UroGen Pharma Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
July 26, 2023

There are 9 speakers on the call.

Operator

You for standing by, and welcome to the Prong Holdings Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Mr.

Operator

John Bob, Vice President, Investor Relations. Please go ahead, sir.

Speaker 1

Thank you, and good morning, everyone. Welcome to the Prague Holdings 2nd Quarter 2023 Earnings Call. Joining me this morning are Steve Michaels, Prague Holdings' President and Chief Executive Officer And Brian Garner, our Chief Financial Officer. Many of you have already seen a copy of our earnings release issued this morning, which is available on our Investor Relations website, investor. Progholdings.com.

Speaker 1

During this call, certain statements we make will be forward looking, including comments regarding our GMV performance Leased merchandise write offs in future periods, shareholder return over time, our updated 2023 full year outlook and our outlook for the Q3 of 2023. I want to call your attention to our Safe Harbor provision for forward looking statements That can be found at the end of the earnings press release that we issued earlier this morning. That Safe Harbor provision identifies risks That may cause actual results to differ materially from the expectations discussed in our forward looking statements. There are additional risks that can be found in our annual report on Form 10 ks for the year ended December 31, 2022, which we encourage you to read. Listeners are cautioned not to place undue emphasis on forward looking statements we make today, and we undertake no obligation to update any such statements.

Speaker 1

On today's call, We will be referring to certain non GAAP financial measures, including adjusted EBITDA and non GAAP EPS, which have been adjusted for certain items, which may affect the comparability of our performance with other companies. These non GAAP measures are detailed in the reconciliation tables included with our earnings release. The company believes that these non GAAP financial measures provide meaningful insight into the company's operational performance and cash flows and provide these measures to investors to help facilitate comparisons of operating results with prior periods and to assist them in understanding the company's ongoing operational performance. With that, I would like to turn the call over to Steve Michaels, Prague Holdings' President and Chief Executive Officer. Steve?

Speaker 2

Thank you, John, and good morning, everyone. I appreciate you being with us today as we discuss our Q2 results, share our thoughts on a few important Q3 metrics and provide an update on our full year 2023 financial outlook. We had another excellent quarter adjusted EBITDA well above the range we provided at the end of April. I'm proud of our team's performance as they executed a high level In what remains a challenging retail environment, the trend of fewer customers choosing to utilize 90 day buyout options And the strong portfolio performance that we discussed in Q1 continued into the Q2. As you may have seen in this morning's earnings release, We are incorporating our year to date outperformance and reflecting these favorable trends in our increased outlook for 2023.

Speaker 2

The strong customer payment behavior we experienced in Q2 is evidenced by our year over year 2 60 basis point gross margin expansion, Improved write offs of 7.1 percent and adjusted EBITDA growth of $22,800,000 or 43.7 percent, resulting in a 12.7% margin. Our write offs for the first half of twenty twenty three were 6.5%, Keeping us on track to deliver another year within our targeted annual range of 6% to 8%. The decline in GMV was largely due to our implementation of tighter decisioning in Q2 last year, which we believe accounted for approximately 2 thirds of our GMV decline. As we look to July trends and our Q3 expectations, we anticipate the difficult year over year GMV comparisons to ease as we fully lap the introduction of last year's tighter decision. We have yet to see any indicators leading us to assume That retail sales will materially rebound through the balance of 2023.

Speaker 2

Though we have not assumed any benefit in the revised outlook we provided this morning, We believe that the current macro environment will result in tightening of lending practices from credit providers above us in the stack. Additionally, past experience demonstrates that consumers benefit from our flexible payment options during periods of sustained liquidity pressures. Our teams are working well with their counterparts at our retail partners to find GMV growth opportunities, including promotions, point of sale materials and tech integrations that improve application flows and conversion rates. We're on track to grow our balance of share with several large Our 3 pillared strategy to grow, enhance and expand remains focused on sustainable growth rather than short term gains. Gro emphasizes dedication to our business development efforts.

Speaker 2

In a sluggish retail climate, our goal is to broaden new and existing retail partnerships, positioning ourselves for significant growth once conditions improve. We remain focused on regaining growth through sustainable strategies, including e commerce, marketing and technology innovations, Along with new retailer pipeline conversion. Our efforts to increase our e commerce business are showing solid progress. We added nearly 4 times the number of new partners in the first half of twenty twenty three than we did in the same period last year, and the channel consistently contributes more than 15% of our total GMV. These new partners, along with upcoming e commerce integrations with Several existing retailers should contribute to our long term GMV growth.

Speaker 2

We are also planning second half promotions and cross with many of our key retailers in support of GMV. One specific example of this is last week's Prague Perks Week, where we provide daily offers from select retail partners to our large database of current and previous customers. We have run this promotion several times over the last 2 years with much success and retail partners have enjoyed the incremental business the program drives. This is just one example of the benefit of being part of the Prod Preferred Partner Network. Our high customer retention, Illustrated by consistent repeat rates of over 50% is a testament to our customers' affinity for our leasing products and contributes to our higher than average lifetime value to customer acquisition cost ratio.

Speaker 2

Lastly, our pursuit of new retail opportunities remains a key component of our strategy for long term growth, especially in the current challenging retail environment That may motivate more retailers to seek avenues for revenue enhancement. We have added a number of regional accounts in the quarter and remain in ongoing discussions with many recognizable regional and national brands about the value Progressive Leasing can bring to their business and customers. We're confident in our proven ability to increase share balance with existing retailers, while converting retailers without a virtual lease to own payment option, and will continue to build the relationships and technologies that will enable us to capture more of our industry's $30,000,000,000 to $40,000,000,000 addressable market. Under Enhance, our technology initiatives aimed at improving the retailer experience and offering customers more frictionless Omnichannel journey are progressing nicely, and we believe those initiatives will bolster our GMV performance in future periods. Our tech road map is focused on 3 core areas improving our customer centric flexible lease platform, Providing self-service tools to enable a superior retailer experience while helping the customer make the best and most informed choices and offering greater personalization for a streamlined shopping and decisioning experience.

Speaker 2

We are also developing products that we believe will boost Our direct to consumer business and give retail partners easier paths to identify and convert potential LTO customers. We aim to enhance operating efficiency while addressing technical debt, an issue common in today's rapidly evolving technology landscape. Lastly, our Prog Labs R and D Group is innovating ways to enhance customer service, personalization and decisioning through generative AI. As for Xpand, in Q2, we announced a new product called Build, a credit management designed to aid consumers in enhancing their credit scores. Our leasing customers frequently express a desire to improve their credit profile.

Speaker 2

Build, which is a blend of an installment loan and a secured savings account, both issued by WebBank, can help to address this need while aiding in credit history And savings accumulation. Build is a natural addition to our product suite, joining Progressive Leasing VIVE and IV In addition to empowering our customers through their financial journey, We anticipate Build will boost Progressive Leasing and VIVE volumes catering to potential customers currently not qualifying for leases or loans. These pillars are underpinned by our robust financial health, marked by strong profitability, substantial free cash flow and a healthy net leverage position, all of which we expect to continue going forward. This financial strength enables us to invest in areas promoting future growth. Turning to capital allocation.

Speaker 2

We have acquired over 2,500,000 shares of our outstanding common stock in the 1st 6 months of the year At an average price of $28.26 per share. These purchases account for approximately 5% of our outstanding shares. Since the company's spin transaction 2.5 years ago, we have reduced our share count by roughly 1 third. Year to date, we have generated $205,000,000 of cash flow from operations, closing the quarter with a cash balance of 253,000,000 As a reminder, we typically generate the majority, if not all of our operating cash flow in the first half of the calendar year, A seasonal pattern we expect again in 2023. Our capital allocation priorities remain unchanged and we expect to fund growth, Look for strategic M and A opportunities and return excess cash to shareholders primarily through share purchases.

Speaker 2

While Brian will provide more detail on the upward revision to our outlook for the year, I'd like to provide some high level thoughts. Our first half earnings outperformed expectations due to tailwinds that may not carry forward into the remainder of the year with the same magnitude. Our updated outlook reflects ongoing challenges to consumer demand resulting from the macro environment. We expect that revenues in the second half of twenty twenty three We'll show a mid to high single digit percentage decline as compared to the same period last year, primarily due to GMV performance in the first half of the year, resulting in a smaller lease portfolio balance. However, there is an easing in the difficult year over year GMV comparison as we lap last year's decisioning changes.

Speaker 2

My summary is consistent with last quarter's. Our strong first half far exceeded earnings expectations And as a result of the hard work of our teams and strong customer payment behavior, we have a proven track record of navigating through dynamic and challenging environments, and we will adjust as macro conditions evolve. We believe our strong financial health and ongoing investments will drive compelling shareholder return over time. I'll now turn the call over to our CFO, Brian Garner, for more details on our Q2 results and 2023

Speaker 3

outlook. Brian? Thanks, Steve. Let me start by summarizing our Q2 highlights. For the Q2 in a row, We exceeded earnings expectations as we effectively managed our P and L in a highly uncertain environment.

Speaker 3

I want to thank the teams for their perseverance in managing During the quarter, our customer payment behavior remained strong as elevated portfolio yields contributed to increased gross margins in the period. Similar to Q1, we saw fewer customers choosing to utilize 90 day purchase options, Yet our write offs remained within our targeted annual range. As always, we are actively managing portfolio performance q2 consolidatedrevenuedeclined8 point 7% year over year due to a lower portfolio balance entering the period. However, revenue exceeded expectations driven by strong portfolio performance. Consolidated adjusted EBITDA increased by 43.7 percent to $75,000,000 from $52,200,000 in Q2 last year.

Speaker 3

Our better than expected consolidated adjusted EBITDA results were primarily driven by our Progressive Leasing segment's lower SG and A, Lower write offs and stronger gross margins and the favorable SG and A was driven by our focus on operational efficiencies. Non GAAP diluted EPS increased to $0.92 per share, growing 76.9% to adapt to revenue headwinds, while preserving margins and cash flow, and I'm extremely proud of our team's efforts to deliver these results. For our Progressive Leasing segment, GMV decreased 14.7% year over year, which was slightly better than our internal expectations. We have improved the year over year GMV comparison from a 17% decline in Q1 to a 14.7% decline in Q2 and believe we are trending to a mid single digit decline for Q3. As Steve mentioned, we believe roughly 2 thirds of the negative GMV comp in the First half is driven by the proactive steps we took to tighten our decisioning in Q2 of 2022, which has improved our write offs and profitability.

Speaker 3

Q2 revenue declined 8.9% and was impacted by a lower gross leased asset balance throughout the quarter, Ending the period down 10.7% year over year as well as a decline in 90 day buyouts during the period, partially offset by improved portfolio yield. However, similar to last quarter, year over year gross margin in Q2 improved 2 60 basis points to 33%, primarily driven by strong customer payment behavior and lower levels of 90 day buyouts Our revised outlook anticipates 90 day buyout activity and write offs to follow pre pandemic seasonal trends for the remainder of 2023, resulting in a slight decrease in gross margins versus the first half of twenty twenty three. Rest of Leasing's SG and A expense in Q2 was $78,300,000 a decrease of $3,600,000 or 4.4% compared to $81,900,000 in the same quarter last year. SG and A as a percentage of revenue increased slightly to 13.6% Compared to 13% in Q2 of 2022. We expect that for the remainder of the year, SG and A as a percentage of revenues will be higher compared to the first half of twenty twenty three.

Speaker 3

We will continue to operate efficiently Through a challenging consumer demand environment, while balancing investment in key technology platforms, marketing and business development. Progressive Leasing's write offs were $41,000,000 or 7.1%, down from 9.8% in the previous year's period. The sequential quarterly increase in write offs in the first half of twenty twenty three was driven by seasonal trends, resulting in year to date write offs of 6.5%. We remain on track to end the year within our targeted annual write off range of 6% to 8%. Moving to our balance sheet.

Speaker 3

We ended the quarter with $253,000,000 of cash and gross debt of $600,000,000 resulting in a net leverage ratio of 1.14 times our trailing 12 months adjusted EBITDA of 304,100,000 In the Q2, we purchased 1,100,000 shares of our common stock at a weighted average price of $32.65 per share And have $265,400,000 remaining under a previously authorized $1,000,000,000 share purchase program. To summarize our performance to expectations in the first half of twenty twenty three, we actively managed the portfolio return While driving efficiencies in our cost structure and the shift we observed of fewer customers choosing to utilize 90 day Buyout options resulted in higher gross margin. I'd now like to touch on a few key aspects of our Q3 and revised Full year outlook, which were provided in this morning's earnings press release. As a reminder, the guidance we provided on our Q1 earnings Call in late April assumed headwinds on GMV with easing in the year over year comparisons starting in July. The gross leased asset balance, which is a key driver of future period revenue, was expected to decline further at the end of Q2.

Speaker 3

Although we anticipated margin pressures as we move throughout the year, we assumed our lease portfolio performance And our low 90 day buyout rates would drive Progressive Leases margin to improve year over year. We projected 90 day buyout activity to be lower year over year for the remainder of 2023, although the variance was expected to narrow compared to Q1 over the course of the year. Our performance in the Q2 gives us reason to believe that GMV is trending slightly better compared to what we expected in April. In addition to our favorable year to date performance, we feel a higher degree of confidence in our portfolio performance going forward. Lastly, Although SG and A as a percentage of revenue will increase as we move through the remainder of 2023, we will evaluate the timing And return of our investments to align with revenue trends and future growth opportunities.

Speaker 3

As a result, we are raising our full year revenue and earnings outlook. We anticipate the Q3 GMV year over year comparison to ease to a mid single digit decline as we lap last year's tightening. Our revised consolidated outlook for 2023 includes revenues in the range Of $2,360,000,000 to $2,390,000,000 adjusted EBITDA to be in the range of $270,000,000 to 280,000,000 And non GAAP EPS in the range of $3.10 to $3.25 This outlook assumes a continued soft demand For leasable consumer durable goods, no material change to the company's decision posture, an effective tax rate for non GAAP EPS of approximately 27% and no impact from additional share repurchases. Consistent with last quarter, Our base case outlook for the remainder of the year considers current consumer trends, but does not assume further economic downturn, A material negative impact on the employment of our customers or a material benefit from tightening by providers above us in the credit stack. I will now turn the call back to the operator for questions.

Speaker 3

Operator?

Operator

Certainly. One moment for our first question. And our first question comes from the line of Kyle Joseph from Jefferies. Your question please.

Speaker 4

Hey, good morning, guys. Thanks for having me on and taking my questions. Just curious, your thoughts on kind of the health of your underlying consumer, obviously, some moving parts In terms of less early buyout activity, but ongoing stable credit performance, obviously, the employment environment is very strong still. But just kind of get a sense for the overall health of your the underlying consumer and potentially if there are any sort of green shoots of Improving demand or consumer confidence there.

Speaker 2

Yes. Thanks, Kyle. Good morning. I guess I'll start. When we spoke last quarter, we talked a lot about fewer consumers choosing to utilize a 90 day buyout option and its impacts on the overall margin the gross margin of the business.

Speaker 2

But what we were trying to A status at that point was how will those pools continue to mature and would those customers that otherwise during a Regular tax season that have would have utilized their 90 day buyout option, how would they perform? So far today through Q2, the verdict is that they're performing fairly well. They're making their payments. They're still active leases. And so that's a good sign for the health of our consumer.

Speaker 2

You mentioned in kind of one of your data points there, strong employment, and that is always a Big factor in our business and we're not seeing any signs of weakness in the employment side of the business or economy, I should say. As it relates to cost pressures and inflation rolling over, I think that's probably Also fairly good news, you can see it in our portfolio performance and what we talked about in the prepared remarks strong portfolio and strong customer payment behavior. The only, what I would say, wildcard that's out there is a very fluid in developing situation This student loan repayment that is facing us in the fall and there's a lot of Puts and takes on that to who will be impacted and what may happen between now and then. So, I would say generally, it's pretty good shape for the consumer With a little bit of a wildcard in the future that may or may not materialize.

Speaker 4

Got it. Very helpful. And then just one follow-up for me. I think on last quarter's call, you guys addressed kind of Credit availability broadly and I think you mentioned you saw some initial signs of tightening From those above you or trade down, in other words, any update there?

Speaker 2

Yes. What we said last quarter was that we had only very recently begun to see some change in our applicant In the top of the funnel, if you will. And the best way we have to monitor that is basically the FICO scores or And even our own internal risk scores of our applicants in the top quintile of our app funnel. And what we saw in late April, that had just recently begun, we did continue to see throughout the quarter. So we have seen a drift up in our FICO scores throughout our app funnel, but certainly in the top quintile.

Speaker 2

There as we has been widely reported, there has been some FICO inflation. So a 660 might not Perform like a 660 did a couple of years ago. So we're paying attention to that as well. As we mentioned in the prepared remarks, It's difficult for us to, at this point in the year, determine how large, if any, the benefit from that will be for us. But and so it's not baked into our outlook, at least the material benefit is not baked into our outlook.

Speaker 2

But we do believe and have believed for a long time that it is A potential tailwind for our business.

Speaker 4

Great. Thanks. That's it for me.

Operator

And our next question comes from the line of Jason Haas from Bank of America. Your question please.

Speaker 5

Great. Good morning and thanks for taking my questions. So it seems like the guidance implies a worsening of margins in the second half of the year, both versus the first half and also if you look on a year over year basis. You talked about it a little bit in the prepared remarks, but can you just walk through Why gross margins would soften in the second half? And then also what's driving that step up in SG and A spending as well?

Speaker 5

Thanks.

Speaker 3

Yes, Kyle. This is Brian sorry, Jason. This is Brian. The dynamic that's playing out is effectively, we're starting with a lower GLA balance or gross lease asset balance entering the back half. And so that's been Pressure on total dollars of revenue, 1st and foremost.

Speaker 3

So you've got to fix you've got some fixed costs within the SG and A structure. You've got a lower Revenue stream coming in the back half, so that's going to put some pressure on margins. The other dynamic that is happening is SG and A expected to step up. And that has to do with some technology initiatives, some back end office initiatives that we are pursuing and Also on the sales and marketing front, I think as we look forward to the end of the year and into next, we want to grow The gross lease asset balances are put on a trajectory towards a higher balance As we exit the year, so we can be at a good footing entering into next year. So that's the primary reason for the margin Pressures in Q3 and Q4.

Speaker 3

And it's not unexpected from what we communicated In our previous outlook, we'd anticipated this SG and A ramp and some of these revenue pressures from a declining GLA at this point in the year.

Speaker 5

That's great. Thank you. And then for my follow-up, are the margins that you're Expecting in 2023, is that a good framework to use for like 2024 and beyond? I think historically you've talked about for the Progressive segment, The goal is to be in that 11% to 13% range for EBITDA margins. I think you should be well within that range This year based on the guidance.

Speaker 5

And then is the expectation just to be able to grow revenue from there and maintain that margin rate? Or is there any Do you have any goals to grow margins from here?

Speaker 3

Yes. I'm not going to get specific on 2024, but I do think from a Tom, long term margin expectation, where we're at this year and where we've been trending, I think is within the comfortable range for us. And it's not happened On its own, it's been actively managed through portfolio management and watching SG and A and aligning SG and A with our top line performance. And so, I think that 11% to 13% that you highlighted for Progressive Leasing remains unchanged. I think it's here in the quarter, Progressive Leasing was About 13.5% for Q2 and that's obviously a very strong Quarterly result, I don't expect it to remain that high on a quarter to quarter basis, but we had a great quarter.

Speaker 3

And I think that 11%, 13% is a good guideline for long term.

Speaker 5

That's great. Thank you. Congratulations on the strong results. Thanks, Dave.

Operator

Thank you. One moment for our next question. And our next question Comes from the line of Brad Thomas from KeyBanc Capital Markets. Your question please.

Speaker 6

Hi, good morning. I wanted to follow-up on the GMV a bit. I was wondering if you could talk a little bit more about how you're thinking about the cadence of GMV in the second half of the year. Does seem like in the end markets, what we're hearing out of retailers is kind of getting less bad and In some cases, even retailers moving to positive territory more recently. So again, curious a little bit more how you're thinking about GMV growth in the second half?

Speaker 6

And then if you could also just remind us how much of a headwind the underwriting has been as we think about maybe what the more organic run rate trends have been? Thanks.

Speaker 2

Yes, Brad. We did give the range, I would say, of kind of Negative mid single digits for Q3. We did not speak to Q4 as of yet From a GMV standpoint and that I guess as you rolling it back a little bit, if you think about Q2, We heard the same things from the retail earnings season that April was bad and May was less bad and June was less bad. So If you carry those things into the Q3, I would expect we would participate in that Less bad scenario as well. On top of that, we've got the lapping of the decision tightening from last year.

Speaker 2

And We've said a number of times that we believe that about 2 thirds of our negative GMV pressures were From the year over year decisioning changes or approval rates, if you will, as it relates to approval rates, we generally look at a trailing 4 week average because approvals are good for about 90 days. It doesn't it's rare that somebody Comes in on the 89th day and funds a lease, but it does take a bit for those approved leases to flow through the funded GMV. And so we look at a trailing 4 week average. And as we sit here today, we're still not we're still several weeks away from getting back to parity with last as those decision changes happened late in Q2 of last year. So, still a little bit of a headwind, but certainly less of a headwind As the quarter progresses and so that's the decisioning in the retail environment.

Speaker 2

On top of that, I would I'm encouraged by the receptivity and the partnerships of our retailers Looking for ways to deepen our integrations and deploy tools that we have like we've talked about for several quarters. Even the sense of urgency to get some of that stuff done before holiday of this year. Obviously, we're fast approaching Code freezes for most retailers and so time is of the essence. But to the extent we can get some of those done, We look forward to the benefit that can have in the balance of 2023, but also as we roll into 2024.

Speaker 6

That's great. And then Steve, you all talked about what you're seeing kind of above you all in the site stack. But I was curious if you could comment a little bit more about what you're seeing from a competitive standpoint. Are you seeing those in the lease to own group Tightening more, are you seeing anyone loosening? Do you feel like competitors are playing defense here?

Speaker 6

Are they getting more aggressive Trying to win business away from you. But just curious what you're seeing out there right now?

Speaker 3

Yes. I

Speaker 2

mean, Competition is strong as it usually is. And as we always talk about the bifurcated business, the book of business that we have with the enterprise Accounts and their exclusivities along with the regionals where there may be multiple players there. I would not say that I've seen the evidence Our competitors are tightening from an approval rate standpoint. In fact, on the margin, it might be a little bit the other way. And so the competition remains strong and we're out there fighting day to day.

Speaker 6

Great. Thank you.

Speaker 1

Thank you.

Operator

Our next question comes from the line of Anthony Chukumba from Loop Capital Markets. Your question please.

Speaker 7

Good morning. Thanks for taking my question and congrats on a nice quarter. So can you just provide some more color On the Build product, I guess I was getting a little confused on that. What exactly is that and when would you be rolling that out? Thanks.

Speaker 2

Yes. Thanks, Anthony. Yes, Build is a it's a credit builder loan. So it's a combination of A credit builder loan and savings accumulation vehicle, and we're proud to be partnering with WebBank to offer that. And what we saw there is our we survey a lot of our customers quite frequently and Many of them have said that they're looking for ways to improve their credit score or profile, however you want to characterize that.

Speaker 2

And build is a credit builder loan is not a new product. It's a tried and true way to do that or can do that if it's done properly. And so, we're excited to add it to the Prague Ecosystem suite of products and it helps to further our mission of improving the lives of our customers through financial empowerment. There's lots of opportunities for us to acquire new customers into the ecosystem using Build. We as you can imagine, with our approval rates, we decline a number of customers every year.

Speaker 2

And we believe there's to the extent that we could offer them a build product and have them grow back into a lease approval and then effectively maybe Over time or hopefully over time grow into a Vive product or a more near prime product. And so, there's we've got a lot of plans For build is launched, just to be clear. It's not in all states yet, but we expect to be in all states by the end of this year. We have active customers. We have active loans out there.

Speaker 2

We're going to be launching a secured card that It would allow the customers to be able to access the accumulated savings. And we will be doing cross Marketing promotional activity between the products to help our customers access build, but also Have Bill helped to grow the leasing business.

Speaker 7

Got it. And just a follow-up. So How is that being marketed? Is that being marketed under Progressive or under WebBank?

Speaker 2

It's being marketed under Build. Build is the product's name, gitbuild.com, and it is being marketed Through to the progressive database, but also in other forms.

Speaker 7

That's helpful. Thank you.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Bobby Griffin from Raymond James, your question please.

Speaker 8

Good morning, everybody. Thanks for taking my question.

Speaker 5

I guess my first question is, Steve and Brian, can

Speaker 8

you guys just provide any type of context or numbers to kind of maybe help us understand the number of customers that are hanging on the lease Longer than maybe historical standards. Because I'm just asking in the sense that as we roll into next year, this behavior could be relatively unique and I'm trying to get a

Speaker 3

Yes. I mean, Bobby, we haven't disclosed the revenue component of the 90 day buyout or the number of customers. I guess what I would say is, It's the primary driver of the gross margin improvement that you have seen year to date. That along I mean, there's that component and then you've got the strong customer paying performance overall that are influencing gross margins. And so I think our expectations around this lower 90 day take rate is that it will subside over the course of time.

Speaker 3

And as I mentioned in my The variance year over year and versus pre pandemic is expected to kind of narrow As we move throughout the year and so as we exit into next year, obviously, we'll take a look at what the customer behavior is, But we have not made public that revenue tranche that is coming from 90 days. So I think that The way to think about it is normalized gross margins that we experienced pre pandemic are really Probably what we would expect longer term and not necessarily counting on this being a permanent dynamic in the model.

Speaker 8

Okay. That makes sense. And then I guess to follow-up on that, then the right way to think about like the flow through of the guide is not necessarily that you're betting The 90 day behavior continues. It's just more that you feel more comfortable about those customers that didn't buy out staying on lease longer. So you're Implying some of that upside that's been taking place actually continues in 3Q

Speaker 2

and 4Q. Is that correct?

Speaker 3

Yes. I think there's I think you're right on that. There's 2 primary components from the previous outlook to the current outlook that I would highlight here. The 90 day at the Certainly, at the top of the list, and the performance we've seen in Q1 and Q2. Now, like Steve mentioned, what do those customers do and where do they go from a Performance standpoint, after they elect not to do the 90 day buyout, I think what we've got incorporated in the model is some Level of degradation or an allowance for Performance declined from where it's been right now.

Speaker 3

And if payments continue the way they have been in the first half, And that's upside to the base case that we've laid out, but we are not counting on the customer kind of At this elevated level of portfolio performance and below level of 90 days, so 90 day will start to normalize A bit as we move throughout the year, payment performance will show maybe a slight takedown from where we've been in the first half. But overall, still as incorporated in the year, strong EBITDA performance and EBITDA margins Along the lines of what we would have expected. So that's I think that's the commentary I'd give.

Speaker 8

Okay. And then lastly for me, just any we talked last quarter just about some of the product category performance within GMV. Any interesting changes in that? I know some of these larger ticket home durable categories likely over earned a little bit more during pandemic, so just anything interesting to call out from a product category standpoint within the GMV and how it played out during the quarter?

Speaker 2

No, Bobby, nothing that we would note. I mean, obviously, we are We participate in the categories and how they're doing generally, but we can also have Results that might deviate from that just because of some new integration or new initiative that we're doing within a door. And so, obviously, we're focused on all the categories and some are stronger and some are weaker, but nothing specific to call out.

Speaker 8

Okay. I appreciate the details. Best of luck here in the Q3.

Speaker 2

Thanks, Bobby.

Operator

Thank you. This does conclude the question and answer After the session of today's program, I'd like to hand the program back to Steve Michaels for any further remarks.

Speaker 2

Thank you. I'd like to again thank you for joining us this morning and for your continued interest in Prague Holdings. Our teams did a great job and delivered another strong quarter. We feel good about the positioning of our portfolio, and we're making the right investments in people and technology to further our 3 pillar grow, enhance, expand strategy. We look forward to updating you on our progress next quarter and hope you have a great day.

Operator

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Powered by Quartr
Earnings Conference Call
UroGen Pharma Q2 2023
00:00 / 00:00