Viscom : achieves annual forecast for 2020 in difficult market environment
Special Note Regarding Forward-Looking Information: Except for historical
information contained herein, the matters set forth in this Form 10-Q are
forward-looking statements. These statements are based on management's current
expectations and plans, which involve risks and uncertainties. Such
forward-looking statements generally can be identified by the use of
forward-looking terminology such as "anticipate," "believe," "could,"
"estimate," "expect," "intend," "plan," "project," "would," "should," and
similar expressions. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the filing date of this
Quarterly Report and which involve risks and uncertainties that may cause actual
results to differ materially from those set forth in these statements. These
risks and uncertainties include factors that could cause our actual results and
financial condition to differ materially from those expressed or implied in our
forward-looking statements. Such risks and uncertainties include, among others,
those discussed in "Item 1A. Risk Factors" in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2021 (the "2021 Annual
Report"). Except as required by law, the Company undertakes no obligation to
update these forward-looking statements to reflect subsequent events or
circumstances after the filing date of this Quarterly Report.

The following discussion should be read in conjunction with the condensed
consolidated financial statements as of and for the three and six months ended
June 30, 2022 and 2021, including the notes to those statements, appearing
elsewhere in this report. We also suggest that management's discussion and
analysis appearing in this report be read in conjunction with the management's
discussion and analysis and consolidated financial statements included in our
2021 Annual Report.

Business Overview

PROG Holdings, Inc. ("we," "our," "us," the "Company," or "PROG Holdings") is a
financial technology holding company that provides leading financial solutions
to empower consumers and retailers. PROG Holdings has two reportable segments:
(i) Progressive Leasing, an e-commerce, app-based, and in-store point-of-sale
lease-to-own solutions provider; and (ii) Vive Financial ("Vive"), an
omnichannel provider of second-look revolving credit products.

Our Progressive Leasing segment provides consumers with lease-purchase solutions
through its point-of-sale partner locations and e-commerce website partners
in the United States (collectively, "POS partners"). It does so by purchasing
the merchandise desired by customers from the POS partners and, in turn, leasing
that merchandise to the customers through a cancellable lease-to-own
transaction. Progressive Leasing has no stores of its own, but rather offers
lease-purchase solutions to the customers of traditional and e-commerce
retailers.

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

On June 25, 2021, the Company completed the acquisition of Four Technologies,
Inc. ("Four"), an innovative Buy Now, Pay Later company that allows shoppers to
pay for merchandise through four interest-free installments. Four's proprietary
platform capabilities and its base of customers and retailers expand PROG
Holdings' ecosystem of financial technology offerings by introducing a payment
solution that further diversifies the Company's consumer fintech offerings.
Shoppers use Four to purchase furniture, clothing, electronics, health and
beauty products, footwear, jewelry, and other consumer goods from retailers
across the United States. Four is not expected to be a reportable segment in
2022 as its revenues, loss before income taxes, and assets are not expected to
be material to the Company's consolidated financial results in 2022.

Current Business Environment and Outlook


The Company continues to operate in a challenging macro environment as inflation
levels in the United States, particularly in gas, food, and housing costs, are
putting significant pressure on our customers, resulting in an unfavorable
impact on our lease portfolio performance and Gross Merchandise Volume ("GMV")
production. Customer payment delinquencies and uncollectible renewal payments
experienced within our Progressive Leasing segment during the first half of 2022
were higher than projected, and exceeded levels experienced during recent
pre-pandemic periods. In response to increasing customer delinquencies and
higher write-offs, the Company has tightened its lease decisioning, resulting in
fewer lease approvals and an adverse impact on GMV production. The significant
increase in inflation levels has also resulted in a decrease in demand from our
customer base at key national and regional POS partners.
                                       21
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In light of these macro environment challenges and to align the cost structure
of the business with our near-term revenue outlook, the Company executed on a
number of cost reduction initiatives during the second quarter of 2022 to drive
efficiencies and right-size variable costs, while attempting to minimize the
negative impact on growth-related initiatives.

The Company anticipates a challenging and volatile macro environment for the
remainder of 2022, which may result in continued customer payment delinquencies
and associated write-offs at levels higher than typical pre-pandemic levels. The
relatively high levels of customer payment delinquencies and related write-offs
experienced during the second quarter of 2022 may continue for an extended
period of time, and/or may increase to even higher levels, which would have an
unfavorable impact on our performance.

COVID-19 Pandemic. On March 11, 2020, the World Health Organization declared the
outbreak of COVID-19 a pandemic. Since then, the COVID-19 pandemic has
negatively impacted the global economy, disrupted global supply chains and, at
times, increased unemployment levels. Although the temporary showroom and/or
store closures or reduced hours and scope of operations that many of our POS
partners experienced during portions of 2020 and 2021 generally have eased, the
significant increase in COVID-19 cases from the Omicron variant during the first
quarter of 2022 resulted in many of our POS partners temporarily resuming such
measures during the first half of the quarter, and also resulted in increases in
employee absenteeism and declines in customer traffic for many of our POS
partners, all of which unfavorably impacted Progressive Leasing's GMV. In
addition, other pandemic-related factors continue to unfavorably impact many of
our POS partners, including supply chain disruptions resulting in shortages of
available products at certain POS partners, primarily in the appliance,
electronics and furniture categories. These pandemic-related developments, as
well as the emergence of the BA.5 Omicron subvariant or other subvariants, may
have an unfavorable impact on Progressive Leasing's generation of new lease
agreements, Vive's generation of new loans, and on our revenues and earnings, in
future periods.

The COVID-19 pandemic may adversely impact our business, results of operations,
financial condition, liquidity and/or cash flow in future periods. The extent of
any such adverse impacts will depend on future developments, which are highly
uncertain and cannot be predicted, including (i) the length and severity of the
pandemic, including, for example, the emergence of contagious and harmful
variants of COVID-19, such as the BA.5 Omicron subvariant, and localized
outbreaks or additional waves of COVID-19 cases; (ii) the impact of any such
outbreaks on our customers, POS partners, and employees; (iii) the nature of any
government orders issued in response to such outbreaks, and/or self-imposed
restrictions on operations being implemented by our POS partners; (iv) the
effectiveness, availability and level of use of vaccines; and (v) whether there
is any additional government stimulus in response to the pandemic, as well as
the nature, timing and amount of such stimulus payments.

In response to the unfavorable economic impacts arising out of the COVID-19
pandemic, the United States government enacted certain fiscal stimulus measures
in several phases during 2020 and 2021 to assist in counteracting the economic
disruptions caused by the pandemic. We believe all of those government stimulus
measures provided economic support to many of our customers, resulting in an
increase in payment activity and early lease buyouts, as well as lease
merchandise, accounts receivable, and loan receivable write-offs trending lower
during 2020 and the first half of 2021. We believe a significant portion of our
Progressive Leasing and Vive customers received stimulus payments and/or
federally supplemented unemployment payments during 2020 and the first half of
2021, which enabled them to continue making payments to us under their
lease-to-own or credit card agreements, despite the economically challenging
times resulting from the COVID-19 pandemic. The expiration of the government
stimulus payments, enhanced unemployment benefits and child tax credits that
were implemented in response to the COVID-19 pandemic, and other adverse
economic impacts arising out of the pandemic also contributed to unfavorable
results of operations in the second quarter of 2022 as compared to the same
period in 2021.
                                       22
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Highlights

The following summarizes significant financial highlights from the three months
ended June 30, 2022:


•We reported revenues of $649.4 million, a decrease of 1.6% compared to the
second quarter of 2021. The decrease in revenues was primarily due to an
increase in customer payment delinquencies and uncollectible renewal payments,
as well as a decrease in customers exercising early lease buyout options, as
compared to the stronger customer payment activity and low delinquencies we
experienced during the second quarter of 2021.

•GMV decreased by $12.0 million for Progressive Leasing and $4.7 million for
Vive in the second quarter of 2022, compared to the same period in the prior
year. We believe these decreases were due to our tighter lease decisioning,
resulting in fewer lease approvals; the rapid increase in the rate of inflation
eroding customers' disposable incomes and reducing their demand for many of the
goods sold by our POS partners; and the absence of government stimulus payments
and enhanced unemployment benefits and child tax credits, which we believe
benefited many of our customers in the first half of 2021. These negative
impacts were partially offset by increased penetration in e-commerce. In the
second quarter of 2022, GMV generated through e-commerce platforms represented
15.6% of Progressive Leasing's total GMV, compared to 13.0% in the second
quarter of 2021.

•Earnings before income taxes decreased to $27.3 million compared to
$91.9 million in the same period in 2021. In addition to lower revenues, the
decrease was primarily driven by an increase of $30.5 million in the provision
for lease merchandise write-offs, as a result of higher customer payment
delinquencies and write-offs, as compared to the strong customer payment
activity and low lease merchandise charge-offs we experienced during the second
quarter of 2021. The decrease was also driven by a $14.9 million increase in
operating expenses, as compared to the second quarter of 2021, and an additional
$9.2 million of interest expense related to the Senior Notes issued in November
2021.

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
lease and loan originations 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 in the
short-term. 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. Vive GMV is defined as gross loan originations.

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

                                       Three Months Ended June 30,                    Change
(Unaudited and In Thousands)               2022                  2021             $             %
Progressive Leasing              $      494,003               $ 505,971      $ (11,968)       (2.4) %
Vive                                     47,003                  51,701         (4,698)       (9.1)
Other                                    11,394                       -         11,394            nmf
Total GMV                        $      552,400               $ 557,672      $  (5,272)       (0.9) %

nmf-Calculation is not meaningful


We believe the decrease in Progressive Leasing's and Vive's GMV was primarily
due to our tighter lease decisioning to address the unfavorable economic
conditions that were present in the second quarter of 2022, resulting in fewer
lease approvals; the rapid increase in the rate of inflation to levels not seen
in more than forty years, which eroded customers' disposable incomes and their
demand for many of the goods sold by our POS partners; the absence of government
stimulus payments and enhanced unemployment benefits and child tax credits,
which we believe benefited many of our customers in the first half of 2021, and
the lingering effects of the COVID-19 pandemic, including supply chain
disruptions for many of our POS partners, all of which have unfavorably impacted
the generation of new leases and loans. The decrease in Progressive Leasing's
GMV from those factors was partially offset by continued growth from e-commerce
channels. E-commerce channels generated 15.6% of Progressive Leasing's GMV in
the second quarter of 2022 compared to 13.0% in the second quarter of 2021.
                                       23
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Active Customer Count. Our active customer count represents the total number of
customers that have an active lease agreement with our Progressive Leasing
segment or an active loan with our Vive segment. The following table presents
our consolidated active customer count, which includes an immaterial number of
customers that have both an active lease agreement and loan agreement, for the
Company for the periods presented:

                 As of June 30 (Unaudited)         2022           2021
                 Active Customer Count:
                 Progressive Leasing              965,000       905,000
                 Vive                              90,000        81,000
                 Other                             22,000             -
                 Total Active Customer Count    1,077,000       986,000


The increase in the number of Progressive Leasing customers was primarily due to
a large number of customers electing to exercise early lease buyouts in the
second quarter of 2021, which reduced our active customer count for the three
months ended June 30, 2021. The increase in the number of Vive customers was
primarily driven by strong GMV growth in 2021.

Key Components of Earnings Before Income Taxes


In this MD&A section, we review our condensed consolidated results. For the
three and six months ended June 30, 2022 and the comparable prior year period,
some of the key revenue, cost and expense items that effected 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 Four.

Depreciation of Lease Merchandise. Depreciation of lease merchandise primarily
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, professional services
expense, sales acquisition expense, computer software expense, the provision for
loan losses, fixed asset depreciation expense, intangible asset amortization,
and restructuring, among other expenses.

Interest Expense. Interest expense consists of interest incurred on the
Company’s senior secured revolving credit facility (the “Revolving Facility”)
and on the Company’s Senior Notes.

                                       24
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Results of Operations – Three months ended June 30, 2022 and 2021

                                                 Three Months Ended
                                                      June 30,                      Change
(In Thousands)                                  2022           2021             $             %
REVENUES:
Lease Revenues and Fees                      $ 631,344      $ 646,048      $ (14,704)       (2.3) %
Interest and Fees on Loans Receivable           18,100         13,923       

4,177 30.0

                                               649,444        659,971        (10,527)       (1.6)
COSTS AND EXPENSES:
Depreciation of Lease Merchandise              439,113        439,658           (545)       (0.1)
Provision for Lease Merchandise Write-Offs      61,788         31,258         30,530        97.7
Operating Expenses                             111,606         96,745         14,861        15.4
                                               612,507        567,661         44,846         7.9
OPERATING PROFIT                                36,937         92,310        (55,373)      (60.0)
Interest Expense                                (9,608)          (436)        (9,172)           nmf
EARNINGS BEFORE INCOME TAX EXPENSE              27,329         91,874        (64,545)      (70.3)
INCOME TAX EXPENSE                               7,845         23,037        (15,192)      (65.9)
NET EARNINGS                                 $  19,484      $  68,837      $ (49,353)      (71.7) %

nmf-Calculation is not meaningful

Revenues


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

                                      Three Months Ended June 30, 2022                         Three Months Ended June 30, 2021
                               Progressive
(In Thousands)                   Leasing         Vive       Other       Total      Progressive Leasing     Vive        Other       Total
Lease Revenues and Fees     $      631,344    $      -    $     -    $ 631,344    $        646,048      $      -    $      -    $ 646,048
Interest and Fees on Loans
Receivable                               -      17,518        582       18,100                   -        13,923           -       13,923
Total                       $      631,344    $ 17,518    $   582    $ 649,444    $        646,048      $ 13,923    $      -    $ 659,971


The decrease in Progressive Leasing revenues was primarily due to an increase in
customer payment delinquencies and uncollectible renewal payments, as compared
to the strong customer payment activity and low delinquencies it experienced
during the second quarter of 2021. The provision for uncollectible renewal
payments, which is recorded as a reduction to lease revenues and fees, was
$97.0 million in the second quarter of 2022 compared to $39.8 million in the
second quarter of 2021. Lease revenues and fees were also lower as a result of
fewer customers electing to exercise early lease buyouts in the second quarter
of 2022, as compared to the second quarter of 2021, and a 2.4% decrease in GMV.
These declines were partially offset by growth in the lease portfolio and an
increase in GMV generated through e-commerce platforms, which represented 15.6%
of total Progressive Leasing GMV in the second quarter of 2022, compared to
13.0% in the second quarter of 2021. The increase in Vive revenues was primarily
due to higher loans receivable driven by strong GMV growth in 2021.
                                       25
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Operating Expenses


Information about certain significant components of operating expenses for the
second quarter of 2022 as compared to the second quarter of 2021 is as follows:

                                                          Three Months Ended
                                                               June 30,                               Change
(In Thousands)                                         2022                2021                $                  %
Personnel Costs1                                   $   49,282          $  45,844          $  3,438                 7.5  %
Stock-Based Compensation                                2,417              3,973            (1,556)              (39.2)
Occupancy Costs                                         1,740              1,432               308                21.5
Advertising                                             3,543              4,728            (1,185)              (25.1)
Professional Services                                   6,343              7,115              (772)              (10.9)
Sales Acquisition Expense2                              7,495              5,600             1,895                33.8
Computer Software Expense3                              6,522              4,684             1,838                39.2
Other Sales, General and Administrative Expense        12,619             10,948             1,671                15.3
Sales, General and Administrative Expense4             89,961             84,324             5,637                 6.7
Provision for Loan Losses                               8,778              4,388             4,390               100.0
Depreciation and Amortization                           8,539              8,033               506                 6.3
Restructuring Expense                                   4,328                  -             4,328                    nmf
Operating Expenses                                 $  111,606          $  96,745          $ 14,861                15.4  %

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.

4 Progressive Leasing’s sales, general and administrative expense was
$81.9 million and $79.5 million during the three months ended June 30, 2022 and
2021, respectively.


The increase in personnel costs of $3.4 million was driven by an increase of
$1.5 million and $0.5 million at Progressive Leasing and Vive, respectively,
resulting from wage increases and promotions, partially offset by a reduction in
short-term incentive expense at Progressive Leasing. An additional $1.4 million
in personnel costs was attributable to the acquisition and growth of Four, and
other strategic initiatives started by the Company in 2021.

Stock-based compensation decreased $1.6 million due to a tranche of 2021
performance units that were determined to no longer be probable of achievement
being forfeited in the second quarter of 2022, a reduction of the estimated
payout of performance units granted in 2022, and other stock-based compensation
forfeitures in the second quarter of 2022 related to the Company's restructuring
program initiated during the period. These decreases were partially offset by an
increased number of awards granted to personnel hired to support the Company's
growth and new business initiatives.

Sales acquisition expense increased $1.9 million compared to the prior year
quarter primarily due to increased incentives, sales commissions, and other
expenses at Progressive Leasing to promote lease originations with its POS
partners.


Computer software expense increased $1.8 million compared to the prior year
quarter primarily due to an increase in non-capitalizable software project costs
at Progressive Leasing, new strategic initiatives started by the Company in 2021
that continued incurring costs in the second quarter of 2022, and increased
software licensing costs.

The provision for loan losses increased $4.4 million compared to the prior year
quarter due to the unfavorable economic conditions present in the second quarter
of 2022, including a rapid increase in inflation and the absence of government
stimulus payments and enhanced unemployment benefits and child tax credits, as
compared to the second quarter of 2021, resulting in Vive's delinquencies
returning to pre-pandemic levels, and also due to an increase in the Company's
overall loan portfolio resulting from growth in GMV at Vive in 2021 and the
acquisition of Four in June 2021. The provision for loan losses as a percentage
of interest and fees revenue increased to 48.5% in the second quarter of 2022
compared to 31.5% in the same period in 2021 due to delinquencies at Vive
returning to pre-pandemic levels and higher write-offs within our Four
operations.

Restructuring expense of $4.3 million is the result of a number of restructuring
activities initiated by the Company in the second quarter of 2022 intended to
reduce expenses, consolidate certain segment corporate headquarters, and align
the cost structure of the business with our near-term revenue outlook. The
restructuring expense was primarily comprised of severance costs associated with
a reduction in Progressive Leasing's workforce and operating lease right-of-use
asset impairment charges related to the relocation of the Vive corporate
headquarters to the Company's corporate office building.
                                       26
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Other Costs and Expenses


Depreciation of lease merchandise. Depreciation of lease merchandise remained
relatively flat, decreasing by 0.1% compared to the second quarter of 2021. As a
percentage of total lease revenues and fees, depreciation of lease merchandise
increased to 69.6% from 68.1% in the prior year quarter, primarily due to an
increase in uncollectible renewal payments, which is recorded as a reduction to
lease revenues and fees.

Provision for lease merchandise write-offs. The provision for lease merchandise
write-offs increased $30.5 million due to higher customer payment delinquencies
and write-offs in the second quarter of 2022, compared to the strong customer
payment activity and lower lease merchandise write-offs Progressive Leasing
experienced during the second quarter of 2021. Given the significant economic
uncertainty resulting from the rate of the increase in inflation in recent
months to levels not seen in more than forty years; the absence of government
stimulus payments and enhanced unemployment benefits and child tax credits in
2022, which we believe benefited many of our customers in the first half of
2021, the ongoing impacts of the COVID-19 pandemic, 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 June 30, 2022. Actual lease merchandise write-offs could differ
materially from the allowance for those write-offs.

The provision for lease merchandise write-offs as a percentage of lease revenues
increased to 9.8% in the second quarter of 2022 from 4.8% in the same period in
2021, as a result of higher customer payment delinquencies and write-offs in
2022 as compared to the strong customer payment activity and low lease
merchandise write-offs we experienced in 2021.

Earnings Before Income Tax Expense


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

                                                  Three Months Ended
                                                       June 30,                      Change
   (In Thousands)                                 2022           2021            $             %

EARNINGS BEFORE INCOME TAX EXPENSE:

   Progressive Leasing                        $   27,383      $ 87,521      $ (60,138)      (68.7) %
   Vive                                            3,355         4,353           (998)      (22.9)
   Other                                          (3,409)            -         (3,409)           nmf

Total Earnings Before Income Tax Expense $ 27,329 $ 91,874 $ (64,545) (70.3) %

nmf-Calculation is not meaningful


The $3.4 million loss before income tax expense within "Other" primarily relates
to our Four operations. Factors impacting the change in earnings before income
taxes include a $14.7 million reduction in Lease Revenue and Fees, a
$30.5 million increase in the provision for lease merchandise write-offs, a
$14.9 million increase in operating expense, and a $9.2 million increase in
interest expense, all as compared to the first quarter of 2021.

Income Tax Expense


Income tax expense decreased to $7.8 million for the three months ended June 30,
2022 compared to $23.0 million in the prior year comparable period due to lower
earnings before income taxes. The effective income tax rate for the three months
ended June 30, 2022 was 28.7% compared to 25.1% for the same period in the prior
year. The increase in the effective tax rate was primarily driven by discrete
income tax expense related to interest on the Company's uncertain tax position
liabilities.
                                       27
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Results of Operations – Six months ended June 30, 2022 and 2021

                                                          Six Months Ended
                                                              June 30,                                  Change
(In Thousands)                                        2022                 2021                  $                   %
REVENUES:
Lease Revenues and Fees                          $ 1,324,258          $ 1,354,030          $  (29,772)               (2.2) %
Interest and Fees on Loans Receivable                 35,650               26,942               8,708                32.3
                                                   1,359,908            1,380,972             (21,064)               (1.5)
COSTS AND EXPENSES:
Depreciation of Lease Merchandise                    936,124              944,715              (8,591)               (0.9)
Provision for Lease Merchandise Write-Offs           112,118               49,898              62,220               124.7
Operating Expenses                                   225,264              187,941              37,323                19.9
                                                   1,273,506            1,182,554              90,952                 7.7
OPERATING PROFIT                                      86,402              198,418            (112,016)              (56.5)
Interest Expense                                     (19,237)                (948)            (18,289)                   nmf
EARNINGS BEFORE INCOME TAX EXPENSE                    67,165              197,470            (130,305)              (66.0)
INCOME TAX EXPENSE                                    20,546               49,145             (28,599)              (58.2)
NET EARNINGS                                     $    46,619          $   148,325          $ (101,706)              (68.6) %

nmf-Calculation is not meaningful

Revenues


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

                                       Six Months Ended June 30, 2022                         Six Months Ended June 30, 2021
                              Progressive                                           Progressive
(In Thousands)                  Leasing        Vive       Other        

Total Leasing Vive Other Total
Lease Revenues and Fees $ 1,324,258 $ – $ – $ 1,324,258 $ 1,354,030 $ – $ – $ 1,354,030
Interest and Fees on Loans
Receivable

                             -      34,634      1,016         35,650               -      26,942           -         26,942
Total Revenues              $  1,324,258    $ 34,634    $ 1,016    $ 

1,359,908 $ 1,354,030 $ 26,942 $ – $ 1,380,972



The decrease in Progressive Leasing revenues was primarily due to an increase in
customer payment delinquencies and uncollectible renewal payments for
Progressive Leasing, as compared to the strong customer payment activity and low
delinquencies it experienced during the six months ended June 30, 2021. The
provision for uncollectible renewal payments, which is recorded as a reduction
to lease revenues and fees, was $185.5 million for the six months ended June 30,
2022 compared to $76.3 million in the same period in 2021. Lease revenues and
fees was also lower as a result of fewer customers electing to exercise early
lease buyouts in the first half of 2022, as compared to the same period in 2021,
and a 1.7% decline in Progressive Leasing's GMV in the first half of 2022, as
compared to the same period in 2021.
                                       28
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Operating Expenses


Information about certain significant components of operating expenses for the
six months ended June 30, 2022 as compared to the six months ended June 30, 2021
is as follows:

                                                         Six Months Ended
                                                             June 30,                                Change
(In Thousands)                                        2022               2021                $                   %
Personnel Costs1                                  $ 102,867          $  90,061          $  12,806                 14.2  %
Stock-Based Compensation                              9,040              8,136                904                 11.1
Occupancy Costs                                       3,344              2,814                530                 18.8
Advertising                                           8,047              7,648                399                     5.2
Professional Services                                11,783             11,462                321                  2.8
Sales Acquisition Expense2                           13,329             10,502              2,827                 26.9
Computer Software Expense3                           13,118              8,794              4,324                    49.2
Other Sales, General and Administrative Expense      25,927             21,815              4,112                 18.8
Sales, General and Administrative Expense4          187,455            161,232             26,223                    16.3
Provision for Loan losses                            16,460             10,856              5,604                 51.6
Depreciation and Amortization                        17,021             15,853              1,168                  7.4
Restructuring Expense                                 4,328                  -              4,328                     nmf
Operating Expenses                                $ 225,264          $ 187,941          $  37,323                 19.9  %

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.

4 Progressive Leasing’s sales, general and administrative expense was
$167.9 million and $151.5 million during the six months ended June 30, 2022 and
2021, respectively.


The increase in personnel costs of $12.8 million was driven by an increase of
$8.9 million and $1.0 million at Progressive Leasing and Vive, respectively,
resulting from wage increases and promotions, partially offset by a reduction in
short-term incentive expense at Progressive Leasing. An additional $2.9 million
in personnel costs was attributable to the acquisition and growth of Four, and
other strategic initiatives started by the Company in 2021 that continued
incurring costs during the first half of 2022.

Sales acquisition expense increased $2.8 million compared to the prior year
primarily due to increased incentives, sales commissions, and other expenses at
Progressive Leasing to promote lease originations with its POS partners.


Computer software expense increased $4.3 million primarily due to an increase in
non-capitalizable costs for software implementation projects by Progressive
Leasing during the first six months of 2022, new strategic initiatives started
by the Company in 2021 that continued incurring costs in the first half of 2022,
and increased software and licensing costs.

Other sales, general and administrative expense increased $4.1 million primarily
due to additional administrative costs within Progressive Leasing and Vive
during 2022, as well as an increase of $0.8 million due to the acquisition and
growth of Four, and other strategic initiatives started by the Company in 2021
that continued incurring costs during the first half of 2022.

Provision for loan losses increased $5.6 million due to an increase in the
Company's overall loan portfolio, resulting from growth in GMV at Vive during
2021 and the acquisition of Four in June 2021, and also due to higher
delinquencies at Vive during the six months ended June 30, 2022 as compared to
the strong customer payment activity during the same period in 2021. The
provision for loan losses as a percentage of interest and fees revenue increased
to 46.2% for the six months ended June 30, 2022 compared to 40.3% in the same
period in 2021, due to higher write-offs within our Four operations and
delinquencies at Vive returning to pre-pandemic levels.

Restructuring expense of $4.3 million is the result of a number of restructuring
activities initiated by the Company in the second quarter of 2022 intended to
reduce expenses, consolidate certain segment corporate headquarters, and align
the cost structure of the business with our near-term revenue outlook. The
restructuring expense was primarily comprised of severance costs associated with
a reduction in Progressive Leasing's workforce and operating lease right-of-use
asset impairment charges related to the relocation of the Vive corporate
headquarters to the Company's corporate office building.
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Other Costs and Expenses


Depreciation of lease merchandise. Depreciation of lease merchandise decreased
by 0.9% due to fewer customers exercising 90-day and other early lease buyout
elections in the first six months of 2022 when compared to the same period in
2021. As a percentage of total lease revenues and fees, depreciation of lease
merchandise increased to 70.7% from 69.8% in the prior year period, primarily
due to an increase in uncollectible renewal payments in the first six months of
2022 compared to the same period in 2021.

Provision for lease merchandise write-offs. The provision for lease merchandise
write-offs increased $62.2 million due to higher customer payment delinquencies
and write-offs in the first six months of 2022, compared to the strong customer
payment activity and lower lease merchandise write-offs we experienced during
the first six months of 2021. Given the significant economic uncertainty
resulting from the rate of the increase in inflation experienced in recent
months, the absence of government stimulus payments and enhanced unemployment
benefits and child tax credits, which we believe benefited many of our customers
in the first half of 2021, and the ongoing impacts of the COVID-19 pandemic and
the potential effects of such developments on our POS partners, customers, and
business going forward, a high level of estimation was involved in determining
the allowance as of June 30, 2022. Actual lease merchandise write-offs could
differ materially from the allowance.

The provision for lease merchandise write-offs as a percentage of lease revenues
increased to 8.5% for the six months ended June 30, 2022 from 3.7% for the same
period in 2021 due to higher customer payment delinquencies and write-offs, and
changes in estimates on the allowance as discussed above.

Earnings Before Income Taxes


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

                                               Six Months Ended
                                                   June 30,                      Change
      (In Thousands)                          2022          2021             $              %
      EARNINGS BEFORE INCOME TAXES:
      Progressive Leasing                  $ 69,464      $ 191,693      $
(122,229)      (63.8) %
      Vive                                    7,778          5,777           2,001        34.6
      Other                                 (10,077)             -         (10,077)           nmf

Total Earnings Before Income Taxes $ 67,165 $ 197,470 $ (130,305) (66.0) %

nmf-Calculation is not meaningful

The $10.1 million loss before income tax expense within “Other” primarily
relates to our Four operations. Factors impacting the change in earnings before
income taxes are discussed above.

Income Tax Expense


Income tax expense decreased to $20.5 million for the six months ended June 30,
2022 compared to $49.1 million in the prior year comparable period. The
effective tax rate was 30.6% during the six months ended June 30, 2022 compared
to 24.9% in the same period in the prior year. The increase in the effective tax
rate is primarily driven by discrete income tax expense related to the Company's
uncertain tax position liabilities and the employee stock-based compensation
vesting event that occurred in the first quarter of 2022. There are no material
adjustments between the Company's effective tax rate of 24.9% for the six months
ended June 30, 2021 and the Company's statutory income tax rate.
                                       30
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Overview of Financial Position

The major changes in the condensed consolidated balance sheet from December 31,
2021
to June 30, 2022 include:

•Cash and cash equivalents decreased $42.8 million to $127.3 million during the
six months ended June 30, 2022. For additional information, refer to the
“Liquidity and Capital Resources” section below.


•Lease merchandise, net of accumulated depreciation and allowances, decreased
$98.8 million due primarily to an increase of $45.7 million in accumulated
depreciation and allowance on lease merchandise and a decrease in Progressive
Leasing's GMV of 22.2% for the second quarter of 2022 as compared to the fourth
quarter of 2021.
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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.


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 (vi) servicing our outstanding debt obligation.

Our capital requirements have been financed through:

•cash flows from operations;

•private debt offerings;

•bank debt; and

•stock offerings.

As of June 30, 2022, the Company had $127.3 million of cash, $350.0 million of
availability under the Revolving Facility, and $600.0 million of indebtedness.

Cash Provided by Operating Activities


Cash provided by operating activities was $155.7 million and $238.8 million
during the six months ended June 30, 2022 and 2021, respectively. The
$83.1 million decrease in operating cash flows was driven by a reduction in
customer payment activity compared to the prior year period, primarily due to
increased customer payment delinquencies and fewer customers exercising early
lease buyout options in the first six months of 2022 as compared to the same
period in 2021. The decrease in cash provided by operating activities is also a
result of $17.1 million of interest paid on the Company's Senior Notes and
changes in certain working capital accounts, including a decrease of $33.4
million in accounts payable and accrued expenses. The change was partially
offset by a $22.5 million decrease in purchases of lease merchandise by
Progressive Leasing during the six months ended June 30, 2022 compared to the
same period in 2021. Other changes in cash provided by operating activities are
discussed above in our discussion of results for the six months ended June 30,
2022.

Cash Used in Investing Activities


Cash used in investing activities was $22.0 million and $58.7 million during the
six months ended June 30, 2022 and 2021, respectively. The $36.7 million
decrease in investing cash outflows in the six months ended June 30, 2022 as
compared to the same period in 2021 was primarily due to the $22.7 million of
cash paid for the acquisition of Four in June 2021. Additionally, proceeds from
loans receivable increased $13.3 million and cash outflows for investments in
loans receivables decreased $1.4 million as compared to the same period in 2021.

Cash Used in Financing Activities


Cash used in financing activities was $176.6 million during the six months ended
June 30, 2022 compared to $79.3 million during the same period in 2021. Cash
used in financing activities in the six months ended June 30, 2022 was primarily
used for the Company's repurchase of $176.5 million of its common stock,
compared to $77.2 million of share repurchases in the same period in the prior
year.
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Share Repurchases


We purchase our stock in the market from time to time as authorized by our Board
of Directors. On November 3, 2021, the Company announced that its Board of
Directors had authorized a new $1 billion share repurchase program that replaced
the previous $300 million repurchase program. The Company repurchased 6,099,866
shares for $176.5 million during the six months ended June 30, 2022. As
of June 30, 2022, we had the authority to purchase additional shares up to our
remaining authorization limit of $384.4 million.

As of July 26, 2022, we repurchased an additional 97,203 shares of common stock
for $1.6 million subsequent to June 30, 2022.

Debt Financing


On November 24, 2020, the Company entered into a credit agreement with a
consortium of lenders providing for a $350.0 million senior revolving credit
facility, under which revolving borrowings became available on the date of the
completion of the separation and distribution transaction pursuant to which our
former Aaron's Business segment was spun-off into a separate publicly-traded
company, and under which all borrowings and commitments will mature or terminate
on November 24, 2025.

As of June 30, 2022, the Company had no outstanding balance and $350.0 million
remaining available for borrowings on the Revolving Facility. 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 $300.0 million.

Our Revolving Facility 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. Additionally, under the Revolving Facility, if the total net
debt to EBITDA, as defined by the Revolving Facility, exceeds 1.25, the revolver
becomes fully secured for the remaining duration of the Revolving Facility term.
As of June 30, 2022, the Company exceeded the 1.25 total net debt to EBITDA
ratio and the Revolving Facility became fully secured. At June 30, 2022, we were
in compliance with the financial covenants set forth in the Revolving Facility
and believe that we 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. We were in compliance with these covenants at June 30, 2022 and
believe that we will continue to be in compliance in the future.

Commitments

Income Taxes

During the six months ended June 30, 2022, we made net tax payments of
$19.5 million. Within the next six months, we anticipate making estimated tax
payments of $26.3 million for United States federal income taxes and state
income taxes.


Deferred income tax liabilities as of June 30, 2022 were $145.6 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 could be misleading because this
scheduling would not necessarily relate to liquidity needs.
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Leases


We lease management and information technology space for corporate functions as
well as call center space and storage space for our hub facilities under
operating leases expiring at various times through 2027. Our corporate and call
center leases contain renewal options for additional periods ranging from three
to five years. We also lease transportation vehicles under operating leases
which generally expire during the next three years. We expect that most leases
will be renewed or replaced by other leases in the normal course of business.

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 London Interbank Overnight ("LIBO")
rate 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 no outstanding
borrowings under the Revolving Facility as of June 30, 2022.

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
accrues on the outstanding balance and is 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.

Unfunded Lending Commitments


The Company, through its Vive business, had unconditionally cancellable unfunded
lending commitments totaling approximately $522.7 million and $467.6 million as
of June 30, 2022 and December 31, 2021, respectively, that do not give rise to
revenues and cash flows. These unfunded commitments arise in the ordinary course
of business from credit card agreements with individual cardholders that give
them the ability to borrow, against unused amounts, up to the maximum credit
limit assigned to their account. While these unfunded amounts 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.

Critical Accounting Policies

Refer to the 2021 Annual Report.

Recent Accounting Pronouncements

Refer to Note 1 to the condensed consolidated financial statements for a
discussion of recently issued accounting pronouncements, including
pronouncements that were adopted in the current year.

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