prg-20221231
00018088342022FYFALSEhttp://fasb.org/us-gaap/2022#AccountingStandardsUpdate201613MemberP6MP6MP3YP1YP5YP2YP3YP1YP1YP1YP1Y0.500018088342022-01-012022-12-3100018088342022-06-30iso4217:USD00018088342023-02-17xbrli:shares00018088342022-12-3100018088342021-12-31iso4217:USDxbrli:shares0001808834prg:LeaseRevenuesandFeesMember2022-01-012022-12-310001808834prg:LeaseRevenuesandFeesMember2021-01-012021-12-310001808834prg:LeaseRevenuesandFeesMember2020-01-012020-12-310001808834prg:InterestAndFeesOnLoansReceivableMember2022-01-012022-12-310001808834prg:InterestAndFeesOnLoansReceivableMember2021-01-012021-12-310001808834prg:InterestAndFeesOnLoansReceivableMember2020-01-012020-12-3100018088342021-01-012021-12-3100018088342020-01-012020-12-310001808834us-gaap:TreasuryStockCommonMember2019-12-310001808834us-gaap:CommonStockMember2019-12-310001808834us-gaap:AdditionalPaidInCapitalMember2019-12-310001808834us-gaap:RetainedEarningsMember2019-12-310001808834us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-3100018088342019-12-3100018088342019-01-012019-12-310001808834us-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-12-310001808834srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-12-310001808834us-gaap:RetainedEarningsMember2020-01-012020-12-310001808834us-gaap:AdditionalPaidInCapitalMember2020-01-012020-12-310001808834us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-12-310001808834us-gaap:TreasuryStockCommonMember2020-01-012020-12-310001808834us-gaap:TreasuryStockCommonMember2020-12-310001808834us-gaap:CommonStockMember2020-12-310001808834us-gaap:AdditionalPaidInCapitalMember2020-12-310001808834us-gaap:RetainedEarningsMember2020-12-310001808834us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-3100018088342020-12-310001808834us-gaap:AdditionalPaidInCapitalMember2021-01-012021-12-310001808834us-gaap:TreasuryStockCommonMember2021-01-012021-12-310001808834us-gaap:CommonStockMember2021-01-012021-12-310001808834us-gaap:RetainedEarningsMember2021-01-012021-12-310001808834us-gaap:TreasuryStockCommonMember2021-12-310001808834us-gaap:CommonStockMember2021-12-310001808834us-gaap:AdditionalPaidInCapitalMember2021-12-310001808834us-gaap:RetainedEarningsMember2021-12-310001808834us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001808834us-gaap:AdditionalPaidInCapitalMember2022-01-012022-12-310001808834us-gaap:TreasuryStockCommonMember2022-01-012022-12-310001808834us-gaap:RetainedEarningsMember2022-01-012022-12-310001808834us-gaap:TreasuryStockCommonMember2022-12-310001808834us-gaap:CommonStockMember2022-12-310001808834us-gaap:AdditionalPaidInCapitalMember2022-12-310001808834us-gaap:RetainedEarningsMember2022-12-310001808834us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-31prg:segment0001808834prg:FourTechnologiesIncMember2021-06-252021-06-25prg:paymentInstallment0001808834prg:AgreementOneMemberprg:ProgressiveFinanceHoldingsLLCMember2022-01-012022-12-310001808834us-gaap:CreditCardReceivablesMember2022-01-012022-12-310001808834srt:MinimumMemberus-gaap:CreditCardReceivablesMember2022-01-012022-12-31xbrli:pure0001808834us-gaap:CreditCardReceivablesMembersrt:MaximumMember2022-01-012022-12-310001808834us-gaap:CreditCardReceivablesMember2022-12-310001808834srt:MinimumMemberus-gaap:CreditCardReceivablesMember2022-12-310001808834us-gaap:CreditCardReceivablesMembersrt:MaximumMember2022-12-310001808834prg:ProgressiveLeasingMember2022-12-310001808834prg:ProgressiveLeasingMember2022-01-012022-12-310001808834prg:POSPartnersMember2022-01-012022-12-310001808834prg:POSPartnersMember2021-01-012021-12-310001808834prg:POSPartnersMember2020-01-012020-12-310001808834us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-12-310001808834us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-12-310001808834us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-12-310001808834prg:ProgressiveLeasingMember2021-12-310001808834prg:FourTechnologiesIncMember2022-12-310001808834prg:FourTechnologiesIncMember2021-12-310001808834prg:FICOScoreLessthan600Member2022-12-310001808834prg:FICOScoreLessthan600Member2021-12-310001808834us-gaap:FicoScore600To699Member2022-12-310001808834us-gaap:FicoScore600To699Member2021-12-310001808834us-gaap:FicoScoreGreaterThan700Member2022-12-310001808834us-gaap:FicoScoreGreaterThan700Member2021-12-310001808834prg:FICOScoreNoScoreIdentifiedMember2022-12-310001808834prg:FICOScoreNoScoreIdentifiedMember2021-12-310001808834srt:MinimumMemberus-gaap:BuildingAndBuildingImprovementsMember2022-01-012022-12-310001808834us-gaap:BuildingAndBuildingImprovementsMembersrt:MaximumMember2022-01-012022-12-310001808834srt:MinimumMemberus-gaap:OtherCapitalizedPropertyPlantAndEquipmentMember2022-01-012022-12-310001808834us-gaap:OtherCapitalizedPropertyPlantAndEquipmentMembersrt:MaximumMember2022-01-012022-12-310001808834us-gaap:ComputerSoftwareIntangibleAssetMembersrt:MinimumMember2022-01-012022-12-310001808834us-gaap:ComputerSoftwareIntangibleAssetMembersrt:MaximumMember2022-01-012022-12-310001808834prg:ComputerSoftwareUpdateIntangibleAssetMembersrt:MaximumMember2022-01-012022-12-310001808834us-gaap:ComputerSoftwareIntangibleAssetMember2022-01-012022-12-310001808834us-gaap:ComputerSoftwareIntangibleAssetMember2021-01-012021-12-310001808834us-gaap:ComputerSoftwareIntangibleAssetMember2020-01-012020-12-310001808834prg:FourTechnologiesIncMember2022-01-012022-09-300001808834prg:FourTechnologiesIncMember2022-12-310001808834us-gaap:TechnologyBasedIntangibleAssetsMemberprg:DentAMedInc.Member2022-01-012022-12-310001808834us-gaap:TechnologyBasedIntangibleAssetsMemberprg:ProgressiveFinanceHoldingsLLCMember2022-01-012022-12-310001808834prg:MerchantRelationshipsMemberprg:ProgressiveFinanceHoldingsLLCMember2022-01-012022-12-3100018088342022-10-012022-10-010001808834prg:FederalTradeCommissionInquiryMember2020-01-012020-12-310001808834srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMembersrt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMember2020-01-010001808834srt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMember2020-01-010001808834us-gaap:SegmentDiscontinuedOperationsMember2020-01-012020-11-300001808834prg:AaronsBusinessMember2020-01-012020-12-310001808834us-gaap:SegmentDiscontinuedOperationsMemberprg:AaronsBusinessMember2020-01-012020-12-310001808834prg:FourTechnologiesIncMember2021-06-250001808834prg:FourTechnologiesIncMember2021-06-252021-12-310001808834prg:FourTechnologiesIncMember2022-01-012022-12-310001808834prg:FourTechnologiesIncMemberus-gaap:TechnologyBasedIntangibleAssetsMember2021-06-252021-06-250001808834prg:FourTechnologiesIncMemberus-gaap:TradeNamesMember2021-06-252021-06-250001808834prg:FourTechnologiesIncMemberus-gaap:CustomerRelationshipsMember2021-06-252021-06-250001808834prg:FourTechnologiesIncMember2021-01-012021-12-310001808834us-gaap:TrademarksAndTradeNamesMember2022-12-310001808834us-gaap:TrademarksAndTradeNamesMember2021-12-310001808834prg:ProgressiveFinanceHoldingsLLCMember2020-12-310001808834prg:FourTechnologiesIncMember2020-12-310001808834prg:ProgressiveFinanceHoldingsLLCMember2021-01-012021-12-310001808834prg:FourTechnologiesIncMember2021-01-012021-12-310001808834prg:ProgressiveFinanceHoldingsLLCMember2021-12-310001808834prg:FourTechnologiesIncMember2021-12-310001808834prg:ProgressiveFinanceHoldingsLLCMember2022-01-012022-12-310001808834prg:FourTechnologiesIncMember2022-01-012022-12-310001808834prg:ProgressiveFinanceHoldingsLLCMember2022-12-310001808834prg:FourTechnologiesIncMember2022-12-310001808834prg:InternalUseSoftwareMember2022-12-310001808834prg:InternalUseSoftwareMember2021-12-310001808834us-gaap:TechnologyBasedIntangibleAssetsMember2022-12-310001808834us-gaap:TechnologyBasedIntangibleAssetsMember2021-12-310001808834prg:MerchantRelationshipsMember2022-12-310001808834prg:MerchantRelationshipsMember2021-12-310001808834us-gaap:OtherIntangibleAssetsMember2022-12-310001808834us-gaap:OtherIntangibleAssetsMember2021-12-310001808834us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2022-12-310001808834us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2022-12-310001808834us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2022-12-310001808834us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2021-12-310001808834us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-12-310001808834us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2021-12-310001808834prg:SeniorUnsecuredNotesDue2029Memberus-gaap:UnsecuredDebtMember2022-12-310001808834us-gaap:FairValueInputsLevel1Member2022-12-310001808834us-gaap:FairValueInputsLevel2Member2022-12-310001808834us-gaap:FairValueInputsLevel3Member2022-12-310001808834us-gaap:FairValueInputsLevel1Member2021-12-310001808834us-gaap:FairValueInputsLevel2Member2021-12-310001808834us-gaap:FairValueInputsLevel3Member2021-12-310001808834us-gaap:LeaseholdImprovementsMember2022-12-310001808834us-gaap:LeaseholdImprovementsMember2021-12-310001808834prg:FixturesandEquipmentMember2022-12-310001808834prg:FixturesandEquipmentMember2021-12-310001808834prg:InternalUseSoftwareMember2022-12-310001808834prg:InternalUseSoftwareMember2021-12-310001808834prg:InternalUseSoftwareInDevelopmentMember2022-12-310001808834prg:InternalUseSoftwareInDevelopmentMember2021-12-310001808834us-gaap:FinancingReceivables30To59DaysPastDueMember2022-12-310001808834us-gaap:FinancingReceivables30To59DaysPastDueMember2021-12-310001808834us-gaap:FinancingReceivables60To89DaysPastDueMember2022-12-310001808834us-gaap:FinancingReceivables60To89DaysPastDueMember2021-12-310001808834us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2022-12-310001808834us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2021-12-310001808834us-gaap:OperatingExpenseMember2022-01-012022-12-310001808834us-gaap:OperatingExpenseMember2021-01-012021-12-310001808834srt:MinimumMember2022-12-310001808834srt:MaximumMember2022-12-310001808834us-gaap:SecuredDebtMemberprg:SeniorUnsecuredNotes6000Due2029Member2021-11-260001808834us-gaap:UnsecuredDebtMember2022-12-310001808834us-gaap:UnsecuredDebtMember2021-12-310001808834us-gaap:LineOfCreditMember2022-12-310001808834us-gaap:LineOfCreditMember2021-12-310001808834us-gaap:RevolvingCreditFacilityMember2022-12-310001808834us-gaap:RevolvingCreditFacilityMember2021-12-310001808834us-gaap:UnsecuredDebtMember2021-11-260001808834us-gaap:SecuredDebtMemberprg:SeniorUnsecuredNotes6000Due2029Memberus-gaap:DebtInstrumentRedemptionPeriodOneMember2021-11-262021-11-260001808834us-gaap:CommonStockMember2021-11-042021-11-040001808834us-gaap:SecuredDebtMemberprg:SeniorUnsecuredNotes6000Due2029Memberus-gaap:DebtInstrumentRedemptionPeriodTwoMember2021-11-262021-11-260001808834us-gaap:DebtInstrumentRedemptionPeriodThreeMemberus-gaap:SecuredDebtMember2021-11-262021-11-260001808834us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2020-11-240001808834us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2022-12-310001808834srt:SubsidiariesMemberus-gaap:LetterOfCreditMember2022-12-310001808834srt:SubsidiariesMemberprg:SwinglineLoansOnCustomaryTermsMember2022-12-310001808834prg:IncrementalFacilitiesMember2022-12-310001808834srt:MinimumMemberus-gaap:LineOfCreditMemberus-gaap:LondonInterbankOfferedRateLIBORMember2022-01-012022-12-310001808834us-gaap:LineOfCreditMemberus-gaap:LondonInterbankOfferedRateLIBORMembersrt:MaximumMember2022-01-012022-12-310001808834us-gaap:LineOfCreditMemberus-gaap:BaseRateMember2022-01-012022-12-310001808834srt:MinimumMemberus-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMemberprg:CreditFacility2014Member2022-01-012022-12-310001808834us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMemberprg:CreditFacility2014Membersrt:MaximumMember2022-01-012022-12-310001808834prg:CreditFacility2014Member2022-01-012022-12-3100018088342022-01-012022-06-3000018088342018-12-3100018088342020-07-012020-07-310001808834prg:ViveFinancialLLCMember2018-12-310001808834prg:ViveFinancialLLCMember2019-12-310001808834prg:ViveFinancialLLCMember2020-01-012020-12-310001808834prg:ViveFinancialLLCMember2021-01-012021-12-310001808834prg:ViveFinancialLLCMember2022-12-310001808834us-gaap:StateAndLocalJurisdictionMember2022-12-3100018088342019-12-012019-12-310001808834prg:FederalTradeCommissionInquiryMember2020-04-272020-04-270001808834prg:FederalTradeCommissionInquiryMember2019-12-012019-12-310001808834prg:CivilPenaltiesMember2022-09-090001808834prg:CivilPenaltiesMember2022-09-092022-09-090001808834prg:CivilPenaltiesForViolationInvolvingConsumersAged60OrOlderMember2022-09-092022-09-090001808834us-gaap:UnusedLinesOfCreditMember2022-12-310001808834us-gaap:UnusedLinesOfCreditMember2021-12-310001808834us-gaap:EmployeeSeveranceMemberprg:ProgressiveMember2022-01-012022-12-310001808834us-gaap:EmployeeSeveranceMemberprg:ViveSegmentMember2022-01-012022-12-310001808834prg:OtherMemberus-gaap:EmployeeSeveranceMember2022-01-012022-12-310001808834us-gaap:EmployeeSeveranceMember2022-01-012022-12-310001808834prg:RightofUseAssetImpairmentMemberprg:ProgressiveMember2022-01-012022-12-310001808834prg:RightofUseAssetImpairmentMemberprg:ViveSegmentMember2022-01-012022-12-310001808834prg:RightofUseAssetImpairmentMemberprg:OtherMember2022-01-012022-12-310001808834prg:RightofUseAssetImpairmentMember2022-01-012022-12-310001808834prg:PropertyAndEquipmentImpairmentMemberprg:ProgressiveMember2022-01-012022-12-310001808834prg:PropertyAndEquipmentImpairmentMemberprg:ViveSegmentMember2022-01-012022-12-310001808834prg:OtherMemberprg:PropertyAndEquipmentImpairmentMember2022-01-012022-12-310001808834prg:PropertyAndEquipmentImpairmentMember2022-01-012022-12-310001808834us-gaap:OtherRestructuringMemberprg:ProgressiveMember2022-01-012022-12-310001808834prg:ViveSegmentMemberus-gaap:OtherRestructuringMember2022-01-012022-12-310001808834prg:OtherMemberus-gaap:OtherRestructuringMember2022-01-012022-12-310001808834us-gaap:OtherRestructuringMember2022-01-012022-12-310001808834prg:ProgressiveMember2022-01-012022-12-310001808834prg:ViveSegmentMember2022-01-012022-12-310001808834prg:OtherMember2022-01-012022-12-310001808834us-gaap:EmployeeSeveranceMember2021-12-310001808834us-gaap:OtherRestructuringMember2021-12-310001808834us-gaap:EmployeeSeveranceMember2022-12-310001808834us-gaap:OtherRestructuringMember2022-12-310001808834prg:ShareRepurchaseProgramMember2022-12-310001808834prg:ShareRepurchaseProgramMember2022-01-012022-12-310001808834prg:November2021ShareRepurchaseProgramTenderOfferMember2021-11-042021-11-040001808834srt:MinimumMemberprg:November2021ShareRepurchaseProgramTenderOfferMember2021-11-040001808834prg:November2021ShareRepurchaseProgramTenderOfferMembersrt:MaximumMember2021-11-040001808834prg:November2021ShareRepurchaseProgramTenderOfferMember2021-12-030001808834prg:November2021ShareRepurchaseProgramTenderOfferMember2021-11-040001808834prg:ShareRepurchaseProgramMember2021-01-012021-12-310001808834prg:November2021TenderOfferAndShareRepurchaseProgramMember2021-01-012021-12-310001808834prg:UnvestedRestrictedStockWithVotingRightsMember2022-12-3100018088342021-04-3000018088342021-05-310001808834prg:EmployeeMattersAgreementMember2022-01-012022-12-310001808834prg:RetirementRelatedModificationsMember2022-01-012022-12-310001808834prg:RetirementRelatedModificationsMember2020-10-012020-12-310001808834us-gaap:SegmentDiscontinuedOperationsMember2020-01-012020-12-310001808834us-gaap:EmployeeStockMember2022-12-310001808834us-gaap:EmployeeStockMember2022-01-012022-12-310001808834srt:MinimumMemberus-gaap:EmployeeStockMemberprg:A2001IncentiveAwardPlanMember2022-01-012022-12-310001808834us-gaap:EmployeeStockMemberprg:A2001IncentiveAwardPlanMembersrt:MaximumMember2022-01-012022-12-310001808834prg:A2001IncentiveAwardPlanMember2022-01-012022-12-310001808834srt:MinimumMemberus-gaap:EmployeeStockMemberprg:A2015IncentiveAwardPlanMember2022-01-012022-12-310001808834us-gaap:EmployeeStockMemberprg:A2015IncentiveAwardPlanMembersrt:MaximumMember2022-01-012022-12-310001808834prg:A2015IncentiveAwardPlanMember2022-01-012022-12-310001808834us-gaap:EmployeeStockOptionMember2022-01-012022-12-310001808834us-gaap:EmployeeStockOptionMember2021-01-012021-12-310001808834us-gaap:EmployeeStockOptionMember2020-01-012020-12-310001808834prg:RangeOneMember2022-01-012022-12-310001808834prg:RangeOneMember2022-12-310001808834prg:RangeTwoMember2022-01-012022-12-310001808834prg:RangeTwoMember2022-12-310001808834prg:RangeThreeMember2022-01-012022-12-310001808834prg:RangeThreeMember2022-12-310001808834prg:RangeFourMember2022-01-012022-12-310001808834prg:RangeFourMember2022-12-310001808834prg:RangeFiveMember2022-01-012022-12-310001808834prg:RangeFiveMember2022-12-310001808834srt:MinimumMemberus-gaap:RestrictedStockMemberprg:A2015IncentiveAwardPlanMember2022-01-012022-12-310001808834us-gaap:RestrictedStockMemberprg:A2015IncentiveAwardPlanMembersrt:MaximumMember2022-01-012022-12-310001808834us-gaap:RestrictedStockMember2022-01-012022-12-310001808834us-gaap:RestrictedStockMember2021-01-012021-12-310001808834us-gaap:RestrictedStockMember2020-01-012020-12-310001808834us-gaap:RestrictedStockMember2021-12-310001808834us-gaap:RestrictedStockMember2022-12-310001808834srt:MinimumMemberus-gaap:PerformanceSharesMemberus-gaap:ShareBasedCompensationAwardTrancheTwoMember2022-01-012022-12-310001808834us-gaap:PerformanceSharesMemberus-gaap:ShareBasedCompensationAwardTrancheTwoMembersrt:MaximumMember2022-01-012022-12-310001808834srt:MinimumMemberus-gaap:PerformanceSharesMember2022-01-012022-12-310001808834us-gaap:PerformanceSharesMemberprg:ShareBasedCompensationAwardTrancheFourMembersrt:MaximumMember2022-01-012022-12-310001808834us-gaap:PerformanceSharesMemberprg:ShareBasedCompensationAwardTrancheFiveMembersrt:MaximumMember2022-01-012022-12-310001808834us-gaap:PerformanceSharesMemberprg:ShareBasedCompensationAwardTrancheSixMembersrt:MaximumMember2022-01-012022-12-310001808834us-gaap:PerformanceSharesMemberprg:ShareBasedCompensationAwardTrancheSevenMembersrt:MaximumMember2022-01-012022-12-310001808834us-gaap:PerformanceSharesMember2021-12-310001808834us-gaap:PerformanceSharesMember2022-01-012022-12-310001808834us-gaap:PerformanceSharesMember2022-12-310001808834us-gaap:PerformanceSharesMember2021-01-012021-12-310001808834us-gaap:PerformanceSharesMember2020-01-012020-12-310001808834us-gaap:EmployeeStockMember2018-05-092018-05-090001808834us-gaap:EmployeeStockMember2018-05-0900018088342018-05-092018-05-090001808834us-gaap:EmployeeStockMember2021-01-012021-12-310001808834us-gaap:EmployeeStockMember2020-01-012020-12-310001808834us-gaap:EmployeeStockMemberus-gaap:SegmentContinuingOperationsMember2020-01-012020-12-3100018088342020-11-270001808834prg:ProgressiveLeasingMemberprg:LeaseRevenuesandFeesMember2022-01-012022-12-310001808834us-gaap:AllOtherSegmentsMemberprg:LeaseRevenuesandFeesMember2022-01-012022-12-310001808834prg:ViveSegmentMemberprg:InterestAndFeesOnLoansReceivableMember2022-01-012022-12-310001808834us-gaap:AllOtherSegmentsMemberprg:InterestAndFeesOnLoansReceivableMember2022-01-012022-12-310001808834us-gaap:AllOtherSegmentsMember2022-01-012022-12-310001808834prg:ProgressiveLeasingMemberprg:LeaseRevenuesandFeesMember2021-01-012021-12-310001808834us-gaap:AllOtherSegmentsMemberprg:LeaseRevenuesandFeesMember2021-01-012021-12-310001808834prg:ViveSegmentMemberprg:InterestAndFeesOnLoansReceivableMember2021-01-012021-12-310001808834us-gaap:AllOtherSegmentsMemberprg:InterestAndFeesOnLoansReceivableMember2021-01-012021-12-310001808834prg:ProgressiveLeasingMember2021-01-012021-12-310001808834prg:ViveSegmentMember2021-01-012021-12-310001808834us-gaap:AllOtherSegmentsMember2021-01-012021-12-310001808834prg:ProgressiveLeasingMemberprg:LeaseRevenuesandFeesMember2020-01-012020-12-310001808834us-gaap:AllOtherSegmentsMemberprg:LeaseRevenuesandFeesMember2020-01-012020-12-310001808834prg:ViveSegmentMemberprg:InterestAndFeesOnLoansReceivableMember2020-01-012020-12-310001808834us-gaap:AllOtherSegmentsMemberprg:InterestAndFeesOnLoansReceivableMember2020-01-012020-12-310001808834prg:ProgressiveLeasingMember2020-01-012020-12-310001808834prg:ViveSegmentMember2020-01-012020-12-310001808834us-gaap:AllOtherSegmentsMember2020-01-012020-12-310001808834prg:ProgressiveFinanceHoldingsLLCMember2020-01-012020-12-310001808834us-gaap:CorporateNonSegmentMember2022-01-012022-12-310001808834us-gaap:CorporateNonSegmentMember2021-01-012021-12-310001808834us-gaap:CorporateNonSegmentMember2020-01-012020-12-310001808834us-gaap:OperatingSegmentsMemberprg:ProgressiveFinanceHoldingsLLCMember2022-12-310001808834us-gaap:OperatingSegmentsMemberprg:ProgressiveFinanceHoldingsLLCMember2021-12-310001808834prg:ViveSegmentMemberus-gaap:OperatingSegmentsMember2022-12-310001808834prg:ViveSegmentMemberus-gaap:OperatingSegmentsMember2021-12-310001808834us-gaap:AllOtherSegmentsMemberus-gaap:OperatingSegmentsMember2022-12-310001808834us-gaap:AllOtherSegmentsMemberus-gaap:OperatingSegmentsMember2021-12-310001808834us-gaap:OperatingSegmentsMember2022-12-310001808834us-gaap:OperatingSegmentsMember2021-12-310001808834us-gaap:OperatingSegmentsMemberprg:ProgressiveFinanceHoldingsLLCMember2022-01-012022-12-310001808834us-gaap:OperatingSegmentsMemberprg:ProgressiveFinanceHoldingsLLCMember2021-01-012021-12-310001808834us-gaap:OperatingSegmentsMemberprg:ProgressiveFinanceHoldingsLLCMember2020-01-012020-12-310001808834prg:ViveSegmentMemberus-gaap:OperatingSegmentsMember2022-01-012022-12-310001808834prg:ViveSegmentMemberus-gaap:OperatingSegmentsMember2021-01-012021-12-310001808834prg:ViveSegmentMemberus-gaap:OperatingSegmentsMember2020-01-012020-12-310001808834us-gaap:AllOtherSegmentsMemberus-gaap:OperatingSegmentsMember2022-01-012022-12-310001808834us-gaap:AllOtherSegmentsMemberus-gaap:OperatingSegmentsMember2021-01-012021-12-310001808834us-gaap:AllOtherSegmentsMemberus-gaap:OperatingSegmentsMember2020-01-012020-12-310001808834us-gaap:OperatingSegmentsMember2022-01-012022-12-310001808834us-gaap:OperatingSegmentsMember2021-01-012021-12-310001808834us-gaap:OperatingSegmentsMember2020-01-012020-12-310001808834us-gaap:SegmentDiscontinuedOperationsMember2020-01-012020-12-310001808834prg:ProgressiveFinanceHoldingsLLCMemberprg:RestructuringRelatedActivitiesMember2022-01-012022-12-310001808834prg:ViveSegmentMemberprg:RestructuringRelatedActivitiesMember2022-01-012022-12-310001808834prg:RetirementRelatedModificationsMemberprg:ProgressiveFinanceHoldingsLLCMember2020-01-012020-12-310001808834prg:RetirementRelatedModificationsMemberus-gaap:CorporateNonSegmentMember2020-01-012020-12-310001808834prg:DeferredCompensationPlanMemberprg:EmployeeMember2022-01-012022-12-310001808834prg:NonEmployeeDirectorMemberprg:DeferredCompensationPlanMember2022-01-012022-12-310001808834prg:DeferredCompensationPlanMember2022-12-310001808834prg:DeferredCompensationPlanMember2021-12-310001808834us-gaap:ShareBasedCompensationAwardTrancheOneMemberprg:DeferredCompensationPlanMemberus-gaap:NonqualifiedPlanMemberprg:EmployeeMember2018-01-012018-01-010001808834prg:DeferredCompensationPlanMemberus-gaap:ShareBasedCompensationAwardTrancheTwoMemberus-gaap:NonqualifiedPlanMemberprg:EmployeeMember2018-01-012018-01-010001808834prg:DeferredCompensationPlanMemberus-gaap:NonqualifiedPlanMemberprg:EmployeeMember2018-01-012018-01-010001808834us-gaap:UnfundedPlanMemberprg:DeferredCompensationPlanMemberus-gaap:NonqualifiedPlanMemberprg:EmployeeMember2022-01-012022-12-310001808834us-gaap:UnfundedPlanMemberprg:DeferredCompensationPlanMemberus-gaap:NonqualifiedPlanMemberprg:EmployeeMember2021-01-012021-12-310001808834us-gaap:UnfundedPlanMemberprg:DeferredCompensationPlanMemberus-gaap:NonqualifiedPlanMemberprg:EmployeeMember2020-01-012020-12-310001808834prg:DeferredCompensationPlanMember2022-01-012022-12-310001808834prg:DeferredCompensationPlanMember2020-01-012020-12-310001808834prg:DeferredCompensationPlanMember2021-01-012021-12-310001808834prg:A401kDefinedContributionPlanMember2022-01-012022-12-310001808834prg:A401kDefinedContributionPlanMembersrt:MaximumMember2022-12-310001808834srt:MinimumMemberprg:A401kDefinedContributionPlanMember2022-12-310001808834prg:A401kDefinedContributionPlanMember2022-12-310001808834prg:A401kDefinedContributionPlanMember2021-01-012021-12-310001808834prg:A401kDefinedContributionPlanMember2020-01-012020-12-31

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from                  to                 
Commission file Number. 1-39628
 PROG HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Georgia
85-2484385
(State or other jurisdiction of
incorporation or organization)
(I. R. S. Employer
Identification No.)
256 W. Data DriveDraper,Utah84020-2315
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (385) 351-1369
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading SymbolName of each exchange on which registered
Common Stock, $0.50 Par ValuePRGNew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes      No  
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     Yes      No  
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerýAccelerated Filer 
Non-Accelerated FilerSmaller Reporting Company 
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.  
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  No 
The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2022 was $580,775,300 based on the closing price on that date as reported by the New York Stock Exchange. Solely for the purpose of this calculation and for no other purpose, the non-affiliates of the registrant are assumed to be all shareholders of the registrant other than (i) directors of the registrant, (ii) executive officers of the registrant, and (iii) any shareholder that beneficially owns 10% or more of the registrant’s common shares.
As of February 17, 2023, there were 48,035,766 shares of the Company’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for the 2023 annual meeting of shareholders, to be filed subsequently with the Securities and Exchange Commission, or SEC, pursuant to Regulation 14A, are incorporated by reference into Part III of this Annual Report on Form 10-K.
1


2


Cautionary Note Regarding Forward Looking Statements
This Annual Report on Form 10-K (this "Form 10-K") contains forward-looking statements within the meaning of the Securities Act of 1933, the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. These statements include, among others, statements that involve expectations, plans or intentions, such as those relating to management strategies, future business, future results of operations or financial condition, mergers or acquisitions, capital allocation, an increasing rate of inflation, increasing interest rates, the possible impacts to our businesses of a prolonged recession, and any further impacts of the COVID-19 pandemic. These forward-looking statements may be identified by words such as "may," "will," "would," "should," "could," "expect," "anticipate," "believe," "estimate," "intend," "strategy," "future," "opportunity," "plan," "project," "forecast," and other similar expressions. These forward-looking statements involve risks and uncertainties that may 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 the Risk Factor Summary below, Part I, "Item 1A. Risk Factors" and Part II, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation" of this Form 10-K, as well as in our consolidated financial statements, related notes, and the other information appearing in this Form 10-K and our other filings with the Securities and Exchange Commission (the "SEC"). We do not intend, and undertake no obligation except as required by law, to update any of our forward-looking statements after the date of this Form 10-K to reflect actual results or future events or circumstances. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements.
Risk Factor Summary
Our businesses are subject to certain risks and uncertainties. Any of the following risk factors may cause our actual results to differ materially from historical or anticipated results. These risks and uncertainties are not all inclusive, but represent the risks that we currently believe are material. There may be additional risks that we do not currently consider to be material or of which we are not currently aware. Any of these risks, as well as the risks described below, could cause our actual results to differ materially from historical or anticipated results and could materially and adversely affect several aspects of our performance.
Risks Related to our Businesses, Regulatory Environment and Industry
Our businesses are subject to extensive laws and regulations, including laws and regulations unique to the industries in which our businesses operate, that may subject them to government investigations and significant monetary penalties and compliance-related burdens.
Progressive Leasing serves subprime consumers, and its lease-to-own business model poses inherent risks that may have an adverse impact on our financial performance.
Inflation, rising interest rates, and other adverse macro-economic conditions, including a prolonged recession, may adversely affect consumer confidence and demand for the products and services offered by our Progressive Leasing, Vive and Four businesses.
Our customers' inability to make the payments they owe our Progressive Leasing, Vive and Four businesses due to inflation, rising interest rates and other adverse macro-economic conditions may unfavorably impact our overall financial performance.
Given the deteriorating macro-economic environment, our proprietary algorithms and decisioning tools used in approving Progressive Leasing and Vive customers may no longer be indicative of their ability to perform.
A large percentage of Progressive Leasing’s revenue, which represents approximately 97% of PROG Holdings' consolidated revenue, is concentrated with several key point-of-sale partners (whom we refer to as our "POS partners)."
Progressive Leasing may be unable to attract additional POS partners and consumers and to retain and grow its existing POS and consumer relationships.
The business models for our Vive and Four businesses differ significantly from Progressive Leasing’s lease-to-own business, which creates specific and unique risks including significantly different regulatory risks, particularly at the federal level.
Interruptions, inventory shortages and other factors affecting the supply chains of our retail partners may have a material and adverse effect on several aspects of our performance.
The COVID-19 pandemic has had, and is expected to continue to have, a material and adverse effect on several aspects of our performance.
3


Our capital allocation strategy and financial policies, including our current stock repurchase program, as well as any potential debt repurchase or dividend programs, may not be effective at enhancing shareholder value, or providing other benefits we expect.
Our cost reduction initiatives may not be adequate or may have unintended consequences that could be disruptive to our businesses.
The loss of the services of our key executives or our inability to attract and retain key talent, particularly with respect to our information technology function, may have a material adverse impact on our operations.
Our failure to successfully compete in our highly competitive industry may harm several aspects of our performance.
The effects of Progressive Leasing’s 2020 settlement with the FTC are not certain.
The transactions offered to consumers by Progressive Leasing, Vive and Four may be negatively characterized by government officials, consumer advocacy groups and the media.
Any significant disruption in, or errors in, service on Progressive Leasing’s, Vive’s or Four’s platforms or relating to vendors, including events beyond their control, may prevent Progressive Leasing, Vive or Four from processing transactions (including making accurate lease and loan decisioning).
Our business continuity and disaster recovery plans may not be sufficient to prevent losses in the event we experience a significant disruption in, or errors in, service on Progressive Leasing’s, Vive’s or Four’s platforms.
Real or perceived software errors, failures, bugs, defects, or outages may adversely affect Progressive Leasing, Vive and/or Four.
The ability of Progressive Leasing, Vive and Four to protect confidential, proprietary, or sensitive information, including the confidential information of their customers, may be adversely affected by cyber-attacks, employee or other internal misconduct, computer viruses, physical or electronic break-ins, or similar disruptions.
Consumer identity fraud may adversely affect the performance of our businesses' lease and loan portfolios.
E-commerce lease and loan origination processes may give rise to greater risks than in-store originations and processes.
The geographic concentration of Progressive Leasing’s POS partners may magnify the impact of conditions in a particular region, including economic downturns and other occurrences.
Our results largely depend on prominent presentation, integration, and support of Progressive Leasing and Vive's products and services by POS partners.
Risks Related to Our Indebtedness
We may not be able to generate sufficient cash to service all of our indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
The terms of our indebtedness may restrict our current and future business plans and strategies, particularly our ability to respond to changes or to take certain actions.
The portion of our indebtedness that is variable in nature subjects us to interest rate risk, which may cause our debt service obligations to increase significantly.
Risks Related to the Spin-Off of The Aaron’s Company, Inc.
In connection with the spin-off of The Aaron’s Company, Inc. in November 2020 (the "Spin-Off"), The Aaron’s Company agreed to indemnify us for certain liabilities, and we agreed to indemnify The Aaron’s Company for certain liabilities.
If the Spin-Off does not ultimately qualify as a transaction that is generally tax free for U.S. federal income tax purposes, we or our shareholders may be subject to significant tax liabilities.
Potential liabilities in connection with the Spin-Off may arise under fraudulent conveyance and transfer laws and legal capital requirements.
4


PART I
ITEM 1. BUSINESS
Unless otherwise indicated or unless the context otherwise requires, all references in this Annual Report on Form 10-K to the "Company," "we," "us," "our" and similar expressions are references to PROG Holdings, Inc. ("PROG Holdings") and its consolidated subsidiaries.
Overview
PROG Holdings is a financial technology holding company that provides transparent and competitive payment options to consumers. PROG Holdings' operating segments include Progressive Leasing, an in-store, app-based, and e-commerce point-of-sale lease-to-own solutions provider, Vive Financial ("Vive"), an omnichannel provider of second-look revolving credit products, and Four Technologies, Inc. ("Four"), which offers Buy Now, Pay Later payment options to consumers through the Four platform. The Progressive Leasing segment comprised approximately 97% of our consolidated revenues for the year ended December 31, 2022. Progressive Leasing provides consumers with lease-purchase solutions for merchandise, including furniture, appliances, electronics, jewelry, mobile phones and accessories, mattresses, and automobile electronics and accessories from leading traditional and e-commerce retailers (whom we refer to as our point-of-sale partners, "POS partners," or "retail partners"). Many of our customers fall within the near-prime or subprime Fair Isaac and Company ("FICO") score categories and may have difficulty purchasing big-ticket and other durable goods they desire. Progressive Leasing's technology-based, proprietary decisioning platform offers prompt lease decisioning at the point-of-sale and is integrated with both traditional and e-commerce POS partners’ systems. Progressive Leasing provides customers with transparent and competitive lease payment options along with flexible terms that are designed to help customers achieve merchandise ownership, including through low initial payments and early buyout options. Lease-to-own transactions facilitated through our Company also benefit our POS partners by generating incremental sales to credit-challenged consumers, who typically would not have qualified for financing offers traditionally provided by these retailers.
Strategy
Our strategy to drive growth in our business, which we believe positions us for success over the long-term, includes the following:
https://cdn.kscope.io/5aded3f4d071f9db5a2343731ecac526-prg-20221231_g1.jpg


5


Grow our gross merchandise volume ("GMV") through existing merchant partners, new partners, and direct-to-consumer initiatives - We plan to grow GMV through strategic collaboration and marketing efforts with our existing POS partners. We remain focused on converting our pipeline of retailers into new POS partners. Our ability to maintain and strengthen new and existing relationships, including addressing the changing needs of our POS partners, is critical to the long-term growth of our business. We will also continue to expand our direct-to-consumer marketing efforts to attract new customers and drive more GMV through in-store and online retailers.
Enhance our industry-leading consumer experience - We are investing in technology platforms that promote customer engagement and simplify the lease application, origination and servicing experience. We are committed to providing our customers with transparency, flexibility, and greater choice on how and where they choose to shop. We are expanding and innovating our e-commerce capabilities to benefit existing and new POS partners and customers.
Expand our ecosystem to increase access and deliver more value to our consumers - We expect to broaden our financial technology product ecosystem through research and development ("R&D") efforts and strategic acquisitions that will result in a more loyal and engaged customer base. We will leverage our extensive database of lease agreements to offer current and previous customers products that meet their needs.
Operating Segments
As of December 31, 2022, the Company has three operating segments: Progressive Leasing, Vive and Four. The Company’s two reportable segments are Progressive Leasing and Vive, which is consistent with the current organizational structure and how the chief operating decision maker regularly reviews results to analyze performance and allocate resources.
The operating results of our two reportable segments may be found in (i) Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and (ii) Item 8. Financial Statements and Supplementary Data.
Progressive Leasing
Progressive Leasing is our largest operating segment, which empowers consumers and businesses with transparent and flexible lease-to-own options to help consumers achieve ownership of durable goods. Progressive Leasing provides e-commerce, app-based, and in-store point-of-sale lease-to-own solutions through approximately 24,000 third-party POS partner locations and e-commerce websites in 46 states, the District of Columbia and Puerto Rico. It does so by purchasing the desired merchandise from POS partners and, in turn, leasing that merchandise to customers through a cancellable lease-to-own transaction. Progressive Leasing consequently 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 97% of our consolidated revenues for the year ended December 31, 2022.
Vive
Vive primarily serves customers who may not qualify for traditional prime lending offers and 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 over 6,500 POS partner locations and e-commerce websites includes furniture, mattresses, fitness 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, 2022.
Four
Four provides consumers of all credit backgrounds with Buy Now, Pay Later ("BNPL") options through four interest-free installments. Four's proprietary platform capabilities provide our base of customers and POS partners with another payment solution as part of the PROG Holdings financial technology offerings. Shoppers use Four's platform to purchase furniture, clothing, electronics, health and beauty, footwear, jewelry, and other consumer goods from retailers across the United States. Four was not a reportable segment for the year ended December 31, 2022 as its financial results were not material to the Company’s results of operations or financial condition. Four's financial results are reported within "Other" for segment reporting purposes.
6


Operations
Operating Strategy
Our operating strategy is based on distinguishing our Progressive Leasing, Vive, and Four brands from those of our competitors, along with maximizing our operational efficiencies. At every interaction with our POS partners and customers, we strive to combine our service and advanced technology-based solutions to deliver a best-in-class experience. We believe this strategy allows us to grow incremental sales for our POS partners, while realizing operating efficiencies at scale. Importantly, our ability to service our POS partners and our customers while effectively managing labor costs allows us to offer lease-purchase solutions that are generally lower cost and otherwise more attractive than many other options available in the market.

Legacy finance solution shortfallProgressive Leasing’s answer
Approximately 40% of United States population has a near or below prime FICO score and may not have a convenient solution to finance the purchase of big-ticket items.Progressive Leasing offers a technology-based, proprietary decisioning platform with transparent and competitive lease payment options.
Consumers may not be able to qualify for traditional products due to low credit score or no traditional credit file/score.Approvals are determined by various credit underwriting factors beyond traditional credit scores.
Traditional products have high denial rates for non-prime customers and retailer staff have minimal training or program support to enable the purchase.Progressive Leasing brand loyalty, marketing and POS partner support efforts help drive incremental business to our POS partners and facilitate sales to customers that are otherwise unable to purchase.
Lease Agreement Customer Experience
We offer simplified and transparent lease application and payment processes:
https://cdn.kscope.io/5aded3f4d071f9db5a2343731ecac526-prg-20221231_g2.jpg
7


Lease Agreement Decisioning Process
Progressive Leasing uses proprietary decisioning algorithms to determine which applicants meet our leasing qualifications and the lease amount for which customers are approved. The Company leverages a large decisioning data set with mature lease performance data and other information provided from third party sources. Progressive Leasing's proprietary algorithms utilize the customer application, customer history, known fraud attributes, retailer/vertical performance and other information in the decision-making process.
Lease Agreement and Collection
The Progressive Leasing customer has the option to acquire ownership of merchandise over a fixed term, usually 12 months, by making weekly, bi-weekly, semi-monthly, or monthly lease payments. The customer may cancel the agreement at any time without penalty by returning the merchandise to Progressive Leasing. If the customer leases the item through the completion of the full term, ownership of the item transfers to the customer. The customer may also purchase the item at any time by making the contractually specified payment.
Contractual payments are usually based on a customer's pay frequency and are typically processed through automated clearing house payments. If a payment is not made in a timely manner, collections are managed in-house through our call centers and proprietary lease management system. The call center contacts customers within a few days after the due date to encourage them to keep their agreement current. If the customer chooses to return the merchandise, arrangements may be made to receive the merchandise from the customer by either scheduling a pick-up or shipping the merchandise to our warehouse in Draper, Utah.
For customer agreements that are past due, the Company's policy is to write off lease merchandise after 120 days. The provision for lease merchandise write-offs as a percentage of lease revenues was 7.7%, 4.8% and 5.4% for the years ended December 31, 2022, 2021, and 2020, respectively.
Vive's Credit Decisioning and Collection
Vive partners with merchants to provide a variety of revolving credit products originated through third-party federally insured banks to customers that may not qualify for traditional prime lending offers (referred to as "second-look" financing programs). We believe Vive provides the following strategic benefits:
Enhanced product for POS partners - Vive is able to drive more sales for its POS partners through its revolving credit products. Vive has a centralized, scalable underwriting model with a long operating history, deployed through its third-party bank partners, and a proprietary receivable management system.
Expanded customer base - PROG Holdings is able to serve a broader base of consumers through Vive. Vive primarily serves customers with FICO scores between 580 and 700, which make up approximately a quarter of the United States population. These customers generally have credit profiles that are typically stronger than Progressive Leasing's current customers. Additionally, Vive's revolving credit products can be used for the purchase of services in addition to merchandise.
Proprietary decision algorithm and collection - Vive uses an underwriting model that provides standardized credit decisions, including borrowing limit amounts. Credit decisions are primarily based on a proprietary underwriting algorithm. Loans receivable are unsecured, and collections on loans receivable are managed in-house through Vive's call center and proprietary loans receivable management system.
Customer Service
8


A critical component of the success of our operations is the commitment to develop good relationships with our customers. We consistently monitor consumer preferences and trends to ensure that our business models are aligned with our customers' needs. We believe that building a relationship with the customer that ensures customer satisfaction is critical to our long-term success. Our goal, therefore, is to develop a positive experience with our customers, and for our products, service and support in the minds of our customers from the moment they enter the stores, e-commerce websites or mobile apps of our POS partners, or access our website or mobile app.
We believe the strong focus on customer satisfaction generates repeat business from our customers and long-lasting relationships with our POS partners. Our customers are given access to products through multiple channels, including a network of POS partner store locations and e-commerce sites. Our customers benefit from Progressive Leasing's flexible payment alternatives, including early purchase options, reinstatement options, product replacement, discounts and other benefits. In addition, we offer payment deferral options and other payment adjustment options to customers who are experiencing financial difficulties, such as to those customers who have been adversely impacted by financial hardships and other qualifying events. We foster relationships with POS partners to better serve new and existing customers. Our Progressive Leasing segment offers centralized customer and retailer support through call centers located in Draper, Utah; Glendale, Arizona; and virtual servicing operations in El Paso and San Antonio, Texas. Additionally, we utilize a third-party service provider in Cali, Colombia to assist us with our customer support efforts. Our call centers for Vive are located in Draper, Utah and Fayetteville, Arkansas. Since early 2020, substantially all call center representatives for Progressive Leasing and Vive have transitioned to working remotely.
Our commitment to our customers is ongoing throughout their lease term. Progressive Leasing customers have the option to cancel their lease-to-own agreement and return the merchandise at any time. We provide customers the convenience to return merchandise by either scheduling a pick-up or shipping the merchandise to our warehouse in Draper, Utah. Progressive Leasing partners with multiple third-party vendors to sell its returned merchandise.
Purchasing and POS Partner Relationships
The following table details the percentage of Progressive Leasing's revenues attributable to different categories of merchandise offered by its POS partners:
Year Ended December 31,
Progressive Leasing POS Partner Merchandise Category1
202220212020
Furniture, Appliances and Electronics2
57 %57 %57 %
Jewelry17 %17 %14 %
Mobile Phones and Accessories14 %12 %13 %
Mattresses%%%
Automobile Electronics and Accessories%%%
Other%%%
1Revenues from a POS partner are attributed to a single category even if the POS partner may carry merchandise across multiple categories.
2Progressive Leasing also classifies some electronics within mobile phones and accessories, automobile electronics and accessories, and other.
The following table details the percentage of Vive's revenues attributable to different categories of services and merchandise offered by its POS partners:
Year Ended December 31,
Vive POS Partner Services and Merchandise Category1
202220212020
Furniture and Mattresses55 %48 %41 %
Medical and Dental20 %26 %34 %
Home Exercise and Home Improvement11 %%%
Other14 %18 %16 %
1Revenues from a POS partner are attributed to a single category even if the POS partner may offer services or merchandise across multiple categories.
During 2022, four POS partners each individually provided customer relationships that generated greater than 10% of our consolidated revenues.
Marketing and Advertising
Progressive Leasing actively markets its leasing services to help increase the purchasing power of its customers and drive new shoppers and incremental revenue for our POS partners. To accomplish these goals, we invest in digital, traditional, and in-store
9


marketing, and our internal marketing and data science teams continually evaluate and optimize this investment to maximize the benefit for our POS partners.
Our robust digital media program is comprised of paid search, digital display, mobile, video, and paid social advertising. Through a variety of media testing methods, we can verify the impact of our paid digital media on in-store and online shopping trips and lease origination activity. In addition, targeted, personalized email and SMS marketing campaigns leverage our large customer database, educating customers about lease-to-own offerings, and driving lease conversion and sales for our POS partners. In addition, in cooperation with our POS partners, Progressive Leasing leverages a variety of in-store marketing materials to drive awareness at the point of sale.
These efforts drive new and returning customers online and into retail locations, generating incremental sales for our POS partners.
Competition
Our Progressive Leasing segment competes with other lease-to-own companies (virtual and traditional store based), and to a lesser extent, consumer finance companies, and traditional and online sellers of merchandise that provide customers with various types of payment options. The virtual lease-to-own market is highly competitive. The industry is also experiencing an increase in new products and services designed to compete for the traditional lease-to-own consumer. The emergence of these new products and services has resulted in consumers having various payment alternatives for the goods and services they desire, resulting in a highly competitive environment. Vive competes with banks, consumer finance companies, and other financial technology companies for customers desiring to purchase merchandise or services. Four also competes with these same financial service providers for customers desiring to purchase merchandise or services for cash or credit. Competition is based primarily on product selection and availability, customer service, lease rates, interest rates, promotional rates, and other terms.
Working Capital
Progressive Leasing's most significant working capital asset is merchandise on lease. The need for additional lease merchandise is expected to remain a major working capital requirement. Vive's most significant working capital assets are loans receivable. Four's most significant working capital assets are loans receivable. Consistent and dependable sources of liquidity are required for Progressive Leasing and Four to purchase such merchandise, and for Vive to acquire new loans through its third-party bank partners. Failure to maintain adequate sources of liquidity to purchase lease merchandise and originate loans may materially adversely affect our Progressive Leasing, Vive, and Four businesses. We believe our cash on hand, operating cash flows, and availability under our revolving credit facility are adequate to meet our normal liquidity requirements.
Human Capital
Diversity, equity and inclusion ("DE&I") is integral to our ability to grow and thrive. We respect the dignity and diversity of all people. We strive to nurture a culture of inclusion, holding all employees accountable for advancing our culture of belonging while supporting a diverse environment free from discrimination, harassment and bullying.
By supporting a diverse and inclusive workplace, our employee resource groups help to ensure the many experiences of our diverse employees, customers and communities are reflected in our decisions and actions. We continue to focus on hiring, retention and advancement of women and underrepresented groups. Our vision is to cultivate a welcoming and nurturing workplace that will activate the next generation of innovators. One of the ways we strive to achieve these goals is by providing executive, monetary and other support to our Employee Resource Groups ("ERGs"), all of which encourage and welcome participation from all employees in all positions and locations. Our ERGs work to ensure their members have a voice in the Company’s on-going conversations about DE&I matters, including strategy. Currently, our ERGs include:
The Black Inclusion Group ("BIG"), whose mission is to enrich the experience of our African American employees by providing professional and leadership development, networking, mentoring and social opportunities, while also promoting understanding of their concerns and views among all of our employees. BIG is focused on inclusion, engagement, learning and advancement initiatives intended to foster recruitment, development, advancement and retention of African American employees.
Women In Leadership ("WIL"), is an organization created to inspire female employees to develop their leadership abilities, prepare for and take advantage of career growth opportunities, and increase their knowledge of the Company for organizational and personal success. This organization is focused on fostering the recruitment, development, advancement and retention of female employees, and helping all employees gain an appreciation of issues and topics of importance to our female employees.
10


Adelante! provides a platform for highlighting and celebrating the richness of the Hispanic and Latino communities’ heritages to promote cultural and issue awareness among all of our employees. This organization also facilitates professional and leadership development, networking, mentoring and social opportunities for Hispanic and Latino employees, with the aim of fostering recruitment, development, advancement and retention of those employees.
PROGPeople Respecting Individuality, Diversity and Equality ("PRIDE") seeks to foster a culture of understanding, diversity, inclusion and equality with our LGBTQ+ employees and allies, and encourages individuality, respect, professional development, and awareness of the challenges faced by, and issues that are important to, the LGBTQ+ community.
Veterans and Allies Leading the Organization Responsibly ("VALOR") has developed a mission that embraces the proud military community of employee veterans and brings together the unique background of military service to harness their strengths to better serve the company, community and customers.
In addition to providing support to our ERGs, our efforts to promote DE&I practices include:
Hosting internal and guest speakers to discuss topics relevant to DE&I matters;
Conducting training to educate our employees about various DE&I themes, racial justice, disability inclusion and LGBTQ+ allyship, among other themes;
Improving and formalizing mentorship programs targeted towards our female, minority and LGBTQ+ employees, which we expect to implement during 2023;
Implementing a talent review process that is designed to utilize a multi-factor approach to understanding the talents of our employees and the potential they have to be future leaders of the Company; and
Providing the ERGs with financial resources to target donations from the PROG Foundation to non-profit organizations that support DE&I, the missions of the ERGs and the communities in which we serve our customers.
As of December 31, 2022, our employee count was 1,491 for Progressive Leasing, 184 for Vive, and 17 for Four, the majority of which were full time employees. None of our employees are covered by a collective bargaining agreement, and we believe that our relations with employees are good.
The information in the tables below summarizes our gender, ethnicity and race diversity metrics as of December 31, 2022:
December 31, 2022
MaleFemale
Vice Presidents and Above76.3 %23.7 %
All Other Employees47.0 %53.0 %

December 31, 2022
Hispanic or LatinoWhiteBlack or African AmericanNative Hawaiian or Pacific IslanderAsianAmerican Indian or Alaskan NativeTwo or More Races
Vice Presidents and Above2.7 %86.8 %7.9 %2.6 %
All Other Employees27.1 %53.9 %9.3 %1.4 %4.4 %1.0 %2.9 %
We foster a culture of learning that provides employees with development opportunities to support their unique career paths. We support our employees in owning their development and growth, and we provide development training and resources to empower employees to achieve their personal best at work. In 2023, we are launching a career development framework tool that links employees to online learning curricula in multiple delivery formats as a way to further aid employees in their development. The tool will provide content on topics such as compliance and specific business-related needs, as well as assessments, videos and digital learning modules, which will be available live, in-person and online. 
We empower our employees to give to causes they feel passionately about, through volunteering, making financial donations, which we match up to certain limits, serving as nonprofit board members, and participating in our Company-sponsored Day of Service.
We work to ensure that our employment practices comply with all applicable local, state and federal laws, including those concerning equal opportunity, compensation and safe working conditions. We strive to achieve shared, meaningful goals and commit to open communication through which individuals have no fear of expressing themselves freely and respectfully where, for example, they in good faith believe they need to raise a concern regarding a potential violation of law or Company policies.
11


We offer our employees fair and competitive wages and benefits which include (i) health benefits consisting of medical, dental, vision, life insurance, short-term and long-term disability insurance; (ii) paid parental leave; (iii) Company matched 401(k); (iv) paid time off, paid holidays, and paid volunteer hours; (v) an employee stock purchase program; (vi) tuition reimbursement; and (vii) charitable gift matching.
For the years ended December 31, 2022, 2021, and 2020, personnel expenses were $194.2 million, $189.6 million, and $170.3 million, respectively.
Seasonality
Progressive Leasing's revenue mix is moderately seasonal. Adjusting for growth, the first quarter of each year generally has higher revenues than any other quarter. This is primarily due to realizing the benefit of our POS partners' increases in business and higher lease originations during the fourth quarter holiday season, as well as increased liquidity for our customers in the first quarter due to receipt of federal and state income tax refunds. Our customers will more frequently exercise the early purchase option on their existing lease agreements during the first quarter of the year. We expect these trends to continue in future periods.
Industry Overview
The Lease-to-Own Industry
The lease-to-own industry offers customers an alternative to traditional methods of obtaining home furnishings, electronics, appliances, computers, jewelry, and other consumer goods and services. In a standard industry lease-to-own transaction, the customer has the option to acquire ownership of merchandise over a fixed term by making periodic lease payments. The customer may cancel the agreement at any time without penalty by returning the merchandise to the lessor. If the customer leases the item through the completion of the full term, ownership of the item transfers to the customer. The customer may also purchase the item at any time by tendering the contractually specified payment.
The lease-to-own model is particularly attractive to customers who are unable to pay the full purchase price for merchandise upfront and lack the credit to qualify for conventional financing programs. Other individuals who find the lease-to-own model attractive are customers who, despite access to credit, do not wish to incur additional debt or have only a temporary need for the merchandise.
Government Regulation
Our Progressive Leasing, Vive and Four businesses are extensively regulated by and subject to the requirements of various federal, state and local laws and regulations. Violations of these laws and regulations may subject them to government investigations and significant monetary penalties, remediation expenses and compliance-related burdens.
Federal regulatory authorities are increasingly focused on alternative consumer financial services and products that our Progressive Leasing, Vive and Four businesses provide. For example, in April 2020, Progressive Leasing entered into the Federal Trade Commission ("FTC") Settlement in order to resolve allegations by the FTC that certain of Progressive Leasing’s advertising and marketing practices violated the FTC Act. Even though Progressive Leasing believed it was in compliance with the FTC Act, and thus, did not admit any violations of the FTC Act or any other laws, under the terms of the FTC Settlement, Progressive Leasing paid $175 million to the FTC and agreed to enhance certain of its compliance-related activities, including augmenting disclosures to its customers and expanding its POS partner monitoring programs. Furthermore, our Vive business, through its bank partners, offers Vive branded credit cards and other private label credit card products for subprime and near-prime consumers. Accordingly, it is subject to federal laws and regulations with respect to cardholder agreement terms and disclosures (e.g., the Truth In Lending Act), credit discrimination (e.g., the Equal Credit Opportunity Act), credit reporting (e.g., the Fair Credit Reporting Act), and servicing and collection activities. The BNPL industry is also under increasing scrutiny from federal regulators as the Consumer Financial Protection Bureau ("CFPB") is currently reviewing the business practices of a number of companies that offer BNPL services and has alleged several areas of perceived risks of consumer harm, including inconsistent consumer protections and the risk of borrowers becoming overextended. We expect applicable federal regulatory agencies will continue their increased focus on alternative consumer financial services and products, and, as a result, businesses such as ours may be held to higher standards of monitoring, disclosure and reporting, regardless of whether new laws or regulations governing our industry are adopted.
In addition to federal regulatory oversight, currently, nearly every state specifically regulates lease-to-own transactions via state statutes, and are holding businesses like Progressive Leasing to higher standards of training, monitoring and compliance. Most state lease purchase laws require lease-to-own companies to disclose to their customers the total number of payments, total amount and timing of all payments to acquire ownership of any item, any other charges that may be imposed and miscellaneous other items. The more restrictive state lease purchase laws limit the retail price for an item, limit the total amount that a
12


customer may be charged for an item, or regulate the "cost-of-rental" amount that lease-to-own companies may charge on lease-to-own transactions. With respect to the regulation of the "cost-of-rental" amount, such laws generally define "cost-of-rental" as lease fees paid in excess of the "retail" price of the goods. Progressive Leasing’s long-established policy in all states is to disclose the terms of its lease purchase transactions as a matter of good business ethics and customer service. From time to time, state attorneys general have directed investigations, regulatory initiatives and/or legal actions toward us, our industry, or certain companies within the industry, including states in which our Progressive Leasing business has POS partners. For example, in August 2022, the Pennsylvania Attorney General filed a complaint against Progressive Leasing alleging, among other things, that Progressive Leasing was operating in Pennsylvania in violation of the Pennsylvania Rental Purchase Agreement Act by failing to disclose certain terms and conditions of rent-to-own ("RTO") transactions on "hang tags" physically attached to RTO merchandise. Although the Company believes the Pennsylvania Attorney General’s claims are without merit and intends to vigorously defend itself, we may incur substantial costs, including legal fees, penalties, and remediation expenses in the matter.
Intellectual Property
Intellectual property and proprietary rights are important to the success of our business. We rely on a combination of trademark, service mark, trade name and copyright laws in the United States and other jurisdictions, as well as license agreements, confidentiality procedures, non-disclosure agreements, and other contractual protections, to establish and protect our intellectual property and proprietary rights, including our proprietary technology, software, know-how, and brand. However, these laws, agreements, and procedures provide only limited protection. We own, or are otherwise entitled to use, the various trademarks, trade names, and service marks used in our businesses, including those used with the operations of Progressive Leasing, Vive, and Four. We intend to file for additional trade name and trademark protection when appropriate.
Although we rely on intellectual property and proprietary rights, copyrights, trademarks and trade secrets, as well as contractual protections, in our business, we also seek to preserve the integrity and confidentiality of our intellectual property and proprietary rights through appropriate technological restrictions, such as physical and electronic security measures. We believe that factors such as the technological and creative skills of our personnel and frequent enhancements to our network are also essential to establishing and maintaining our competitive position.
Available Information
Our primary internet address is www.progholdings.com. The information contained on our website is not included as part of, or incorporated by reference into, this Annual Report on Form 10-K or any other reports we file with or furnish to the Securities and Exchange Commission ("SEC"). On our website, we make available, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, director and officer reports on Forms 3, 4, and 5, and any amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. We also make available on our website our Code of Ethics, our corporate governance principles, and the charters for the Audit, Compensation and Nominating and Corporate Governance Committees of the Board of Directors. The SEC maintains an internet site, www.sec.gov, containing reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC.
13


ITEM 1A. RISK FACTORS
Our businesses are subject to a number of risks and uncertainties that may affect our businesses, results of operations and financial condition, or the trading price of our common stock, some of which are described below. These risk factors may not be all of the risks our businesses face because we operate in a continually changing regulatory and macroeconomic environment, and new risks and uncertainties may emerge from time to time. We cannot predict such new risks and uncertainties, nor can we assess the extent to which any of the risk factors below or any such new risks and uncertainties, or any combination thereof, may impact our businesses.
Risk Factors
Risks Related to our Businesses, Regulatory Environment and Industry
Our businesses are subject to extensive federal, state and local laws and regulations, including certain laws and regulations unique to the industries in which our businesses operate, that may subject them to government investigations and significant monetary penalties, remediation expenses and compliance-related burdens that may result in them changing the manner in which they operate, which may be materially adverse to several aspects of our performance.
In April 2020, our Progressive Leasing business entered into a settlement with the FTC (the "FTC Settlement") to resolve allegations by the FTC that certain of Progressive Leasing’s advertising and marketing practices violated the FTC Act, even though Progressive Leasing believed it was in compliance with the FTC Act, and thus, did not admit any violations of that act or any other laws. Under the FTC Settlement, Progressive Leasing paid $175 million to the FTC and agreed to enhance certain of its compliance-related activities, including augmenting disclosures to its customers and expanding its POS partner monitoring programs. Federal regulatory authorities are increasingly focused on alternative consumer financial services products, including consumer protection within the subprime financial marketplace in which our Progressive Leasing, Vive and Four businesses operate. For example, the Consumer Financial Protection Bureau ("CFPB") is currently reviewing the business practices of a number of companies that offer buy-now-pay-later ("BNPL") services and has alleged several areas of perceived risk of consumer harm, including inconsistent consumer protections and the risk of borrowers becoming overextended. We believe the CFPB’s review is illustrative of the greater focus federal regulatory authorities are putting on alternative consumer financial services products, including within the industries in which our businesses operate, which may result in increased compliance costs and the possibility of significant monetary penalties, remediation expenses and costly changes to the manner in which we conduct our businesses.
Any of these federal agencies may propose and adopt new regulations (or interpret existing regulations) that may result in significant adverse changes in the regulatory landscape for Progressive Leasing, Vive and Four. We expect federal regulatory agencies will continue their increased focus on alternative consumer financial services products, and, as a result, businesses transacting with subprime consumers, for example, may be held to higher standards of monitoring, disclosure and reporting, regardless of whether new laws or regulations governing our industry are adopted. This increased attention may increase Progressive Leasing’s, Vive’s and Four’s compliance costs significantly, result in additional fines or monetary penalties or settlements due to future government investigations, and materially and adversely impact the manner in which they operate, which may be materially adverse to several aspects of our performance.
In recent years, state regulatory authorities have been increasingly focused on the subprime financial marketplace, including the lease-to-own industry. For example, in August 2022, a complaint was filed by the Pennsylvania Attorney General against the Company's Progressive Leasing business alleging, among other things, that Progressive Leasing was operating in the Commonwealth of Pennsylvania in violation of the Pennsylvania Rental Purchase Agreement Act by failing to disclose certain terms and conditions of rent-to-own ("RTO") transactions on "hang tags" physically attached to RTO merchandise. Although the Company believes the Pennsylvania Attorney General's claims are without merit and intends to vigorously defend itself, we may incur substantial costs, including legal fees, fines, penalties, and remediation expenses in the matter. Additionally, in early 2021, a number of lease-to-own companies, including the Company's Progressive Leasing business, received a subpoena from the California Department of Financial Protection and Innovation (the "DFPI"). The subpoena received by Progressive Leasing in January 2021 from the DFPI requested the production of documents regarding Progressive Leasing's operations and its compliance with state consumer protection laws, including new legislation that went into effect on January 1, 2021. Although the Company believes Progressive Leasing is in compliance with all applicable consumer financial laws and regulations in California, this inquiry may lead to an enforcement action and/or a consent order and substantial costs, including legal fees, fines, penalties, and remediation expenses. While the Company intends to preserve defenses surrounding the jurisdiction of DFPI in this matter, the Company has fully cooperated and anticipates that it will continue cooperating with the DFPI in responding to its inquiry. We are currently unable to predict the ultimate timing or outcome of either the complaint filed by the Pennsylvania Attorney General or the investigation undertaken by the DFPI. In addition, the FTC Settlement may lead to investigations and enforcement actions by, and/or consent orders with, state Attorneys General or other state regulatory agencies.
14


Furthermore, in November 2021, Rent-A-Center, Inc. announced that its Acima division ("Acima"), which is a large virtual lease-to-own business that competes with Progressive Leasing, had received a letter from the Nebraska Attorney General’s office stating that the Attorney General of Nebraska, along with a coalition of thirty-eight state Attorneys General, had initiated a multistate investigation into the business acts and practices of Acima. As of the date of this Annual Report on Form 10-K, we have not received a similar communication from the Nebraska Attorney General’s office and are not aware of any intention by any state Attorneys General involved in the Acima matter to broaden their investigation to include Progressive Leasing in their investigation. However, there can be no assurance that Progressive Leasing will not be included in such matter and, if it is, that it would not lead to an enforcement action and/or a consent order, or substantial costs, including legal fees, fines, penalties, and remediation expenses. We cannot predict whether any state Attorneys General or state regulatory agencies will direct other investigations or regulatory investigations towards us or our industry in the future, or what the impact of any such future regulatory investigation may be.
In addition, certain aspects of Progressive Leasing’s, Vive’s and Four’s businesses, such as the content of their advertising and other disclosures to customers about transactions, their respective data collection practices, the manner in which they may contact their customers, the decisioning process regarding whether to enter into a transaction with a potential customer, their credit reporting practices, and the manner in which they process and store certain customer, employee and other information are subject to federal and state laws and regulatory oversight. For example, the California Consumer Privacy Act of 2018 (the "CCPA"), which became effective on January 1, 2020, gives residents of California expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used, and also provides for civil penalties for violations and private rights of action for data breaches. In addition, the California Privacy Rights Act ("CPRA"), which became effective on January 1, 2023, significantly modifies the CCPA, including by expanding consumers’ rights with respect to certain personal information and creating a new state agency to oversee implementation and enforcement efforts. The CCPA, CPRA, and other applicable state and federal privacy laws now require Progressive Leasing, Vive and Four to design, implement and maintain different types of privacy-related compliance controls and programs simultaneously in multiple states, thereby further increasing the complexity and cost of compliance. In addition, certain states' laws limit the total cost that Progressive Leasing may charge a customer in order for the customer to achieve ownership of the leased merchandise at the end of the lease term.
We have incurred and will continue to incur substantial costs to comply with federal, state and local laws and regulations, including rapidly evolving expected consumer protection standards. In addition to compliance costs, we may continue to incur substantial expenses to respond to regulatory and other third-party investigations and enforcement actions, proposed fines and penalties, criminal or civil sanctions, and private litigation, as well as potential "headline risks" that may negatively impact our business and may adversely affect our share price. Consumer complaints with respect to our industry have resulted in, and may in the future result in, state, federal and local regulatory and other investigations. In addition, while we are not aware of any whistleblower claims regarding Progressive Leasing’s, Vive’s or Four’s specific business practices, such claims are on the rise generally. We believe these claims will likely continue, in part because of the provisions enacted by the Dodd-Frank Act that provide for cash awards to persons who report alleged wrongdoing to the U.S. Securities and Exchange Commission, and because competitors may use it as a method to weaken their competitors, and others, like former personnel or other constituencies, may use it as means to extract payment or otherwise retaliate.
Additionally, as we execute on our strategic plans, we may continue to expand into complementary businesses that engage in financial, consumer credit transactions or lending services, or lease-to-own or rent-to-rent transactions involving products that we do not currently offer our customers, all of which may be subject to a variety of statutes and regulatory requirements in addition to those regulations currently applicable to our operations, which may impose significant costs, limitations or prohibitions on the manner in which we currently conduct our businesses as well as those we may acquire in the future.
Progressive Leasing serves subprime consumers. Its lease-to-own business model poses inherent risks that may have a material and adverse effect on our results, financial condition, and prospects.
Progressive Leasing offers lease-to-own solutions to subprime consumers through point-of-sale retail partners via in-store, mobile, and online solutions. While this model allows Progressive Leasing to address an underserved, credit-challenged segment of the population with an innovative lease-to-own solution that integrates seamlessly with the traditional and e-commerce retailers with whom Progressive Leasing partners (whom we refer to as our point of sale or "POS" partners), it creates specific and unique risks including, among others:
reliance on POS partners (over whom Progressive Leasing does not exercise full control and oversight) for many important business functions, from advertising through assistance with lease transaction applications, including, for example, explaining the nature of the lease-to-own transaction when asked to do so by a consumer;
the potential that federal, state and local regulators will continue to focus on alternative financial services products, including consumer protection with respect to such products within the subprime financial marketplace, and impact lease-to-own transactions by adopting new regulations (or applying existing laws and regulations that were never
15


intended to apply to lease-to-own transactions) that require Progressive Leasing to change its business practices in a materially adverse manner;
indemnification obligations to POS partners for losses stemming from, among other matters, Progressive Leasing’s violation of federal, state or local laws or regulations or failure to take the appropriate steps to protect its POS partners’ and customers’ information from being accessed or stolen by unauthorized third parties through cyber-attacks or "hacking" or similar occurrences;
reliance on automatic bank account drafts for lease payments, which may become disfavored as a payment method by regulators and/or providers, or may otherwise become unavailable; and
an increase in the risk of consumer fraud since lease decisions are made through remote technology-based platforms and, because transactions are consummated through the Internet, there is a risk customers may challenge, among other potential claims, the authenticity of their documents and whether their electronic signatures are valid.
These risks, which may have a material and adverse effect on several aspects of our performance in the future, are described further below.
Inflation, rising interest rates, and other adverse macro-economic conditions, including a prolonged recession, may adversely affect consumer confidence and demand for the products and services offered by our Progressive Leasing, Vive and Four businesses.
We derive our revenue from the products and services offered by our Progressive Leasing, Vive and Four businesses. Consumer confidence is affected by inflation, rising interest rates, and other macro-economic conditions, including a prolonged recession. A deterioration in consumer confidence could adversely affect our business in many ways, including reducing demand for our products and services. As a result, a sustained decline in macro-economic conditions could result in lower revenue and negatively impact our businesses and the Company's overall financial results.
Our customers' inability to make the payments they owe our Progressive Leasing, Vive and Four businesses due to inflation, rising interest rates and other adverse macro-economic conditions, including a prolonged recession, may unfavorably impact our overall financial performance.
Inflation has recently increased at the fastest pace in over forty years. In response to these concerns, the Federal Reserve has raised interest rates multiple times over the past year, and will likely continue to raise them again in the near term, which could lead to a prolonged economic recession. Food, energy, residential rent and other costs of living have also increased significantly over the last twelve months, which we believe disproportionately negatively affects the customers we serve and therefore may unfavorably impact our customers' ability to make the payments they owe the Company, resulting in increased customer payment delinquencies, lease merchandise write-offs, loan loss provisioning and loan write-offs.
Given the deteriorating macro-economic environment, our proprietary algorithms and decisioning tools used in approving Progressive Leasing and Vive customers may no longer be indicative of their ability to perform, which in turn may limit the ability of our Progressive Leasing, Vive and Four businesses to manage risk, avoid lease and loan charge-offs and may result in insufficient reserves to cover actual losses.
We believe our proprietary lease and loan decisioning processes to be a key to the success of our Progressive Leasing and Vive businesses. These decisioning processes assume behavior and attributes observed for prior customers, among other factors, are indicative of performance by our future customers. Unexpected changes in customer behavior caused by deteriorating macroeconomic conditions, including, for example, widespread supply chain disruptions and/or the significant increase in inflation in the U.S., which has reached levels not seen since before Progressive Leasing was founded, the U.S. economy experiencing a prolonged recession and/or job losses or increased job absenteeism for hourly employees who are our customers may lead to increased incidences and costs related to lease merchandise write-offs. In addition, we believe that deteriorating macroeconomic conditions such as these lead to general declines in discretionary spending levels and disproportionately negatively impact the customers we serve. As a result, our decisioning process has required, and will likely continue to require, frequent adjustments (including tightening) and the application of greater management judgment in the interpretation of the results produced by our decisioning tools, which could have an unfavorable impact on our GMV, margins and earnings. These decisioning tools may be unable to accurately predict and respond to the impact of a prolonged economic downturn or changes to customer behaviors, which in turn may limit the ability of our Progressive Leasing and Vive businesses to manage risk, avoid lease and loan charge-offs and may result in insufficient reserves to cover actual losses (which Progressive Leasing records as accounts receivable allowance and allowance for lease merchandise write-offs and Vive and Four record as provision for loan losses).
16


A large percentage of Progressive Leasing’s revenue is concentrated with several key POS partners, and the loss of any of these POS partner relationships would materially and adversely affect several aspects of our performance.
Progressive Leasing’s relationship with its largest POS partners will have a significant impact on our operating revenues in future periods. The loss of any key POS partners would have a material adverse effect on our business.
For example, during 2022, we derived 49.3% of our consolidated revenues from customers of Progressive Leasing's top three POS partners, and 77.3% of our consolidated revenues from customers of Progressive Leasing's top ten POS partners. Any extended discontinuance of Progressive Leasing’s relationship with any of those POS partners or other high visibility retailers would have a material adverse impact on several aspects of our performance. In addition, in the event that Progressive Leasing enters into new or amended business or contractual terms or conditions with any of its largest POS partners that are less favorable than its current arrangements with those POS partners, including with respect to the prices it pays those POS partners for merchandise that it leases to consumers and/or exclusivity, rebate or other incentive payments it may make to those POS partners, our business and prospects may be materially and adversely effected.
Any publicity associated with the loss of any of Progressive Leasing’s large POS partners may harm its reputation, making it more difficult to attract and retain consumers and other POS partners and could lessen its negotiating power with its remaining and prospective POS partners. Our operating revenues and operating results may also suffer if any of Progressive Leasing’s POS partners experiences a significant decline in sales for any reason, including, for example, due to increased inflation and/or a prolonged recession reducing or eliminating many consumers’ discretionary incomes, and/or supply chain interruptions unfavorably impacting the inventories of our POS partners.
There can be no assurance that Progressive Leasing will be able to continue its relationships with its largest POS partners on the same or more favorable terms in future periods or that its relationships will continue beyond the terms of its existing contracts with them. Our operating revenues and operating results may suffer if, among other things, any of Progressive Leasing’s POS partners renegotiate, terminate or fail to renew, or fail to renew on similar or favorable terms, their agreements or otherwise choose to modify the level of support they provide for Progressive Leasing’s products and services.
If Progressive Leasing is unable to attract additional POS partners and retain and grow its relationships with its existing POS partners, several aspects of our performance would be materially and adversely affected.
Our continued success is dependent on the ability of Progressive Leasing to maintain its relationship with its existing POS partners and grow its gross merchandise volume, or "GMV", (which we define as the retail price of merchandise acquired by Progressive Leasing, which we then lease to our customers) from those existing POS partners through their in-store and e-commerce platforms, and also to expand its POS partner base. Progressive Leasing’s ability to retain and grow its relationships with POS partners depends on the willingness of POS partners to partner with it. Depending on the severity of the COVID-19 pandemic, and the seriousness and number of infections resulting from any resurgences in or new variants of the virus, potential POS partners’ focus and resources may be diverted to responding to the pandemic, and thus, potential POS partners and their resources may be delayed in, or unavailable for, evaluating and/or implementing our lease-to-own or other offerings in their store locations and/or e-commerce platforms, which may unfavorably impact our efforts to add new POS partners to our business. The attractiveness of Progressive Leasing’s platform to POS partners depends upon, among other things: its brand and reputation; its ability to sustain its value proposition to POS partners for consumer acquisition; the attractiveness to POS partners of its virtual and data-driven platform; the services, products and customer decisioning standards offered by Progressive Leasing's competitors; the amount of rebates or other incentive payments offered to those POS partners by Progressive Leasing, and its ability to perform under, and maintain, its POS partner agreements, most of which have terms that do not exceed three years.
In addition, competition for smaller POS partners has intensified significantly in recent years, with many such POS partners simultaneously offering several products and services that compete directly with the products and services offered by Progressive Leasing. Having a diversified mix of POS partners is important to mitigate risk associated with changing consumer spending behavior, economic conditions and other factors that may affect a particular type of retailer. If Progressive Leasing fails to retain any of its larger POS partners or a substantial number of its smaller POS partners, if it does not acquire new POS partners, if it does not continually grow its GMV from its POS partners, or if it is not able to retain a diverse mix of POS partners, several aspects of our performance would be materially and adversely affected.
If Progressive Leasing is unable to attract new consumers and retain and grow its relationships with its existing consumers, several aspects of our performance would be materially and adversely affected.
Our continued success depends on the ability of Progressive Leasing to generate repeat use and increased GMV from existing customers and to attract new consumers to its platform. Its ability to retain and grow its relationships with its consumers depends on the willingness of consumers to use its products and services. The attractiveness of Progressive Leasing’s data-driven platform to consumers depends upon, among other things: the number and variety of its POS partners and the mix of products and services available through its platform; its brand and reputation; customer experience and satisfaction; trust and
17


perception of the value it provides; technological innovation; and the services, products and customer decisioning standards offered by its competitors. If Progressive Leasing fails to retain its relationship with existing customers, if it does not attract new consumers to its platform, products and services, or if it does not continually expand usage and GMV, including, for example, due to a failure to successfully and timely enhance the features of our existing products or create and launch innovative new products, several aspects of our performance would be materially and adversely affected.
Vive also serves subprime and near-prime consumers, but Vive’s business model differs significantly from Progressive Leasing’s lease-to-own business, as does Four’s business model.
Through its Vive branded credit cards and other private label credit card products, Vive offers POS partners a variety of revolving loans for subprime and near-prime consumers. Therefore, Vive’s business model differs significantly from Progressive Leasing’s lease-to-own business, which creates specific and unique risks including, among others:
Vive's reliance on two bank partners to issue its Vive branded credit cards and other credit products. Vive’s agreements with its issuing bank partners give those partners the right to terminate those agreements without cause by providing Vive with a non-renewal notice within a specified number of days prior to the dates on which those agreements are scheduled to automatically renew. If those agreements both were terminated or otherwise disrupted, there is a risk that Vive would not be able to replace those banks with an alternative bank provider on terms that Vive would consider favorable or in a timely manner without disruption of its business.
Vive has significantly different regulatory risks as compared to Progressive Leasing, including those applicable to consumer credit card transactions. For example, Vive may have compliance obligations with respect to federal and state laws and regulations, including pursuant to its agreements with its issuing bank partners, that govern, among other areas, cardholder agreement terms and disclosures (e.g., the Truth In Lending Act), credit discrimination (e.g., the Equal Credit Opportunity Act), credit reporting (e.g., the Fair Credit Reporting Act), and servicing and collection activities. As a result, Vive is or may be subject to different regulations and different regulators than Progressive Leasing, particularly at the federal level, including the Consumer Financial Protection Bureau.
In addition, through its BNPL offerings, Four allows shoppers to pay for merchandise through four interest-free installments, which enables its customers to purchase furniture, clothing, electronics, health and beauty, footwear, jewelry, and other consumer goods from retailers across the United States. Thus, Four’s business model differs significantly from Progressive Leasing’s and Vive’s business models, which also creates different risks than those faced by Progressive Leasing and Vive, including, for example, different regulatory requirements and related risks.
The risks that are specific to Vive may also have a material and adverse effect on several aspects of our performance in the future.
Interruptions, inventory shortages and other factors affecting the supply chains of our retail partners may have a material and adverse effect on several aspects of our performance.
The POS partners with whom our Progressive Leasing, Vive and Four businesses partner are critical to our success. Any extended supply chain interruptions, inventory shortages or other operational disruptions affecting any of our POS partners may have a material adverse impact on our business. We depend on our POS partners’ abilities to deliver products to customers at the right time and in the right quantities. Accordingly, it is important for our POS partners to maintain optimal levels of inventory and respond rapidly to shifting demands. For example, during the first half of 2022, global supply chain issues attributable to the COVID-19 pandemic negatively impacted inventory and stocking levels in the retail industry. Future increases in the number and/or severity of COVID-19 infections in countries from which our POS partners source merchandise, such as China, could result in similar supply chain disruptions and inventory shortages for our POS partners in future periods, which could adversely affect their sales and Progressive Leasing’s GMV, revenue and earnings.
The COVID-19 pandemic has had, and may continue to have, among other risks, a material and adverse effect on several aspects of our performance.
The COVID-19 pandemic has had, and may continue to have, an adverse effect on several aspects of our performance. For example, Progressive Leasing's POS partners may experience significant declines in sales, and Progressive Leasing may experience related declines in GMV, active customer counts, revenues and profitability related to the COVID-19 pandemic. Such declines may be due to, among other factors: supply chain interruptions unfavorably impacting the inventories and merchandise availability of our POS partners; increased absenteeism among our POS partners' employees who service customers; and/or reduced operating hours or store closures by our POS partners.The extent to which the COVID-19 pandemic impacts us will depend on a number of factors and developments that we are not able to predict or control, including, among others: the length and severity of the COVID-19 pandemic, including additional periods of increases or spikes in the number of COVID-19 cases in future periods in some or all of the regions where Progressive Leasing’s POS partners’ stores operate, and how widespread any such additional wave of infections, including those related to new variants of the virus, may become; governmental, business and other actions, including the possibility of additional state or local emergency or executive orders
18


that require its POS partners to close or reduce their hours of operations; the health of, and the effect on, our team members; and the impact and efficacy of any governmental and other actions taken to control the spread and impact of the virus, including the efficacy of vaccines administered to prevent the further spread of the virus.
As discussed above, Progressive Leasing’s largest POS partners have a significant impact on our operating revenues even in a normalized operating environment and, in light of COVID-19, their significance has, and is likely to continue to grow. For example, 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 measures such as store closures or reduced hours and scope of operations, and also resulted in increases in employee absenteeism and declines in customer traffic, all of which unfavorably impacted Progressive Leasing's GMV. Any additional, extended operational disruptions to, or financial distress of, any of those POS partners due to COVID-19 may have a material adverse impact on several aspects of our performance.
Our capital allocation strategy and financial policies, including our current stock repurchase program, as well as any potential debt repurchase or dividend programs may not be effective at enhancing shareholder value, or providing other benefits we expect.
Although our capital allocation strategy and financial policies are intended to enhance shareholder value, lower our cost of capital and demonstrate our commitment to return excess capital to shareholders while maintaining our ability to invest in organic growth and strategic acquisition opportunities, there can be no assurance they will be effective.
We have taken significant steps intended to better align our existing capital structure with our go-forward capital allocation strategy. For example, in November 2021, our Board of Directors approved an increase to our share repurchase program, increasing the program from $300 million to $1.0 billion in the aggregate. Promptly thereafter, we commenced a modified “Dutch Auction” tender offer to repurchase up to $425 million of our common stock, funded largely from the proceeds of a $600 million senior notes issuance that was undertaken in connection with the tender offer. The tender offer resulted in the Company repurchasing approximately 13% of its outstanding shares, at $49.00 per share.
Following the tender offer, we have resumed purchases under our share repurchase program. Under the program, we may repurchase shares in open market transactions or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Exchange Act. For the fiscal year ended December 31, 2022, we purchased an additional $223.6 million of our common stock, representing 15.5% of our outstanding shares, with remaining authority to purchase additional shares up to our remaining authorization limit of $337.3 million. The timing and actual number of further share repurchases following the date of this Annual Report on Form 10-K, if any, will depend on a variety of factors, including the price and availability of our shares, trading volume, general market conditions, and projected cash positions in light of other capital allocation opportunities such as organic growth and strategic acquisitions. The program may be suspended or discontinued at any time in the future without prior notice.
Repurchases under our share repurchase program will reduce the market liquidity for our stock, potentially affecting its trading volatility and price. Future share repurchases (or any potential debt repurchases or dividend programs) will also diminish our cash reserves, which may impact our ability to pursue organic growth and attractive strategic opportunities. Furthermore, there are other financial and operational risks associated with our capital allocation strategy and financial policies, including in the event that we implement a debt repurchase or dividend program, which are detailed more fully below. See "Risks Related to Our Indebtedness."
Our cost reduction initiatives may not be adequate or may have unintended consequences that could be disruptive to our businesses.
In response to the deteriorating macro-economic environment, we have taken a number of steps to reduce our cost structure in order to drive efficiencies and right-size variable costs, while minimizing the negative impact on growth-related initiatives. These cost reduction initiatives have included, among others, reduction of our workforce and of other SG&A expenditures. While we believe these initiatives have thus far benefited the Company, particularly as they relate to aligning our servicing costs with our expectations regarding GMV and revenue, such initiatives may ultimately prove to be inadequate or have unintended consequences disruptive to our businesses. In addition, we may not be fully successful in realizing the efficiencies we are seeking, which are subject to many estimates and assumptions and other factors we may not be able to control. We may also be required to undertake additional cost reduction steps, including a further reduction of our workforce, which could also be disruptive to our businesses and potentially lower the anticipated benefits with respect to our future performance, including with respect to GMV and revenue.
19


The loss of the services of our key executives or our inability to attract and retain key talent, particularly with respect to our information technology function, may have a material adverse impact on our operations.
Competition for senior executives and key talent in the information technology, finance and sales areas in our industry is intense and the failure to identify, hire, develop, motivate, and retain highly qualified personnel may adversely affect our business and operations. In particular, we rely significantly on the continued service of our data scientists and information technology engineers in order to maintain our complex information technology infrastructure, avoid information technology control deficiencies and develop new products as part of our go-forward business strategy. Competition for these types of highly skilled technology-based employees, as well as an experienced sales force and finance team, in the Salt Lake City area is extremely intense as other national and geographically remote employers who allow such employees to work remotely actively recruit information technology, data science, sales and finance employees, where those employers are not headquartered and do not otherwise maintain a physical presence. Trained and experienced personnel are in high demand and may be in short supply. Many of the companies with which we compete for experienced employees have greater resources than we do and may be able to offer more attractive terms of employment. In addition, we invest significant time and expense in training our employees, which increases their value to competitors that may seek to recruit them. We may not be able to attract, develop, and maintain the skilled workforce necessary to operate our business, including with respect to the maintenance and development of our information technology infrastructure, and labor expenses may increase as a result of a shortage in the supply of qualified personnel. If we are unable to continue to attract experienced data scientists and information technology engineers, or unable to maintain and build our highly experienced sales force and finance team, several aspects of our performance may be materially and adversely affected. We do not carry key man life insurance on any of our personnel.
In addition, our failure to put in place adequate succession plans for key executives or the failure of key employees to successfully transition into new roles, for example, as a result of reductions in workforce, organizational changes and attrition, could have an adverse effect on our businesses and operating results. The unexpected or abrupt departure of one or more of our key personnel and the failure to effectively transfer knowledge and effect smooth key personnel transitions may have an adverse effect on our businesses resulting from the loss of such person’s skills, knowledge of our businesses, and years of industry experience. If we cannot effectively manage leadership transitions and management changes in the future, our reputation and future business prospects could be adversely affected.
Our businesses operate in a highly competitive industry, and their inability to compete successfully would materially and adversely affect several aspects of our performance.
The industry in which our Progressive Leasing, Vive and Four businesses operate is highly competitive and highly fluid, particularly in light of the evolving and increasing regulatory environment we are witnessing from regulators such as the FTC and the CFPB, among others, as discussed above. Progressive Leasing and Vive face competition from national, regional and local operators of lease-to-own stores, virtual lease-to-own companies, traditional and e-commerce retailers (including many that offer layaway programs and title or installment lending), traditional and online sellers of used merchandise, and various types of consumer finance companies that may enable our customers to shop at traditional or online retailers, as well as with rental stores that do not offer their customers a purchase option. Similarly, Four faces competition from other companies who offer buy now, pay later products, many of whom are larger than Four, in addition to some of the competitors mentioned above. These competitors may have significantly greater financial and operating resources, greater name recognition in certain markets and more developed products and services, which may allow them to grow faster, including through acquisitions, and to offer more aggressive exclusivity, rebate and/or other incentive payments to existing and potential POS partners, some of whom may be our POS partners. This in turn may enable these competitors to enter new markets, which may decrease opportunities for us in those markets. Greater name recognition, or better public perception of a competitor’s reputation, may help the competitor divert market share, even in established markets. Some competitors may be willing to offer competing products on an unprofitable basis (or may have looser decisioning standards or be willing to relax their decisioning standards) in an effort to gain market share, which could compel us to match their pricing and/or decisioning strategy or lose business. In addition, some of Progressive Leasing’s competitors may be willing to lease certain types of products that we will not agree to lease, enter into customer leases that have services, as opposed to goods, as a significant portion of the lease value, or engage in other practices related to pricing, aggressive rebates and other incentive payments to POS partners, compliance, and other areas that we will not, in an effort to gain market share at our expense. Our business relies heavily on relationships with POS partners. An increase in competition may cause our POS partners to no longer offer our product and services in favor of our competitors, or to offer our product and services and the products of its competitors simultaneously at the same store locations, which may slow growth in our business and limit or reduce profitability. Furthermore, our virtual lease-to-own competitors may deploy different business models, such as direct-to-consumer strategies, that forego reliance on POS partner relationships that may prove to be more successful.
20


If Progressive Leasing fails to comply with the FTC settlement, it may be subject to additional injunctive and monetary remedies and be required to change its business practices in a manner materially adverse to our business. In addition, other regulatory authorities and third parties may make allegations similar to those alleged by the FTC, which may result in costly legal fees and lead to monetary settlements, fines, penalties, and/or injunctions that may adversely impact Progressive Leasing’s business operations and financial results.
As indicated by the FTC Settlement in April 2020, Progressive Leasing paid $175 million to the FTC and agreed to enhance certain of its compliance-related activities, including augmenting consumer disclosures and expanding its POS partner monitoring programs. Compliance with the FTC Settlement requires the cooperation of Progressive Leasing’s POS partners, over whom it does not exercise full control and oversight, including, for example, with respect to advertising and explaining the lease-to-own transaction to consumers. In the event Progressive Leasing is found to be in violation of the terms of the FTC Settlement, the FTC could, among other actions, initiate further enforcement proceedings, seek an injunction or other restrictive orders and impose civil monetary penalties against Progressive Leasing and its officers, which would divert the attention of our management team and may have a material adverse effect on several aspects of our performance.
If any other federal, state or local regulatory authorities or other third parties were to initiate any investigations or proceedings alleging facts similar to those resolved pursuant to the FTC Settlement, it may lead to substantial legal fees and costs for extended periods of time, monetary settlements, fines, penalties or injunctions requiring Progressive Leasing to change its business practices in a manner materially adverse to its business. The incurrence of substantial costs to respond to such third-party actions also may have a material adverse effect on several aspects of our performance in the future.
If Progressive Leasing fails to maintain a consistently high level of customer satisfaction and trust in its brand, our business, results of operations, financial condition, and prospects would be materially and adversely affected.
Offering an additional option for Progressive Leasing’s customers to obtain the big-ticket merchandise they need is critical to its success. If consumers do not trust the Progressive Leasing brand or do not have a positive experience, they will not use its products and services. If consumers do not use Progressive Leasing’s products and services, it will not be able to attract or retain POS partners. As a result, Progressive Leasing has invested heavily in both technology and its support team, including the utilization of third-party customer service call centers. If it is unable to maintain a consistently high level of positive customer experience, it will lose existing customers and POS partners. In addition, Progressive Leasing’s ability to attract new consumers and POS partners is highly dependent on its reputation and on positive recommendations from its existing customers and POS partners. Any failure to maintain a consistently high level of customer service, including as a result of actions or events beyond our control relating to the third-party call centers we utilize, or a market perception that it does not maintain high-quality customer service, would adversely affect its reputation and the number of positive customer referrals that it receives. As a result, our business, results of operations, financial condition, and prospects would be materially and adversely affected.
The transactions offered to consumers by our Progressive Leasing, Vive and Four businesses may be negatively characterized by federal, state and local government officials, consumer advocacy groups and the media, and if those negative characterizations become increasingly accepted by consumers and/or others with whom we do business, several aspects of our performance may be materially and adversely affected.
Consumer protection within the subprime financial marketplace in which our Progressive Leasing and, to some extent, Vive and Four businesses operate is increasingly garnering the attention of federal, state and local government officials as well as consumer advocacy groups and the media. In addition, the business models and practices of companies offering BNPL services have recently become the subject of information requests and related inquiries by the CFPB and related media coverage. Legislative or regulatory proposals regarding our industry, or interpretations of them, may subject Progressive Leasing, Vive and Four to "headline risks" that could negatively impact each of them in a particular market or in general and, therefore, may adversely affect our share price. In particular, and among other perceived concerns, advocacy groups have asserted (and are likely to continue asserting) that laws and regulations should be broader and more restrictive regarding lease-to-own transactions, such as those engaged in by Progressive Leasing. With respect to these transactions, consumer advocacy groups and media reports generally focus on the total cost to a consumer to acquire merchandise, which is often alleged to be higher than the interest typically charged by banks or similar lending institutions to consumers with better credit histories. This "cost-of-rental" amount, which is generally defined as lease fees paid in excess of the "retail" price of the merchandise, is from time to time characterized by consumer advocacy groups and media reports as predatory or abusive without discussing the benefits associated with lease-to-own programs. Moreover, they often allege noncompliance with current consumer protection regulations and violations of notions of fair dealing with consumers, including, for example, the complaint filed against the Company's Progressive Leasing business by the Pennsylvania Attorney General.
Although we strongly disagree with these characterizations, if the negative characterization of these types of lease-to-own transactions becomes increasingly accepted by consumers or Progressive Leasing’s POS partners and others with whom it does business, demand for its products and services may significantly decrease, which may have a material adverse effect on several
21


aspects of our performance. Additionally, if the negative characterization of these types of transactions is accepted by government officials, Progressive Leasing may become subject to more restrictive laws and regulations and more stringent enforcement of existing laws and regulations, any of which may have a material adverse effect on several aspects of our performance. The vast expansion and reach of technology, including social media platforms, has increased the risk that Progressive Leasing’s, Vive’s or Four’s reputations may be significantly impacted by negative characterizations in a relatively short amount of time. If Progressive Leasing is unable to quickly and effectively respond to such characterizations, it may experience declines in customer loyalty and traffic and its relationships with its POS partners may suffer, which may have a material adverse effect on several aspects of our performance. Similarly, either Vive or Four’s inability to timely and effectively respond to such characterizations may harm its relationships with its merchant partners and customers, and result in declines in transactions and revenue. Additionally, any failure by Progressive Leasing or by its competitors, including smaller, regional competitors, for example, to comply with the laws and regulations applicable to the traditional and/or virtual lease-to-own business models, or any actions by those competitors that are challenged by consumers, advocacy groups, the media or governmental agencies or entities as being abusive or predatory may result in our business being mischaracterized, by implication, as engaging in similar unlawful or inappropriate activities or business practices, even if our only association with such conduct is that we operate in the same general industries as one or more offenders.
Any significant disruption in, or errors in, service on Progressive Leasing’s, Vive’s or Four’s platforms or relating to vendors, including events beyond their control, may prevent Progressive Leasing, Vive or Four from processing transactions (including making accurate lease and loan decisioning) and have a material and adverse effect on several aspects of our performance.
Progressive Leasing, Vive and Four use vendors, such as cloud computing web services providers and third-party software providers, in the operation of their businesses. The satisfactory performance, reliability, and availability of Progressive Leasing’s, Vive’s and Four’s technology and their underlying network and infrastructure are critical to their operations and reputation and the ability of their platforms to attract new and retain existing POS partners and customers. They rely on these vendors to protect their systems and facilities against damage or service interruptions from natural disasters, power or telecommunications failures, computer viruses or attempts to harm these systems, criminal acts, and similar events. If an arrangement with a vendor is terminated or if there is a lapse of service or damage to Progressive Leasing’s, Vive’s or Four’s systems or facilities, they may experience interruptions in their ability to operate their platforms. Similarly, the business continuity and disaster recovery plans maintained by Progressive Leasing, Vive and Four, as well as those maintained by any third-party vendors, may not adequately or efficiently prevent or protect against the types of damage or service interruptions discussed above. They also may experience increased costs and difficulties in replacing vendors, and replacement services may not be available on commercially reasonable terms, on a timely basis, or at all. Any interruptions or delays in their platform availability, whether as a result of a failure to perform on the part of a vendor, any damage to one of their vendor’s systems or facilities, the termination of any third-party vendor agreement, software failures, the inadequacy of their or their vendor's business continuity and disaster recovery plans, their or their vendor’s error, natural disasters, terrorism, other man-made problems, security breaches, whether accidental or willful, or other factors, may harm their relationships with their POS partners and customers and also harm their reputation.
In addition, both Progressive Leasing and Vive source certain information from third parties. For example, the decisioning engine utilized by Progressive Leasing and Vive is based on algorithms that evaluate a number of factors and currently depend on sourcing certain information from third parties, including consumer reporting agencies. In the event that any third-party from which they source information experiences a service disruption, whether as a result of maintenance, natural disasters, terrorism, or security breaches, whether accidental or willful, or other factors, the ability of the decisioning engine utilized by Progressive Leasing and Vive to make accurate lease and loan decisions and to process them correctly may be adversely impacted. For example, several years ago Progressive Leasing experienced a temporary interruption in certain data used in its algorithms, which resulted in incorrect decisions in certain specific instances and higher lease charge-offs. Additionally, there may be errors contained in the information provided by third parties. This may result in the inability to approve otherwise qualified applicants, which may adversely affect Progressive Leasing and Vive by negatively impacting their reputations and reducing their transaction volumes.
To the extent Progressive Leasing, Vive and Four use or are dependent on any particular third-party data, technology, or software, they may also be harmed if such data, technology, or software becomes non-compliant with existing regulations or industry standards, becomes subject to third-party claims of intellectual property infringement, misappropriation, or other violation, or malfunctions or functions in a way we did not anticipate. Any loss of the right to use any of this data, technology, or software may result in delays in the provisioning of Progressive Leasing’s, Vive’s and Four’s products and services until equivalent or replacement data, technology, or software is either developed by them, or, if available, is identified, obtained, and integrated, and there is no guarantee that they would be successful in developing, identifying, obtaining, or integrating equivalent or similar data, technology, or software, which may result in the loss or limiting of their products, services, or features available in their products or services.
22


Our business continuity and disaster recovery plans may not be sufficient to prevent losses in the event we experience a significant disruption in, or errors in, service on Progressive Leasing’s, Vive’s or Four’s platforms.
Progressive Leasing, Vive and Four maintain business continuity and disaster recovery plans in the event of a disruption in service on their platforms, including a disruption in service from a required vendor to those platforms. We maintain insurance policies to mitigate against any resulting losses. Those disaster recovery plans have not been tested under actual disaster conditions, and Progressive Leasing, Vive and/or Four may not have sufficient capacity to recover all data and services in the event of an outage. These factors could prevent them from processing transactions or posting payments on their platforms, damage their brands and reputations, divert the attention of their employees, reduce our revenue, subject us and them to liability, and cause consumers or merchants to abandon their platforms. In addition, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we incur. The impact of any of these events may have a material and adverse effect on several aspects of our performance.
Progressive Leasing and Vive rely extensively on models in managing many aspects of their businesses, and if those models are not accurate or are misinterpreted, such errors may have a material adverse effect on several aspects of our performance.
Progressive Leasing and Vive rely extensively on models in managing many aspects of their businesses, including loan and lease decisioning, pricing, and collections management. The models may prove in practice to be less predictive than they expect for a variety of reasons, including as a result of errors in constructing, interpreting or using the models or the use of inaccurate or incomplete data or inaccurate assumptions (including failures to update assumptions appropriately or in a timely manner). Their assumptions may be inaccurate for many reasons including that such assumptions often involve matters that are inherently difficult to predict and beyond their control (e.g., macroeconomic conditions and their impact on customer behaviors) and they often involve complex interactions between a number of dependent and independent variables, factors, and other assumptions. The errors or inaccuracies in Progressive Leasing’s and Vive’s models may be material, and may lead them to make wrong or sub-optimal decisions in managing their businesses, which may have a material adverse effect on several aspects of our performance.
Real or perceived software errors, failures, bugs, defects, or outages may adversely affect Progressive Leasing, Vive and/or Four and have a material and adverse effect on several aspects of our performance.
The platforms and internal systems utilized by Progressive Leasing, Vive and Four rely on software that is highly technical and complex. In many cases, these systems are developed by internal resources and customized specifically for the Progressive Leasing, Vive and Four businesses, resulting in a higher likelihood that they may have undetected errors, failures, bugs, or defects than other commercially available software and platforms. For example, each of the Progressive Leasing and Vive platforms and internal systems depend on the ability of such software to store, retrieve, process, and manage immense amounts of data. As a result, undetected errors, failures, bugs, or defects may be present in such software or occur in the future in such software. For example, in 2015, Progressive Leasing experienced software issues that resulted in the failure to identify a number of accounts as delinquent and, therefore, affected its ability to begin prompt collection efforts.
Any real or perceived errors, failures, bugs, or defects in the software may not be found until customers use Progressive Leasing’s, Vive’s or Four’s platforms and may result in outages or degraded quality of service that may adversely impact their respective businesses, as well as negative publicity, loss of or delay in market acceptance of their products and services, and harm to their brands or weakening of their competitive positions. In such an event, Progressive Leasing, Vive or Four may be required, or may choose, to expend significant additional resources in order to correct the problem. Any real or perceived errors, failures, bugs, or defects in the software they rely on may also subject us and them to liability claims, impair their ability to attract new customers, retain existing customers, or expand their use of their products and services, which may materially and adversely affect several aspects of our performance.
The ability of Progressive Leasing, Vive and Four to protect confidential, proprietary, or sensitive information, including the confidential information of their customers, may be adversely affected by cyber-attacks, employee or other internal misconduct, computer viruses, physical or electronic break-ins, or similar disruptions, any one of which may have a material adverse impact on several aspects of our performance.
Progressive Leasing’s, Vive’s and Four’s businesses involve the collection, storage, use, disclosure, processing, transfer, and other handling (collectively, "processing") of a wide variety of information, including personally identifiable information, for various purposes in their businesses, including to help ensure the integrity of their services and to provide features and functionality to their customers and POS partners. The processing of the information they acquire in connection with their customers’ and POS partners’ use of their services is subject to numerous privacy, data protection, cybersecurity, and other laws and regulations in the United States. The automated nature of their businesses and their reliance on digital technologies may make them an attractive target for, and potentially vulnerable to, cyber-attacks, computer malware, computer viruses, social engineering (including phishing and ransomware attacks), general hacking, physical or electronic break-ins, or similar
23


disruptions. While they and their vendors have taken steps to protect the confidential, proprietary, and sensitive information to which they have access and to prevent data loss, their security measures or those of their vendors could be breached, including as a result of employee theft, exfiltration, misuse or malfeasance, their actions, omissions, or errors, third-party actions, omissions, or errors, unintentional events, or deliberate attacks by cyber criminals, any of which may result in the loss of, or unauthorized access to, their or their customers’ data, their intellectual property, or other confidential, proprietary, or sensitive business information. Any accidental or willful security breaches or other unauthorized access to their platforms or servicing systems may cause confidential, proprietary, or sensitive information to be stolen and used for criminal or other unauthorized purposes. Security breaches or unauthorized access to confidential information may also expose Progressive Leasing, Vive, Four and us to liability related to the loss of the information, time-consuming and expensive litigation and government investigations, enforcement actions and negative publicity. If security measures are breached because of employee theft, exfiltration, misuse or malfeasance, Progressive Leasing’s, Vive’s or Four’s own actions, omissions, or errors, third-party actions, omissions, or errors, unintentional events, deliberate attacks by cyber criminals or otherwise, or if design flaws in their software or systems are exposed and exploited, Progressive Leasing’s, Vive’s and Four’s relationships with their customers may be damaged, and they and/or us may incur significant liability. Although we, Progressive Leasing, Vive and Four monitor our respective systems in order to detect security breaches or instances of unauthorized access to confidential information, there is no guarantee that our monitoring efforts will be effective.
The techniques used to obtain unauthorized, improper, or illegal access to Progressive Leasing’s, Vive’s, or Four’s systems, their or their customers’ data, or to disable or degrade service or sabotage systems, are constantly evolving, may be difficult to detect quickly, and often are not recognized until after they have been launched against a target. They may be unable to anticipate these techniques, react in a timely manner, or implement adequate preventative or remedial measures. Unauthorized parties have in the past attempted and may in the future attempt to gain access to Progressive Leasing’s, Vive’s or Four’s systems or facilities through various means, including, among others, hacking into our or their POS partners’ or customers’ systems or facilities, or attempting to fraudulently induce employees, POS partners, customers or others into disclosing usernames, passwords, or other sensitive information, which may in turn be used to access systems and gain access to confidential, proprietary, or sensitive information. Such efforts may be state-sponsored and supported by significant financial and technological resources, making them even more difficult to detect and prevent.
Any actual or perceived failure to comply with legal and regulatory requirements applicable to us, Progressive Leasing, Vive or Four, including those relating to information security, or any failure to protect the information that they collect from their customers and POS partners, including personally identifiable information, from cyber-attacks, may result in, among other things, regulatory or governmental investigations, administrative enforcement actions, sanctions, criminal liability, private litigation, civil liability and constraints on our, Progressive Leasing’s, Vive’s or Four’s ability to continue to operate.
Furthermore, federal and state regulators and many federal and state laws and regulations require notice of any data security breaches that involve personal information. These mandatory disclosures regarding a security breach are costly to implement and often lead to widespread negative publicity, which may cause consumers to lose confidence in the effectiveness of our, Progressive Leasing’s, Vive’s or Four’s data security measures. Any security breach suffered by us, Progressive Leasing, Vive, Four or our vendors, any unauthorized, accidental, or unlawful access or loss of data, or the perception that any such event has occurred, may result in a disruption to our, Progressive Leasing’s, Vive’s or Four’s operations, litigation, an obligation to notify regulators and affected individuals, the triggering of indemnification and other contractual obligations, regulatory investigations, government fines and penalties, reputational damage, and loss of customers and ecosystem partners, and our business may be materially and adversely affected.
In addition, we may incur significant costs and operational consequences in connection with investigating, mitigating, remediating, eliminating, and putting in place additional tools and devices designed to prevent future actual or perceived security incidents, as well as in connection with complying with any notification or other obligations resulting from any security incidents. Our insurance policies carry retention and coverage limits, which may not be adequate to reimburse us for losses caused by security breaches, and we may not be able to collect fully, if at all, under these insurance policies. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, may adversely affect our business. Furthermore, we cannot be certain that insurance coverage will continue to be available on acceptable terms or at all, or that the insurer will not deny coverage as to any future claim. Reduced confidence and participation in our platforms and our data security measures may also adversely affect a customer’s willingness to make payments on his or her lease (in the case of Progressive Leasing) or loan (in the case of Vive or Four), which may result in reduced collections.
24


While Progressive Leasing, Vive and Four take precautions to prevent consumer identity fraud, it is possible that identity fraud may still occur or has occurred, which may adversely affect the performance of Progressive Leasing’s, Vive’s and Four's lease and loan portfolios.
As described above, there is risk of fraudulent activity associated with Progressive Leasing’s, Vive’s and Four’s virtual platforms. The technologies and fraud prevention tools employed by Progressive Leasing, Vive and Four may be insufficient to accurately detect and prevent fraud. Progressive Leasing, Vive and Four bear the risk of consumer fraud in their transactions and they generally have no recourse to the respective POS partner (as the case may be) to collect the amount owed by the customer. Significant amounts of fraudulent transactions may adversely affect Progressive Leasing’s, Vive’s and Four’s respective businesses. High profile fraudulent activity or significant increases in fraudulent activity may also lead to regulatory intervention, negative publicity, and the erosion of trust from Progressive Leasing’s, Vive’s and Four’s POS partners and may materially and adversely affect several aspects of our performance.
E-commerce lease and loan origination processes may give rise to greater risks than in-store originations and processes.
As described above, Progressive Leasing, Vive and Four increasingly use e-commerce platforms, including the websites of our POS partners, to obtain application information and distribute certain legally required notices to their lease and loan applicants, and to obtain electronically signed documents in lieu of paper documents with tangible consumer signatures. For example, in 2022, Progressive Leasing's GMV generated from e-commerce platforms represented 17.2% of its total GMV, as compared to 15.2% in 2021. These e-commerce-based processes entail additional risks relative to in-store-based underwriting processes and procedures, including risks regarding the sufficiency of notice for compliance with consumer protection laws, increased risks and occurrences of fraud, risks that customers may challenge the authenticity of their lease or loan documents, or the validity of electronic signatures and records, and risks that, despite internal controls, unauthorized changes are made to their electronic documents.
The geographic concentration of Progressive Leasing’s POS partners may magnify the impact of conditions in a particular region, including economic downturns and other occurrences.
The concentration of our POS partners in one region or a limited number of markets may expose us to risks of adverse economic developments that are greater than if our POS partners were more geographically diverse.
In addition, the brick and mortar operations of our POS partners are subject to the effects of adverse acts of nature, such as winter storms, hurricanes, hail storms, strong winds, earthquakes and tornadoes, which have in the past caused damage such as flooding and other damage in specific geographic locations, including in California, Florida and Texas, three of our large markets, and may, depending upon the location and severity of such events, unfavorably impact our business continuity. Additionally, the amount of our hurricane, windstorm, earthquake, flood, business interruption or other casualty insurance we maintain from time to time may not be sufficient to entirely cover damages caused by any such event.
Progressive Leasing’s and Vive’s results depend on prominent presentation, integration, and support of their products and services by their POS partners.
Both Progressive Leasing and Vive depend on their respective POS partners to present and feature their products and services as payment options to consumers. Furthermore, POS partners integrate the Progressive Leasing and Vive platforms into their systems and provide ongoing support as their platforms improve over time. Progressive Leasing and Vive do not have any recourse against their respective POS partners if they do not prominently present, integrate or support their offerings as a payment option. The failure by Progressive Leasing’s and Vive’s POS partners to effectively present, integrate, and support their product and services would have a material and adverse effect on several aspects of our performance.
If we fail to promote, protect, and maintain our Progressive Leasing, Vive, and Four brands in a cost-effective manner, they may lose market share and several aspects of our performance may be materially and adversely affected.
We believe that developing, protecting and maintaining awareness of our Progressive Leasing, Vive and Four brands in a cost-effective manner is critical to our success. Successful promotion of our brands will depend largely on the effectiveness of our marketing efforts and the experience of POS partners as well as our customers. Additionally, the successful protection and maintenance of our brands will depend on our ability to obtain, maintain, protect, and enforce trademark and other intellectual property protections for our brands. If we fail to successfully promote, protect, and maintain our brands or if we incur substantial expenses in an unsuccessful attempt to promote, protect, and maintain our brands, Progressive Leasing, Vive or Four may lose their existing POS partners and customers to their competitors or be unable to attract new POS partners and customers. Any such loss of existing POS partners or customers, or inability to attract new POS partners or customers, may have an adverse effect on several aspects of our performance.
25


Progressive Leasing, Vive and Four may improve their products and services in ways that forego short-term gains.
Progressive Leasing, Vive and Four are constantly striving to improve the user experience for their customers. Some of their changes may have the effect of reducing their short-term revenue or profitability if they believe that the benefits will ultimately improve their financial performance over the long-term. Any short-term reductions in revenue or profitability may be more severe than they (or we) anticipate or these decisions may not produce the long-term benefits that they (or we) expect, in which case several aspects of our performance may be materially and adversely affected.
We may pursue acquisitions or strategic investments, and the failure of an acquisition or investment to produce the anticipated results or the inability to fully integrate an acquisition may have a material adverse impact on several aspects of our performance.
We may consider or undertake strategic acquisitions of, or material investments in, businesses, products, or technologies in the future. We may not be able to identify suitable acquisition or investment candidates, or even if we do identify suitable candidates, they may be difficult to finance, expensive to fund and there is no guarantee that we can obtain any necessary regulatory approvals or complete the transactions on terms that are favorable to us.
To the extent we pay the purchase price of any strategic acquisition or investment in cash, it may have an adverse effect on our financial condition; similarly, if the purchase price is paid with our stock, it may be dilutive to our shareholders. In addition, we may assume liabilities associated with a business acquisition or investment, including unrecorded liabilities that are not discovered at the time of the transaction, and the repayment or settlement of those liabilities may have an adverse effect on our financial condition.
We may not be able to successfully integrate the personnel, operations, businesses, products, or technologies of an acquisition or investment. Integration may be particularly challenging if we enter into a line of business in which we have limited experience and the business operates in a difficult legal, regulatory or competitive environment. We may find that we do not have adequate operations or expertise to manage the new business. The integration of any acquisition or investment may divert management’s time and resources from our core business, which may impair our relationships with our current employees, customers and strategic partners and disrupt our operations. Additionally, any acquisition or investment may expose us to increased information security risk as we integrate new systems that we may not be as familiar with or bring them in line with the requirements of our information security and business continuity programs. Acquisitions and investments also may not perform to our expectations for various reasons, including the loss of key personnel, customers or vendors. If we fail to integrate acquisitions or investments or realize the expected benefits, we may lose the return on these acquisitions or investments or incur additional transaction costs, and several aspects of our performance may be materially harmed as a result.
We are subject to sales, income and other taxes, which can be difficult and complex to calculate due to the nature of our businesses. A failure to correctly calculate and pay such taxes, or an unfavorable outcome on uncertain tax positions we may record from time to time, may result in substantial tax liabilities and a material adverse effect on several aspects of our performance.
The application of indirect taxes, such as sales tax, continues to be a complex and evolving issue, particularly with respect to the lease-to-own industry generally and our virtual lease-to-own business more specifically. Many of the fundamental statutes and regulations that impose these taxes were established before the growth of the lease-to-own industry and e-commerce and, therefore, in many cases it is not clear how existing statutes apply to our business. In addition, governments are increasingly looking for ways to increase revenues, which has resulted in discussions about tax reform and other legislative action to increase tax revenues, including through indirect taxes. This also may result in other adverse changes in or interpretations of existing sales, income and other tax regulations. For example, from time to time, some taxing authorities in the United States have notified us that they believe we owe them certain taxes imposed on transactions with our customers, including some state tax authorities suggesting that our virtual lease-to-own business may owe certain state taxes based on the locations of POS partners where our lease-to-own transactions are originated. Although these notifications have not resulted in material tax liabilities to date, there is a risk that one or more jurisdictions may be successful in the future, which may have a material adverse effect on several aspects of our performance. In addition, we may record uncertain tax positions from time to time, such as with respect to the deductibility of the FTC Settlement in April 2020. Any unfavorable outcome with respect to such uncertain tax positions also may have an adverse effect on several aspects of our performance.
26


Our ability to utilize certain types of contractual provisions designed to limit costly litigation, including class actions, may not be enforceable.
To attempt to limit costly and lengthy consumer, employee and other litigation, including class actions, Progressive Leasing and Vive require their customers and employees to sign arbitration agreements and class action waivers, many of which offer opt-out provisions. There can be no assurance that they will be successful in enforcing these provisions. If Progressive Leasing and Vive are not permitted to use arbitration agreements and/or class action waivers, or if the enforceability of such agreements and waivers is restricted or eliminated, they may incur increased costs to resolve legal actions brought by customers, employees and others, as they would be forced to participate in more expensive and lengthy dispute resolution processes.
Employee misconduct or misconduct by third parties acting on our behalf may harm us by subjecting us to monetary loss, significant legal liability, regulatory scrutiny and reputational harm.
Our reputation is critical to maintaining and developing relationships with our existing and potential customers and third parties with whom we do business. There is a risk that our employees or the employees of a POS partner with whom Progressive Leasing, Vive or Four does business, may engage in misconduct that adversely affects our reputation and business. For example, if one of our employees engages in discrimination or harassment in the workplace, or if an employee or a third-party directly or indirectly associated with our business were to engage in, or be accused of engaging in, illegal or suspicious activities including fraud or theft of our customers’ information, we may suffer direct losses from the activity and, in addition, we may be subject to regulatory sanctions and suffer serious harm to our reputation, financial condition, customer relationships and ability to attract future customers. Employee or third-party misconduct may prompt regulators to allege or to determine based upon such misconduct that we have not established adequate supervisory systems and procedures to inform employees of applicable rules or to detect violations of such rules. The precautions that we take to detect and prevent misconduct may not be effective in all cases. Misconduct by our employees or third-party contractors or other third parties who are directly or indirectly associated with our business, or even unsubstantiated allegations of misconduct, may result in a material adverse effect on our reputation and our business.
We may be unable to sufficiently obtain, maintain, protect, or enforce our intellectual property and other proprietary rights.
Intellectual property and other proprietary rights are important to the success of our business. Our ability to compete effectively is dependent in part upon our ability to obtain, maintain, protect, and enforce our intellectual property and other proprietary rights, including with respect to our proprietary technology, and to obtain licenses to use the intellectual property and proprietary rights of others. We rely on a combination of trademarks, service marks, copyrights, trade secrets, domain names, and agreements with employees and third parties to protect our intellectual property and other proprietary rights. Nonetheless, the steps we take to obtain, maintain, protect, and enforce our intellectual property and other proprietary rights may be inadequate and, despite our efforts to protect these rights, unauthorized employees or third parties, including our competitors, may duplicate, mimic, reverse engineer, access, obtain, or use the proprietary aspects of our technology, processes, products, or services without our permission. Our competitors and other third parties may also independently develop similar technology or otherwise duplicate or mimic our services or products such that we would not be able to successfully assert our intellectual property or other proprietary rights against them. We cannot assure that any future patent, trademark, or service mark registrations will be issued for our pending or future applications or that any of our current or future patents, copyrights, trademarks, or service marks (whether registered or unregistered) will be valid, enforceable, sufficiently broad in scope, provide adequate protection of our intellectual property or other proprietary rights, or provide us with any competitive advantage.
Our trademarks, trade names, and service marks have significant value, and our Progressive Leasing, Vive and Four brands are important factors in the marketing of their products and services. While we rely on both registrations and common law protections for our trademarks, we may be unable to prevent competitors or other third parties from acquiring or using trademarks, service marks, or other intellectual property or other proprietary rights that are similar to, infringe upon, misappropriate, dilute, or otherwise violate or diminish the value of our trademarks and service marks and our other intellectual property and proprietary rights. The value of our intellectual property and other proprietary rights may diminish if others assert rights in or ownership of our intellectual property or other proprietary rights, or in trademarks or service marks that are similar to our trademarks or service marks.
In addition, we cannot guarantee that we have entered into agreements containing obligations of confidentiality with each party that has or may have had access to proprietary information, know-how, or trade secrets owned or held by us. Moreover, our contractual arrangements may be breached or may otherwise not effectively prevent disclosure of, or control access to, our confidential or otherwise proprietary information or provide an adequate remedy in the event of an unauthorized disclosure. The measures we have put in place may not prevent misappropriation, infringement, or other violation of our intellectual property or other proprietary rights or information and any resulting loss of competitive advantage, and we may be required to litigate to protect our intellectual property or other proprietary rights or information from misappropriation, infringement, or other violation by others, which is expensive, may cause a diversion of resources, and may not be successful, even when our rights have been infringed, misappropriated, or otherwise violated. Our efforts to enforce our intellectual property and other
27


proprietary rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property and other proprietary rights, and if such defenses, counterclaims, or countersuits are successful, it may diminish or we may otherwise lose valuable intellectual property and other proprietary rights.
Furthermore, third parties may challenge, invalidate, or circumvent our intellectual property and proprietary rights, including through administrative processes or litigation. The legal standards relating to the validity, enforceability, and scope of protection of intellectual property and other proprietary rights are uncertain and still evolving. Our intellectual property and other proprietary rights may not be sufficient to provide us with a competitive advantage and the value of our intellectual property and other proprietary rights may also diminish if others assert rights therein or ownership thereof, and we may be unable to successfully resolve any such conflicts in our favor or to our satisfaction.
We may be sued by third parties for alleged infringement, misappropriation, or other violation of their intellectual property or other proprietary rights.
Our success depends, in part, on our ability to develop and commercialize our products and services without infringing, misappropriating, or otherwise violating the intellectual property or other proprietary rights of third parties. We may become involved in disputes from time to time concerning intellectual property or other proprietary rights of third parties, which may relate to our own proprietary technology, or to technology that we acquire or license from third parties, and we may not prevail in these disputes. Relatedly, competitors or other third parties may raise claims alleging that service providers or other third parties retained or indemnified by us, infringe on, misappropriate, or otherwise violate such competitors’ or other third parties’ intellectual property or other proprietary rights. These claims of infringement, misappropriation, or other violation may be extremely broad, and it may not be possible for us to conduct our operations in such a way as to avoid all such alleged violations of such intellectual property or other proprietary rights. We also may be unaware of third-party intellectual property or other proprietary rights that cover or otherwise relate to some or all of our products and services.
Given the complex, rapidly changing, and competitive technological and business environment in which we operate, and the potential risks and uncertainties of intellectual property-related litigation, a claim of infringement, misappropriation, or other violation against us may require us to spend significant amounts of time and other resources to defend against the claim (even if we ultimately prevail), pay significant money damages, lose significant revenues, be prohibited from using the relevant systems, processes, technologies, or other intellectual property (temporarily or permanently), cease offering certain products or services, obtain a license, which may not be available on commercially reasonable terms or at all, or redesign our products or services or functionality therein, which may be costly, time-consuming, or impossible.
Some of the aforementioned risks of infringement, misappropriation or other violation, in particular with respect to patents, are potentially increased due to the nature of our business, industry, and intellectual property portfolio. For instance, it has become common in recent years for certain third parties to purchase patents or other intellectual property assets for the sole purpose of making claims of infringement, misappropriation, or other violation in an attempt to extract settlements from companies such as ours. Relatedly, we do not currently have any patents, and thus, do not have a patent portfolio, which could otherwise assist us in deterring patent infringement claims from competitors, through our ability to bring patent infringement counterclaims using our own patents. In addition to the previously mentioned impacts of intellectual property-related litigation, while in some cases a third party may have agreed to indemnify us for costs associated with intellectual property-related litigation, such indemnifying third party may refuse or be unable to uphold its contractual obligations. In other cases, our insurance may not cover potential claims of this type adequately or at all, and we may be required to pay monetary damages, which may be significant.
Some aspects of Progressive Leasing’s, Vive’s and Four's platforms include open source software, and their use of open source software may negatively affect several aspects of our performance.
Some aspects of Progressive Leasing’s, Vive’s and Four’s platforms include software covered by open source licenses. The terms of various open source licenses have not been interpreted by United States courts, and there is a risk that such licenses may be construed in a manner that imposes unanticipated conditions or restrictions on Progressive Leasing’s, Vive’s and Four’s platforms. In such an event, either or both of them may be required to re-engineer all or a portion of their technologies, seek licenses from third parties in order to continue offering their products and services, discontinue the use of their platforms in the event re-engineering cannot be accomplished, or otherwise be limited in the licensing of their technologies, each of which may reduce or eliminate the value of their technologies and products and services. If portions of Progressive Leasing’s, Vive’s and Four’s proprietary software are determined to be subject to an open source license, they may also be required to, under certain circumstances, publicly release or license, at no cost, their products and services that incorporate the open source software or the affected portions of their source codes, which may allow our competitors or other third parties to create similar products and services with lower development effort, time, and costs, and may ultimately result in a loss of transaction volumes for each of Progressive Leasing, Vive and Four. We cannot ensure that Progressive Leasing, Vive and Four have not incorporated open source software in their software in a manner that is inconsistent with the terms of the applicable license or their current policies, and they may inadvertently use open source in a manner that they (and we) do not intend or that may expose them (or
28


us) to claims for breach of contract or intellectual property infringement, misappropriation, or other violation. If Progressive Leasing, Vive or Four fail to comply, or are alleged to have failed to comply, with the terms and conditions of their open source licenses, they may be required to incur significant legal expenses defending such allegations, be subject to significant damages, be enjoined from the sale of their products and services, and be required to comply with onerous conditions or restrictions on their products and services, any of which may be materially disruptive to our business.
In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software because open source licensors generally do not provide warranties or other contractual protections regarding infringement, misappropriation, or other violations, the quality of code, or the origin of the software. Many of the risks associated with the use of open source software cannot be eliminated and may adversely affect several aspects of our performance. For instance, open source software is often developed by different groups of programmers outside of our control that collaborate with each other on projects. As a result, open source software may have security vulnerabilities, defects, or errors of which we are not aware. Even if we become aware of any security vulnerabilities, defects, or errors, it may take a significant amount of time for either us or the programmers who developed the open source software to address such vulnerabilities, defects, or errors, which may negatively impact our products and services, including by adversely affecting the market’s perception of Progressive Leasing’s, Vive’s and/or Four’s products and services, impairing the functionality of their products and services, delaying the launch of new products and services, or resulting in the failure of their products and services, any of which may result in liability to them (and us).
Progressive Leasing’s and Vive’s results are somewhat seasonal, which causes our results to fluctuate.
Progressive Leasing’s leasing business and Vive’s consumer lending business typically experience reduced demand in the first and second quarters as a result of their customers’ receipt of federal tax refund checks typically in February of each year. Demand at both businesses is generally greatest during the fourth quarter. Also, demand for retail merchandise is seasonally higher in the fourth quarter associated with holiday shopping, which typically causes Progressive Leasing and Vive to experience seasonal growth in GMV in the fourth quarter of each year due to lease and loan balance growth. Lease revenue and interest income is the highest in the first quarter of each year due to the typical increased payment activity associated with tax refund proceeds often received by customers in the first quarter. This seasonality requires the Company to manage its cash flows over the course of the year.
In addition, and as discussed above, if federal, state or local governmental authorities pursue economic stimulus actions or issue additional tax refunds, tax credits or other statutory payments at other times during the year, such actions may have a material adverse effect on the Company’s results of operations, financial condition, and prospects during such periods.
Vive's and Four's allowance for loan losses may prove to be insufficient to cover losses on outstanding loans.
Each of Vive and Four maintains an allowance for loan losses that we believe is appropriate at December 31, 2022. Each of Vive and Four estimates its allowance for loan losses in accordance with ASU 2016-13, Measurement of Credit Losses on Financial Instruments ("CECL"), which requires the recognition of all expected credit losses over the life of the loan based on historical experience, current conditions and reasonable and supportable forecasts. The process for establishing the allowance for loan losses is critical to our results of operations and financial condition, and requires complex models and judgments, including forecasts of economic conditions and other qualitative factors. Changes in economic conditions affecting our customers, new information regarding our loans and other factors, both within and outside of our control, may require an increase in the allowance for credit losses. We may underestimate our expected losses and fail to maintain an allowance for credit losses sufficient to account for these losses. In cases where we modify a loan, if the modified loans do not perform as anticipated, we may be required to establish additional allowances on these loans.
Given the significant judgment used in estimating the allowance for loan losses, Vive's and Four’s loan loss reserves may not be sufficient to cover actual losses. Future increases in the allowances for credit losses or actual write-offs will result in a decrease in net earnings and may have a material adverse effect on our business, results of operations and financial condition.
Risks Related to Our Indebtedness
We may not be able to generate sufficient cash to service all of our indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
Our ability to make scheduled payments on or refinance our debt obligations, including the Senior Notes, depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness, including the Senior Notes.
29


If our cash flows and capital resources are insufficient to fund our debt service obligations, we may face substantial liquidity problems and may be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The Revolving Facility and the indenture that governs the Senior Notes restrict our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due.
In addition, we conduct our operations through our subsidiaries. Accordingly, repayment of our indebtedness is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend, debt repayment or otherwise. Unless they are guarantors of the Senior Notes or our other indebtedness, our subsidiaries do not have any obligation to pay amounts due on the senior notes or our other indebtedness or to make funds available for that purpose. Our subsidiaries may not be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our indebtedness. Each subsidiary is a distinct legal entity, and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. While the indenture that governs the senior notes and the Revolving Facility limit the ability of our subsidiaries to incur consensual restrictions on their ability to pay dividends or make other intercompany payments to us, these limitations are subject to qualifications and exceptions. In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness.
Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability to satisfy our obligations under our Senior Notes and Revolving Facility.
If we cannot make scheduled payments on our debt, we will be in default and holders of the Senior Notes may declare all outstanding principal and interest to be due and payable, the lenders under the Revolving Facility may terminate their commitments to loan money and we may be forced into bankruptcy or liquidation.
Despite our current level of indebtedness, we and our subsidiaries may still be able to incur substantially more debt. This may further exacerbate the risks to our financial condition described above.
We and our subsidiaries may be able to incur significant additional indebtedness in the future. Although the indenture that governs the Senior Notes and the Revolving Facility contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions may be substantial. These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness. As of December 31, 2022, we would have had undrawn commitments available to be borrowed under the Revolving Facility of up to $350.0 million. We also would have had available to us an uncommitted incremental facility under the Revolving Facility of up to $300.0 million, with availability subject to satisfaction of certain conditions. If new debt is added to our current debt levels, the related risks that we and our subsidiaries now face may intensify.
The terms of the Revolving Facility and the indenture that governs the Senior Notes may restrict our current and future business plans and strategies, particularly our ability to respond to changes or to take certain actions.
The indenture that governs the Senior Notes and the Revolving Facility contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit the extent to which, or our ability to, engage in acts that may be in our long-term best interest, including restrictions on our ability to:
incur additional indebtedness and guarantee indebtedness;
pay dividends or make other distributions or repurchase or redeem capital stock;
prepay, redeem or repurchase certain debt;
issue certain preferred stock or similar equity securities;
make loans and investments;
sell assets;
incur liens;
enter into transactions with affiliates;
alter the businesses we conduct;
enter into agreements restricting our subsidiaries’ ability to pay dividends; and
consolidate, merge or sell all or substantially all of our assets.
30


In addition, the restrictive covenants in the Revolving Facility require us to maintain specified financial ratios, such as a consolidated interest coverage ratio and a total net debt to EBITDA ratio, and satisfy other financial condition tests. Our ability to meet those financial ratios and tests can be affected by events beyond our control, and we may be unable to meet them. A breach of the covenants or restrictions under the indenture that governs the Senior Notes or under the Revolving Facility may result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the Revolving Facility would permit the lenders under our Revolving Facility to terminate all commitments to extend further credit under that facility. In the event our lenders or noteholders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness. As a result of these restrictions, we may be:
limited in how we conduct our business;
unable to raise additional debt or equity financing to operate during general economic or business downturns, or at other times; or
unable to compete effectively or to take advantage of new business opportunities.
These restrictions may affect our ability to grow in accordance with our strategy. In addition, our financial results, our substantial indebtedness and our credit ratings may adversely affect the availability and terms of our financing.
Our variable rate indebtedness subjects us to interest rate risk, which may cause our debt service obligations to increase significantly.
Borrowings under our Revolving Facility are at variable rates of interest and expose us to interest rate risk. If interest rates were to increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. Assuming all loans are fully drawn, each quarter point change in interest rates would result in a $0.9 million change in annual interest expense on our indebtedness under our Revolving Facility. In the future, we may enter into interest rate swaps that involve the exchange of floating for fixed rate interest payments in order to reduce interest rate volatility. However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk.
Risks Related to the Spin-Off of The Aaron’s Company, Inc.
General
On November 30, 2020, we consummated the spin-off (the "Spin-Off") of The Aaron’s Company, Inc. ("The Aaron’s Company"), an omnichannel provider of lease-purchase solutions through its company-operated and franchised stores in the United States, Canada and Puerto Rico.
In connection with the Spin-Off, The Aaron’s Company agreed to indemnify us for certain liabilities, and we agreed to indemnify The Aaron’s Company for certain liabilities. If we are required to make payments to The Aaron’s Company under these indemnities, our financial results may be negatively impacted. The Aaron’s Company indemnity may not be sufficient to hold us harmless from the full amount of liabilities for which Aaron’s will be allocated responsibility, and The Aaron’s Company may not be able to satisfy its indemnification obligations in the future.
Pursuant to our separation agreement and certain other agreements with The Aaron’s Company, The Aaron's Company agreed to indemnify us for certain liabilities, and we agreed to indemnify The Aaron’s Company for certain liabilities, in each case for uncapped amounts. Third parties may also seek to hold us responsible for any of the liabilities that The Aaron’s Company has agreed to retain. Any amounts we are required to pay pursuant to these indemnification obligations and other liabilities may require us to divert cash that would otherwise have been used in furtherance of operating our business and implementing our strategic plan. Further, the indemnity from The Aaron’s Company may not be sufficient to protect us against the full amount of such liabilities, and The Aaron’s Company may not be able to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in recovering from The Aaron’s Company any amounts for which we are held liable, we may be temporarily required to bear those losses ourselves. Each of these risks may negatively affect several aspects of our performance.
If the Spin-Off, together with certain related transactions, does not qualify as a transaction that is generally tax free for U.S. federal income tax purposes, our Company or our shareholders may be subject to significant tax liabilities.
It was a condition to the distribution that we received an opinion of counsel regarding the qualification of the Spin-Off, together with certain related transactions, as a transaction that is generally tax free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code. The opinion of counsel was based upon and relied on, among other things, certain facts and
31


assumptions, as well as certain representations, statements and undertakings of us and Aaron’s, including those relating to the past and future conduct of us and The Aaron’s Company. If any of these representations, statements or undertakings are, or become, inaccurate or incomplete, or if we or The Aaron’s Company breaches any of the covenants in the Spin-Off documents, the opinion of counsel may be invalid and the conclusions reached therein may be jeopardized.
Notwithstanding the opinion of counsel, the Internal Revenue Service ("IRS") may determine that the Spin-Off, together with certain related transactions, should be treated as a taxable transaction if it determines that any of the representations, assumptions or undertakings upon which the opinion of counsel was based are false or have been violated, or if it disagrees with the conclusions in the opinion of counsel. The opinion of counsel is not binding on the IRS and there can be no assurance that the IRS will not assert a contrary position.
If the Spin-Off, together with certain related transactions, fails to qualify as a transaction that is generally tax-free, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) of the Code, in general, we would recognize taxable gain as if we had sold the The Aaron’s Company common stock in a taxable sale for its fair market value and our shareholders who received Aaron’s shares in the Spin-Off would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares.
Potential liabilities in connection with the Spin-Off may arise under fraudulent conveyance and transfer laws and legal capital requirements.
With respect to the Spin-Off, if either we or The Aaron’s Company subsequently fails to pay our creditors or enter insolvency proceedings, the transaction may be challenged under U.S. federal, U.S. state and foreign fraudulent conveyance and transfer laws, as well as legal capital requirements governing distributions and similar transactions. If a Court were to determine under these laws that the transaction in question failed to satisfy applicable legal capital requirements, the Court may determine that the Spin-Off was voidable, in whole or in part. Subject to various defenses, the Court could then require us or The Aaron’s Company, or other recipients of value in connection with the Spin-Off (potentially including recipients of shares of The Aaron’s Company common stock in connection with the Spin-Off), as the case may be, to turn over value to other entities involved in the Spin-Off and contemplated transactions for the benefit of unpaid creditors. The measure of insolvency and applicable legal capital requirements will vary depending upon the jurisdiction whose law is being applied.
General Risk Factors
Our stock price is volatile, and you may not be able to recover your investment if our stock price declines.
The stock market in general, and our stock in particular, has recently experienced significant volatility and the price of our stock may continue to fluctuate significantly. In particular, we cannot assure that you will be able to resell your shares at or above your purchase price. Among the factors that may affect our stock price are:
how our actual financial performance compares to the financial performance outlook we provide;
quarterly variations in our key operating metrics, such as revenue, active customer count, GMV and profitability that are not necessarily indicative of longer-term operating performance and valuation;
the stock price performance of comparable companies and quarterly variations in their results of operations;
changes in earnings estimates or buy/sell recommendations by securities or industry analysts;
investor perceptions of us and our industry;
federal, state or local regulatory proposals, initiatives, actions or changes that are, or are perceived to be, adverse to our operations, including any continuing impacts of the FTC Settlement as discussed above;
actions by institutional and "activist" shareholders, including future purchases and sales of our stock;
our capital allocation strategy and financial policies, including continued share repurchases under our current share repurchase program as discussed above;
additions or departures of key personnel;
continuing unpredictable macro-economic conditions, in particular those relating to the COVID-19 pandemic, rapidly increasing inflation and higher interest rates.
In the past, following periods of volatility in the market price of a company’s securities, class action litigation has often been instituted against the affected company. Any litigation of this type brought against us may result in substantial costs and a diversion of our management’s attention and resources, which would harm our business, results of operations, financial condition, and cash flows.
32


If we fail to establish and maintain effective internal control over financial reporting and disclosure controls and procedures, we may not be able to accurately report our financial results, or report them in a timely manner.
As a public company, we are required to document and test our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 so that our management can certify, on an annual basis, that our internal control over financial reporting is effective. In addition, we are required to, among other things, establish and periodically evaluate procedures with respect to our disclosure controls and procedures.
If we fail to establish and maintain effective internal control over financial reporting and disclosure controls and procedures, we may not be able to accurately report our financial results, or report them in a timely manner, which may cause a decline in our stock price and adversely affect several aspects of our performance. In addition, if our senior management is unable to conclude that we have effective internal control over financial reporting, or to certify the effectiveness of such controls, or if our independent registered public accounting firm cannot render an unqualified opinion on the effectiveness of our internal control over financial reporting, when required, or if material weaknesses in our internal controls are identified, we may be subject to increased regulatory scrutiny and a loss of public and investor confidence, which may also have a material adverse effect on our business and our stock price.
Our risk management processes and procedures may not be effective in mitigating our risks.
We continue to establish and enhance processes and procedures intended to identify, measure, monitor, manage and control the types of risk to which we are subject, including, but not limited to, decisioning risks related to the leases and loans Progressive Leasing, Vive and Four originate, strategic risk, regulatory risk and operational risk. We seek to monitor, manage and control our risk exposure through a framework that includes our risk appetite, enterprise risk assessment process, risk policies, procedures and controls, reporting requirements, risk culture and governance structure. Our framework, however, may not always effectively identify and control our risks. In addition, there may also be risks that exist, or that develop in the future, that we have not appropriately anticipated, identified or mitigated. If our risk management framework does not effectively identify, manage and control our risks, both those we are aware of and those we do not anticipate, including as a result of changes in economic conditions, we may suffer unexpected losses that may have a material and adverse effect on several aspects of our performance.
If securities or industry analysts publish research that is unfavorable about our business, our stock price and trading volume may decline.
As described above, the trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about our business. We currently have a limited number of analysts who are publishing research about us. In the event that one or more of our analysts downgrades our stock or publishes misleading or unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of the Company, demand for our stock may decrease, which may cause our stock price or trading volume to decline.
Our actual operating results may differ significantly from our guidance.
From time to time, we issue guidance in our quarterly earnings conference calls, or otherwise, regarding our future performance that represents our management’s estimates as of the date of release. This guidance, which constitutes forward-looking statements, is based upon a number of management's assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control, and are based upon specific assumptions with respect to future business decisions, some of which will change. While we have stated and we intend to continue to state possible outcomes as high and low ranges that are intended to provide a sensitivity analysis as variables change, we can provide no assurances that actual results will not fall outside of the suggested ranges.
The principal reason we release guidance is to provide a basis for our management to discuss our business outlook with analysts and investors. We do not accept any responsibility for any projections or reports published by any of these persons.
Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the guidance furnished by us will prove to be incorrect or will vary significantly from actual results. For example, on a number of occasions over the last several years, we adjusted our guidance when actual results varied from our assumptions. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of release. Actual results will vary from our guidance, and the variations may be material.
33


We are not currently paying any dividends on our common stock. As a result, unless our Board of Directors determines to begin paying dividends, shareholders will need to sell their shares of common stock to receive any income or realize a return on their investment.
We are not currently paying any dividends on our common stock. Any declaration and payment of future dividends to holders of our common stock may be limited by the provisions of Georgia law, among other considerations. 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 deem relevant. As a result, unless our Board of Directors determines to begin paying dividends, our shareholders will need to sell their shares of common stock to receive any income or realize a return on their investment.
We are a holding company and are dependent on the operations and funds of our subsidiaries.
As a holding company, we are dependent on dividends, distributions and other payments from our subsidiaries, particularly Progressive Leasing, (i) to fund payments on our obligations, including debt obligations, (ii) to provide funding and capital as needed to our operating subsidiaries, and (iii) to repurchase shares and pay dividends, to the extent our Board of Directors approves them.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
The Company leases call center space, and management and information technology space for corporate functions under operating leases expiring at various times through 2027. Most of the leases contain renewal options for additional periods ranging from three to five years. The following table sets forth certain information regarding our corporate and segment management, and significant call center facilities as of December 31, 2022:
LOCATIONSEGMENT, PRIMARY USE AND HOW HELDSQ. FT.
Draper, UtahProgressive Leasing and Vive—Corporate Management/Call Center – Leased 148,000 
Glendale, Arizona1
Progressive Leasing—Corporate Management/Call Center – Leased 69,000 
Draper, Utah2
Vive—Corporate Management/Call Center – Leased25,000 
1During 2022, the call center office space in Arizona was consolidated to a single floor as part of the Company's restructuring initiatives and partial impairment was recognized for the abandoned portion of the right-of-use lease asset. The existing lease agreement expires in March 2025.
2Vive's corporate headquarters were relocated to the Company's corporate office building as part of the restructuring initiatives during 2022. The existing lease agreement expires in June 2023 and the associated right-of-use lease asset was fully impaired in 2022.
We believe that all of our facilities are well maintained and adequate for their current and reasonably foreseeable uses.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we are party to various legal proceedings arising in the ordinary course of business. While any proceeding contains an element of uncertainty, we do not currently believe that any of the outstanding legal proceedings to which we are a party will have a material adverse impact on our business, financial position or results of operations. However, an adverse resolution of a number of these items may have a material adverse impact on our business, financial position or results of operations. For further information, see Note 11 in the accompanying consolidated financial statements under the heading "Legal Proceedings," which discussion is incorporated by reference in response to this Item 3.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
34


PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information, Holders and Dividends
Effective December 1, 2020, all shares of the Company's common stock were trading as a single class on the New York Stock Exchange ("NYSE") under the ticker symbol "PRG." The CUSIP number of the Company's common stock is 74319R101.
The number of shareholders of record of the Company's common stock at February 17, 2023 was 483. The closing price for the common stock at February 17, 2023 was $23.42.
We do not currently anticipate paying any dividends on our common stock. Any declaration and payment of future dividends to holders of our common stock may be limited by the provisions of Georgia law, among other considerations. The future payment of dividends, if permitted, will be at the sole discretion of our Board of Directors and will depend on many factors, including our earnings, financial condition, and other considerations that our Board of Directors deems relevant.
Issuer Purchases of Equity Securities
The following table presents our share repurchase activity for the three months ended December 31, 2022:
PeriodTotal Number of Shares PurchasedAverage Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs1
October 1, 2022 through October 31, 2022125,000 16.55 125,000 $371,444,470 
November 1, 2022 through November 30, 20221,882,976 17.92 1,882,976 337,707,705 
December 1, 2022 through December 31, 202224,629 17.52 24,629 337,276,089 
Total2,032,605 2,032,605 
1 Share repurchases are conducted under authorizations made from time to time by the Company’s Board of Directors. The authorization, effective November 3, 2021, provided the Company with the ability to repurchase shares up to a maximum amount of $1.0 billion. Subject to the terms of the Board's authorization and applicable law, repurchases may be made at such times and in such amounts as the Company deems appropriate. Repurchases may be discontinued at any time.
Securities Authorized for Issuance Under Equity Compensation Plans
Information concerning the Company's equity compensation plans is set forth in Item 12 of Part III of this Annual Report on Form 10-K.

35


Performance Graph
Comparison of 5 Year Cumulative Total Return*
Among PROG Holdings, Inc., the S&P Midcap 400 Index, S&P 400 Retailing Index, S&P North American Technology Sector Index, and S&P Smallcap 600 Index
https://cdn.kscope.io/5aded3f4d071f9db5a2343731ecac526-prg-20221231_g3.jpg
*$100 invested on 12/31/17 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
The line graph above and the table below compare, for the last five years, the yearly dollar change in the cumulative total shareholder returns (assuming reinvestment of dividends) on the Company's common stock with that of the S&P Midcap 400 Index, S&P North American Technology Sector Index, S&P 400 Retailing Index, and the S&P Smallcap 600 Index. The Company was previously included in the S&P Midcap 400 Index, but moved to the S&P Smallcap 600 Index in April 2022. The spin-off of The Aaron's Company on November 30, 2020 was reflected as a $9.60 per share special dividend in calculating the PROG Holdings cumulative total shareholder return. Shareholders of PROG Holdings received one share of The Aaron's Company for every two shares of PROG Holdings common stock in the distribution related to the separation and spin-off. The $9.60 per share special dividend was based on the November 30, 2020 closing price of one share of The Aaron's Company common stock, on a "when issued" basis, which was $19.19, adjusted for the distribution ratio.
December 31,201720182019202020212022
PROG Holdings, Inc.$100.00 $105.81 $144.06 $157.32 $131.74 $49.33 
S&P Midcap 400100.00 88.92 112.21 127.54 159.12 138.34 
S&P 400 Retailing Index100.00 93.05 104.12 160.25 195.30 145.42 
S&P North American Technology Sector Index100.00 102.88 146.79 213.07 269.33 174.09 
S&P Smallcap 600100.00 91.52 112.37 125.05 158.59 133.06 
36


ITEM 6. [RESERVED]
Not applicable.
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 the 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 97% of our consolidated revenues for the year ended December 31, 2022.
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, 2022.
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 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, 2022 as its financial results are not material to the Company's consolidated financial results. Four's financial results are reported within "Other" for segment reporting purposes.
Separation and Distribution of the Aaron's Business Segment
On November 30, 2020, PROG Holdings (previously "Aaron's Holdings Company, Inc.") completed the separation of its Aaron's Business segment from its Progressive Leasing and Vive segments. The separation was effected through a tax-free distribution of all outstanding shares of common stock of The Aaron's Company, Inc. ("The Aaron's Company") to the PROG Holdings shareholders of record as of the close of business on November 27, 2020 (referred to as the "separation and distribution transaction"). Through that distribution, shareholders of PROG Holdings received one share of The Aaron's Company for every two shares of PROG Holdings common stock. Upon completion of the separation and distribution transaction on November 30, 2020, The Aaron's Company became an independent, publicly traded company under the symbol "AAN" on the New York Stock Exchange, while PROG Holdings continued to be listed on the New York Stock Exchange under the new symbol "PRG".
Prior to the separation and distribution transaction, the Company's operating segments were Progressive Leasing, the Aaron's Business, and Vive. All direct revenues and expenses of the Aaron's Business operations have been classified within discontinued operations, net of income tax, within our consolidated statements of earnings (loss) through the separation and distribution date of November 30, 2020. Certain corporate expenses that have previously been reported as expenses of the Aaron's Business segment in 2020 did not qualify for classification within discontinued operations and are reported as unallocated corporate expenses for segment purposes within continuing operations. These unallocated corporate expenses are in addition to corporate overhead costs allocated to the Progressive Leasing and Vive segments through the separation and distribution date of November 30, 2020.
37


Macroeconomic and Business Environment
The Company continues to operate in a challenging macroeconomic environment. The rapid increase in the rate of inflation during 2022, particularly in gas, food, and housing costs, which we believe disproportionately negatively affects the customers we serve and therefore our customers' ability to make the payments they owe to the Company, has resulted in an unfavorable impact on our lease portfolio performance and Gross Merchandise Volume ("GMV") during 2022. Customer payment delinquencies and uncollectible renewal payments experienced within our Progressive Leasing segment during much of 2022 significantly exceeded levels experienced during pre-pandemic periods. In response to increasing customer delinquencies and higher write-offs, Progressive Leasing tightened its lease decisioning several times during 2022, resulting in fewer lease approvals and an adverse impact on GMV. Levels of customer payment delinquencies and uncollectible renewal payments for leases originated after Progressive Leasing further tightened its lease decisioning in mid-2022 improved to levels consistent with pre-pandemic lease portfolio performance. The relatively high levels of customer payment delinquencies and related write-offs experienced during the year ended December 31, 2022 related to leases originated prior to the Company's further tightening of its lease decisioning in mid-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. Furthermore, increasing unemployment rates and/or a U.S. recession may result in increasing levels of customer payment delinquencies and related write-offs, which would result in an unfavorable impact on our performance.
The significant increase in inflation and interest rates, and fears of a possible recession 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. 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 during the second and third quarters of 2022 to drive efficiencies and right-size variable costs, while attempting to minimize the negative impact on growth-related initiatives.
COVID-19 Pandemic. The COVID-19 pandemic has negatively impacted the global economy in recent years, including the businesses and operations of our POS partners and our own businesses. For example, 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 closing showrooms and/or reducing the hours and scope of operations of their showrooms, 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 unfavorably impacted many of our POS partners during the first half of 2022, including supply chain disruptions resulting in shortages of available products at certain POS partners, primarily in appliances, electronics and furniture categories. Those and other pandemic-related developments, may adversely impact Progressive Leasing's generation of new lease agreements, Vive's generation of new loans, and our results of operations, financial condition, cash flow and/or liquidity in future periods.
The extent of any such adverse, pandemic-related impacts will depend on future developments, which are highly uncertain and cannot be predicted, including, for example, the emergence of more contagious and harmful variants of COVID-19, and localized outbreaks or additional waves of COVID-19 cases and the impact of any such outbreaks on our customers, POS partners, and employees.
We believe pandemic-related government stimulus payments and enhanced unemployment benefits and child tax credits provided in 2020 and 2021 provided economic support to many of our customers, resulting in an increase in payment activity and early lease buyouts despite the economically challenging environment, as well as lease merchandise, accounts receivable, and loan receivable write-offs trending lower during 2020 and 2021. In turn, we further believe that the expiration of the government stimulus payments, enhanced unemployment benefits and child tax credits that were implemented in response to the COVID-19 pandemic also contributed to unfavorable results of operations in 2022 as compared to 2021.
38


Highlights
The following summarizes significant highlights from the year ended December 31, 2022:
We reported revenues of $2.6 billion in 2022, a decrease of 3.0% compared to 2021. The decrease in revenues was primarily due to lower GMV as described below, an increase in customer payment delinquencies and uncollectible renewal payments, tightening of lease decisioning beginning in mid-2022 resulting in fewer lease originations, and a decrease in customers exercising early lease buyout options, as compared to the strong customer payment activity and low delinquencies we experienced in 2021.
GMV decreased by $167.2 million for Progressive Leasing and $21.1 million for Vive in 2022, compared to 2021. These decreases were due to tighter lease and loan decisioning, resulting in fewer lease and loan originations, 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 2021. These negative impacts were partially offset by a $13.0 million increase in Progressive Leasing GMV generated through e-commerce platforms. In 2022, e-commerce GMV represented 17.2% of Progressive Leasing's total GMV, compared to 15.2% in 2021. GMV from our other operations increased by $51.8 million resulting from the growth in loan originations by our Four business during 2022.
Earnings before income tax expense decreased to $148.2 million compared to $328.2 million in 2021. The decrease was primarily driven by an overall decline in revenues as discussed above. The decrease was also driven by an increase of $66.9 million in the provision for lease merchandise write-offs, as a result of higher customer payment delinquencies and write-offs in 2022, as compared to the strong customer payment activity and historically low lease merchandise write-offs we experienced during 2021. The decrease was further driven by an increase of $23.6 million in the provision for loan losses due to higher loan write-offs during 2022 and the recognition of estimated credit losses as of December 31, 2022, resulting from unfavorable forecasted macroeconomic conditions. Other factors contributing to the decrease were a $32.1 million increase in interest expense related to the Senior Notes issued in November 2021, a $19.8 million increase in sales, general, and administrative expenses, and a $10.2 million goodwill impairment loss related to Four.
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 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. GMV for Vive and Other are defined as gross loan originations.
The following table presents our GMV for the Company for the years presented:
For the Year Ended December 31 (Unaudited and In Thousands)202220212020
Progressive Leasing$1,976,794 $2,143,948 $1,851,308 
Vive178,002 199,139 130,751 
Other60,459 8,651 — 
Total GMV$2,215,255 $2,351,738 $1,982,059 
The decrease in Progressive Leasing's and Vive's GMV was primarily due to our tighter lease and loan decisioning to address the unfavorable economic conditions that were present in 2022, resulting in fewer lease and loan approvals; the rapid increase in the rate of inflation, which eroded customers' disposable incomes and 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 2021. We believe all of these factors have unfavorably impacted the generation of new leases and loans. The decrease in Progressive Leasing's GMV from those factors was partially offset by a $13.0 million increase in GMV generated through e-commerce platforms. E-commerce channels generated 17.2% of Progressive Leasing's GMV in 2022 compared to 15.2% in 2021. The decrease in total GMV was also partially offset by an increase in GMV from our other operations, primarily due to an increase in loan originations by our Four business.
39


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 Four. 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 years presented:
As of December 31 (Unaudited)202220212020
Active Customer Count:
Progressive Leasing943,000 1,044,000 970,000 
Vive92,000 88,000 66,000 
Other39,000 18,000 — 
Total Active Customer Count1,074,000 1,150,000 1,036,000 
The decrease in the number of Progressive Leasing customers in 2022 compared to 2021 was primarily due to a decrease in customer demand for the types of merchandise typically purchased through our lease-to-own solutions and the tightening of our lease decisioning to address the unfavorable economic conditions that were present during 2022. The increase in the number of Vive customers was primarily driven by the growth in loan originations we experienced in 2021. The increase in customers from our other operations is driven primarily by the continued growth in loan originations from our Four business.
Key Components of Earnings from Continuing Operations Before Income Tax Expense
In this MD&A section, we review our consolidated results. For the year ended December 31, 2022 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 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, bank service charges, the provision for loan losses, fixed asset depreciation expense, intangible asset amortization, and restructuring, 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.
Separation Related Charges. Separation related charges include stock-based compensation expense and retirement charges associated with the separation of the Aaron's Business segment. Refer to Note 2 of the accompanying consolidated financial statements for further discussion of the separation and distribution of the Aaron's Business segment.
Interest Expense, Net. Interest expense, net consists of interest expense 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.
40


Results of Operations
Results of Operations – Years Ended December 31, 2022 and 2021
  Change
 Year Ended December 31,2022 vs. 2021
(In Thousands)20222021$%
REVENUES:
Lease Revenues and Fees$2,523,785 $2,619,005 $(95,220)(3.6)%
Interest and Fees on Loans Receivable74,041 58,915 15,126 25.7 
2,597,826 2,677,920 (80,094)(3.0)
COSTS AND EXPENSES:
Depreciation of Lease Merchandise
1,757,730 1,820,010 (62,280)(3.4)
Provision for Lease Merchandise Write-offs193,926 126,984 66,942 52.7 
Operating Expenses450,374 397,399 52,975 13.3 
Impairment of Goodwill10,151 — 10,151 nmf
2,412,181 2,344,393 67,788 2.9 
OPERATING PROFIT185,645 333,527 (147,882)(44.3)
Interest Expense, Net(37,401)(5,323)(32,078)nmf
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE148,244 328,204 (179,960)(54.8)
INCOME TAX EXPENSE 49,535 84,647 (35,112)(41.5)
NET EARNINGS$98,709 $243,557 $(144,848)(59.5)%
nmf—Calculation is not meaningful
41


Revenues
Information about our revenues by source and reportable segment is as follows: 
 Year Ended December 31, 2022Year Ended December 31, 2021
(In Thousands)Progressive LeasingViveOtherTotalProgressive LeasingViveOtherTotal
Lease Revenues and Fees$2,523,785 $— $— $2,523,785 $2,619,005 $— $— $2,619,005 
Interest and Fees on Loans Receivable— 70,911 3,130 74,041 — 58,462 453 58,915 
Total Revenues$2,523,785 $70,911 $3,130 $2,597,826 $2,619,005 $58,462 $453 $2,677,920 
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 in 2021. The provision for uncollectible renewal payments, which is recorded as a reduction to lease revenues and fees, was $376.3 million for the year ended December 31, 2022 compared to $224.7 million in 2021. The decrease in Progressive Leasing revenues was also due to a 7.8% decline in its GMV during the year ended December 31, 2022, as compared to 2021, and fewer customers electing to exercise early lease buyouts during 2022, as compared to 2021. The increase in Vive revenues was primarily driven by a larger loan portfolio throughout 2022 as compared to 2021.
Operating Expenses
Information about certain significant components of operating expenses is as follows:
Change
 Year Ended December 31,2022 vs. 2021
(In Thousands)20222021$%
Personnel Costs1
$194,195 $189,576 $4,619 2.4 %
Stock-Based Compensation 17,521 21,349 (3,828)(17.9)
Occupancy Costs6,466 6,633 (167)(2.5)
Advertising15,762 17,502 (1,740)(9.9)
Professional Services22,824 24,106 (1,282)(5.3)
Sales Acquisition Expense2
28,828 22,374 6,454 28.8 
Computer Software Expense3
27,629 20,674 6,955 33.6 
Bank Service Charges12,491 11,542 949 8.2 
Other Sales, General and Administrative Expense40,574 32,717 7,857 24.0 
Sales, General and Administrative Expense4
366,290 346,473 19,817 5.7 
Provision for Loan Losses41,232 17,668 23,564 133.4 
Depreciation and Amortization33,851 33,258 593 1.8 
Restructuring Expense9,001 — 9,001 nmf
Operating Expenses$450,374 $397,399 $52,975 13.3 %
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 $321.3 million and $316.3 million during the years ended December 31, 2022 and 2021, respectively.
The increase in personnel costs of $4.6 million was driven primarily by an increase of $2.9 million in personnel costs attributable to an increase in the number of employees resulting from the Four acquisition and other strategic initiatives started by the Company in 2021 that continued incurring costs during 2022. Personnel costs also increased by $2.2 million at Vive, primarily due to wage inflation. These increases were partially offset by a decrease of $0.8 million at Progressive Leasing, primarily due to its reduction in the number of employees during the second half of 2022 as part of its restructuring and cost cutting initiatives.
Sales acquisition expense increased $6.5 million primarily due to increased incentives, sales commissions, and other expenses at Progressive Leasing to promote lease originations with its POS partners.
42


Computer software expense increased $7.0 million primarily due to an increase in non-capitalizable costs for software implementation projects by Progressive Leasing during 2022, other strategic initiatives started by the Company in 2021 that continued incurring costs in 2022, and increased software licensing costs.
Other sales, general and administrative expense increased $7.9 million primarily due to additional administrative costs within Progressive Leasing during 2022, in addition to an increase of $2.4 million due to the acquisition and growth of our Four business, and other strategic initiatives started by the Company in 2021 that incurred greater costs in 2022 than in 2021.
Provision for loan losses increased $23.6 million due to unfavorable economic conditions present during 2022 and projected macroeconomic conditions, including a rapid increase in the rate of inflation, high unemployment rates, and the absence of government stimulus payments and enhanced unemployment benefits and child tax credits, as compared to 2021, at Vive. The provision for loan losses also increased due to growth in GMV at Four since it was acquired in June 2021. The provision for loan losses as a percentage of interest and fees revenue increased to 55.7% for the year ended December 31, 2022 compared to 30.0% in 2021, due to customer payment delinquencies at Vive returning to pre-pandemic levels, higher expected credit losses due to projected unfavorable macroeconomic conditions, and higher write-offs within our Four operations.
Restructuring expense of $9.0 million is the result of a number of restructuring activities initiated by the Company during 2022 intended to reduce expenses, consolidate certain segment corporate headquarters and other office locations, and align the cost structure of the business with the Company's strategy and 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 a reduction in call center and office space and the relocation of the Vive corporate headquarters to the Company's corporate office building.
Other Costs and Expenses
Depreciation of lease merchandise. Depreciation of lease merchandise decreased by 3.4% due to fewer customers exercising early lease buyout elections during the year ended December 31, 2022 compared to 2021. As a percentage of total lease revenues and fees, depreciation of lease merchandise increased slightly compared to 2021, resulting from the decline in early buyout elections.
Provision for lease merchandise write-offs. The provision for lease merchandise write-offs increased by $66.9 million due to higher customer payment delinquencies and write-offs during the year ended December 31, 2022, compared to the strong customer payment activity and historically low lease merchandise write-offs we experienced in 2021. Given the significant economic uncertainty resulting from challenges in the macroeconomic environment, including high inflation, forecasted unemployment rates, and/or a recession 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 December 31, 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 was 7.7% for the year ended December 31, 2022, compared to 4.8% for the year ended December 31, 2021. The increase in the provision as a percentage of lease revenues was primarily due to higher customer payment delinquencies and write-offs on leases originated in 2022, most notably in the first half of 2022 prior to the Company further tightening its lease decisioning to address the unfavorable economic conditions. The provision also increased as a result of changes in estimates for the allowance as discussed above.
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. Refer to Note 1 for additional information regarding the details of the goodwill impairment loss.
43


Earnings from Continuing Operations Before Income Tax Expense
Information about our earnings from continuing operations before income tax expense by reportable segment is as follows: 
  Change
 Year Ended December 31,2022 vs. 2021
(In Thousands)20222021$%
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE:
Progressive Leasing$174,143 $319,125 $(144,982)(45.4)%
Vive9,195 20,225 (11,030)(54.5)
Other(35,094)(11,146)(23,948)nmf
Earnings from Continuing Operations Before Income Tax Expense$148,244 $328,204 $(179,960)(54.8)%
nmf—Calculation is not meaningful
The $35.1 million loss before income taxes within "Other" primarily relates to our Four operations and includes a $10.2 million impairment loss related to the partial impairment of Four's goodwill. Other factors impacting the change in earnings before income tax expense are discussed above.
Income Tax Expense
Income tax expense decreased to $49.5 million for the year ended December 31, 2022 compared to $84.6 million in 2021 primarily due to lower earnings before income tax expense. The effective tax rate was 33.4% for the year ended December 31, 2022 compared to 25.8% in 2021. The increase in the effective tax rate was primarily driven by the non-deductible goodwill impairment loss for Four of $10.2 million, interest on the Company's uncertain tax position liabilities, an unfavorable adjustment for employee stock-based compensation vesting, and an increase in the valuation allowance related to certain deferred tax assets.
Results of Operations – Years Ended December 31, 2021 and 2020
  Change
 Year Ended December 31,2021 vs. 2020
(In Thousands)20212020$%
REVENUES:
Lease Revenues and Fees$2,619,005 $2,443,405 $175,600 7.2 %
Interest and Fees on Loans Receivable58,915 41,190 17,725 43.0 
2,677,920 2,484,595 193,325 7.8 
COSTS AND EXPENSES:
Depreciation of Lease Merchandise
1,820,010 1,690,922 129,088 7.6 
Provision for Lease Merchandise Write-offs126,984 131,332 (4,348)(3.3)
Operating Expenses397,399 372,625 24,774 6.6 
Separation Related Charges— 17,953 (17,953)nmf
2,344,393 2,212,832 131,561 5.9 
OPERATING PROFIT333,527 271,763 61,764 22.7 
Interest Expense, Net(5,323)(187)(5,136)nmf
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE328,204 271,576 56,628 20.9 
INCOME TAX EXPENSE84,647 37,949 46,698 123.1 
NET EARNINGS FROM CONTINUING OPERATIONS243,557 233,627 9,930 4.3 
LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAX— (295,092)295,092 nmf
NET EARNINGS (LOSS)$243,557 $(61,465)$305,022 nmf
nmf—Calculation is not meaningful
44


Revenues
Information about our revenues by source and reportable segment is as follows:
 Year Ended December 31, 2021Year Ended December 31, 2020
(In Thousands)Progressive LeasingViveOtherTotalProgressive LeasingViveOtherTotal
Lease Revenues and Fees$2,619,005 $— $— $2,619,005 $2,443,405 $— $— $2,443,405 
Interest and Fees on Loans Receivable— 58,462 453 58,915 — 41,190 — 41,190 
Total Revenues$2,619,005 $58,462 $453 $2,677,920 $2,443,405 $41,190 $— $2,484,595 
The increase in Progressive Leasing revenues was due to a 15.8% increase in GMV driven by growth from large national POS partners and e-commerce platforms. GMV generated through e-commerce platforms represented 15.2% of total Progressive Leasing GMV in 2021, compared to 7.0% in 2020. Although Progressive Leasing's customer payment delinquencies and uncollectible renewal payments began trending back to normalized pre-pandemic levels in the second half of 2021, and reached those pre-pandemic levels in the fourth quarter, the unfavorable impact of that factor on revenues was more than offset by Progressive Leasing's lease portfolio growth in 2021. The increase in Vive revenues was due to continued strong customer payment performance and a 52.3% increase in GMV in the year ended December 31, 2021, compared to 2020, resulting in growth in our loans receivable portfolio and additional interest and fee revenues. We believe a significant portion of our Progressive Leasing and Vive customers received stimulus payments and/or federally supplemented unemployment payments, which contributed to the strong customer payment activity we experienced in 2020 and the first half of 2021.
Operating Expenses
Information about certain significant components of operating expenses is as follows:
Change
 Year Ended December 31,2021 vs. 2020
(In Thousands)20212020$%
Personnel Costs1
$189,576 $170,285 $19,291 11.3 %
Stock-Based Compensation21,349 20,403 946 4.6 
Occupancy Costs6,633 6,545 88 1.3 
Advertising17,502 6,627 10,875 164.1 
Professional Services24,106 22,503 1,603 7.1 
Sales Acquisition Expense2
22,374 19,449 2,925 15.0 
Computer Software Expense3
20,674 13,260 7,414 55.9 
Bank Service Charges11,542 9,916 1,626 16.4 
Other Sales, General and Administrative Expense32,717 37,779 (5,062)(13.4)
Sales, General and Administrative Expense4
346,473 306,767 39,706 12.9 
Provision for Loan Losses17,668 34,038 (16,370)(48.1)
Depreciation and Amortization33,258 31,820 1,438 4.5 
Operating Expenses$397,399 $372,625 $24,774 6.6 %
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 $316.3 million and $268.9 million during the years ended December 31, 2021 and 2020, respectively.
The increase in personnel costs of $19.3 million was driven by increases of $21.5 million and $0.9 million at Progressive Leasing and Vive, respectively, for additional hiring and promotions resulting from continued growth in the business and new personnel costs for functions associated with becoming a standalone public company effective November 30, 2020. Personnel costs increased an additional $1.8 million as a result of strategic initiatives started by the Company in 2021. These increases were partially offset by executive personnel costs incurred by the Aaron's Business segment in the year ended December 31, 2020, which did not qualify for classification within discontinued operations, and are classified within unallocated corporate costs for segment purposes.
45


Advertising expense increased $10.9 million primarily due to Progressive Leasing's effort to continue growing GMV from existing POS partners and to further expand into e-commerce, combined with reduced marketing efforts in the same period of 2020 associated with cost cutting measures implemented in response to the COVID-19 pandemic.
Computer software expense increased $7.4 million primarily due to non-capitalizable software implementation projects by Progressive Leasing during 2021 and increased software and licensing costs related to the overall growth and strategic initiatives of the Company.
Provision for loan losses decreased $16.4 million due to continued strong customer payment activity and changes to estimates in Vive's allowance for loan losses during the year ended December 31, 2021 as compared to 2020. The Company recognized an incremental $12.3 million allowance for loan losses during the year ended December 31, 2020 due to the unfavorable forecasted macroeconomic conditions resulting from the COVID-19 pandemic. In the year ended December 31, 2021, strong customer payment activity and improved forecasted macroeconomic conditions resulted in a downward change in estimate to the allowance for loan losses of $14.7 million. These changes in forecasted macroeconomic conditions and strong customer payment activity resulted in a decrease in Vive's allowance for loan losses as a percentage of gross loans receivable from 32.1% as of December 31, 2020 to 23.4% as of December 31, 2021. We believe a significant portion of our Vive customers received stimulus payments and/or federally supplemented unemployment payments, which contributed to the strong customer payment activity in 2020 and 2021. These decreases were partially offset by the establishment of new allowances due to Vive's GMV growth of 52.3% in the year ended December 31, 2021 compared to the prior year.
Other Costs and Expenses
Depreciation of lease merchandise. Depreciation of lease merchandise increased due to growth in Progressive Leasing's portfolio of leased assets for the year ended December 31, 2021 compared to 2020. As a percentage of total lease revenues and fees, depreciation of lease merchandise increased to 69.5% from 69.2% in 2020, primarily due to elevated early lease buyouts in 2021 as compared to 2020, partially offset by a decrease in the provision for uncollectible renewal payments.
Provision for lease merchandise write-offs. The provision for lease merchandise write-offs decreased $4.3 million primarily due to a $14.8 million decline in write-offs, compared to the year ended December 31, 2020, as a result of continued strong payment activity from customers, and changes to estimates in our allowance for lease merchandise write-offs. At December 31, 2020, we established incremental lease merchandise allowances of $10.3 million, in response to the COVID-19 pandemic, based on management's best estimate of the potential unfavorable impacts the COVID-19 pandemic may have on our customers' ability to continue making payments on their leases. In the year ended December 31, 2021, we continued to experience strong customer payment activity and relatively low write-offs, resulting in the reversal of the full amount of the incremental COVID-19 specific allowance for write-offs. We believe a significant portion of our Progressive Leasing customers received stimulus payments and/or federally supplemented unemployment payments, which contributed to the strong customer payment activity we experienced in 2020 and 2021.
The provision for lease merchandise write-offs as a percentage of lease revenues decreased to 4.8% for the year ended December 31, 2021 from 5.4% in 2020 due to improved customer payment activity, relatively low write-offs, and changes in estimates on the allowance as discussed above.
Separation related charges. The Company incurred $18.0 million of stock-based compensation and retirement costs in the year ended December 31, 2020 related to the Company's separation of the Aaron's Business segment.
Earnings from Continuing Operations Before Income Tax Expense
Information about our earnings from continuing operations before income tax expense by reportable segment is as follows: 
  Change
 Year Ended December 31,2021 vs. 2020
(In Thousands)20212020$%
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE:
Progressive Leasing$319,125 $320,636 $(1,511)(0.5)%
Vive20,225 (11,180)31,405 nmf
Other(11,146)— (11,146)nmf
Unallocated Corporate Expenses— (37,880)37,880 nmf
Earnings from Continuing Operations Before Income Tax Expense$328,204 $271,576 $56,628 20.9 %
46


The $11.1 million loss before income taxes within "Other" primarily relates to our Four operations. Unallocated corporate expenses represent certain expenses that had previously been reported within the Aaron's Business segment in 2020 that did not qualify for classification within discontinued operations. Factors impacting the change in earnings from continuing operations before income tax expense are discussed above.
Income Tax Expense
Income tax expense increased to $84.6 million for the year ended December 31, 2021 compared to $37.9 million in 2020. The effective tax rate of 14.0% during the year ended December 31, 2020 was primarily due to a $34.2 million discrete income tax benefit generated by the provisions of the CARES Act in 2020, which resulted from the rate differential on the carryback of the Company's 2018 net operating loss previously recorded at 21% to the 2013 tax year, where the benefit was recognized at 35%. There are no material adjustments between the Company's effective tax rate of 25.8% and the Company's statutory income tax rate for the year ended December 31, 2021.
Overview of Financial Position
The major changes in the consolidated balance sheet from December 31, 2021 to December 31, 2022, include:
Cash and cash equivalents decreased $38.3 million to $131.9 million for the year ended December 31, 2022. For additional information, refer to the "Liquidity and Capital Resources" section below.
Lease merchandise, net, decreased $66.0 million due primarily to a 7.8% decrease in Progressive Leasing's GMV in 2022 as compared to 2021.
Loans receivable, net of allowances and unamortized fees, increased $11.7 million due to growth in the loan portfolios of Vive and Four compared to December 31, 2021.
Goodwill decreased $10.2 million as a result of the impairment loss to partially write off the goodwill balance of the Four reporting unit during the third quarter of 2022. Refer to Note 1 for additional information regarding the details of the impairment loss.
47


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 December 31, 2022, the Company had $131.9 million of cash, $350.0 million of availability under the Revolving Facility, and $600.0 million of indebtedness.
The Company's statement of cash flows for the year ended 2020 was not required to be adjusted for discontinued operations. Accordingly, the cash flow activities for the Aaron's Business discontinued operations are included in the discussion and analysis set forth below for the comparative periods through the separation and distribution date of November 30, 2020.
Cash Provided by Operating Activities
Cash provided by operating activities was $242.5 million and $246.0 million during the years ended December 31, 2022 and 2021, respectively. Cash provided by operating activities decreased by $3.5 million despite the $144.8 million decrease in net earnings from continuing operations as compared to 2021. Other significant changes in operating cash outflows compared to the prior year include $35.6 million of interest paid on the Company's Senior Notes compared to $1.5 million in 2021, and an $8.6 million increase in net income tax payments for the year ended December 31, 2022. These decreases in operating cash flows were partially offset by a $165.3 million decrease in purchases of lease merchandise by Progressive Leasing during the year ended December 31, 2022 compared to 2021. Other changes in cash provided by operating activities are discussed above in our discussion of results for the year ended December 31, 2022.
Cash provided by operating activities was $246.0 million and $456.0 million during the years ended December 31, 2021 and 2020, respectively. The $210.0 million decrease in operating cash flows was primarily due to the separation of the Aaron's Business, which accounted for $193.3 million of the cash provided by operating activities during the year ended December 31, 2020. The $16.7 million decrease in cash provided by operating activities from continuing operations in 2021 when compared to 2020 was driven by an increase of lease merchandise purchases of $265.5 million during 2021. The Company also made net income tax payments of $53.6 million during 2021, compared to $29.0 million in 2020. These higher cash outflows in 2021 were partially offset by stronger customer payment activity during the first half of 2021 and the payment of Progressive Leasing's $175.0 million settlement with the FTC in the second quarter of 2020. Changes in certain working capital accounts also contributed to operating cash inflows. Other changes in cash provided by operating activities are discussed above in our discussion of results for the year ended December 31, 2021.
Cash Used in Investing Activities
Cash used in investing activities was $53.5 million and $82.2 million during the year ended December 31, 2022 and 2021, respectively. The $28.7 million decrease in investing cash outflows in the year ended December 31, 2022 as compared to the same period in 2021 was primarily due to the $22.8 million of cash paid for the acquisition of Four in June 2021. Additionally, proceeds from loans receivable increased $27.4 million in 2022 compared to 2021. These changes were partially offset by a $21.4 million increase in cash outflows for investments in loans receivables in 2022 as compared to 2021.
Cash used in investing activities was $82.2 million and $114.5 million during the years ended December 31, 2021 and 2020, respectively. The cash used in investing activities during the year ended December 31, 2020 included $64.5 million in cash outflows attributable to the Aaron's Business discontinued operations. The $32.2 million increase in cash used in investing
activities from continuing operations when compared to the same period in 2020 was primarily due to: (i) a $69.6 million increase in cash outflows for investments in Vive loans receivable in 2021 due to growth in loan origination activity; and (ii) the $22.8 million cash paid, net of cash acquired, for the acquisition of Four in June 2021. The increases were partially offset by a $62.9 million increase in proceeds on loans receivable driven by strong customer payment activity and growth in the portfolio in the year ended December 31, 2021 compared to the same period of 2020.
Cash Used in Financing Activities
Cash used in financing activities was $227.2 million during the year ended December 31, 2022 compared to $30.3 million during the year ended December 31, 2021, an increase of $196.9 million. Cash used in financing activities in 2022 was primarily due to the $223.6 million outflows for the acquisition of treasury stock. Cash used in financing activities in 2021 was primarily comprised of: (i) a $425 million outflow for the "Dutch auction" tender offer, plus $3.6 million in related transaction fees, for the repurchase and retirement of our common stock; (ii) a $142.4 million outflow for the acquisition of treasury stock; (iii) the repayment of $50.0 million on our Revolving Facility; and (iv) $600 million gross proceeds from the issuance of Senior Notes, net of $8.3 million of bank fees.
Cash used in financing activities was $30.3 million during the year ended December 31, 2021 compared to $362.6 million during the year ended December 31, 2020, a decrease of $332.3 million. Cash used in financing activities in 2021 was primarily comprised of: (i) a $425 million outflow for the "Dutch auction" tender offer, plus $3.6 million in related transaction fees, for the repurchase and retirement of our common stock; (ii) a $142.4 million outflow for the acquisition of treasury stock; (iii) the repayment of $50.0 million on our Revolving Facility; and (iv) $600 million gross proceeds from the issuance of Senior Notes, net of $8.3 million of bank fees. Cash used in financing activities in 2020 was primarily comprised of: (i) $342.0 million of net repayments made to fully extinguish the Company's historical debt facilities in advance of the separation and distribution transaction; (ii) $50.0 million of borrowings on the Company's Revolving Facility; (iii) $54.2 million of cash transferred to The Aaron's Company in the separation and distribution; (iv) $13.8 million of dividends paid; and (v) $12.4 million of proceeds from stock option exercises.
Share Repurchases
We purchase our stock in the market from time to time as authorized by our Board of Directors. On February 22, 2021, the Company's Board of Directors terminated the share repurchase program that was in effect as of December 31, 2020 and replaced it with a repurchase program that permitted the Company to repurchase up to $300 million of the Company's outstanding common stock. 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. As of December 31, 2022, we had the authority to purchase additional shares up to our remaining authorization limit of $337.3 million.
The Company purchased 8,720,223 shares of its common stock for $223.6 million during the year ended December 31, 2022 and 11,611,178 shares for $567.4 million during the year ended December 31, 2021.
Dividends
We paid no dividends during 2022 and 2021 and do not currently anticipate paying any dividends. Prior to the separation and distribution transaction, we declared an annual common stock dividend of $0.165 per share in 2020, which resulted in an aggregate dividend payment of $13.8 million.
Debt Financing
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 will accrue on the outstanding balance and will be payable semi-annually. The Senior Notes are general unsecured obligations of the Company and will be 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 December 31, 2022 and believe that we will continue to be in compliance in the future.
On November 24, 2020, the Company entered into a credit agreement with a consortium of lenders providing for our $350 million senior unsecured Revolving Facility, under which revolving borrowings became available at the completion of the separation and distribution date and under which all borrowings and commitments will mature or terminate on November 24, 2025.
As of December 31, 2022, the Company had no outstanding balance and $350 million remaining available for borrowings on the Revolving Facility. The Revolving Facility includes an uncommitted incremental facility increase option 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.
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 December 31, 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.
Commitments
Income Taxes. During the year ended December 31, 2022, we made net income tax payments of $62.2 million. During the year ended December 31, 2023 we anticipate making estimated cash payments of $71.4 million for United States federal and state income taxes.
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 Rate ("LIBOR") 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. The agreement governing the Revolving Facility also contains language allowing for the substitution of interest rates based on the Secured Overnight Financing Rate ("SOFR") once LIBOR ceases being published, which is expected to occur in 2023. 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 December 31, 2022.
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, 2022 were approximately $137.3 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.
48


Unfunded Lending Commitments. The Company, through its Vive business, has unconditionally cancellable unfunded lending commitments totaling approximately $513.7 million and $467.6 million as of December 31, 2022 and 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.
49


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, 2022 and 2021, we had deferred revenue representing cash collected in advance of being due or earned totaling $37.1 million and $45.1 million, respectively, and accounts receivable, net of an allowance for doubtful accounts based on historical collection rates, of $64.5 million and $66.3 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 25% of the loan face value. The discount is designed to cover the risk of loss related to the portfolio of cardholder charges and Vive’s direct origination costs. The merchant fee discount, 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, 2022 and 2021, the allowance for lease merchandise write-offs was $47.1 million and $54.4 million, respectively. The provision for lease merchandise write-offs was $193.9 million and $127.0 million for the years ended December 31, 2022 and 2021, respectively.
Goodwill and Other Intangible Assets
Intangible assets are classified into one of three categories: (i) intangible assets with definite lives subject to amortization; (ii) intangible assets with indefinite lives not subject to amortization; and (iii) goodwill. For intangible assets with definite lives, tests for impairment are performed if conditions exist that indicate the carrying amount may not be recoverable. For intangible assets with indefinite lives and goodwill, tests for impairment are performed at least annually, and sooner if events or circumstances indicate that an impairment may have occurred. Factors which may necessitate an interim impairment assessment include a sustained decline in a company’s stock price, prolonged negative industry or economic trends and significant underperformance relative to historical or projected future operating results. For the annual impairment test of intangible assets with indefinite lives and goodwill, a company may perform a qualitative assessment for impairment if it believes it is not more likely than not that the carrying amount of a reporting unit’s net assets exceeds the reporting unit’s fair value.
Indefinite-lived intangible assets represent the value of the trade name acquired as part of the Progressive Leasing acquisition. At the date of acquisition, the Company determined that no legal, regulatory, contractual, competitive, economic or other factors limit the useful life of the trade name intangible asset and, therefore, the useful life is considered indefinite. The Company reassesses this conclusion quarterly and continues to believe the useful life of this asset is indefinite. The Company
50


performed a quantitative assessment to complete its indefinite-lived intangible asset impairment test as of October 1, 2022 and determined that no impairment had occurred.
In conjunction with the purchase of Four on June 25, 2021, the Company acquired $5.2 million of definite-lived intangible assets comprised of Four's proprietary technology platform, trade name, and existing merchant relationships. The Company also recorded $17.4 million of goodwill related to the excess of the purchase price over the fair value of the net assets acquired, which represents the Company’s ability to provide a BNPL product to the Company’s existing base of retailers, merchants and customers.
The following table presents the carrying amount of goodwill and other intangible assets, net:
December 31,
(In Thousands)2022
Goodwill1
$296,061 
Other Indefinite-Lived Intangible Assets2
53,000 
Definite-Lived Intangible Assets, Net61,411 
Goodwill and Other Intangibles, Net$410,472 
1 As of December 31, 2022, goodwill for Progressive Leasing and Four was $288.8 million and $7.3 million, respectively.
2 Other indefinite-lived intangible assets represents the Progressive Leasing trade name.
As of December 31, 2022, the Company had two reporting units with goodwill: Progressive Leasing and Four. We performed our annual goodwill impairment testing for the Progressive Leasing reporting unit as of October 1, 2022 using a quantitative methodology. We engaged the same third-party valuation firm to assist with the annual goodwill impairment test for the Progressive Leasing reporting unit. This entailed an assessment of the reporting unit's fair value relative to the carrying value that was derived using a combination of both income and market approaches and performing a market capitalization reconciliation which included an assessment of the control premium implied from our estimated fair values of our reporting units. The fair value measurement involved significant unobservable inputs (Level 3 inputs, as discussed more fully below). The income approach utilized the discounted future expected cash flows, which required assumptions about short-term and long-term cash flows for the Progressive Leasing reporting unit. Due to the significant uncertainty associated with macroeconomic conditions, the assumptions and estimates used by management were highly subjective. The weighted-average cost of capital used in the income approach was adjusted to reflect the specific risks and uncertainties associated with the current macroeconomic environment in developing the cash flow projections. The market approach, which includes the guideline public company method, utilized pricing multiples derived from an analysis of comparable publicly traded companies. We believe the comparable companies we evaluated as marketplace participants served as an appropriate reference when calculating fair value because those companies have similar risks, participate in the lease to own market, provide similar products and services, and compete with Progressive Leasing directly. The Company concluded that the fair value of Progressive Leasing exceeded its carrying value and, therefore, determined that there was no indication of impairment as of October 1, 2022.
As of September 30, 2022, the Company concluded an interim goodwill impairment test was triggered for the Four reporting unit. Factors that led to this conclusion included: (i) a significant decline in valuations and related market multiples for Four's peers in the BNPL industry; (ii) an increase in Four's forecasted losses; and (iii) projected negative cash flows for Four in future periods. The Company determined the Four goodwill was partially impaired and recorded an impairment of goodwill of $10.2 million during the third quarter of 2022. The Company engaged a third-party valuation firm to assist with the interim goodwill impairment test for the Four reporting unit. This included an assessment of the Four reporting unit's fair value relative to the carrying value that was derived using a market approach. The market approach, which includes the guideline public company method, utilized pricing multiples derived from an analysis of other publicly traded companies that operate in the BNPL industry. We believe the comparable companies we evaluate as marketplace participants serve as an appropriate reference when calculating fair value because those companies have similar risks, participate in similar markets, provide similar products and services for their customers and compete with Four directly.
As a result of the impairment recorded in the third quarter of 2022, the carrying value of our Four reporting unit approximated its fair value as of October 1, 2022. As such, additional goodwill impairment charges may occur in future periods if the Company fails to execute on one or more elements of Four's strategic plan, Four's actual or projected results are unfavorable compared to the current forecasted operating results, and/or there are further declines in the BNPL peer market multiples.
As of December 31, 2022, the Company concluded that there were no events or circumstances that would more likely than not reduce the fair value of the Progressive Leasing or Four reporting unit below its carrying amount.
51


Provision for Loan Losses and Loan Loss Allowance
Effective January 1, 2020 with the adoption of ASU 2016-13, Measurement of Credit Losses on Financial Instruments ("CECL") 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.
The Company calculates the Vive allowance for loan losses based on internal historical loss information and incorporates observable and forecasted macroeconomic data over a twelve-month reasonable and supportable forecast period. 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. For any periods beyond the twelve-month reasonable and supportable forecast period described above, the Company reverts to using historical loss information on a straight-line basis over a period of six months and utilizes historical loss information for the remaining life of the portfolio.
The Company may also consider other qualitative factors in estimating the allowance, as necessary. For the purposes of determining the allowance as of December 31, 2022, management considered other qualitative factors such as the macroeconomic conditions associated with the impacts from the COVID-19 pandemic, increasing inflation, forecasted higher unemployment rates, and/or a prolonged recession in the United States, which was not fully factored into the macroeconomic forecasted data, and which likely contributed to unfavorable cardholder payment trends we experienced during these periods. 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.
Delinquent loans receivable are those that are 30 days or more past due based on their contractual billing dates. The Company places loans receivable on nonaccrual status when they are greater than 90 days past due or upon notification of cardholder bankruptcy, death or fraud. The Company discontinues accruing interest and fees and amortizing merchant fee discounts and promotional fee discounts for loans receivable in nonaccrual status. Loans receivable are removed from nonaccrual status when cardholder payments resume, the loan becomes 90 days or less past due and collection of the remaining amounts outstanding is deemed probable. Payments received on nonaccrual loans are allocated according to the same payment hierarchy methodology applied to loans that are accruing interest. Loans receivable are charged off at the end of the following month after the billing cycle in which the loans receivable become 120 days past due.
The provision for loan losses was $41.2 million and $17.7 million for the years ended December 31, 2022 and 2021, respectively. The allowance for loan losses was $42.4 million and $40.8 million as of December 31, 2022 and 2021, respectively.
Recent Accounting Pronouncements
Refer to Note 1 to the Company’s consolidated financial statements for a discussion of recently issued accounting pronouncements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of December 31, 2022, we had no outstanding borrowings under our senior unsecured Revolving Facility. Borrowings under the Revolving Facility are indexed to LIBOR or the prime rate, which exposes us to the risk of increased interest costs if interest rates rise. Based on the Company’s variable-rate debt outstanding as of December 31, 2022, a hypothetical 1.0% increase or decrease in interest rates would not affect interest expense.
We do not use any significant market risk sensitive instruments to hedge commodity, foreign currency or other risks, and hold no market risk sensitive instruments for trading or speculative purposes.
52


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of PROG Holdings, Inc.

Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of PROG Holdings, Inc. (the Company) as of December 31, 2022 and 2021, the related consolidated statements of earnings (loss), comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 22, 2023 expressed an unqualified opinion thereon.

Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
53


Valuation of the allowance for loan losses
Description of the Matter
As of December 31, 2022, the allowance for loan losses (ALL) was $42.4 million. As discussed in Note 1 and Note 7 to the consolidated financial statements, management records the ALL to estimate probable lifetime losses that are expected in the loan portfolio. In determining the estimate, management utilizes quantitative factors such as actual historical loss experience and incorporates observable and forecasted macroeconomic data such as unemployment rates, market volatility, inflation, and changes in risk-free and prime rates over a reasonable and supportable forecast period. The Company also considers, as necessary, qualitative factors including observable market factors such as macroeconomic conditions associated with the impacts from the COVID-19 pandemic, increasing inflation, high unemployment rates, and the possibility of a prolonged recession in the United States, which was not fully factored into the macroeconomic forecasted data to evaluate the impact of such programs on its customers’ ability to pay. The Company applies judgment, including the determination of the expected life of the loan receivable, as it determines necessary to make its best estimate of probable expected lifetime losses in the portfolio.
Auditing management’s ALL estimate involved a high degree of complexity in evaluating the quantitative calculation of expected losses in the loan portfolio and subjectivity in evaluating management’s qualitative factors. Management’s assessment and measurement of the qualitative factors is judgmental and has a significant effect on the ALL.

How We Addressed the Matter in Our Audit
We focused our testing within the Vive segment as it comprised the majority of the Company’s ALL balance as of December 31, 2022. We obtained an understanding, evaluated the design and tested the operating effectiveness of controls for management’s process of the measurement and valuation of the ALL. For example, we tested controls over management's review of the ALL calculations, methodology and significant assumptions, including qualitative adjustments.
With respect to the quantitative calculation of expected losses, we involved internal specialists and evaluated the conceptual soundness of the methodology and performed calculation procedures over the model. We also tested the appropriateness of key inputs and assumptions used in the calculation by agreeing a sample of inputs to supporting information. With respect to the identification of qualitative factors, we evaluated the potential impact of imprecision in the calculation and hence the need to consider a qualitative adjustment to the ALL. Regarding measurement of the qualitative adjustment, we evaluated internal data and qualitative factors utilized by management, as well as external macroeconomic factors independently obtained during the audit.


/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1991.
Salt Lake City, Utah
February 22, 2023
54


Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of PROG Holdings, Inc.

Opinion on Internal Control Over Financial Reporting
We have audited PROG Holdings, Inc.’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, PROG Holdings, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of earnings (loss), comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 22, 2023 expressed an unqualified opinion thereon.

Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP
Salt Lake City, Utah
February 22, 2023
55


Management Report on Internal Control over Financial Reporting
Management of PROG Holdings, Inc. and subsidiaries (the "Company") is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) in Internal Control-Integrated Framework. Based on its assessment using those criteria, management concluded that, as of December 31, 2022, the Company’s internal control over financial reporting was effective.
The Company’s internal control over financial reporting as of December 31, 2022 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in its report dated February 22, 2023, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022.
56


PROG HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS

December 31,
20222021
 (In Thousands, Except Share Data)
ASSETS:
Cash and Cash Equivalents$131,880 $170,159 
Accounts Receivable (net of allowances of $69,264 in 2022 and $71,233 in 2021)
64,521 66,270 
Lease Merchandise (net of accumulated depreciation and allowances of $467,355 in 2022 and $463,929 in 2021)
648,043 714,055 
Loans Receivable (net of allowances and unamortized fees of $53,635 in 2022 and $53,300 in 2021)
130,966 119,315 
Property and Equipment, Net23,852 25,648 
Operating Lease Right-of-Use Assets11,875 17,488 
Goodwill296,061 306,212 
Other Intangibles, Net114,411 137,305 
Income Tax Receivable18,864 14,352 
Deferred Income Tax Assets2,955 2,760 
Prepaid Expenses and Other Assets48,481 48,197 
Total Assets$1,491,909 $1,621,761 
LIABILITIES & SHAREHOLDERS’ EQUITY:
Accounts Payable and Accrued Expenses$135,025 $135,954 
Deferred Income Tax Liabilities137,261 146,265 
Customer Deposits and Advance Payments37,074 45,070 
Operating Lease Liabilities21,122 25,410 
Debt590,966 589,654 
Total Liabilities