The Aaron’s Company Reports Third Quarter Revenues and Earnings

The Aaron’s Company, Inc., a leading, technology-enabled, omnichannel provider of lease-to-own and purchase solutions, announced financial results for the third quarter ended September 30, 2021.

Third Quarter Financial Highlights

-Total Revenues of $452.2 Million, a 2.5% Increase

-Same Store Revenues Increased 4.6%; E-commerce Revenues Increased 13.3%

-Net Income of $24.3 Million; Adjusted EBITDA of $53.6 Million

-Diluted EPS of $0.73; Non-GAAP Diluted EPS of $0.83

-Returned $37.5 Million to Shareholders Through Share Repurchases

“I am pleased to announce that Aaron’s third quarter results exceeded our expectations as we continue to track ahead of our long-term strategic plan. In the nearly one-year since our spin transaction, we have strengthened Aaron’s leadership position in the direct-to-consumer lease-to-own market. Through continued investments in our fast-growing e-commerce channel, predictive lease decisioning engine and high-performing GenNext stores, we are delivering a better customer experience, greater productivity and long-term growth in our business.

“With strong third quarter results, we are again raising our revenue and earnings outlook for the full year 2021. I am encouraged by the continued year-over-year growth in our lease portfolio and the robust inventory position we have built as we enter the peak demand season,” said Douglas Lindsay, Chief Executive Officer of The Aaron’s Company.

Results of Operations – Third Quarter 2021

For the third quarter of 2021, total revenues were $452.2 million compared with $441.0 million for the third quarter of 2020, an increase of 2.5%. The increase in revenues was primarily due to the increasing size and quality of our lease portfolio, partially offset by lower customer payment activity during the quarter and the reduction of 79 franchised stores during the 15-month period ended September 30, 2021. E-commerce revenues were up 13.3% compared to the prior year quarter and represented 14.3% of lease revenues compared to 13.1% in the prior year quarter.

On a same store basis, lease and retail revenues increased 4.6% in the third quarter compared to the prior year quarter. Same store revenue growth was primarily driven by a larger same store lease portfolio size to begin the quarter, partially offset by lower customer payment activity as compared to the prior year.

Net earnings for the third quarter of 2021 were $24.3 million compared to $32.6 million in the prior year period. Net earnings in the third quarter of 2021 included $2.9 million in pre-tax restructuring charges and $0.4 million in pre-tax spin-related separation charges. Net earnings in the third quarter of 2020 included $4.0 million in pre-tax restructuring charges and $1.7 million in pre-tax spin-related separation and retirement charges.

Adjusted EBITDA for the Company was $53.6 million for the third quarter of 2021, compared with $64.3 million for the same period in 2020, a decrease of $10.7 million, or 16.6%. As a percentage of revenues, Adjusted EBITDA margin was 11.9% in the third quarter of 2021 compared with 14.6% for the same period in 2020. The decline in Adjusted EBITDA and Adjusted EBITDA margin was primarily due to the expected increase in lease merchandise write-offs and lower customer payment activity compared to the stimulus-aided levels in the third quarter of last year.

Diluted earnings per share for the third quarter of 2021 were $0.73 compared with diluted earnings per share of $0.96 in the year ago same period. On a non-GAAP basis, diluted earnings per share were $0.83 in the third quarter of 2021 compared with non-GAAP diluted earnings per share of $1.10 for the same quarter in 2020.

During the third quarter, the Company repurchased 1,333,264 shares of Aaron’s common stock for a total purchase price of approximately $37.5 million. For the year-to-date period through October 22, 2021, the Company repurchased 3,034,097 shares of Aaron’s common stock for a total purchase price of approximately $90.4 million. As of October 22, 2021, the Company had approximately $59.6 million remaining under its $150 million share repurchase program.

During the quarter, the Company’s Board of Directors declared a quarterly cash dividend of $0.10 per share which was paid on October 5, 2021.

As of September 30, 2021, the company had no debt and total available liquidity of $247.5 million, which includes $14.8 million of cash and $232.7 million of availability under the Company’s existing revolving credit facility.

Franchise Performance

Franchisee revenues totaled $79.8 million for the three months ended September 30, 2021, a decrease of 21.2% from the three months ended September 30, 2020 primarily due to a reduction in franchise locations. Same store revenues for franchised stores increased 2.1% for the three months ended September 30, 2021 compared with the same quarter in 2020. Revenues and customers of franchisees are not revenues and customers of the Company.

2021 Outlook

The Company has revised its full year 2021 outlook. For the full year 2021, we increased our expected total revenues to between $1.820 billion and $1.830 billion. We also increased our expected Adjusted EBITDA to between $225 million and $230 million.

For the full year 2021 updated outlook, we have assumed an effective tax rate for 2021 of approximately 26%, depreciation and amortization of approximately $70 million, and a diluted weighted average share count of approximately 34 million shares. We have lowered our 2021 annual free cash flow outlook to between $30 million and $40 million primarily as a result of incremental lease merchandise purchased during the third quarter. This outlook assumes no significant deterioration in the current retail environment, state of the U.S. economy or global supply chain as compared to its current condition.

The benefits to our customers from government stimulus programs declined in the third quarter, and as expected, resulted in lower customer payment activity as compared to the prior year. Over the next three to four quarters, we expect customer payment activity to remain above pre-pandemic levels but below that experienced in the 2021 year-to-date period.

Basis of Presentation

The financial statements and related results discussed herein for periods prior to and through the date of the separation and distribution, November 30, 2020, were prepared on a combined standalone basis and were derived from the consolidated financial statements and accounting records of PROG Holdings, Inc. The financial statements for the periods subsequent to December 1, 2020 and through September 30, 2021 are consolidated financial statements of the Company and its subsidiaries, each of which is wholly-owned, and is based on the financial position and results of operations of the Company as a standalone company.

The combined financial statements prepared through November 30, 2020 include all revenues and costs directly attributable to the Company and an allocation of expenses from PROG Holdings, Inc. related to certain corporate functions and actions. These costs include executive management, finance, treasury, tax, audit, legal, information technology, human resources and risk management functions and the related benefit cost associated with such functions, including stock-based compensation. These expenses have been allocated to the Company based on direct usage or benefit where specifically identifiable, with the remaining expenses allocated primarily on a pro rata basis using an applicable measure of revenues, headcount or other relevant measures.

For the complete press release, click here.

About The Aaron’s Company Inc.

Headquartered in Atlanta, The Aaron’s Company, Inc. (NYSE: AAN), is a leading, technology-enabled, omni-channel provider of lease-to-own and purchase solutions.  The Aaron’s Company engages in the sales and lease ownership and specialty retailing of furniture, appliances, electronics, computers and a variety of other products and accessories through its approximately 1,300 Company-operated and franchised stores in 47 states and Canada, as well as its e-commerce platform, Aarons.com. For more information, visit investor.aarons.com and Aarons.com.

Source: The Aaron’s Company, Inc.