Good day, and welcome to the PROG Holdings Fourth 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. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, John Baugh, Vice President, Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to the PROG Holdings fourth quarter 2023 earnings call. Joining me this morning are Steve Michaels, PROG 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. During this call, certain statements we make will be forward-looking, including comments regarding our 2024 full year outlook and our outlook for the first quarter of 2024; the health of our portfolio; our capital allocation priorities, including our ability to continue paying a quarterly cash dividend and repurchase shares in future periods; our expectations regarding GMV and the levels of charge-offs and 90-day purchase options in 2024; our expectations regarding the future performance of our other operations; and our expectations regarding consumer demand for leasable items in 2024. 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. 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 provides these measures to investors to help facilitate comparisons of operating results with prior periods and to assist them in understanding the company's ongoing operational performance. With that, I would like to turn the call over to Steve Michaels, PROG Holdings' President and Chief Executive Officer. Steve?

Thank you, John, and good morning, everyone. I appreciate you joining us as we report fourth quarter and full year 2023 results that matched or exceeded the outlook we provided in late October. Today, we will cover how Q4 unfolded, how 2023 concluded, our outlook for 2024, some of the strategic initiatives we are implementing to drive our business forward, and our decision to initiate a dividend as a complement to our capital return activities. Last year was another challenging year for both our customers and retail partners. The combination of weaker-than-expected retail traffic and a shift in consumer spending from leasable categories to consumables and experiences impacted our business. We navigated these headwinds through strong operational execution and gaining balance of share in our top retail partners, while balancing GMV pressures with portfolio management and continued spending discipline. Despite a decline in revenues for the full year 2023, our gross margin expanded, primarily due to strong customer payment behavior. As a reminder, our portfolio benefited from our decisioning changes made in mid-2022, along with our team's careful monitoring and management of the portfolio throughout 2023, which drove strong customer payments and lower-than-expected charge-offs throughout the year. The portfolio also benefited from fewer customers choosing to exercise their 90-day purchase option in the first half of 2023. I want to thank our teams for executing at a high level through a volatile macroeconomic and consumer backdrop. Gross margin expansion of 210 basis points improved write-offs of 6.7% compared to 7.7% in 2022, and a disciplined approach to spending drove year-over-year adjusted EBITDA growth of $41.3 million or 16.1%, resulting in a 12.4% margin for 2023. Our non-GAAP diluted EPS of $3.67 grew 41.2% year-over-year, as we also benefited from a lower share count due to our share repurchase program. Turning to Q4 and our GMV performance, we delivered a 1.2% increase in Progressive Leasing GMV, materially above our expectations set in late October when we anticipated a mid-single-digit decline similar to Q3. The GMV pressures of Q3 2023 continued into October, with the month ending down 6.3% year-over-year. The holiday season, however, performed better than expected, resulting in a positive GMV comp for the quarter. We believe this outperformance was driven by a mix of factors, including increased and more effective marketing spend, implementation of various initiatives with our retail partners, slightly higher approval and conversion rates, increased consumer demand for point-of-sale payment solutions, and some signs of trade-down effects due to credit tightening. Notably, we observed strong sales in consumer electronics and smartphones during the holiday season. In Q4, e-commerce as a percentage of Progressive Leasing GMV was at a seasonal high, representing approximately 20% of total leasing GMV, and we continue to add new e-com retail partners during the quarter through our customizable integrations and plug-ins. We also deepened our integrations with several existing partners, including launching an e-com card solution with a long-time top 5 retail partner. In 2023, we added nearly twice as many new e-com partners as we added in 2022, which allows us to further our strategy of being able to engage with our customers wherever and whenever it is most convenient for them. Entering 2024, we feel good about the health of our portfolio and our cost structure. We continue to make progress against our multiyear strategy to Grow, Enhance, and Expand. To support our Grow pillar, which emphasizes our dedication to business development efforts across new and existing retail partnerships, I'd like to highlight a few focus areas across sales and marketing. Within the retail channel environment of 2023, we grew balance of share with our top partners and continued our track record of renewing key retailers with multiyear exclusive contracts. Our sales team creates value for prospective and existing partners through initiatives that drive incremental traffic and improved top-of-funnel applications and customer conversion. The team is in a business development mindset across all categories as existing and new partners are engaged continually. Our pursuit of new retail opportunities across regional and national brands is an important component of our growth strategy to capture more of our industry's $30 billion to $40 billion addressable market. Additionally, under the Grow pillar, we continue to enhance our direct-to-consumer marketing strategies through a focus on the customer lifecycle. We invest in top-of-the-funnel marketing channels and brand awareness as a catalyst to scale growth. We also work closely with our retail partners to support strategic marketing campaigns to increase new customer acquisition and attract repeat business. Our high repeat customer base, which we nurture with engaging content that builds and maintains relationships, helps us keep a healthy customer lifetime value to cost of acquisition ratio. Our direct-to-consumer efforts, which we refer to as PROG Marketplace, allow new and repeat customers to shop when and where they want through our mobile app, which has been downloaded more than 4 million times since its launch. We grew the PROG Marketplace materially in 2023. And through continued enhancements, we plan to roughly double the GMV for PROG Marketplace in 2024. We view this marketplace as a complement to our retail partner channel since we already partner with some of the best retailers in the country. But we also have affiliate relationships with other leading retailers through our marketplace, which gives our customers more choice. Under our Enhance pillar, we are leveraging technology to make the journey quicker and more seamless for our retail partners and customers. Our recent technology investments provide more self-service tools to enable a superior retailer experience, while helping the customer make the best and most informed choices, and offer greater personalization for a streamlined shopping and decisioning experience. Also, a portion of our 2024 technology roadmap is dedicated to continuing our investment in our customer-centric, flexible lease platform to support new features for our customers and retail partners. Additionally, under our Enhance pillar, we launched the PROG Labs R&D group last year to achieve productivity gains within the company and to improve our retailer and customer experience through generative AI. These efforts represent a strategic investment in improving our responsiveness to consumer and merchant needs while reducing costs. In the relatively short period since the launch of PROG Labs, the group has piloted several value-creating solutions within customer support, fraud prevention, marketing, and code cleanup. Under the Expand pillar, our multiproduct ecosystem continues to empower more of our customers through their financial journey. In 2023, we successfully launched our Build product, which combines the benefits of an installment loan and a secured savings account to help customers build both positive credit history and personal savings. We expect 2024 to be a pivotal year as we leverage necessary infrastructure to further integrate Vive, our secondary credit offering; Four, our Buy Now, Pay Later solution; and Build, our credit building product into our Progressive Leasing ecosystem. We will also lean into marketing, and through our cross-selling motion, believe we will drive incremental leasing GMV. In 2024, through customer acquisition and these cross-marketing efforts, we anticipate that our other operations, which include Four and Build, will represent the size of a top 10 retailer in terms of the GMV it will drive for our leasing business. Lastly, we've made good progress on the profitability of our other operations. We expect to reduce the drag on our 2024 earnings from these operations by approximately one-third compared to 2023, and we believe the other operations will reach profitability as we exit the year. While Brian will get into more detail on our 2024 outlook, I'd like to summarize how we're thinking about the macro backdrop going into the year. Similar to 2023, due to continued economic pressures our customers are facing, we believe the headwinds in demand for our leasable categories will continue in 2024. However, we are optimistic that as the year progresses, the initiatives outlined in our Grow, Enhance, and Expand strategy will further offset these pressures. Despite a strong 2023 holiday season, 2024 started off with GMV pressures across many of our retail partners. With trends softening since the holidays in major leasable categories, an uptick in promotional activity by retailers in an attempt to drive traffic could result in a decline in average ticket size. Q1 is heavily influenced by the tax refund season, which has yet to really kick in. Tax season impacts our business in several different ways and can have a margin impact due to refunds affecting the level of 90-day purchase activity, but can also have a GMV impact based on the amount of liquidity our customers have. As we understand it, the first large release of refunds will happen this week, but we will not know the full impact of how the tax season will unfold until late March, when most of the tax refund activity should be complete. Our Progressive Leasing GMV for the month of January was down low-single digits. And given the macro headwinds and uncertainty I have been discussing, we expect the quarter to end within a similar range. Even with these headwinds and unknowns as we enter the year, we are optimistic about our strategic direction, growth initiatives, and the health of our portfolio. In terms of gross margin, we have a difficult comparison between this year and last, predominantly in the first half of the year. 2023 benefited from a Goldilocks scenario of lower charge-offs and fewer customers choosing to exercise their 90-day purchase option in the first half, which, based on behavior as we exited 2023, we are not expecting the historically low 90-day purchases from the first half of 2023 to repeat in 2024. Our strategy remains solid across Grow, Enhance, and Expand, with resources in 2024 focused on numerous initiatives across these three pillars. Turning to capital allocation, PROG Holdings' Board of Directors declared a quarterly cash dividend of $0.12 per share for the first quarter of 2024 and increased the availability under the company's share repurchase program to a total of $500 million, reflecting our business model's strong free cash flow generation and our ongoing commitment to returning excess capital to shareholders. We intend to pay a cash dividend on a quarterly basis going forward, subject to a number of factors, including market conditions and approval by our Board of Directors. This dividend initiation is designed to complement our share repurchase program, and our capital allocation priorities remain unchanged, prioritizing reinvesting in the business, followed by M&A and returning excess capital to shareholders. In summary, our performance in 2023 and our ongoing strategic initiatives lay a solid foundation for 2024 and beyond. We are excited about the opportunities ahead and remain dedicated to delivering value to our customers, retail partners, and shareholders. Before I turn the call over to Brian, I want to announce that Curt Doman, Co-Founder of Progressive Leasing and Chief Innovation Officer and Board member of PROG Holdings, will be retiring as a member of the executive team in this his 25th year of service. While he is retiring from his executive position, Curt will transition to a senior adviser role and will continue as a member of our Board of Directors. It will be impossible to overemphasize the impact that Curt has had on both the virtual lease-to-own industry and on our company. 25 years ago, Curt and his partner, Brent Wilson, created the industry we now call virtual lease-to-own with the founding of Progressive Leasing. For the last two-and-a-half decades, Curt has been the driving force behind the grit and innovation that has helped PROG remain a market leader, while creating a better today and unlocking the possibilities of tomorrow for millions of customers through financial empowerment. I want to congratulate Curt for all he has built and thank him personally on behalf of the entire PROG family for what he has accomplished in his exemplary career. We are fortunate that Curt will continue to advise and counsel us. He will remain involved in strategy, but his primary focus will be driving PROG's philanthropic efforts, specifically the PROG Foundation and its recently launched Youth Development Center, which was also Curt's brainchild. Thanks, Curt. I'll now turn the call over to our CFO, Brian Garner, who will discuss our 2023 financial results and 2024 outlook in greater detail.

Thanks, Steve. I'll start with a summary of the Q4 financial highlights. Our fourth quarter results matched or exceeded our outlook, showing strong demand for our virtual lease-to-own product as sales and marketing initiatives improved GMV results, and we continue to demonstrate our ability to manage financial drivers within our control. Beginning with the Progressive Leasing segment, as Steve mentioned, GMV for Progressive Leasing improved 1.2% compared to Q4 of last year, materially above our expectations communicated on our Q3 call of a mid-single-digit decline. In addition to the benefit of strong consumer demand during the holiday season, our timing increased the rate of marketing spend and pursued direct-to-consumer opportunities, which contributed to overall results. As a portfolio of business, this GMV tailwind late in the year will contribute more meaningfully to 2024 revenue as compared to Q4 2023 revenue. Revenues for our Progressive Leasing segment declined 6% from $592.9 million to $557.5 million. We entered the fourth quarter with a gross lease asset balance down 9.6% as compared to the same time last year and exited 2023 down 5.2% as the improvement in Q4 GMV benefited our portfolio size. Revenue for the fourth quarter exceeded the top end of our outlook, largely due to the better-than-expected customer payment behavior, along with a slight benefit from the favorable GMV. Year-over-year, we saw higher portfolio yield driven by favorable charge-off trends, while revenue from 90-day purchases remained at normalized levels in the quarter, as gross margin improved 20 basis points year-over-year to 32.9%. Our management of the lease portfolio led to strong customer payment behavior and resulted in a provision for lease merchandise write-offs of 7%, the midpoint of our annual targeted range of 6% to 8%. Progressive Leasing's SG&A expense as a percentage of revenue increased year-over-year to 15% in Q4 of 2023 from 13.2% in Q4 of 2022. For the fourth quarter, SG&A expense increased approximately $5 million year-over-year, primarily due to incremental marketing spend and one-time costs associated with the cyber incident that occurred in Q3. As I will discuss further in our outlook, we expect the restructuring actions we took in January have put us on a trajectory for flat SG&A as a percentage of revenue in 2024. Adjusted EBITDA for Progressive Leasing declined from $80.4 million to $65.8 million as headwinds to revenue and SG&A spend in Q4 compared to the same period last year were partially offset by portfolio performance, resulting in an adjusted EBITDA margin of 11.8% within our targeted annual range of 11% to 13%. Pivoting to consolidated results. Our Q4 non-GAAP EPS came in at $0.72, exceeding the top end of our outlook due in part to a lower share count that resulted from our share repurchase program. Consolidated revenues declined 5.7% from $612.1 million to $577.4 million, driven by the decline at the Progressive Leasing segment. Consolidated adjusted EBITDA declined 18% to $61 million from $74.4 million in the year-ago period, driven by the contraction in revenue at the Progressive Leasing segment, but partially offset by the favorability in gross margin. Our adjusted EBITDA performance was at the midpoint of our outlook. As announced in this morning's earnings press release, the company's Board has approved a quarterly cash dividend of $0.12 per share and increased the remaining authorization under the company's existing share repurchase program to a total of $500 million. To echo Steve, these decisions speak to the strong profitability and cash flow generation of our business, which allows us to return value to shareholders through a combination of dividends and share repurchases. We repurchased 4.7 million shares of our common stock in 2023 at a weighted average price of $29.75. The company generated $204 million of cash from operations, which is net of the working capital needed to fund GMV. Moving to the balance sheet. We ended the quarter with net debt of $444.6 million comprised of $155.4 million in cash and $600 million of gross debt, which is 1.49 times our trailing 12-month adjusted EBITDA. We remain undrawn on our $350 million revolver at quarter-end. I'll now touch on some key aspects of our 2024 outlook, which was provided in this morning's earnings press release. We expect GMV headwinds to continue through at least the first half of 2024, with a year-over-year percentage decline of our first quarter GMV down low-single digits. We expect these first half GMV pressures, combined with a gross lease asset balance down 5.2% as we enter 2024, will result in consolidated revenue being down year-over-year. Our portfolio performance is expected to remain strong, and we will continue to actively manage yields throughout 2024. However, we expect gross margin to be difficult compared to 2023 for the Progressive Leasing segment as we saw a record low percentage of customers exercising their 90-day purchase option in the first half of last year, coupled with lower charge-off rates throughout the year. We anticipate a slight increase in Progressive Leasing provision for lease merchandise write-offs, but we still expect to deliver yet another year of consistent performance within our targeted annual range of 6% to 8%. The cost actions that we announced last month, including a reduction in workforce, the termination of certain independent sales agent agreements, and office-based consolidation are intended to drive efficiencies within the cost structure and should allow for the Progressive Leasing segment's SG&A as a percentage of revenue to remain roughly flat year-over-year. In 2024, these cost actions will drive roughly $10 million of year-over-year savings for Progressive Leasing, partially offset by investments in growth initiatives across the leasing business and other operations. Turning to the consolidated outlook for 2024, we expect revenues to be in the range of $2.24 billion to $2.34 billion, adjusted EBITDA in the range of $230 million to $250 million, and non-GAAP EPS in the range of $2.70 to $3. This outlook assumes a difficult operating environment with continued soft demand for consumer durable goods, no material changes in the company's decisioning posture and effective tax rate for non-GAAP EPS of approximately 29%, no material increases in the unemployment rate for our consumers and no impact from additional share repurchases. In closing, I want to emphasize the company's ability to operate at a high level through a challenging macro environment and thank the team for several wins during 2023, including an increase in balance of share with top retail partners, the renewal of multiyear exclusive agreements with several key partners, strong portfolio performance, and disciplined SG&A spending. In 2024, we will continue to focus on the growth initiatives, balanced with portfolio performance and controlled spending to maximize shareholder value. I will now turn the call back over to the operator for the Q&A portion of the call.

Thank you. Our first question comes from Kyle Joseph with Jefferies. Your line is open.

Good morning, Steve and Brian. Congratulations on successfully handling a challenging year, and I appreciate you addressing my questions. I would like to begin by hearing your thoughts on the condition of the underlying consumer as reflected in your guidance. You mentioned a return to normal EBO activity, along with an increase in provisions. What is causing this? Is it primarily due to the reversal of the Goldilocks scenario? While there is inflation to consider, the employment situation appears relatively strong. I'm interested in understanding the current dynamics affecting your consumers.

You got it, Kyle. You mentioned some important points. Looking back, 2022 was a challenging time for consumers due to inflation, but 2023 felt stable and possibly even improving. We discussed the lower 90-day buyouts during tax season, but what's even more significant is the 90-day buyouts that didn't occur—customers who continued making payments rather than going into charge-offs. They may have faced some difficulties that prevented them from opting for the 90-day buyout, but were still able to keep up with their payments, which contributed to the favorable conditions we observed. As we entered the latter half of 2023, the activity around 90-day buyouts returned to a more typical level. It’s hard for us to predict that the favorable conditions we experienced earlier in 2023 will happen again, especially since tax season hasn’t started for us to assess the situation thoroughly. However, we feel the consumer is in a solid position. Employment remains strong, though some inflationary pressures have notably affected consumers. While we are not anticipating any major downturn, we also don't expect the exceptionally good conditions of 2023, particularly those more evident in the first half, to repeat. We will gain clearer insights over the next six to eight weeks as tax season progresses, but overall, we believe consumer health is good, just not expecting a full repetition of 2023.

Got it. Yeah, that makes sense. I have one follow-up. You mentioned a bit of a tailwind in fourth quarter GMV due to the trade-down effect. I would like to hear your perspective on this. The macro environment seems to have changed; a few weeks ago, we discussed a soft landing, and now there's talk of potentially higher rates. Additionally, there has been significant news in the prime consumer finance space this week. Could you provide insight on whether you're seeing incremental trade down into the fourth quarter based on your conversations with retailers?

We believe that the fourth quarter and the holiday season benefited from several factors, including a noticeable trade-down effect that we had been anticipating for some time, although it was delayed. Conversations with our retail partners indicated that finance was a positive aspect during the holidays, encompassing everything from primary financing to lease-to-own options, highlighting the demand from consumers for payment solutions on larger purchases. Retailers have also informed us that their main financial partners have tightened their criteria and are planning to do so again. We see this situation primarily as one influencing traffic. More consumers will likely seek purchase options over time, and fewer of them will qualify through their main providers. This belief supports our confidence in gaining market share among our retail partners, which can help balance the overall challenging demand landscape. The extent of the trade-down effect is hard to predict since there's no direct or linear correlation to funded GMV, but we view it as alleviating previously existing challenges. We are hopeful that it will serve as a positive force moving into 2024 and beyond.

Got it. Very helpful. Thanks for taking my question.

Thanks, Kyle.

One moment for our next question. Our next question comes from Jason Haas with Bank of America. Your line is open.

Hey, good morning, and thanks for taking my questions. I'm curious if you could provide a little bit more color on what you saw in regards to write-offs in 4Q. I think historically, you've seen write-offs will tick down from 3Q to 4Q. But this quarter, we saw a step up. And then following on that, I'm just curious about how you're thinking about the cadence of write-offs through 2024.

Yes, Jason, there are some seasonal factors involved, but we are currently within our historical range of 7%, and there are no signs indicating that the portfolio is weakening beyond our comfort level. Everything suggests we are in a strong position as we move into 2024. Looking ahead, considering the current macroeconomic situation and what Steve mentioned regarding the shift from an ideal scenario to a more normal one, we anticipate a slight increase on an annualized basis compared to what we reported in 2023, which was below the midpoint of the 6% to 8% range. The portfolio remains a key focus for us in terms of managing the profit and loss and optimizing gross margins, and we are confident in our ability to perform within that range for 2024.

And just to clarify, was there any decisioning changes? Did you lose some credit at all in the quarter or no?

Jason, this is Steve. We're always tweaking and adjusting and testing on the decisioning, but no wholesale changes were done in the quarter. Approval rates in the quarter were slightly higher than the previous year, more so in the online channel than in the in-store channel, but on a weighted average, slightly higher. And obviously, as you know, those different channels have different conversion dynamics. There's more purchase intent if you're in the store versus online. So, an increase or a change to approved rates in-store would have a bigger impact on GMV. But nothing that we believe really flows through into a noticeable change in our portfolio performance or certainly write-offs.

Got it. That's helpful. And then as a follow-up, I was curious if you could provide some more color on the weakness that you've seen in January, I'm curious how that compared on e-commerce versus in-store? I know there's some bad winter weather in January in certain regions. And then also by category, if there are any categories that were noticeably stronger or weaker in January?

January has been fairly soft. I told the team we couldn't mention the word weather on the call, but you brought it up. There were indeed some weather events across the country that affected in-store sales more than online sales. After the holiday season, we did experience a dip in January, as mentioned in our prepared remarks, down by low single digits. There wasn't a significant difference between online and in-store channels. Regarding categories, similar to the holiday season, consumer electronics performed better, and some promotion-driven furniture stores had decent days or weekends. Overall, though, it was softer than we anticipated.

Was there any pickup during the Presidents' Day weekend or too early to say?

It's too early to provide an answer. We collaborated effectively with our retailers on their sales campaigns. The data will take some time to come in regarding funded leases, deliveries, and similar matters. As you've noted, tax season, whether it is delayed or not, affects buying activity during Presidents' Day. Therefore, it's challenging to make definitive statements about February until we observe how tax season unfolds, which we'll really understand only by the end of March.

Got it. Really helpful. Thank you.

Thanks, Jason.

One moment for our next question. Our next question comes from Bradley Thomas with KeyBanc Capital Markets. Your line is open.

Hi, good morning. I apologize if I missed this in the prepared remarks, but Steve, I was hoping you could talk a little bit about customer count and how that's been trending? I believe you're starting to lap a point where there was a bit of a step down in the number of customers about a year ago. So, just curious about how that's trending and how you all are thinking about that going forward?

Yeah, Brad, I don't have those numbers right in front of me. We can get those to you after the call. I think we'll file the K here shortly as well. But obviously, we have a lot of repeat business. We are always looking to add new customers to the ecosystem. And that's some of the discussion that we had about our multiproduct ecosystem and the other products that we have, helping to introduce new customers to all of our products, including leasing from the existing retailers that we have. The more mature those relationships become, we will have a higher repeat business. So obviously, we're working very hard to try and add new retailers and then we'll get a new influx of customers in that regard. But as far as the year-over-year customer numbers, I don't have those right in front of me.

Can you guys still hear me?

I wanted to mention that there has been a slight decrease, which aligns with the decline in GLA, roughly around 5%. So there is no significant inconsistency between customer count and GLA; they are quite consistent.

I appreciate it. Really, I was going to kind of tie it to my follow-up question just around dynamics like average lease balance and some of the dynamics with deflation that we're seeing out from your retail partners. Broadly, a lot of the hard goods, furniture, etc., have been seeing deflation, particularly as lower container rates have flowed through. So I was curious how you're seeing that affect your business if it's been reducing average lease balance or if the customers are taking up usable capacity that they have with you to which they're approved for it? And then kind of how you're thinking about the dynamic going forward?

We did expect some reduction in average basket size or ticket size in 2023, although we didn't really see that as it remained fairly flat. However, we are observing some pressure on average ticket due to deflation or promotional activity aimed at clearing inventory, and we've accounted for a small amount of that in our forecast for 2024.

Got you. Understood. Well, if I could squeeze in one last one. Obviously, the new share repurchase program, quite sizable. Just curious if you could give us any context around leverage ratios or potential capacity to get after that program over the course of this year.

We have topped up the repurchase authorization by the Board to $500 million. We have been quite active in buying back our stock over the past few years and will continue to view this as our preferred way to return capital to shareholders. Additionally, we have initiated a dividend approved by the Board, which we see as a good complement to our stock repurchasing activities. Regarding leverage ratios, we are comfortable within the range of 1.5 to 2 turns of net leverage. We assess this annually rather than quarterly, as it can fluctuate. Our current leverage ratio is satisfactory, and we expect to generate cash in most scenarios related to growth. Our forecast for 2024 indicates we will generate additional cash flow. When we define excess cash flow, we plan to return that to shareholders, primarily through repurchases, and now with a dividend as well.

Great. Thank you so much, Steve.

Thanks, Brad.

One moment for our next question. Our next question comes from Anthony Chukumba with Loop Capital Markets. Your line is open.

Good morning. Thanks for taking my question. I guess my first question is in terms of what you're seeing in the retail partner pipeline, both from an SMB perspective, but also from an enterprise perspective.

Yeah, Anthony, I mean, obviously, pipeline is a big focus of ours, it continues to be the. On the SMB side, depending on which vertical or category you're in, there's various levels of maturation. And as we've talked about a number of times, that's a more, I'll call it, competitive area with more players out there. But we do a great job in the regional SMB space, and we'll continue to look to grow that business through growing existing partnerships as well as converting pipeline. The national side or the enterprise side is always a frustratingly long sales cycle and not really any new updates and certainly not any names for you here this morning, but clearly remains a top priority of ours. And we believe this continued challenging environment is a supportive backdrop for those conversations to lead to conversions.

Got it. That's helpful. As you consider GMV, you mentioned expecting it to decline by low-single digits in the first quarter. What do you think needs to occur for GMV to potentially improve this year? You had a positive GMV report, which was better than expected, marking the first positive GMV growth we've seen in quite some time during the fourth quarter. What do you believe needs to happen for us to achieve positive GMV growth in any of the last three quarters of 2024? Thanks.

We have several initiatives underway with our existing retail partners, including an integration for e-commerce with one of our long-standing top partners. These initiatives can help us navigate a challenging demand environment. We have multiple projects in the pipeline, and while the current retail conditions haven’t led to significant enterprise pipeline conversions, they have led to a greater focus on prioritizing projects from our existing retailers. Our internal goals, like the PROG Marketplace and our direct-to-consumer efforts, along with cross-sell marketing for our other products, can help generate gross merchandise volume even in this tough environment. While we are diligently working on securing large pipeline conversions, we are also focused on smaller wins that can help us compensate for the current challenges. We expect to see progress on these initiatives as the year progresses and will continue to keep you updated on our advancements.

That's helpful. Thank you.

One moment for our next question. Our next question comes from Bobby Griffin with Raymond James. Your line is open.

Good morning. This is Alessandra Jimenez on for Bobby Griffin. Thank you for taking our questions. Maybe first, just a follow-up on GMV. My apologies if I missed it in the prepared remarks. But what is the full year 2024 sales guidance apply for the full year GMV outlook?

We do not provide guidance on GMV for the year. While everyone has their own models, you can estimate revenue, although the types of dispositions and the compositions of that revenue will play a significant role. Last year, we offered some insight into what we expected GMV to be for the quarter as we reported on the previous one, and we plan to do the same this year. However, we have not provided a complete guide for GMV for 2024.

Okay. Understood. And then maybe just on 2024 profitability guidance. What are the building blocks to kind of get us to the low end versus the high end of that range? Is it just revenue-dependent? Or are there some other puts and takes there?

I think it's important to highlight some of the variability within our model, particularly regarding revenue dynamics in a challenging environment. Additionally, the situation with gross profit and gross margin is noteworthy, as we've considered various scenarios where variability could occur. We're confident in our ability to manage the portfolio, and if the favorable conditions experienced in 2023 continue into 2024, that would benefit our model significantly. Conversely, we will remain cautious about potential downsides. Overall, gross margin and gross profit are crucial factors outside of revenue. From a selling, general, and administrative perspective, those cost dynamics are manageable, and we will align them with our top-line performance. Ultimately, the main focus is on revenue and the gross margin situation.

Okay. That's very helpful. And then lastly for me. We're pleased to see the dividend announcement and then regards to upping the share repurchase. Just given the strong cash flow generation of the business, what is the implied free cash flow off of the guide? Should we expect a similar adjusted EBITDA to cash flow conversion in 2023 and 2024?

Yeah. I mean I think that's fair. There's a cash tax dynamic where you might have a little more in cash taxes. But I think the relationship between EBITDA and free cash flow is relatively consistent. The big variable in that is GMV as you're putting working capital out on the street. So, what I'd pay attention to there is obviously, if we start to exceed our GMV plan or GMV starts to come later in the year, that can be a pretty significant usage of free cash flow. So that's the variability I point you towards. But otherwise, you're thinking about it right. The consistency between EBITDA and free cash flow, absent those dynamics.

Thank you so much. Best of luck in 2024.

Thank you.

That concludes the question-and-answer session. At this time, I would like to turn the call back over to Steve Michaels, President and Chief Executive Officer, for closing remarks.

Yeah. I'd like to, again, thank you guys for joining us this morning and for your continued interest in PROG Holdings. Our teams did a great job and delivered a strong 2023. We feel good about the positioning of our portfolio and we're making the right investments in people and technology to further our three-pillared strategy of Grow, Enhance, and Expand. We look forward to updating you on our progress on 2024's initiatives during our Q1 call in late April. Hope you have a great day.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.