months and has an average life of, you know, six and a half months, a four transaction is much shorter in duration. And then to the extent that some gas price or other shock impacts that consumer and they come back, we have the ability to assess that, the wherewithal and the ability to pay, again, in a very short duration. And so I think that is one of the big things that helps us across the different portfolios. That's really helpful. Thanks. And then just to follow up, probably for Brian, you know, obviously this is our first quarter trying to model out purchasing power. We get the seasonality of that business. But just in terms of timing, kind of in terms of originations, thinking about provision and whatnot there, is it one of those things where originations are pretty back-weighted, you know, based on holiday spending, or is it, you know—holiday spending feels like it moves up a bit every year. Just kind of want to think about how we should be modeling that in the timing around originations there. Thanks. Yeah, I think, Kyle, I—I think the seasonality dynamic with—with purchasing power is certainly pronounced and anchored in Q4. And you see that with our guidance, kind of the year-to-date performance and where they're at from a revenue perspective and what we're implying in our outlook for purchasing power. And so they've certainly, again, the first year under our operations and we are getting better each quarter at our degree of precision around the metrics, but certainly the The holiday season is significant for purchasing power, and we've got the right team and processes and plan in place to execute here in Q4, but your sense is right, and I think you can see the order of magnitude just from the guidance that we have provided. Yep, absolutely. Thanks for taking my questions. Thank you. And our next question will come from the line of John Hecht with Jefferies. Your line is open. Please go ahead. Morning, guys. Thanks very much. So I guess first back on purchasing power, Q4, I mean, number one, what can you tell us about how October is trending? It sounded like September saw some good activity. And in addition to that on purchasing tower, maybe talk about call it customer trends. you know, the B2B side of the relationship and activity in that regard. Yeah, John. Yeah, we're not really, you know commenting beyond the quarter end as to trends on purchasing power. We did see, like you said, and like you mentioned double-digit GMV growth in Q3, but as Brian just discussed Q4 is an all-important quarter. As a retail platform We experienced the most seasonality in that business, and we're going to be executing through our first Black Friday and holiday period. The consumer, you know, is generally employed, which is a good thing, and, you Know, we're pleased with our client roster and lineup. On the biz dev side, we have had some activity. We did sign a sizable new client partner here subsequent to quarter end that won't impact this year. It's a Q1 launch. And then the signing that we announced last quarter, we do expect to launch here pre-holiday. So we're expecting that to have an impact for us in Q4. And we've got lots of other lines in the water on the biz dev front. This particular business's biz dev season, I would say, is impacted by open enrollment. So whereas on the leasing side, we kind of hit code freeze and holiday readiness for retailers on the purchasing power side, total rewards teams are certainly busy during open enrollment season. And so while we keep the conversations going and the pressure on, it's likely that a lot of those things will start to move forward again once we flip the calendar page to 27. Okay, that's super helpful context. And then with four, you know, still very strong momentum there. You know, I think a lot of the customer activity over the course of a lot of this year has been just sort of organic kind of pull growth. I think you guys were maybe exploring some sort of more, you know, more outreach in terms of different marketing programs. Maybe can you give us an update on that and how that's translating into call it customer inflow? Yeah, we're very pleased with four across all the channels. We continue to have a very robust organic acquisition and just kind of a word of mouth and referral network that we're pleased with. We are testing and leaning more into paid acquisition and placement in the app store. We see a definite correlation between how we're positioned in the App Store and also Google Play, for that matter, but mostly App Store, and installs, and acquisition. Very data-driven optimization around marketing, mostly through social, as you would imagine. And we're seeing good results there. We have a good plan here for Q4, and we are spending more in marketing this year than we did last, and we expect that will continue, but we're still very, very pleased with the return on that ad spend and the ability to drive new customers into the platform, which then become four-plus customers and then become repeat multiple-time customers, which is a good thing for lifetime value and general GMB production. Okay, great. Great. Thanks very much. Thanks, John. Thank you. And our next question is going to come from the line of Hal Goach with B. Reilly Securities. Your line is open. Please go ahead. Thank you, Higgy. you guys give us a little more color on the tightening actions you took and maybe give us the feel for maybe what the impact was on GMV. Because if you did tighten Q2 a little bit and Q3, but then also saw GMV growth, you know, that's some pretty powerful stuff. Want to know maybe what that impact was. And then given the short duration of the portfolio on leasing, you know. you know, what's your confidence level in, like, getting into that 6% to 8% range or at least in the 7% range on lease charge-offs after a couple different tightenings and comfortable with the cohorts that are currently showing right now? Thanks. Yeah, I'll start, and Brian can certainly fill in any gaps that I miss. Yeah. I mean, as we mentioned in July, we did some tightening in Q2. we saw the need to do some additional tightening in Q3. Post-call, we did see, you know, some deterioration in the performance of the pre-tightening pools, which caused us to take some more action. But I think I appreciate your focus on the fact that we're continuing to grow through that, and that's because of a lot of the, you now, the initiatives that we have, both with retail partners as far as partner marketing as well as additional integrations, also our direct consumer business with marketplace growing very robustly and just generally digital channels becoming a more impactful part of our business at almost 27% of GMV in the third quarter and certainly holiday season we expect it to be even more than that. So, you know, we feel like we've got the approvals, amounts, and rates dialed in. It certainly had several, you now, I'd say several hundred basis points of pressure on the GMV production in Q3, and we would expect that probably in Q4 as well. The reason we have such confidence is because we've executed this business through these cycles before, and we've seen this movie before. We have the ability to manage the portfolio in a fairly tight band, we think very tight band. It turns over quickly. The pre-tightening lease pools will be largely through the portfolio by the end of this year with some remnants into Q1. And we do believe we have the ability and made the appropriate moves to land near the high end of that 68% long-held range. I'm not making news here and changing that range, but I would say the six part of that six to eight is not really appropriate anymore. I'm not even sure that we would, we or you would want us to run the business down in the sixes. So, as I mentioned in my prepared remarks, the gross margin of the business has structurally changed over the last several years. And so, you know, being in that whatever seven to eight percent part of the range is probably more appropriate and not knowingly leaving EBITDA dollars on the table. So we look forward to operating the business through this holiday season. The portfolio will do what it does on a short duration portfolio and it'll turn over and we'll be in good shape with a lot of the things that we've got on the table for 27 and beyond, which is why we're confident and really excited about hitting those three-year CAGRs from the investor day and taking this opportunity to bring quite a few material amount of shares back in through the ASR while still having confidence in the earnings power of the business and cash flow generation. You mentioned some technology improvements. You shortened the application time three to four minutes. That's a lot of friction taken out of the process. I was wondering if you had any comments on how that might have decreased any part abandonment or closed rates or something like that to share with us. That sounds like a pretty good efficiency gain. Yeah, we're pleased with the innovation that our product team is bringing in the improvements or the removing of friction from the process. This particular stat was related to returning customers, and that's really just kind of changing the flows and making it easier for us to use the data that we already have on the customer to make it easier for them to come back and do business with us. And we certainly have plans to remove friction from new customer flows as well. We're tracking conversion at every point and different, you know, abandonment points or cutoff points across all the flows. And as you can imagine, the flows are a little different in our direct-to-consumer, whether it be the product marketplace or just generally DTC or in an integrated flow with a large retail partner. And so we're looking to make changes everywhere we can while still providing the most fulsome disclosures for our consumers. And clearly, the consumer would like to have zero friction, and that's what we're working towards. But we also have to make sure that they understand the transaction. Returning customers, it's a little easier because they've done business with us before. And we also Have to make Sure that we're protecting the portfolio, which we know is job one. So a lot of great progress made there, more to come, certainly. I'm really proud of the teams for what they're delivering. Okay, terrific. Thanks. Thank you. And our next question is going to come from the line of Bobby Griffin with Raymond James. Your line is open. Please go ahead. Hey, guys. Thanks for taking the questions. Steve, you spent some time on the credit side, but obviously there was a public report out that kind of pushed back on some of Forrest's credit aspects. I think you mentioned that loss provision improved year over year by 100 basis points, but maybe can you spend a little bit of time just unpacking that further, how it trended sequentially, you know, how you guys are, you know, anything more just to kind of unpack credit there on that business as it's obviously growing very healthily and just to help us get comfort around that level of growth with managing the risk side of that growth? Yeah, I'll start, and Brian can chime in, but the reality is that business is performing very well. We couldn't be more pleased. Massive growth, improving portfolio dynamics. It's inappropriate to compare December to June or September due to the seasonality of the business, but things are getting better there, right? And so the provision expense is down year over year, and the underwriting changes and model improvements and enhancements are doing what we want them to do. We still have a pretty good percentage of our GMV production coming from new customers, and they inherently come with higher risk. But things are performing as we would expect. And you wouldn't want me to get into talking about Cecil, so I'll turn it over to Brian. Yeah, Bobby, appreciate the question. I think I would echo Steve's comments there. We're very pleased with what's going on at four and the credit performance and a lot of credit to John trainer and the team over there that are, that are managing that. And we are leveraging much of the expertise we feel like we have throughout the organization around this, but I mean, the, the construct around that it's, it's typical Cecil accounting. You're, you're reserving upfront for the, for the anticipated losses. And as we look back, you know, historically and you know kind of compare what we thought the reserves should be versus what actually charged through. We've got a very narrow delta really going back each quarter. And so we have a high degree of confidence in our reporting around that. And it's like you were indicated, it's trending in the right direction. And really, it's part of the long-term for opportunity around margin expansion, this loss rate dynamic. And as you lean more on repeat customers certainly the um the the margin profile improves and here you've got 30 plus percent in the quarter uh with ebitda margins it's already starting from a strong base and i think some you know some improvement to be had uh as we get as we get smarter and so um you know i it's been pretty boring playing vanilla on the on the accounting front um uh with four we were right down the middle of fairway in terms of how we how we go about our business there no no reagings no nothing to to you know you know suggest that there's there's anything to communicate there but um hopefully that's helpful yeah that's very helpful i appreciate the detail and i appreciate you kind of going a little bit of the accounting side of it as well i guess secondly for me just on purchasing power you know first holiday you guys have owned it for i think last year the business was negatively impacted by the 40 plus day government shutdown. So just, I guess, anything there on how that impacted the business that, you know, that happened before the holiday. So, you know, maybe it wasn't as big of an impact, but does that set up with the comparisons, at least in your favor, as we think about this year, anything more there? Yeah, I mean, I would say, yes, we, the business, even though we didn't own it was impacted by the government shutdown, the, the segment of the business that we refer to as, you know, non-core or FedGov is actually fairly small. So it's not like it's a major factor in this year's comp, but certainly something, you know, there's always something. It seems like every year and every quarter there's something. And this year you've got what we have experienced in the past with the election. And usually it's more in the presidential cycle than it is in the midterm, but you could have some kind of distraction or malaise that might peel off after the election day, but yeah, I mean, it is a thing, but it's not like going to be a driver of it because of the smaller portion of the business that's from that segment. Very good. Best of luck here on holiday. I appreciate the details this morning. Thank you. Thank You. And our next question is going to come from the line of Brad Thomas with KeyBank Capital Markets. Your line is open please go ahead thanks good morning steve brian john um steve i want to just follow up on some of your comments that you made um after talking about the the asr where you spoke to your confidence in 2027 and that's where i was wondering do you just highlight a bit more about you know what is it that you're seeing in the business that gives you that confidence to you know want to do an asr right now at a time where there's so much uncertainty for the consumer Thanks. Yeah, Brad, I mean, I think it just goes to our confidence and our ability to control the businesses and ourability to profitably originate deals across our portfolio businesses. You know, right now we're dealing with the pre-tightening and post-tightened pools on the leasing side. That'll largely be through the pipeline by the end of the year. And we You're seeing some nice, you know, activity in our leasing business. I briefly talked about business development in the prepared remarks, and we're hoping that we can get some things across the goal line here that will certainly help 2027. And four continues to grow very robustly. We'll be in year two of the purchasing power ownership and execution, and nothing about this quarter or our guide for Q4 has changed our outlook for the three-year CAGRs that we put out in Investor Day. And if you take those three-year CAGRs against 2025, you come up with a very positive picture for prop holdings for 2027 and 2028. And so we see this as an opportunity to put some capital to work, investing in our own business, because the balance sheet allows for it. And the EPS guide that we put out there did not anticipate this type of action. So those three-year CAGRs can actually be impacted by bringing shares in. And so we see it as an opportunity. That's great. And, Brian, you guys continue to generate a tremendous amount of cash flow. So I don't think you have formal guidance on it, but can you help give us a range of maybe where you think the free cash flow shakes out for the year based on the new earnings guidance and then maybe just as a first blush on 27, you know, assuming, you know, the Prague business continues to keep GMV more positive, should we be thinking about free cashflow for next year being perhaps a touch lower than what we do this year just because of the working capital needs? Or are there any other puts and takes to think about from a free cashless standpoint? Thanks. Yeah. So let me maybe give you a couple of data points to help you kind of visualize the cash picture. So obviously, for the year, we've been high the cash general, which has allowed us to pay down the debt-related purchasing power, also get back into the cadence of share repurchase in Q2 and Q3. And now we're talking about this ASR. So we're, all that being said, we started the year at two and a half turns of leverage immediately after the purchasing power acquisition. We're now down to one and a half times. And even with this, you know, heavy Q4 that we talked about with purchasing power that we were looking at. Some of that will be leaned on with their securitization, but we continue to also contribute cash to our subsidiaries and PPC along the way to help pay down some debt. And so that one and a half turns, we're expecting even with the ASR of $100 million here in Q4 to be right at the top end of our range of two turns of leverage. We like to kind of keep it in between one and a half to two turns. And so even digesting the growth and the ASR, we're still within our range. And then you're looking forward to tax season that'll start to bring that down again. And so that's certainly the cash flow dynamic that we're proud of. And as you look forward to 2027, obviously we haven't given any guidance yet, and we will look to talk more about that in February. But structurally, on the progressive leasing segment, I see no reason why we would see softer cash flows than what we saw here in the year from a margin profile. Well, you know, here we're going to end the year at 11.6% EBITDA margin, which is kind of midpoint of our 11 to 13% that we talk about. And so, you now, like Steve said, nothing's changed in how we view the business. And if we are talking about in 2027, hey, four grew at a very strong clip at the end of 2027 and used up some cash, that's a good problem to have. But we have optionality. We don't anticipate, you know, additional facilities beyond what we have today with our outstanding revolver and securitization. And so we're going to be self-funding for the foreseeable future. That speaks to the cash flow dynamic. Appreciate it. Thank you, Brian. Thank you. And our next question is going to come from the line of Hong Nguyen with TD Cowen. Your line is open. Please go ahead. Good morning, guys. and thanks for taking my questions. Just curious, I mean, how would you characterize, I guess, this round versus maybe the round that you guys did last year in 2025, I mean in terms of magnitude and maybe the impact and maybe one for Brian and when we think about this tightening, how should we think of the impact on maybe the nascent growth of gross lease assets going forward? Yes, I guess just with respect to the leased asset dynamic, we comp positively this quarter, which has been a long time coming, and there's been a lot of work to fight against the headwinds that have been in place in order for us to grow. And as you kind of see implied in our guidance, what we're saying for Q4 for progressive leasing is that we're going to see a couple percentage points at the midpoint of revenue growth. And so that has everything to do with our ability to grow that portfolio. And so going forward, we also, in my prepared remarks, talked about even in the face of tightening, we're anticipating Q4, our ability-to-grow GMV. So you stack those things together, and I think we've got a good story here on leasing from a GMV trajectory, even in the face of tightening. And kudos to the sales team and everyone involved in making that happen because that, you know, certainly has been some headwinds. So, again, we'll talk more about 2027 in February. But, I mean, exiting the year, you now, we had a little bit of a, you know, a macro portfolio dynamic that I think we'll work through pretty quickly here. and hopefully we're talking more about the top line of the growth and the stable portfolio into 2027. Got it. And maybe, I mean, the difference between this year tightening versus last year? Yeah, I think the difference that I would speak to, you know, we tightened, you now, pretty dramatically, I would say, or significantly is probably a better word in q1 of 2025 and that was you know based on the data we had available to us at the time it was in one fell swoop that we we made that change um and let the portfolio play through i think what you've seen this year in in terms of how we've approached this we've we tried to be more a little bit more real time in the data we have made smaller iterative tightening uh you know into you know in q2 and q3 and and and you know here into into this year based upon what the data is telling us and so we're trying to we're trying to offset some of the pressures that we're seeing in the pre-tightening pool predominantly and the the post tightening pools are showing some encouraging trends of of sequential improvement from those those uh pre-tightening pools and so to answer your question that's been more iterative less, less significant in each iteration. And, um, I don't, I don't anticipate, you know, that we're, we're for the next year talking about the, you know, a one point in time, uh, you know, getting past that, that difficult comp because of the way that it's kind of played out this year. Um, and, uh and again, I think that's, I think that's evident here in Q4 with the growth or signal. Got it. Thank you, guys. Thank you. And our last question is going to come from the line of Casey Coates with Loop Capital Markets. Your line is open. Please go ahead. Good morning. Thank you for taking my question. First, I want to just ask about purchasing power had a strong 3Q. Given that, what was, can you explain a little bit of the reduction in the guidance for 4Q given the strong 3q and 4Q weighting of the company? Yeah, it was really, you know, of the guidance story, obviously, the preponderance of it was with the leasing segment and the portfolio dynamics we discussed. Let's do it to a much smaller extent here on purchasing power. But again, I think a large part of it is just us learning the business, the mixed dynamic with respect to the product offering, and just looking forward to Q4 and just the broader pressures, I think, on the consumer that have reared its head here late in the year. And we're looking at that, and as I mentioned, how consequential Q4 is for purchasing power. And I thought we just thought it was a prudent thing to do and maybe trim around the edges to a lesser degree for purchasing power. But there's nothing more more significant than that. And as a quick follow up, thinking about purchasing power and really that ecosystem strategy, when when should like cross selling and like the shared decisioning benefits benefit become more meaningful in the end results? yeah i mean we're working on those um you know every day obviously um the um the teams are are partnering well together the data science team is uh is being integrated and uh um small area of changes uh are not are being deployed um cross-selling is happening um of course on the in a B2B to B2C business like both leasing and purchasing power. There's these times of the year where they're less fruitful, as I called out earlier, related to open enrollment periods and things of that nature. But, you know, nothing has changed in our our view as to how these businesses can be better together than during diligence or since we've since we owned purchasing power Thank you. Thank you. And I would now like to hand the conference back over to Steve Michaels for closing remarks. Thank you, operator, and thank you all for joining us this morning. The third quarter asked more of our customer and our leasing business work through some portfolio challenges, but our diversified platform delivered consolidated results within our outlook ranges. Progressive Leasing's portfolio size inflected positive. Four delivered its 12th straight quarter of triple-digit growth, and purchasing power grew double digits. We're putting capital behind our conviction because the fundamentals are strong, the model is proven, and our ecosystem is contributing. I firmly believe the best chapters of Prague's story are still in front of us. So, thank you all for joining us today. This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.