AAN - Earnings call transcript Q4 2020 | The Aaron's Company, Inc.

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Operator

Good morning. My name is Michelle, and I will be your conference coordinator. At this time, I would like to welcome everyone to the Aaron's Company Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions]. After the speakers' remarks, there will be a question-and-answer session. the to turn now will call Mr. over I Corporate Investor Relations Dickerson, Vice Aaron's. and of President Michael for Communications

You may begin your conference.

Michael Dickerson

Thank Earnings everyone. Fourth you, Welcome to the morning, and Aaron's Quarter Conference XXXX Call. good Company

Olsen, of morning earnings are release of Aaron's Aaron's Officer; Kelly Joining me already Aaron's Officer. seen Douglas and Many this President; Financial our morning. have Chief issued Lindsay, Executive this Steve you Chief copy Wall, a

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

our statements. our for year other to provision our Form our December may please our the a cause During we including on statements, and items, adjusted this can net EBITDA, obligation we to and the results severity release. will will Also, the periodic XX, our adjusted statements. impact to the be to XX-K our certain the materially and comparability performance discussed and for of companies. make financial and XXXX, operational The place related and and provision non-GAAP EPS, provide that non-GAAP which believes in SEC including be risks measures, your earnings to future for to these with pandemic Actual economy detailed have we may with of provides of of that variety results and be periods including, performance due things, those earnings release. any materially assist non-GAAP from undue identifies the statements. risks factors The to measures certain results Safe related actual our XXXX. understanding company's Safe to tables included uncertainties into earnings which duration here. measures a cash content them COVID-XX today's operational and other end on call, with affect statements results non-GAAP performance. to company be such the the to forward-looking of update from financial These of are certain EBITDA to meaningful insight actual be differ This our the forward-looking reconciliation financial ended cause Harbor operating the filings different chain. no the for been at measures comparisons forward-looking Harbor On than Listeners of performance see description found facilitate that help forward-looking, prior flows, other attention referring call, call among business and are I outlook in supply the statements may want materially undertake could company's may cautioned not these for in forward-looking with emphasis investors ongoing associated the with to differ non-GAAP that

one it basis comment, Let our as relates to me of presentation. add

the position For of consolidated as is of the represent month financial results based stand-alone results company. and a the statements and operations of its and the on our subsidiaries, December, XXXX, company

that, CEO, be Douglas explanation today. our and to can now filed basis presentation our over our I call more Form found actions. in the XX-K of attributable directly prior cost statements former allocation all our expenses the and of Xst to to from periods financial related all combined corporate revenue December to XXXX, include For certain company functions and an A of turn With Lindsay. detailed will parent

Douglas Lindsay

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

priorities key our a challenging and all to take team of to accelerate year. determination in which talented for our recognize moment strategic First, their in very a enabled Aaron's let XXXX, me commitment members

to by of adjusted provide center needs exceeded our that and our the same an and continuing transformation. team the while expectations overcame year and was fantastic posed several revenues and our time, our real annual safeguarding customers services that products the At worked tirelessly meet our accelerating EBITDA generated members we centers, Our while at for and pandemic, estate the higher delivered manufacturing members. to team we've stores, our challenges years. Woodhaven customers, and digital We support in than service to distribution the store COVID-XX

during our addition, establish well with the company. stand-alone sheet XXXX. the and we our profile new In execute on spin-off publicly as Aaron's flow team a diligently year, And traded following balance cash worked strong a go-forward spin, has positioned strategy. closed to XXth on The transaction to are November

than regarding or behavior, Corona the virus remains energized the about impact I'm how consumer ever. future may uncertainty some economy While optimistic our more and

in comps, and we more X.X% performance. positive due nimble, annual Our was fourth prior rose quarter and with investments of e-commerce to higher sixth lease productivity growth improving since never with business and that quarter In the primarily are representing as make fourth decisioning, activity, payment higher continue revenues XXXX. the the customer The yielding quarter, year the size to of portfolio to and same-store same-store retail strong has compared XXXX, lease technology, the been first last XXXX operations quarters same-store store sales. eight portfolio revenue positive out

X% fourth We written achieved portfolio customer that our decisioning the platform. our of effectively and operational in product of ended portfolio is was of technology write-offs, we second the to decisioning which this the of roll-out result in implementation collections, that better execution, portfolio at to healthier improvements and and beginning larger larger enhancements Additionally, XXXX centralized the originations X%. of enabled therefore, year. revenue the XXXX we lease returns a portfolio had quarter. the despite in size was technology into fewer by with reduced new lease than Recall The quarter revenue a flat payments by larger written and lower

was for their to e-commerce customers homes. products continues affordable increase are e-commerce quarter to In to and the quarter, revenues in the site tremendous as into year's of up XXXX. portfolio increasingly recurring traffic Despite aarons.com, as our the lease the to efforts of search Revenues represented the X.X% last quarter Thanks XX% team; fourth at the in to of XX% quarter traffic revenue fourth channel. significant declined compared written in to XXXX. e-commerce increase compared XX% in fourth total lower our global online what resulting fourth quarter, due we the grew not to to due decisioning inventory of shortages approximately Moving supply XX% it our of the be from year-over-year, optimization and compared to going chain disruption. would aarons.com expect traffic. traffic conversion of the Conversion both to our is

progress to digital and acquisition, including the modestly our imaging. to our our and expanded However, customer evolving important GenNext positive higher conversion strategy online our e-commerce brand XXXX, should store new position XXXX, of rates. the Improvements are continues lead in conversion decisioning we digital in and first quarter by which concept, improve with our assortment channel. I'm growth includes of initiatives, also encouraged and footprint momentum continued capabilities. leading analytics margin to technologies, product and improved our consolidate, which enhanced rooms, in remodel accelerated to store this shared reposition In inventory

the the have had pipeline. XX stores year, of more XXXX and end than we As opened stores GenNext of additional in XX the

are new in Our corporate GenNext expectations. lease well, with averages line higher volumes the than are our stores and that performing delivering

I'm of XXXX store and I'm overall the stores year the And will chapter new strong meaningful a strategy new with to execution company. our quarter of our provide our portion encouraged the and we as GenNext pleased full our still of over public a fourth lift believe performance. store count, represent While our results. small about Overall, time overall financially future stand-alone

Aaron's customer Financial our strategic the of experience, discuss aligning rates financial Wall, best-in-class look Kelly our footprint to Officer, on simplifying proposition and value Chief store payments, to results. XXXX, and digitizing promoting customer call low now, key our I'll the we the As high initiatives service. we And to of our remain turn and focused our over approval opportunity to

Kelly Wall

Douglas. you, Thank

full of consolidated For to in reduction $X.XXX increase the compared year stores the year for and was billion, year by in compared XXX or decline primarily a full a is to full the XXXX. EBITDA result year XXXX. decline the for $XX.X million, Adjusted XXXX million of were XXXX, XX.X% same-store year. X.X% company-operated XXXX of This the X.X% increase offset of partially the of an full revenues XXXX $XXX.X a revenues

pandemic-related earnings of $X.XX per EBITDA staffing in $X.XX XXXX. to X.X% and reductions over XX.X% an EBITDA lease including improvement the in compared were to XXXX. merchandise lease an increase improvement year. adjusted due store increase percentage the increase activity, in XXXX. a second in customer over XXX non-GAAP returns an revenues, efficiencies point This XXX of and was third was XXXX, basis prior Write-offs quarters XX% of prior for operations, adjusted year primarily points a is of Annual fewer share in compared X.X%, to in revenues As payment XXXX, basis of

year, Adjusted for The from ago, to same offset XX quarter period. locations XX acquisition Revenues the to comping was the XX.X% items of in related year. were XXXX. was of an the over compared revenues basis EBITDA reduction one-time of and $XX.X year XXXX, the consolidation due despite the was to the decrease the of to and for $X.X $XX.X margin partially gains an miscellaneous and of same QX closure, approximately a one-time XXXX, in estate the XXXX real EBITDA million fourth sale company-owned the million, fourth period margin last increase in the X% improvement net to a of Turning by of quarter impact period items. fourth primarily X.X%. XX.X% $XXX primarily transactions million same benefits EBITDA quarter inventory leaseback points. adjusted of a quarter increase throughout million other realized Adjusted or write-offs, the compared of compared These prior year in to in

of lease an down $XX.X million quarter due reduction that $X.X spend would items in activity fourth per have EBITDA the $X.XX write-offs. in quarter primarily versus prior benefit Excluding and reduced as increased real in year. write-offs, took quarter, for strength on payment mentioned primarily Diluted increase continuing primarily the in earnings an prior merchandise XXXX, advertising the due of a share XX.X% estate previously the place to the expenses non-GAAP to fourth of quarter XXXX, adjusted XXX to by margin of $X.XX compared approximately these million basis of one-time Operating fourth from the improved transactions the and offset customer in basis to points. year quarter the XXXX were

$XXX.X XXX grew fourth primarily our from activities decisioning resulting year-over-year, operating improved company's the store to million stimulus. government from other basis of which XXXX, lower of to of for in technology, activities fourth was performance, compared during Write-offs quarter expense $XX.X closures offset were of generated of lower second end the quarter At due the XXXX. year, and increased partially to ended months benefits the operations debt. December and Cash fourth from of cash labor the the quarters, down X.X%, implementation expenses $X year prior XX a working the benefit Cash changes had to company CARES $XXX.X in points and store balance by the the the purchases and million During portfolio lease inventory third one-time new furloughs. and labor pandemic-related were Act, from quarter, million than million primarily XX, tax due operating less improved capital. the the due

concurrent completing a million XXXX, was the liquidity revolving the the end of which than more into the unsecured November $XXX as company spin-off transaction of addition, In of XXth, undrawn year-end. $XXX credit with at company entered giving facility, of million

that want I in the in cash review January its have been spin-off I paid XXXX, company Before payment normally for would to November, XXXX. accelerated of all the prior combined the remind transaction, dividend, to quarterly regular outlook which legacy you completing our

revenues as our bottom November. $XXX of $XX of representing section the spin-off Turning in to preliminary in on the to November, provided in the XXXX currently million, billion expect which outlook summarized to represents This a midpoint presentation to end the website. with to to range of preliminary $XXX of on $X.XX is increase our in outlook our be $X.X total connection our EBITDA the Slide in XX the range billion. Relations the outlook. We we provided we roadshow increase of an is outlook Adjusted expected roadshow million compared Investor and available the million in of is

define the items the operating As to we flows, six higher outlook expected year. be are and be of to financial seasonality compared cash we XXXX expenditures key capital will we XXXX. in This expect few million of between $XX million. Capital it both expenditures, the for months $XX want revenues of of less Free a assumes to six earnings to are $XX flows million to our results, expected the and $XX somewhat be second relates to first cash which also million months that as highlight.

environment the in economy as state current significant of its condition. or current retail deterioration no compared U.S. the First, the in to

of of nature with combined unique sheet, will With And despite to the am and taking the who the well team global gradual your members government questions. recurring benefits. turn supplemental a encouraged in earlier incremental us. I echo To improvement faced. uncertainty. strong a The Aaron's successful will business Second, now unemployment or was model assist operating supply for Aaron's, by XXXX of stimulus ahead summarize, finally, chain of I many customers conditions. and over operator, opportunity to during challenges leverage flows that, revenue comments, our balance us To cash this enables the the year our no period Douglas's perform with call

Operator

Your from Instructions] will question you. Chukumba Anthony Capital come Thank [Operator from Markets. first Loop

open. is line Your

Anthony Chukumba

ask traded I Wow, call to honored. your publicly public first said company, a on the I am question traded I first as got company.

Douglas Lindsay

Thank Anthony. you,

Anthony Chukumba

little congrats serious, a on finish Being capital on a of question more I great have couple first I allocation. a year. My is to questions. guess great a

ended $X debt, the $XX essentially worth million of cash million of you So, no virtually debt. and with year

$XX You're [low] $XX to million at trading free multiple. going stock million, generate is flow, of kind cash and at your another of

I'm and about just share think guess, cash I how So, of in do capital repurchases. terms wondering you allocation also dividend

Douglas Lindsay

call. our for to here. Hey, first you Thanks this our first Douglas. Anthony. Yeah. earnings questioner Yes, is have being on Glad

got we've on and you setup prospects. -- cash mentioned, balance nice we've our very flow actually as a sheet, So, great

in mentioned, Kelly laid outlook. And estate in a and Kelly give XXXX, to technology deploying laid strategy. our we're -- As going in investments real cash been that's that into of be that bit internal out out

is focus, to super that to capital on however, us. shareholders returning continue and We important to

remarks, $XX at we cash As time annual that plans the board makes roadshow, million of in expectation. continues of we normal dividend did mentioned for the capital And of dividends. our and the miss that indicated did million when dividend we of prepared XXXX, into $XX spin, to our you shareholders our our our while formalizes his wouldn't to and a the so structure. recall, expect the a we that pay November accelerate policy be to payment future January on dividend new Kelly future

to primary as not And M&A strategy open to we to opportunities business. and core capital that as our the It's we're historically so a right discussing. almost, in as is shareholders. been will do in We've we'll activity something all that used sort strategy while continue say, would our as in process. will want lastly, the is buybacks something that's So, you also discuss strategic And information we've our share a past return team, future, arise if they on at now, I give to that in focus to we part direct-to-consumer management pursuing Board, and the more is of of pursue. and looking

returning order as in to our to we executing So, of existing on look opportunistic I've strategies, then focusing and shareholders M&A capital the these future. the listed specifically

Anthony Chukumba

then, Got follow-up one it. That's And helpful. just question.

half compares on would closed. current safe that the is as of the right be additional assume a of [indiscernible] assuming fact that measures from guidance, consumer I terms to I sort now, your upside half. administration sales I seeing to and is in first stores the that stimulus. were easier in you it the is, half that you enacted, first know guidance? to there extent about than that know taxes stronger that stimulus question talked So, are the expect lingering some disclosing there guess my am bit the the mix I working in second impact we're the little

Kelly Wall

Hey, Yes. Anthony. It's Kelly.

You're correct.

of pointed our may on outlook benefit stimulus this be the not we out call, year. does As any that include incremental past

But our it for what into If last was which on benefited to difficult have and didn't note, obviously to we pushed you that that's we back of us to around makeup few it's to in there exactly outlook. don't why from guess, we the impact either, a at certainly know, include others consensus challenging. is don't right? start; look may know generally market. stimulus going forecast year, stimulus our when bit things A we it the size business, So, the what like, end, and is it's going formally right? when it's I the seems look to While that it makes going again, little

is, in year were really unemployment was this was unique a customer our good that's thing pandemic was at early economy we going other shape, in in the record into XXXX, as great The spot. lows, the

here today, behind and are believe, in that obligations rent sit we elevated; As we customers, other have. unemployment's obviously, payments they

may we'd know uncertainty, season that not a to that to haven't stimulus used the past. point some how finally, So, some that to don't they around this available it out last be right, will they comes it our how know year. use there this relative we exactly We it's And liabilities them the that delayed. probability is when there that in customers think remiss year. We high is know had tax they have year I

they all But So increasing it put when employment together, to to better. it's have right, to government due forecast. as makes or a rule, our rising you difficult we wages, tend it whether customer, very general greater do stimulus, that liquidity, when

Operator

from Jefferies. Kyle your next from question And come Joseph will

is Your open. line

Kyle Joseph

Hey, good quarter. on guys. Congratulations morning, a good

incremental it outlook? really bigger of give what improvement better And end you stimulus following performance the November. to point, that the of fourth you a outlook, drove because sense you in us some in is the had the quarter. your than at in Regarding because provided portfolio that, December? Can the when of a the Was

Kelly Wall

Kyle. few Yes. It things, was really a

nationally believe to collection to moved centralized of continue the by forward in earlier field. to the we of impacted by that year, platform strong our and in did we as continued team positively activity, operating the was that as as decisioning be roll we incredible performance well less putting the out is impacted right, the year our just have end the stimulus as So,

to So, those are two things drive of kind that continue that.

thinking a the year get helped is, completing we which what in higher, right, ending did December, first few we then, as than the weeks other in the And were extent, quarter. are to stimulus were we the we much some first lesser roadshow. The has slightly of

Kyle Joseph

kind then in this on me, And it. of sort third normalizing? in one you, versus the underwriting, your been highlight for of how 'XX, would then focusing write-off the And performance you credit. your Got can just post-centralized the leg has question follow-up us performance expectations? credit Would then how versus of outlook from performance this credit expectations. guess And anticipate I levels has through been be, walk e-commerce

Douglas Lindsay

we've Yes. Kelly the make I'll on. talk Hey, there, assumed comment Kyle, Douglas. what outlook it's but let I'll and just a about general

in large portfolio centrally and to of now out quarter know, has our everybody, piece rolled decisioned. of second you remind we XXXX. just been As centralized A the decisioning

in and confidence a keeping results, as healthier decisioning and that have making sort we we strong our -- deal pools is collection much sort how performance improving was portfolio we customers at that we bands, our the do collections and scoring by year, this While versus great our look centralized stronger exactly of can't the forward. differentiate move stimulus, to right-size related of

been that's So, successful. really

It win for sides processes simplified from the in for our there and biggest labor sort great customers made our all members. us team in team model, of probably the for I stores is and the more by Aaron's is efficient our and members. win-win our a think which reaction

this is, e-commerce, of again, big terms a win. In

fourth to and losses in the Part our down. decisioning has know, the the our the recurring commented We've you benefited time. that our recurring quarter. of over what year optimizing further written seeing previous was been to this, us restrict, centralized And long continuing the on models a of close that optimize of e-com. and there half end As and that we fourth really we've e-commerce for and by decisioning down revenue they we had were us of quarter, really are revenue written were course on was

considerable XXXX and there. we're talk So, we're in about I'll seeing e-com Kelly happy margin flow-through write-offs. let the really decisioning about

Kelly Wall

Yes.

obviously experienced more than we've lower levels. enjoyed and year Kyle, So, lower than what our last year this I also normalized we consider would write-offs historic

outlook, a that in in on do X% as we to levels As back roadshow believe -- of and range. play it there I expect range to more those the currently normalized we year will X% to well. to that relates to expect put start had return our XXXX, discussion, during out I our out

Operator

from your And question from KeyBanc Thomas Brad next will come Capital.

line Your is open.

Bradley Thomas

well Douglas, in morning. public good first on add congratulations my Hi, me company. great here year and as a a as Kelly, let Mike, quarter a

how how XX should we like, the change ahead, to will you questions. But have this first I write-offs trying months at One about you've out you first ball are about as are and some how question this to at XX behind gets around of in figure my two crystal write-offs, next is bit. there us? vaccine as thinking question -- particularly be a point, the all but addressed look normalized just My going out stimulus gets and behavior of look what America overall, over thinking a to in

Douglas Lindsay

look in I historic we normalized or But mean, percentages, on we mean, that. plus I thoughts at you sort forget were couple range. write-offs, last just that, years of prior points total on Yes. had to collection of higher years year if five if basis a at collecting a we portfolio XXX our look than XXXX, our

normalizing. of necessarily in mentioned. improvement included we XXX of basis we time, benefit over believe all as we rolls that, potentially not Kelly should the That further and It is as we year, normalizing move we so more points stimulus see stimulus. be vaccine get stimulus, a supported will stimulus into be as way. the If decisioning, While of and we'll centralized out some the also that there get more we think helps write-offs which

would also if portfolio revert we revenue we forward, the kind potential into it translates into collected which because revenue, normalizing five-year is and the is our that revenue, to our both have it well. losing XXX%. no to look translates which performance, see of revenue in we back we as averages, stimulus, would reductions obviously And expect write-off so, not our as And

-- them? So additional to comments any have know Kelly, you if I don't

Kelly Wall

you I it properly. covered think No,

Douglas Lindsay

Okay.

Bradley Thomas

I And would then, say that question, great. competitive group space I'm are my on the landscape. time, That's given players the talk you follow-up to be e-commerce receiving end going have at happening a BXC and in just customer in long look doing is changes in Douglas, of of if SPACs that I with of things are the some and about you're more intention, given the this with help that that to could calls occurring. the than acquisitions And

so, it heating definitely competition up. And is that seems

of hand, put the just you've long three of a best same-store sales time. other quarters up On in the

bit e-commerce face are if do to offering in-store landscape how than you Thanks. you So, could competition? positioned perceive and better like, maybe talk a offering feel, about the perhaps and little your the investors competitive

Douglas Lindsay

the e-commerce every industry. our of omnichannel our are experience value that of customer Sure. leading and I past and e-commerce data really in our We've the I'm at centralized And and we've our built business for mean what this growing the say, analytics me -- company back on team our accomplished of we modernized is an think a is proud over processes, day. five the systems years. fully driving in platforms, transactional has definitely scale, platform we've all First, let

and younger, acquiring a of large always many drive those has network e-com to e-com site really importantly, we over that advantage our us. we Also know, like as store logistics. Aaron's; on you hours. are can newer we chain time. feel leverage a we're that store competitive been We've shopping the that, customer our can e-com last-mile grow on supply we a for global performance margin with As after got And

huge so, that. of our got And on top e-com we layering a benefit we've embedded and infrastructure think of

to continue in drive traffic more site. As you we quarter, saw to the our

and traffic there the the inventory in up also that number to was XXXX. improving year was big of the that and lower has the expect the of customer during think been in XX% are search; conversion traffic in terrific I thanks our we the back doing levels and to due acquisition while quarter, to teams that get course to quarter normalized work over

of we're that. XX% excited super So, about revenue. It's currently

We as that what's we the the from down. of expect to part probably be last e-com business And mentioned move been most I as on portfolio and of the bigger the is it Kyle, rates the encouraging loss coming a forward. have questions health of the control

e-com. let as feel lot we're briefly So, even I to do. mean, -- I e-com, I'm inning think on one. inning we're it we're kind We've of like, about we like we like in feel though a in, just going three, Steve really it our to got talk about roadmap for

Steve Olsen

Thanks, Douglas. Sure.

want expanded continue their to that's to point better experience, servicing and for great them and and roadmap journey site so payments, A that e-com that and in first, shopping control, we're putting to hopefully then need self-service the on asking customer As digitizing platform, the the really we their that then are, want I'd modernize performance the them obviously, a putting relative an to. that accounts, of to to drive our have 'XX assortment going them focused roadshow, things business filtering working multi-year site around that's few they our we that questions. in area experience to continue friction for allowing investor that discussed functionality that's to we control. our this to a customer site entry customer continue customer We're content in whether the maybe prior We to focus really any to remove We their in content, and to get personalization. and call connect of our on enhance make for add up the give to whether really experience. continue manage in

So, we're year. for we and really throughout build going e-com excited as about the really move upon it's road to map the we have

Douglas Lindsay

Yes.

-- hugely any advances to big going as online So, that our adding area. a Mr. We're products be us. of things we look Brad, help will important think looking more to strategy at in I all hugely the and and and we is future, direct-to-consumer to part and

Kelly Wall

Yes. enables omnichannel I of I our key Kelly. we around from have approach as customers. more that return view to of And Brad, a a mean, it's element take product add, true our which just strategy, and stores thing one are model. differentiator we the right,

the deeper does returns, that things. more portfolio And experience the terms. thing better And that risk customers. to So, into with customer. with second Obviously, we're extend few a is finally, our then that can for to able go we Right? Right? serve model,

lower XX-month for to which our customers. for up So, monthly payments terms, allow

Operator

And will Griffin from your James. come from next question Raymond Bobby

open. line is Your

Bobby Griffin

for start back what's Thank bit of centralized better operating written that? grow as made you you maybe to we own. ultimately, company your I on congrats questions, dive to assumed little to lap on portfolio into XXXX, spinned guidance lap XQ then and decisioning for a I just and portfolio guess, in the want a on revenues into public little understand having start If the in guys revenues as XXXX? a written taking and into my the now changes XXXX we

Kelly Wall

repositioning continue things going to there's Bobby, and few the to strategy, stores. estate part of our of as relates it kind Obviously, on we portfolio. Yes. a real as consolidate remodeling expect to there

be XX% the with leads company-owned years, our reduction in out there's merged to a laid over the existing will we in the stores portfolio. of -- into XX% That next their roadshow, to As current markets. five stores

at that levels. revenue right, say at we a before, normalized quality in I'd on that But written that a But current the same our We impact -- combination same-store believe mentioned have kind of So revenues to continuing set, has portfolio. though, pace the time, of of a on return we've with offsets terms higher more of as to begin collections, will in.

So, book our of one with centralized higher today real we benefits the here decisioning much a is of sit leases. for that quality

the percentage that positive the we X% returns in for a X% to is the collect those of And comps pool, leases kind more and so, year. have ultimately of as result as less on expectation will total

Bobby Griffin

Okay.

Douglas Lindsay

comping through the be think written. against way it second the And way that we'll quarter Bobby, about revenue -- the I'd I is,

down So, our X%. approval rates X% to are

a the over should half prior the And year. first you year. expect pressure two that of the the in pressure against quarters So, of relief then, second

items health customers the keeping churn we portfolio expect higher in in XXXX our we're which to we into we normalizing would leading even churned out that it component And and last portfolio why we're that written year, what larger to XXXX, of We have is while sales. think I of less lower, than we a is so in ex-stimulus, therefore, puts portfolio, size that's a X% pressure a write-offs, year, revenues of the and of that as had churned the the previously on was size getting on portfolio. that that's than of a to bridging customers did we'd returns were Kelly the revenue is portfolio. have than and we more the and product portfolio guiding one indicator mentioned out the to though we begin were did considerably to same-store see we the same-store X%

Bobby Griffin

that's but was stores. helpful. should thinking on Yes, are I -- guys basis, I a up, probably I my cleared have question comp closing realizing more Okay, was you

Just we assume count for should modeling that our assume there we a closures XXXX rough should of store in models? in or estimate purposes, that relocation is

Douglas Lindsay

Yes.

is plan close I probably roughly think stores. our to this year XX

Bobby Griffin

Okay.

help to customers just versus lastly behave of the customer the what of into the is of you stimulates about with translate they happen And looked another where what the saw little little in would it a from or bit perfect. that bought was mentioned there your the a I you similar And think the kind at uptick me, I the guess we looking at recent $XXX around think can checks. of stimulus, round? back or how if maybe or they what pandemic? anything the that, first behavior months, Okay, in stimulus prepayments the we heart bit this us summer time just that first got But

Kelly Wall

round Operations operations question. Store mean, it's Malone, very driving Because -- for out that was Chief Officer, also that came the also I great as nationally. I mean, well. There a unfortunately, difficult in, rolled we under centralized when Yes. Ryan new proven -- that of our Right? answer. us Bobby, that's was first decisioning stimulus to first

to how of exactly saw it's for hard we much attributable the to that us So, stimulus. XXXX disaggregate is lift in

the out that, of on way different. flowing it's put it's -- You top is

enhanced longer in one-time whether funds. recall the of and stimulus weekly customers on a might back the in the benefit. be also of could stimulus time you top So, unemployment includes over QX, And electronic QX that, that -- that the received period of that just was [indiscernible] transfer or delays

It that monthly You bigger December, which spot as same $XXX the a see. I folks one-time they December rolled the customers So, mentioned stimulus $XXX I $XXX at and any of of into much expecting the going different and candidly, than did we it were the roll include whereas a a of think earlier, quite our was is top months more think, XXXX, were delivered. we driver time, that, in the benefit, quicker, are unemployment it, At to forward period in Right? from did we beginning XXXX in rolled sit back at stimulus, it and was about On over out out. this because and the quickly pandemic. of that because not XXXX what just end benefited of pop. this

used they So, likely stimulus how was different. much the

Bobby Griffin

then on And helpful. that's Okay, lastly me, guess for just I chain. supply the

that in But availability we a in move out You in all little moderating, better. release has improve? have giving has were that step issues that guys to back started terms of the called when Or direction a in the seeing assumes been at it or right there some taken categories across the sequentially, the board? it look categories guidance

Steve Olsen

that I'm I to all Steve. is glad This seen answer categories. Bobby. improvement would we've that. Hey, across moderate say

the from inventory So, to seeing whether the suppliers that with work we're from supply flow their like pre-plan to grow, what was demand things outlook summer a categories perspective, of a daily you're continuing computers, is. it appliances, fall, we that into the our that. the perspective, and But throughout that wins coming and

categories So, see modest that we'll as 'XX. improvement optimistic into all continued believe we're we across moved and our

Operator

question Berenberg. next from Moroccia Alex comes from Your

line Your open. is

Alex Moroccia

questions. taking Good morning, Thanks my guys. for

may with impact standpoint, change wage your from on you business increase have would Can that it starting well minimum the both an discuss as macro-level Just your profiles? one. customer expense as a how

Kelly Wall

question, great a Alex. It's

that expense, wage. the seem although first there how to some way it look, But minimum seems to pass. going kind going may But I'd a things, how $XX that want out consensus the be goes be few say of through $X consensus we of to impact So, there XXXX, in business to phased working be system over point in impact than into a to of it's to our there you is so no be expense. the would roll will personnel terms five-year out as it as on can in personnel this contemplated. And that, that increase with period. year, XXXX, if doesn't around of in right? to its it's yet look, It's be And million what would less through kind DC. the terms our

only also because not improving to of moving us that, it's experience, which to consolidate the kind customer invest Beyond parts, We improves much it are technology, continuing to few stores. in a difficult efficiencies. forecast, but our We're continuing there's for also just our more becomes right?

in that, impact our So, as again, and impact beyond no XXXX operations while to forecast modest for year, evolve. to this continue us difficult

Douglas Lindsay

Alex, and of this also store number. as our And variable wage sense that, across close that well, Douglas. makes networks number. note is that rate important is base Yeah, to It's we pay that have to our

ranges comp across higher portfolio. our total so, -- on than in the are $XX average, And

Alex Moroccia

in on how and regarding the you to That's on just XXXX? then a I other left then Aaron's How helpful. in Okay, customers particular, made chain restocked? peers, do appliances follow-up at And understood. the do come in and sure electronics of you was before ones moment. comments revenue get think you inventories really And supply make the much the table

Steve Olsen

Yes, sure.

our Alex. second it's I'll of question half messages benefits whether we through digital, is our seeing all are around of So and proposition and whether around price offering, value -- great tying the place email, Aaron's it's the the our weekly Steve. that is first. And we of points broadcast, Hey, shop. assortment in to marketing, that marketing are it's why This our answer we the to think a QX whether really performance. Through

but that saw to has as As that impact I to quantify. we tough there, that continued far through, we most luxury remarks, like guess during of say the our moved we business mentioned the saw or as we have our in XXXX point we can e-com I'd inventory prepared a low we months, stores. improve. in But of by as it earlier definitely probably inventory, out our is and pre-leased and people having What fulfillment in supported summer an to e-com say, impact new our returned merchandise is our carry definitely in centers.

So, and improved between us balance new that allows our network. our inventory to products throughout

Douglas Lindsay

Yes.

really that target very are continue value in payments will think, with it's they U.S. that And and differentiates service, rates a of with on approval And in strategy, other why part our we also combined there. that's of and roughly just use for that's room our think is competitive look of serve got shop. to to XX% I market we We, products the payment. we've the our I and what population believe we customers important compelling a marketplace. that of the large a note, us, for proposition continue that payment, and acquisition channels to as and think customers best-in-class our our run customer lot marketing to and high evangelize

optimistic and and technology we behind we're about So, put it. super systems the that that support

Operator

from next Haas question America. Bank come of John your from will And

line is open. Your

Jason Haas

Thanks. It's Jason Haas.

yeah, in any on But, if Maybe all is to on whether mixed stimulus terms that more you've compares? curious, color provide that's I maybe of customer maybe been coming. like could ask some if of loosen that's your just So, health to decisioning them. XQ, able It the that the just to base wanted decisioning. relative at color -- sounds you on how given

Douglas Lindsay

our we specifically speak or year last we've Yes. I don't is, done. or to of we to loosening any in and XXXX. I say What want decisioning did all anything so continually else will tightening optimize

for see led we're and to benefits out lease which rolled to we've in our e-com we decisioning of great performance and our that at pools as optimizing decisioning, centralized optimizing. We stores, are our us portfolio continued

more power us, adjust Some of areas model. we of it to purchasing customers higher-scored of our and finding with sort giving our need matrix decisioning sort that our optimization of is some and is where

year And monthly a doing been so, I the think that we and course basis. that of over on and will benefits the seeing of do continue the that, we've to we're

Jason Haas

expectation that grow year-over-year thanks. strategy. Great, still it XXXX. think more longer-term understand But to consolidation would question, that in I Is -- there an focus. after a is down then there store an the I final And I that, due be, expectation little will guess, EBITDA

curious should I'm be if that's right, we how that's thinking So, longer-term? about it

Kelly Wall

it's yes, Kelly. Jason,

in You're correct continuing think about to that it way.

of and the and demonstrating then they're growth. of continue that course decline portfolio sequential You and at growth presentation, will. see correctly. view, we growth about did the larger a recall and outline currently after you included kind translates the that new stores kind those earnings roll expected XXXX midway benefit this then that five-year our line of the growth of show and of Revenues to of through takes period into we percentage In grow, that year-over-year start and our front road stores and in and end five-year out kind to top it both if as kind bottom to of line reset are year, reverse a

Jason Haas

question, if quarter-over-quarter. think, you have Great, add could I sequentially in thanks. more picked I mentioned levels one And that staffing up,

I I some centralized decisioning has labor due because there there on tough not extent cuts been take that know a just get to think read to pandemic. what to some the -- allowed you out I'm hours. It's sure were to

rate lower centralized decisioning? a curious Thanks. a or staffing we levels So, is rate have that are to there long-term pandemic, because normal, or of running at of XQ returned if because sort of the lower still term, I'm like

Douglas Lindsay

it's Sure. Jason, Douglas.

for the So, across first and stores of business all, of we're on open now. U.S. all right our Canada

and than what I What is generally QX. reflective better would staffed in we're portfolio so, seeing open. labor being is, costs in full QX now you're of And QX we say were in our

our has perspectives and come year. So, at up. labor We're still relative historical to for target levels this not understaffed

full staffing portfolio. reflects XXXX of our Our outlook, however,

full introduced does in I So, staffing decisioning. level sort year right know for reflects last what the to of of, reflect that we centralized important sort that's call, staffing. really technology that also It

now payments, XX the we're percent For taking store. of of our plus outside payments

it outlook And so, our made Aaron's run easier for we've reflected an really all store to staffing in and XXXX. that's

Operator

come final from your question will for today And from Rowan John Janney.

Your line is open.

John Rowan

consumers the there'll you Doug, for past. the think earlier they in tax be that liabilities I that haven't this said are been expecting year not or there

to you referencing. could what if you're as specific be wondering Just

Douglas Lindsay

out second Yes. quarter, -- We look will We we do. quarter, were checks as referencing, were our beginning to think I first end that. of the Kelly the the they referred of usually as tax to be customers receiving

taxes be checks tell, So, the unemployment for be of may the pressured during chose withheld by to what we not not size the checks withholdings can consumer year. withheld were by tax from may those be or that -- those

And overall so, on put pressure that pressure that may those tax we could checks season. have on

Kelly Wall

Yes.

taxable. So, John, unemployment benefits, right, are

our liability addressed not accustomed the for legislation tax that's year. right, may they in customers of then would So, forward, they're unprecedented all to given not the it that benefits last come to any create seeing, received a extent level that unemployment

John Rowan

Okay.

Kelly Wall

withhold they to have yes, are those don't taxes. Well, you opt At states, they federal -- in some some stage, in.

So...

Douglas Lindsay

Correct.

Kelly Wall

pay don't year. you consumers, for order They this If bigger to you year, those those have owe taxes taxes. will last opt in

John Rowan

earnings or going And being in you one-half see And seeing you then, be weather included earnings? than to the two-half for any did are stronger is interruptions? guidance that

Douglas Lindsay

the course. withstand period COVID-XX. like down A allows part of model Texas that had did news experienced weather a the the the recurring in is, and last have in stores we business over with for the time. our of system country as few everyone weeks. bigger We, else, of to about we to the We shut last revenue Yes, year us a middle issues shocks

a portfolio rolling. got keeps on And so, we've that

once a guidance and to returned has for weather that cleared all But have XXXX. of in Our customers rebound seen we've there. the up this us been reflected

John Rowan

lastly. then just and Okay,

good that is number us run XXXX to down correct a Thank I through post XXXX the rate going Is be is closure that there from think, you get store store kind of a guide? for Kelly, guide. you. XX said deviation the cadence Or good XXXX? a to to

Douglas Lindsay

Yes.

is Douglas. it So,

to what about and So, that to portfolio our be think the year. repositioning of is optimizing over we're we going course continue the

GenNext we our believe We we'll five equates store certain three portfolio markets have XXX two what doing reduction in the the to concept, number our that. on and XX% opportunities roadshow be to into a years, over new which about XX% stores. I I or stores was next one collapse of in guided to a roughly with mentioned,

put should track on for that So, that. us

would year, I or accelerate to real goal. we in opportunities, any that think based be that may but given tracking ultimate on decelerate estate

Operator

This of brings Q&A our call end session us back today. turn over the Douglas to the I remarks. Lindsay to closing will for

Douglas Lindsay

want joining thank just Yes. I for us to everybody today.

will cash Aaron's that really So, believe our strategy our competitive in and conclusion, earning assets, investors. growing and about our in I rent-to-own just want strong We is say deliver to to flow free margins, the that supported growth unique expanding we're advantage confident which market. direct-to-consumer by evolving at our

our got members, to forward up now to about catching our for position next win to right customers marketplace. I excited the come we've team pricing, us name best-in-class and strategy be competitive couldn't and customers Thank rates and proposition, right high look you we with a more and approval we team products, prospect in the value shareholders. quarter. we are because for joining our And create rewarding Our our future believe And Aaron's. today, I ourselves our and the you us we our right service. the brand for where of to believe

Operator

Thank you This everyone for today. joining today’s us call. conference concludes

You disconnect. now may

The Aaron's Company, Inc. (AAN) 24 Feb 212020 Q4 Earnings call transcript