AAN - Earnings call transcript Q4 2018

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Operator

Good morning. My name is Cherry and I will be your conference coordinator. At this time, I would like to welcome everyone to the Aaron’s, Inc. Fourth Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. there a remarks, session. speaker’s the will question-and-answer be After is Please event recorded. note this being turn over the now will I call to Mr. Michael for Aaron’s of Investor President Dickerson, Inc. Vice Relations

You your may begin conference.

Michael Dickerson

Inc. morning to and conference everyone. you XXXX earnings good the Thank Aaron��s, fourth quarter call. Welcome

are President morning Aaron’s, Robinson, Strategic Business; Aaron’s, seen Steve of Officer; the this Chief of Progressive Inc. Inc. Executive Michaels, Officer of Woodley, Aaron’s this Operations. Chief our me you Officer and and morning. Chief Leasing; Executive have John copy Joining a President Ryan earnings of Douglas President Financial issued Lindsay, release Many and already of

For those our on of website available of at aarons.com. is you have it Investor section not, the Relations who

operational want any the cause for provision attention our our differ Harbor from that the The During a risks Also, actual and included we certain and net been provision and certain believes companies. tables year These referring forward-looking our this for non-GAAP end non-GAAP call, EPS, release. today’s The other are in of not cautioned description emphasis certain financial prior call call, with our results measures release. forward-looking to provide understanding undertake ongoing risks of to statements. statements. adjusted statements would undue from the be the performance call the on the which I December measures with of that and to assist any XX, XX-K Safe statements to help to operating adjusted we performance subsequent measures, provides in SEC to affect items meaningful operational and to filings found cash and insight of Form for our to be see Harbor make Safe financial and obligation to detailed related please business Listeners On company’s are our for have With content with actual company may these measures periods identifies into such forward-looking XXXX update results like that forward-looking. statements. the turn our John results company’s EBITDA earnings materially flows non-GAAP now performance. with of statements including reconciliation which may Robinson. the ended over that, I investors can be will non-GAAP the these forward-looking non-GAAP to materially EBITDA, to place the no comparability earnings earnings at them that comparisons to to differ facilitate cause our your may we will

John Robinson

Thanks, Mike us thank joining all you today. for and

want how you company, many company are but with and their achieve I the discuss leadership, are we in hard in work results I more we Doug the early direction the earnings and detail, of have quarter our resilience XXXX. quarter going. about both and of for strong the team our a for associates across on capped thank challenges, demonstrated Continued all of the growth year. provided to off help revenue fourth outlook Despite businesses delivered to they the we each thinking the where that, want we to will accomplishment. businesses where been fourth the before that and Ryan in share

to Over and profitability. consistently of developed I incredibly retail partner from product retail not $X doubled performed the broadened last proud essential team continue exciting we the the that Progressive the over will Ryan transformational past maintaining compliance there is to I few way am partners. has results, results. believe initiatives most billion me business new and years team market strong opportunity pipeline infrastructure, help The The of has their an grow. in our the exciting on well-positioned Woodley invested progress in is Aaron’s tremendous delivered part sustainable revenue they has $X for is but the also business years, has network, while growth. for Progressive to that believe and significant made only in get several Progressive’s also well. Along XXXX, profitably incredibly Progressive the un-served for how back billion to XXXX in still

and have growing margins. We have new attracting that lease our marketing and We merchandising in on invested meaningfully to experience, few tickets We and invested customer to higher over and and inform platform model compliance. now improve the in is is e-commerce average Aaron’s. us analytics initiatives resulted which in streamline the better an to operating younger last decisions, improve improved customers years has

piloting have store employee continue us confidence business. are will level efficiencies, the make store results traffic engagement. customer intend business to around the be have our to investments making we lift generating investments concepts and strategic transformation been give in experience, thus operating in seen The revenue. the far Aaron's The improving in compliance substantial We initiatives centered and our new we that

strong the we model proud about committed the optimistic We and on Douglas operating I like both. earnings. expect of difficult. team would revenue new it. a to prospects to to led the balancing near-term Lindsay, a investments act team and put more profitability continue on these and am I business to the complex business team I path growth the sustainable takes innovate omni-channel the thank leadership to is Aaron's in execute and business’ very and by transforming am attractive long-term between will business maintaining It the as Aaron's

of decisions XXXX we make and and of businesses, strong leverage short-term Our the and markets, the stores shareholders few one our acquire franchise across over and capital of able through were long-term. years to make attractive in $XXX flexibility ratio cash significant to number the in buybacks past to returned shareholders In earnings a the flow million maintain investments all resources both allocation benefit and turn. that provided about have dividends

for advantage us. the competitive sheet is Our strong balance

beyond. with innovate the explore financial to continue that ahead and to flexibility the will XXXX in and business results I am development it excited Progressive’s lie us XXXX Overall, opportunities. Progressive the Aaron's to provide pleased potential with scale now discuss the expect partners, QX Ryan strategic the We to over in capacity about performance and I very call give outlook. company’s XXXX to will the opportunities pipeline turn and

Ryan Woodley

John. I Thanks results of and am pleased XXXX. the in the quarter Progressive for the team delivered with the all

driven increased pipeline quarter quarter the year, XXXX margin improvement growth per to invoice compared of and active to revenues partners. invoice rapid was driving ourselves significant quarter and from period are increase rose primarily retail a a in strong by technology fourth and to Total EBITDA XX.X% XX.X% XX.X% in X.X% record in as $XXX of infrastructure as position in We of on last doors. and the investments in making convert the large number performance The by the gross expense scale the active to by operating door volume compared XX.X% resulting in same driven increase increase leverage. to revenue a million.

In store industry. door terms mattress active vertical count prior number changes to notable XXX in from to due incurring of the periods doors impart is the over locations consolidations the of of down in our

quarter fourth due door during expect of in the of We to invoice growth the these quarter. mattress quarter in the in closures In additional our and during count our count reductions mattress the the spite we reductions XXXX vertical door year. some timing of to experienced first

new locations. second from pleased door of the from comping partner these now additions are We the XXXX strong half increasing with are contribution and new

store focusing the We doors. have worked performance analytics. level diligently on By optimizing other goals among framework advanced to new alignment and for strategies teams the program partner existing improve continuously with end performance using tools across and of

In making from We quarter generated XX.X% of reported effect fourth quarter underperforming the were the addition year EBITDA revenue active We is year fourth these future and compared revenues Bad in increase strong of growth. in period. believe in continuously the the the to productivity net platform locations. of XX doors, basis revenues of an ago performance among of expected XX.X% X.X% optimization identifying removing XX.X% and efforts the quarter of in necessary. XX.X% to of the our last doors XXXX of in expenses from expense of investments versus points. by productive ahead despite period, was our we locations our planned where down optimizing XXXX, evidenced amongst was debt the in in are Write-offs leverage increase year. X.X% revenues ago operating fourth evaluating

within have Our year range well full bad debt for was the XXXX XX.X%, target XX% XX% previously communicated. expense to we

reported debt will contractual expense lease the be instead longer will operating no as change a be With expenses, in reported revenue but Progressive’s account. accounting bad in

to X% range same net a from reported our revenues that this to roughly slightly on X% revenues, X% revenues group Given are revising we performance. write effect expected to the changes of lease target accounting to X% reduction off the of of

our a strong the to of plan have expected year In growth outlook book a our industry from retail approach, growth national partners look existing as beyond, visibility. with one from we pipeline new across past portion piloting. partner potential have for where and whom this of that partners includes pipeline XXXX retail partners practice, our with benefit verticals. of expect our we of a continue variety Consistent for outlook includes XXXX anticipated to As with rollout we of well keeping the our as conversion retail the of been of we to near-term

and existing relationships I mature time opportunity well partners retail Virtually considers as have position proud virtual over that productivity across of quarter majority the to integrated our have technology selling discuss rollouts partners partners. the in market largest and grow several their un-served in we with large team’s to continue and become with whom Aaron’s the profitably of scale $XX strong outlook. investments familiar plus our some we billion Again, segments The and their exhibited marketing convert time of XXXX the increasing call this over in of to Our people highly many into increasingly forged new of Douglas new program am rates is all in trend I will accounts, modeling our turn with productive we this us require to now for years. business QX evident the our opportunities. as as of as of impact locations lease-out believe fact us and attract, partnerships and fully the the and the results continue from to to growth been remains well and retail activities. the performance see partner

Douglas Lindsay

fourth eighth the margin. consecutive the and in we Thanks, in quarter our online Aaron’s season X the business. momentum the last by best the am years both and seeing in encouraged experienced selling of teams holiday in stores I Ryan. revenue recurring consecutive portfolio an the proud and with into are in We quarterly finished increase fourth with and lease a our quarter the improvement written

employed quarter in also paying increased improvement us Business below in quarter grew to Our are the in the believe we negative which as year promotions, the to retail benefited payment they acquired pillar revenues strategy revenue faster on in XXXX. prior who improved also resulted slightly move of and customer XX% compared Same-store franchise year. the as guidance. same people but aarons.com quarter fourth stores customer compared Aarons.com the investments throughout but ticket Lease margin in investments of the of believe will are were quarter X.X% quarter is and future X.X%, X.X% revenues lower into that is prefers revenue technology fourth by primarily our year higher fourth an a in last as in increased enabling from In and driven off to written attracting the fourth revenues last key experience. platform, more from our in Aaron’s quarter, the quarter. which than XXXX. the periods, mobile portfolio low experience. points shopping the a first revenue opportunities basis XXX we the same in same-store expected the our Lease younger, omni-channel a revenues quarter, previous we benefit Total compared enhancing to

stores and We continue existing expect centers, mile our delivery. of aarons.com grow last will infrastructure in that to fulfillment

should profitably. lease increasing in into EBITDA related XX.X% to mix higher initiatives, of XXX people promotional the of benefited Adjusted written the increase partially were revenue. enable an X.X% transformation versus in and period our continue year. write-offs the investments Contributing percent the this number EBITDA was and in of increase business technology. Adjusted ago by higher of leases Write-offs and last of a and portfolio offset the advantage, versus including scale in revenues points. X.X% X.X% offerings, an business year an e-commerce investments basis to revenue e-commerce competitive ticket increase increase growth was our us quarter, a in from margin type write-offs and same As to to XX.X% increased an of as

leases charge the channel. profitability remain with at a e-commerce we While pleased higher the rate, off of

Given underlying momentum trends generated our fourth we channel, as going profits the XXXX number of the e-commerce in encouraged customers business and well this are believe by our in XXXX. performance in I quarter as incremental. largely generated in into new by the remain our

the look provide demand to cost you rollout a to also have be Aaron’s serve. XXXX initiatives. want initiatives to and XXXX, I scaling we into XXXX. proven successful pilots from to our ready Many and business served in customer lowering test our As with take driving and further visibility experience, continue transformation and moment around for improving the are of These to learn

company which initiatives allows customer customer rapid capture stores The begin onboard of process. which in and is paperless better very these has be the to our faster feedback rollout associates to totally test, all by in been completed owned new should significantly digitally expect data been of end first and through the us our experience and on-boarding that successful. results the decisioning immediately we This customers and The XXXX. sales positive a have process

initiative XXXX. centralization rolling productivity lift. collection of outcome forward significantly stores be is and for additional but on this expanded the of early second being out of in-store collections testing, to expect based well. on on as activities half and in Testing to Next moving is expanded promising Depending our XXXX I the results, certain successful think we sales

store our experiencing and meaningful In have XXXX tested of look the concept modern digital showroom and feel lift. San customer versions of out, more and addition new hours, couple and Greater separate static The operating market and product we in delivery model. pre-lease different concept store the inside new with retail the expanded we a the of new next includes focused revenue on-boarding a in area, generation are sales Antonio

from components to across you will be a plan there new relevant stores locations. know, don’t large new metro one-size-fits-all of we solution, will in all next locations we to our attractive concept of XX small stores a renovating store but concept of existing operate expand we markets store We and our think the As markets. repositioning which of In a to XX variety be rural markets. XXXX, is to areas more to generation combination believe

But We the will initial will long growth run. the capital expect return drag these create a invested and for stores attractive earnings costs have up on investment in the we believe periods. short-term due an ramp we on to

will investments. taking business and measured continue are We our we from these a results evaluate initiatives transformation approach to to

XXXX included other demand have outlook incremental and of We initiatives. in $XX these expenses our for approximately marketing operating million and generating

from our to on that to our from we Sunday noon are Before have on that holiday I during opening of who revenue Sunday store sets Steve hours where XXXX PM. seen adopted to new have hand we over these and it also store season expanded numbers in Sunday our may Early include are you hours customers transacting lift stores meaningful. been indications greater have X

excited we expect about our XXXX both company in stores outlook. our costs are sales in the related our expected our XXXX. We be call will are Sunday I XXXX Steve. of turn to nearly business to now transformation open the the all lift and over and owned am the included in in on I in progress prospects and advancing

Steve Michaels

Douglas. Thanks

period the $XX.X in XX.X%. for XXXX. of financial year increase $XXX.X compared some over for a $X.XX XXXX On an XX% or on $XXX.X this Now the an million, quarter fourth last quarter the million non-GAAP consolidated EPS Adjusted to period quarter of for increase for was basis quarter. versus were $X.XX year, year fourth a of XXXX company XX.X% million a the to the I will for million ago. same increased in EBITDA Diluted $XX.X the to of for highlights revenues same the turn basis

quarter. release, As addition year the you XX% locations throughout increase approximately operating or to franchise the have is due million of of the ago from seen $XX year. earnings acquired XX% About versus the increased expenses the

was million term XXXX, $XXX revenue increase line Another expense Cash responses periods. in million to full compared term year the XX, primarily our The taxes by change businesses, year from The was total cash intangible for increase to their from both The to the amended at paid the resulting $XX year-over-year previously million driven maturity well full including its CIDs. our as of improvement spread $XXX balance disclosed XXXX. of marketing, write-offs third facility by credit our with $XX October in commitment XXXX, driven company Progressive, to October amortization its from loan in and activities the two FTC personnel also for and with of growth. the with extend company XXXX. expectations the in million of revolving $XXX.X amount $XXX is was increase amended and agreement loan fees expenses by On reduce bad legal operating the the $XXX between its a facility as and generated to loan the increase investments XX, debt franchise significant million. the across million and to million

the During XXXX, We million. hand for on quarter acquisitions. revolver XX the our cash fourth availability under acquired fund and of franchise used we $XX.X stores approximately to

quarter, $XX.X shares the of X.XX common company million. the million stock During approximately for fourth purchased

purchased For stock approximately $XXX.X million of the per approximately of price full for million average shares $XX an at common X.XX year, company the share.

has share million $XXX with fourth the under acquisitions available of buybacks over approximately company the turn. remain conservatively $XXX the share its end ended liquidity of net fourth and authorization. We ratio and of following quarter a the and debt-to-adjusted EBITDA the repurchase one just million quarter, capitalized As of remaining

impairment in file the with strategic will existing company-operated be see of with company the management’s the and the million expects Because demand. further stores segment. under-performing first quarter. restructuring align store restructuring Lastly, will the to approximately between company Aaron’s XX-K later charges that to which marketplace expect XXXX of the $XX initiated in the Aaron’s Business January its of will The a closing Aaron’s all XX today The you to company-operated company primarily consist within program million incur review portfolio of store-based we during associated restructuring incurred portfolio, is currently charges, stores. closed charges $XX

Now to revenues let’s billion, expect XXXX. to X% be outlook XXXX. for to our a basis, for we $X.X turn an approximately increase XXXX On billion and to consolidated XX% compared between of $X.XX

For have for This purposes rates, earnings per X% reported periods count component of these than share bad diluted we is to all of tax a and expense share, Progressive an operating assumes and of is growth shares. revenue to that $X.XX. XX.X $X.XX a expected of effective contra debt between expenses grow presented. rather assumed as to rate approximately XX% XX.X% million Non-GAAP

we CAPEX. to in million a $XXX $XXX on million consolidated XXXX, expect For approximately to invest basis,

expect capital $XX million that be We course to $XX our ongoing normal business. will for for expenditures million

discuss The spending incremental increase in areas. is let’s primarily baseline. the So, three that from

lease acquisition for trucks approximately to in expenditures the due First, in forward. the trucks purchase incremental The for $XX reevaluated should million leasing capital vehicle accounting, going be instead XXXX. to them change of our and Aaron’s Business strategy plan we

of complete $XX both support rapid customer Aaron’s centralized decisioning our rollout onboarding, Business. other the hardware IT-required million software and to Another and for relates to

we seen over an Douglas of improvements store in we the you in of the about The have deliveries new tested the XX%. Finally, year. success last concept heard excess include increase have that talk

are sample XX quickly, some in Given tests but expanding and our our to additional XX to these way, we XXXX. locations during set increasing by a disciplined markets results,

spend to it rollout. we for our broader expect to approximately We prudent We this improvements. a before possible decide step estate-related million additional findings is to $XX these real believe about take confirm

the not As years. the entire franchise of pace expect concept scale our apply expect We our internally acquisitions investments, back have couple last store material expenditures we do Offsetting any capital throughout at these planned to focused new Douglas these of do to and franchise mentioned, acquisitions compared system. to this related not we time.

would do, right we itself. the where it, certainly present opportunity evaluate However,

about talk seasonality. Let’s

we throughout in to anticipate the be the biggest which We EBITDA significant and expect of revenue business of and real quarter with expect and Business second year, half concepts, grow the be initiatives turn slightly second impact XXXX. Progressive will will and the new revenues, the I while have EBITDA of costs front-end to the transformation versus to first to final the basis, With EPS that, for the earnings that Aaron’s On higher further the fourth loaded our both adjusted be of EBITDA quarter peak estate impact we primarily due comments. associated consolidated half expect non-GAAP in the year to half ramp it his throughout a over in rollout of the investments John XXXX of year. store will and

John Robinson

Steve. Thanks,

I XXXX. with underserved another partners the the its pleased to franchisees credit-challenged their transformation high-quality business Business dedication providing associates, look and ongoing year our are and for strong customers. generate to and retail fruit continues would to Progressive mission thank our and forward our like and of We experience beginning is to in Aaron’s efforts. products results the in outstanding business improvements to to

the the the for your Our our customers remarks. Q&A. for That of result operator every prepared day. very success is experience concludes call to commitment best our over direct Thank you, to now much. a providing turn I’ll

Operator

The [Operator from go Brad KeyBanc Instructions] Capital Markets. come question Please first will of Thomas ahead.

Brad Thomas

everyone. if ask I and a could. I question Aaron’s, on wanted to Progressive on morning, one good Hi,

And rollouts scheduled from existing versus you’re lying about guidance level, color the What’s affecting partners? for guess, the high new the your little how pipeline, of thinking baked Progressive First, us side, I into in that at terms you profitability could more a year? a of this here on give Progressive? the on accounts

Steve Michaels

Thanks, Happy Brad. Sure. to.

doing prepared regional team the of mention as think continues great one and and and We to opportunities I job from is rollouts we’re the remarks taken about the have comprised occurring. about comments, As opportunities the a both surfacing the national in is pipe. of well the pipeline. working the you be It existing as through the of might accounts excited did

commenting as also of in us the with for about obviously it’s There’s but lot potential the excited program, do, a we’ve pipeline prospect specifics about who the a excited time I work about and to enjoyed some on not for but the of have a obviously partner. successful Generally, of remarks, program progressing and piloting still our program pilot We’re mentioned partner that been rollout. and of a the to we’re we bullish today. where remain is very the

John Robinson

take try Brad, include again. this our we’re that in to have and rollout I in into visibility that. kind of Yes, lot that have what a John. doing is done because a accounts to and there’s of think that terms mean, we’re do type But partnering of add we we we that to of the lot we’ve in of on account national outlook, keep to it we conservatives uncertain. that pipeline regional is would with I of any to and near-term historically we the schedule with there’s it

always well. as in uncertainty There’s there. And in portion that of so, that there’s a

been again. years consistent the in approach from and that we’ve this So, in prior year

Brad Thomas

ahead Progressive year? pretty thinking that? of with accounts, this think margins national still as of you. flow-through how do Got about for you can these good some heavily you having terms Or in of up And invest be are the to scale you’re then you

Steve Michaels

of ahead definitely investment There that. is

will can And investing remain in been others consistently of the in account business help about are we of pretty building as think that best the support ahead of in and expected future we’ve we’ve end the vocal and pipeline. that And this the pretty team and of time. the remains but a suited as both think rollout. growth and solutions number think we the in opportunity how quarters. certainly and ways, that that and to to over ensure or at those both continue with the think out in buttresses our to I support technology about the by belief And I several programs retailers’ that done those, investment kind we success pilots do case and store expand how investment now think a about think for sales we our well revenue of there’s these of environment rollout you selling that day that preparing of

Brad Thomas

some Douglas, same-store you. trend thank sales in step back And good in a these news been the bit? the talk down little quarters in a we little you a quarter. in think, of I about is obviously, the of years, what just two could Okay, did but have a take bit little the here best that it bit performance XQ, mean, the is that I last slowed

Douglas Lindsay

where did we’re that adversely guiding. which of dip down little you’ve delivers, got bit our term. and more to double impacts Sure. I below on probably payments, late down first of nature basis and originally promotional decided first a by lot in the build our seen. quarter of our promotional happy mean, of did but they doing driver we first we so into as and the in holiday Biggest we’re we and offerings fourth long really of dollar all, business with XXX are low helps those we’re Many offerings revenue season got lower that into our the point particularly us Sequentially, is increase of year-over-year. quarter a

of in initially the XXXX and but quarter had estimated. fourth benefit we the of see down to a it that terms quarter be portfolio, in we into revenue written we’ll the really So, had calls successful below where

quarter portfolio adversely those impact charge-offs had talked higher is the during the and happened we as that well. thing other The about we as

all happy were both our So, we of net-net ‘XX, for the we those our think business. XXXX, outlook quarter and drove the the outlook in and real in combination fourth think things, that that’s of about we’re comp that the we deals positive really of to but a benefit

Brad Thomas

of government delayed And refunds gate, a the and Douglas, thinking bit trends? as you it’s having with are How XQ, hopefully takes impacting of a about those out XQ, backdrop tax been a potentially shutdown, refund think then about puts good unusual sort you season. but little

Douglas Lindsay

Yes. see I benefit we’re that’s, healthy continue demand mean, portfolio generally, year. working side the rolled the environment business to we’ll the rolling we’ve in I last XXXX, of got a into as of higher portfolio things. And on ticket said, of that we ticket

benefits So, season enjoying sort into of prognosticate anything run and ‘XX. we continue pace to of what’s going the we’ve happen on tax been and with going to sort I’m portfolio but during else, of same not building or running the

Brad Thomas

Thank much. you so Great.

Operator

come Anthony markets. Chukumba Baugh of will Please from question now go from our go John next ahead. I will next Please Stifel. sorry of The come question ahead. am Capital Loop

John Baugh

Alright, taking side curious my to thanks obviously was from promote, disappointing guess, little a core that on comps I and a had very the I and good were morning you questions. tests high expand for these to flows. these store see how drag. of and concepts kind has that some are working it level, sounds And an that the like you’re obviously and going earnings to

earnings, get is forward, thinking Douglas, you flat the given incremental look other we So, ‘XX we my in we real core areas, the the look were able at simply, to that, budgeting investments of at how if or business and question of as in extract John the or about to performance traction strategically, that are there? difficulty side business? kind we going are Or estate

John Robinson

we and the great business managing doing for the the in remarks, the John right Douglas long And are they’ve balancing innovating few just that and a my profitability Robinson. it’s are question. that It’s the I between years prepared And the team question. done that’s a good mentioned last really definitely the John, and term. a business managing. in for Hi it’s And short now. term with act Thanks for where job

are and we’ll as we do the it very that take measured they’ve that what and seen investment the to the that been we’re tests results. to have the we’re had drag and about kind move that really to approach new from running running do last optimistic of We and it creates results on some store over is take been have we What of very a we’ve and going earnings good concepts continue testing is into forward. couple doing been And culminated Texas in been years. all it’s

the We’re really results. optimistic of some about

– going kind of X running. been we’ve X store that the expand tests got we’ve been running. or We’re of We’ve to test a that

We’re basis right now. we’d account it Obviously, profitability probably and is the We expand and into to we longer we’re going model, another higher year. our encouraged great of business. really into great it term XX% but are without on we’re the had revenue that up materially like ability and be that really it’s higher have to outlook continue a going written takes really this that, but near-term prospects to of long-term our a we’ve by perspective stores E-com the and and a that. have process XXXX, innovate during year more a results expand, where example on process in attractive to it’s in

maintaining of outlook. estimate So, our of profitability a is measured trying it, very about to lot of our optimism, XXXX best be and for current in balanced we our combination investment provided and but have what and think we’re

John Baugh

And are follow charge-offs promotions you you growth ran, what not charge-off was way the that Is you on up isolate that side the on the going is say you still been alluded to basically on there I’m to e-commerce press John, mistaken for I release of your your which Are and the that just growing. a if in that business was of your core? to able experience increase? driver on limit the clearly the what fraud that, versus e-commerce,

Douglas Lindsay

Douglas. Yes, hey, John, it’s

roughly So, bigger portfolio piece revenue. of growing the of XX% and now and e-commerce overall is write a into our revenue we the

slightly but we monitor e-commerce, curves the those losses all visibility and those pools great higher into on incur time. have we So,

We But for all dollar even they e-com, product the are to higher taking take try in in new those, we’re seeing new business, charge with storefront that, constantly of amount appropriate customers margins accounting to reduce action the all of a percentage higher higher the book we’re they a do also new we’re value. products ticket risk. but And the so at off than e-com margins a e-commerce larger or rate. customers and of incur are in typically and So, that’s is happy much we deals. of really much higher on has

is low business. largely they and business and are there store really our So, our overlap between incremental, e-com

but time the over happy evolve may as now that more expect customers, really a We with take result. we right to our omni-channel approach

Steve Michaels

I in John, that one we definitely fraud, you on anyone from We would knowledge And e-com a that have from mentioned Progressive. thing to is do the has. business add consideration side, the which the e-commerce benefit substantially

over one from to is from is standpoint, which the a to on able side. of knowledge synergies considerable been for that’s So, the sure combination Aaron’s Progressive us a port the the we’ve for Aaron’s decisioning advantage of

John Baugh

joined this, or Internet my – I for driving the something could apologize with of on update Ashley I that Is business? of virtual Any sort inventory so the that’s available apologies. stores, computer whatever in still or late, example. the And core the you your Great. address

Douglas Lindsay

John, hey Douglas. it’s Yes,

that’s technical e-com So, out sort upload allowing to of business those typically of to or connectivity of re-platforming when and our have generally the outcome an was we us expanded our direct part refer vendors. to and relationships

product every more day on to are we And e-com. adding so

think referring showroom to stores. I our that continue them. stores renovate we what you’re digital is in in our And we as product or in-store to put the

in over these in expanded isle. this have year, overlap to progress new continue that broaden that we’ll see and that just in with But we we that in happy e-com user e-com offer we’ve I a there with with experience new this the and stores to XX XX platform online. will have time particularly product in stores side selection our put place. do the believe we tie we’re functionality and the same our we’ll our will stores You’ll different

Operator

come will Bill Please next go The ahead. of question from Chappell SunTrust.

Bill Chappell

Thanks, good morning.

John Robinson

Good morning, Bill.

Steve Michaels

morning, Good Bill.

Bill Chappell

fourth the I in promotion same-store on bounce what’s where but Douglas to stores, year? kick expect first A to impact do in the the of little them same-store first new start kind of could quarter the you – understand expectation, quarter bit sales, this sales this positive see you on the back as with

Douglas Lindsay

Yes, Bill.

to comps, guidance X% guiding on to which full-year we’re is So, X%.

You can look at the trajectory of where comps have been.

And We’re in momentum comments even Sunday, into be. of my so – well – we’re quarter, tell in we’ll I seeing you stores Sunday And week first the remarks. fourth and of not end guidance. coming the labor strong providing And our further of investment there prepared made January after even on we’ve almost New the will Hours and is as to open good were that, we’re it about our out quarterly Year. that’ll really got baked lift and continue all in lift guidance. help the comps

and that ticket also has the we see I year sort the portfolio that continuing into that of there. work as benefits XXXX, we from the – ticket –we the first So increasing we on well been carrying – quarter, that of did mentioned half first as of the

Bill Chappell

put even So, it opening your in comps still you’re comfortable without I just mouth, fair? to on would like that be this not Is – words that just Sunday. sounds up year

Douglas Lindsay

it is put me Let way. helping this Sunday comps.

looking are the X for week. at the all business days We holistically of

underlying ticket. versus going really we’re the we not see the customer wave of through piece. out these that haven’t demand the we So, to business, solving we’re business parse non-Sunday is traffic to over we’re that year believe of but with the ride comp course one is to what taken But out transformation the going cannibalization Sunday initiatives, the across Sunday all still so the issue

Bill Chappell

then look Ryan that just bad And improved – quarter kind into the I missed way little in as bit have might anything but works? of the we to it, the it. or debt the a or XXXX Got mix sequentially

Ryan Woodley

we the into down the like looks in portfolio range the the head the with middle were Yes, ended X% are to X% right line in say, Happy in write-offs we ‘XX. quarter, of accounting. pools expectations. that old I’d with the of used performing year lease the Yes, under what and how

Bill Chappell

the of to national that does like vendor, roll-out just actually new usually help on does start a write-off that negative with? big a or have And impact a

Ryan Woodley

all to don’t put – given sure target the and can decisioning volume we into invoice portfolio look achieve the we’ve with range to We shooting returns the for that the part of the target make that manage we that is XX% ranges. of the pipeline. of outdoors is And that grow variability. to spite same And opportunity work XX% we’re to in specifically kind EBITDA this to case that’s those what that’s of the

John Robinson

And to Bill, that. XXXX in that in a that have are in I’ll we we been time. long verticals for The add expect roll-outs

of so around national have as And verticals said forecasting. that these have pilot Ryan us gives we do the for continuation a while. them that on roll-out comfort that predictability the a been and So, our he mentioned in working is

the performance. pilot, comfort terms you into give a you does but poor will scaled necessarily as to forecasting gives Not that look that completely how predictable of So well. version insight it it’s in good relative

Bill Chappell

it. Got Thanks much. so

Operator

question The come ahead. Chukumba Loop from Capital of will Please next go Anthony Markets.

Anthony Chukumba

technical I – myself. and difficulties, and apologize the on that earlier the accidentally for thanks you Thanks, for difficulties I mean, all hung color. the all I technical by Thank up for

clarification. So, just two questions, two quick one real a just –

business the by meant you XXXX have you Progressive said, really then but guidance, said what that? you year-over-year year, Aaron’s growth the front-end EBITDA So, about throughout sure so you you loaded. okay, talked for I wasn’t

Steve Michaels

is capital about year. that to initiatives we just mapping kind the kind will little of the of spoke that are spoke business in year. we throughout since and we year have impact annual since Aaron’s we more Steve, on to the the have the half bit – as Anthony, trying for And of Douglas give an back – a about the the a give give this well will the of ramp – Yes, we guidance, OpEx of as

normal influenced in the tax is So, than half, first say the we just this second a the from business. be partially that’s and EBITDA bigger by which meant that occurrence a will season, standpoint, to half

Anthony Chukumba

Okay.

Aaron’s Business Business –you second half Aaron’s in dollars higher than So, the the EBITDA first half? EBIT have

Douglas Lindsay

Yes.

Anthony Chukumba

saying that the year over – saying but growth you are okay, Or not you’re year,

Douglas Lindsay

dollars. No

Anthony Chukumba

in larger recall lower I I the line And of how sort about If then helpful. write-offs. lead it, That’s And thinking the got were was disappointing part little to just Okay, comps the payments just dollars, okay, of that this generally, down you were about wondering the business reason that? upfront guess, so talked upfront lower okay. payments. the question, you I was one industry Aaron’s

John Robinson

so time, see plus on we’re so, these book those those because the hasn’t see acceleration but lower are offers drive the in of with happy during the of those just is, in we write-offs believe deals periods, we XX non-promotional results. do as occurred higher the in write-offs I’d deals spike lifetime depreciation value we And ticket a attractive and seeing accelerate say write-offs more higher we’re value volume write-offs – see look those and those the are over net Sure. but periods, first them, write-offs promotional What we near-term normalize. we write-offs, just and typically as days

Anthony Chukumba

figure use my Thank it. Got to out how I’ll phone. back to get you.

John Robinson

Anthony. Thanks,

Douglas Lindsay

Thanks.

Operator

will question Joseph Please from Kyle next Jefferies. go ahead. come of The

Kyle Joseph

Steve, all the a you. morning, Thanks just color quick my questions. taking for guys. for for and Good one

pro I us get could think were ASC of but if you Progressive have a it, I back sort be XXXX it you XXX, if what off forma revenues into give it’d – the the cuff? helpful

Steve Michaels

I actually do.

one. while have look Let it you if another for you have question, me another

Kyle Joseph

is the XXX that gave, then talked accounting that because write-offs on outlook of And the just Sure. Ryan you Yes. points? Progressive write-offs you up basis just being about

Ryan Woodley

similar that performance expect pool Yes, It XXXX. roughly lease in is we’d we Kyle. mentioned

that reflect the to implementing accounting new this year. guidance range we’re adjusting So, the we’re just

Kyle Joseph

it. Got

numbers sorry. – net from forward to just revenue going related forward on just forward ASC. basis? a modeling okay, to going going And then get or a on we gross we model should under the the question Are that net So Progressive both and

Steve Michaels

Yes.

year color have but we’d because would in of of on the – expect bad We expense, be off be be revenue footnotes debt to expect what working moving the there’ll net would reporting. this we forward just

Kyle Joseph

a Ryan, terms door impact of how the guys that invoice you any one Sure. one Overstock, for of could And on and provide give if active me how that’s – for sense if that about there roll-out whatnot? there’s kind of last from per and metrics you in us then talk the volume going

Ryan Woodley

we’ll a press there so was acknowledge that. release recognize there, Sure. I

a pleased We’d there, it’s pilot We with see continuing I evolving well, in about productivity. a and fully we’re see more excited program it’s we’re our expectations, on and site have going successful to expand it. to we’re the think line run increasing that

that developing part customers excited it’s excellent on going. job an I site, for by team about how done work Prog the flow both Overstock of think both that a of the and they’ve and very went the into team teams, the simple intuitive

refine more doing to what it the easier all accounts and as continues to with we’re identify upside there make to process with that’s customers ways As for better we Overstock. and be

Steve Michaels

it Kyle, XXX was this ‘XX. Steve, first Hey, under question, year is the to the ASC answer billion $X.XX for your for method

Kyle Joseph

give Okay, perfect. us is Ryan, their balance? talked is or you’ve e-commerce, a And then you primarily about your from what one one is last pipeline. Can me, sense, brick-and-mortar it that

Ryan Woodley

more was shift a virtually and and true as contribute development that’s about that’s I to of very to to pipeline that that obviously, it’ll portion standing it’s with fruit e-com come. think a going us beginning purchases I as the and And a well. opportunity. I opportunity It’s – obviously, segment. business target resources business our expect of what for significant brick-and-mortar to in and to I Overstock in that’s attack we’re long-term. think growing effectively both. invested we’ve I on but harbinger the excited remains more point the big things fastest to our bear not question Obviously, general next of obviously online is just We’ve wave growth

continue will from partners our And tool to effective in same online. helping brick-and-mortar wants comps year-over-year, purchase retail I folks customer very existing. positive generate to that channel, and a We’re both new the but the think attract

well. want to our online online are opportunity retailers capture as customers purchase and we demographic hard to working New that help in

Douglas Lindsay

partners thing would through step more businesses omni-channel of mortar the them with Steve exactly help is of many processes and that which is do only it’s approach and to has add excellent right bricks The making to our that relationships, to and their that fact them are an Progressive done that. job those taking I developing

format it’s but retailers, becoming to bricks and who mortar omni-channel. out were migrating only there e-com only that traditionally more them. not is it’s Progressive retailers with So,

Kyle Joseph

I Douglas, you, at out questions this I guys. disrespect of point. am Thanks but No to probably think Alright.

Douglas Lindsay

problem. No

Operator

come go ahead. James. from will question next The Budd Please Bugatch Raymond of

Alessandra Jimenez

taking question the Aaron’s acquired you the is the in is first stores were Jimenez Thank on for comp? what our the Bugatch. the This of performance morning. not line Business, was My Budd Good that Alessandra in questions. year-over-year

Douglas Lindsay

thanks was our of for bought we be our long-term are that Yes, some big for and year we bought asking. We excited about franchisees admire acquisitions. strategy. We really to and with acquisitions. year Obviously, markets last biggest in those a omni-channel want

half year. of of process in the the integrating them transactions, the happened of many those With second

opine So, hard yet. it’s performance really to on

making are switching really right of got our We are our about model operating out up we through under we setting sure the process, the level going optimistic the stores making we staffing, teams, the integration are and markets. sure

inherit on any we each going these I say different not in process into levels different them our transaction. the of and the integrating deals is are We more to speak them could and system them All of operate we at at in levels to out and are will one report future.

Alessandra Jimenez

and Okay, a promoted payment. thank comparable store that mentioned On heavily portfolio year-over-year? you. in then That’s had helpful. resulted And core basis, you contract change in you how first value the a and contracts in that much XQ lower did

Ryan Woodley

part I your of am the question. last missed I sorry

Alessandra Jimenez

and did change contracts much portfolio the year-over-year? contract value How of

Douglas Lindsay

go talking the of down? the they did are portfolio, much You how about value

Alessandra Jimenez

Yes.

Douglas Lindsay

of year-over-year the reported the quarter for we So same-store the negative in and $X.X that’s size portfolio. comps fourth a proxy

fourth about the X.X% as So, of degradation you want at the X% in to think quarter.

Alessandra Jimenez

Progressive with Buy’s how Best Buy? not it says Progressive, Best Points widely will leases Best on And is for website, Buy thank leasing eligible or with then for Okay, Pay my program, for available you. Leasing that be

Ryan Woodley

We refrain No Alessandra. the specific I specific to question, on tend retailers. appreciate from retailer. comment on any commenting

Alessandra Jimenez

Okay, you. thank

Operator

Caintic will question come from next The ahead. go Vincent Please of Stephens.

Vincent Caintic

Hey, thanks. morning, guys. Good

‘XX in say the sense Aaron’s from you normalize us fourth of activity about the revenue revenue, another way for promotional maybe normalize ‘XX if of the the same-store of lower so versus of the a to payments. upfront being to or there that to Is just the in so decline growth? some and lower appreciate way the maybe performed see First, it maybe that a on result in how you talked grew would away the I same-store payments, slight there been the were business number Aaron’s, Business the of you had has that if could year-over-year give quarter of contracts side

Steve Michaels

I another down Yes. about to about projected the which business of balance X.X% in in said think its talk pieces. way year-over-year, our quarter There just is is sort was to it of

our So we write into revenue that the what out of and leading portfolio. churned the we portfolio indicators are

initial I out was did really we our we I strong season. had in had selling selling mentioned we comps think years. out best but It my of X churn season in – that on higher comments same-store so had more we write-offs portfolio, a churned

into you so into written was XXXX, from quarter feel and as is building take that carry strong we next the first will in that, portfolio quarter which we to revenue the year. move the And very like in that can the portfolio of

Vincent Caintic

then And it. on… got Okay,

Steve Michaels

the not written But the numbers we are disclosing and in. any specific both on revenue churn

Vincent Caintic

it. Got

there color on that? If Any down or customer one-timers X%. driving any the was on on basis counts same-store sale Okay, just those if just customer lower? the being counts something’s

Steve Michaels

is the know, you we’ve largely been year year XXX improvement and as What’s ticket. in last driving over this basis talked same-store last about Yes, past. over our points the

we’re transformation like been issue our it’s Our that seen store. customers on we’ve business, projects underlying a solve trying quarters the term, spending I But where but is are of we’re on the seen drove improvement and and demand lot fourth merchandising as on. also, of down the demand-generation of that internally. customer e-comm for money this into to business we as our business and that and traffic marketing we’re we’ve on piece which focused and of part in focus investing longer year has generation, future that the this, biggest is we’re and more well addressing demand mentioned have multiple that. all We quarter, the this those of include store

be into focus XXXX will we address have think we demand plan a and it. to So, going solid the

Vincent Caintic

But So, portfolio? closures over was Okay, way some think growth those grew mattress bankruptcy active side, normalize mattress that? a rest there Switching the and appreciate otherwise Progressive so what store to got doors the have to but was it. that is you. closings, the I your that by of been impacted well-publicized. excluding against for Thank

Ryan Woodley

I think, hundred a prepared the was locations in XX,XXX we it several detail provide about on remarks base the did locations. of that

quarter XX% of all the As growing we with metrics good said those average is ‘XX. invoice, We isn’t, growth growth store is be in how the is and very about in a example in but indicator revenue, and we’re lower portfolio the are had and about happy the past, the doors performing perfect unfortunately, growth business pipeline XX.X% that. in which this doors, of how are productive into customer base, continuing we’re increasingly excited sits productive where on even growth, in very to and with the excited XX% that

Vincent Caintic

then And it. me. just Got one from last

and expense in Understand So, the you’re think bad anything. focus if I I of on bad debt where seeing debt really But we’re the the think, margin and the we are focus on know there’s concern been expense is great. a that’s increasing. on EBITDA cycle I kind

certain if enter bit a but kind you’re helpful. comfort a exposes you seeing up you’re there’s if a recession, that you. a would that maybe to that worry give could So, really correction be more that we the around or opening if us customer Thank of you what that

Ryan Woodley

Sure. bad Happy to. on expense. recap just to debt I

up the we just unique a increases, play the not I’d say but some time, pools with initially. and the reflective over soon things which have line obviously across have more out previous months, on in different perform short a operated lease I’d past with verticals. is And lease revenues the a on seasons we couple seeing leases the was lease We’ve leases history our we the line get to and XX.X%, through in bit life. business versus it relatively ended in XXXX outlook XX.X% play is mind provided year-over-year, of level XX% when in say and are of and after kind the the pools the the the fact expectations, had also of visibility accounting, performing overlooked line year year, to in the just that’s general the XX.X% what origination. near then of out prior in provided consumer range about tends the good increase of performance right into pools of only with talked those the in quarter average of old but context that XX% of also a the that broadly the in seven the cycles of we it middle and that So the that. finance how These we say recessions of And economic aspect that

short-average to business. a you it So, really with life visibility and consumer combine puts the different in manage portfolio the, typical lease place ability a in our finance

Vincent Caintic

much Thanks very helpful. very guys. Great,

Ryan Woodley

Vincent. Thank

Operator

today from question come Please Janney. will Rowan of go John last The ahead

John Rowan

Good morning, guys.

I XXXX? heard million transformation, demand $XX it. guidance. into sure different three to Is incremental just quickly Just on for million then I initiatives it numbers, the and expense make $XX for for understand $XX million restructuring

Steve Michaels

the two CapEx comments maybe some we’re in my of issues. We unpacked John, different guidance. complaining I think,

fleet related the that OpEx $XX and build-out mentioned. that software hardware we million mentioned then million $XX in guess million as of $XX XX and for some well. there is XX to real improvements stores is Douglas So capitalized for to for the of at for I acquisition, section the included in initiatives estate related the million that $XX of some his

Business XXXX, for part burden it in certainly and So, is is Aaron’s of in for an the of it there part outlook on OpEx. capital the investment is but

John Rowan

restructuring there XQ, expenses $XX is million And Okay. in of correct?

Steve Michaels

to $XX is, million $XX million yes.

John Rowan

you delayed refund tax seeing guys clear, activity early payment the be aren’t in to just And any given yet? Okay. change

Steve Michaels

either indications anything of have really any this point at don’t in business. different We

John Rowan

you. Thank Alright.

Steve Michaels

Thanks, John.

Operator

the for question-and-answer session. John to our remarks. back concludes Robinson And now would this to any I over like closing conference turn

John Robinson

earnings our appreciate We we on XXXX participating look the in updating forward interest Aaron’s for Thank of call. your end you you April. quarter and Thank results at to first you. on QX our

Operator

Thank The for now today’s conference concluded. is presentation. you attending

Have You may your now disconnect lines. day. great a

PROG (PRG) 14 Feb 192018 Q4 Earnings call transcript