Breach Inlet Capital Urges PROG Holdings to Launch Strategic Review Process

Highlights Significant Value Destruction Under Incumbent Leadership Team

Believes a Properly Run Strategic Review Process Could Unlock Significant Shareholder Value

Breach Inlet Capital Management, LLC (together with its affiliates, “Breach Inlet Capital” or “we”) is an investment firm focused on underfollowed and misunderstood small cap equities. Today, we issued the following open letter to shareholders of PROG Holdings, Inc. (NYSE: PRG) (“PRG” or the “Company”) highlighting our concerns and recommended path forward for the Company. This open letter is in response to PRG’s board of directors (the “Board”) refusal to engage with us and apparent willingness to continue down its value-destructive path.

June 24, 2025

Fellow Shareholders:

Breach Inlet Capital has been a patient and supportive shareholder of PRG for over two years. Based on publicly available information, we are a top 10 shareholder with ownership of approximately 2% of the Company’s outstanding shares, which is more than PRG’s entire Board and management team combined when excluding CEO Steven Michaels.

We have become increasingly frustrated by PRG’s precipitous decline in its profits and share price. We are also concerned by the Company’s inability to become less dependent and beholden to its large retail partners. We communicated our concerns on multiple occasions to CEO Michaels, CFO Brian Garner, and director Curtis Doman, who is currently serving as a Special Advisor to the CEO and co-founded PRG’s Progressive Leasing segment (“Progressive”). Unfortunately, it became apparent that the Company’s leadership did not fully appreciate PRG’s dismal track record, share our sense of urgency, or have a clear plan to reignite profitable growth.

Against this backdrop, we wrote to the Board privately expressing our views that drastic and immediate actions must be taken to fix the trajectory of PRG. We also recommended that the Company immediately launch a strategic review process to comprehensively evaluate the strategy, structure, and leadership of PRG. In addition, we requested to meet with a subset of the Board to discuss our concerns. Sadly, the Board flat-out rejected our request for engagement and seems content to continue down its value-destructive path.

We will no longer tolerate the status quo, which is why we are writing to our fellow shareholders to highlight our concerns and recommendations to enhance shareholder value at PRG.

Dismal Track Record

Since spinning off from Aaron’s Holdings Company, Inc. (“Aaron’s”) on November 30, 2020, PRG’s share price has fallen ~55%.¹ Meanwhile, the share prices of peers listed in the Company’s proxy statement for this year’s annual meeting (the “2025 Proxy Statement”) have risen by an average of ~50% over that timeframe.² To recap, PRG has underperformed its self-selected peers by ~105% over the past ~4.5 years.

The Company’s closest peer is Upbound Group, Inc. (“UPBD”). Though strangely not included in the 2025 Proxy Statement as a peer, UPBD’s share price has fallen ~30% since PRG’s spin-off. While that is a poor return, it still represents material outperformance relative to PRG. Importantly, UPBD’s board of directors took corrective action after bad results and upgraded key executives, such as its CFO (~2.5 years ago) and EVP of Acima (~3 years ago).

In turn, Acima has substantially outperformed the Company’s primary business, Progressive. Based on 2025 guidance, Progressive’s EBITDA will be ~30% below what it was in 2020. Based on 2025 consensus estimates, Acima’s EBITDA will be ~25% above pro forma 2020. To reiterate, the Company estimates that Progressive’s EBITDA will have declined ~30% in five years while Acima will have grown ~25%. Acima and Progressive are clearly headed in opposite directions for the reasons described below.

Since 2020, Acima improved its leadership, added significantly more retail partners than Progressive by targeting smaller retailers, and entered new product categories such as wheels and tires. Since PRG’s spin-off in 2020, Progressive lost a large retail partner to bankruptcy (Big Lots), lost another key partner to Acima (Ashley’s Furniture), failed to add product categories, and ceded substantial market share.

The Company’s leadership has attributed its inferior results to a greater focus on compliance than its peers. This explanation is ironic given Progressive paid a staggering $175 million to the FTC to settle charges it misled consumers.³ We do not buy the “compliance” excuse – the reality is that peers are just executing better.

Excessive Executive Compensation Not Aligned with Performance

Due to Progressive shrinking while its top competitor (Acima) and others expand, PRG guided to total EBITDA falling by ~25% from 2020 to 2025. Despite the Company’s profits and share price falling, the combined total compensation of PRG’s CEO and CFO has risen from roughly $9.5 million in 2021 to nearly $17.7 million in 2024.⁴ To put this into perspective, the Company’s EBITDA dropped ~30% from 2021 to 2024 yet the CEO and CFO received more than an 86% boost in combined compensation. We cannot fathom the reasons that PRG’s Board is rewarding management with materially higher compensation while the Company’s profits drop and shareholders suffer. Compensation should always be tied to performance and this needs to be rectified at PRG immediately.

Perhaps the Board is not troubled by the disparity between management’s pay and performance due to a lack of “skin in the game.” Only two independent directors – Douglas Curling and Caroline Sheu – have ever purchased a single share. If members of the Board truly believed in the strategic direction of PRG, we would expect them to put their money where their mouth is and purchase shares. Frankly, the lack of insider buying at today’s depressed valuation (~45% below its 52-week high) is inconsistent with the Board’s decision to repurchase shares at much higher prices throughout 2024 and management “emphasizing the strength of our business” on the 1Q25 earnings call.

The Time to Launch a Strategic Review Process is NOW

Shareholder value is not being maximized under PRG’s current leadership, strategy, or structure. Nearly five years of a dismal track record supports this statement. As further evidence that investors have lost confidence in the status quo, PRG trades for only ~5.5x 2025 EBITDA guidance and ~8.5x implied 2025 FCF.⁵

PRG needs to rapidly transform. Fortunately, PRG has two valuable assets that should attract bidders: Progressive and Four Technologies (“Four”). Therefore, we believe the Board should immediately launch a strategic review process and evaluate a myriad of options to address the Company’s continued underperformance, including potentially selling the entire Company, selling one or more business units then repurchasing shares, transforming Progressive’s strategy (to target smaller retailers and enter new product categories such as wheels and tires), refreshing the leadership team, and so on. The Company’s performance has plainly been unacceptable – the status quo will no longer be tolerated so all options to create value must be on the table.

Despite being mismanaged, Progressive remains the leader of the growing virtual lease-to-own (“VLTO”) market and only participant to have significant partnerships with national retail partners. The business has proven its growth potential with EBITDA rising at a 30%+ CAGR from 2014 to 2019 under prior leadership. Also, Progressive has substantial untapped whitespace because most national retailers do not currently have a VLTO partner. For perspective, Aaron’s paid 10.6x forward EBITDA for Progressive in 2014.⁶ In 2021, FirstCash Holdings, Inc. bought a VLTO peer, American First Finance, for 13x EBITDA.⁷ Also in 2021, Rent-A-Center (now UPBD) acquired another VLTO peer, Acima, for 7.2x EBITDA but that EBITDA ultimately proved to be inflated at that time so arguably this valuation multiple was misleading and low.

Four is another underappreciated asset. This Buy Now, Pay Later (“BNPL”) business has increased revenue at 100%+ CAGR since it was acquired by PRG in 2021. PRG expects Four to have $70 million in revenue and be profitable this year. The BNPL behemoth, Affirm Holdings, Inc., trades for ~7.5x CY25 revenue and ~27.5x CY25 EBITDA.⁸ Coincidentally, PRG also purchased Four for over 7x forward revenue.

We believe PRG should be valued on a sum-of-the-parts basis given BNPL businesses are valued at a premium to VLTO companies. Assuming relevant M&A comps for Progressive, trading comps for Four, and valuing the Company’s Vive Financial business for very little, then this would imply PRG could fetch ~$45 to ~$65 per share in a sale equating to ~60% to ~130% upside from today’s price as illustrated below.

Conversely, the Board and its advisors may determine that the value-maximizing path is to sell Four, aggressively repurchase shares, and transform Progressive. In this scenario, we estimate that PRG could be worth ~$45 to ~$80 per share implying ~60% to ~180% upside as outlined below.

We would note that both scenarios above use 2025 guidance, which should mark the trough in PRG’s results and therefore the above estimated valuations are arguably depressed. Regardless, we are confident that PRG’s intrinsic value far exceeds the current share price if the Board is willing to launch a strategic review process. We assume the Board shares our confidence given the Board allocated nearly $40.5 million to repurchase shares at an average price of ~$47 per share in 4Q24, a price that reportedly reflected a discount to the Company’s internal estimate of intrinsic value.⁹

We encourage our fellow shareholders to express their views to the Board as well. We also would like to remind the Board of its fiduciary duty to maximize shareholder value. In the absence of appropriate Board action, we intend to continue to make our voice heard to ensure the Board grasps the severity of the situation and the need to act in the best interests of PRG’s shareholders.

Best Regards,

Chris Colvin, CFA

Founder and Portfolio Manager

Breach Inlet Capital Management, LLC

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