RCII - Earnings call transcript Q3 2020

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Operator

Good morning and thank you for holding. Welcome to Rent-A-Center's Third Quarter Earnings Conference Call.

As a reminder, this conference is being recorded Thursday, October 29, 2020.

Your speakers today are Mr. Mitch Fadel, Chief Executive Officer of Rent-A-Center; Maureen Short, Chief Financial Officer; Anthony Blasquez, Executive Vice President of Rent-A-Center Business; Jason Hogg, Executive Vice President of Preferred Lease; and Daniel O'Rourke, Senior Vice President of Finance and Real Estate. to conference like to now would turn over the Mr. I O'Rourke. ahead, sir. go Please

Daniel O’Rourke

Thank you and everyone you. morning, Good thank for us. joining

outlines release All XXXX. earnings a yesterday results was after the our are it for the financial operational live quarter related to materials, at Our available investor.rentacenter.com. third and on the market website, distributed link and of closed webcast, including our

required update that call could reminder, found described revise As call quarter forward-looking now issued for our actual our to These to most the are this include statements, will like Please financial Mitch. forward-looking Rent-A-Center to measures. in as or call be the over law. of third on subject expectations. statements a to comparable as non-GAAP discussed company's to of except some yesterday non-GAAP This GAAP differ a many in any to the can call SEC I'd undertakes also provided on measures. factors financial cause results our which as financial to publicly release materially filings. are references measures which obligation any statements no on refer well the this our from reconciliation turn website, earnings are earnings factors to release, by

Mitchell Fadel

Daniel you, joining and Thank good morning, for everyone. you us. Thank

The investor.rentacenter.com. our positioning performance strong The at to our trends healthy business guidance shown on quarter made for growth. this well outlook. teams support changes lease customers have the while on increased the in website, track long-term can our very our over found presentation a continue portfolios to quarter close and businesses. the further for extremely safety will XXXX voice prioritized on we're providing to crisis during the given we've to we've omnichannel with underlying and We execute be webcast that pleased stronger and be fourth third We're with

the in is will additional were last to and in increased expenses. takeaways strategy. all and new been importantly, I sales it Maureen established up talent X-year to we've we've right from moment, at attract quarterly XX.X% our basis, shift, updated digital When right stimulus. an pandemic and customers the Revenue on track, model. the since of Slide XXXX, consolidated significant strategy of The journey an driving significant As dramatically experience has retail came our business. next government volume new Rent-A-Center. increased experience segment on Adjusted ecommerce XXX%. a contingent a customer growth can and to of high-level us our transactions right has and in EBITDA accelerate and across to high profitability XX% about in increase him the are level. now and years Blasquez, year and rentacenter.com. has XX to added arguably with XX XX.X% extremely Preferred of to the first the X, revenue digital and, our On And with increased digital fintech high-level EBITDA resiliency partners. years onboarded I about Lease on Growth we've excited are reduce and our Preferred were company and the consolidated that think driven We're confirmed confirms with our grew was adjusted success. free EPS the had We another we a years' approach investments year-to-date seen a you improved reflects same-store is Jason over And Rent-A-Center EPS growth rose we see leads cash the Anthony lead last the talent key best taking in exceptional results Jason at guidance on a our Lease in end performance Hogg quarter expertise and of XX% adjusted our versus the such strongest store that our were by We the we in progress success in rental flow years. in who but it long-term his the in match X.X%, increases non-GAAP XX% combining industry the fintech back the over outlook. perspective my our as accelerated brought take Once the we making EBITDA, couple the on person outline invoice to basis, to operator segment. not growth level. the

Jason So the excitement map additional We trust Blasquez, you'll a about Hogg, strategy, and and joining sense we I road mentioned, Preferred of perspective the leads Anthony future. and Rent-A-Center some Business, call. provide leader on segment today away as are the our understanding who, the of on a all today's Maureen better our I share with Lease to walk

dynamic X, business. As to we're dynamic you expect for the Slide our in business uncertainty supports remain The our and credit of on can credit results. see we seeing tailwind lease-to-own economic economic a times favorable highly of environment remains in and tighter benefits the for financial that the

partners higher more obtaining and we're to trends to the we on support continues team important the notable growth. improving products. believe Rent-A-Center We're strong product with experience benefit as strength to fourth particularly across satisfaction are in home-related new we note we that continue digital rates. Preferred to role our coupled for investments customer ownership As It's government to can We the in resulting to activation strategy. national activity. quarter, positive serve about improve trends, operating focus sales of the merchants Customers experience a and EBITDA solid with ever continue also essential excited customers, expand continuing before performance, make strong in without demand our we at rates, the see is of stimulus. strong than customer further business. retail payment adding start Lease

it's Lease, a more to Preferred more technology in shoppers As a launching partner in year and in increase confidence digital brands you our aspirational their we're investments already we And our social to To resources Preferred new suite that share committing broad market to overall offer products preferred as Preferred lease-to-own. The and, base both the of our watershed Preferred settings. distancing We're experience with we a for and strategic digital is as accelerated to harness interact will XXXX, expand behind broadly around customers. umbrella significant Digital been in given and discuss, digital have Dynamix, can in our will that were know, believe ability ultimately, progress of overall Jason introduce Preferred the support which demographic Marketplace. and Preferred each end, brand.

by believe digital in in of continue of our and same-store near-term revenue We quarter, Rent-A-Center Preferred sales through can lease-to-own believe years Rent-A-Center Lease XXXX. adjusted is $X.X making drive to had end low outstanding ecommerce we're than and and expect margin significant our next loss We're couple growth. margins. a elevated underserved sustainable to strongest significantly XX% an with to goal opportunity with EBITDA virtual penetration investments rates, retention. XX% the digital ecommerce investments also in reach and even we We support customer to billion and of in our confident the revenue more in years

stronger long-term I turn to to time. for our our our before it dedication has I'd never challenging you, to and during retail Jason? mission our been more and coworkers, customers thank our growth franchisees customers like invest Jason, support digital Now value strategies to to can relevant. your never been serve in to partners over that this has Thanks proposition

Jason Hogg

Thanks, as honored we the plans look and move today Lease business I'm to to you sharing forward. with Mitch. our Preferred be here for forward

a As services technology. of have you bringing to disruptive many long innovation of know, I via history financial

I'm I Preferred opportunity think setting. excited the a grow we're course and fantastic to about truly we have Lease

X, and Turning across to quarter speaks onboarded partners categories. points quarter, the as to XX across XX%, locations Slide we volume our of new foundation. hundreds product strong Invoice diversification the broader second achieved grew over third

becoming also retail at efficient more activating mentioned, Mitch partners. As we're

of should customers you us made to million. as retail regional growth. in Adjusted of growing losses drive continued excited invoice quality features Skip/stolen accelerated up activation $XX.X yield Total the increase credit we market are centralized the increased drives we invoice ramp expect allow accounts. in our from that efficient revenue the and revenue we know, support sequentially volume accounts and investments pipeline to to spectrum, The We're volume about growth across was partners. initiative. higher lease collections supporting EBITDA revenue our continue quarter year to more as sales portfolio improved As national growth. to X.X% revenue we trend The share. partner this

time, across advance, digital exciting to the opportunities. some using time improvements making strides the national takes in more we're with the the business, While At and the latter stages digital performance benefiting on payments. customers in of collections our same in final truly we're are

X, Slide one our and ecommerce platform, and to and driving leading that proprietary that products strong take the differentiated growth services. positions that mobile goal and brand our Preferred is innovation accelerate to foundation by with fintech Turning as spans extended

outlined, to under Preferred accomplish team we've Dynamix the Mitch organized As that.

will digital It leverages is more you pace the slide, Preferred house create Preferred expertise to will onboard also see effective seamless structure innovation work which a Dynamix Digital, offering. can As LTO we an and way web Preferred for strategy. lease-to-own operating and a program. Dynamix provide our in-store foundational mobile, Lease, our talent from the accelerate virtual of to as and fast-track Preferred technology to support our new

initiatives the broad retail and suite, functionality provisional Our better set interface, already a support of friction reduce which strategic is included supports initial improve to digital filed, multi-phase, X-year partners. in plan for our customer patent

to and offering support potential business in more pilots fourth partners from tangible retail more time, strategic benefit we base. partnerships executing curated able The from a brand mobile national other That our with a frictionless see our retail and we on interface to market more created and customer efficient X extend We're from and examples implementing and which our add We're we application online innovation partner technology as addressable lower an from platform over with to Marketplace, minutes, functionality. Over will its retail of decisioning been platforms. retail, For partner partner existing total total as scalability, support will We've ecommerce a streamlined are Z existing and our on existing the customers addressable XX adoption integration have should fluidly think of than the potential the strategies can partners. see between merchant seamless network increase customers. we example, with a process and an large seamless better we quarter Ultimately, turn marketing consumer move growth increased to an opportunities strategy our could greatly approval program process, mobile new for also through minute, Preferred a brands enable also to with partner can We've beyond partner to transactions retail partners. as to truly Preferred exciting. expanded we'll focus set expands onboarding, national the new efforts our share Millennials for increase and choices less launching expanded productivity lease-to-own that generate customers that for our new repeat new and Gen with would growth. using the the is mobile feature where creates customers to market. origination

updating and transaction you lease-to-own coming the I look reinvent will on to our the forward quarters. progress strategy new in Our

it turn to I'll Anthony. Now over

Anthony Blasquez

Thanks, Jason.

a forward saying me Jason understanding and Jason share and we to There's continuing Rent-A-Center of been of pleasure start best the franchisees. I'm lot outlined can revolutionize can deep applied It's customer and of operations. our working a to to proud to and things a the with be our practices. experience with do a by look many Rent-A-Center veteran customers culture, I Let

payment As out trends It Mitch story retention ended. the is pointed as we XXXX. positive sustainability of in out, and even activity, in as for the customer saw Rent-A-Center stimulus the played hallmark quarter, third

digital our as We advance improve to continue growth plans expect capabilities. we to

And at throughout X, penetration XX% and total we're quarterly X.X% improve consecutive which engine. helped in incorporating returns the revenues ecommerce XXth with communication growth activity. and adding growth, payment by the of That using multi-store functionality includes same-store adjusted improve its in We're increase we're growth collections. payments, Looking a a To driving the merchandise rate to quarter sale. to expanding quarter, customer sales, better customer increased increase. the quarter test experience our is Preferred entering portfolio on at were support a the strong digital process. Revenue contribute fewer driven better XX.X% the Lease saw to the in was decision electronic continuing point features and we Ecommerce XX% and Slide up XX% transactions EBITDA.

for scores improving customers Our clearly texting, for and shown and that's labor have improving a example preference efficiency. net promoter

Slide to X. Turning

you share ecommerce revenues As we're see, improve overall from to more revenue of during driving and channel. continued can the XXXX the

digital a transaction The As Unlike model incremental profitable using we our forward, is top lease-to-own to our is profitably Rent-A-Center. look priority. ecommerce for many digital retailers, largely remains transaction and evolve customers new as to attracting younger in adoption a levels. are lease-to-own below of And Higher into payments is skip/stolens better have demographic. result, which digital tend historical a collections resulting performance.

on and it look you of progress. and we're that. turn recessions, options have to for past we our in outsize coming I share share quarters tighter We'll Maureen. credit reduced over to to now customers forward an in As updating more think I'll taking the

Maureen Short

Anthony. Thanks,

see in increased last quarter of lower rose the and As EPS by quarter XXX%. last grew Adjusted revenue EBITDA growth additions we Lease sequentially. staffed and driven XX%. That revenue strong the this by ahead Preferred guidance. basis year, on into on segment partner virtual total versus can updated performance, X.X% as grew diluted Non-GAAP locations. retail and leverage XXX X, driven was Adjusted X.X% EBITDA Both growth strengthened our trends revenues deeper organic XX, virtual Slide were volume original on to invoice points expenses. margin and versus in both new Digging third increased year. Slide in

Lease XXXX Preferred and its and XXXX pipeline versus new to build portfolio of Lease end retail year growth efficient partners. up is staff, to made The mentioned, sales onboarding investments drove Mitch which Preferred approximately the As X% more while couple expected activity number we payout locations expect year-over-year. the accelerating early the we is experiencing quarters. volume virtual last to growth, higher as be outpacing invoice growth approximately Invoice year portfolio full XX% are of of increased volume

a is volume invoice leading indicator growth. know, for revenue you As

quality to to to higher centralized customer making our and last activity driven sequentially XX.X% collections EBITDA of across mix the payment XXX increased continue of revenue, were last than engine. an higher Adjusted Lease merchandise Skip/stolen Preferred from improved primarily expect losses losses credit early basis a tightening and through payout We year. benefited lower of benefit from points we're team. XXX to environment our higher the down competitive decision our was sales portfolio enhancements increase margin by and than efficiency from year, for due in activity. Skip/stolen

growth. we virtual as EBITDA In expected grow addition, continue to make investments Lease support collection Preferred scale the business streamline to margins we to and are costs.

Rent-A-Center Turning increased double-digit quarter. third XX% performance versus helped to over quarter were sequential in quarter. ecommerce XXX Business the improved the last A a last with sales outstanding for sales. portfolio over The sales XX.X%, same-store Rent-A-Center year, basis Business, of same-store total of year. losses and year quarter indicator sales improvement approximately an drive the X% points in to up each trend is The versus X.X% Rent-A-Center ended the X-year for positive the revenue second a comps XXXX. leading Skip/stolen which for down same-store month increase last the X%,

adoption pointed more slightly digital with on metric, driving from We're Anthony ecommerce. out, payment higher As which payments activity this and improved offsetting is very increased of losses pleased is than collections. performance

benefiting This us for performance the EBITDA $XX be we with Rent-A-Center year-to-date. year favorable lower losses trends in Rent-A-Center was points revenue the growth X% the in Free the benefited free to expense financial was now revenue, from approximately $XXX favorable investments XX quarter, despite future Adjusted reductions. net of working and basis skip/stolen brings full the Business extremely fund year, ended ecommerce. last and we included million for For to expect And Business flow COVID-XX-related cash strong in to capital growth. from which flow million, debt. quarter zero cash versus

our better-than-expected to performance On to full as revenues locations, quarter our Turning note fourth to X. account we It's of a on trends October reflects to basis, guidance third California closed the our favorable $X.XXX all XX enter for billion. the XXXX, the increased we've which XX, for $X.XXX that on billion year consolidated in guidance in and quarter. we important the we guidance expect Rent-A-Center of range Slide refranchising

lower expect forward, will flat going the it and earnings, to franchise revenue, transaction the as to by line top be foregone While essentially we infrastructure from profit will locations efficiency. payments be the California offset royalty

diluted XXXX. to for range the $XXX million We flow is $XXX between per $XXX to adjusted million earnings and $XXX share $X.XX of of EBITDA million expected expect and non-GAAP to Free in be $X.XX. million cash

Lease $XXX adjusted revenues Preferred $XXX with $X.XX million EBITDA of at are to adjusted $XX segments, of $XXX EBITDA range $X.XXX million. to expect with to we of to Looking billion, in of billion million, in $XXX range be to expected revenues the the the million $XX Rent-A-Center million million.

year businesses balances both portfolio expected overall for end Our to well for growth XXXX. are in positioned the

to Slide Now XX.

performance continues and robust philosophy cash generate to flow. cost revenue disciplined Our

XXXX investment end and support We million prioritizing growth. high-return in profitable $XXX over expect to with we're to liquidity projects in

strong coming expecting years of and digital strategy. flow the in benefit are the our organization we the made from as improvements continued cash across We we've implementation

the this year, $X.XX we fourth have On remaining cash We paid XXXX. share dividend October quarter of a $XX.X million million XX, repurchase leaving in of authorization. $XX.X per repurchased shares share of for

and your the questions. posted the As time always, filing by detailed XX-Q for for Investor over I'll Thank anticipate call and Relations to now statements tomorrow. website turn income our segment we you are

Operator

[Operator Instructions].

from Vincent Our first question comes from of the Stephens. line Caintic,

Vincent Caintic

the on Lease. question, Preferred First

exciting to your on partners. things adding incremental and about hear lot exciting of a here So going

what pipeline, can typical expect. sort about Just sales the cycle could you wondering and conversations the having maybe of we what's partner you are before retail if talk

stages to with You some pointed national final partners.

Operator

Operator. the gentlemen, this Ladies is and

delay. We one are a Please moment. for hold technical experiencing

Jason Hogg

we I microphone. a sorry. with problem I'm guess Well, the had

So I start should guess? I over,

Mitchell Fadel

Ask heard. if Vincent

Jason Hogg

Vincent, did you hear?

Vincent Caintic

didn't Apologies. it. No. I Apologies. hear of any

Jason Hogg

That's no worries.

even got a So up. more be will nice warm polished. I This

a two-pronged we're approach. So pursuing

strategy have national across the robust So we a late-stage And e-com our the can goal retail we both so side. we to programs we're there scale in is discussions side, developed well metrics with so side in launch the to in national programs. the as then that develop on regions that go-to-market verticals, support optimize them, retailers pipeline a number then where pilot of those as specific and

we merchant there, partnership on prong that virtual of are we're our second The things. And number a pursuing actually side. doing is

as we our the sales direct is, past, are force. we've in First growing mentioned

We are I onboarding target perspective a now the from invoice results to our a the with being and right of on new with like regard direct mentioned seeing earlier, seeing increasing hiring correlation. merchant all and, partners perspective, volume we're objectives with on acquiring target there in

leads that, order those sales us an returns most generate In to inside well optimized to in both which targeting approach order enables as a from to a perspective. the addition to utilize modeling implemented from to we've in yield as convert propensity and also optimize

implement So we're going quarters. to over coming strategies continue of both these the to

Mitchell Fadel

a national partners, comment about Jay? maybe And

Jason Hogg

partner lining with as side to negotiation our national out we're pilot up the metrics. as the and well on regard far then order both able very be So to front, that to get actually along programs in implemented prove

Vincent Caintic

to long together? from program, And would just that national typically on to a guess, that pilot to rollout, Okay. typically take, the Great. going how I speaking, negotiations pilot from frame

Jason Hogg

type the it The turning of that volume my up in is do we experience, way, approach. it's

it up into take can we we X of -- doing end X It's not rollout. try thunder get and approach. place months more we a that So we It's quarters. do be rolling type is like don't And when or months what smart. a

Vincent Caintic

wondering footprint? the economics the stores? to the similar just is expect more thought of Are national? was similar helpful. stores And press sort the can what in the were release side. you you laid stores to what that of the I to really and that. those kind of on we of of next Business the sort national franchise if franchising out Very drove kind interesting Okay. And question, Rent-A-Center California So

Mitchell Fadel

well of one. was couple feel take I'll better like years, felt of and a This Mitch. franchisee one performed that of markets we we California is markets Thanks, -- of them. a that in only a as there's the as would couple that we've in only last couple be There's hands Vincent. of

you're see of not whole So bunch going franchising. to a

we opportunistically. being the I flat only think markets franchisee; and stores. off a hands think said before, earnings, one the like plus selling of better there's will a said, they're from revenue made it cash couple California the plus The I deal again, in we've essentially use the And we'd we just -- of of to them. be where

to X over what making agreement with XX-store there. earnings new the on years. the based out were agreement The flat has we agreement, a next the So growth franchisee

would So we're growth, going to earnings. accretive have which actually actually to be

markets; So one there's few only them. a that being of

the going like coming not franchising mention will handle it. I essentially the it's it that we to flat agreement comes limited. us. But side, see you're good than California to to much it's can that the not And proceeds be more pretty really in with like the So franchisee said, and felt growth earnings, but on going forward, about one, better

Operator

Your from of the Bobby James. Raymond next line comes question from Griffin,

Alessandra Jimenez

This is Bobby. for on Alessandra Jimenez

any the the quarter? broader First, the Lease side during Did categories on the you mentioned enter in press product product diversification across release new you business, Preferred categories. of

Jason Hogg

modeling a ago who sales to call of from actually them, my markets. in diversification into ability into on ranging we to thoughtful last And as how into I very enter we with to generate We're electronics. those leads approach a be jewelry proactive us referenced number enables using to to regard answer, moving targeted an the tires further inside moment through

and verticals us that, kind make dynamics enables to engine into we're very the sure to the enables decision initial that we our addition much to understand us that as get performance new bring as and as as merchant to and then both the we turn region well make of the performance vertical size to the up continue we that monitoring of adjustments board. on the In

Alessandra Jimenez

merchandise large Preferred early rental fee Lease and higher is delta and revenue? buyouts anything else between aspect, And Okay. sales driving understanding That's the helpful. but the then the there

Maureen Short

just to And time early macro Maureen. is money great merchandise their grew to because similar thing. I more for the it any payouts, in season, customers our more having that. more speak a of can year-over-year pockets. ownership refund hands, and merchandise tax sales is there's in prior customers' higher money environment our rates sales, customers, The This generates a which

last contributed to And rental quarters relative so being of over merchandise sales sales couple quarters. the that's higher to previous than

Alessandra Jimenez

Okay. expect And you revenue ahead. then sorry. That's helpful. Preferred do -- Lease Go

Mitchell Fadel

This Alessandra, what just I sorry. is add Mitch. Maureen said. to to wanted

the really revenues those is extra thing year, well, interesting is well they're portfolios on the all actually those the bringing when positive that side One or the year, coincidentally. earlier of of much year in think Rent-A-Center things last about you you on the see not of in both But about -- primarily but probably ahead anymore, the X% a both are in the earlier quarter, where extra payouts based still it. extra of because payouts that lot so businesses ahead drove of stimulus with all last

this portfolios up the the portfolios income there's getting stacking the held awful of on rental replacement an lot up. great, in So early segments back have as agreements means which we're both in buyouts

indicator payouts. necessarily sales you those business are So X%, the the even all And to of leading the outperforming a the at the Preferred Lease next that And least going the about high-single same-store with to stays digits, sales third the going at Rent-a-Center quarter portfolios same-store end side the but we on forward. really side, quarter close in that's number. end of sales, are of portfolio do double-digit the the don't be, same what at thing, when same-store

Alessandra Jimenez

in the given of in COVID helpful. That for spike And have October last during then Okay. you very any is number trends me, the cases? changes noticed

Mitchell Fadel

to both sides side, talk Anthony, do want the in that you Rent-A-Center (inaudible). to

Anthony Blasquez

would us, the from just the perspective. favorably at as portfolio I almost demand is as stated trending was the X%. well a end both October of a payment that comment for up Mitch third quarter

feel strongly. we So

operated served and haven't essential that. we to business seen an customers do So continue we'll And our and anything. we as safely

Mitchell Fadel

right? products and household really in durable people good side are both Alessandra, side. as the Rent-A-Center spending strong their on in pretty on So been strong, more tailwinds Lease as their Preferred on items it's home, far the home money the

Operator

the question line comes Chukumba, Loop from Anthony Your of Capital Markets. next from

Anthony Chukumba

Just Preferred quick on had a Lease. question

You was investments much the wondering, reasons longer I guess of year-over-year obviously headwind in of mentioned that business? do be you will a a how makes down was lot margin that the that the and EBITDA I'm that just year-over-year margin investments think you're like, that one making sense.

Maureen Short

Anthony, this Maureen. is

If for you look a quarter, EBITDA at implies it around margin quarter. the the XX% gave guidance XX.X% fourth that for the fourth we to

in gross expecting see further less we can slightly the the payouts higher related higher where quarters We're less expecting from see get EBITDA. margin. revenue, as as away and quick you of be sequentially last guidance, further from you the the will stimulus. recovery With couple payouts, that it's impacted improve a quarter-over-quarter closures So very to the with business. pandemic to the But we're

favorable business. loss Preferred trends the to We expect within Lease continue

that a center. into And margins, to call will We've of expect sequentially. higher as margin, business. we've forward, we them so And our increase to number we the as EBITDA continue, made scale centralized changes going collections permanent be the structural

changed business in our be even XX% could that term. in margins to that XX% near haven't we EBITDA So belief the

Mitchell Fadel

was to that. talking from quarter. is guidance. just basis I'll our Maureen like, to quarter, quarter based about to increase up the the second third remind XX%, in the I'd the XXX add also from, on about X.X% you XX% fourth XX% points

has the roll the So sequential on started. already margins

Anthony Chukumba

related. color. Got somewhat then follow-up, just That's helpful very it. one quick And

maybe to of Preferred guess particularly, like how higher be would a subprime of would credit and Are trade customers credit a seeing seems you sort benefit of Business it's Rent-A-Center business? that then score Lease that that, in tightening. as credit I some mentioned your your down You entering tighter to funnel. credit from slides and one perspective start the the see got you in you'd sort

Mitchell Fadel

can we -- We absolutely system. scoring proprietary have tell We our are. own

not they So before. better like numbers quality it's or (inaudible) model, -- something a the credit score own we our yes, were like in scoring But are the than that.

in, coming pushed lease-to-own customer transaction yes, higher down So quality we're getting subprime. as seeing into the a

slide I XX% Slide drop XX% XX%. on said, a back think lending, And sub-prime was X. reported, that near-prime, in like,

those definitely end well. seeing Reserve So are pretty on the as according Federal drops it our Bank. to And big we're

Operator

Your next Kyle question comes from line the Jefferies. Joseph, of from

Kyle Joseph

terms that both volumes on payment results obviously, and the quarter very positive sustainability third So of activity strong, here. and note, in of the was

you business can us of so no you equivalent forward, walk your amount going through of less stimulus there's how kind see or if stimulus, an And performing, stimulus?

Anthony Blasquez

I'll this is first. this take Anthony. Kyle,

doubling team efforts to number enhancements longer. of to more our customers in It's I digital their almost one it's thing paying ahead obviously, my sentiment, start, allowing portfolio really is, X% our focus trending the And quarter. are process. And the so approach that, And fourth They're Mitch multifaceted a commented payments. on stores. to more as testing. And conversions. being got web It's that made echoed that So to and comment taking the lot number we're is convert and the be to And on towards October going store. as staying rent digitally. then the beneficial we prepared far. we've I that our our is seeing faster into allowing remarks, been and believe favorably the initial a another I XX% we've would business of on is on live it's approval going we've for across decision sustainability about things in really thing a and retain read in of frictionless couple that both of is we're commented our a that really engine

going that that increase from in about the you have web, their starting if see demand implemented So think coming it, rates up. stores those are conversion to we're the

just finish we're product So that I with would introducing new verticals. some and

go-forward feel we about the plan. pretty good So

Mitchell Fadel

Kyle, that, add you fourth just would fourth still back obviously the guidance into guidance. quarter. the rely quarter, looking on confident we're good I year our and at for to that to it's pretty our allows It And stimulus pretty doesn't a and in

majority Of benefit the shape, great October. October course done the and we has what in of portfolios seeing of in are the have already, going

wouldn't to upside I So to we're would program, package, confident that going be forward is. speculate only in another that. stimulus a our what Though but want guidance on

Kyle Joseph

don't obviously, the we has high from by there's largely have just going of in kind forward, normal seasonal yet 'XX terms And so the much guidance just is a be business, XXXX? seasonality stimulus? But helpful. Very but know of is it. uncertainty now, trends right Got the the if/when post-COVID in anticipate I you just and world, down. upside in more there to seasonality Or going XXXX, turned determined of been that would level, in

Maureen Short

far Kyle, the differences causes seasonality. refund forward, as call. within some on the XXXX be performance. earnings that got more But as there the We've tax as look we'll guidance higher we will always give season next

obviously we're is sales portfolio, Rent-A-center and X% indicator the for significant, same-store our 'XX, is XX% growth inside growth leading retail doing in The Going in new sales signing on at quarter. great Business of that which invoice this ahead accelerated past We've a team job a partners. into is in volume great the area. the

the on guidance. we'll And more provide next so position within great the both of to out position the then far start gates as 'XX as in a XXXX details call and a businesses in in earnings great we're

Mitchell Fadel

contemplated it's Kyle, going that the a when be you're thing rate the using it's stimulus portfolio quarter add forward, will run for no stimulus-driven closest the into because -- to to in think fourth quarter not you in that, a fourth to there's going have, that package you the business. and annual, the I'll just by about back guidance the fact that, when that the

close can will but start be run to XXXX rate there as look you any going So to at to within that see. it's as to be normal some -- year, in a seasonality going you're

quarters, the rate few able quarter annual numbers fourth the guidance, using quarters. been pretty we've your But close to nothing back obviously, over be As to going rate run you're you over when few last our run numbers. has last been to into see

Kyle Joseph

Very helpful. Good point. Last one for me.

a the the of profit terms buyout being the buyout Obviously, sequentially. recover about less function buyout down, you we activity the In basis driving but gross on of year-over-year you margins can talked that know Is quarter that? talk and activity, activity? a second what's about I quarter? margins Or third between saw

Maureen Short

quarter It and that as relative the stimulus will activity we second we the lower and in is. continue. We did to see that out quarter the get third further buyout think from further

expected the in planned is margins collection, of Preferred than both EBITDA in lower margin sales of about. are is and a have time. the businesses, gross gross within businesses the percentage centralizing do quarter sustain transaction. still costs the be talked to grow We even and both to the that the we third merchandise gross over particularly grow for example, That the help expecting with guidance ownership, in which we're that a the lower But as margins, revenue fourth we initiatives it margins because sequentially it Lease So great, total and customers but it EBITDA Anthony side growth to lower to business, of some margins, will contributing lower impact does year-over-year more the have initiatives our of because quarter. is get that margins which

Operator

the KeyBanc from Your Markets. line question of comes Bradley next from Capital Thomas,

Andrew Efimoff

Brad. This is Andrew on for

heard few in electronics. your seeing are business capacity and disruptions partners last that's far? chain supply your the chain and particularly the you so in Over furniture the of Could disruptions various supply how with we've on months business across any impacting industry, comment or you or

Anthony Blasquez

Anthony. Andrew, this is

So I can speak the Rent-A-Center Business. on

a meet this So to quarter we of And the we're can get And merchants limitless it And rent fact, commented our quarter. to to numbers compare ahead Mitch That go was pretty last season. we has. we for say like recall, up really, of improve. If well of supplies and being for on it's as I the been expectations for stocked said, suppliers that our obviously, doing list if close. matter certain us testament year-over-year But positioned. speaking, pretty a demand I all a held to position going and sequentially things. feel believe job nice the we're and busy you have we're just good and our holiday generally they've in it wish

Jason Hogg

This is Jay.

we've they to side, the in work the weeks. And their of the very similar a course reserve partners back actually time their and past and Lease sense, largest normal with several our On rounds get backlog Preferred onto made over few and the months normal inventories. we've over plans the gone delivery have through next proactive game

as sort very And maybe there's place. taking clear several now, more digging game specific partnerships. compared of of off with coming to have of actively months ago, a out large So really sight key our plans we that's line

Andrew Efimoff

That's you if was during quarter very that last that XQ helpful. and this payment and My the strong activity. talk you question about drivers little customer wondering Understood. saw evolve in activity a is could to more you on even bit expect how XXXX. the of payment the in perhaps I customer

Anthony Blasquez

This again. is Anthony

So customer payments have been strong.

on migrated pricing our Our stated obviously as to delinquencies. I've we're more very in versus towards is year. And double last lower the which digital earlier, customers value proposition. had pace And approach payments, to it's enabling some and intentional

in So bunch resulting ownership. the through for we've obviously would with thing then I their surveyed us customers really We it especially communications. texting. efficient, say is them and more making more much it's And and invested our in preference other that communication told they've a

confident day. leading the as look then So single portfolio, directionally, indicators that's customer payments. we And forward the feel at health And going very well. of every improving the we considering

Operator

[Operator Instructions].

John line Janney. next from from Rowan, Your of the question comes

John Rowan

California, the I sidestep that the in that first decision to state? in were new hand stores new that the and franchisees any DFPI off understand there regulator targeting is -- is were certain off, a exit by way driven you to. to But So to looking

Mitchell Fadel

like things. deal a the the margin operate different of think better all the California from the that is reasons is specific franchisee of we are of lease-to-own country. with for Certainly, we don't It's There's a of laws there than -- a one it's market lot that the to standpoint a a law California combination to out rest nationally.

any a for not felt Multiple reasons of a sidestepping better multitude It's that a So that was like situation we just regulation. franchisee. particular it's reasons.

John Rowan

Okay. increase Lease skip/stolen Did Preferred year-over-year? in the guys losses you address the

Jason Hogg

it's is sequentially, year-over-year. down. way a little Well, It higher

an I has think got Maureen answer.

Maureen Short

on don't John, driven business. rates of shift similar. rates, margins do the that business. a business, because have And help loss it's to the by have mix then There's like lot, to Preferred higher that in higher the because in grow slightly to but year-over-year in Lease change actually going are generate have is do EBITDA the lower We pressure we increasing fairly labor of sales. put loss the stores mainly business. rates the We as some expenses, virtual loss virtual model the though, course, we

quarter. up in quarter. the it does we're versus you XX% sorry, But down -- And But favorable. some significant And so significantly, year-over-year, second the pressure margins. put those EBITDA margins are it's the to expecting if sequentially, on look about I efficient And said, favorable XX% as business, more over pressure, because trends continue the the like a EBITDA will. be if grow will you grow it's percent fourth will we loss into there we model, virtual all then but

John Rowan

that new we be all about at Okay. typical offering? thinking in are would we are retailers? for are would moment, Or opportunity? them, that in we the just Preferred rate about that scale Or looking you second-look you're of have at Lease you products a anything at, Staying these your partners. any potentially a the third-look? be other talk outside on difference looking there a with conversations Is that lot national product Are

Jason Hogg

Digital proactively. increase ability those at platform able in mobile retail third-look kind still customers and we're There's with. launching discussion active the our and our of partner component that the customers market that a a a how critical have and we do be to by get of we one in marketplace what number X.X having situation. Obviously, of advantages participate the different now waterfall Version a also into we're in is of drive locations But app is addressable when and first Preferred to we opportunities the our of the other to look

So well as that kind consumer of able for verticals segments them optimal us. enables optimal to be into into us as drive target to

the several we going really next be to this out to at quarters roll begin is of taking scale. as approach over the platform So course transformative it

John Rowan

you behind waterfall, operator? talk you program you only be about Or lease-to-own a be another would possibly the third-look a waterfall? a for the When in would lease-to-own operator second-look

Jason Hogg

There are that unfold. scenarios number a different of

on originating first, situations, is, situations, whether we're And is some actually customer so yes; where yes. the In we're depending In or third. answer we're not coming the other and to your other from. question directly situations, in

up is segment that point more getting increase risk when and in that decision were enabling actually in be to benefit to score, regard So as tightening is to at selective blend Mitch point or made it. credit scenario, that talking the we to regard To which the third-look we we people about earlier, the us second-look seeing end we we is with tightened engine seeing, at earlier are our some we way look are we're when actually of it's it. average a that expansion, up that with have and we have what look the an that

John Rowan

there we Okay. a for should Is rate that last just then Maureen. any guidance question use, tax And going forward?

Maureen Short

still year forward going be rate NOL the were tax around will a this will take advantage we carryback benefited and that The bit favorability of. from to able But around that be XX%. CARES some XX%. Act the rate quite go-forward We

Operator

Officer time. of I call for Mitch Chief the turn this back closing There are no questions Executive remarks. Fadel, further at to Rent-A-Center,

Mitchell Fadel

and middle questions. than one every happy and line end. hear, apologize. certainly to was was it Things our each Thank And about there questions thank future update. really your time it better. audio to end. you anything certainly you, than answering morning only to excited If for very Hopefully, Jay. if hopefully it spend the this choppy, if on better listen on problems the end we're any positive audio on more of the our our taking getting our you in your answer a with on choppy we're get them. only had And We on your was we're was prepared for our but We it some your little end we you, end. And more to of the call, was the time here are to support apologize obviously, follow-up than on everyone, couldn't and was

again have So day, great and thanks everyone. a

Operator

conference today's concludes That call.

You may now disconnect.

Upbound (UPBD) 30 Oct 202020 Q3 Earnings call transcript