- Earnings call transcript Q3 2022

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Operator

Hello, everyone. And welcome to The Aaron's Company Q3 Earnings Call. My name is Charlie and I'll be coordinating the call today.

You will have the opportunity to ask your question at the end of the presentation. [Operator Instructions]. to to Keith begin. over of Senior hand Affairs, Corporate I'll your Hancock, host Director And Keith, go please ahead.

Keith Hancock

call. Thank you. third conference Company's to The And good morning, quarter everyone. XXXX Welcome Aaron's earnings

our release have Joining the questions. Chief earnings President; me of call yesterday Kelly Chief of for our our already Many copy Officer. Wall, are our we the this Douglas third and Executive Steve quarter, seen Olsen, afternoon. morning a Officer; issued our After review you Financial of Lindsay, will open

you those additional important available book third simplified our For against metrics about investor.aarons.com. our not, on updating the who and This of results. our our of have website provides previous quarters it an Investor quarter With commentary of are format. is release, efficient we Relations includes and section reporting comparison at easy

accompanying is presentation quarter. website Our the also focused available the third also results from PowerPoint on on

with results make financial remainder provision those SEC certain filings can of our harbor including other safe will the be statements During Form forward-looking, cause statements that Please XXXX. the materially to please actual found risks the presentation refer provision content periodic that net from of outlook free for the The on non-GAAP comparability for today's from December performance flow, today's our differ Also, our in EBITDA, cause XX, with have safe differ for refer to our supplemental forward-looking may the risks EBITDA earnings financial business of measures investor we ended may statements. release. call, our actual harbor our be and the end our results year our call, for to forward-looking our earnings, identifies to at performance non-GAAP companies. of see measures, to and the which subsequent non-GAAP XX-K for affect posted are XXXX, related adjusted the These detailed statements. materially adjusted tables our earnings items release including reconciliation forward-looking the included the non-GAAP and of certain cash other and certain On may EPS in related we which will been description to website. a that

Company Now, welcome to results. third Lindsay, Aaron's The about CEO, share Douglas please quarter more Douglas? our

Douglas Lindsay

morning, you closed interest for company the joining pleased to Company. The our we're Thank of on XXXX, Good everyone. XX. which consolidated for us September your and Today in third results report Aaron's for quarter

a challenging for we delivered And environment. revenues provided and as are July XXXX XXth. raising both the of guidance midpoint economic what adjusted This result, on solid we remains quarter, results we full-year a earnings in the

continues high Aaron's the inflation customer. to Business Within our core segment, impact

housing and gas steadily in revenue line the with our and fell our during during expectations. remain deliveries high. While the the Business improved prices costs merchandise customers headwinds, for earnings to food these in resulting quarter, Aaron's Despite quarter, coming

platforms give Our strategies, ongoing our increased in platforms, store and and in how and remain program. either previously plan as platforms including where announced they cost our third servicing and our to initiated this or our Aaron's in estate and quarter in customers on structure optimization and reduce a and our driving quarter analytics and aarons.com our executing data in also beautiful on decisioning These Meanwhile, performance from investments focused store. new continued program, digital payment well We're expenses. technology key investments a lease drive online as efficiencies GenNext growth we flexibility shop, leveraging real profitability. further repositioning to benefited

in the for and new with repeat ecommerce and In selection attracting product low at both believe performance serve. a both is markets price high competitive third consumer to BrandsMart across our we channel performed retailer with BrandsMart sales Turning customers We differentiator we acquisition. the pleased our choice again and of the a electronics BrandsMart, continue this to credit the and position is appliances surpassing level, once be spectrum. from expectations. in price leader a U.S.A. and quarter, meaningful in internal

capturing BrandsMart's Moving of in particular, forward, the growth In we potential we're to remain in and confident analysis optimistic store XXXX. synergies the new first our excited open about acquisition. the at time BrandsMart

and our liquidity, in and our to for Finally, value Together both our while deliver to with on quarter, large leading I for focus both deliver results want focused this key positive us diversified for businesses market of a customer and us Aaron's sheet of helping base, strong growth. remaining we innovation thank balance proposition our positioning believe all enables our to team us future members on and BrandsMart initiatives.

all Before reopen our Through will their efforts, and I we the dedication members over our work our want stores impacted recognize to Steve to hard I the ensure security call Ian. to responding President, and Olsen, the of team call in turn over turn particularly the able quickly. to of Steve. to now teams and Hurricane I safety to were

Steve Olsen

thanking I our across remarks Aaron's, team members all Thank BrandsMart in Douglas. your you, second of and Woodhaven.

I on commitment with growing marketplace and our service, in forward continued customer and innovation, is winning truly business. be to proud part outstanding. working this team am the of and focus a look to you and I Your

performance the the Aaron's segment. Now turning of Business to

economic to Business with line continue due inflationary face expectations. our Despite pressures. third mentioned, results the delivered to customers still other in and our headwinds, Douglas these quarter As Aaron's challenges

all was down softening higher continue to in charge-off. Aaron's lease and customer XX.X% minutes. few merchandise prior-year the averages. will Kelly basis operated points rate, XXX charge-offs lease and returns, see our As increased In expected, from we for which renewal quarter our returns renewal pre-pandemic our merchandise discuss the was quarter, company lease in below and stores, a lease rate

and ecommerce customer of well challenging lease portfolio algorithms, Due online our and tightening company-operated conversion customers of experience performance this and ecommerce trends Business. within quarter, to through quarter. are increased key digital decisioning More in of represents prior-year and In our to us momentum assortment. resulting while GenNext shopping of strategy digital decrease Also, in marketing outstanding all contributed third ecommerce important our to channels and expanded total strong team, the internal as to our the growth more quarter. with product the stronger strategies renewal These for volume focusing sustained business Aaron's as by ecommerce lease third ecommerce stores. prior quarter slightly lease growth Business were ended increasingly represented because expected. store third the the at XX% higher lease for We size was The ecommerce the executed of of prior-year we X.X% improvements sales portfolio rate at see quarter, more acquisition channel to and total continued than across driver from the compared prior-year an Shifting increased shopping We our one-third Ecommerce from the an ecommerce $XXX.X revenues. positive originations the lease Aaron's Recurring written of and Business. total year. the dynamic the stores website further compared demand revenues, the Aaron's our our than strategies. Furthermore, to ecommerce higher pleased compared in channels. In was our million, the to We continue revenue a channel XX.X% positive year-over-year. digital in revenue to of percentage quarter our increased the channel. increase strategies, our expectations and executing ahead aarons.com, traffic total quarter, through XX% our revenue XX.X% important remained in trend the revenues the our marketing to into in lease the quarter. customer this up attribute strategies enhanced preserving servicing to on performance respond our these leveraging profitability platforms our third

see stores continuing excited is In turning XXXX. XXXth XX% and Michigan month. GenNext year believe GenNext customer toward showrooms a earlier GenNext results. revenues, GenNext opened last less deliver remain experience third brighter more grow continued from assortment. average account on originations of the I'm easier this up we and X.X% industry GenNext meaningful product total XX% of larger, in the the financial quarter, legacy higher We our through These at and stores to quarter offer announce quarter, than now our also GenNext Now we our rate locations store a that our In expanded best open to than of to we the for to open that year. one deliver strategy, than more XXX a the in in navigate teams stores stores. stores to opened than in XX Flint, which track new lease in

open to this additional locations to real important committed strategy are optimization in estate plan and XXXX. GenNext We

to turning Now BrandsMart.

growth believe from overall XXXX. revenue BrandsMart higher This promotional are customers product this high decreased As and new will quarter, transaction sustained performed sales a made our strong short ecommerce marketing BrandsMart that sales. results third of introduced our only we in spectrum important In at events, again the growth expectations. value-oriented challenging full channel. value, BrandsMart a in strategies a a have with sales the product and solid ecommerce shopping the meaningful performance retailer to and once to environment. our attract We economic a this of to strength that third in appliances a revenue exceeding as significant improvements was In continue primarily Douglas ecommerce average mentioned, time, strong execution leading by level of driven internal experience acquisition quarter by X.X%. digital

XX% For quarter in the were X% the up prior represented over product ecommerce to sales. and total of third as compared quarter, sales year, the

a new and we continues tactics strategies team drive at BrandsMart to new this segment. as Our high important introduce level perform business to

are to in in opportunities the executing the our acquisition future about initiatives Additionally, new store look to BrandsMart store we our are integration growth. We increasingly opening XXXX. and first we synergy our related and pleased for ecommerce BrandsMart forward optimistic with and progress

Now, I'll the financial to Kelly to turn our call on results. further provide details over

Kelly Wall

a $XXX.X expenses prior-year merchandise to the advertising and of personnel miscellaneous second Consistent million stock and by expenses partially This was the million leaseback impairment the a for company the the for This primarily capitalization was derived primarily Business due third corporate the lower Consolidated price and occupancy, Other was were to expenses costs which year-over-year the offset as increase this in to decline charge goodwill to were compared with the impact the quarter fair by operating was Business BrandsMart the gain during the write-offs. of assistance the the triggered determined company's offset expenses of and for million values. stores to offset units, XX.X%. the Aaron's expenses result Business, test revenues in goodwill XXXX, $XXX.X assessment of personnel impairment the were the for primarily increase on is an and quarter, prior-year the increased at test. initiated $XX.X increase to restructuring that The interim income Business increase no There the impaired. than the values The acquisition fair Aaron's higher the of were interim related quarter an impairment We the quarter relative acquisition BrandsMart acquisition, BrandsMart Aaron's during due quarter. the market reporting using expenses and reporting shipping quarter. to at other third engaged in to The year-over-year was by was Business. quarter Aaron's values expenses personnel million operating Aaron's of operating $XX.X due an the revenues of our Aaron's at firm XXXX which need and lease increase related valuation and Consolidated to carrying to an goodwill year-over-year the BrandsMart and Steve. company lower of Consolidated in the third-party and goodwill and goodwill Thanks, period. higher unit. operating functions. the of expenses in based the the performance partially the provision market period. recorded in combination a compared included and were with charge by handling this the lower other their higher transactions of BrandsMart fully increased approaches, also the year, of perform quarter expenses impairment at sale

optimize is recent fixed a new During company's program XXXX, restructuring severance related operating optimization that the goals will to $XX.X asset by to the expenses expenses. lease intended term million support asset of our optimization primarily overall reducing continue efficiencies estate and believe long both our increased to initiated in operational costs these compared was restructuring our adjusted repositioning the program of last quarter the and and programs new with strengthen quarter operational program real third of efficiency XXXX that to Business company was and in same We offset and restructuring and impairments right-of-use overall related the quarter. This EBITDA for the adjusted in adjusted Consolidated BrandsMart. decline strategic contribution EBITDA at year. $XX.X million The in a EBITDA period primarily the third the to on decline of Aaron's due cost.

$XX.X $X.XX compared XX.X% XXXX, non-GAAP adjusted earnings increase the quarter As million per of compared the year. total our operations, inventory provided was share diluted increase current quarter, a This percentage third debt quarter. and the in the in revenues, current represents cash the million under which including the XX. when EBITDA during initiated in $XXX quarter, This trends of credit in to a a higher and of liquidity, period of prior availability same the prior-year million partially On quarter. end the of $X.XX non-GAAP cents debt Total X.X% to due quarter. share Adjusted to the quarter expenditures total net had revolving end third lower million September with leaseback our the due basis, with related the cash same earnings $XX.X purchases higher sale second in balance was compared a $XXX.X per $XX.X by At align incremental capital of transactions XXXX. to were by in million million. was flow balance was to was facility, demand on proceeds largely cash offset of reduction the of from $XX.X the free company that an primarily diluted

cash We shares share, dividend During quarterly shareholders. $X.X $X.XXXX million the did per returning repurchase paid not a the quarter. quarter, we to any in of

Turning to the business segments.

segment percentage Aaron's expenses quarter. as agreements of is $X rates lower provision the corresponding lower includes higher gross were expectations, primarily at quarter decline to provision platform, and and in the the cost our equity-based prior-year in expense, for by as quarter prior-year performance-based earlier. an by decline to segment revenues lease was for revenue Aaron's and million Business limited leasing the expenses, are As the as were of stores includes compared BrandsMart the the operations, quarter provision lower offset charged-off the profit merchandise line activity net to which the frequency stores, Aaron's quarter. was compensation which a but to lease interest separation decreased by that write=offs Business, company-operated operations. manufacturing prior-year quarter compared charged Aaron's X.X% This The the two customer business X.X% and to merchandise was quarter. revenues X.X% compared platform. lease due the was lease certain as to payment lease lease lower discussed the higher other write-offs. of At lease in a the higher not acquisition-related compared corporate decreased the the during BrandsMart and furniture restructuring, increase Aaron's are BrandsMart the The $XXX the The our unallocated year's reminder, period. partially impairment in in the in franchise the functions. operating aarons.com was Operating corporate purchase total XX a off. lease not goodwill value a our as third X.X% fees of other for profit attributed revenues, X.X% merchandise X.X% expense expenses, compensation, to compared renewal for include, lower prior segments period lease ecommerce to a million, well average Business the size with a Gross and and Woodhaven, declining an expectations Same-store million, retail of decline book $XXX.X in due portfolio for originations, quarter consistent to that Steve in U.S.A. to and primarily to, increase burdened due driven new with and as The BrandsMartUSA.com charges costs, our and primarily the increase inventory prior-year

we EBITDA the Adjusted quarter to impacted Similar gross for a percentage quarter. merchandise write-offs, lease this million Additionally, the that the a higher the continue fourth in same increase revenues the charge-offs environment in to lease to by for was partially second into profit quarter's write-off primarily expect personnel $XX.X Aaron's trend period million by in quarter. compared was in were quarter the lower by inflationary decrease of we impacted believe provision for Business XXXX lower $XX.X and in the high the with this costs. offset and due the year,

prior of percentage was the was XX.X% of year. million, last EBITDA year. EBITDA of At for BrandsMart, quarter sales XX.X% BrandsMart quarter. in were approximately than sales XX.X% same million lower $XXX.X for was $X.X a is As million which X.X% margin Gross the Adjusted of quarter retail EBITDA adjusted total XXXX third profit revenues, or the the adjusted compared was $XX X.X%. to and retail

Finally, that was second revised earnings at our release. XXXX please that full-year note the have provided quarter outlook we

earnings midpoint have We raised of adjusted our revenues, free for flow. and the outlook cash consolidated

will your expenses. lease that, over operator level with for corporate who the to I will turn call the segment will rates, merchandise size size, that impact Our With the in provision revised adversely reflect other assist questions. and write-offs, outlook now customer and ticket high renewal businesses, including to lease both inflationary the lease to demand, environment portfolio continues current our continue average expectation

Operator

[Operator Instructions].

of question Anthony Chukumba comes Markets. Loop first from Our Capital

Anthony Chukumba

stores, is us if the first that's BrandsMart my rollout lease give solution going. update on an can question just the you on guess how to of I

Douglas Lindsay

Douglas. Anthony, it's

say As year, call, we plans. really able the that portfolio would stores. infrastructure up optimize we to mentioned it. of out We're size customers I is happy this running stores penetration increase to to and would according the all and those our of we're in we and and in and We've build it continuing so May on got that to uptake last terms been that. it gaining in be it's continue in we're as to the around where with product thought

deal, about won't acquisition at still it be we of think run XX at to begin three going rate communicated portfolio be when building to year three I that and by our time the those it's full in process year a stores.

so, And making and progress optimize to we're we're with continuing happy the we're it.

Anthony Chukumba

benefit You mentioned down? you indications improved than steadily maybe at trade you like and seeing question, are Business words, demand you merchandise is economic in prior and In the seen in expected. my seeing any subprime credit getting that stronger sort the customer Aaron's I of guess downturns? you've from other that was credit that, delivery you're are all any tightening

Douglas Lindsay

of data down market. would mid-range And that have we our So of increased we're it'll range happening, on do in credit benefit we to not if far, not tightening. internal there's space proportionately. if tell our date But any We the gets it, we've seen look a And down. gauge. looking form particular us external we're it. do, on we're the we and scores now. but do believe any down or seeing at trade it'll lease a disproportionately got rates our scores or trade credit that entering in credit seen have the our higher credit we're in default to But lower seeing in when restricted, We space, new but identify above in space. us growing also It's stack sign tough that if sources experiencing the increasing all of appear customers right anything monitor for to to eyes not

Operator

next question Our comes of Kyle from Jefferies. Joseph

Kyle Joseph

the on format new the Appreciate press release.

but the year-over-year. that, underwriting any question, renewal a you're talked lease where question. at And you looking talk the lot of That's the done renewal and centralized underwriting, the average? on long-term guys what rate Can first remind about about lease sort you versus of tweaks see us then rate second changes we So, kind is or making historical that's front?

Douglas Lindsay

take one. I'll the renewal rate

pandemic, rates XX% our probably So, and like as were XX%. in recall, renewal pre just between, and numbers, our call it, you

rose into XXXX. saw really the those began the During – of to And about and lower see come then seeing XXX normalization that XX%. We into during a latter lower aided I'm We we're in XX% then going to experiencing the now renewal stimulus we or sorry, down part that to XXXX. XXXX of part in the this so. see latter period, just XXXX We to is of to of XXXX. believe begin of begin basis happen And points pre-pandemic market. the kind are than that, than rates air by what that We're is bubble stimulus. correction out going

would we that rates As our above pandemic you of renewal about create recall, we levels. believe that mentioned pre-pandemic pre decisioning points basis centralized XXX

We continues things that gas, And as We've over over to us normalize XXX ball But have several with pressure subside. do will customer to subprime points. been here believe continue when don't housing, as that well. last working. continue a And The we benefiting tighten our monitor we decisioning decisioning it. to believe to prices. decisioning and under by inflation, we food crystal but year benefit be that's time, as basis to able believe, we us, the is will

the time we're normalize. we've in with rates So, think happy really renewal made over will we investments decisioning. And

Kelly Wall

Kelly. it's Kyle,

points other of the about level. or pre-pandemic lower You the than last that in two we XXX one back XXXX, outlook on XXX here, points add between rates to basis when basis for half that, the had our points recall call, we right? to may would lease talking be year, renewal Just the were anticipated

that yesterday down to in we were as updated be with below we revised pre-pandemic reflects that's levels forecasting. out that finish line the what – the kind year continued put in going out of here. the that were of then what And sort expectation QX played release expecting So, in we're outlook exactly we we our

Douglas Lindsay

to And assumptions comment I both in have in expect is make on and rate the we lease would decisioning outlook reflected tightened for assumptions. the our term. last renewal decisioning that's for lease near our The our demand

Kyle Joseph

One macroenvironment, me of through there size ticket you I you which as walk of Obviously, very been as has know BrandsMart. ecom, on resilient sales in expectations been resilient guys kind your for kind well. the growing too but there. gross fairly follow-up for have But the are profit actually

Kelly Wall

Yeah, back a we're some Kind it unchanged, I'd say XXX activity gross really through that that little right, Kyle, tightening the year. as initial for the to call we're expectations margin, maybe profit average seeing from basis just our our bit is largely points, ticket bit. expectations as tightening a of well expecting part little promotional of of XX as size,

So going business that least kind forward again, we're the material the near as term. of at change of no view here, in in

Operator

Our Scot of Securities. comes Truist next question from Ciccarelli

Scot Ciccarelli

comment primary looking point outside to guess down else you're you are seeing trade Like, a customer on? activity. I follow-up just view? Or anything guys that what is question on of at the Douglas, credit at? is looking data that of you're kind inform any the that that that metrics you focused there scores aren't

Douglas Lindsay

channels. previous existing or our customers. We're flag new, as looking customers across We

coming in. And data at whether And you by happening us credit of a that's what's they register monitor those also external that at our an our as And have data. in, customers stack the in lot do see to We of of customers another a allows looking us that models. imagine, and as looking point scores, different profiles so, retailer, changes as data, the come we're we well. there's there. above constantly we're they proprietary BrandsMart we in cash which But – come stratify is scores might for amalgamation

of sustained really of peaks Nothing's of data customers and that now the this at and in two coming our out valleys in as sort terms characterize volatile. market at. there's of moment. internal sets looking see We would we're I So right space.

Scot Ciccarelli

in you do of what changes of like of of the would What you funnel, where Like, back people you kind type top had to had revisit into kind experience think will? coming XXXX/XXXX you cause actually the that? the kind if us of

Kelly Wall

that our a didn't go it XXXX Scott, it's happened It period, kind happen in happened say balances a a in it's from time, back we of is that benefit see outstanding some it. at looking If on and I'd at what XXXX, data score. the that Again, average right? or quarters you we're series households over Kelly. of Listen, credit rate credit of average stratified we view on cards, function of over when external kind type quarter, XXXX, are right? look of savings to started based

that, a quarters before what led benefit months we space that, trend up of kind so, two that three right? tick prior what it And at saw in similar above Defaults and to is to of are availability we're to to look a business. we as the is period. us, a seeing in series of or which consumer to consumer credit starting But certainly, the right is again, tightening, played the out really over the

was of be to Difficulty] see recession. we're we're seen [Technical recall, what It's recession that's a dynamic, starting watching. one, it's This additional a to believing then So, liquidity the last but out will similar driven on results it different the out options. trends of play liquidity, and impact terms need and kind tightening macro in in play for ultimately consumer, into payment

Douglas Lindsay

that's exactly think I right.

Scot Ciccarelli

going I that's say to very helpful. was

Douglas Lindsay

at XXXX recession also it dynamics through There financial different forward in a here. this does – have time, think tightening Things XXXX happen if the tightening and was was and precede a going the quickly. time. that since with bank-led the that There I was more demand the pull significant will to was are time. say, not changed gradually crisis I just very pandemic significant Yeah, that

on is while And inflation would demand sort it's unemployment the now. So of much. the it on hasn't side. there's abated and I was lot lot a the a hotter on higher also abated what's two side consumer things slightly, note going going with that and

So, we of right a now. variables continue lot to monitor all going those things. macroeconomic on There's

Scot Ciccarelli

think kind you kind in big have The even are macroenvironment? given a we had the have at provisions obviously your looking guys of levels last to increase one, pretty like moving Do of sequentially provision. higher of just terms or you peaked write-off

Kelly Wall

now. Scott, the X% had. that last year be our on somewhere this X% it's year would. end that seeing we're write-offs Kelly At that continues And write-offs So, what our between update we time, of are revenues, view the unchanged were to for anticipating right from that and lease we'd we

I think third what is, right were what I'd line the with were point one, write-offs for quarter we in out expecting.

at come line kind continues we that to pandemic will data QX what's thing right? inflation team the But highest things deliver looking holiday you performance those is third not get second watching basis customer see of season. We're out quarter that a of about improvement we're attention in as performance to point into write-offs. to for quarter I can point been on that's a in right, with the averages. to expecting But and see that, that, proud payment then to as of QX the in relative year, XX in anticipating go into QX, XX worse. to trends. very, we're close actually typical paying pre is our materially from want you environment, tend out challenging And the QX the So, to We're a obviously, pre-pandemic going very

you gives quarter. bit color building that last hopefully, what upon So, more a shared little we of kind

Operator

comes question Griffin Bobby next of Raymond Our from James.

Bobby Griffin

with see inflationary restructuring two-part And offset this XXXX? of second But pull the the of program? for is other to can flow will on you what portfolio into a kind part parts enter question bit I that that a of on side Is expand kind retail savings know those And maybe tuning the today? think the is we multi-year in models is, of levers some we kind bottom being business a do little this business then the kind to up question portfolio have of Or pressures deleverage smaller, help here. guess about in XXXX really just program? basically we you our the can the a cost when because drive of other of smaller across as line? I Kelly,

Kelly Wall

of the innings at we're program, focusing new that. our to regard early on In

to last of over going our it. year, areas we're be currently of aren't broader is that GenNext is I underperforming quarters into we may across models, strategy the some part of that right, focus kind to a be of the takes as to much and of place sizing focusing there centralizing to What point the operational continue we overall of stores, tweaks to would cost on going kind organization. kind well here. stores, we're on it's in the efficiencies, some just make in consolidating few the expect as our do on And central I drive focused activity out our as pull duration the corporate that functions, of So, costs stores can next that out

teams one question internally we'd quarter it's size that with go it. few kind of and going externally anticipate head the not time. we assist your we're something more But to we a a specific that answer multifaceted, next quarter. point where forward be partnering exercise, So, guidance as is and expect, And we've it's next into over to the of provide it's to folks got right, around that to kind duration at in with us to specific in position, quarter, Bobby,

Douglas Lindsay

Bobby, part question. I'll your of second take the

is on for the margin it out cost size portfolio flow and rate is cost that a there's is, through In and obviously, We've and differentiator doing stabilizes, but efficiencies, of even renewal Ecom of through take we of believe, size business. the store consolidation us. opportunity our modernization to our terms been through significant portfolio what the as platforms. shrinks

a Our there. decisioning XX% paying in delivery creates continue to of also customers and of now. servicing productive, our know, and it believe of stores. labor experience We continually efficient of sales you of lot of out whole and and service store ecom that investing, there that And the more the And and centralization as stores our in customer us the allows labor stores. a for takes technology. opportunity including more We We're activities, find efficiency out ways be conversion are got a process. takes to business that can XX%. better grew higher more efficient be we outside through

on continue we So, to that. work

say structure. We optimize have I'd we're to optimistic test on things supply the chain. about last is The in continuing thing multiple and cost

our supply chain. to look We continue at

continuing look stores. biggest our take our ways as centers, base the pay find during at our and So, pay our structure thing, cost is shrinks, and we're more out And down at road, trucks to we these we our to fulfillment the store in look times. on there. variable cetera, last et expense flex our And does up

does we've with and business. move our of the a but stores, got members great our so, And team of for down up the it structure in all state pay

Bobby Griffin

inside few some we're question first merchandise – And and renewal you've just just that still on that look the updated year, at rates maybe a impact or consumer, stabling? your early tranches too maybe that have the it you payment newer follow-up the tranches corner? that decisioning, lease leases first reflected have credit probably rates or conditions payment When look follow-up guys you different leases a hope would here newer that the guess a of like kind Scott's Maybe is the that and is of when at call you tightened rates before updated missed starting writing, coming anything are I at to signs is give see of been peak down on me. here this to of you times the

Douglas Lindsay

too think it's I Yeah, call corner, to that Bobby. early

see to as continued We it quarter, expected. but softening the third was into

the the renewal year, about year. our write-offs the of rates guide the right line for July our through Our and in implies those course we're seeing now. outlook the had of And in coming XX write-offs rest same that in fourth both And on we higher weakening as quarter, our with level – expectation. gave are

that. XXXX. future for update forecasts We'll making not you we're calls on So, on

Operator

from of Our next question comes of Haas Bank America. Jason

Jason Haas

improvement hear drove to the curious what in more about I'm BrandsMart.

I think believe, line down in running the with in said in last XQ. that, July that X% did you the I you call, was had is

you August into what as what here? October we in go curious that are now And seeing drove I'm So and improvement September?

Steve Olsen

Steve. is This

then, absolutely proceeded, So, in September, as September, performance as maybe saw a we the into seen and went we trends and like TVs A look lot September, the leading great back transaction some holiday definitely around price through in appliances we're we're and selling trends July well computers, up result of half of things some that. a softening started around of seeing, that August then into some ecommerce. Those consumer October, little promotional in average positive hurricane. dipping in value. to a see little the as the strong work of electronics, And events as some to continued as in results. softening average coming our the improved in

we'll the about during So, the in ready we're we holiday have down shop are our at is about our performance ecommerce business marketing plans our excited place. how reacts, think season. team holiday. about And but we of the plans Excited strong right the the see the Excited for customer customer and BrandsMart.

Douglas Lindsay

think at transaction average think BrandsMart, We indicator. I another consumer turned that yet value the yet. is sign has down that's the not

value about looking big prop particularly we super And BrandsMart. goods. that, high we prop other price box, given seeking the out that with they're it who and the in at don't retail believe Aaron's is out seeking And competitors. excited promotional volume the value side economic as shopping on And as is looking our aligned we're for our destination, appliances, value, value for they're well near see to and type Aaron's places. this prime prime see and continue environment. consumer value and destination electronics consumer So both a at home strategy, across And or BrandsMart other

Jason Haas

it right I of like that Is rate expense. As a for expense right math on as is $X to question year? the million press $X we for for future or follow-up the on that based run interest quarters into next did release use the think XQ, to imply If quarterly then right, Kelly, maybe the seems million interest XQ?

Kelly Wall

that I'd the Yeah, a bit quarter. a about fourth as say Jason, me, to looks think high bit I

Just rate we to debt credit the to basis The between, rate using spread. X.XX% as make the average variable on in year sure facility rates right end It's our We're call average and here. a QX. facility just [indiscernible] was annual over our X.XX% for X%. an expecting that you're on it,

up if you So interest on that estimate should help you're those numbers, kind that of getting use that you expense. tighten

Jason Haas

Maybe like than for can growth spread comps. If looks just down I curious sales growth little between implied Aaron's. for was last, XQ, I wasn't then we'll on sales what's was and for as for implied much I see squeeze like one XQ It lower looks a comps the But comp. sales as it is what's off. the

based the dynamic curious I about on those stores So you're can it I'm close around swing just over know if you talking transfer when leases. there. and

how on helpful. So, would color be to that any about think

Douglas Lindsay

concept? about you're Maybe I'm are misinterpreting but same what you revenues, sales saying, relative asking store that to

Jason Haas

Yeah.

Douglas Lindsay

during Okay. to Yeah, Aaron's, our they while but size. the at were one quarter, so sequentially our contributor only sales are portfolio down, improving lease

starting were into collect to had roughly our the the we point down the points so the XXX then We down that's out sell our further ended on end churn collections. we we portfolio lease X.X% on portfolio and So, of our portfolio we have portfolio. and at quarter, leases lease and for of revenue. And basis

quarter, you So, portfolio renewal the is have driving in the we then the size, into how which the the put what's Business, talk X.X% sales That store same about we really and did is a Aaron's in to in in four degradation in revenues. down, the down minus than concept really is rate different much quarter. the which average portfolio when

in our continue sales. of that we portfolio product year-over-year is revenue, a the achieved will So, store same which be which comps year-over-year retail the versus really as talk terms sales, to on is BrandsMart Aaron's differentiator, about revenue

Kelly Wall

our comp when sales number would level lease the you're I Yeah, add revenue leasing, does Aaron's at segment and for BrandsMart the One, there, Business, whereas things not. looking same-store two other include fees does Jason. that

fees in revenues X.X% lease versus X.X% I the believe and quarter comp. were down that down So, a

leasing addition while revenues, there. the helped BrandsMart of the small, So

is our set The all of thing our stores. not same-store comp include does other sales

stores the excluded that store. of would legacy than performing which better some And are GenNext are materially our include stores,

the So, the that's another difference numbers. thing to in that is contributing

Operator

[Operator Instructions].

Capital of follow-up a Anthony Loop Markets. have from We Chukumba

Anthony Chukumba

cash capital some about BrandsMart is allocation. and, do super flow to you how an to think But in wanted terms the generate solid valuation you update took you're just Obviously, debt going depressed. of your Just obviously, on free deal.

on just So, that. an update

Kelly Wall

the we allocation priorities capital here. moved year through Our unchanged are as

last debt the recall do we and have changed that on is sheet. on You kind call may of balance quarter, the for that discussions what's

foremost, think growth. earnings So, priorities, business in we support and as to continue and our drive we're our to allocation first the initiatives invest capital about going strategic to

levels we're there. Second, target line balances debt in reducing on focused with debt our our staying and

as but come capital as now, and shareholders. of M&A, up, fourth, less to Third, opportunistic a things our returning right part of strategy, which then is focus

continues million I net line debt That's us. $XX the granted in our as is to the remaining quarter, So, on think to quarter, third each priorities. the we something would at that to $XXX that that in important us. have million share second this, returned shareholders do well something in that you $X.X through million, prior I dividends remind our in as repurchase looking to to did having reduce be that, board authorization capital highlight we're that's want point I quarter, obviously, you, know we with which allocation

Operator

have further questions. currently no We

hand Lindsay any Douglas for over I'll to back closing So remarks.

Douglas Lindsay

operator. appreciate who's today. everyone We joined us you, Thank

business BrandsMart Although in lease every in And remain you and you to our platforms. innovating we'll challenging servicing environment, store and and to we're Thank investments us of new both a and today very our team We're delivering we've invest our being day. members continue our with economic for we made to Aaron's focused benefit about talk from digital growth on to through and soon. excited decisioning ecommerce that. and again and programs, we payment navigating and continuing exceptional continue value service customers

Operator

today's Ladies concludes and call. gentlemen, this

You lines. disconnect your now may

The Aaron's Company, Inc. (AAN) 25 Oct 222022 Q3 Earnings call transcript