# PROG Holdings, Inc. (PRG) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from PROG Holdings, Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1808834/000180883425000009/prg-20241231.htm
Accession: 0001808834-25-000009
Filing date: 2025-02-19
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/PRG/
All MD&A years: /company/PRG/mda/
Previous year: /company/PRG/mda/fy2023/ (FY 2023)
Next year: /company/PRG/mda/fy2025/ (FY 2025)

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis ("MD&A") is intended to help the reader understand the results of operations and financial condition of PROG Holdings, Inc. and should be read in conjunction with the consolidated financial statements and the accompanying notes. Throughout the MD&A we refer to various notes to our Consolidated Financial Statements which appear in Item 8 of this Form 10-K. The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs and involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed in these forward-looking statements. Factors that may cause or contribute to these differences include those discussed in Item 1A. Risk Factors and "Forward-Looking Statements" of this Form 10-K.

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 two reportable segments: (i) Progressive Leasing, an in-store, app-based, and e-commerce point-of-sale lease-to-own solutions provider; and (ii) Vive Financial ("Vive"), an omnichannel provider of second-look revolving credit products.

Our Progressive Leasing segment provides consumers with lease-purchase solutions through its point-of-sale partner locations and e-commerce website partners (collectively, "POS partners"). It does so by purchasing merchandise from the POS partners desired by customers and, in turn, leasing that merchandise to the customers through a cancellable lease-to-own transaction. Progressive Leasing has no stores of its own, but rather offers lease-purchase solutions to the customers of traditional and e-commerce retailers. The Progressive Leasing segment comprised approximately 96% of our consolidated revenues for the year ended December 31, 2024.

Our Vive segment primarily serves customers that may not qualify for traditional prime lending offers who desire to purchase goods and services from participating merchants. Vive offers customized programs, with services that include revolving loans through private label and Vive-branded credit cards. Vive's current network of POS partner locations and e-commerce websites includes furniture, mattresses, home exercise equipment, and home improvement retailers, as well as medical and dental service providers. The Vive segment comprised approximately 3% of our consolidated revenues for the year ended December 31, 2024.

Four Technologies, Inc. ("Four"), is a Buy Now, Pay Later ("BNPL") company that allows shoppers to pay for merchandise through four interest-free installments. Four's proprietary platform capabilities and its base of customers and retailers expand PROG Holdings' ecosystem of financial technology offerings by introducing a payment solution that further diversifies the Company's consumer financial technology offerings. Shoppers use Four to purchase furniture, clothing, electronics, health and beauty products, footwear, jewelry, and other consumer goods from retailers across the United States. Four is not a reportable segment for the year ended December 31, 2024 as its financial results are not significant to the Company's consolidated financial results. Four's financial results are reported within "Other" for segment reporting purposes.

PROG Holdings also owns Build, a credit building financial management tool. Build is not a reportable segment in 2024 as its financial results are not significant to the Company's consolidated financial results. Build's financial results are reported within "Other" for segment reporting purposes.

Macroeconomic and Business Environment

During 2024, the Company's lease application volume increased due to progress in executing our strategic growth initiatives, including direct-to-consumer and other enhanced marketing initiatives, e-commerce integrations with POS partners, customer experience technology improvements with certain POS partners, and also due to the tightening of the credit supply above Progressive Leasing. We believe these factors contributed to growth in Progressive Leasing's Gross Merchandise Volume ("GMV") in the year ended December 31, 2024 when compared to the prior year, and will continue to have a favorable impact in 2025. Despite the increase in demand for our lease-to-own offerings, the Company continues to operate in a challenging macroeconomic environment. Due to inflationary pressures in recent years, the cost of living remains significantly higher than it was prior to 2020, particularly with respect to housing, food and gas costs. We believe the increased cost of living has had a disproportionate negative effect on the customers we serve and an unfavorable impact on our GMV and financial performance in 2024, and will continue to do so in 2025. We believe the persistent inflationary pressures, the cost of living and elevated interest rates for extended periods have also unfavorably impacted consumer confidence within our customer base, resulting in a decrease in demand for the types of merchandise offered by many of our key national and regional POS partners. For example, Big Lots, Inc., one of Progressive Leasing's ten largest POS partners filed for Chapter 11 bankruptcy in September 2024, resulting in the permanent closure of many of its stores. While we expect to implement a number of initiatives intended to

35

offset the GMV loss arising out of Big Lots' bankruptcy, we believe that development will have a negative impact on Progressive Leasing's GMV and financial performance in 2025.

In light of these macroeconomic challenges and to align the cost structure of our business with our near-term revenue outlook, the Company executed on a number of cost reduction initiatives beginning in 2022 and continuing into 2024, to drive efficiencies and right-size variable costs, while attempting to minimize the negative impact on growth-related initiatives.

Customer payment delinquencies at the end of 2024 were elevated compared to the end of 2023, which contributed to the provision for lease merchandise write-offs as a percentage of lease revenues increasing to 7.5% for the year ended December 31, 2024 from 6.7% in the same period in 2023, but still within the Company's targeted annual range of 6% to 8%. Any meaningful increase in the unemployment rate or any further increase in inflation may result in increasing levels of customer payment delinquencies and related write-offs, which would result in an unfavorable impact on our performance.

Cybersecurity Incident

During the third quarter of 2023, Progressive Leasing experienced a cybersecurity incident affecting certain data and IT systems of Progressive Leasing. Promptly after detecting the incident, the Company engaged third-party cybersecurity experts and took immediate steps to respond to, remediate and investigate the incident. Law enforcement was also notified. Based on the Company's investigation, the Company determined that the data involved in the incident contained a substantial amount of personally identifiable information, including social security numbers, of Progressive Leasing's customers and other individuals. With the assistance of cybersecurity experts, the Company located the Progressive Leasing customers and other individuals whose information was impacted and notified them, consistent with state and federal requirements. The Company also took a number of additional measures to demonstrate its continued support and commitment to data privacy and protection.

As a result of this cybersecurity incident, Progressive Leasing has become subject to multiple lawsuits which allege, among other things, the incurrence of various types of damages arising out of the incident. All of these lawsuits have been consolidated into a single action in the United States District Court for the District of Utah (the "District Court"). The plaintiffs filed a consolidated complaint on April 19, 2024. On June 24, 2024, Progressive Leasing filed a motion to dismiss the complaint, which was granted in part and denied in part on January 16, 2025.

Progressive Leasing intends to vigorously defend itself against the lawsuit; however, at this time, the Company is unable to determine or predict the outcome of this lawsuit or reasonably provide an estimate or range of the possible losses, if any. The Company also maintains cybersecurity insurance coverage, subject to a $1.0 million retention, to limit the exposure to losses and related costs and expenses, such as those related to the cybersecurity incident and lawsuits stemming therefrom; however, there can be no assurance that such insurance coverage will be adequate to cover all of the costs and expenses related thereto or that the insurers will agree to cover all such losses, costs and expenses.

During the years ended December 31, 2024 and 2023, the Company incurred $0.3 million and $2.8 million, respectively, for costs related to the cybersecurity incident, net of insurance proceeds. These costs related primarily to third-party legal and consulting services and credit monitoring services for Progressive Leasing's customers and employees that were impacted and are included within professional services expense as a component of operating expenses in the consolidated statements of earnings.

36

Highlights

The following summarizes significant highlights from the year ended December 31, 2024:

•We reported revenues of $2.5 billion in 2024, an increase of 2.3% compared to 2023. The increase in revenues was primarily due to an increase in GMV at Four and Progressive Leasing in 2024 compared to the prior year.

•GMV from our other operations increased by $200.5 million, or 198.3%, primarily due to an increase in loan originations for our Four business in 2024 compared to 2023. GMV increased by $130.5 million for Progressive Leasing in 2024, compared to 2023. The increase in GMV for Progressive Leasing was due to a combination of: (i) positive customer responses to our strategic initiatives, such as direct-to-consumer and other enhanced marketing initiatives, e-commerce integrations with our POS partners and customer experience technology improvements with certain POS partners, and (ii) increasing demand for our lease-to-own offering arising out of a tightening of the credit supply above Progressive Leasing, which resulted in an increase in lease applications when compared to 2023.

•Earnings before income tax (benefit) expense decreased to $163.6 million compared to $196.2 million in 2023. The decrease was primarily driven by higher provisions for lease merchandise write-offs and loan losses, more customers choosing to exercise early buyout options, and increased restructuring expenses in 2024 compared to 2023. These decreases to earnings before income taxes were partially offset by lower personnel costs resulting from our cost reduction initiatives.

Key Operating Metrics

Gross Merchandise Volume. We believe GMV is a key performance indicator of our Progressive Leasing and Vive segments, as it provides the total value of new leases 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 Vive and Other are defined as gross loan originations.

The following table presents our GMV for the Company for the years presented:

[[GREPCENT_TABLE]]
[["For the Year Ended December 31 (Unaudited and In Thousands)","2024","","2023","","2022"],["Progressive Leasing","$","1,927,164","","","$","1,796,647","","","$","1,976,794"],["Vive","141,093","","","143,541","","","178,002"],["Other","301,568","","","101,099","","","60,459"],["Total GMV","$","2,369,825","","","$","2,041,287","","","$","2,215,255"]]
[[/GREPCENT_TABLE]]

The increase in Progressive Leasing's GMV was primarily due to a combination of: (i) positive customer responses to our strategic initiatives, such as direct-to-consumer and other enhanced marketing initiatives, e-commerce integrations with our POS partners and customer experience technology improvements with certain POS partners, and (ii) increasing demand for our lease-to-own offering arising out of a tightening of the credit supply above Progressive Leasing, which resulted in an increase in lease applications when compared to 2023. E-commerce channels generated 17.0% of Progressive Leasing's GMV in 2024 compared to 16.9% in 2023. The increase in GMV from our other operations was primarily due to an increase in loan originations by our Four business. GMV for Vive remained consistent year over year.

Active Customer Count. Our active customer count represents the total number of customers that have an active lease agreement with Progressive Leasing, or an active loan with Vive or our other operations. Active customer counts include customers that may have an active lease or loan agreement with more than one segment. The following table presents our active customer count for each segment and Other:

[[GREPCENT_TABLE]]
[["As of December 31 (Unaudited and In Thousands)","2024","","2023","","2022"],["Active Customer Count:"],["Progressive Leasing","934","","","893","","","943"],["Vive","90","","","86","","","92"],["Other","252","","","113","","","39"]]
[[/GREPCENT_TABLE]]

The number of customers for Progressive Leasing was higher in 2024, compared to the prior year, due to favorable customer responses to our strategic initiatives, including enhanced marketing, e-commerce integrations with POS partners, customer experience technology improvements with certain POS partners, and to a lesser extent, a tightening of the credit supply above Progressive Leasing. The number of customers for Vive has remained essentially flat. The increase in the number of customers for Other was the result of continued growth in our other strategic businesses.

37

Key Components of Earnings Before Income Tax (Benefit) Expense

In this MD&A section, we review our consolidated results. For the year ended December 31, 2024 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 two components: (i) lease revenues and fees and (ii) interest and fees on loans receivable. 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. Interest and fees on loans receivable represents merchant fees, finance charges and annual and other fees earned on outstanding loans in our Vive segment and, to a lesser extent, from our Four business.

Depreciation of Lease Merchandise. Depreciation of lease merchandise reflects the expense associated with depreciating merchandise leased to customers by Progressive Leasing.

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 personnel costs, stock-based compensation expense, occupancy costs, advertising, decisioning expense, professional services expense, sales acquisition expense, computer software expense, bank service charges, the provision for loan losses, fixed asset depreciation expense, intangible asset amortization, and restructuring expense, among other expenses.

Impairment of Goodwill. Impairment of goodwill is the partial write-off of the goodwill balance at the Four reporting unit. Refer to Note 1 of the accompanying consolidated financial statements for further discussion of the goodwill impairment assessment and resulting impairment charge that occurred in the third quarter of 2022.

Interest Expense, Net. Interest expense, net consists of interest incurred on the Company's Senior Notes and senior secured revolving credit facility (the "Revolving Facility"). Interest expense is presented net of interest income earned on the Company's deposits in cash and cash equivalents.

38

Results of Operations

Results of Operations – Years Ended December 31, 2024 and 2023

[[GREPCENT_TABLE]]
[["","","","Change"],["","Year Ended December 31,","","2024 vs. 2023"],["(In Thousands)","2024","","2023","","","","$","","%"],["REVENUES:"],["Lease Revenues and Fees","$","2,366,489","","","$","2,333,588","","","","","$","32,901","","","1.4","%"],["Interest and Fees on Loans Receivable","97,007","","","74,676","","","","","22,331","","","29.9"],["","2,463,496","","","2,408,264","","","","","55,232","","","2.3"],["COSTS AND EXPENSES:"],["Depreciation of Lease Merchandise","1,621,101","","","1,576,303","","","","","44,798","","","2.8"],["Provision for Lease Merchandise Write-offs","178,338","","","155,250","","","","","23,088","","","14.9"],["Operating Expenses","469,160","","","451,084","","","","","18,076","","","4.0"],["","2,268,599","","","2,182,637","","","","","85,962","","","3.9"],["OPERATING PROFIT","194,897","","","225,627","","","","","(30,730)","","","(13.6)"],["Interest Expense, Net","(31,289)","","","(29,406)","","","","","(1,883)","","","(6.4)"],["EARNINGS BEFORE INCOME TAX (BENEFIT) EXPENSE","163,608","","","196,221","","","","","(32,613)","","","(16.6)"],["INCOME TAX (BENEFIT) EXPENSE","(33,641)","","","57,383","","","","","(91,024)","","","nmf"],["NET EARNINGS","$","197,249","","","$","138,838","","","","","$","58,411","","","42.1","%"]]
[[/GREPCENT_TABLE]]

nmf—Calculation is not meaningful

Revenues

Information about our revenues by source and reportable segment is as follows: 

[[GREPCENT_TABLE]]
[["","Year Ended December 31, 2024","","Year Ended December 31, 2023"],["(In Thousands)","Progressive Leasing","Vive","Other","Total","","Progressive Leasing","Vive","Other","Total"],["Lease Revenues and Fees","$","2,366,489","","$","\u2014","","$","\u2014","","$","2,366,489","","","$","2,333,588","","$","\u2014","","$","\u2014","","$","2,333,588"],["Interest and Fees on Loans Receivable","\u2014","","64,415","","32,592","","97,007","","","\u2014","","68,912","","5,764","","74,676"],["Total Revenues","$","2,366,489","","$","64,415","","$","32,592","","$","2,463,496","","","$","2,333,588","","$","68,912","","$","5,764","","$","2,408,264"]]
[[/GREPCENT_TABLE]]

The increase in Progressive Leasing revenues was primarily the result of the 7.3% increase in GMV for 2024 as compared to the prior year, due to an increase in demand for our lease-to-own offerings and more customers choosing to exercise early buyout options. This increase was partially offset by having a smaller lease portfolio at the beginning of 2024 as compared to the beginning of 2023. Vive revenues declined primarily due to a smaller loan portfolio throughout 2024 as compared to 2023, as a result of lower demand for products offered by certain Vive POS partners. The increase to Other revenue was primarily driven by a 198.3% increase in Four's GMV as compared to the same period in 2023, due to increased loan originations.

39

Operating Expenses

Information about certain significant components of operating expenses is as follows:

[[GREPCENT_TABLE]]
[["","","","","","","","Change"],["","Year Ended December 31,","","2024 vs. 2023"],["(In Thousands)","2024","","2023","","","","$","","%"],["Personnel Costs1","$","172,542","","","$","187,199","","","","","$","(14,657)","","","(7.8)","%"],["Stock-Based Compensation","29,179","","","24,920","","","","","4,259","","","17.1"],["Occupancy Costs","4,199","","","5,429","","","","","(1,230)","","","(22.7)"],["Advertising","20,102","","","17,203","","","","","2,899","","","16.9"],["Professional Services","32,277","","","26,882","","","","","5,395","","","20.1"],["Sales Acquisition Expense2","29,175","","","28,205","","","","","970","","","3.4"],["Computer Software Expense3","28,057","","","26,673","","","","","1,384","","","5.2"],["Bank Service Charges","11,042","","","11,246","","","","","(204)","","","(1.8)"],["Other Sales, General and Administrative Expense","36,969","","","38,005","","","","","(1,036)","","","(2.7)"],["Sales, General and Administrative Expense","363,542","","","365,762","","","","","(2,220)","","","(0.6)"],["Provision for Loan Losses","55,950","","","40,757","","","","","15,193","","","37.3"],["Depreciation and Amortization","26,977","","","32,032","","","","","(5,055)","","","(15.8)"],["Restructuring Expense","22,691","","","12,533","","","","","10,158","","","81.1"],["Operating Expenses","$","469,160","","","$","451,084","","","","","$","18,076","","","4.0","%"]]
[[/GREPCENT_TABLE]]

1 Personnel costs excludes stock-based compensation expense, which is reported separately in the operating expense table.

2 Sales acquisition expense includes vendor incentives and rebates to POS partners, external sales commissions, amortization of initial direct costs and amounts paid to various POS partners to be their exclusive provider of lease-to-own solutions.

3 Computer software expense consists primarily of software subscription fees, licensing fees and non-capitalizable software implementation costs.

The $14.7 million decrease in personnel costs was due to a decrease of $13.3 million at Progressive Leasing attributable to its reduction in the number of employees during the second half of 2023 and first quarter of 2024 as part of its restructuring and cost cutting initiatives. Personnel costs at Vive also decreased by $1.4 million compared to 2023.

Stock-based compensation increased $4.3 million compared to 2023, consisting of increases of $5.3 million at Progressive Leasing and $0.2 million at Vive, partially offset by a decrease of $1.2 million at Four. The higher stock-based compensation in 2024 was the result of: (i) an increase in the grant date value of restricted stock units granted in 2024 compared to 2023; and (ii) an increase to the estimated payout of performance stock units granted in 2024 based on the Company's actual results, compared to a lower payout of performance stock units granted in 2023. The lower stock-based compensation at Four in 2024 compared to 2023, was a result of the Company determining in the second quarter of 2024 that performance stock units that had been granted to Four executives in 2021 and 2022 were no longer probable of being earned.

Advertising expense increased $2.9 million compared to 2023, primarily due to increased advertising in the Progressive Leasing segment associated with the expansion of our direct-to-consumer marketing efforts.

Professional services increased $5.4 million compared to 2023, primarily due to higher technology-related costs. Professional services in the prior year were also impacted by the benefit of $0.5 million of regulatory insurance recoveries that were received during the first quarter of 2023.

The provision for loan losses increased $15.2 million compared to 2023. The increase was primarily the result of a $14.0 million increase in the provision for loan losses for our Other operations, due to the continued growth of our Four business and our other strategic operations. The provision for loan losses at Vive also increased $1.2 million due to higher delinquencies compared to 2023.

Depreciation and amortization decreased $5.1 million compared to 2023, primarily due to a decrease of $5.7 million at Progressive Leasing and $0.1 million at Vive, partially offset by an increase of $0.7 million at Four and other strategic businesses. The decrease at Progressive Leasing was primarily attributable to a technology asset that was fully amortized during the second quarter of 2024, as well as assets that were impaired as part of the Company's restructuring activities during the first quarter of 2024. The increase at Four and other strategic businesses was due to an increase in depreciable assets as compared to 2023.

In 2024, restructuring expense included $7.8 million associated with the early termination of an independent sales agent agreement for Progressive Leasing, $2.0 million associated with the early termination of a third party vendor agreement within other strategic operations, $6.0 million of operating lease right-of-use asset and other fixed asset impairment charges related to

40

the reduction of Progressive Leasing office space, and $6.8 million of employee severance for Progressive Leasing, Vive, and Other operations. In 2023, restructuring expense included $9.6 million associated with the early termination of certain independent sales agent agreements and $2.9 million of employee severance within Progressive Leasing.

Other Costs and Expenses

Depreciation of lease merchandise. Depreciation of lease merchandise increased by 2.8% during the year ended December 31, 2024 compared to 2023. The increase was primarily due to growth in the Company's lease portfolio, resulting from positive customer responses to our strategic initiatives and increasing demand for our lease-to-own offering. As a percentage of lease revenues and fees, depreciation of lease merchandise increased to 68.5% from 67.5% in the prior year period, primarily due to a normalized level of early buyouts during 2024 as compared to a lower level of early buyouts during 2023.

Provision for lease merchandise write-offs. The provision for lease merchandise write-offs increased by $23.1 million during the year ended December 31, 2024, as compared to 2023. The provision for lease merchandise write-offs as a percentage of lease revenues increased to 7.5% for the year ended December 31, 2024 from 6.7% for the prior year. The increase in the provision was a result of higher delinquencies and write-offs in 2024 compared to 2023. Given the significant economic uncertainty resulting from a higher cost of living, inflationary pressures, impact of tariffs, and increased interest rates for an extended period, 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 December 31, 2024. Actual lease merchandise write-offs could differ materially from the allowance for those write-offs.

Interest expense, net. Information about interest expense and interest income is as follows:

[[GREPCENT_TABLE]]
[["","","","Change"],["","Year Ended December 31,","","2024 vs. 2023"],["(In Thousands)","2024","","2023","","","","$","","%"],["Interest Expense, Net:"],["Interest Expense","$","38,816","","","$","38,694","","","","","$","122","","","0.3","%"],["Interest Income","(7,527)","","","(9,288)","","","","","1,761","","","19.0"],["Total Interest Expense, Net","$","31,289","","","$","29,406","","","","","$","1,883","","","6.4","%"]]
[[/GREPCENT_TABLE]]

Interest expense, net increased $1.9 million due to a decrease in interest income earned from a decrease in cash deposits during 2024 compared to 2023.

Earnings Before Income Tax (Benefit) Expense

Information about our earnings before income tax (benefit) expense by reportable segment is as follows: 

[[GREPCENT_TABLE]]
[["","","","Change"],["","Year Ended December 31,","","2024 vs. 2023"],["(In Thousands)","2024","","2023","","","","$","","%"],["EARNINGS BEFORE INCOME TAX (BENEFIT) EXPENSE:"],["Progressive Leasing","$","184,782","","","$","216,271","","","","","$","(31,489)","","","(14.6)","%"],["Vive","(848)","","","4,545","","","","","(5,393)","","","nmf"],["Other","(20,326)","","","(24,595)","","","","","4,269","","","17.4"],["Earnings Before Income Tax (Benefit) Expense","$","163,608","","","$","196,221","","","","","$","(32,613)","","","(16.6)","%"]]
[[/GREPCENT_TABLE]]

nmf—Calculation is not meaningful

The loss before income tax (benefit) expense within Other primarily relates to losses from our other strategic operations. Factors impacting the change in earnings before income tax (benefit) expense for each reporting segment are discussed above.

Income Tax (Benefit) Expense

Income tax (benefit) expense was a benefit of $33.6 million for the year ended December 31, 2024 compared to an expense of $57.4 million in 2023. The effective tax rate was (20.6)% for the year ended December 31, 2024 compared to 29.2% in 2023. The income tax benefit and negative effective tax rate in 2024 was primarily due to a $51.4 million non-cash reversal of the uncertain tax position related to Progressive Leasing and a $27.6 million deferred tax benefit related to an election which resulted in the deemed liquidation of a wholly-owned partnership for tax purposes.

41

Results of Operations – Years Ended December 31, 2023 and 2022

[[GREPCENT_TABLE]]
[["","","","Change"],["","Year Ended December 31,","","2023 vs. 2022"],["(In Thousands)","2023","","2022","","","","$","","%"],["REVENUES:"],["Lease Revenues and Fees","$","2,333,588","","","$","2,523,785","","","","","$","(190,197)","","","(7.5)","%"],["Interest and Fees on Loans Receivable","74,676","","","74,041","","","","","635","","","0.9"],["","2,408,264","","","2,597,826","","","","","(189,562)","","","(7.3)"],["COSTS AND EXPENSES:"],["Depreciation of Lease Merchandise","1,576,303","","","1,757,730","","","","","(181,427)","","","(10.3)"],["Provision for Lease Merchandise Write-offs","155,250","","","193,926","","","","","(38,676)","","","(19.9)"],["Operating Expenses","451,084","","","450,374","","","","","710","","","0.2"],["Impairment of Goodwill","\u2014","","","10,151","","","","","(10,151)","","","nmf"],["","2,182,637","","","2,412,181","","","","","(229,544)","","","(9.5)"],["OPERATING PROFIT","225,627","","","185,645","","","","","39,982","","","21.5"],["Interest Expense, Net","(29,406)","","","(37,401)","","","","","7,995","","","21.4"],["EARNINGS BEFORE INCOME TAX EXPENSE","196,221","","","148,244","","","","","47,977","","","32.4"],["INCOME TAX EXPENSE","57,383","","","49,535","","","","","7,848","","","15.8"],["NET EARNINGS","$","138,838","","","$","98,709","","","","","$","40,129","","","40.7","%"]]
[[/GREPCENT_TABLE]]

nmf—Calculation is not meaningful

Revenues

Information about our revenues by source and reportable segment is as follows:

[[GREPCENT_TABLE]]
[["","Year Ended December 31, 2023","","Year Ended December 31, 2022"],["(In Thousands)","Progressive Leasing","Vive","Other","Total","","Progressive Leasing","Vive","Other","Total"],["Lease Revenues and Fees","$","2,333,588","","$","\u2014","","$","\u2014","","$","2,333,588","","","$","2,523,785","","$","\u2014","","$","\u2014","","$","2,523,785"],["Interest and Fees on Loans Receivable","\u2014","","68,912","","5,764","","74,676","","","\u2014","","70,911","","3,130","","74,041"],["Total Revenues","$","2,333,588","","$","68,912","","$","5,764","","$","2,408,264","","","$","2,523,785","","$","70,911","","$","3,130","","$","2,597,826"]]
[[/GREPCENT_TABLE]]

The decrease in Progressive Leasing revenues was primarily the result of having a smaller lease portfolio at the beginning of and throughout 2023, as compared to the same periods in 2022. The decrease was also a result of a decline in Progressive Leasing's GMV for the year ended 2023, as compared to 2022, resulting from decreased customer demand for many of the products offered by our POS partners and tightened lease decisioning beginning in mid-2022. The decline in revenues was partially offset by improved customer payment activity in 2023, as compared to 2022. Vive revenues declined due to a 19.4% decrease in GMV as compared to 2022, resulting in a smaller loan portfolio throughout 2023. The increase in Other revenue was primarily driven by a 67.2% increase in Four's GMV as compared to the same period in 2022.

42

Operating Expenses

Information about certain significant components of operating expenses is as follows:

[[GREPCENT_TABLE]]
[["","","","","","","","Change"],["","Year Ended December 31,","","2023 vs. 2022"],["(In Thousands)","2023","","2022","","","","$","","%"],["Personnel Costs1","$","187,199","","","$","194,195","","","","","$","(6,996)","","","(3.6)","%"],["Stock-Based Compensation","24,920","","","17,521","","","","","7,399","","","42.2"],["Occupancy Costs","5,429","","","6,466","","","","","(1,037)","","","(16.0)"],["Advertising","17,203","","","15,762","","","","","1,441","","","9.1"],["Professional Services","26,882","","","22,824","","","","","4,058","","","17.8"],["Sales Acquisition Expense2","28,205","","","28,828","","","","","(623)","","","(2.2)"],["Computer Software Expense3","26,673","","","27,629","","","","","(956)","","","(3.5)"],["Bank Service Charges","11,246","","","12,491","","","","","(1,245)","","","(10.0)"],["Other Sales, General and Administrative Expense","38,005","","","40,574","","","","","(2,569)","","","(6.3)"],["Sales, General and Administrative Expense","365,762","","","366,290","","","","","(528)","","","(0.1)"],["Provision for Loan Losses","40,757","","","41,232","","","","","(475)","","","(1.2)"],["Depreciation and Amortization","32,032","","","33,851","","","","","(1,819)","","","(5.4)"],["Restructuring Expense","12,533","","","9,001","","","","","3,532","","","39.2"],["Operating Expenses","$","451,084","","","$","450,374","","","","","$","710","","","0.2","%"]]
[[/GREPCENT_TABLE]]

1 Personnel costs excludes stock-based compensation expense, which is reported separately in the operating expense table.

2 Sales acquisition expense includes vendor incentives and rebates to POS partners, external sales commissions, amortization of initial direct costs and amounts paid to various POS partners to be their exclusive provider of lease-to-own solutions.

3 Computer software expense consists primarily of software subscription fees, licensing fees and non-capitalizable software implementation costs.

The $7.0 million decrease in personnel costs was due to a decrease of $9.1 million at Progressive Leasing attributable to its reduction in the number of employees during the second half of 2022 as part of its restructuring and cost cutting initiatives. Personnel costs for Four and other strategic businesses also decreased by $0.1 million as compared to 2022. These decreases were partially offset by an increase of $2.2 million at Vive primarily due to increased salaries and wages for new and existing employees.

Stock-based compensation increased $7.4 million compared to 2022, consisting of increases of $4.7 million at Progressive Leasing, $1.9 million at Four and other strategic businesses, and $0.8 million at Vive. The lower stock-based compensation in 2022 was the result of: (i) the Company determining in the second quarter of 2022 that performance stock units that had been granted to Four executives were no longer probable of being earned resulting in lower expense in 2022 compared to 2023; (ii) no stock-based compensation expense being recognized for Progressive Leasing performance stock units granted in 2022 as the performance metrics related to those performance stock units were not met; and (iii) other stock-based forfeitures in 2022 related to the Progressive Leasing restructuring program. During 2023, the estimated payout of performance stock units granted in 2023 exceeded target based on the Company's actual results, further increasing the stock-based compensation expense during 2023 versus 2022.

Professional services expense increased $4.1 million, consisting of $3.2 million at Progressive Leasing, $0.8 million at Four and other strategic businesses and $0.1 million at Vive. The increase at Progressive Leasing was primarily due to costs incurred related to the cybersecurity incident during the third quarter of 2023. The remaining increases were the result of increased expenses for other legal services and contract labor compared to 2022.

Restructuring expense increased $3.5 million due to additional actions taken during the year ended December 31, 2023. In 2023, restructuring costs included $9.6 million associated with the early termination of certain independent sales agent agreements and $2.9 million of employee severance within Progressive Leasing. In 2022, restructuring costs included $5.6 million of employee severance within Progressive Leasing, $3.3 million of operating lease right-of-use asset and other fixed asset impairment charges related to the relocation of the Vive corporate headquarters and a reduction of Progressive Leasing management and information technology office space, and $0.1 million of other restructuring expenses.

43

Other Costs and Expenses

Depreciation of lease merchandise. Depreciation of lease merchandise decreased by 10.3% during the year ended December 31, 2023 compared to 2022. The decrease was primarily due to a reduction in the size of Progressive Leasing's lease portfolio, resulting from tightening of its decisioning in mid-2022 and decreased consumer demand for many of the leasable products offered by Progressive Leasing's retail partners. As a percentage of total lease revenues and fees, depreciation of lease merchandise decreased to 67.5% from 69.6% in the prior year period, primarily due to improved customer payment activity and lower early buyouts for the year ended December 31, 2023, as compared to the same period in 2022.

Provision for lease merchandise write-offs. The provision for lease merchandise write-offs decreased by $38.7 million due to a reduction in the size of Progressive Leasing's lease portfolio and improved customer payment activity during the year ended December 31, 2023, as compared to the same period in 2022. The provision for lease merchandise write-offs as a percentage of lease revenues decreased to 6.7% for the year ended December 31, 2023 from 7.7% in the same period in 2022. The decrease in the provision as a percentage of lease revenues was a result of improved customer payment activity and lower write-offs due to the Company tightening its lease decisioning in mid-2022. Given the significant economic uncertainty resulting from inflation, elevated interest rates for extended periods, the resumption of student loan payments in October 2023, and the potential effects of such developments on Progressive Leasing's customers, and business going forward, a high level of estimation was involved in determining the allowance as of December 31, 2023. Actual lease merchandise write-offs could differ materially from the allowance for those write-offs.

Impairment of Goodwill. The Company recorded a loss of $10.2 million to partially write off the goodwill balance of the Four reporting unit during the third quarter of 2022.

Interest expense, net. Information about interest expense and interest income is as follows:

[[GREPCENT_TABLE]]
[["","","","Change"],["","Year Ended December 31,","","2023 vs. 2022"],["(In Thousands)","2023","","2022","","","","$","","%"],["Interest Expense, Net"],["Interest Expense","$","38,694","","","$","38,675","","","","","$","19","","","\u2014","%"],["Interest Income","(9,288)","","","(1,274)","","","","","(8,014)","","","nmf"],["Total Interest Expense, Net","$","29,406","","","$","37,401","","","","","$","(7,995)","","","(21.4)","%"]]
[[/GREPCENT_TABLE]]

nmf—Calculation is not meaningful

Interest expense, net decreased $8.0 million due to interest income earned on the Company's deposits in cash and cash equivalents resulting from an increase in deposits in higher yield accounts.

Earnings Before Income Tax Expense

Information about our earnings before income tax expense by reportable segment is as follows: 

[[GREPCENT_TABLE]]
[["","","","Change"],["","Year Ended December 31,","","2023 vs. 2022"],["(In Thousands)","2023","","2022","","","","$","","%"],["EARNINGS BEFORE INCOME TAX EXPENSE:"],["Progressive Leasing","$","216,271","","","$","174,143","","","","","$","42,128","","","24.2","%"],["Vive","4,545","","","9,195","","","","","(4,650)","","","(50.6)"],["Other","(24,595)","","","(35,094)","","","","","10,499","","","29.9"],["Earnings Before Income Tax Expense","$","196,221","","","$","148,244","","","","","$","47,977","","","32.4","%"]]
[[/GREPCENT_TABLE]]

The loss before income taxes within Other primarily relates to our Four operations. Factors impacting the change in earnings before income tax expense for each reporting segment are discussed above.

Income Tax Expense

Income tax expense increased to $57.4 million for the year ended December 31, 2023 compared to $49.5 million in 2022 primarily due to higher earnings before income tax expense in 2023 as compared to prior year. The effective tax rate was 29.2% for the year ended December 31, 2023 compared to 33.4% in 2022. The decrease in the effective tax rate was primarily driven by the non-deductible goodwill impairment loss for Four of $10.2 million that occurred in 2022, and the increase in the valuation allowance related to certain deferred tax assets that occurred in 2022.

44

Overview of Financial Position

The major changes in the consolidated balance sheet from December 31, 2023 to December 31, 2024 include:

•Cash and cash equivalents decreased $59.7 million to $95.7 million for the year ended December 31, 2024. For additional information, refer to the "Liquidity and Capital Resources" section below.

•Lease merchandise, net, increased $46.8 million due primarily to a 7.3% increase in Progressive Leasing's GMV in 2024 as compared to 2023.

•Loans receivable, net of allowances and unamortized fees, increased $20.2 million due primarily to growth in the loan portfolio of Four compared to December 31, 2023. Four's GMV increased 198.3% in 2024 as compared to 2023.

•Income tax receivable decreased $22.3 million primarily due to a net decrease in tax payments made during the year ended December 31, 2024.

•Prepaid expenses and other assets increased $27.5 million due primarily to upfront vendor incentives paid to certain Progressive Leasing POS partners in 2024.

•Accounts payable and accrued expenses decreased $58.2 million due primarily to the reversal of the uncertain tax position, including interest, related to Progressive Leasing's $175.0 million settlement with the FTC in 2020.

•Debt, net increased $51.3 million due to a $50.0 million draw on our Revolving Facility in December 2024, and the amortization of deferred financing costs. The $50.0 million draw was subsequently repaid in January 2025.

•Deferred tax assets increased $23.5 million and deferred tax liabilities decreased $30.5 million, due primarily to an election which resulted in the deemed liquidation of a wholly-owned partnership for tax purposes.

45

Liquidity and Capital Resources

General

We expect that our primary capital requirements will consist of:

•Reinvesting in our business, including buying merchandise for the operations of Progressive Leasing. Because we believe Progressive Leasing will continue to grow over the long-term, we expect that the need for additional lease 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; (v) funding of loans receivable for Vive and Four; and (vi) servicing our outstanding debt obligations.

Our capital requirements have been financed through:

•cash flows from operations;

•private debt offerings;

•bank debt; and

•stock offerings.

As of December 31, 2024, the Company had $95.7 million of cash, $300.0 million of availability under the Revolving Facility, and $650.0 million of gross indebtedness.

Cash Provided by Operating Activities

Cash provided by operating activities was $138.5 million and $204.2 million during the years ended December 31, 2024 and 2023, respectively. The $65.7 million decrease in operating cash flows was primarily driven by a $129.3 million increase in cash used for purchases of lease merchandise as a result of higher GMV at Progressive Leasing, an increase in the balance of accounts receivable due to timing of payments received from customers, and an increase in payments made on accounts payable and accrued expenses compared to December 31, 2023. These decreases in cash provided by operating activities were offset primarily by a decrease in cash paid for taxes of $50.6 million when compared to the prior year.

Cash provided by operating activities was $204.2 million and $242.5 million during the years ended December 31, 2023 and 2022, respectively. The $38.3 million decrease in operating cash flows was primarily driven by a $190.2 million decrease in lease revenue resulting from a smaller lease portfolio and a $38.3 million increase in cash paid for income taxes compared to 2022. These decreases were partially offset by a $168.1 million decrease in purchases of lease merchandise, an increase in the balance of accounts payable and accrued expenses compared to December 31, 2022, improved customer payment activity during 2023, and an increase in interest income resulting from an increase in deposits in higher yield accounts. Other changes in cash provided by operating activities are discussed above in our discussion of results for the year ended December 31, 2023.

Cash Used in Investing Activities

Cash used in investing activities was $79.2 million and $38.8 million during the years ended December 31, 2024 and 2023, respectively. The $40.4 million increase in investing cash outflows was primarily the result of a $244.8 million increase in cash outflows for investments in loans receivable, partially offset by a $203.4 million increase in proceeds from loans receivable. These increases are primarily the result of growth of loan activity at Four.

Cash used in investing activities was $38.8 million and $53.5 million during the years ended December 31, 2023 and 2022, respectively. The $14.7 million decrease in investing cash outflows was primarily the result of a $25.3 million increase in proceeds from loans receivable, partially offset by a $11.1 million increase in cash outflows for investments in loans receivable.

Cash Used In Financing Activities

Cash used in financing activities was $119.1 million during the year ended December 31, 2024 compared to $141.9 million during the year ended December 31, 2023, a decrease of $22.8 million. The decrease in cash used in financing activities was primarily the result of a $50.0 million draw on our revolving credit facility. This decrease in cash used was partially offset by a $20.4 million increase in cash paid for dividends, as the Company began paying dividends during 2024.

Cash used in financing activities was $141.9 million during the year ended December 31, 2023 compared to $227.2 million during the year ended December 31, 2022, a decrease of $85.3 million. Cash used in financing activities in 2023 was primarily for the Company's repurchase of $139.6 million of its common stock, compared to $223.6 million of share repurchases in 2022. The Company also used cash for an immaterial amount of debt issuance costs in 2023 compared to $1.6 million in 2022.

Share Repurchases

We purchase our stock in the market from time to time as authorized by our Board of Directors. Effective November 3, 2021, the Company announced that its Board of Directors had authorized a share repurchase program that provided the Company with the ability to repurchase shares up to a maximum amount of $1 billion. On 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. As of December 31, 2024, we had the authority to purchase additional shares up to our remaining authorization limit of $361.3 million.

The Company purchased 3,480,871 shares of its common stock for $138.7 million during the year ended December 31, 2024, 4,691,274 shares for $139.6 million during the year ended December 31, 2023, and 8,720,223 shares for $223.6 million during the year ended December 31, 2022. These amounts do not include any excise tax that may be assessed on those repurchases.

Dividends

We declared and paid a dividend of $0.12 per share in each quarter of 2024, which resulted in aggregate dividend payments of $20.4 million. We paid no dividends during 2023 and 2022. 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

On November 24, 2020, the Company entered into a credit agreement with a consortium of lenders providing for a $350 million senior revolving credit facility (the "Revolving Facility"). On November 15, 2024, the Company entered into an amendment to the Revolving Facility, the primary purpose of which was to extend the maturity date of the Revolving Facility from November 24, 2025 to November 15, 2029.

The Revolving Facility includes an uncommitted incremental facility increase option ("Incremental Facilities") which, subject to certain terms and conditions, permits the Company at any time prior to the maturity date to request an increase in extensions of credit available thereunder by an aggregate additional principal amount of up to $300 million. As of December 31, 2024, the Company had $50.0 million outstanding and $300 million remaining available for borrowings on the Revolving Facility. The Company repaid the $50.0 million Revolving Facility borrowing in January 2025.

The Revolving Facility is fully secured and contains certain financial covenants, which include requirements that the Company maintain ratios of (i) total net debt to EBITDA of no more than 2.50:1.00 and (ii) consolidated interest coverage of no less than 3.00:1.00. The Company will be in default under the Revolving Facility if it fails to comply with these covenants, and all borrowings outstanding may become due immediately. As of December 31, 2024, the Company was in compliance with the financial covenants set forth in the Revolving Facility and believes it will continue to be in compliance in the future.

On November 26, 2021, the Company entered into an indenture in connection with its offering of $600 million aggregate principal amount of its senior unsecured notes due 2029 (the "Senior Notes"). The Senior Notes were issued at 100.0% of their par value with a stated fixed annual interest rate of 6.00%. Interest accrues on the outstanding balance and is payable semi-annually. The Senior Notes are general unsecured obligations of the Company and are guaranteed by certain of the Company's existing and future domestic subsidiaries.

The indenture discussed above contains various other covenants and obligations to which the Company and its subsidiaries are subject while the Senior Notes are outstanding. The covenants in the indenture may limit the extent to which, or the ability of the Company and its subsidiaries to, among other things: (i) incur additional debt and guarantee debt; (ii) pay dividends or make other distributions or repurchase or redeem capital stock; (iii) prepay, redeem or repurchase certain debt; (iv) issue certain preferred stock or similar equity securities; (v) make loans and investments; (vi) sell assets; (vii) incur liens; (viii) enter into transactions with affiliates; (ix) enter into agreements restricting the ability of the Company's subsidiaries to pay dividends; and (x) consolidate, merge or sell all or substantially all of the Company's assets. The indenture also contains customary events of default for transactions of this type and amount. The Company was in compliance with these covenants at December 31, 2024 and believes that it will continue to be in compliance in the future.

46

Commitments

Income Taxes. During the year ended December 31, 2024, we made net income tax payments of $49.8 million. During the year ended December 31, 2025 we anticipate making estimated cash payments of $67.0 million for United States federal and state income taxes.

Leases. We lease management and information technology space for corporate functions under operating leases expiring at various times through 2028. Our corporate and segment management office leases contain renewal options for additional periods ranging from three to five years. Approximate future minimum payments for operating leases that have initial or remaining non-cancelable terms in excess of one year as of December 31, 2024 are disclosed in Note 6 in the accompanying consolidated financial statements.

Contractual Obligations and Commitments. Future interest payments on the Company's variable-rate debt are based on a rate per annum equal to, at our option, (i) the Secured Overnight Financing Rate ("SOFR") plus a margin within the range of 1.5% to 2.5% for revolving loans, based on total leverage, or (ii) the administrative agent's base rate plus a margin ranging from 0.5% to 1.5%, as specified in the agreement. Future interest payments related to our Revolving Facility are based on the borrowings outstanding at that time. Future interest payments may be different depending on future borrowing activity and interest rates. The Company had $50.0 million of outstanding borrowings under the Revolving Facility as of December 31, 2024.

As discussed above, on November 26, 2021, the Company issued $600 million aggregate principal amount of Senior Notes that bear a fixed annual interest rate of 6.00%. Interest will accrue on the outstanding balance and will be payable semi-annually. The Senior Notes will mature on November 15, 2029.

The Company has no long-term commitments to purchase merchandise nor does it have significant purchase agreements that specify minimum quantities or set prices that exceed our expected requirements for three months.

Deferred income tax liabilities as of December 31, 2024 were approximately $74.3 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. As a result, scheduling deferred income tax liabilities as payments due by period may be misleading, because this scheduling would not necessarily relate to liquidity needs.

Unfunded Lending Commitments. The Company, through its Vive business, had unconditionally cancellable unfunded lending commitments totaling approximately $461.1 million and $523.9 million as of December 31, 2024 and 2023, respectively, that do not give rise to revenues and cash flows. These unfunded commitments arise in the ordinary course of business from credit card agreements with individual cardholders that give them the ability to borrow, against unused amounts, up to the maximum credit limit assigned to their account. While these unfunded amounts represented the total available unused lines of credit, the Company does not anticipate that all cardholders will utilize their entire available line at any given point in time. Commitments to extend unsecured credit are agreements to lend to a cardholder so long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

47

Critical Accounting Policies

We discuss the most critical accounting policies below. For a discussion of all of the Company's significant accounting policies, see Note 1 in the accompanying consolidated financial statements.

Revenue Recognition

All of Progressive Leasing's customer agreements are considered operating leases and are recognized in accordance with ASC 842, Leases. The Company maintains ownership of the lease merchandise until all payment obligations are satisfied under the lease ownership agreements. Progressive Leasing recognizes lease revenue on a straight-line basis over the estimated lease term. Initial lease payments made by the customer upon lease execution are initially recognized as deferred revenue and are recognized as lease revenue over the estimated lease term on a straight-line basis. All other customer billings are in arrears and, therefore, lease revenues are earned prior to the lease payment due date and are recorded in the statements of earnings net of related sales taxes as earned. Cash collected in advance of being due or earned and recognized as deferred revenue is presented within customer deposits and advance payments in the accompanying consolidated balance sheets. Progressive Leasing revenues recorded prior to the payment due date results in unbilled accounts receivable in the accompanying consolidated balance sheets. Our revenue recognition accounting policy matches the lease revenue with the corresponding costs, mainly depreciation expense, associated with lease merchandise.

At December 31, 2024 and 2023, we had deferred revenue representing cash collected in advance of being due or earned totaling $40.9 million and $35.7 million, respectively, and accounts receivable, net of an allowance for doubtful accounts based on historical collection rates, of $80.2 million and $67.9 million, respectively. Our accounts receivable allowance is estimated using historical write-off and collection experience. Other qualitative factors, such as current and forecasted customer payment trends, are considered in estimating the allowance. For customer agreements that are past due, the Company's policy is to write off lease receivables after 120 days. The provision for uncollectible renewal payments is recorded as a reduction of lease revenues and fees in accordance with ASC 842.

Vive recognizes interest income based upon the amount of the loans outstanding, which is recognized as interest and fees on loans receivable in the billing period in which they are assessed if collectability is reasonably assured. Vive acquires loans receivable from its third-party bank partners at a discount from the face value of the loan. The discount is comprised mainly of a merchant fee discount, which represents a pre-negotiated, nonrefundable discount that generally ranges from 3.0% to 30.0% of the loan face value. The discount is designed to cover the risk of loss related to the portfolio of cardholder charges and Vive's direct origination costs. The merchant fee discount, net of the origination costs, is amortized on a net basis and is recorded as interest and fee revenue on loans receivable on a straight-line basis over the initial 24-month period that the card is active.

Lease Merchandise

The Company's Progressive Leasing segment, at which all merchandise is on lease, depreciates merchandise on a straight-line basis to a 0% salvage value generally over 12 months. We record a provision for lease merchandise write-offs using the allowance method. The allowance for lease merchandise write-offs estimates the merchandise losses incurred but not yet identified by management as of the end of the accounting period. The Company estimates its allowance for lease merchandise write-offs using historical write-off experience. Other qualitative factors, such as current and forecasted customer payment trends, are considered in estimating the allowance. For customer agreements that are past due, the Company's policy is to write off lease merchandise after 120 days. As of December 31, 2024 and 2023, the allowance for lease merchandise write-offs was $51.9 million and $44.2 million, respectively. The provision for lease merchandise write-offs was $178.3 million and $155.3 million for the years ended December 31, 2024 and 2023, respectively.

Provision for Loan Losses and Loan Loss Allowance

Expected lifetime losses on loans receivable are recognized upon loan acquisition, which results in earlier recognition of credit losses and requires the Company to make its best estimate of probable lifetime losses at the time of acquisition. The Company segments its Vive loans receivable portfolio into homogenous pools by FICO score and by delinquency status and evaluates loans receivable collectively for impairment when similar risk characteristics exist. Our Vive credit card loans do not have contractually stated maturity dates, which requires the Company to estimate an average life of loan by analyzing historical payment trends to determine an expected remaining life of the loan balance. Our current estimate is that the average life of an outstanding credit card loan is approximately one to two years, depending on the respective FICO score segmentation.

48

The Company calculates the Vive allowance for loan losses based on internal historical loss information and incorporates observable and forecasted macroeconomic data over a six-month reasonable and supportable forecast period. Key macroeconomic factors incorporated into our forecasts include projected changes in unemployment rates, stock market volatility, projected United States treasury rates, and projected prime lending rates. Incorporating macroeconomic data could have a material impact on the measurement of the allowance to the extent that forecasted data changes significantly, such as changes in forecasted unemployment rates and the observed significant market volatility. Subsequent to the six-month reasonable and supportable forecast period described above, the Company reverts to using historical loss information on a straight-line basis over a period of three months. For the remaining life of the portfolio, the Company utilizes historical loss information.

The Company may also consider other qualitative factors in estimating the allowance, as necessary. For the purposes of determining the allowance as of December 31, 2024, management considered qualitative factors such as the macroeconomic conditions associated with the impacts of stabilizing inflation and unemployment rates. The allowance for loan losses is maintained at a level considered appropriate to cover expected lifetime losses of principal, interest and fees on active loans in the loans receivable portfolio, and the appropriateness of the allowance is evaluated at each period end.

Vive's delinquent loans receivable are those that are 30 days or more past due based on their contractual billing dates. Vive's loans receivable are placed on nonaccrual status when they are greater than 90 days past due or upon notification of cardholder bankruptcy, death or fraud. Vive discontinues recognizing interest and fee revenue and amortizing merchant fee discounts and promotional fee discounts for loans receivable in nonaccrual status. Loans receivable are removed from nonaccrual status when the loan becomes 90 days or less past due and collection of the remaining amounts outstanding is deemed probable. Payments received on nonaccrual loans are allocated according to the same payment hierarchy methodology applied to loans that are accruing interest. Loans receivable are charged off at the end of the following month after the billing cycle in which the loans receivable become 120 days past due.

Four extends or declines credit on an individual transaction basis using its proprietary decisioning platform, without using customer credit ratings. Four's credit risk exposure is limited by smaller transaction values and a short loan duration.

The provision for loan losses was $56.0 million and $40.8 million for the years ended December 31, 2024 and 2023, respectively. The allowance for loan losses was $47.8 million and $40.6 million as of December 31, 2024 and 2023, respectively.

Recent Accounting Pronouncements

Refer to Note 1 to the Company's consolidated financial statements for a discussion of recently issued accounting pronouncements.