The Aaron's — Q1 2024 Earnings Presentation
26 slides from The Aaron's's earnings presentation, May 6, 2024
Slide 1: Q1 2024 Earnings Results
Q1 2024 Earnings Results May 6, 2024 0
Slide 2: Special Note Regarding Forward-Looking Information
Special Note Regarding Forward-Looking Information Statements in this presentation regarding our business that are not historical facts are "forward-looking statements" that involve risks and uncertainties which could cause actual results to differ materially from those contained in the forward-look
Slide 3: CEO Comments
CEO Comments “We are seeing strong positive momentum in the business, and our first quarter results were in line with our guidance. Our new omnichannel lease decisioning and customer acquisition program at the Aaron’s Business is driving significant growth in lease merchandise deliveries, and we con
Slide 4: Key Themes
Key Themes ▪ Delivered first quarter consolidated revenues and adjusted earnings in line with expectations, with operational improvements leading to positive momentum in the business ▪ Aaron's Business recurring revenue written increased 2.3% driven by 6.8% growth in lease merchandise deliveries ▪ E
Slide 5: Q1 Highlights
Q1 Highlights 4
Slide 6: Consolidated Q1 2024 Results of Operations
Consolidated Q1 2024 Results of Operations1 Three Months Ended March 31, Variance ($ in Thousands, except per share) 2024 2023 $ % or bps Consolidated $ 511,497 $ 554,361 $ (42,864) (7.7) % Revenues Aaron's Business 381,055 412,133 (31,078) (7.5) % BrandsMart 132,523 144,158 (11,635) (8.1) % Consoli
Slide 7: The Aaron's Company – Consolidated Q1 Highlights
The Aaron’s Company – Consolidated Q1 Highlights1 Revenues Adjusted EBITDA Highlights • Revenues decreased YoY primarily due to -50.4% lower lease revenues and fees at the -7.7% $554.4M $45.9M Aaron's Business and lower retail sales at $511.5M BrandsMart $22.7M • Adjusted EBITDA and adjusted EBITDA
Slide 8: Aaron's Business Q1 Highlights
Aaron’s Business Q1 Highlights Revenues Adjusted EBITDA1 Highlights • Revenues decreased YoY primarily due to -7.5% -30.8% a smaller lease portfolio size and lower $412.1M $381.1M $54.6M lease renewal rate; the lower lease $37.7M renewal rate primarily resulted from an increasing mix of e-commerce a
Slide 9: Aaron's Business Q1 Highlights – Lease Portfolio Size
Aaron’s Business Q1 Highlights – Lease Portfolio Size Ending Lease Portfolio Size Highlights -4.8% • The ending lease portfolio size began Q1 2024 down 7.0% YoY and ended the $126.5M $121.9M $119.6M $117.7M $116.4M $116.1M quarter down 4.8% YoY ‒ This improvement was driven by 6.8% YoY growth in lea
Slide 10: Aaron's Business Q1 Highlights – E-commerce & GenNext Store Strategy
Aaron’s Business Q1 Highlights – E-commerce & GenNext Store Strategy E-commerce Highlights Recurring Revenue Written1 Revenues +94.1% +20.8% Q1 2023 Q1 2024 % of Lease Q1 2023 Q1 2024 Revenues 17.9% 24.0% GenNext Store Highlights % of Revenues2 GenNext Store Count Opened in the Quarter 33.4% Q1’24 I
Slide 11: Aaron's Business Q1 Highlights – Non-Renewal Rates & Write-offs
Aaron’s Business Q1 Highlights – Non-Renewal Rates & Write-offs1 32+ Day Non-Renewal Rate2 Highlights 2.9% 3.0 2.7% 2.5% • 32+ day non-renewal rate increased 2.5 2.2% 60 bps YoY from Q1 2023 (2.2% vs. 1.6%) 2.6% 2.7% 2.0 2.4% ‒ Sequential improvement of 50 bps 1.5 from Q4 2023 (2.2% vs. 2.7%) 1.6% 1
Slide 12: BrandsMart Q1 Highlights
BrandsMart Q1 Highlights Revenues Gross Profit Highlights • Revenues and comparable sales -8.1% -16.1% decreased YoY driven primarily by $144.2M $35.1M ongoing weaker customer traffic, $132.5M $29.5M customer trade down to lower priced products, and credit tightening with private label credit card p
Slide 13: Balance Sheet and Outlook
Balance Sheet and Outlook 12
Slide 14: Balance Sheet and Shareholder Returns
Balance Sheet and Shareholder Returns As of March 31, 2024, the Company’s net debt1 balance was $171.9 million, favorable to internal expectations Cash and Cash Debt Liquidity Shareholder Returns Equivalents (As of 3/31/24) (As of 3/31/24) (As of 3/31/24) $41.0 million $212.9 million $252.0 million2
Slide 15: Updated 2024 Outlook
Updated 2024 Outlook1 The Company is raising outlook for non-GAAP diluted EPS, updating its estimated effective tax rate, and reaffirming outlook for revenues, adjusted EBITDA, capital expenditures, and adjusted free cash flow. The revised estimated effective tax rate is approximately 38%, 12% point
Slide 16: Overview of Capital Allocation Strategy
Overview of Capital Allocation Strategy 1 ▪ Invest in Aaron’s and BrandsMart Growth Initiatives 2 ▪ Maintain Conservative Leverage Profile (1.0x – 1.5x Net Debt-to-Adjusted EBITDA) 3 ▪ Return Capital to Shareholders through Dividends and Share Repurchases 4 ▪ Evaluate Acquisitions on an Opportunisti
Slide 17: Key Takeaways
Key Takeaways • New omnichannel lease decisioning and customer acquisition program is generating strong momentum in the Aaron’s Business • Significant growth in e-commerce lease merchandise deliveries and recurring revenue written expected to drive mid-single digit growth in lease portfolio size by
Slide 18: Appendix
Appendix 17
Slide 19: Company Store Count By Ownership Type
Company Store Count By Ownership Type As of March 31, 2024 2023 Company-operated Aaron’s Stores1 987 1,030 GenNext (included in Company-Operated) 265 222 Franchisee-operated Aaron’s Stores 230 231 BrandsMart U.S.A. Stores2 11 10 Systemwide Stores 1,228 1,271 Company-Operated Aaron’s Stores by Type A
Slide 20: Use of Non-GAAP Financial Information
Use of Non-GAAP Financial Information Non-GAAP net earnings, non-GAAP diluted earnings per share, adjusted free cash flow, net debt, EBITDA and adjusted EBITDA are supplemental measures of our performance that are not calculated in accordance with generally accepted accounting principles in the Unit
Slide 21: Reconciliation to Non-GAAP Net (Loss) Earnings and Non-GAAP (Loss) Earnings Per Share
Reconciliation to Non-GAAP Net (Loss) Earnings and Non-GAAP (Loss) Earnings Per Share (Unaudited) Three Months Ended March 31, (In Thousands, except per share amounts) 2024 2023 Net (Loss) Earnings $ (14,181) $ 12,798 Income Taxes (2,138) (3,906) (Loss) Earnings Before Income Taxes $ (16,319) $ 8,89
Slide 22: Reconciliation to Quarterly Adjusted EBITDA by Segment
Reconciliation to Quarterly Adjusted EBITDA by Segment (Unaudited) (Unaudited) Three Months Ended Three Months Ended March 31, 2024 March 31, 2023 Aaron’s Unallocated Aaron’s Unallocated (In Thousands) BrandsMart Elimination1 Total BrandsMart Elimination1 Total Business Corporate Business Corporate
Slide 23: Reconciliation to Adjusted Free Cash Flow and Net Debt
Reconciliation to Adjusted Free Cash Flow (Unaudited) Three Months Ended March 31, (In Thousands) 2024 2023 Cash Provided by Operating Activities $ (18,540) $ 60,960 Proceeds from Real Estate Transactions 5,464 1,078 Acquisition-Related Transaction Costs 806 717 Capital Expenditures (20,941) (20,209
Slide 24: Reconciliation to 2024 Current Outlook for Adjusted EBITDA
Reconciliation to 2024 Current Outlook1 for Adjusted EBITDA Fiscal Year 2024 Ranges (In Thousands) Aaron’s Business BrandsMart Consolidated Total Projected Net (Loss) Earnings $(19,000) - $(7,000) Income Taxes (1,000) - 3,000 Projected Earnings (Loss) Before Income Taxes 64,500 - 77,500 (9,500) - (5
Slide 25: Reconciliation to 2024 Previous Outlook for Adjusted EBITDA
Reconciliation to 2024 Previous Outlook1 for Adjusted EBITDA Fiscal Year 2024 Ranges (In Thousands) Aaron’s Business BrandsMart Consolidated Total Projected Net (Loss) Earnings $(12,000) - $0 Income Taxes 0 - 4,000 Projected Earnings (Loss) Before Income Taxes 64,500 - 77,500 (9,500) - (5,500) (12,0
Slide 26: investor.aarons.com
The Aaron's Company, Inc. i. . BreandsMart ey, Aarons BrandsMart:“ Leasing’ Woodhaven’ investor.aarons.com