Earnings call transcript Q2 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 July 31, 2023. My name is Doug, 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 August was XX, before company's The be accessed

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

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

company's company's and are speakers CEO; George Miller, Interim the the Bchara, Your Norman today CFO.

to over turn I would the Miller. now to Please ahead. call like go Mr.

Norm Miller

Good fiscal call. year Conn's XXXX second quarter morning, conference earnings to and welcome

are detail. on strategic core I'll the perform better credit-constrained our strategic with hold continue more line call taking results an and our start our to pursuing review to our in over around retail update will performance our in to priorities call before we George, today's initiatives turn serve who financial turning The expectations. and customers are with

in-house our financed lease-to-own sales Conn's For increased X.X%. through quarter, through option and the our X.X% second credit offering increased year-over-year sales

by revenue grew applications XX%. quarterly over eCommerce record produced we and addition, In credit

changes period This the the have last almost years made basis the by of year. gross retail to highest level assortment margin, the nearly points since we reflects XX%. improvement expanded is also We significant ago experienced and of over and same the year a pricing end XXX in benefits two a in which

risk, am believe progress confident and economic that value serve I growing term, focus a emerge our and to and leverage stronger improving pursuing near in customers. credit drive from powerful are the making customers we remain strategies fluid positioned our we proposition we on of While well will profitability, environment the to the serve continue controlling that expect to is sales. to over needs the this period company as our we

this with our we better business the want to with the model. pursuing, our serve efforts customers. retail I I discussed consistently So refocusing our Since XXXX, credit-constrained unique core introduction, the credit to rejoined strategies highlight importance our I in of leverage to are October have strategy company starting

resonates we a strong have belief customers By product our and the entire I credit multiple need now that than provide. proposition payment business provide experience, shopping powerful elevated an a who we essential options payment our offerings value across categories the unmatched with more spectrum to with combining our home-based core ever customers.

the I positive two sales believe in-house within follows quarterly several that This and have we lease-to-own eCommerce that growth reflect momentum business. over our our quarters. record within success initiatives is past underway well as the important sales second discussed as Conn's quarter offerings

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

for impact on the application little-to-no credit that with our our launch process makes apply easier completed we of Second, for options new it to payment their customers score.

first have growth in year-over-year second to level XX% we reach the continued in experienced the momentum years. quarter credit over nearly application growth quarter, Following applications of the experienced as XX% increased applications in the nine highest we in

our lease-to-own applications driving a application segments. in-house and Credit indicator is critical of within are leading growth and our sales sales financing

application and trends, improvements as and our process our priorities February refocused growing marketing take and steady We in hold, new our also business. overall strategic have efforts benefit since experienced which sales have improved eCommerce from sales

down total The basis of year's improve continual quarter have X,XXX since in sales a continued improvements last by XX.X%. third driven improvement an of Same-store last sequential pursuing. and sales are same-store strategies over offerings year's down improvement in from for second and sales XX% sales growth we payment as significant are month-to-date August our and the have were line through been the quarter a same-store turnaround trends financed to sales are point primarily third down result in in-house is which third quarter, XX.X% quarter. Top the

We a has economic we supported a underwriting, challenging as credit credit environment. stable even more within maintained conservative which have navigate segment approach performance to our

lease-to-own In quarter within of X.X quarter, lease-to-own years. in sales positive during reflecting the increased segment our sales addition, our first

As a sales in well our the positive and strategies positioned are demand result, our increases. same-store payment we continue as quarters taking options to achieve for coming hold believe growth we

to expect fiscal the following Softer period sales cash experienced credit tighter offerings we home-related several forward extended cash customers have spending demand higher we growth underwriting from general in quality this continue this has will lease-to-own of quality from being by believe year. products an lower sales trend for credit consumer through and excess and our customers are throughout and discretionary and including Conn's offset in-house higher prime and impacted pulled lenders. sales We factors, in liquidity,

million, during next today. of e-commerce quarter same sales strategic is We the Our quarter increase XX.X% like priority review the I'd achieved record over to $XX.X a last second quarterly the year. eCommerce growth

annual to $XX to just eCommerce fiscal have are quarter achieved year sales on basis well we than this fact, and XX.X% In sales eCommerce we are over Year-to-date, increased to sales last year. positioned in compared eCommerce nearly achieve million $XX million million, years we higher $XXX ago. three believe second an

our over on in drive sales and digital years. multiple we encouraged of capitalize next years making million eCommerce annual am scale our on we to are optimizing sales to eCommerce logistics the our several online and business strategy I continued to investment as Record on tremendous focused follows capabilities. delivery quarterly by best-in-class capitalize the a and progress ability our opportunity $XXX

coming our which the has we lease-to-own both more in detail, potential allows lease-to-own to and as to profitable on to focus payment contribute past the approximately XXX,XXX optimizing believe in Financial years. at that in-house not option solutions our months. in we for the Conn's XX revenue provide directly a another applicants continue to significant Improvement including earnings qualify growth target financing product addressable the did known Looking us Improvement market, larger over in-house Financial, to

lease-to-own As transactions our early Improvement to XXXX, a we Financial reminder, our first started optimize have to in-house we product. and through in-house lease-to-own in continued originate

macroeconomic cautious taking believe new to program our lease-to-own navigate that to in-house stable I be Conn's, a transformative expansion across environment. base approach credit the performance remains product to more While for an will for ensure store our we we continue are as uncertain this

we now year. financial result, a of will expect offered at the be majority across our stores As improvement next fiscal conns.com and

years, remain once to believe more the mature year is sales. $XX and million our continue from coming we intact and lease-to-own Our financial annual over sales XX% can of grow last in retail improvement assumptions overall to than double approximately

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

fiscal a stores have more detail. XX footprint and stores year. our this of to opened new seven we total retail at in expect new open Year-to-date, Looking

openings to couple we pause store As the these next over we stated, have open, years. intend previously new of after stores

fixed online investments believe new growth costs. retail we We opportunity the and multiyear major operating we per to within and leveraging maximize profitability store have our segments drive existing a increasing our strategy need or by believe distribution With across us, locations to credit our centers. this stores retail without behind and revenue open will

to turn in the reiterate I business. George business, Before are share the on priorities eCommerce strategic on over demonstrate higher confidence I my in our expansion the customers, details increased call gross our sales margin credit our more to financials, having retail the to success and want core to sales our key constrained

right believe have While we we shareholders. long-term by direction, I and opportunities do, headed work still our and pursuing is the customers, am are create Conn's excited our value the team members for I to our to in

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

George Bchara

Thanks, Norm.

and to enormous better performance. to grow around core results success progress the we our I we turn an quarter second continue our believe are the encouraged in retail future. opportunity to our am the and profitably Our efforts our credit-constrained by business demonstrate serve have making customers of

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

share quarter, the second a to for share the net diluted For diluted of per company XXXX. fiscal compared income reported $X.XX period per year of in loss GAAP same $X.XX net the

press financial that release As are this a morning. earnings of was GAAP our reminder, second to issued reconciliations quarter in available non-GAAP measures

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

home-related XX.X% in accelerated lower the The product fixed by costs. a Same-store pricing for quarter offset changes, extended normalizing increase Retail of more resulted costs. compared following products profitable and distribution year assortment XX.X% were partially basis and increased an excess points for sales primarily of driven discretionary impacted during period second period in XXX which same the the to consumer fiscal XXXX, the freight for by mix was to deleveraging by liquidity, spending second margin quarter gross sales.

over the The the $XX second expenses fiscal of million our increase impact lower a the period decline partially costs SG&A and year. the labor to result for offset expenses $XXX.X in retail XX past new SG&A same months, savings million stores was by costs were of variable compared in initiatives. for reflect opened cost a segment quarter last as which in

second to XXXX. XX.X% expenses SG&A the same sales, retail XX.X% fiscal sales lower to in compared of for quarter for retail Due the were year period

compared year fiscal year loss There the $XXX,XXX compared For of for loss to XXXX. for XXXX. operating of in non-GAAP fiscal period the same $X.X was million operating segment fiscal XXXX the to adjustments quarter, an no period retail retail same retail segment to income operating adjusted in income the quarter million of segment second were in $XX.X year second

to Turning to performance. a decline primarily in Finance offset X.X% to insurance credit and and average in million, receivable of portfolio, customer our partially an commissions late increase declined second revenues year-over-year $XX.X the other charges quarter fees. by balance the due segment

percent of balance the compared delinquency XX% was XX, at XXXX. the XXXX, July July portfolio, XX-day at a to As XX.X% XX,

in point XX year. second portfolio represents year same of basis first for period XX from points percent to of the The as accounts this increase in quarter year sequential last compared compared a re-aged XX.X% of balance basis of was decline XX.X% addition, the fiscal to this a a In the of the quarter XXXX.

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

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

compared year-over-year to net million same million second million and in the driven by credit year. fiscal $XX.X for was last for provision the The debts. $XX.X bad the debts reduction charge-offs year-over-year bad a for year-over-year provision smaller higher $X.X During the quarter, the for in allowance bad increase was debts primarily period credit

reduction reported segment income The credit fiscal credit greater before loss company quarter second higher of $X.X due The spread, period to the $X.X as was interest X.X% taxes to the to credit year. same segment last of in million our credit declined taxes for compared loss fiscal which primarily before segment in year. million same period a compared to in the last expense well X.X% as

Net improve at $XX capital million of X-year our and the XX.X% XX, XXXX. percent end approximately debt during access entered debt quarter, liquidity, To delayed compared $XXX.X further we million we had to the our balance now Turning of in draw net July was second $XXX.X into portfolio quarter. July as balance to position the loan. a ending at million the to a term XXXX, second At XX, sheet.

we As loan had under credit of term and revolving of XX, plus million delayed cash July XXXX, our draw availability $XXX.X facilities.

XX, on million completed transaction. ABS we $XXX.X In a August addition,

ABS XXx reflecting the transaction demand latest our Our extremely for was oversubscribed, bonds. strong

market the conditions. the our the market the even to has While and markets company's recent improve access position capital over ABS to demonstrate during year, the fluid past capital ability improved actions volatile market remains

our As investing the needs support and flexibility capital with liquidity in we to continue to provides us result, access a believe our business our to of initiatives. growth long-term current while

in perform fiscal As expectations, to first call. outlook our our hasn't since quarter with changed for our strategies continue our take hold and XXXX line

retail gross benefit to fiscal from freight this year. continue to expect expenses lower We margins

million focused to remain we to increase primarily e-commerce continue While due and we investments $XX year-over-year to expect annual in growth expenses SG&A million, our managing strategy. stores new by on costs, $XX to

the we the million continue million, impacted of allowance. and remainder adjustments our expect interest rate to by believe be by expense increase We valuation to effective tax our to will further year-over-year for approximately year annual the to $XX $XX fiscal

as we and the of and expect second from our the top believe of business same-store we line remainder in our strategies positive sales year momentum the quarter today. and total we retail our initiatives. benefit for a sales growth across Overall, strategic continued improvements discussed perspective, From the results the expectations growing success demonstrate we underway

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

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

Operator

[Operator Oppenheimer. question. first Please of Instructions] from line question Brian comes with Our proceed your the with Nagel

Brian Nagel

morning. Good guys. Hi

Norm Miller

Good morning, Brian.

George Bchara

morning. Good

Brian Nagel

Definitely congratulations. so some here, positives nice

Norm Miller

you. Thank

Brian Nagel

accelerated application go you was succession. It the So questions. the called in few first have question, comments, fiscal improving quarter. like the -- your credit I sounds through in I'll out -- here that I've third question got Norm, so the a numbers. But first the

guess metric, is it Conn's at accelerated are is, -- consumers consumer? the question or to say, the same mix, for there I you that the seeing change? credit I So that so pace? have Or it applying look as at Is you

Norm Miller

say, certainly and lending for I out increasing in would for marketplace. loan products. Brian, -- and is demonstrating demand the What demand there it's

because is shift year towards consumer. our that emphasis that in marketing of But with a that even credit marketing versus the part towards shift of Now in consumer ago.

our that lenders and it more marketplace say which Conn's rule a at the definitely and times, LTO I usually if increasing there's historically, would business banks result demand economic of general benefits business. as challenge an our look in tightening you economic a as prime

kind near As as towards the would -- the in it's subprime of heavily mix the it, it's far consumer. say and based I prime

Brian Nagel

this the initiatives bigger started here the the lot picture, really helpful. talking to Conn's Got a progression that be quarter, it. hold. guess I at second That's And in looking a the here, of then but will my about question, take second you're place positives

comp as here? Is still some there while you just we're still losing this here you look in is these on type So store better at hitting ongoing sales initiatives P&L basis, recognizing to trajectory you're benefit a quarters? of going and your negative, do How the getting be the you're money. solidly it of unlocks view an forthcoming

Norm Miller

comp just it's we it third improvement from ongoing in the especially think third quarter, fourth lap I and the some now on an quarter, basis tougher steady in numbers.

easier numbers. an comp that's So

single you benefit. little ultimately make But a So -- year-over-year. there's -- going bullet that comping that's be will that comp. actually our our silver LTO will unlock -- unfortunately, it's those bit segments -- positive get of to a not Conn's financing as It's a heard, and and are us a positive the

XX then business at the So and is high mitigating eCommerce the to next would months. the I part that on quality is, over those drive which segments incremental credit I continuing potential that accelerate sales mitigating time, as has build same think, it if to and, be well, material highlight and there to unlock a here on anything, cash customer the continuing customer of to

Brian Nagel

I you. Thank appreciate it. Got it.

Norm Miller

Brian. Thanks

Operator

the next your line Jefferies. Our Please question. with with Kyle from comes Joseph of question proceed

Kyle Joseph

Good questions. taking morning, for guys. Thanks my

we normally So seasonal increase. the a from delinquencies sequential would that expect decline in perspective, to

a is mix, underwriting a that? healthier customer? function So of customer that Or broadly what changes, drove

George Bchara

Tier our that and performance standpoint B originations to of from A year-over-year. to a which seen Yes. credit about, And higher that, the stable, third talked I shifted risk a mean, is we've down Tier Kyle, that as say standpoint. remained a bit are I expand quality customer. we've bulk mix we've think our into the delinquencies so I from that quarter, would even risk trend

and that and performance remain that macro consumer. credit from more there year even from uncertain are more in down this with see an with go operating seeing we're we performance encouraged stress you a a origination standpoint we're from further challenged we've that And an both seen also what standpoint spectrum, The environment. stable here customer as and standpoint, the

Kyle Joseph

I the prime you how tightening what landing, longer Norm, then, expect we of opportunities the are And Obviously, does on sales. for do term guys prime. headwind sense. go instance, Conn's some those if environment a term, you makes a -- into to in going for to alluded there? tight? is But be some do that's hard the like That when do credit Or it. near what Got in think credit you

Norm Miller

I more What from us opportunities an if say standpoint. would actually that you're Yes. actually more creates landing sales is right, a harder a it and into -- standpoint, it's we from go from economic challenging

watching go is balance go to if The can opportunities stress, you that to it portfolio actually back of during be XXXX, If existing have because with back that and economic that sales us. have the there's the base. consumer other we any happens feel you in for what portfolio out creates we times,

point, done if those we've higher does it we're the absolutely uncertain into it gone spectrum. George's of it as at tighten will credit that better, that portfolio economic us customers, underwriting will turn as the quality credit But and of because end we've folks landing, times to and into these sales think a provide up we weather challenging more if opportunities purposefully higher

Kyle Joseph

a you then And Margins heading give it really one And run last expect the in that snapback onetime rate? improvements and sense snapped you things quarter. where here? us a there, I for highlighted know Great. Is from back kind the but for one just you see some Any good quick of ongoing there? this me.

George Bchara

a the number was Kyle. by that talked quarter, Yes. of we really It items factors No in driven onetime about.

on changes continue ancillary we're assortment here First we the -- we of quarter, we're we in some benefit to continue, expect was quarter the that pricing year. remainder benefit quarter. second expect to here the And for the of would fees the starting third the would would in third in pricing seeing see that and some of including changes the to that

And the there's impact side, of benefit additional then on seeing and we're now look the costs, you as furniture still the of some for freight forward, the balance really, margin year lower there. upside

other of look this lower sales dealing positive, on ultimately from turn continue the cost you'll on leverage benefit here, see quarter. with another and improve as margin. on The we're you term as longer deleveraging fixed costs still factor, sales And fixed to

So now to with the where for right the we're levels margin sustain here is pleased and remainder of very year. expect

Kyle Joseph

for Got my taking it. Thanks questions.

Operator

queue. call the I'd further the closing There remarks. questions for are in like to hand to management no back

Norm Miller

Thanks.

acknowledge their hard want our in hard all continued I -- all recognize associates out. First, to day day and for and of and work contributions

We are who we are because of them.

I hard their in Have I everyone's of to on the the company. talking a work. So And appreciate call also the forward day. quarter. We appreciate your here, good at look to you the interest third end

Operator

Ladies and you today's conclude gentlemen, this your Thank for participation. teleconference. does

this your have You may time, disconnect at wonderful a lines and day.

Norm Miller

Thanks, guys.

Conns (CONNQ) 30 Aug 232024 Q2 Earnings call transcript