Earnings call transcript Q1 2024

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Operator

Good morning and thank you for holding. Welcome to the Conn’s, Inc. Conference Call to discuss Earnings for the Fiscal Quarter ended April 30, 2023. My name is Donna and I will be your operator today. [Operator Instructions] As a reminder, this conference call is being recorded.

ir.conns.com. dated morning XXXX via and Investor website release market distributed the earnings Relations this opened can at company’s June was X, before company’s The be accessed

other measures. these During was for financial GAAP operating today’s most issued adjusted per refer today debt. loss non-GAAP a their and net will comparable earnings to call, discuss, the loss, performance adjusted company’s measures retail management to measures, segment net Please of share reconciliation among release that

subject The I concerning that forward-looking made which are that within statements federal you uncertainties, present must this based the in to These to company’s laws. could company the cause statements statements actual remind expectations are materially such today. the of risks some cautions indicated future from or those of call forward-looking results statements are and on the events. necessarily differ securities beliefs represent which certain assumptions meanings

CEO; the ahead. the Your conference go Mr. Please speakers turn today Miller. the Interim over now Miller, are to company’s CFO. and will Bchara, Norm I company’s George

Norm Miller

welcome call and who review earnings on today’s detail. our strategic fiscal results update year turning with Conn’s call. George, I’ll morning, Good start first conference call before priorities more in our over an to to the quarter XXXX financial will

expanding a credit-constrained macroeconomic and lease-to-own for quarter serve our results business better a Despite environment. an difficult refocusing customers our challenging to expectations our e-commerce position our launching in-house backdrop, growth a the by first Our continue to reflect were generally with profitable in core business. offering and efforts we to sales line return

these to improving progress lease-to-own segments we initiatives. includes against see have and applications, and our quarter, we priorities, first and strategic the growing sales. in-house e-commerce accelerating successfully within these This executed trends Conn’s sales against During started

a stronger from the continue as the company believe needs serve customers. the on well positioned a to we track emerge to expect landscape is economic this year, to right While throughout we growing challenging our period are we of that

I starting core the introduction, customers. I the leverage strategy of model. I efforts to in making, this highlight have the our rejoined Since our serve company discussed unique to our consistently I importance we XXXX, progress October are than credit-constrained to strong credit retail refocusing have want home-based our With the business we with a better experience, payment powerful across value provide customers. belief we our that combining our proposition the with By customers ever and with spectrum multiple more now product core a shopping credit elevated who provide. need payment resonates to essential unmatched our an categories offerings options entire business

to We significant changes core made sales drive two have our to recently customers.

credit-oriented with marketing effective marketing First, proposition. our channels we changed towards adjusted spend value our to that our emphasize most credit customer our message and are

Second, a as to sales, and credit growth launched last payment to visitors process application application having their of innovative millions quarter easier that experienced our first in the new impact score. volume we the on our Conn’s first quarter, we to application two to XX in represents approximately which during our months. past increased and impact credit apply discussed on it of Applications website for no with little options the a are meaningful applications These a changes XX%, makes positive the we for and acceleration quarter. stores

to and our is indicator application our sales are segments. lease-to-own starting drive financing, in-house growth critical a of sales Applications leading within and

our as e-commerce accelerated overall business new marketing since take We have strategy. hold application trends, sales our February, sales growing process, experienced have steady refocused also and which our improvements benefit and renewed efforts in from our

through XXXX, into May. and positive, were trend this April and In March retail in-house option our sales accelerated monthly financing

being are credit underwriting to retail pursuing. sales We growth we approach strategies maintained a the have recent in driven consistent by and are improvements

addition, standards Sales supports manage to home-related for continue strategies. their similar improvements, consumers our increase believe credit which other as segment lease-to-own solutions the options risk look helps lenders demand within credit refocused our experiencing tighten will big-ticket payment payments success growth and products. of In are we that our for of spread out and

As prime products, extended credit increases, factors, pull-forward this demand from lenders. of our demand and and behavior, by excess seeing period several being for from consumer general We segment underwriting cash like core other believe including is discretionary from customer spending retailers, is following Conn, customers. consumer an impacted especially home-related higher liquidity, tighter in evolving lower quality

from demand to the fiscal impact throughout remainder customers these of expect this We higher credit quality trends year.

improved Overall, third weaker credit-constrained the stable finance last both core cash quality credit and trends in LTO has business sales sales customers. May, customers. momentum by higher offset Positive on as remained or refocused our in but in-house since continued quarter to year’s have has Conn’s trends we been and sales

month were XX%, the sales down May same-store total approximately approximately of As result, XX%. down a were while sales for retail

has Like Financial. other to benefit of significant the We positioned believe, to in both bringing the in revenue product potential LTO as years, through known Improvement over earnings year the higher strategic the last softness lease-to-own later our cash business credit the transformations the in-house as been we from growth our to has this company initiatives, and years. XX coming from and we consumers the including offset quality well in-house are recent contribute launch

Financial allows than applicants both approximately market, a qualify XXX,XXX over not profitable margin greater ultimately enables model power purchasing to our the provide providers. did differentiated believe past approve income, to LTO can Conn’s gross larger other and Conn’s credit retail more the including in-house months. retail target provide Improvement us for the financing XX capture lease option and addressable that we business applicants to another Since us

drive of we from insight history LTO customer believe opportunity payment a also We customers. by repeat relationships have to the compelling our leveraging

our and improve credit. use will relationships to LTO customers to information their building helping We customers this customers, credit Conn’s deeper in-house graduate future

XXXX last call, on we went in of As And X area Houston today’s stores. early to XX as expanded we live have mentioned our call, Financial in Improvement locations.

and long-term are this offered implementing stores approach sales our Once Improvement of double mature of the XX% By coming We retail can more we ensure end measured fiscal in at across majority be to success. annual sales. year years, expect the its the believe year, to program approximately $XX will Financial to than we grow over continue LTO a from conns.com. last and million of taking to the our

Improvement Financial a coming As value opportunity that will we unlock you the transformative see, can over significant believe is years.

review I’d Our e-commerce the to like today. expansion next priority strategic is

enhancements conversion application after process. our We to our continue strategy successful e-commerce to recent optimize platform last year’s and

our and launched assortment, and technologies first The AI-driven expanded record improved we we created produced quarter, program online sales dropship $XX.X e-commerce platform and content the our overall and quarter e-commerce powerful have strategy offering. During of million. furniture new photography the of

e-commerce first e-commerce fact, slight making we in year during increase the In in quarter, this sales and can previous growth only $XXX the the I accelerated over increase to year-over-year progress and total by increased by XX.X%. quarter are fiscal anticipate a after million. am encouraged well

expect a in business, next tremendous years. over the which we sales $XXX to annual opportunity to We grow several to over our million scale online have

Now looking footprint. our retail at

offer decided in-house we couldn’t quarter, limiting the their and test we customers lease-to-own Belk, During opportunities. financing end options, to our with our as first payment our sales

payment valuable outcome of we have unmatched the lessons about Belk, by test the While we of strength the our disappointed learned options. were with

our promote focused innovative customers. addition, reach In pursuing on continues opportunities team leadership more to culture to a

a retail over store our Additionally, as distribution need open openings will credit centers. multiyear opportunity intend and and maximize year, We have this mentioned stores or opened by our pause operating revenue drive major fixed we new store retail our us, growth locations our and stores on we we believe to after behind this new existing without to of XX With couple we profitability new last increasing the online the we leveraging per call, to years. within strategy for cost. across segments planned investments believe next

that quarter, details the I reiterate growing to in over first more I to within George business. during have accelerating I customers strategies our priorities. are our the resonates and our improving want in applications, Conn’s we a that operating Before leadership The strategic team’s business financials, our belief and on e-commerce with turnaround financial lease-to-own confidence and signs progress and our my strong conviction call our encouraging deep our our both results. in-house refocused our ability deliver on helping segments made a sales sales are turn share to to

With to the this call I’ll overview, over George. turn

George Bchara

Norm. Thanks,

core of believe we we refocusing applications, aspects We pursue are on have e-commerce sales. grow progress including growing trends customer. profitably strategies to and We an improving making we our several enormous our are the opportunity business, as at excited accelerating across aimed by sales

a representing revenues On $XXX.X a basis, XX.X% decline. total the quarter, were for year-over-year million first consolidated

share diluted the a costs $X.XX location, within compared to closure same GAAP of Belk. decision of single by first store XXXX. associated loss non-GAAP fiscal net the company store of share basis, quarter, period On the offset a the net store year loss which diluted with per excludes the for test related for to first a to income sale the a net per a $X.XX the of gain $X.XX For end store quarter, partially in reported reported we with the diluted share per

press are of There the available of and financial our the non-GAAP last to quarter first GAAP issued earnings fiscal in quarter morning. release that were this was reconciliations adjustments net income measures year, first in no to

revenue the Looking in by a in partially million decline. same-store retail first a of at our revenues XX.X% Total performance The quarter, were retail $XXX decline in new store XX.X% more growth. driven year-over-year segment the in detail. by representing decrease primarily was retail sales, offset

to discretionary which products accelerated were the lower costs for excess by in Same-store deleveraging distribution fiscal impacted fixed declined driven the gross primarily the period XX.X% higher of quarter home-related same first sales first following margin consumer Retail compared spending freight for sales. year an costs from period of liquidity, to extended quarter lower sales. XX.X% by XXXX, resulted for in during and

sales the we benefit over international expect time retail margin realize to shipping We of lower gross recover, and as retail improve costs.

million first increases sales compared the than XX.X% retail the expenses our store first the costs in Due new the and expenses more quarter savings to same SG&A our million year XXXX. period same expenses the of to related decreased SG&A $XX.X fiscal for Lower initiatives segment XX.X% $XX were declines in reflect last sales, fiscal retail period SG&A cost to for for lower to variable for retail of that compared growth. year. quarter effort offset in to

in period $X.X the segment quarter loss operating was For basis, the quarter, loss $X.X the $XX.X On XXXX. of first retail a non-GAAP $XX.X year retail same a year was segment of operating for million loss first fiscal million loss a for million compared period fiscal XXXX. same the to in segment retail operating for million compared to

our to a of receivable and remains performance. to portfolio credit charges Turning average as well customer revenues as due portfolio million, first declined reduction a decline other year-over-year in to X.X% $XX.X health stable. Finance balance quarter segment Underlying commissions. primarily insurance in the the

re-aged performance. However, a normalizing and have economic trends, more overall policy current conditions impacted restrictive

delinquency XX, same re-aged of accounts as portfolio, fiscal XX.X% at the period consumer liquidity. of April XX.X% XX.X% XXXX, for The excess to from was percent compared at a a the benefited percent As the portfolio XX.X% XXXX, XX-day balance which of to the XXXX. April year compared in was XX, balance

of one lowest almost remains re-aged and at in value to accounts carrying the addition, levels improve continues decade. the a of In

compared average portfolio XXXX, the quarter charge-offs period percent XX.X% balance fiscal for year. to For net the fiscal year of first as the XX.X%, same of were last a

During and compared company quarter a for was provision the The income before bad the credit year. $XX.X million smaller million for in credit million period provision to debts quarter, net was same $XX.X portfolio. in the credit year-over-year year-over-year receivable debts charge-offs customer segment $XX.X taxes primarily fiscal last compared accounts million same increase the credit the driven last of higher segment decline by a period to reported year. a bad first of the $XX.X $XX.X in million loss fiscal The for the for first

as expense X.X% The compared greater taxes in due in declined last interest to year. the before primarily to was reduction credit as fiscal which to our a well XX.X% credit same spread, period segment loss higher

debt maturities. at the remains have and availability XX, $XXX.X XX% debt a of had million Turning end XXXX, million to debt first we compared approximately revolving to of $XXX ending Net quarter, which below April in we levels, $XXX.X our At XXXX, XXXX. the net portfolio under now balance cash sheet. percent XX, balance near-term April pre-pandemic was plus our had as April at XX, $XXX.X credit million the no of facility. At million we

to our continue our provides later expect we next while liquidity investing to us and access support growth year. complete long-term fiscal to our our believe current business We of with and initiatives, in flexibility the transaction to needs this ABS capital

and lieu to environment expectations the economic uncertain our official of remainder the in for year. update an the Given of want guidance, regarding I provide

as benefit We fiscal we to expect this continued same-store from and lower sales from margins Retail have are discussed we improvements today. strategies in benefit stabilize and sales the year. total expected growth gross expenses freight retail

are on also focused identifying further We reduce to continuously opportunities expenses.

a of As our locations. Belk a million expect prior annual decision by This also now $XX revised to close million result $XX year-over-year result, to expenses million. as to increase $XX reflects SG&A versus all $XX outlook expectation to lower we of the million

$XX expense will fourth to year-over-year million, we monitoring quarter conference closely rate are approximately our in the million believe environment, call. as interest We and stated annual $XX increase by we our current

the effective impacted expect further fiscal the year by be tax We of our adjustments rate valuation to remainder to the allowance. for

to want I continued work, for my share service dedication. our to hard their Finally, members thanks team and all

questions. overview, with and So Operator, this I up the to take your happy please questions. to are open call Norm

Operator

coming Today’s go from of question is [Operator Jefferies. first Joseph Please Instructions] Kyle ahead.

Kyle Joseph

of would the my of demand? and morning magnitude both taking well quarter, as a lot tax for sense get that just I guys. I want a how impacted timing performance, as to but Good for the a credit the portfolio questions. around there loan throughout refunds just and Thanks were sense. us give headlines your size Hey. your the say,

Norm Miller

if on of see not peak that morning I What Yes. out, a of degree kind February-March is the typically was certainly wasn’t did would late exclude tax see say sales pandemic around side of It years met timeframe. a house the having standpoint. disappointing. season tax season an seasons, for we collection What number been the during of in was that different uptick It you Kyle. the Good it range average to we that of expectations. tax that was in the the from

portfolio headwinds tax through the but sales normalizes season. where with it pleased coming it the certainly of the out to from are performance with season a pre-pandemic, We was standpoint and tax as saw

Kyle Joseph

for like customer like a seems was ‘XX, into Got under improvements cash And product sounds there channel. moving and consumer you you what sense those it. Thanks. then just LTO. by pull like selection? need your in recover the kind The seeing on some for or obviously, we it do in but to forward But and get some have any Obviously, and your are for obviously, demand of ‘XX it to product have sounds years is average how far pressure. core and away terms demand your definitely parts customer – you it’s of from cycle

Norm Miller

Yes, couple Kyle. comments on that,

LTO LTO absolutely both core both my we LTO and I First, demand the seen Conn side our and our side, comments, have in-house mentioned partner. in with on increasing customer, as the

of If the they quality came XX% and were LTO down credit those – to anywhere issue company, become before is, the I to where positive, Conn’s back The high sales, you not from are starting seeing and the obviously, look sales XX% and but to at cash right the customer. accelerate. before only we were same-store bottom

demand. appliance pull-forward We saw there, continue we especially That was category. in from where see the the greatest headwinds to

to as as faster get be and easing and our the don’t unfolds. going business are the year headwinds to Conn’s but they are of some to a year credit see persist, offset do those think And pace cash to is expect the the LTO as that up strong We that high how I that quality with at challenge progresses. going we

Now, the lap the year a is comps will from we material what from of half were easier part that of first back comps here, the quarter standpoint.

Kyle Joseph

Thanks Got it. for That’s me. for my answering questions. it

Operator

next Please [Operator is ahead. Caintic Stephens. The of Vincent Instructions] from question coming go

Vincent Caintic

Hi. Good questions. my morning. Thanks for taking

opportunity lease-to-own, and I the financing sales you in quality overall completely offset growth guess, and the for First, or you a a then the the improvement higher And to customers, to all the sales weakness just cash or pointing financing improvement in need the to get we cash comments, there? in-house growth, a different and out weakness an to if overall do Thank to should in-house the the those was on numbers, just sense the – but with could improve, prior financing kind then you. but lease-to-own. of of follow-up that see of kind in-house break in being recovery wondering to I credit attribution categories? the

Norm Miller

don’t I and no, still we the to are cash consumer credit answer the make our question, – very high mean we the I customers saw part there customer, up and discretionary quality grow to of that Well entire business, we parts with the the looking of the headwinds Synchrony your from macro pandemic. what’s both business. well. a that are the Vincent, LTO as with first standpoint, important cash so of – not It’s think happening those from And forward both but the and need coupled a standpoint, significant, the last in the are we pull are Conn’s to the completely

Now, LTO. lower our Conn’s business, opportunities, as we actually creates are end Vincent, the seeing and challenging on times, both of know, with you credit and the the that the which stack with economic with middle with

were replace. and to As core our the tighten, for to required the number, finance that to they not products discretionary, or lenders reduces tighten, our and products customer, they LTO be even other lenders able but prime opportunities which other need, a and the banks lenders and that and that fill customer that

than creates economic that in sales our which stack. growth elements those are we what of So, past we opportunities timeframes have that’s is actually there, for seen why not atypical seeing credit challenging

said we our end as headwinds we having spectrum. working I and that for are So, high are the mitigate to of some that, high still credit looking of mentioned, the with that partner quality in strategies seeing credit

points is year-over-year, the sales accelerating did that are application Back from all of fueled but we in we break now trend. growth positive four XX%. it’s XX%, down month sales May, down from were that by down May. you XX%, And we And sales the and the each growth quarter X,XXX a almost XX%. quarter give Conn say quarter seeing actually of I one at As seeing is we that three, categories, improvement is basis same-store customer. the And being predominantly in far AFF, out through would what cash quality and in-house as customer on the both or been an Conn’s LTO, in-house growth, on not don’t which the improvements the and the driven way standpoint of the high specifics, in by by the indicator you credit the has the and are

Vincent Caintic

Okay. wondering Thank posture And quarter-over-quarter, were or you are to good. more you points saw that? That now, charge-offs might of you helpful. question, tighten you need today I But are right if you. you you that thinking so the that. comfortable then credit about net basis that’s how detail just XXX or just for is think are Thank with underwriting if if comfortable where super your down second your is underwriting wondering

George Bchara

XX-day had down between range the at good quarter-over-quarter our We actually Norm delinquency refunds a from look difference if saw fourth delinquency, year-over-year come like narrowed. of we mean feel And sort with I the we the quarter. XX-day season you it’s of Yes. tax in mentioned, a as expectation.

standpoint a feel place from standpoint here a we from where on an based we sit we good like are underwriting So, today. in credit and

Norm Miller

if consumer is Vincent, business able delinquencies at we have. in I we add, transformative year, from why to really And that. which on it’s to There us one And would buckets. I by a this are about still basis that as think to constantly happening is a the no opportunity because see our that LTO, is financing of enables stated, monitoring LTO in-house in-house challenged. We opportunities I those what get in-house in-house of out later seamlessly for there the all us, customer Conn’s see closely is, edges move is the that stress, we we strategically leased day-by-day the be it we as And start – on of LTO, customers the to transformative what’s having more in-house very question the longer that. term look

Vincent Caintic

so lap Okay. not, from Thank year, get or from let’s underwriting I you. underwriting we And of But and able say, to underwriting. will the was past through one be tighter there over tighter or calendar we me, and there. comfortable underwriting year a as whether tightening last the if whether forget follow-up prior seems the rest this comment. that

have if comment improved And volumes you so point maybe from that just on, on any that?

Norm Miller

the would say, at always we policy. not or year that, What double-digits, XX% changes tweaks to Having into our making underwriting XX% But Vincent, down Vincent, were then our year made and are last quarter, to the around first underwriting policy. as look is mentioned high evolves. at as I material if comps the XXs have in looking and that went any our last you said they I we so, before, and down

to Conn’s driven from with and lap driven those we strategic tailwinds in-house by the LTO. strategic see numbers, as weren’t that some unfolds. the expect from were as lap refocus, those underwriting. They shift we away to So, as the numbers, we business by year they coupled But

Vincent Caintic

much. so Thanks helpful. Very

Operator

Thank you.

at We no floor I time. this turn to would to any additional or showing over comments. queue for in closing like management the questions additional are back

Norm Miller

Thanks.

company for next the forward also at call. you First to They interest take the associates company. this We across environment. a make opportunity in difference. hard to want and all, their thank work challenging I of we George’s quarterly to reiterate certainly of your appreciate the our updating comments the all in look

Operator

concludes and participation. for This today’s you Ladies gentlemen, your event. thank

time, the this You day. webcast may disconnect enjoy the of your lines and your at logoff rest or

Conns (CONNQ) 1 Jun 232024 Q1 Earnings call transcript