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The Aaron’s Company, Inc. Reports Second Quarter 2022 Financial Results, Updates Full Year Outlook

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The Aaron’s Company, Inc. (“Aaron’s” and the “Company”), a leading, technology-enabled, omnichannel provider of lease-to-own and retail purchase solutions, today announced financial results for the second quarter ended June 30, 2022. This quarter is the Company’s first report on a consolidated basis, incorporating results from BrandsMart U.S.A., acquired April 1, 2022.

  • Consolidated revenues were $610.4 million, up 30.6%, benefiting from BrandsMart acquisition
  • Strong performance from Aaron’s e-commerce channel and GenNext stores
  • Losses per share were $0.17; Non-GAAP earnings per share were $0.79, adjusted primarily for acquisition-related items
  • Net losses were $5.3 million; Non-GAAP net earnings were $24.8 million
  • Consolidated adjusted EBITDA was $48.1 million, down 26.4%, as high inflation pressured lower-income consumers
  • Updates full year adjusted EBITDA outlook to $150 million to $170 million

“With the acquisition of BrandsMart U.S.A., consolidated revenues increased in the second quarter, and we are encouraged by the performance of this new business segment,” said Douglas Lindsay, Chief Executive Officer of The Aaron’s Company, Inc. “In the Aaron’s Business, customer demand and payment activity progressively worsened through the quarter as high inflation impacted the lower-income consumer. In response to these challenging market conditions, we are leveraging our centralized lease decisioning and digital servicing platforms to maintain relationships with our customers and strengthening actions to control costs.”

“We continue to strategically invest in our growing e-commerce channel, our high-performing GenNext store program, and the value creation opportunities available through the BrandsMart acquisition,” Lindsay added. “Together with our strong balance sheet and liquidity, we believe these investments enable us to continue delivering a market leading value proposition to a large and increasingly diversified customer base that will expand our market share and position us for future growth.”

Second Quarter 2022 Financial Highlights

The Aaron’s Company, Inc. (the “Company”) conducts its operations through two primary operating business segments: 1) the Aaron’s Business segment, which includes, Company-operated Aaron’s stores, the Aarons.com e-commerce platform, Aaron’s franchise operations, BrandsMart Leasing, a lease-to-own solution offered to customers of BrandsMart U.S.A., and Woodhaven, a furniture manufacturing operation (collectively, the “Aaron’s Business”); and 2) the BrandsMart segment, which includes, BrandsMart U.S.A. retail stores and the Brandsmartusa.com e-commerce platform (collectively, “BrandsMart”). The financial and operating results for the BrandsMart segment do not include BrandsMart Leasing and neither business segment results include unallocated corporate expenses. Additionally, the Company’s financial and operating results for the second quarter of 2022 include the results of operations of BrandsMart subsequent to the April 1, 2022 acquisition, while financial and operating results for all periods prior to the April 1, 2022 acquisition do not include BrandsMart. For all periods presented, the Company has retroactively adjusted disclosures to align with the new reportable segments.

Consolidated Results

The Company’s total revenues were $610.4 million in the second quarter of 2022 compared with $467.5 million for the second quarter of 2021. Net losses were $5.3 million for the second quarter of 2022 compared with net earnings of $33.0 million in the prior year period. Net losses for the second quarter of 2022 include the effects of a one-time, non-cash charge for a fair value adjustment to merchandise inventories of $23.0 million, BrandsMart acquisition-related costs of $8.0 million, restructuring charges of $5.6 million, acquisition-related intangible amortization expense of $2.8 million, and separation costs of $0.2 million. These charges were partially offset by a net tax benefit of $4.8 million related to a remeasurement of the Company’s deferred state tax balances in conjunction with the BrandsMart acquisition. Net earnings in the second quarter of 2021 included restructuring charges of $1.8 million and separation costs of $1.2 million.

Adjusted EBITDA was $48.1 million in the second quarter of 2022, a decrease of 26.4% compared to the second quarter of 2021. As a percentage of total consolidated revenues, adjusted EBITDA was 7.9% in the second quarter of 2022 compared with 14.0% in the prior year second quarter. The declines in adjusted EBITDA and adjusted EBITDA margin were primarily due to lower lease renewal rates, higher provision for lease merchandise write-offs, and higher other operating expenses, partially offset by lower personnel costs in the Aaron’s Business. The decline in adjusted EBITDA was also offset by $10.5 million of adjusted EBITDA generated from the BrandsMart acquisition.

Diluted losses per share were $0.17 in the second quarter of 2022 compared with diluted earnings per share of $0.95 in the second quarter of 2021. On a non-GAAP basis, diluted earnings per share were $0.79 for the second quarter of 2022 compared with $1.05 in the second quarter of 2021.

Aaron’s Business Segment Results

Total revenues for the Aaron’s Business were $430.2 million in the second quarter of 2022, a decrease of 8.0% compared to the second quarter of 2021, primarily due to lower lease revenues and retail sales. The lower lease revenues were primarily attributable to lower lease renewal rates and lower exercise of early purchase options. At the end of the second quarter of 2022 our overall lease portfolio size was $130.8 million, a decrease of 1.5% compared to the end of the second quarter of 2021. The lease renewal rate for the second quarter of 2022 was 88.5%, compared to 92.4% in the government stimulus-aided second quarter of 2021. E-commerce revenues increased 4.0% in the second quarter of 2022 compared to the same period in 2021 and represented 15.4% of lease revenues. During the quarter, the Aaron’s Business opened 36 GenNext locations, bringing the total to 171 GenNext stores, or 16.1% of total Company-operated Aaron’s stores. Lease originations in GenNext stores open less than one year continued growing at a rate of more than 20 percentage points higher than our average legacy stores.

Same store revenues decreased 6.7% as compared to the second quarter of 2021. The decrease was primarily driven by a lower lease renewal rate, lower exercise of early purchase options, and a reduction in retail sales. These factors were partially offset by a larger average same-store lease portfolio size during the quarter.

For the Aaron’s Business, earnings before income taxes for the second quarter of 2022 were $29.5 million compared to $61.7 million in the second quarter of 2021.

Adjusted EBITDA for the Aaron’s Business was $48.0 million in the second quarter of 2022, a decrease of 38.9% compared to the second quarter of 2021. As a percentage of total revenues for the Aaron’s Business, adjusted EBITDA was 11.2% in the second quarter of 2022 compared with 16.8% in the prior year second quarter. The declines in adjusted EBITDA and adjusted EBITDA margin for the Aaron’s Business were primarily due to lower lease renewal rates and higher provision for lease merchandise write-offs compared to the government stimulus-aided levels in the second quarter of 2021. Lease merchandise write-offs were 5.7% in the second quarter of 2022, as compared to 2.9% in the second quarter of 2021. Adjusted EBITDA was also impacted by higher other operating expenses offset by lower personnel costs.

BrandsMart Segment Second Quarter Results

The Company’s consolidated financial and operating results for all periods prior to the April 1, 2022 acquisition do not include BrandsMart and therefore have not been addressed in the discussion below.

Total revenues for BrandsMart were $181.4 million in the second quarter of 2022. Losses before income taxes for the second quarter of 2022 were $15.9 million. Losses before income taxes in the second quarter of 2022 include a one-time $23.0 million non-cash charge related to a fair value adjustment of the acquired merchandise inventories.

Adjusted EBITDA was $10.5 million in the second quarter, and as a percentage of total revenues for the BrandsMart segment, adjusted EBITDA was 5.8%.

Second Quarter Share Repurchase Program and Dividend Activity

During the second quarter of 2022, the Company repurchased 254,216 shares of Aaron’s common stock for a total purchase price of approximately $5.3 million. The total shares outstanding as of June 30, 2022 were 30,777,065, compared to 33,093,668 as of June 30, 2021. The remaining authorized share repurchase amount was $135.8 million as of June 30, 2022. In addition, the Board declared a quarterly cash dividend of $0.1125 per share which was paid to shareholders of record on July 5, 2022.

Updated Full Year 2022 Outlook

The Company has updated its full year 2022 outlook to reflect expectations that continued high inflation and related macroeconomic factors will adversely impact customer demand, lease portfolio size, lease renewal rates, the provision for lease merchandise write-offs, and Company expenses. For the full year 2022, we now expect consolidated total revenues between $2.19 billion and $2.27 billion, adjusted EBITDA between $150.0 million and $170.0 million, and non-GAAP earnings per share between $1.75 and $2.15.

The Company assumes depreciation and amortization of $85.0 million to $90.0 million, and a diluted weighted average share count of approximately 31.5 million shares.

For the full second quarter results, click here.

About The Aaron’s Company Inc.

Headquartered in Atlanta, The Aaron’s Company, Inc. (NYSE: AAN) is a leading, technology-enabled, omnichannel provider of lease-to-own and retail purchase solutions of appliances, electronics, furniture, and other home goods across its brands: Aaron’s, BrandsMart U.S.A., BrandsMart Leasing, and Woodhaven. Aaron’s offers a direct-to-consumer lease-to-own solution through its approximately 1,300 Company-operated and franchised stores in 47 states and Canada, as well as its e-commerce platform. BrandsMart U.S.A. is one of the leading appliance retailers in the country with ten retail stores in Florida and Georgia. BrandsMart Leasing offers lease-to-own solutions to customers of BrandsMart U.S.A. Woodhaven is our furniture manufacturing division. For more information, visit investor.aarons.com, aarons.com, and brandsmartusa.com.

Source: The Aaron’s Company, Inc.