10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 ________________________________

 FORM 10-Q

________________________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                      TO                     

COMMISSION FILE NUMBER 1-39681

 ________________________________

  THE AARON'S COMPANY, INC.

(Exact name of registrant as specified in its charter)

 _________________________________

Georgia				85-2483376
(State or other jurisdiction of incorporation or organization)				(I. R. S. Employer Identification No.)
400 Galleria Parkway SE	Suite 300	Atlanta	Georgia	30339-3182
(Address of principal executive offices)				(Zip Code)

(678) 402-3000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.50 Par Value	AAN	New York Stock Exchange

 ___________________________________

    Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒    No  ☐

    Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒    No ☐

    Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-Accelerated Filer	☒	Smaller Reporting Company	☐
		Emerging Growth Company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

    Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

    Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Title of Each Class	Shares Outstanding as of July 23, 2021
Common Stock, $0.50 Par Value	32,672,565

1

THE AARON'S COMPANY, INC.

INDEX

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements	4
Condensed Consolidated Balance Sheets – June 30, 2021 (Unaudited) and December 31, 2020	4
Condensed Consolidated and Combined Statements of Earnings (Unaudited) – Three and Six Months Ended June 30, 2021 and 2020	5
Condensed Consolidated and Combined Statements of Comprehensive Income (Loss) (Unaudited) – Three and Six Months Ended June 30, 2021 and 2020	6
Condensed Consolidated and Combined Statements of Cash Flows (Unaudited) – Six Months Ended June 30, 2021 and 2020	7
Notes to Condensed Consolidated and Combined Financial Statements (Unaudited)	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3. Quantitative and Qualitative Disclosures About Market Risk	40
Item 4. Controls and Procedures	41
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	42
Item 1A. Risk Factors	42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3. Defaults Upon Senior Securities	42
Item 4. Mine Safety Disclosures	42
Item 5. Other Information	42
Item 6. Exhibits	43
Signatures	44

2

PART I – FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

THE AARON’S COMPANY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	(Unaudited)
	June 30, 2021		December 31, 2020
	(In Thousands, Except Share Data)
ASSETS:
Cash and Cash Equivalents	$	47,979	$	76,123
Accounts Receivable (net of allowances of $5,667 at June 30, 2021 and $7,613 at December 31, 2020)	26,569		33,990
Lease Merchandise (net of accumulated depreciation and allowances of $445,867 at June 30, 2021 and $458,405 at December 31, 2020)	737,305		697,235
Property, Plant and Equipment, Net	209,876		200,370
Operating Lease Right-of-Use Assets	236,507		238,085
Goodwill	8,482		7,569
Other Intangibles, Net	5,844		9,097
Income Tax Receivable	1,800		1,093
Prepaid Expenses and Other Assets	89,179		89,895
Total Assets	$	1,363,541	$	1,353,457
LIABILITIES & SHAREHOLDERS’ EQUITY:
Accounts Payable and Accrued Expenses	$	230,279	$	230,848
Deferred Income Taxes Payable	79,275		62,601
Customer Deposits and Advance Payments	58,180		68,894
Operating Lease Liabilities	262,292		278,958
Debt	—		831
Total Liabilities	630,026		642,132
Commitments and Contingencies (Note 4)
SHAREHOLDERS' EQUITY:
Common Stock, Par Value $0.50 Per Share: Authorized: 112,500,000 Shares at June 30, 2021 and December 31, 2020; Shares Issued: 35,520,456 at June 30, 2021 and 35,099,571 at December 31, 2020	17,760		17,550
Additional Paid-in Capital	715,513		708,668
Retained Earnings	64,320		1,881
Accumulated Other Comprehensive Loss	(450)		(797)
	797,143		727,302
Less: Treasury Shares at Cost
2,426,788 Shares at June 30, 2021 and 894,660 at December 31, 2020	(63,628)		(15,977)
Total Shareholders’ Equity	733,515		711,325
Total Liabilities & Shareholders’ Equity	$	1,363,541	$	1,353,457

The accompanying notes are an integral part of the Condensed Consolidated and Combined Financial Statements.

3

THE AARON’S COMPANY, INC.

CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF EARNINGS

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(In Thousands, Except Per Share Data)
REVENUES:
Lease and Retail Revenues	$	428,498	$	394,257	$	872,585	$	793,167
Non-Retail Sales	32,455		33,044		62,404		59,890
Franchise Royalties and Other Revenue	6,542		3,654		13,560		10,729
	467,495		430,955		948,549		863,786
COSTS AND REVENUES:
Cost of Lease and Retail Revenues	143,206		137,718		294,701		279,721
Non-Retail Cost of Sales	29,609		29,316		56,100		52,897
	172,815		167,034		350,801		332,618
GROSS PROFIT	294,680		263,921		597,748		531,168
OPERATING EXPENSES
Personnel Costs	121,426		118,395		246,289		234,141
Other Operating Expenses, Net	114,046		93,993		222,412		217,058
Provision for Lease Merchandise Write-Offs	12,117		14,213		25,534		38,173
Restructuring Expenses, Net	1,794		6,991		5,235		29,277
Impairment of Goodwill	—		—		—		446,893
Separation Costs	1,246		—		5,636		—
	250,629		233,592		505,106		965,542
OPERATING PROFIT (LOSS)	44,051		30,329		92,642		(434,374)
Interest Expense	(451)		(2,853)		(795)		(6,652)
Other Non-Operating Income, Net	744		1,948		1,146		189
EARNINGS (LOSS) BEFORE INCOME TAXES	44,344		29,424		92,993		(440,837)
INCOME TAX EXPENSE (BENEFIT)	11,369		7,050		23,695		(139,437)
NET EARNINGS (LOSS)	$	32,975	$	22,374	$	69,298	$	(301,400)
EARNINGS (LOSS) PER SHARE	$	0.98	$	0.66	$	2.04	$	(8.91)
EARNINGS (LOSS) PER SHARE ASSUMING DILUTION	$	0.95	$	0.66	$	1.99	$	(8.91)

The accompanying notes are an integral part of the Condensed Consolidated and Combined Financial Statements.

4

THE AARON’S COMPANY, INC.

CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2021		2020		2021		2020
Net Earnings (Loss)	$	32,975	$	22,374	$	69,298	$	(301,400)
Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustment	220		331		347		(1,423)
Total Other Comprehensive Income (Loss)	220		331		347		(1,423)
Comprehensive Income (Loss)	$	33,195	$	22,705	$	69,645	$	(302,823)

The accompanying notes are an integral part of the Condensed Consolidated and Combined Financial Statements.

5

THE AARON’S COMPANY, INC.

CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,
	2021		2020
	(In Thousands)
OPERATING ACTIVITIES:
Net Earnings (Loss)	$	69,298	$	(301,400)
Adjustments to Reconcile Net Earnings (Loss) to Cash Provided by Operating Activities:
Depreciation of Lease Merchandise	269,600		260,308
Other Depreciation and Amortization	34,547		34,235
Accounts Receivable Provision	10,879		14,957
Stock-Based Compensation	6,882		5,370
Deferred Income Taxes	16,674		(80,206)
Impairment of Assets	2,810		468,634
Non-Cash Lease Expense	45,802		48,394
Other Changes, Net	(2,437)		1,790
Changes in Operating Assets and Liabilities, Net of Effects of Acquisitions and Dispositions:
Additions to Lease Merchandise	(408,440)		(193,677)
Book Value of Lease Merchandise Sold or Disposed	98,712		104,370
Accounts Receivable	(3,554)		(6,754)
Prepaid Expenses and Other Assets	(3,228)		3,012
Income Tax Receivable	(707)		(76,175)
Operating Lease Right-of-Use Assets and Liabilities	(63,169)		(51,051)
Accounts Payable and Accrued Expenses	(2,748)		(19,950)
Customer Deposits and Advance Payments	(10,766)		2,583
Cash Provided by Operating Activities	60,155		214,440
INVESTING ACTIVITIES:
Insurance Proceeds relating to Property, Plant and Equipment	363		—
Proceeds from Investments	1,974		—
Purchases of Property, Plant, and Equipment	(45,826)		(30,059)
Proceeds from Dispositions of Property, Plant, and Equipment	7,977		2,208
Acquisition of Businesses and Customer Agreements, Net of Cash Acquired	(1,734)		(1,210)
Proceeds from Dispositions of Businesses and Customer Agreements, Net of Cash Disposed	—		358
Cash Used in Investing Activities	(37,246)		(28,703)
FINANCING ACTIVITIES:
Proceeds from Debt	—		5,625
Repayments on Debt	(753)		(60,748)
Dividends Paid	(6,770)		—
Acquisition of Treasury Stock	(42,626)		—
Issuance of Stock Under Stock Option Plans	1,790		—
Shares Withheld for Tax Payments	(2,729)		—
Net Transfers From Former Parent	—		126,265
Debt Issuance Costs	—		(1,020)
Cash (Used in) Provided by Financing Activities	(51,088)		70,122
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	35		(79)
(Decrease) Increase in Cash and Cash Equivalents	(28,144)		255,780
Cash and Cash Equivalents at Beginning of Period	76,123		48,773
Cash and Cash Equivalents at End of Period	$	47,979	$	304,553

The accompanying notes are an integral part of the Condensed Consolidated and Combined Financial Statements.

6

THE AARON’S COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BASIS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

As described elsewhere in this Quarterly Report on Form 10-Q, the novel coronavirus ("COVID-19") pandemic led to significant market disruption and has impacted various aspects of our operations, directly and indirectly. Throughout these notes to the condensed consolidated and combined financial statements, the impacts of the COVID-19 pandemic on the financial results for the three and six months ended June 30, 2021 and comparable prior periods have been identified to the best of our ability under the respective sections. For a discussion of trends that we believe have affected our business as a result of the COVID-19 pandemic, see Item 2. "Management’s Discussion and Analysis of Financial Condition and Results of Operations", including the "Recent Developments and Operational Measures Taken by Us in Response to the COVID-19 Pandemic," "Results of Operations" and "Liquidity and Capital Resources", below, and Part I, Item 1A "Risk Factors" of our Current Report on Form 10-K, filed with the United States Securities and Exchange Commission on February 23, 2021 (the "2020 Annual Report").

Description of Spin-off Transaction

On October 16, 2020, management of Aaron’s, Inc. finalized the formation of a new holding company structure in anticipation of the separation and distribution transaction described below. Under the holding company structure, Aaron’s, Inc. became a direct, wholly owned subsidiary of a newly formed company, Aaron’s Holdings Company, Inc. Aaron's, Inc. was subsequently converted to a limited liability company ("Aaron’s, LLC") holding the assets and liabilities historically associated with the historical Aaron's Business segment (the "Aaron's Business"). Upon completion of the holding company formation, Aaron’s Holdings Company, Inc. became the publicly traded parent company of the Progressive Leasing segment ("Progressive Leasing"), Aaron’s Business, and Vive segment ("Vive").

On November 30, 2020 (the "separation and distribution date"), Aaron's Holdings Company, Inc. completed the previously announced separation of the Aaron's Business from Progressive Leasing and Vive and changed its name to PROG Holdings, Inc. (referred to herein as "PROG Holdings" or "Former Parent"). The separation of the Aaron's Business was effected through a distribution (the "separation", the "separation and distribution", or the "spin-off transaction") of all outstanding shares of common stock of a newly formed company called The Aaron's Company, Inc., a Georgia corporation ("Aaron's", "The Aaron's Company" or "the Company"), to the PROG Holdings shareholders of record as of November 27, 2020. Upon the separation and distribution, Aaron's, LLC became a wholly-owned subsidiary of The Aaron's Company. Shareholders of PROG Holdings received one share of The Aaron's Company for every two shares of PROG Holdings' common stock. Upon completion of the separation and distribution transaction, The Aaron's Company became an independent, publicly traded company under the ticker "AAN" on the New York Stock Exchange.

Unless the context otherwise requires or we specifically indicate otherwise, references to "we," "us," "our," "the Company," and "Aaron's" refer to The Aaron's Company, Inc., which holds, directly or indirectly, the Aaron’s Business prior to the separation and distribution date. References to "the Company", "Aaron's, Inc.", or "Aaron's Holdings Company, Inc." for periods prior to the separation and distribution date refer to transactions, events, and obligations of Aaron's, Inc., which took place prior to the separation and distribution. Historical amounts herein include revenues and costs directly attributable to the Company and an allocation to the Company of expenses of the Aaron's Business related to certain PROG Holdings' corporate functions prior to the separation and distribution date.

We describe in these footnotes the business held by us after the separation as if it were a standalone business for all historical periods described. However, we were not a standalone separate entity with independently conducted operations before the separation.

Description of Business

Aaron's is a leading, technology-enabled, omni-channel provider of lease-to-own ("LTO") and purchase solutions generally focused on serving the large, credit-challenged segment of the population. Through our portfolio of approximately 1,300 stores and our Aarons.com e-commerce platform, we provide consumers with LTO and purchase solutions for the products they need and want, including furniture, appliances, electronics, computers and a variety of other products and accessories. In addition, the Company includes the operations of Woodhaven Furniture Industries ("Woodhaven"), which manufactures and supplies the majority of the bedding and a significant portion of the upholstered furniture leased and sold in Company-operated and franchised stores.

7

THE AARON’S COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)

The following table presents store count by ownership type:

Stores as of June 30 (Unaudited)	2021	2020
Company-operated Stores	1,087	1,098
Franchised Stores	247	316
Systemwide Stores	1,334	1,414

Basis of Presentation

The financial statements 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. The financial statements for the period from December 1, 2020 through December 31, 2020, and three and six months ended June 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. Intercompany balances and transactions between consolidated entities have been eliminated. These condensed consolidated and combined financial statements reflect the historical results of operations, financial position and cash flows of the Company in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The historical results of operations and cash flows of the Company prior to the separation and distribution presented in these condensed consolidated and combined financial statements may not be indicative of what they would have been had the Company been an independent standalone entity, nor are they necessarily indicative of the Company's future results of operations, financial position and cash flows.

The condensed combined balance sheets for periods prior to and through the separation and distribution date include the assets and liabilities associated with the historical Aaron’s Business and certain assets and liabilities where Aaron's, Inc. is the legal beneficiary or obligor. The combined statements of earnings for periods prior to and through the separation and distribution date include all revenues and costs directly attributable to the Company and an allocation of expenses related to certain PROG Holdings corporate functions. These allocated costs and expenses 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 costs and 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. The Company considers these allocations to be a reasonable reflection of the utilization of services or the benefit received.

The preparation of the Company's condensed consolidated and combined financial statements in conformity with U.S. GAAP for interim financial information requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates. Generally, actual experience has been consistent with management's prior estimates and assumptions. However, as described above, the extent to which the normalization of business trends since the start of the COVID-19 pandemic, and the resulting measures taken by the Company and federal and state governments, will impact the Company's business will depend on future developments, which are uncertain and cannot be precisely predicted at this time. In many cases, management's estimates and assumptions are dependent on estimates of such future developments and may change in the future.

The accompanying unaudited condensed consolidated and combined financial statements do not include all information required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included in the accompanying unaudited condensed consolidated and combined financial statements. These financial statements should be read in conjunction with the financial statements and notes thereto included in the 2020 Annual Report. The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of operating results for the full year.

Accounting Policies and Estimates

See Note 1 to the consolidated and combined financial statements in the 2020 Annual Report for an expanded discussion of accounting policies and estimates. Discussions of accounting estimates and application of accounting policies herein have also been updated as applicable to describe the uncertainty associated with the impacts of the COVID-19 pandemic described above.

8

THE AARON’S COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)

Earnings Per Share

Earnings per share is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. The computation of earnings per share assuming dilution includes the dilutive effect of stock options, restricted stock units ("RSUs"), restricted stock awards ("RSAs"), performance share units ("PSUs") and other awards issuable under the Company's employee stock purchase plan ("ESPP") (collectively, "share-based awards") as determined under the treasury stock method, unless the inclusion of such awards would have been anti-dilutive.

The Company's basic earnings per share calculations for the periods prior to the separation and distribution assumes that the weighted average number of common shares outstanding was 33,841,624, which is the number of shares distributed to shareholders on the separation and distribution date, November 30, 2020. The same number of shares was used in the calculation of diluted earnings per share for the periods prior to the separation and distribution, as there were no equity awards of The Aaron's Company outstanding prior to the distribution date.

The following table shows the calculation of weighted-average shares outstanding assuming dilution:

	Three Months Ended June 30,		Six Months Ended June 30,
(Shares In Thousands)	2021	2020	2021	2020
Weighted Average Shares Outstanding	33,812	33,842	34,036	33,842
Dilutive Effect of Share-Based Awards	749	—	703	—
Weighted Average Shares Outstanding Assuming Dilution	34,561	33,842	34,739	33,842

The weighted-average anti-dilutive share-based awards that were excluded from the computation of earnings per share assuming dilution during the three and six months ended June 30, 2021 were not significant.

Revenue Recognition

The Company provides lease merchandise, consisting of furniture, appliances, electronics, computers and a variety of other products and accessories to its customers for lease under certain terms agreed to by the customer. Our stores and e-commerce platform offer leases with flexible ownership plans that can be renewed monthly up to 12, 18 or 24 months. The Company also earns revenue from the sale of merchandise to customers and its franchisees, and earns ongoing revenue from its franchisees in the form of royalties and through advertising efforts that benefit the franchisees. See Note 3 to these condensed consolidated and combined financial statements for further information regarding the Company's revenue recognition policies and disclosures.

Accounts Receivable

Accounts receivable consist primarily of receivables due from customers on lease agreements, corporate receivables incurred during the normal course of business (primarily for vendor consideration and real estate leasing activities) and franchisee obligations.

Accounts receivable, net of allowances, consist of the following: 

(In Thousands)	June 30, 2021		December 31, 2020
Customers	$	7,154	$	8,399
Corporate	9,969		12,771
Franchisee	9,446		12,820
	$	26,569	$	33,990

The Company maintains an accounts receivable allowance, under which the Company's policy is to record a provision for returns and uncollectible contractually due renewal payments based on historical payments experience, which is recognized as a reduction of lease and retail revenues within the condensed consolidated and combined statements of earnings. Other qualitative factors are considered in estimating the allowance, such as current and forecasted business trends. The Company writes off customer lease receivables that are 60 days or more past due on pre-determined dates twice monthly.

9

THE AARON’S COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)

The Company also maintains an allowance for outstanding franchisee accounts receivable. The Company's policy is to estimate a specific allowance on accounts receivable to estimate future losses related to certain franchisees that are deemed to have a higher risk of non-payment and a general allowance based on historical losses as well as the Company's assessment of the financial health of all other franchisees. The estimated allowance on franchisee accounts receivable includes consideration of broad macroeconomic trends, such as the uncertainty surrounding the impacts of the normalization of current and future business trends associated with the COVID-19 pandemic on the franchisees' ability to satisfy their obligations. Accordingly, actual accounts receivable write-offs could differ from the allowance. The provision for uncollectible franchisee accounts receivable is recorded as bad debt expense in other operating expenses, net within the condensed consolidated and combined statements of earnings.

The following table shows the components of the accounts receivable allowance:

	Six Months Ended June 30,
(In Thousands)	2021		2020
Beginning Balance	$	7,613	$	10,720
Accounts Written Off, net of Recoveries	(12,825)		(19,200)
Accounts Receivable Provision	10,879		14,957
Ending Balance	$	5,667	$	6,477

The following table shows the components of the accounts receivable provision, which includes amounts recognized for bad debt expense and the provision for returns and uncollected payments:

	Six Months Ended June 30,
(In Thousands)	2021		2020
Bad Debt (Reversal) Expense	$	(734)	$	960
Provision for Returns and Uncollectible Renewal Payments	11,613		13,997
Accounts Receivable Provision	$	10,879	$	14,957

Lease Merchandise

The Company’s lease merchandise is recorded at the lower of depreciated cost or net realizable value. The cost of merchandise manufactured by our Woodhaven operations is recorded at cost and includes overhead from production facilities, shipping costs and warehousing costs. The Company begins depreciating merchandise at the earlier of 12 months and one day from its purchase of the merchandise or when the item is leased to customers. Lease merchandise depreciates to a 0% salvage value over the lease agreement period when on lease, generally 12 to 24 months, and generally 36 months when not on lease. Depreciation is accelerated upon early payout.

The following is a summary of lease merchandise, net of accumulated depreciation and allowances:

(In Thousands)	June 30, 2021		December 31, 2020
Merchandise on Lease, net of Accumulated Depreciation and Allowances	$	478,396	$	473,964
Merchandise Not on Lease, net of Accumulated Depreciation and Allowances1	258,909		223,271
Lease Merchandise, net of Accumulated Depreciation and Allowances	$	737,305	$	697,235

1 Includes Woodhaven raw materials, finished goods and work-in-process inventory that has been classified within lease merchandise in the condensed consolidated balance sheets of $17.2 million and $10.4 million as of June 30, 2021 and December 31, 2020, respectively.

The Company's policies require weekly merchandise counts at its store-based operations, which include write-offs for unsalable, damaged, or missing merchandise inventories. In addition to monthly cycle counting, full physical inventories are generally taken at the fulfillment and manufacturing facilities annually and appropriate provisions are made for missing, damaged and unsalable merchandise. The Company also monitors merchandise levels and mix by division, store, and fulfillment center, as well as the average age of merchandise on hand. If obsolete merchandise cannot be returned to vendors, its carrying amount is adjusted to its net realizable value or written off. Generally, all merchandise not on lease is available for lease or sale. On a monthly basis, all damaged, lost or unsalable merchandise identified is written off.

10

THE AARON’S COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)

The Company records a provision for write-offs using the allowance method, which is included within lease merchandise, net within the condensed consolidated balance sheets. The allowance method for lease merchandise write-offs estimates the merchandise losses incurred but not yet identified by management as of the end of the accounting period based primarily on historical write-off experience. Other qualitative factors are considered in estimating the allowance, such as uncertainty surrounding the impacts of the normalization of current and future business trends associated with the COVID-19 pandemic. Therefore, actual lease merchandise write-offs could differ from the allowance. The provision for write-offs is included in provision for lease merchandise write-offs in the accompanying condensed consolidated and combined statements of earnings. The Company writes off lease merchandise on lease agreements that are 60 days or more past due on pre-determined dates twice monthly.

The following table shows the components of the allowance for lease merchandise write-offs:

	Six Months Ended June 30,
(In Thousands)	2021		2020
Beginning Balance	$	11,599	$	13,823
Merchandise Written off, net of Recoveries	(27,656)		(36,978)
Provision for Write-offs	25,534		38,174
Ending Balance	$	9,477	$	15,019

Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist of the following:

(In Thousands)	June 30, 2021		December 31, 2020
Prepaid Expenses1	$	19,262	$	17,411
Insurance Related Assets1	27,094		27,020
Company-Owned Life Insurance	15,348		16,223
Assets Held for Sale	7,453		8,956
Deferred Tax Asset	7,014		7,014
Other Assets1	13,008		13,271
	$	89,179	$	89,895

1 During the second quarter of 2021, the Company recategorized items within the components of prepaid expenses and other assets. The presentation of prior period amounts has been reclassified to be consistent with the current period presentation. Such reclassification has no impact on the total prepaid expenses and other assets balance as of December 31, 2020.

Assets Held for Sale

Certain properties, consisting of parcels of land and commercial buildings, met the held for sale classification criteria as of June 30, 2021 and December 31, 2020. Assets held for sale are recorded at the lower of their carrying value or fair value less estimated cost to sell and are classified within prepaid expenses and other assets in the condensed consolidated balance sheets. Depreciation is suspended on assets upon classification to held for sale. Gains and losses related to the sale of assets held for sale are recorded in other operating expenses, net of restructuring expenses, net (if the asset is a part of the Company's restructuring programs further described in Note 5 to these condensed consolidated and combined financial statements) in the condensed consolidated and combined statements of earnings. Such gains and losses were not significant for the three and six months ended June 30, 2021 and June 30, 2020.

Management estimated the fair values of real estate properties using the market values for similar properties. These properties are considered Level 2 assets as defined below. The carrying amount of the properties held for sale as of June 30, 2021 and December 31, 2020 is $7.5 million and $9.0 million, respectively.

11

THE AARON’S COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:

(In Thousands)	June 30, 2021		December 31, 2020
Accounts Payable 1	$	63,983	$	84,738
Estimated Claims Liability Costs	53,804		49,272
Accrued Salaries and Benefits	54,576		53,396
Accrued Real Estate and Sales Taxes1	24,153		23,968
Other Accrued Expenses and Liabilities1	33,763		19,474
	$	230,279	$	230,848

1 During the second quarter of 2021, the Company recategorized items within the components of accounts payable and accrued expenses. The presentation of prior period amounts has been reclassified to be consistent with the current period presentation. Such reclassification has no impact on the total accounts payable and accrued expenses balance as of December 31, 2020.

Estimated Claims Liability Costs

Estimated claims liability costs are accrued primarily for workers compensation, vehicle liability, general liability and group health insurance benefits provided to employees. These liabilities are recorded within estimated claims liability costs within accounts payable and accrued expenses in the condensed consolidated balance sheets. Estimates for these claims liabilities are made based on actual reported but unpaid claims and actuarial analysis of the projected claims run off for both reported and incurred but not reported claims. This analysis is based upon an assessment of the likely outcome or historical experience. The Company makes periodic prepayments to its insurance carriers to cover the projected claims run off for both reported and incurred but not reported claims, considering its retention or stop loss limits. In addition, we have prefunding balances on deposit and other insurance receivables with the insurance carriers which are recorded within prepaid expenses and other assets in our condensed consolidated balance sheets.

12

THE AARON’S COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)

Goodwill

The Company’s goodwill is not amortized but is subject to an impairment test at the reporting unit level annually as of October 1 and more frequently if events or circumstances indicate that an impairment may have occurred. An interim goodwill impairment test is required if the Company believes it is more likely than not that the carrying amount of one or more reporting units exceeds the reporting units' fair value. The Company concluded that the need for an interim goodwill impairment test was triggered as of March 31, 2020. Factors that led to this conclusion included: (i) a significant decline in the Aaron's, Inc. stock price and market capitalization in March 2020; (ii) the temporary closure of all Company-operated store showrooms due to the COVID-19 pandemic, which impacted our financial results and was expected to adversely impact future financial results; (iii) the significant uncertainty with regard to the short-term and long-term impacts that macroeconomic conditions arising from the COVID-19 pandemic and related government emergency and executive orders would have on the financial health of our customers and franchisees; and (iv) consideration given to the amount by which the Aaron's Business reporting unit's fair value exceeded the carrying value from the October 1, 2019 annual goodwill impairment test.

As of March 31, 2020, management of Aaron's, Inc. determined its existing goodwill was fully impaired and recorded a goodwill impairment loss of $446.9 million during the three months ended March 31, 2020. Management engaged the assistance of a third-party valuation firm to perform the interim goodwill impairment test, which entailed an assessment of the Aaron's Business reporting unit’s fair value relative to the carrying value that was derived using a combination of both income and market approaches and performing a market capitalization reconciliation, which included an assessment of the control premium implied from the Company's estimated fair values of its reporting units. The fair value measurement involved significant unobservable inputs (Level 3 inputs, as discussed more fully below). The income approach utilized the discounted future expected cash flows, which required assumptions about short-term and long-term revenue growth or decline rates, operating margins, capital requirements, and a weighted-average cost of capital. The income approach reflected assumptions and estimates made by management regarding direct and indirect impacts of the COVID-19 pandemic on the short-term and long-term cash flows for the reporting unit. Due to the significant uncertainty associated with the impacts of the COVID-19 pandemic, the assumptions and estimates used by management were highly subjective. The weighted-average cost of capital used in the income approach was adjusted to reflect the specific risks and uncertainties associated with the COVID-19 pandemic in developing the cash flow projections. Given the uncertainty discussed above, the Company performed certain sensitivity analyses including considering reasonably possible alternative assumptions for short-term and long-term growth or decline rates, operating margins, capital requirements, and weighted-average cost of capital rates. Each of the sensitivity analyses performed supported the conclusion of a full impairment of the existing goodwill balance within the Aaron's Business reporting unit.

The market approach, which includes the guideline public company method, utilized pricing multiples derived from an analysis of comparable publicly traded companies. We believe the comparable companies we evaluate as marketplace participants serve as an appropriate reference when calculating fair value because those companies have similar risks, participate in similar markets, provide similar products and services for their customers and compete with us directly. However, we considered that such publicly available information regarding the comparable companies evaluated likely did not reflect the impact of the COVID-19 pandemic in determining the multiple assumptions selected.

The Company completed acquisitions of certain franchisees and third party rent-to-own stores subsequent to March 31, 2020, which resulted in a goodwill balance of $8.5 million and $7.6 million as of June 30, 2021 and December 31, 2020, respectively. The Company determined that there were no events that occurred or circumstances that changed during the three or six months ended June 30, 2021 that would more likely than not reduce the fair value of its reporting unit below its carrying amount.

13

THE AARON’S COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)

Segment Reporting

Management concluded that the Company has one operating and reportable segment based on the nature of the financial information regularly reviewed by the chief operating decision maker to assess performance and allocate resources. We have also concluded that the Company has one reporting unit due to the fact that the components included within the operating segment have similar economic characteristics, such as the nature of the products and services provided, the nature of the customers we serve, and the interrelated nature of the components that are aggregated to form the sole reporting unit. The Company evaluates performance and allocates resources as a single operating segment based on revenue growth and pre-tax profit or loss from operations.

Related Party

The Aaron's Company was a related party to PROG Holdings prior to the separation and distribution date.

All intercompany transactions between the Company and PROG Holdings were included within invested capital in the historical combined balance sheets prior to the separation and distribution date, and are classified as changes in invested capital within stockholders' equity for the historical periods prior to the separation and distribution date. The total net effect of the settlement of these intercompany transactions is reflected in the condensed consolidated and combined statements of cash flows as a financing activity for the six months ended June 30, 2020.

Corporate Allocations

The Company's previous operating model included a combination of standalone and combined business functions with PROG Holdings. The condensed consolidated and combined financial statements in the 2020 Annual Report include corporate allocations to the Company through the separation and distribution date for expenses related to activities that were previously provided on a centralized basis within PROG Holdings. These expenses primarily related to 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. See Note 12 to the consolidated and combined financial statements in the 2020 Annual Report for more information regarding stock-based compensation. Corporate allocations to the Company during the three and six months ended June 30, 2020 also include expenses related to the separation and distribution. These expenses have been allocated to the Company based on direct usage or benefit where specifically identifiable, with the remainder allocated primarily on a pro rata basis using an applicable measure of revenues, headcount or other relevant measures. The Company considers these allocations to be a reasonable reflection of the utilization of services or the benefit received. These allocated expenses are included within personnel costs and other operating expenses, net in the condensed consolidated and combined statements of earnings and as an increase to invested capital in the historical condensed combined balance sheets prior to the separation and distribution date. General corporate expenses allocated to the Company during the three and six months ended June 30, 2020 were $5.3 million and $11.9 million, respectively.

Management believes the assumptions regarding the allocation of general corporate expenses from PROG Holdings are reasonable. However, the consolidated and combined financial statements may not include all of the actual expenses that would have been incurred and may not reflect the Company's consolidated and combined results of operations, financial position and cash flows had it been a standalone company during the periods presented. Actual costs that would have been incurred if the Company had been a standalone company would depend on multiple factors, including organization structure and various other strategic decisions.

14

THE AARON’S COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)

Post-Separation Arrangements

In connection with the separation and distribution, the Company entered into several agreements with PROG Holdings, which (i) govern the separation and our relationship with PROG Holdings after the separation, and (ii) provide for the allocation between the two companies of PROG Holdings' assets, employees, liabilities and obligations (including its investments, property and employee benefits and tax-related assets and liabilities) attributable to periods prior to, at, and after the separation. These agreements are further described in Note 14 to the consolidated and combined financial statements in the 2020 Annual Report. Amounts incurred and due to or from PROG Holdings for transition services were not significant during the three and six months ended June 30, 2021.

Stockholders' Equity

Changes in stockholders' equity for the three and six months ended June 30, 2021 and 2020 are as follows:

	Treasury Stock			Common Stock		Invested Capital		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
(In Thousands, Except Per Share)	Shares	Amount
Balance, December 31, 2020	(895)	$	(15,977)	$	17,550	$	—	$	708,668	$	1,881	$	(797)	$	711,325
Cash Dividends, $0.10 per share	—	—		—		—		—		(3,472)		—		(3,472)
Stock-Based Compensation	—	—		—		—		3,551		—		—		3,551
Issuance of Shares under Equity Plans	(114)	(2,729)		165		—		378		—		—		(2,186)
Acquisition of Treasury Stock	(252)	(6,280)		—		—		—		—		—		(6,280)
Net Earnings	—	—		—		—		—		36,323		—		36,323
Foreign Currency Translation Adjustment	—	—		—		—		—		—		127		127
Balance, March 31, 2021	(1,261)	$	(24,986)	$	17,715	$	—	$	712,597	$	34,732	$	(670)	$	739,388
Cash Dividends, $0.10 per share	—	—		—		—		—		(3,387)		—		(3,387)
Stock-Based Compensation	—	—		—		—		1,714		—		—		1,714
Issuance of shares under equity plans	—	—		45		—		1,202		—		—		1,247
Acquisition of Treasury Stock	(1,166)	(38,642)		—		—		—		—		—		(38,642)
Net Earnings	—	—		—		—		—		32,975		—		32,975
Foreign Currency Translation Adjustment	—	—		—		—		—		—		220		220
Balance, June 30, 2021	(2,427)	$	(63,628)	$	17,760	$	—	$	715,513	$	64,320	$	(450)	$	733,515

	Treasury Stock			Common Stock		Invested Capital		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
(In Thousands, Except Per Share)	Shares	Amount
Balance, December 31, 2019	—	$	—	$	—	$	837,800	$	—	$	—	$	(19)	$	837,781
Stock-Based Compensation	—	—		—		2,725		—		—		—		2,725
Net increase in Invested Capital	—	—		—		90,211		—		—		—		90,211
Net Loss	—	—		—		(323,774)		—		—		—		(323,774)
Foreign Currency Translation Adjustment	—	—		—		—		—		—		(1,754)		(1,754)
Balance, March 31, 2020	—	$	—	$	—	$	606,962	$	—	$	—	$	(1,773)	$	605,189
Stock-Based Compensation	—	—		—		2,892		—		—		—		2,892
Net increase in Invested Capital	—	—		—		35,994		—		—		—		35,994
Net Earnings	—	—		—		22,374		—		—				22,374
Foreign Currency Translation Adjustment	—	—		—		—		—		—		331		331
Balance, June 30, 2020	—	$	—	$	—	$	668,222	$	—	$	—	$	(1,442)	$	666,780

15

THE AARON’S COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)

Fair Value Measurement

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Valuations based on unobservable inputs reflecting the Company's own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

The Company measures a liability related to its non-qualified deferred compensation plan, which represents benefits accrued for participants that are part of the plan and is valued at the quoted market prices of the participants' investment election, at fair value on a recurring basis. The Company measures assets held for sale at fair value on a nonrecurring basis and records impairment charges when they are deemed to be impaired.

The fair values of the Company's other current financial assets and liabilities, including cash and cash equivalents, accounts receivable and accounts payable, approximate their carrying values due to their short-term nature. The Company also measures certain non-financial assets at fair value on a nonrecurring basis, such as goodwill, intangible assets, operating lease right-of-use assets, and property, plant, and equipment, in connection with periodic evaluations for potential impairment.

Recent Accounting Pronouncements

Adopted

Income Taxes. In December 2019, the Financial Accounting Standards Board (the "FASB") issued ASU 2019-12, Simplifying the Accounting for Income Taxes. This guidance simplifies the accounting for income taxes by removing certain exceptions to general principles in Income Taxes (ASC 740). It also simplifies certain aspects of accounting for franchise taxes and clarifies and amends existing guidance to improve consistent application and reduce complexity. There was no material impact on the consolidated financial statements of the Company upon adoption of the standard during the first quarter of 2021.

Pending Adoption

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). The standard provides temporary guidance to ease the potential burden in accounting for reference rate reform primarily resulting from the discontinuation of the London Interbank Overnight ("LIBO") rate, which is currently expected to occur on December 31, 2021. The Company's $250.0 million senior unsecured revolving credit facility (the "Revolving Facility"), as further described in Note 8 to the consolidated and combined financial statements in the 2020 Annual Report, currently references the LIBO rate for determining interest payable on outstanding borrowings. The amendments in ASU 2020-04 are elective and apply to all entities that have contracts referencing the LIBO rate. The new guidance provides an expedient which simplifies accounting analyses under current GAAP for contract modifications if the change is directly related to a change from the LIBO rate to a new interest rate index. The Company will adopt the standard in the first quarter of 2022, and is continuing to evaluate the provisions of ASU 2020–04 and the impacts of transitioning to an alternative rate; however, we do not expect it to have a material impact to the Company's consolidated financial statements or to any key terms of our Revolving Facility other than the discontinuation of the LIBO rate.

16

THE AARON’S COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)

NOTE 2. FAIR VALUE MEASUREMENT

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes financial liabilities measured at fair value on a recurring basis:

(In Thousands)	June 30, 2021						December 31, 2020
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Deferred Compensation Liability	$	—	$	(11,074)	$	—	$	—	$	(10,450)	$	—

The Company maintains The Aaron's Company, Inc. Deferred Compensation Plan, which is an unfunded, nonqualified deferred compensation plan for a select group of management, highly compensated employees and non-employee directors. The liability represents benefits accrued for plan participants and is valued at the quoted market prices of the participants’ investment elections, which consist of equity and debt "mirror" funds. As such, the Company has classified the deferred compensation liability as a Level 2 liability, which is recorded in accounts payable and accrued expenses in the condensed consolidated balance sheets.

Non-Financial Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The following table summarizes non-financial assets measured at fair value on a nonrecurring basis:

(In Thousands)	June 30, 2021						December 31, 2020
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets Held for Sale	$	—	$	7,453	$	—	$	—	$	8,956	$	—

Assets classified as held for sale are recorded at the lower of carrying value or fair value less estimated costs to sell, and any adjustment is recorded in other operating expenses, net or restructuring expenses, net (if the asset is a part of the Company's restructuring programs as described in Note 5 to these condensed consolidated and combined financial statements) in the condensed consolidated and combined statements of earnings. The highest and best use of the assets held for sale is as real estate land parcels for development or real estate properties for use or lease; however, the Company has chosen not to develop or use these properties, and plans to sell the properties to third parties as quickly as practicable.

NOTE 3: REVENUE RECOGNITION

The following table disaggregates revenue by source:

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2021		2020		2021		2020
Lease Revenues and Fees	$	411,621	$	380,237	$	839,262	$	769,616
Retail Sales	16,877		14,020		33,323		23,551
Non-Retail Sales	32,455		33,044		62,404		59,890
Franchise Royalties and Fees	6,253		3,365		12,962		10,089
Other	289		289		598		640
Total1	$	467,495	$	430,955	$	948,549	$	863,786

1 Includes revenues from Canadian operations of $6.1 million and $12.0 million during the three and six months ended June 30, 2021, respectively (three and six months ended June 30, 2020: $5.3 million and $10.7 million, respectively). The revenues are primarily lease revenues and fees.

17

THE AARON’S COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)

Lease Revenues and Fees

The Company provides lease merchandise, consisting of furniture, appliances, electronics, computers, and a variety of other products and accessories to its customers for lease under certain terms agreed to by the customer. The Company’s stores and its e-commerce platform offer leases with flexible ownership plans that can be renewed monthly up to 12, 18 or 24 months. The Company does not require deposits upon inception of customer agreements. The customer has the right to acquire ownership either through an early purchase option or through payment of all required lease payments through the end of the ownership plan. Our store-based operations also offer customers the option to obtain a membership in the Aaron’s Club program. The benefits to customers of the Club program are separated into three general categories: (a) product protection benefits; (b) health & wellness discounts; and (c) dining, shopping and consumer savings. Lease agreements and Aaron's Club program memberships are cancelable at any time by either party without penalty, and as such, we consider these offerings to be to be month-to-month arrangements.

Lease revenues related to the leasing of merchandise and Aaron's Club membership fees are recognized as revenue in the month they are earned. Payments received prior to the month earned are recorded as deferred lease revenue, and this amount is included in customer deposits and advance payments in the accompanying condensed consolidated balance sheets. Lease revenues are recorded net of a provision for returns and uncollectible renewal payments.

All of the Company's customer lease agreements are considered operating leases. The Company maintains ownership of the lease merchandise until all payment obligations are satisfied under sales and lease ownership agreements. Initial direct costs related to customer agreements are expensed as incurred and have been classified as other operating expenses, net in the condensed consolidated and combined statements of earnings. The statement of earnings effects of expensing the initial direct costs as incurred are not materially different from amortizing initial direct costs over the lease ownership plan.

Substantially all lease revenues and fees were within the scope of ASC 842, Leases, during the three and six months ended June 30, 2021 and 2020. Included in lease revenues and fees above, the Company had $6.8 million and $13.0 million of other revenue during the three and six months ended June 30, 2021, respectively (three and six months ended June 30, 2020: $6.4 million and $12.3 million, respectively) within the scope of ASC 606, Revenue from Contracts with Customers. Lease revenues and fees are recorded within lease and retail revenues in the accompanying condensed consolidated and combined statements of earnings.

Retail and Non-Retail Sales

Revenues from the retail sale of merchandise to individual consumers are recognized at the point of sale. Generally, the transfer of control occurs near or at the point of sale for retail sales. Revenues for the non-retail sale of merchandise to franchisees are recognized when control transfers to the franchisee, which is upon delivery of the merchandise.

Sales of lease merchandise to franchisees and to other customers are recorded within non-retail sales and lease and retail revenues, respectively, in the accompanying condensed consolidated and combined statements of earnings. All retail and non-retail sales revenue is within the scope of ASC 606, Revenue from Contracts with Customers, during the three and six months ended June 30, 2021 and 2020.

Franchise Royalties and Fees

Franchisees pay an ongoing royalty of 6% of the weekly cash revenue payments received, which is recognized as the fees become due. In response to the COVID-19 pandemic, the Company temporarily suspended, as opposed to deferring, the royalty fee obligation in March 2020, effectively forgiving the franchisee royalty payments that otherwise would have been due during the suspension period. The Company reinstated the requirement that franchisees make royalty payments during the second quarter of 2020.

The Company guarantees certain debt obligations of some of the franchisees and receives guarantee fees based on the outstanding debt obligations of such franchisees. Refer to Note 4 to these condensed consolidated and combined financial statements for additional discussion of the franchise-related guarantee obligation. The Company also charges fees for advertising efforts that benefit the franchisees, which are recognized at the time the advertising takes place.

Substantially all franchise royalties and fees revenue is within the scope of ASC 606, Revenue from Contracts with Customers. Of the franchise royalties and fees, $4.9 million and $10.3 million during the three and six months ended June 30, 2021, respectively, (three and six months ended June 30, 2020: $2.6 million and $7.6 million, respectively) is related to franchise royalty income that is recognized as the fees become due. The remaining revenue is primarily related to advertising fees charged to franchisees. Franchise royalties and fees are recorded within franchise royalties and other revenue in the accompanying condensed consolidated and combined statements of earnings.

18

THE AARON’S COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)

NOTE 4. COMMITMENTS AND CONTINGENCIES

Guarantees

The Company has guaranteed certain debt obligations of some of its franchisees under a franchise loan program (the "Franchise Loan Facility") as described below with several of the banks in our Revolving Facility. In the event these franchisees are unable to meet their debt service payments or otherwise experience an event of default, the Company would be unconditionally liable for the outstanding balance of the franchisees’ debt obligations under the Franchise Loan Facility, which would be due in full within 75 days of the event of default. The Franchise Loan Facility has a total commitment of $25.0 million and expires on November 16, 2021. We are able to request additional 364-day extensions of our franchise loan facility, as long as we are not in violation of any of the covenants under that facility or our Revolving Facility, and no event of default exists under those agreements, until such time as our Revolving Facility expires. We currently expect to include a franchise loan facility as part of any future extension or renewal of our Revolving Facility. At June 30, 2021, the maximum amount that the Company would be obligated to repay in the event franchisees defaulted was $10.8 million. The Company is subject to financial covenants under the Franchise Loan Facility that are consistent with the Revolving Facility, which are more fully described in Note 8 to the consolidated and combined financial statements in the 2020 Annual Report.

The Company has recourse rights to franchisee assets securing the debt obligations, which consist primarily of lease merchandise and fixed assets. Since the inception of the franchise loan program in 1994, the Company's losses associated with the program have been immaterial. However, such losses could be material in a future period due to adverse trends in the liquidity and/or financial performance of the Company's franchisees. The Company records a liability related to estimated future losses from repaying the franchisees' outstanding debt obligations upon any possible future events of default. This is included in accounts payable and accrued expenses in the condensed consolidated balance sheets and was $2.2 million and $2.4 million at June 30, 2021 and December 31, 2020, respectively. The balances at June 30, 2021 and December 31, 2020 included qualitative consideration of potential losses, including uncertainties surrounding the normalization of current and future business trends associated with an anticipated end to the COVID-19 pandemic, and the corresponding unknown effect on the operations and liquidity of our franchisees.

Legal Proceedings

From time to time, the Company is party to various legal and regulatory proceedings arising in the ordinary course of business, certain of which have been described below. The Company establishes an accrued liability for legal and regulatory proceedings when it determines that a loss is both probable and the amount of the loss can be reasonably estimated. The Company continually monitors its litigation and regulatory exposure and reviews the adequacy of its legal and regulatory reserves on a quarterly basis. The amount of any loss ultimately incurred in relation to matters for which an accrual has been established may be higher or lower than the amounts accrued for such matters due to the inherent uncertainty in litigation, regulatory and similar adversarial proceedings, and substantial losses from these proceedings or the costs of defending them could have a material adverse impact upon the Company’s business, financial position, and results of operations.

At June 30, 2021 and December 31, 2020, the Company had accrued $1.5 million and $0.8 million, respectively, for pending legal and regulatory matters for which it believes losses are probable and is management’s best estimate of its exposure to loss. The Company records these liabilities in accounts payable and accrued expenses in the condensed consolidated balance sheets. The Company estimates that the aggregate range of reasonably possible loss in excess of accrued liabilities for such probable loss contingencies is between zero and $2.6 million.

At June 30, 2021, the Company estimated that the aggregate range of loss for all material pending legal and regulatory proceedings for which a loss is reasonably possible, but less likely than probable (i.e., excluding the contingencies described in the preceding paragraph), is between zero and $0.5 million. Those matters for which a reasonable estimate is not possible are not included within estimated ranges and, therefore, the estimated ranges do not represent the Company’s maximum loss exposure. The Company’s estimates for legal and regulatory accruals, aggregate probable loss amounts and reasonably possible loss amounts, are all subject to the uncertainties and variables described above.

Regulatory Inquiries

In the first quarter of 2021, Aaron's, LLC, along with a number of other lease-to-own companies, received a subpoena from the California Department of Financial Protection and Innovation (the "DFPI") requesting the production of documents regarding the Company’s compliance with state consumer protection laws. The Company is cooperatively engaging with the DFPI in response to its inquiry. Although the Company believes it is in compliance with all applicable consumer protection laws and regulations in California, this inquiry ultimately could lead to an enforcement action and/or a consent order, and substantial costs, including legal fees, fines, penalties, and remediation expenses.

19

THE AARON’S COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)

Other Contingencies

Management regularly assesses the Company’s insurance deductibles, monitors litigation and regulatory exposure with the Company’s attorneys, and evaluates its loss experience. The Company also enters into various contracts in the normal course of business that may subject it to risk of financial loss if counterparties fail to perform their contractual obligations.

NOTE 5. RESTRUCTURING

Real Estate Repositioning and Optimization Restructuring Program

During the first quarter of 2020, the Company initiated a real estate repositioning and optimization restructuring program. This program includes a strategic plan to remodel, reposition, and consolidate our Company-operated store footprint over the next three to four years. We believe that such strategic actions will allow the Company to continue to successfully serve our markets while continuing to utilize our growing Aarons.com shopping and servicing platform. Management expects that this strategy, along with our increased use of technology, will enable us to reduce store count while retaining a significant portion of our existing customer relationships as well as attract new customers. Since initiation, the program has resulted in the closure, consolidation, or relocation of 111 Company-operated stores during 2020 and the first six months of 2021. As of June 30, 2021, we have identified approximately 76 remaining stores for closure, consolidation, or relocation that have not yet been closed and vacated, nearly all of which are expected to be vacated by December 31, 2021. During the three and six months ended June 30, 2020, we also further rationalized our store support center staff, which resulted in a reduction in employee headcount in those areas to more closely align with current business conditions.

Total net restructuring expenses of $0.9 million and $4.0 million were recorded for the three and six months ended June 30, 2021 under the real estate repositioning and optimization restructuring program. Restructuring expenses were comprised mainly of operating lease right-of-use asset and fixed asset impairment charges related to the vacancy or planned vacancy of stores identified for closure, continuing variable occupancy costs incurred related to closed stores, and offset by gains related to the sale of vehicle and real estate assets previously impaired in conjunction with the repositioning and optimization program in prior periods.

As management continues to execute on its long-term plan, additional restructuring charges will result from our real estate repositioning and optimization initiatives, primarily related to operating lease right-of-use asset and fixed asset impairments. However, the extent of future restructuring charges is not estimable at this time, as the specific relocation site for the locations noted above have not yet been identified by management. Additionally, we expect future restructuring expenses (reversals) due to potential future early buyouts of leases with landlords, as well as continuing variable occupancy costs related to closed stores.

2019 Restructuring Program

During the first quarter of 2019, the Company initiated a restructuring program to optimize its Company-operated Aaron's store portfolio, which resulted in the closure and consolidation of 155 underperforming Company-operated stores during 2019. The Company also rationalized its store support center and field support staff, which resulted in a reduction in associate headcount in those areas to more closely align with current business conditions.

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THE AARON’S COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)

Total net restructuring expenses of $0.8 million and $1.0 million were recorded for the three and six months ended June 30, 2021 under the 2019 restructuring program. Restructuring expenses were primarily comprised of continuing variable occupancy costs incurred related to closed stores. These costs were included in restructuring expenses, net in the condensed consolidated and combined statements of earnings. We expect future restructuring expenses (reversals) due to potential future early buyouts of leases with landlords as well as continuing variable occupancy costs.

The following table summarizes restructuring charges for the three and six months ended June 30, 2021 and 2020, respectively, under both of the Company's restructuring programs:

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2021		2020		2021		2020
Right-of-Use Asset Impairment	$	401	$	2,456	$	2,272	$	18,634
Operating Lease Charges	1,660		1,557		2,751		2,570
Fixed Asset Impairment	95		263		416		2,952
Severance	113		2,694		150		4,725
Other Expenses	50		21		171		396
Gain on Asset Sale	(525)		—		(525)		—
Total Restructuring Expenses, Net1	$	1,794	$	6,991	$	5,235	$	29,277

1 Includes expenses related to our 2016 and 2017 restructuring programs as described within Note 11 to the consolidated and combined financial statements in the 2020 Annual Report, which were not significant during the three and six months ended June 30, 2021.

To date, the Company has incurred charges of $46.2 million under the 2019 restructuring program, and $37.9 million under the real estate repositioning and optimization restructuring program. These cumulative charges are primarily comprised of operating lease right-of-use asset and fixed impairment charges, losses recognized related to contractual lease obligations, and severance related to reductions in store support center and field support staff headcount.

The following table summarizes the activity for the six months ended June 30, 2021 and the corresponding accrual balance as of June 30, 2021 for the restructuring programs:

(In Thousands)	Severance
Balance at January 1, 2021	$	773
Restructuring Severance Charges	150
Payments	(923)
Balance at June 30, 2021	$	—

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Special Note Regarding Forward-Looking Information: Except for historical information contained herein, the matters set forth in this Form 10-Q are forward-looking statements. These statements are based on management’s current expectations and plans, which involve risks and uncertainties. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as "believe," "expect," "expectation," "anticipate," "may," "could," "should", "intend," "belief," "estimate," "plan," "target," "project," "likely," "will," "forecast,", "future", "outlook," and similar expressions. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the filing date of this Quarterly Report and which involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. These risks and uncertainties include factors such as (i) any ongoing impact of the COVID-19 pandemic due to new variants or efficacy and rate of vaccinations, as well as related measures taken by governmental or regulatory authorities to combat the pandemic, including whether additional government stimulus payments or supplemental unemployment benefits will be approved, and the nature, amount and timing of any such payments or benefits; (ii) the possibility that the operational, strategic and shareholder value creation opportunities expected from the separation and spin-off of the Aaron’s Business (as defined below) into what is now The Aaron’s Company, Inc. may not be achieved in a timely manner, or at all; (iii) the failure of that separation to qualify for the expected tax treatment; (iv) changes in the enforcement and interpretation of existing laws and regulations and the adoption of new laws and regulations that may unfavorably impact our business; (v) legal and regulatory proceedings and investigations, including those related to consumer protection laws and regulations, customer privacy, third party and employee fraud and information security; (vi) the risks associated with our strategy and strategic priorities not being successful, including our e-commerce and real estate repositioning and optimization initiatives or being more costly than anticipated; (vii) risks associated with the challenges faced by our business, including the commoditization of consumer electronics and our high fixed-cost operating model; (viii) increased competition from traditional and virtual lease-to-own competitors, as well as from traditional and online retailers and other competitors; (ix) financial challenges faced by our franchisees; (x) increases in lease merchandise write-offs and the potential limited duration and impact of stimulus and other government payments made by the federal and state governments to counteract the economic impact of the COVID-19 pandemic; and the other risks and uncertainties discussed under "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the "2020 Annual Report"). Except as required by law, the Company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances after the filing date of this Quarterly Report.

The following discussion should be read in conjunction with the condensed consolidated and combined financial statements as of and for the three and six months ended June 30, 2021 and 2020, including the notes to those statements, appearing elsewhere in this report. We also suggest that management’s discussion and analysis appearing in this report be read in conjunction with the management’s discussion and analysis and the consolidated and combined financial statements included in our 2020 Annual Report.

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Description of Spin-off Transaction

On October 16, 2020, management of Aaron’s, Inc. finalized the formation of a new holding company structure in anticipation of the separation and distribution transaction described below. Under the holding company structure, Aaron’s, Inc. became a direct, wholly owned subsidiary of a newly formed company, Aaron’s Holdings Company, Inc. Aaron's, Inc. was subsequently converted to a limited liability company ("Aaron’s, LLC") holding the assets and liabilities historically associated with the historical Aaron's Business segment (the "Aaron's Business"). Upon completion of the holding company formation, Aaron’s Holdings Company, Inc. became the publicly traded parent company of the Progressive Leasing segment ("Progressive Leasing "), Aaron’s Business, and Vive segment ("Vive").

On November 30, 2020 (the "separation and distribution date"), Aaron's Holdings Company, Inc. completed the previously announced separation of the Aaron's Business from Progressive Leasing and Vive and changed its name to PROG Holdings, Inc. (referred to herein as "PROG Holdings" or "Former Parent"). The separation of the Aaron's Business segment was effected through a distribution (the "separation", the "separation and distribution", or the "spin-off transaction") of all outstanding shares of common stock of a newly formed company called The Aaron's Company, Inc. ("Aaron's", "The Aaron's Company" or the "Company"), a Georgia corporation, to the PROG Holdings shareholders of record as of November 27, 2020. Upon the separation and distribution, Aaron's, LLC became a wholly-owned subsidiary of The Aaron's Company. Shareholders of PROG Holdings received one share of The Aaron's Company for every two shares of PROG Holdings' common stock. Upon completion of the separation and distribution transaction, The Aaron's Company became an independent, publicly traded company under the ticker "AAN" on the New York Stock Exchange.

Unless the context otherwise requires or we specifically indicate otherwise, references to "we," "us," "our," "our Company," and "the Company" refer to The Aaron's Company, Inc., which holds, directly or indirectly, the Aaron’s Business prior to the separation and distribution date. References to "the Company", "Aaron's, Inc.", or "Aaron's Holdings Company, Inc." for periods prior to the separation and distribution date refer to transactions, events, and obligations of Aaron's, Inc., which took place prior to the separation and distribution. Historical amounts herein include revenues and costs directly attributable to the Company and an allocation to the Company of expenses of the Aaron's Business related to certain PROG Holdings' corporate functions prior to the separation and distribution date.

Business Overview

Aaron's is a leading, technology-enabled, omni-channel provider of lease-to-own ("LTO") and purchase solutions generally focused on serving the large, credit-challenged segment of the population. Through our portfolio of approximately 1,300 stores and our Aarons.com e-commerce platform, we provide consumers with LTO and purchase solutions for the products they need and want, including furniture, appliances, electronics, computers and a variety of other products and accessories. We focus on providing our customers with unparalleled customer service and an attractive value proposition, including low monthly payments and total cost of ownership, high approval rates and flexible lease ownership plans. In addition, we offer a wide product selection, and for our lease customers we offer free prompt delivery, setup, service and product returns, and the ability to pause, cancel or resume lease contracts at any time with no additional costs to the customer.

Recent Restructuring Programs

As a result of our real estate repositioning strategy and other cost-reduction initiatives, we initiated a restructuring program in 2020 to optimize our Company-operated store portfolio. This restructuring program has resulted in the closure, consolidation or relocation of a total of 111 Company-operated stores during 2020 and the first six months of 2021. We currently expect to close, consolidate, or relocate approximately 76 additional stores by December 31, 2021 under this program. Additionally, from 2016 to 2019, we closed and consolidated a total of 294 underperforming Company-operated stores under similar restructuring initiatives. We will continue to evaluate our Company-operated store portfolio to determine how to best rationalize and reposition our store base to better align with marketplace demand.

Under the real estate repositioning and optimization restructuring program, though all specific locations have not yet been identified, the Company’s current strategic plan is to remodel, reposition and consolidate our Company-operated store footprint over the next three to four years. We believe that such strategic actions will allow the Company to continue to successfully serve our markets while continuing to utilize our growing Aarons.com shopping and servicing platform. Management expects that this strategy, along with our increased use of technology, will enable us to reduce store count while retaining a significant portion of our existing customer relationships and attract new customers. To the extent that management executes on its long-term strategic plan, additional restructuring charges will likely result from our real estate repositioning and optimization initiatives, primarily related to operating lease right-of-use asset and fixed asset impairments. However, the extent of future restructuring charges is not estimable at this time, as specific store locations to be closed and/or consolidated, beyond the stores noted above, have not yet been identified by management.

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Recent Developments and Operational Measures Taken by Us in Response to the COVID-19 Pandemic

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. As a result of the COVID-19 pandemic, we temporarily closed our showrooms in March 2020 and shifted to e-commerce and curbside service only for all of our Company-operated stores to protect the health and safety of our customers and associates, except where such curbside service was prohibited by governmental authorities. Since that time, we have reopened our store showrooms, but there can be no assurance that those showrooms will not be closed in future months, or have their operations limited, if, for example, there are new variants of the virus, localized increases in infections or "additional waves" in the number of COVID-19 cases in the areas where our stores are located and, in response, governmental authorities issue orders requiring such closures or limitations on operations, or we voluntarily close our showrooms or limit their operations to protect the health and safety of our customers and associates. Furthermore, we have experienced disruptions in our supply chain which have impacted product availability in some of our stores and, in some situations, we are procuring inventory from alternative sources at higher costs. These developments have had an unfavorable impact on our generation of lease agreements.

The COVID-19 pandemic may impact our business, results of operations, financial condition, liquidity and/or cash flow in future periods. The extent of any such impacts likely would depend on several factors, including (a) the length and severity of any continuing impact of the pandemic, which may be affected by the successful distribution and efficacy of COVID-19 vaccines to our customers and associates, as well as any new variants of the virus, localized outbreaks or additional waves of COVID-19 cases, among other factors; (b) the impact of any such outbreaks on our customers, suppliers, and employees; (c) the nature of any government orders issued in response to such outbreaks, including whether we would be deemed essential, and thus, exempt from all or some portion of such orders; (d) the extent of the impact of additional government stimulus and/or enhanced unemployment benefits to our customers in response to the negative economic impacts of the COVID-19 pandemic, as well as the nature, timing and amount of any such stimulus payments or benefits; and (e) supply chain disruptions for our business.

The following summarizes significant developments and operational measures taken by us in response to the COVID-19 pandemic:

•In our Company-operated stores, we are monitoring and limiting, where possible, associates' potential exposure to persons at or who may enter our stores, reviewing orders and industry-specific guidance from applicable federal and state laws, Occupational Safety and Health Administration regulations and Centers for Disease Control ("CDC") and state/local health authorities, evaluating our existing COVID-19 prevention controls and the need for different or additional controls, and conducting periodic inspections at our stores to identify unhealthy conditions, work practices and work procedures related to COVID-19 to help ensure compliance with our COVID-19 policies and procedures. We have also installed protective plexiglass barriers at check-out counters, implemented enhanced cleaning and sanitization procedures, and reconfigured our showrooms in a manner designed to reduce COVID-19 transmission. We also require associates to adhere to the latest CDC and state/local health authorities guidelines with respect to social distancing and face coverings.

•In conjunction with the operational adjustments made at our Company-operated stores, we accelerated the national rollout of our centralized digital decisioning platform, which is an algorithm-driven lease decisioning tool used in our Company-operated stores that is designed to improve our customers' experiences by streamlining and standardizing the lease application decisioning process, shortening transaction times, and establishing appropriate transaction sizes and lease payment amounts, given the customer’s profile. We completed the national rollout during the second quarter of 2020, and that decisioning platform is now being utilized in all of our Company-operated and most of our franchised store locations in the United States.

•To assist the franchisees of our business who were facing adverse impacts to their businesses, we offered a royalty fee abatement from March 8, 2020 until May 16, 2020 and modified payment terms on outstanding accounts receivable owed to us by franchisees. In addition, payment terms were temporarily modified for the franchise loan facility under which certain franchisees have outstanding borrowings that are guaranteed by us.

•Our management team and store support center associates are continuing to primarily work remotely through the end of the second quarter of this year. We expect that approximately 65% of our management and store support center associates will return to the office for between two and five days a week in the third quarter of 2021, with the remainder working fully remote moving forward. Additionally, we reduced our corporate real estate footprint by electing to permanently vacate one of our leased administrative offices in Kennesaw, Georgia during the fourth quarter of 2020.

Coronavirus Legislative Relief

In response to the global impacts of COVID-19 on U.S. companies and citizens, the government enacted the Coronavirus, Aid, Relief, and Economic Security Act ("CARES Act") on March 27, 2020, the Consolidated Appropriations Act on December 27,

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2020, and the American Rescue Plan Act of 2021 ("American Rescue Plan") on March 11, 2021. We believe a significant portion of our customers have received stimulus payments and/or federally supplemented unemployment payments, pursuant to these economic stimulus measures, which we believe have enabled them to continue making payments to us under their lease-to-own agreements, despite the economically challenging times resulting from the COVID-19 pandemic. In addition to the stimulus payments mentioned above, we also believe that certain elements of the American Rescue Plan, primarily the temporary expansion of the child tax credit which increases the amount of the credit, makes the credit fully refundable, and allows for half of the credit to be paid in periodic installments beginning on July 15, 2021, should have a beneficial impact to certain of our customers. Additionally, we may experience an increase in the exercise of early purchase options or decreases in the total number of new ownership plans, as customers could potentially opt to use such payments and credits to acquire merchandise outside of our LTO solutions.

The CARES Act included several tax relief options for companies, which resulted in the following provisions available to the Company:

•Aaron's, Inc. elected to carryback its 2018 net operating losses of $242.2 million to 2013, generating a refund of $84.4 million, which was received in July 2020, and a discrete income tax benefit of $34.2 million recognized during the three months ended March 31, 2020. The discrete tax benefit is the result of the federal income tax rate differential between the current statutory rate of 21% and the 35% rate applicable to 2013.

•Throughout 2020, the Company deferred $16.5 million in payroll taxes that it was permitted to defer under the CARES Act, which generally applies to Social Security taxes otherwise due, with 50% of the tax payable on December 31, 2021 and the remaining 50% payable on December 31, 2022.

•Certain wages and benefits that were paid to furloughed employees were eligible for an employee retention credit of up to 50% of wages paid to eligible associates.

Separate from the CARES Act, the Internal Revenue Service extended the due dates for estimated tax payments for the first and second quarters of 2020 to July 15, 2020. Additionally, many states offered similar deferrals. The Company took advantage of all such extended due dates.

The federal supplement to unemployment payments originally lapsed on July 31, 2020, but has been extended on a prospective basis through September 6, 2021, although certain states have decided to stop participation in the supplemental payments prior to that date. The current nature and/or extent of future stimulus measures, if any, remains unknown. We cannot be certain that our customers will continue making their payments to us at recently experienced levels if the federal government does not continue supplemental measures or enact additional stimulus measures, which could result in a significant reduction in the portion of our customers who continue making payments owed to us under their lease-to-own agreements.

Highlights

The following summarizes significant financial highlights from the three months ended June 30, 2021:

•We reported revenues of $467.5 million in the second quarter of 2021 compared to $431.0 million for the second quarter of 2020, an increase of 8.5%. This increase is primarily due to a $33.2 million increase driven by an 11.2% increase in same store revenues, partially offset by the planned net reduction of 42 Company-operated stores and the reduction of 71 franchised stores during the 15-month period ended June 30, 2021. The increase in same store revenues was driven by a larger same store lease portfolio size, which ended the first quarter of 2021 at $98.1 million, up 5.3% compared to 2020, and ended the second quarter of 2021 at $101.6 million, up 8.7% compared to the second quarter of 2020, and strong customer payment activity. E-commerce revenues increased 16% compared to the prior year quarter and were approximately 14% and 13% of total lease revenues and fees during the three months ended June 30, 2021 and 2020, respectively.

•Earnings before income taxes were $44.3 million in the second quarter of 2021 compared to $29.4 million during the prior comparable period. Earnings before income taxes during the second quarter of 2021 were negatively impacted by restructuring charges of $1.8 million and separation-related costs of $1.2 million. Operating results from the second quarter of 2020 were negatively impacted by restructuring charges of $7.0 million.

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Key Metrics

Lease Portfolio Size. Our lease portfolio size represents the total balance of collectible lease payments for the next month derived from our aggregate outstanding customer lease agreements at a point in time. As of the end of any period, the lease portfolio size is calculated as the lease portfolio size at the beginning of the period plus collectible lease payments for the next month derived from new lease agreements originated in the period less the reduction in collectible lease payments for the next month as a result primarily of customer agreements that reach full ownership, lease merchandise returns and write-offs, and customer early purchase option exercises. Lease portfolio size provides management insight into expected future collectible lease payments. The Company ended the second quarter of 2021 with a lease portfolio size for all Company-operated stores of $132.8 million, an increase of 7.6% compared to the balance as of June 30, 2020.

Same Store Revenues. We believe that changes in same store revenues are a key performance indicator of the Company, as it provides management insight into our ability to collect customer payments, including contractually due payments and early purchase options exercised by our current customers. Additionally, this indicator allows management to gain insight into the Company's success in writing new leases into and retaining current customers.

For the three months ended June 30, 2021, we calculated this amount by comparing revenues for the three months ended June 30, 2021 to revenues for the comparable period in 2020 for all stores open for the entire 15-month period ended June 30, 2021, excluding stores that received lease agreements from other acquired, closed or merged stores. For the six months ended June 30, 2021, we calculated this amount by comparing revenues for the six months ended June 30, 2021 to revenues for the six months ended June 30, 2020 for all stores open for the entire 24-month period ended June 30, 2021, excluding stores that received lease agreements from other acquired, closed or merged stores. Same store revenues increased 11.2% and 13.4% during the three and six months ended June 30, 2021, respectively, compared to the prior year comparable periods.

Seasonality

Our revenue mix is moderately seasonal. Adjusting for growth, the first quarter of each year generally has higher revenues than any other quarter. This is primarily due to realizing the full benefit of business that historically gradually increases in the fourth quarter as a result of the holiday season, as well as the receipt by our customers in the first quarter of federal and state income tax refunds. Our customers will more frequently exercise the early purchase option on their existing lease agreements or purchase merchandise off the showroom floor during the first quarter of the year. We expect these trends to continue in future periods.

Due to the seasonality of our business and the extent of the impact of additional government stimulus, and/or enhanced unemployment benefits to our customers in response to the economic impacts of the COVID-19 pandemic as discussed above, results for any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year.

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Key Components of Earnings (Loss) Before Income Taxes

In this management’s discussion and analysis section, we review our condensed consolidated and combined results. The financial statements 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. The financial statements for the periods subsequent to December 1, 2020 and through June 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 of the Aaron's Business related to certain PROG Holdings corporate functions. 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. The Company considers these allocations to be a reasonable reflection of the utilization of services or the benefit received. The combined financial statements include assets and liabilities specifically attributable to the Company. All intercompany transactions and balances within the Company have been eliminated. Transactions between the Company and PROG Holdings that took place prior to the separation and distribution have been included as invested capital within the condensed consolidated and combined financial statements.

For the three and six months ended June 30, 2021 and the comparable prior year periods, some of the key revenue, cost and expense items that affected earnings (loss) before income taxes were as follows:

Revenues. We separate our total revenues into three components: (a) lease and retail revenues; (b) non-retail sales; and (c) franchise royalties and other revenues. Lease and retail revenues primarily include all revenues derived from lease agreements at our Company-operated stores and e-commerce platform, the sale of both new and returned lease merchandise from our Company-operated stores and fees from our Aaron's Club program. Lease and retail revenues are recorded net of a provision for uncollectible accounts receivable related to lease renewal payments from lease agreements with customers. Non-retail sales primarily represent new merchandise sales to our franchisees and, to a lesser extent, sales of Woodhaven manufactured products to third-party retailers. Franchise royalties and other revenues primarily represent fees from the sale of franchise rights and royalty payments from franchisees, as well as other related income from our franchised stores. Franchise royalties and other revenues also include revenues from leasing Company-owned real estate properties to unrelated third parties, as well as other miscellaneous revenues.

Cost of Lease and Retail Revenues. Cost of lease and retail revenues is primarily comprised of the depreciation expense associated with depreciating merchandise held for lease and leased to customers by our Company-operated stores and through our e-commerce platform. Cost of lease and retail revenues also includes the depreciated cost of merchandise sold through our Company-operated stores as well as the costs associated with the Aaron's Club program.

Non-Retail Cost of Sales. Non-retail cost of sales primarily represents the cost of merchandise sold to our franchisees.

Personnel Costs. Personnel costs represents total compensation costs incurred for services provided by employees of the Company, as well as an allocation of personnel costs for PROG Holdings' corporate and shared function employees for the periods prior to the separation and distribution date.

Other Operating Expenses, Net. Other operating expenses, net includes occupancy costs (including rent expense, store maintenance and depreciation expense related to non-manufacturing facilities), shipping and handling, advertising and marketing, intangible asset amortization expense, professional services expense, bank and credit card related fees, an allocation of general corporate expenses from PROG Holdings for the periods prior to the separation and distribution date, and other miscellaneous expenses. Other operating expenses, net also includes gains or losses on sales of Company-operated stores and delivery vehicles, fair value adjustments on assets held for sale, gains or losses on other transactions involving property, plant and equipment, and gains related to property damage and business interruption insurance claim recoveries.

Provision for Lease Merchandise Write-offs. Provision for lease merchandise write-offs represents charges incurred related to estimated lease merchandise write-offs.

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Restructuring Expenses, Net. Restructuring expenses, net primarily represent the cost of real estate optimization efforts and cost reduction initiatives related to the Company's store support center functions. Restructuring expenses, net are comprised principally of closed store operating lease right-of-use asset impairment and operating lease charges, fixed asset impairment charges, and expenses related to workforce reductions.

Impairment of Goodwill. There were no impairments of goodwill recorded during the first six months of 2021. Impairment of goodwill is the write-off of our existing goodwill balance at March 31, 2020 that was recorded in the first quarter of 2020. Refer to Note 1 to the condensed consolidated and combined financial statements for further discussions of the interim goodwill impairment assessment and resulting impairment charge.

Separation Costs. Separation costs represent expenses associated with the spin-off transaction, including employee-related costs, incremental stock-based compensation expense associated with the conversion and modification of unvested and unexercised equity awards and other one-time expenses incurred by the Company in order to operate as an independent, standalone public entity.

Interest Expense. Interest expense for the six months ended June 30, 2021 consists primarily of commitment fees on unused balances of the Revolving Facility, as well as the amortization of debt issuance costs. Interest expense for prior year periods consists primarily of interest incurred on the fixed and variable rate debt agreements of Aaron's, Inc. All of the interest expense for the historical debt obligations of Aaron's, LLC have been included within the condensed consolidated and combined financial statements of the Company for the periods prior to the separation and distribution date because Aaron's, LLC was the primary obligor for the external debt agreements and is one of the legal entities forming the basis of the Company.

Other Non-Operating Income, Net. Other non-operating income, net includes the impact of foreign currency remeasurement, as well as gains and losses resulting from changes in the cash surrender value of Company-owned life insurance related to the Company’s deferred compensation plan. This activity also includes earnings on cash and cash equivalent investments.

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Results of Operations – Three months ended June 30, 2021 and 2020

	Three Months Ended June 30,				Change
(In Thousands)	2021		2020		$		%
REVENUES:
Lease and Retail Revenues	$	428,498	$	394,257	$	34,241	8.7	%
Non-Retail Sales	32,455		33,044		(589)		(1.8)
Franchise Royalties and Other Revenue	6,542		3,654		2,888		79.0
	467,495		430,955		36,540		8.5
COSTS OF REVENUES
Cost of Lease and Retail Revenues	143,206		137,718		5,488		4.0
Non-Retail Cost of Sales	29,609		29,316		293		1.0
	172,815		167,034		5,781		3.5
GROSS PROFIT	294,680		263,921		30,759		11.7
Gross Profit %	63.0%		61.2%
OPERATING EXPENSES:
Personnel Costs	121,426		118,395		3,031		2.6
Other Operating Expenses, Net	114,046		93,993		20,053		21.3
Provision for Lease Merchandise Write-Offs	12,117		14,213		(2,096)		(14.7)
Restructuring Expenses, Net	1,794		6,991		(5,197)		(74.3)
Separation Costs	1,246		—		1,246		nmf
	250,629		233,592		17,037		7.3
OPERATING PROFIT	44,051		30,329		13,722		45.2
Interest Expense	(451)		(2,853)		2,402		84.2
Other Non-Operating Income, Net	744		1,948		(1,204)		(61.8)
EARNINGS BEFORE INCOME TAXES	44,344		29,424		14,920		50.7
INCOME TAX EXPENSE	11,369		7,050		4,319		61.3
NET EARNINGS	$	32,975	$	22,374	$	10,601	47.4	%

nmf—Calculation is not meaningful

Revenues

The following table presents revenue by source for the three months ended June 30, 2021 and 2020: 

					Change
	Three Months Ended June 30,				2021 vs. 2020
(In Thousands)	2021		2020		$		%
Lease Revenues and Fees	$	411,621	$	380,237	$	31,384	8.3	%
Retail Sales	16,877		14,020		2,857		20.4
Non-Retail Sales	32,455		33,044		(589)		(1.8)
Franchise Royalties and Fees	6,253		3,365		2,888		85.8
Other	289		289		—		—
Total Revenues	$	467,495	$	430,955	$	36,540	8.5	%

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Lease revenues and fees and retail sales increased during the three months ended June 30, 2021 primarily due to an 11.2% increase in same store revenues, inclusive of both in-store and e-commerce originated lease revenues and fees and retail sales, which resulted in an increase of $33.2 million. The increase in same store revenues was driven by a larger same store lease portfolio size and strong customer payment activity. We believe this was due in part to (a) operational investments including the national rollout of our centralized digital decisioning platform and digital customer onboarding; (b) new direct to consumer marketing programs in both in-store and e-commerce channels; (c) government stimulus payments and supplemental federal unemployment benefits received by a significant portion of our customers; and (d) lower prior period revenues caused by the temporary closure of our showrooms and a shift to e-commerce and curbside service only for all of our Company-operated stores as described above in March of 2020. E-commerce revenues increased 16% compared to the prior year quarter and were approximately 14% and 13% of total lease revenues and fees during the three months ended June 30, 2021 and 2020, respectively.

The decrease in non-retail sales is primarily due to a $6.1 million decrease related to the reduction of 71 franchised stores during the 15-month period ended June 30, 2021, which was mostly offset by higher product demand from franchisees primarily as a result of government stimulus and unemployment benefits received by franchisee customers during the period as well as improved advertising and operational focus.

The increase in franchise royalties and fees is primarily the result of the temporary royalty fee abatement offered by the Company from March 8, 2020 through May 16, 2020 in response to the COVID-19 pandemic. We have provided no royalty fee abatements to our franchisees in 2021.

Cost of Revenues and Gross Profit

Information about the components of the cost of lease and retail revenues and non-retail sales is as follows:

					Change
	Three Months Ended June 30,				2021 vs. 2020
(In Thousands)	2021		2020		$		%
Depreciation of Lease Merchandise and Other Lease Revenue Costs	$	132,319	$	128,653	$	3,666	2.8	%
Retail Cost of Sales	10,887		9,065		1,822		20.1
Non-Retail Cost of Sales	29,609		29,316		293		1.0
Total Costs of Revenues	$	172,815	$	167,034	$	5,781	3.5	%

Depreciation of lease merchandise and other lease revenue costs. Depreciation of lease merchandise and other lease revenue costs increased primarily due to a $3.5 million increase as a result of a higher lease portfolio size, a $2.3 million increase due to higher inventory purchase costs and a $1.6 million increase related to higher early purchase options exercised, partially offset by a $1.3 million decrease driven by the planned net reduction of 42 Company-operated stores during the 15-month period ended June 30, 2021 and a $2.7 million decrease related to lower levels of idle inventory.

Retail cost of sales. Retail cost of sales increased due to an increase in retail sales primarily driven by government stimulus and unemployment benefits received by a significant portion of our customers during the COVID-19 pandemic.

Non-retail cost of sales. The increase in non-retail cost of sales during the three months ended June 30, 2021 is primarily attributable to higher inventory purchase costs, partially offset by the decrease in non-retail sales which was driven by the factors discussed above.

Gross Profit

Gross profit for lease revenues and fees was $279.3 million and $251.6 million during the three months ended June 30, 2021 and 2020, respectively, which represented a gross profit margin of 67.9% and 66.2% for the respective periods. The improvement in gross profit percentage was primarily driven by strong customer payment activity and lower depreciation on idle inventory.

Gross profit for retail sales was $6.0 million and $5.0 million during the three months ended June 30, 2021 and 2020, respectively, which represented a gross profit margin of 35.5% and 35.3% for the respective periods. The improvement in gross profit percentage is primarily due to a favorable mix shift from retail sales of returned merchandise to retail sales of new merchandise.

Gross profit for non-retail sales was $2.8 million and $3.7 million during the three months ended June 30, 2021 and 2020, respectively, which represented a gross profit percentage of 8.8% and 11.3% for the respective periods. The decline in gross profit percentage was driven by higher inventory purchase costs in 2021 compared to the prior year comparable period.

30

As a percentage of total revenues, gross profit improved to 63.0% during the three months ended June 30, 2021 compared to 61.2% for the comparable period in 2020. The factors impacting the change in gross profit are discussed above.

Operating Expenses

Personnel costs. Personnel costs increased by $3.0 million during the second quarter of 2021 due primarily to (a) higher store labor hours and store performance-based compensation as compared to the prior year comparable period, as personnel costs for the three months ended June 30, 2020 reflected reduced store labor costs resulting from the temporary store closures; (b) higher standalone public company costs; and (c) cost cutting measures taken during the second quarter of 2020 in response to the COVID-19 pandemic that did not occur during 2021, including furloughing or terminating associates, and instituting temporary salary reductions for executive officers. The increases in 2021 were partially offset by the timing of recognition of corporate incentive compensation costs. Due to uncertainties around the realization of incentive compensation in early 2020, no expense was recognized in the first quarter of 2020. In the second quarter of 2020 this uncertainty was resolved, resulting in recognition of six months of expense in the quarter, compared to three months of expense included in the second quarter of 2021.

Other Operating Expenses, Net. Information about certain significant components of other operating expenses, net is as follows:

	Three Months Ended June 30,				Change
(In Thousands)	2021		2020		$		%
Occupancy Costs	$	42,316	$	38,188	$	4,128	10.8
Shipping and Handling	13,867		11,779		2,088		17.7
Advertising Costs	18,997		5,746		13,251		230.6
Intangible Amortization	1,599		1,632		(33)		(2.0)
Professional Services	4,332		4,273		59		1.4
Bank and Credit Card Related Fees	5,287		4,839		448		9.3
Gains on Insurance Recoveries	(163)		—		(163)		nmf
Gains on Asset and Store Dispositions and Assets Held For Sale, net	(895)		(84)		(811)		(965.5)
Other Miscellaneous Expenses, net	28,706		27,620		1,086		3.9
Other Operating Expenses, net	$	114,046	$	93,993	$	20,053	21.3	%

nmf—Calculation is not meaningful

As a percentage of total revenues, other operating expenses, net increased to 24.4% for the second quarter of 2021 from 21.8% in the same period in 2020.

Occupancy costs increased primarily due to higher maintenance costs during 2021. Additionally, the comparability of occupancy costs for the second quarter of 2021 as compared to the same period in 2020 was impacted by $1.6 million in rent concessions that were negotiated and realized with the landlords of Company-operated stores during the second quarter of 2020 in response to the economic uncertainty created by the COVID-19 pandemic.

Shipping and handling costs increased primarily due to higher fuel and distribution costs, as well as a 14% increase in both deliveries and handling costs associated with lease merchandise returns during the three months ended June 30, 2021 as compared to the same period in 2020. Deliveries and return agreement activity was atypically low during the second quarter of 2020 due to the actions taken by the Company in response to the COVID-19 pandemic, such as temporarily closing stores and suspending customer home delivery activity.

Advertising costs increased primarily due to higher advertising spend related to the launch of a new marketing campaign during the second quarter of 2021, reduced vendor marketing contributions resulting from a general shift towards brand-focused digital and traditional media advertising spend, and a reduction in marketing initiatives during the second quarter of 2020 as a result of the Company's cost cutting measures in response to the COVID-19 pandemic.

Other miscellaneous expenses, net primarily represent the depreciation of IT-related property, plant and equipment, software licensing expenses, franchisee-related reserves, and other expenses. Expenses within this category did not fluctuate significantly versus the prior year.

31

Provision for lease merchandise write-offs. The provision for lease merchandise write-offs as a percentage of lease revenues and fees decreased to 2.9% for the three months ended June 30, 2021 compared to 3.7% for the comparable period in 2020. This decrease was primarily driven by strong customer payment activity, strong operational focus, and the impact of improved decisioning technology.

Restructuring expenses, net. Restructuring activity for the three months ended June 30, 2021 resulted in expenses of $1.8 million, which were primarily comprised of $1.7 million of continuing variable occupancy costs incurred related to previously closed stores and $0.5 million of operating lease right-of-use asset and fixed asset impairment for Company-operated stores identified for closure during 2021, partially offset by gains of $0.5 million related to the sale of vehicle and real estate assets impaired in conjunction with the repositioning and optimization program in prior periods. Restructuring expenses for the three months ended June 30, 2020 were $7.0 million and were primarily due to the identification of stores for closure during the second quarter of 2020 as well as a change in estimates of future sublease activity for vacant properties which resulted in incremental expense.

Separation costs. Separation costs represent expenses associated with the separation and distribution, including employee-related costs, incremental stock-based compensation expense associated with the conversion and modification of unvested and unexercised equity awards, and other one-time expenses incurred by the Company in order to operate as an independent, separate publicly traded Company.

Operating Profit

Interest expense. Interest expense decreased to $0.5 million for three months ended June 30, 2021 from $2.9 million for the three months ended June 30, 2020, which is the result of the full repayment of the outstanding borrowings of $285.0 million under the previous Aaron's, Inc. revolving credit and term loan agreement and senior unsecured notes in conjunction with the separation and distribution in the fourth quarter of 2020. Interest expense for the three months ended June 30, 2021 consists primarily of commitment fees on unused balances of the Revolving Facility, as well as the amortization of debt issuance costs.

Other non-operating income, net. Other non-operating income, net includes (a) the impact of foreign currency remeasurement; (b) net gains and losses resulting from changes in the cash surrender value of Company-owned life insurance related to the Company's deferred compensation plan; and (c) earnings on cash and cash equivalent investments. Foreign currency remeasurement net gains resulting from changes in the value of the U.S. dollar against the Canadian dollar and earnings on cash and cash equivalent investments were not significant during the three months ended June 30, 2021 or 2020. The changes in the cash surrender value of Company-owned life insurance resulted in net gains of $0.7 million and $1.7 million for the three months ended June 30, 2021 and 2020, respectively.

Income Tax Expense

Income tax expense increased to $11.4 million during the three months ended June 30, 2021 compared to $7.1 million for the same period in 2020 due to an increase in earnings before income taxes and an increase in the effective tax rate to 25.6% in 2021 from 24.0% in 2020. The increase in the effective tax rate is primarily related to the impact of non-deductible expenses on earnings before income taxes during the three months ended June 30, 2021 compared to the same period in 2020.

32

Results of Operations – Six months ended June 30, 2021 and 2020

	Six Months Ended June 30,				Change
(In Thousands)	2021		2020		$		%
REVENUES
Lease Revenues and Fees	$	872,585	$	793,167	$	79,418	10.0	%
Non-Retail Sales	62,404		59,890		2,514		4.2
Franchise Royalties and Fees	13,560		10,729		2,831		26.4
	948,549		863,786		84,763		9.8
COSTS AND EXPENSES
Cost of Lease and Retail Revenues	294,701		279,721		14,980		5.4
Non-Retail Cost of Sales	56,100		52,897		3,203		6.1
	350,801		332,618		18,183		5.5
GROSS PROFIT	597,748		531,168		66,580		12.5
Gross Profit %	63.0%		61.5%
OPERATING EXPENSES
Personnel Costs	246,289		234,141		12,148		5.2
Other Operating Expenses, Net	222,412		217,058		5,354		2.5
Provision for Lease Merchandise Write-Offs	25,534		38,173		(12,639)		(33.1)
Restructuring Expenses, Net	5,235		29,277		(24,042)		(82.1)
Impairment of Goodwill	—		446,893		(446,893)		nmf
Separation Costs	5,636		—		5,636		nmf
	505,106		965,542		(460,436)		(47.7)
OPERATING PROFIT (LOSS)	92,642		(434,374)		527,016		nmf
Interest Expense	(795)		(6,652)		5,857		88.0
Other Non-Operating Income, Net	1,146		189		957		506.3
EARNINGS (LOSS) BEFORE INCOME TAXES	92,993		(440,837)		533,830		nmf
INCOME TAX EXPENSE (BENEFIT)	23,695		(139,437)		163,132		nmf
NET EARNINGS (LOSS)	$	69,298	$	(301,400)	$	370,698	nmf

nmf—Calculation is not meaningful

33

Revenues

The following table presents revenue by source for the six months ended June 30, 2021:

					Change
	Six Months Ended June 30,				2021 vs. 2020
(In Thousands)	2021		2020		$
Lease Revenues and Fees	$	839,262	$	769,616	$	69,646	9.0	%
Retail Sales	33,323		23,551		9,772		41.5
Non-Retail Sales	62,404		59,890		2,514		4.2
Franchise Royalties and Fees	12,962		10,089		2,873		28.5
Other	598		640		(42)		(6.6)
Total	$	948,549	$	863,786	$	84,763	9.8	%

Lease revenues and fees and retail sales increased during the six months ended June 30, 2021 primarily due to a 13.4% increase in same store revenues, inclusive of both in-store and e-commerce originated lease revenues and fees and retail sales, as well as early purchase options exercised, which resulted in an increase of $68.1 million, and the acquisition of franchised stores during the 24-month period ended June 30, 2021, which resulted in an increase of $9.4 million. The increase in same store revenues was driven by a larger same store lease portfolio size and strong customer payment activity, including retail sales and early purchase option exercises. We believe this was due in part to (a) operational investments including the national rollout of our centralized digital decisioning platform and digital customer onboarding; (b) new direct to consumer marketing programs in both in-store and e-commerce channels; (c) government stimulus payments and supplemental federal unemployment benefits received by a significant portion of our customers; and (d) lower prior period revenues caused by the temporary closure of our showrooms and a shift to e-commerce and curbside service only for all of our Company-operated stores as described above in March of 2020. E-commerce revenues increased 28% compared to the prior year comparable period and were approximately 14% and 12% of total lease revenues and fees during the six months ended June 30, 2021 and 2020, respectively.

The increase in non-retail sales is due to higher product demand from franchisees primarily as a result of government stimulus and unemployment benefits received by franchisee customers during the period as well as improved advertising and operational focus, partially offset by an $11.1 million decrease related to the reduction of 110 franchised stores during the 24-month period ended June 30, 2021.

The increase in franchise royalties and fees is primarily the result of stronger demand and customer payment activity during 2021 and the impact of the temporary royalty fee abatement offered by the Company from March 8, 2020 through May 16, 2020 in response to the COVID-19 pandemic, partially offset by the reduction of 110 franchised stores during the 24-month period ended June 30, 2021. We have provided no royalty fee abatements to our franchisees in 2021.

Cost of Revenues and Gross Profit

Information about the components of the cost of lease and retail revenues and non-retail sales is as follows:

					Change
	Six Months Ended June 30,				2021 vs. 2020
(In Thousands)	2021		2020		$		%
Depreciation of Lease Merchandise and Other Lease Revenue Costs	$	273,296	$	263,794	$	9,502	3.6	%
Retail Cost of Sales	21,405		15,927		5,478		34.4
Non-Retail Cost of Sales	56,100		52,897		3,203		6.1
Total Costs of Revenues	$	350,801	$	332,618	$	18,183	5.5	%

Depreciation of lease merchandise and other lease revenue costs. Depreciation of lease merchandise and other lease revenue costs increased primarily due to a $10.6 million increase related to higher early purchase options exercised, a $5.1 million increase due to higher inventory purchase costs, and a $4.9 million increase due to a larger lease portfolio size, partially offset by a $6.6 million decrease driven by the planned net reduction of 84 Company-operated stores during the 24-month period ended June 30, 2021 and a $4.8 million decrease related to lower levels of idle inventory.

Retail cost of sales. Retail cost of sales increased due to an increase in retail sales primarily driven by government stimulus and unemployment benefits received by a significant portion of our customers during the COVID-19 pandemic.

34

Non-retail cost of sales. The increase in non-retail cost of sales during the six months ended June 30, 2021 is primarily attributable to higher inventory purchase costs and the increase in non-retail sales, resulting from higher product demand from franchisees as a result of government stimulus and unemployment benefits received by franchisee customers during the period as well as improved advertising and operational focus, partially offset by the reduction of 110 franchised stores during the 24-month period ended June 30, 2021.

Gross Profit

Gross profit for lease revenues and fees was $566.0 million and $505.8 million during the six months ended June 30, 2021 and 2020, respectively, which represented a gross profit margin of 67.4% and 65.7% for the respective periods. The improvement in gross profit percentage was primarily driven by strong customer payment activity and lower depreciation on idle inventory.

Gross profit for retail sales was $11.9 million and $7.6 million during the six months ended June 30, 2021 and 2020, respectively, which represented a gross profit margin of 35.8% and 32.4% for the respective periods. The improvement in gross profit percentage is primarily due to a favorable mix shift from retail sales of returned merchandise to retail sales of new merchandise.

Gross profit for non-retail sales was $6.3 million and $7.0 million during the six months ended June 30, 2021 and 2020, respectively, which represented a gross profit percentage of 10.1% and 11.7% for the respective periods. The decline in gross profit percentage was driven by higher inventory purchase costs in 2021 compared to the prior year comparable period.

As a percentage of total revenues, gross profit improved to 63.0% during the six months ended June 30, 2021 compared to 61.5% for the comparable period in 2020. The factors impacting the change in gross profit are discussed above.

Operating Expenses

Personnel costs. Personnel costs increased by $12.1 million during the six months ended June 30, 2021 due primarily to (a) higher performance-based compensation; (b) higher store labor hours as compared to the prior year comparable period, as personnel costs for the six months ended June 30, 2020 reflected reduced store labor costs resulting from the temporary store closures; (c) higher standalone public company costs; and (d) cost cutting measures taken during 2020 in response to the COVID-19 pandemic that did not occur during 2021, including furloughing or terminating associates and instituting temporary salary reductions for executive officers.

Other Operating Expenses, Net. Information about certain significant components of other operating expenses, net is as follows:

	Six Months Ended June 30,				Change
(In Thousands)	2021		2020		$		%
Occupancy Costs	$	85,625	$	82,451	$	3,174	3.8
Shipping and Handling	27,132		24,751		2,381		9.6
Advertising Costs	36,382		16,787		19,595		116.7
Intangible Amortization	3,283		3,474		(191)		(5.5)
Professional Services	7,368		23,314		(15,946)		(68.4)
Bank and Credit Card Related Fees	10,669		9,523		1,146		12.0
Gains on Insurance Recoveries	(202)		—		(202)		nmf
Gains on Asset and Store Dispositions and Assets Held for Sale, net	(2,118)		30		(2,148)		nmf
Other Miscellaneous Expenses, net	54,273		56,728		(2,455)		(4.3)
Other Operating Expenses, net	$	222,412	$	217,058	$	5,354	2.5	%

nmf—Calculation is not meaningful

As a percentage of total revenues, other operating expenses, net decreased to 23.4% for the six months ended June 30, 2021 from 25.1% in the same period in 2020.

Occupancy costs increased primarily due to higher maintenance costs during 2021. Additionally, the comparability of occupancy costs for the six months ended June 30, 2021 as compared to the same period in 2020 was impacted by $1.6 million in rent concessions that were negotiated and realized with the landlords of Company-operated stores during the second quarter of 2020 in response to the economic uncertainty created by the COVID-19 pandemic.

Shipping and handling costs increased primarily due to higher fuel and distribution costs, as well as a 7.6% increase in deliveries during the six months ended June 30, 2021 as compared to the same period in 2020.

35

Advertising costs increased primarily due to higher advertising spend related to the launch of a new marketing campaign during the second quarter of 2021, reduced vendor marketing contributions resulting from a general shift towards brand-focused digital and traditional media advertising spend and a reduction in marketing initiatives during the first and second quarters of 2020 as a result of the Company's cost cutting measures in response to the COVID-19 pandemic.

Professional services decreased during the six months ended June 30, 2021 compared to the same period in 2020 due primarily to an early termination fee of $14.1 million for a sales and marketing agreement that was recorded during the first quarter of 2020.

Bank and credit card related fees increased during the six months ended June 30, 2021 compared to the same period in 2020 primarily due to higher utilization of credit and debit cards by our customers, more payments due to strong customer payment activity, and more customer leases in our portfolio as of June 30, 2021.

Gains on asset dispositions increased primarily due to a $1.7 million gain related to the sale of Company-owned vehicles.

Other miscellaneous expenses, net primarily represent the depreciation of IT-related property, plant and equipment, software licensing expenses, franchisee-related reserves, and other expenses. The primary decrease was related to the reduction in the provision for franchisee-related losses during the six months ended June 30, 2021 as compared to the additional allowances and reserves of $3.0 million recognized during six months ended June 30, 2020 due to the significant uncertainty regarding the future financial health of certain franchisees as a result of the COVID-19 pandemic. The remaining expenses did not fluctuate significantly versus the prior year comparable period.

Provision for lease merchandise write-offs. The provision for lease merchandise write-offs as a percentage of lease revenues and fees decreased to 3.0% for the six months ended June 30, 2021 compared to 5.0% for the comparable period in 2020. This decrease was primarily driven by strong customer payment activity, strong operational focus, and the impact of improved decisioning technology.

Restructuring expenses, net. Restructuring activity for the six months ended June 30, 2021 resulted in expenses of $5.2 million, which were primarily comprised of $2.7 million of operating lease right-of-use asset and fixed asset impairment for Company-operated stores identified for closure during 2021 and $2.8 million of continuing variable occupancy costs incurred related to previously closed stores, partially offset by gains of $0.5 million related to the sale of vehicle and real estate assets impaired in conjunction with the repositioning and optimization program in prior periods. Restructuring expenses for the six months ended June 30, 2020 were $29.3 million, primarily due to the identification of stores for closure during the first and second quarters of 2020 as well as a change in estimates of future sublease activity for vacant properties which resulted in incremental expense.

Impairment of goodwill. During the first quarter of 2020, we recorded a loss of $446.9 million to fully write-off our existing goodwill balance as of March 31, 2020. Refer to Note 1 to the condensed consolidated and combined financial statements for further discussion of the interim goodwill impairment assessment and resulting impairment charge.

Separation costs. Separation costs for the six months ended June 30, 2021 consisted primarily of employee-related costs, incremental stock-based compensation expense associated with the conversion and modification of unvested and unexercised equity awards, and other one-time expenses incurred by the Company in order to operate as an independent, separate publicly traded Company.

Operating Profit (Loss)

Interest expense. Interest expense decreased to $0.8 million for the six months ended June 30, 2021 from $6.7 million for the six months ended June 30, 2020, which is the result of the full repayment of the outstanding borrowings of $285.0 million under the previous Aaron's, Inc. revolving credit and term loan agreement and senior unsecured notes in conjunction with the separation and distribution in the fourth quarter of 2020. Interest expense for the three months ended June 30, 2021 consists primarily of commitment fees on unused balances of the Revolving Facility, as well as the amortization of debt issuance costs.

Other non-operating income, net. Other non-operating income, net includes (a) the impact of foreign currency remeasurement; (b) net gains and losses resulting from changes in the cash surrender value of Company-owned life insurance related to the Company's deferred compensation plan; and (c) earnings on cash and cash equivalent investments. Foreign currency remeasurement net losses resulting from changes in the value of the U.S. dollar against the Canadian dollar and earnings on cash and cash equivalent investments were not significant during the six months ended June 30, 2021 or 2020. The changes in the cash surrender value of Company-owned life insurance resulted in net gains of $1.1 million and net losses of $0.2 million for the six months ended June 30, 2021 and 2020, respectively.

36

Income Tax Expense (Benefit)

The Company recorded income tax expense of $23.7 million during the six months ended June 30, 2021 compared to a net income tax benefit of $139.4 million for the same period in 2020. The net income tax benefit recognized in 2020 was primarily the result of losses before income taxes of $440.8 million during the period as well as discrete tax benefits generated by the provisions of the CARES Act. The CARES Act, among other things, (a) waived the 80% taxable income limitation on the use of a net operating loss which was previously set forth under the Tax Cuts and Jobs Act of 2017 and (b) provided that a net operating loss arising in a taxable year beginning after December 31, 2017 and before January 1, 2021 may be treated as a carryback to each of the five preceding taxable years. Aaron's, Inc. elected to carryback its 2018 net operating loss of $242.2 million to 2013 which resulted in a discrete income tax benefit of $34.2 million recognized during the three months ended March 31, 2020. The discrete tax benefit is the result of the federal income tax rate differential between the current statutory rate of 21% and the 35% rate applicable to 2013. The effective tax rate decreased to 25.5% for the six months ended June 30, 2021 compared to 31.6% for the same period in 2020 due primarily to the impact of the discrete income tax benefit on our 2020 book loss as described above.

Overview of Financial Position

The major changes in the condensed consolidated balance sheet from December 31, 2020 to June 30, 2021 include:

•Cash and cash equivalents decreased $28.1 million to $48.0 million at June 30, 2021. For additional information, refer to the "Liquidity and Capital Resources" section below.

•Lease merchandise increased $40.1 million due to higher lease merchandise purchases and costs, as the Company continues to normalize lease merchandise levels after experiencing supply chain disruptions resulting from the COVID-19 pandemic throughout 2020 and the first half of 2021.

•Property, plant and equipment increased $9.5 million due to an increase in capital expenditures associated with the Company's real estate optimization strategy.

•Treasury shares increased $47.7 million due primarily to the Company's repurchase of 1,418,210 shares of common stock for $44.9 million during the six months ended June 30, 2021.

Liquidity and Capital Resources

General

Our primary uses of capital consist of (a) buying merchandise; (b) personnel expenditures; (c) purchases of property, plant and equipment, including leasehold improvements for our new store concept and operating model; (d) expenditures related to corporate operating activities; (e) income tax payments; and (f) expenditures for acquisitions, including franchisee acquisitions. The Company also periodically repurchases common stock and has also paid quarterly cash dividends throughout 2021. Prior to the separation and distribution transaction, our capital requirements were financed through:

•cash on hand;

•cash flows from operations;

•Aaron's, Inc. private debt offerings;

•Aaron's, Inc. bank debt; and

•Aaron's, Inc. stock offerings.

As of June 30, 2021, the Company had $48.0 million of cash and $233.5 million of availability under its $250.0 million senior unsecured revolving credit facility (the "Revolving Facility"). We currently expect to finance our primary capital requirements through cash flows from operations, and as necessary, borrowings under our Revolving Facility.

Cash Provided by Operating Activities

Cash provided by operating activities was $60.2 million and $214.4 million during the six months ended June 30, 2021 and 2020, respectively. The $154.3 million decrease in operating cash flows was primarily driven by higher lease merchandise purchases, partially offset by improved lease portfolio performance resulting from a larger lease portfolio size and strong customer payment activity. Other changes in cash provided by operating activities are discussed above in our discussion of results for the six months ended June 30, 2021.

37

Cash Used in Investing Activities

Cash used in investing activities was $37.2 million and $28.7 million during the six months ended June 30, 2021 and 2020, respectively. The $8.5 million increase in investing cash outflows was primarily due to $15.8 million higher cash outflows for purchases of property, plant and equipment, partially offset by $5.8 million higher proceeds from the sale of property, plant and equipment during the second quarter of 2021 compared to the prior year period.

Cash (Used in) Provided by Financing Activities

Cash used in financing activities was $51.1 million during the six months ended June 30, 2021 compared to cash provided by financing activities of $70.1 million during the six months ended June 30, 2020, respectively. The $121.2 million change in financing cash flows was primarily due to cash inflows during the six months ended June 30, 2020 from (i) net borrowings of debt of $55.1 million and (ii) net transfers from Former Parent of $126.3 million, compared to cash outflows during the six months ended June 30, 2021 of (i) $42.6 million in share repurchases and (ii) $6.8 million in dividends paid.

Share Repurchases

At management's request, during its March 2021 meeting, the Board of Directors of the Company (the "Board") authorized management to purchase the Company's common stock up to an aggregate amount of $150.0 million. This authorization expires on December 31, 2023.

During the six months ended June 30, 2021, the Company purchased 1,418,210 shares for $44.9 million. As of June 30, 2021, we have the authority to purchase additional shares up to our remaining authorization limit of $105.1 million. As of July 23, 2021, the Company had repurchased 1,839,313 shares for $57.4 million and had $92.6 million remaining under its $150.0 million share repurchase program.

Dividends

At its May 2021 meeting, the Board approved a quarterly dividend of $0.10 per share, which was paid to shareholders on July 6, 2021. Aggregate dividend payments for the six months ended June 30, 2021 were $6.8 million. We expect to continue paying this quarterly cash dividend, subject to further approval from the Board.

Debt Financing

As of June 30, 2021, the Company did not have any outstanding borrowings under the Revolving Facility, under which all borrowings and commitments will mature or terminate on November 9, 2025. The total available credit under our Revolving Facility as of June 30, 2021 was $233.5 million, which was reduced by approximately $16.5 million for our outstanding letters of credit.

The Revolving Facility contains financial covenants, which include requirements that we maintain ratios of (a) fixed charge coverage of no less than 1.75:1.00 and (b) total net leverage of no greater than 2.50:1.00. If we fail to comply with these covenants, we will be in default under these agreements, and all borrowings outstanding could become due immediately. Under the Revolving Facility and Franchise Loan Facility (as defined below), we may pay cash dividends in any year so long as, after giving pro forma effect to the dividend payment, we maintain compliance with our financial covenants and no event of default has occurred or would result from the payment. We are in compliance with all of these covenants at June 30, 2021.

Commitments

Income Taxes

During the six months ended June 30, 2021, we made net income tax payments of $7.0 million. Within the next six months, we anticipate making estimated cash payments of $2.0 million for U.S. federal income taxes, $4.0 million for state income taxes, and $0.2 million for Canadian income taxes.

The Tax Cuts and Jobs Act of 2017, which was enacted in December 2017, provides for 100% expense deduction of certain qualified depreciable assets, including lease merchandise inventory, purchased by the Company after September 27, 2017 (but would be phased down starting in 2023). Because of our sales and lease ownership model, in which the Company remains the owner of merchandise on lease, we benefit more from bonus depreciation, relatively, than traditional furniture, electronics and appliance retailers.

We estimate the deferred tax liability associated with bonus depreciation from the Tax Cuts and Jobs Act of 2017 and the prior tax legislation is approximately $129.0 million as of December 31, 2020, of which approximately 75% is expected to reverse as a deferred income tax benefit in 2021 and most of the remainder during 2022. These amounts exclude bonus depreciation the Company will receive on qualifying expenditures after December 31, 2020.

Franchise Loan Guaranty

We have guaranteed the borrowings of certain independent franchisees under a franchise loan agreement (the "Franchise Loan Facility") with banks that are parties to our Revolving Facility. The Franchise Loan Facility has a total commitment of $25.0

38

million and expires on November 16, 2021. We are able to request an additional 364-day extension of our franchise loan facility, as long as we are not in violation of any of the covenants under that facility or our Revolving Facility, and no event of default exists under those agreements, until such time as our Revolving Facility expires. We would expect to include a franchise loan facility as part of any extension or renewal of our Revolving Facility thereafter. At June 30, 2021, the maximum amount that the Company would be obligated to repay in the event franchisees defaulted was $10.8 million, which would be due in full within 75 days of the event of default.

Since the inception of the franchise loan program in 1994, losses associated with the program have been immaterial. However, there can be no assurance that the Company will not incur future losses on outstanding franchisee borrowings under the Franchise Loan Facility in the event of defaults or impending defaults by franchisees. The Company records a liability related to estimated future losses from repaying the franchisees' outstanding debt obligations upon any possible future events of default. This liability is included in accounts payable and accrued expenses in the condensed consolidated balance sheets and was $2.2 million and $2.4 million as of June 30, 2021 and December 31, 2020, respectively. The liability for both periods included qualitative consideration of potential losses, including uncertainties surrounding the normalization of current and future business trends associated with an anticipated end to the COVID-19 pandemic, and the corresponding unknown effect on the operations and liquidity of our franchisees.

Contractual Obligations and Commitments

As part of our ongoing operations, we enter into various arrangements that obligate us to make future payments, including debt agreements, operating leases, and other purchase obligations. The future cash commitments owed under these arrangements generally fluctuate in the normal course of business as we, for example, borrow on or pay down our revolving lines of credit, make scheduled payments on leases or purchase obligations, and renegotiate arrangements or enter into new arrangements. There were no material changes outside the normal course of business in our material cash commitments and contractual obligations from those reported in the 2020 Annual Report.

Critical Accounting Policies

Refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies" in the 2020 Annual Report.

Recent Accounting Pronouncements

Refer to Note 1 to the condensed consolidated and combined financial statements for a discussion of recently issued accounting pronouncements, including pronouncements that were adopted in the current year.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of June 30, 2021, the Company did not have any outstanding borrowings under its Revolving Facility. Borrowings under the Revolving Facility are indexed to the LIBO rate or the prime rate, which exposes us to the risk of increased interest costs if interest rates rise while we have outstanding borrowings. We do not use any significant market risk sensitive instruments to hedge commodity, foreign currency or other risks, and hold no market risk sensitive instruments for trading or speculative purposes.

39

ITEM 4.CONTROLS AND PROCEDURES

Disclosure Controls and Procedures.

An evaluation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), was carried out by management, with the participation of the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), as of the end of the period covered by this Quarterly Report on Form 10-Q.

This evaluation is performed to determine if our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms. No system of controls, no matter how well designed and operated, can provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that the system of controls has operated effectively in all cases. Our disclosure controls and procedures, however, are designed to provide reasonable assurance that the objectives of disclosure controls and procedures are met.

Based on management’s evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of the date of the evaluation to provide reasonable assurance that the objectives of disclosure controls and procedures are met.

Changes in Internal Control Over Financial Reporting.

There were no changes in the Company’s internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act, during the three months and six months ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

40

PART II – OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

From time to time, we are party to various legal proceedings arising in the ordinary course of business. While any proceeding contains an element of uncertainty, we do not currently believe that any of the outstanding legal proceedings to which we are a party will have a material adverse impact on our business, financial position or results of operations. However, an adverse resolution of a number of these items may have a material adverse impact on our business, financial position or results of operations. For further information, see Note 4 to the condensed consolidated and combined financial statements, which discussion is incorporated herein by reference.

ITEM 1A.RISK FACTORS

The risk factors that affect our business and financial results are discussed in Part I, Item 1A, of the 2020 Annual Report. There are no material changes to the risk factors previously disclosed, nor have we identified any previously undisclosed risks that could materially adversely affect our business and financial results.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table presents our share repurchase activity for the three months ended June 30, 2021:

Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs 1
April 1, 2021 through April 30, 2021	71,438	31.24	71,438	$	141,487,812
May 1, 2021 through May 31, 2021	652,705	32.52	652,705	120,260,346
June 1, 2021 through June 30, 2021	441,867	34.36	441,867	105,078,909
Total	1,166,010		1,166,010

1Share repurchases are conducted under authorizations made from time to time by the Board. The most recent authorization was publicly announced on March 3, 2021 and authorized the repurchase of shares up to a maximum amount of $150.0 million. Subject to the terms of the Board's authorization and applicable law, repurchases may be made at such times and in such amounts as the Company deems appropriate through December 31, 2023. Repurchases may be discontinued at any time.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

None.

ITEM 5.OTHER INFORMATION

None.

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ITEM 6.EXHIBITS

EXHIBIT NO.	DESCRIPTION OF EXHIBIT
10.1*	The Aaron’s Company, Inc. Compensation Plan for Non-Employee Directors, as amended and restated, dated May 5, 2021.
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
32.1*	Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
104	The cover page from this Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, formatted in Inline XBRL (included in Exhibit 101)
*Filed herewith.

42

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		THE AARON’S COMPANY, INC.
			(Registrant)
Date:	July 27, 2021	By:	/s/ C. Kelly Wall
			C. Kelly Wall
			Chief Financial Officer
			(Principal Financial Officer)
Date:	July 27, 2021	By:	/s/ Douglass L. Noe
			Douglass L. Noe
			Vice President, Corporate Controller
			(Principal Accounting Officer)

43

EX-10.1

THE AARON’S COMPANY, INC.
COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS

Amended and Restated Effective May 5, 2021

1.    Purpose and General Provisions.

1.1    Establishment of Plan. The Aaron’s Company, Inc., a Georgia corporation hereby amends and restates this Compensation Plan for Non-Employee Directors, effective as of May 5, 2021.

1.2    Purpose. The purpose of the Plan is to attract and retain highly-qualified individuals who are not employed by the Company or any of its subsidiaries or affiliates to serve on the Company’s Board of Directors and to provide such directors with rewards that motivate superior oversight and protection of the Company’s business. This Plan aligns the interests of the non-employee directors with the long-term interests of the Company’s shareholders by providing that a significant part of such directors’ compensation is directly linked to the value of the Company’s common stock.

2.    Definitions.

“Affiliate” means a corporation or other entity that, directly or through one or more intermediaries, controls, is controlled by or is under common control with, the Company.

“Annual Retainer” means the annual fee payable by the Company to a Non-Employee Director with respect to his or her service as a member of the Board as in effect from time to time and as indicated in the attached Appendix I.

“Audit Committee” means the Audit Committee of the Board.

“Board” means the Board of Directors of the Company, as constituted from time to time.

“Chair” means a Non-Employee Director occupying the seat of authority with respect to the Board or a Committee.

“Chair Annual Retainer” or “Chair Quarterly Retainer” means the annual or quarterly fee payable by the Company to a Chair with respect to his or her service as a Chair as in effect from time to time and as indicated in the attached Appendix I.

“Code” means the Internal Revenue Code of 1986, as it may be amended from time to time. Any reference to a section of the Code shall be deemed to include a reference to any regulations promulgated thereunder.

“Committee” means a standing committee of the Board.

“Committee Chair” means the Non-Employee Director serving as the Chair of a Committee.

“Common Stock” means the “Common Stock” of the Company as defined in the Equity and Incentive Plan.

“Company” means The Aaron’s Company, Inc., a Georgia corporation, including its successors and assigns.

“Compensation Committee” means the Compensation Committee of the Board.

“Effective Date” shall mean May 5, 2021.

“Equity and Incentive Plan” means The Aaron’s Company, Inc. 2020 Equity and Incentive Plan, as it may be amended from time to time.

“Fair Market Value” means “Fair Market Value” as defined in the Equity and Incentive Plan.

“Lead Director” means a Non-Employee Director occupying the seat of authority with respect to the Board.

“Lead Director Annual Retainer” or “Lead Director Quarterly Retainer” means the annual or quarterly fee payable by the Company to a Lead Director with respect to his or her service as a Lead Director as in effect from time to time and as indicated in the attached AppendixI.

“Nominating and Corporate Governance Committee” means the Nominating and Corporate Governance Committee of the Board.

“Non-Employee Director” means a member of the Board who is not an officer or employee of the Company or any of its subsidiaries or Affiliates.

“Plan” means The Aaron’s Company, Inc. Compensation Plan for Non-Employee Directors, as set forth herein, as it may be amended from time to time.

“Quarterly Payment Dates” has the meaning set forth in Section 5.2 of this Plan.

“Quarterly Retainer” means the quarterly fee payable by the Company to a Non- Employee Director with respect to his or her service as a member of the Board as in effect from time to time and as indicated in the attached Appendix I.

“RSU” has the meaning set forth in the Equity and Incentive Plan.

“Section 409A” means Section 409A of the Code and all authoritative interpretive guidance issued thereunder.

3.    Administration. This Plan shall be administered by the Compensation Committee which shall have the authority to construe and interpret this Plan, prescribe, amend and rescind rules relating to this Plan’s administration and take any other actions necessary or desirable for

the administration of this Plan. The Compensation Committee may correct any defect or supply any omission or reconcile any inconsistency or ambiguity in this Plan. The decisions of the Compensation Committee shall be final and binding on all persons. All expenses of administering this Plan shall be borne by the Company.

4.    Eligibility. Each Non-Employee Director shall be eligible to receive the compensation provided hereunder. For the avoidance of doubt, directors who are also employees of the Company or any of its subsidiaries or affiliates do not receive additional compensation for service as a director and shall not be eligible to participate in this Plan.

5.    Non-Employee Director Compensation.

5.1    Annual Retainers.

(a)    Each Non-Employee Director who is elected or appointed to the Board shall receive an Annual Retainer (or Chair Annual Retainer, or Lead Director Annual Retainer, if any) for each year of the Board term that commences on election or appointment at such meeting. The amount of the Annual Retainer shall be determined by the Board from time to time and be set forth in the attached Appendix I. The amount of a Chair Annual Retainer or Lead Director Annual Retainer (if any) may be different from the Annual Retainers for other Non-Employee Directors, as determined by the Board from time to time.

(b)    Annual Retainers (including, for purposes of this Section 5.1, Chair Annual Retainers, or Lead Director Annual Retainers, if any) shall be paid as set forth in the attached Appendix I. To the extent any Annual Retainers are payable in shares of Common Stock of the Company, the number of shares of Common Stock paid shall be determined by dividing the dollar amount of the Annual Retainer(s) by the Fair Market Value of a share of the Common Stock on the business day immediately preceding the payment date, rounded down to the nearest whole share. The vesting schedule(s) for such Annual Retainer(s) shall also be set forth in the attached Appendix I.

5.2    Quarterly Retainers.

(a)    Each Non-Employee Director who is elected or appointed to the Board at an annual meeting of shareholders shall receive a Quarterly Retainer for each calendar quarter in which he or she serves on the Board. The amount of the Quarterly Retainer shall be determined by the Board from time to time as set forth in the attached Appendix I.

(b)    Each Non-Employee Director who is appointed as a Chair or a Lead Director shall receive a Chair Quarterly Retainer or Lead Director Quarterly Retainer, as applicable, for each calendar quarter in which he or she serves on the Board in such capacity. The amount of a Chair Quarterly Retainer or Lead Director Quarterly Retainer, as applicable, may be different from the Quarterly Retainers for other Non-Employee Directors, as determined by the Board from time to time.

(c)    Except as otherwise provided herein, each Quarterly Retainer (including each Chair Quarterly Retainer or Lead Director Quarterly Retainer, as applicable) shall be paid in cash, in arrears, on the 10th business day after the end of each calendar quarter (“Quarterly Payment Dates”).

(d)    Each Non-Employee Director may elect to have the Company pay all or a portion of his or her Quarterly Retainer(s) (and any Chair Quarterly Retainer or Lead Director Quarterly Retainer, as applicable), in Common Stock, in lieu of cash by submitting the form of election as set forth in the attached Appendix II. The number of shares of Common Stock paid to each electing Non-Employee Director shall be determined by dividing the dollar amount of the Quarterly Retainer(s) (and/or any Chair Quarterly Retainer or Lead Director Quarterly Retainer, as applicable) by the Fair Market Value of a share of Common Stock on the business day immediately preceding the Quarterly Payment Date, rounded down to the nearest whole share, and shall be paid/issued on the same schedule as Quarterly Retainers (and any Chair Quarterly Retainer or Lead Director Quarterly Retainer, as applicable) paid in cash. Any election by a Non-Employee Director to receive or not receive his or her Quarterly Retainer(s) in Common Stock must be made prior to the quarter for which cash payment or Common Stock issuance is desired, or as may be determined by the Compensation Committee from time to time. Any election must comply with all rules established from time to time by the Board, including any insider trading policy or other similar policy. Notwithstanding the foregoing, if any Non-Employee Director ceases to serve on the Board prior to the Quarterly Payment Date for any calendar quarter, each Quarterly Retainer (and each Chair Quarterly Retainer or Lead Director Quarterly Retainer, as applicable) payable to such Non-Employee Director for such calendar quarter shall be paid in cash (regardless of any election made by such Non-Employee Director in accordance with this Section 5.2(d)).

6.    Equity Compensation. Grants of equity awards set forth in this Plan shall be made under the Equity and Incentive Plan as in effect from time to time, subject to all of the applicable terms and conditions thereof, and only to the extent that shares of Common Stock remain available for issuance under the Equity and Incentive Plan. This Plan does not constitute a separate source of Common Stock for the payment of equity compensation hereunder. The terms of the Equity and Incentive Plan are fully incorporated into this Plan with respect to any equity compensation paid hereunder. In the event of any inconsistency between the Equity and Incentive Plan and this Plan with respect to equity compensation, the terms of the Equity and Incentive Plan shall control. Common Stock issued pursuant to this Plan either (i) in lieu of all or a portion of a Non-Employee Director’s Quarterly Retainer pursuant to Section 5.2(d) of this Plan or (ii) in settlement of any RSUs granted to a Non-Employee Director that have vested as set forth in Appendix I shall be fully vested and unrestricted shares of Common Stock.

7.    Total Compensation Limit. Notwithstanding any other provisions of this Plan, in no event shall the aggregate dollar value of: (i) the Annual Retainer; (ii) all Quarterly Retainers; (iii) all Chair Quarterly Retainers; and (iv) any other form of cash compensation, and/or other grants of RSUs or other types of equity made under the Equity and Incentive Plan or otherwise, received by any Non-Employee Director in any fiscal year of the Company exceed Seven Hundred Fifty Thousand Dollars ($750,000). For such purposes, the value of equity and equity-

based awards shall be measured as of the date of grant based on the grant date fair value for financial reporting purposes. Reimbursement of expenses incurred by Non-Employee Directors in connection with carrying out their duties as a Non- Employee Director of the Company shall not be included in the determination of whether the compensation earned by any Non-Employee Director exceeds the aforementioned limit on Non- Employee Director compensation.

8.    General Provisions.

8.1    Pro-Rata Payments. A Non-Employee Director who is appointed or elected to the Board after the annual meeting of shareholders shall receive a pro-rated portion of the Annual Retainer and Quarterly Retainer for the Board term based on the number of complete days of the calendar year and calendar quarter during which the Non-Employee Director serves as a member of the Board, unless otherwise determined by the Board.

8.2    No Fractional Shares of Common Stock. Notwithstanding any provision herein to the contrary, in no case shall any fractional shares of Common Stock be issued pursuant to this Plan. To the extent any fractional share of Common Stock would otherwise be issued pursuant to this Plan, such fractional share shall be rounded down to the nearest whole share.

8.3    Unfunded Obligations. The amounts to be paid to Non-Employee Directors under this Plan are unfunded obligations of the Company. The Company is not required to segregate any monies or other assets from its general funds with respect to these obligations. Non- Employee Directors shall not have any preference or security interest in any assets of the Company other than as a general unsecured creditor.

8.4    No Right to Continued Board Membership. Neither this Plan nor any compensation paid hereunder will confer on any Non-Employee Director the right to continue to serve as a member of the Board or in any other capacity.

8.5    Non-Assignment. Any and all rights of a Non-Employee Director respecting payments under this Plan may not be assigned, transferred, pledged or encumbered in any manner, other than by will or the laws of descent and distribution, and any attempt to do so shall be void.

8.6    Successors and Assigns. This Plan shall be binding on the Company and its successors and assigns.

8.7    Entire Plan. This Plan, together with the Equity and Incentive Plan, constitutes the entire plan with respect to the subject matter hereof and supersedes all prior plans with respect to the subject matter hereof.

8.8    Compliance with Law. The obligations of the Company with respect to payments under this Plan are subject to compliance with all applicable laws and regulations.

8.9    Term of Plan. This Plan shall become effective on the Effective Date and will remain in effect until it is revised or terminated by further action of the Board.

8.10    Termination and Amendment. The Board may at any time amend, modify or terminate this Plan in whole or in part. Notwithstanding the foregoing, no amendment or termination of this Plan may impair the right of a Non-Employee Director to receive any amounts accrued hereunder prior to the effective date of such amendment or termination.

8.11    Applicable Law. The law of the State of Georgia shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state’s conflict of law rules.

8.12    Section 409A. This Plan is intended to comply with the requirements of Section 409A, to the extent applicable, and shall be interpreted accordingly. Notwithstanding the foregoing, the Company makes no representations or covenants that any compensation paid or awarded under this Plan will comply with Section 409A.

8.13    Withholding. To the extent required by applicable Federal, state or local law, a Non-Employee Director must make arrangements satisfactory to the Company for the payment of any withholding or similar tax obligations that arise in connection with this Plan.

8.14    Severability. If any provision of this Plan shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, and this Plan shall be construed as if such invalid or unenforceable provision were omitted.

8.15    Headings. The headings of sections herein are included solely for convenience and shall not affect the meaning of any of the provisions of this Plan.

[Signature page follows]

IN WITNESS WHEREOF, this Plan is executed as of May 5, 2021, the date the Board approved this Plan, to be effective as of May 5, 2021.

THE AARON’S COMPANY, INC.

By: /s/ Rachel G. George

Name: Rachel G. George

Title: Executive Vice President, General Counsel, Corporate Secretary, and Chief Corporate Affairs Officer

Appendix I

The Aaron’s Company, Inc. Compensation Plan
for Non-Employee Directors

As Approved by the Board, Effective May 5, 2021

Description	Amount	Comment
Annual Retainer - RSU	$125,000	Each Annual Retainer will be in the form of RSUs, which will be granted on the date of the annual meeting of shareholders (the “Grant Date”) and, unless otherwise determined by the Board prior to the Grant Date in accordance with the Equity and Incentive Plan, will vest in full on the one-year anniversary of the Grant Date; provided, however, that the RSUs granted at the 2021 annual meeting of shareholders will vest in full on May 8, 2022. Vesting is generally subject to the Non-Employee Director’s continued service on the Board, but if the Non-Employee Director’s service on the Board terminates prior to the applicable vesting date, a pro rata portion of the RSUs shall vest upon the date of such termination. 1
Quarterly Retainer - Cash	$18,750	Can make election to receive shares of fully vested Common Stock as set forth in Section 5.2(d) of the Plan. With respect to any Non-Employee Director who begins or ends her or his service on the Board after the beginning but prior to the end of a calendar quarter, the amount of the Quarterly Retainer paid to that Non-Employee Director for that calendar quarter shall be the product of: (1) the full amount of the Quarterly Retainer in effect at that time; multiplied by: (2) a fraction, the numerator of which shall be the number of days during that calendar quarter that she or he served as a Non-Employee Director, and the denominator of which shall be the total number of days in that calendar quarter.

1 New Non-Employee Directors who join the Board on a date other than the date of the annual meeting of shareholders will receive the full amount of the Annual Retainer (in RSUs) if they join the Board on a date that is less than seven months after the date of the most recent annual meeting of shareholders, and such RSUs will have an effective grant date of the date on which the Non-Employee Director joins the Board and shall vest (subject to continued Board service) on the first anniversary of the grant date; provided that if the Non-Employee Director’s service on the Board terminates prior to the applicable vesting date, a pro rata portion of the RSUs shall vest upon the date of such termination. The number of RSUs granted to any new Non-Employee Director who joins the Board on a date that is seven months or more after the date of the most recent annual meeting of shareholders will be determined by the Board in its discretion. Non-Employee Directors who will not serve on the Board following an annual meeting of shareholders will not receive the Annual Retainer granted on the date of such annual meeting of shareholders.

Compensation for Chairs & Lead Director

Description	Amount2	Comment
Board Chair - Quarterly Cash Retainer	$25,000	Amount is in addition to the quarterly cash retainer received by non-employee directors of $18,750 set forth above. Can make election to receive shares of fully vested Common Stock as set forth in Section 5.2(d) of the Plan.
Audit Committee Chair - Quarterly Cash Retainer	$6,250	Amount is in addition to the quarterly cash retainer received by non-employee directors of $18,750 set forth above. Can make election to receive shares of fully vested Common Stock as set forth in Section 5.2(d) of the Plan.
Compensation Committee Chair - Quarterly Cash Retainer	$3,750	Amount is in addition to the quarterly cash retainer received by non-employee directors of $18,750 set forth above. Can make election to receive shares of fully vested Common Stock as set forth in Section 5.2(d) of the Plan.
Nominating and Corporate Governance Committee Chair - Quarterly Cash Retainer	$2,500	Amount is in addition to the quarterly cash retainer received by non-employee directors of $18,750 set forth above. Can make election to receive shares of fully vested Common Stock as set forth in Section 5.2(d) of the Plan.
Lead Director – Quarterly Cash Retainer	$6,250	Amount is in addition to the quarterly cash retainer received by non-employee directors of $18,750 set forth above. Can make election to receive shares of fully vested Common Stock as set forth in Section 5.2(d) of the Plan.

2 Where a Non-Employee Director becomes the Chair of the Board or any Board Committee or Lead Director, or ceases serving in such capacity, after the beginning but prior to the end of a calendar quarter, the amount of the Chair Quarterly Retainer or Lead Director Quarterly Retainer (as applicable) paid to that Non-Employee Director for that calendar quarter

shall be the product of: (1) the full amount of the Chair Quarterly Retainer or Lead Director Quarterly Retainer (as applicable) in effect at that time; multiplied by: (2) a fraction, the numerator of which shall be the number of days during that calendar quarter that the Non-Employee Director served as the Chair of the Board or such Board Committee or Lead Director (as applicable), and the denominator of which shall be the total number of days in that calendar quarter.

Appendix II

THE AARON’S COMPANY, INC. COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS

Election to Receive Shares in Lieu of Cash
for quarterly retainers

To be effective for the [] term of the Board (“Board Term”), commencing January 1, [] and any future Board Term as provided below.

Election to Receive Shares

Pursuant to Section 5.2(d) of The Aaron’s Company, Inc. Compensation Plan for Non-Employee Directors (the “Plan”), I hereby elect to receive all or a portion of my Quarterly Retainers (and all or a portion of my Chair Quarterly Retainer or Lead Director Quarterly Retainer, as applicable) (collectively, “Cash Fees”) as further set forth below in shares of the Company’s common stock (“Shares”) in lieu of cash in accordance with this election and the Plan. Capitalized terms used but not defined herein shall have the meanings set forth in the Plan.

Quarterly Retainer Election

I hereby elect to receive ____% of the Quarterly Retainer(s) (and any Chair Quarterly Retainer or Lead Director Quarterly Retainer, as applicable) due to me on each Quarterly Payment Date in Shares having an equivalent value determined in accordance with Section 5.2(d) of the Plan.

Type of Shares Issued

Shares issued in lieu of Cash Fees shall be fully vested and unrestricted shares of the Company’s common stock issued pursuant to this Plan and The Aaron’s Company, Inc. 2020 Equity Incentive Plan (“Equity and Incentive Plan”), as in effect from time to time. Notwithstanding the foregoing, if there are not sufficient Shares available under the Equity and Incentive Plan for any reason, the Cash Fees will be paid in cash.

Number of Shares

The number of Shares paid shall be determined by dividing the dollar amount of the Cash Fees subject to the election by the Fair Market Value of a Share on the business day immediately preceding the payment date, rounded down to the nearest whole Share. Pursuant to Sections 5.2(d) and 8.2 of the Plan, the Company shall not issue any fractional Shares.

Duration of Election

I understand that this election will continue in effect (including future Board terms) until I timely submit a new election form modifying or revoking this election.

Withholding

I understand and agree that the Company may take such action as it deems necessary or appropriate to satisfy any obligations it may have to withhold federal, state or local income or other taxes incurred by reason of payments made pursuant to this Plan.

Acknowledgement

I acknowledge receipt of a copy of the Plan and acknowledge and agree that this election is made pursuant to the Plan and is subject to all of the terms and conditions thereof. If my service on the Board ceases prior to the Quarterly Payment Date for a calendar quarter, I acknowledge that the Cash Fees for such calendar quarter will be paid in cash in accordance with Section 5.2(d) of the Plan.

I acknowledge that the Shares issued to me are also subject to the applicable terms and conditions of the Equity and Incentive Plan as in effect from time to time and acknowledge receipt of a copy of the Equity and Incentive Plan.

Signature of Non-Employee Director:

Printed Name:

Date:

RETURN COMPLETED FORM TO:

Accepted by Plan Administrator:

Printed Name:

Date:

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)

	I, Douglas A. Lindsay, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of The Aaron's Company, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	c)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
	a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	July 27, 2021	/s/ Douglas A. Lindsay
		Douglas A. Lindsay
		Chief Executive Officer and Director
		(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)

	I, C. Kelly Wall, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of The Aaron's Company, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	c)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
	a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	July 27, 2021	/s/ C. Kelly Wall
		C. Kelly Wall
		Chief Financial Officer (Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Douglas A. Lindsay, Chief Executive Officer of The Aaron’s Company, Inc. (the “Company”), certify, pursuant to section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1)The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2021 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	July 27, 2021	/s/ Douglas A. Lindsay
		Douglas A. Lindsay
		Chief Executive Officer and Director
		(Principle Executive Officer)

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, C. Kelly Wall, Chief Financial Officer of The Aaron’s Company, Inc. (the “Company”), certify, pursuant to section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1)The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2021 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	July 27, 2021	/s/ C. Kelly Wall
		C. Kelly Wall
		Chief Financial Officer (Principal Financial Officer)

XML

Cover - shares	6 Months Ended
	Jun. 30, 2021	Jul. 23, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2021
Document Transition Report	false
Entity File Number	1-39681
Entity Registrant Name	THE AARON'S COMPANY, INC.
Entity Incorporation, State or Country Code	GA
Entity Tax Identification Number	85-2483376
Entity Address, Address Line One	400 Galleria Parkway SE
Entity Address, Address Line Two	Suite 300
Entity Address, City or Town	Atlanta
Entity Address, State or Province	GA
Entity Address, Postal Zip Code	30339-3182
City Area Code	678
Local Phone Number	402-3000
Title of 12(b) Security	Common Stock, $0.50 Par Value
Trading Symbol	AAN
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		32,672,565
Amendment Flag	false
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2
Entity Central Index Key	0001821393
Current Fiscal Year End Date	--12-31

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
ASSETS:
Cash and Cash Equivalents	$ 47,979	$ 76,123
Accounts Receivable (net of allowances of $5,667 at June 30, 2021 and $7,613 at December 31, 2020)	26,569	33,990
Lease Merchandise (net of accumulated depreciation and allowances of $445,867 at June 30, 2021 and $458,405 at December 31, 2020)	737,305	697,235
Property, Plant and Equipment, Net	209,876	200,370
Operating Lease Right-of-Use Assets	236,507	238,085
Goodwill	8,482	7,569
Other Intangibles, Net	5,844	9,097
Income Tax Receivable	1,800	1,093
Prepaid Expenses and Other Assets	89,179	89,895
Total Assets	1,363,541	1,353,457
LIABILITIES & SHAREHOLDERS’ EQUITY:
Accounts Payable and Accrued Expenses	230,279	230,848
Deferred Income Taxes Payable	79,275	62,601
Customer Deposits and Advance Payments	58,180	68,894
Operating Lease Liabilities	262,292	278,958
Debt	0	831
Total Liabilities	630,026	642,132
Commitments and Contingencies (Note 4)
SHAREHOLDERS' EQUITY:
Common Stock, Par Value $0.50 Per Share: Authorized: 112,500,000 Shares at June 30, 2021 and December 31, 2020; Shares Issued: 35,520,456 at June 30, 2021 and 35,099,571 at December 31, 2020	17,760	17,550
Additional Paid-in Capital	715,513	708,668
Retained Earnings	64,320	1,881
Accumulated Other Comprehensive Loss	(450)	(797)
Stockholders' Equity before Treasury Stock, Total	797,143	727,302
Less: Treasury Shares at Cost
2,426,788 Shares at June 30, 2021 and 894,660 at December 31, 2020	(63,628)	(15,977)
Total Shareholders’ Equity	733,515	711,325
Total Liabilities & Shareholders’ Equity	$ 1,363,541	$ 1,353,457

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Accounts receivable, allowances	$ 5,667	$ 7,613
Lease Merchandise, accumulated depreciation and allowances	$ 445,867	$ 458,405
Common Stock, Par Value (in dollars per share)	$ 0.50	$ 0.50
Common Stock, Shares Authorized (in shares)	112,500,000	112,500,000
Common Stock, Shares Issued (in shares)	35,520,456	35,099,571
Treasury Shares (in shares)	2,426,788	894,660

XML

Condensed Consolidated and Combined Statements of Earnings - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
REVENUES:
Revenues	$ 467,495	$ 430,955	$ 948,549	$ 863,786
COSTS AND REVENUES:
Total cost of revenue	172,815	167,034	350,801	332,618
GROSS PROFIT	294,680	263,921	597,748	531,168
Operating Expenses [Abstract]
Personnel Costs	121,426	118,395	246,289	234,141
Other Operating Expenses, Net	114,046	93,993	222,412	217,058
Provision for Lease Merchandise Write-Offs	12,117	14,213	25,534	38,173
Restructuring Expenses, Net	1,794	6,991	5,235	29,277
Impairment of Goodwill	0	0	0	446,893
Separation Costs	1,246	0	5,636	0
Operating expenses, total	250,629	233,592	505,106	965,542
OPERATING PROFIT (LOSS)	44,051	30,329	92,642	(434,374)
Interest Expense	(451)	(2,853)	(795)	(6,652)
Other Non-Operating Income, Net	744	1,948	1,146	189
EARNINGS (LOSS) BEFORE INCOME TAXES	44,344	29,424	92,993	(440,837)
INCOME TAX EXPENSE (BENEFIT)	11,369	7,050	23,695	(139,437)
NET EARNINGS (LOSS)	$ 32,975	$ 22,374	$ 69,298	$ (301,400)
EARNINGS (LOSS) PER SHARE
EARNINGS (LOSS) PER SHARE (in dollars per share)	$ 0.98	$ 0.66	$ 2.04	$ (8.91)
EARNINGS (LOSS) PER SHARE ASSUMING DILUTION (in dollars per share)	$ 0.95	$ 0.66	$ 1.99	$ (8.91)
Lease and Retail Revenues
REVENUES:
Revenues	$ 428,498	$ 394,257	$ 872,585	$ 793,167
COSTS AND REVENUES:
Costs of goods and services sold	143,206	137,718	294,701	279,721
Non-Retail Sales
REVENUES:
Revenues	32,455	33,044	62,404	59,890
COSTS AND REVENUES:
Costs of goods and services sold	29,609	29,316	56,100	52,897
Franchise Royalties and Other Revenue
REVENUES:
Revenues	$ 6,542	$ 3,654	$ 13,560	$ 10,729

XML

Condensed Consolidated and Combined Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Statement of Comprehensive Income [Abstract]
Net Earnings (Loss)	$ 32,975	$ 22,374	$ 69,298	$ (301,400)
Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustment	220	331	347	(1,423)
Total Other Comprehensive Income (Loss)	220	331	347	(1,423)
Comprehensive Income (Loss)	$ 33,195	$ 22,705	$ 69,645	$ (302,823)

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
OPERATING ACTIVITIES:
Net Earnings (Loss)	$ 69,298	$ (301,400)
Adjustments to Reconcile Net Earnings (Loss) to Cash Provided by Operating Activities:
Depreciation of Lease Merchandise	269,600	260,308
Other Depreciation and Amortization	34,547	34,235
Accounts Receivable Provision	10,879	14,957
Stock-Based Compensation	6,882	5,370
Deferred Income Taxes	16,674	(80,206)
Impairment of Assets	2,810	468,634
Non-Cash Lease Expense	45,802	48,394
Other Changes, Net	(2,437)	1,790
Changes in Operating Assets and Liabilities, Net of Effects of Acquisitions and Dispositions:
Additions to Lease Merchandise	(408,440)	(193,677)
Book Value of Lease Merchandise Sold or Disposed	98,712	104,370
Accounts Receivable	(3,554)	(6,754)
Prepaid Expenses and Other Assets	(3,228)	3,012
Income Tax Receivable	(707)	(76,175)
Operating Lease Right-of-Use Assets and Liabilities	(63,169)	(51,051)
Accounts Payable and Accrued Expenses	(2,748)	(19,950)
Customer Deposits and Advance Payments	(10,766)	2,583
Cash Provided by Operating Activities	60,155	214,440
INVESTING ACTIVITIES:
Insurance Proceeds relating to Property, Plant and Equipment	363	0
Proceeds from Investments	1,974	0
Purchases of Property, Plant, and Equipment	(45,826)	(30,059)
Proceeds from Dispositions of Property, Plant, and Equipment	7,977	2,208
Acquisition of Businesses and Customer Agreements, Net of Cash Acquired	(1,734)	(1,210)
Proceeds from Dispositions of Businesses and Customer Agreements, Net of Cash Disposed	0	358
Cash Used in Investing Activities	(37,246)	(28,703)
FINANCING ACTIVITIES:
Proceeds from Debt	0	5,625
Repayments on Debt	(753)	(60,748)
Dividends Paid	(6,770)	0
Acquisition of Treasury Stock	(42,626)	0
Issuance of Stock Under Stock Option Plans	1,790	0
Shares Withheld for Tax Payments	(2,729)	0
Net Transfers From Former Parent	0	126,265
Debt Issuance Costs	0	(1,020)
Cash (Used in) Provided by Financing Activities	(51,088)	70,122
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	35	(79)
(Decrease) Increase in Cash and Cash Equivalents	(28,144)	255,780
Cash and Cash Equivalents at Beginning of Period	76,123	48,773
Cash and Cash Equivalents at End of Period	$ 47,979	$ 304,553

XML

Basis and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Basis and Summary of Significant Accounting Policies

BASIS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

As described elsewhere in this Quarterly Report on Form 10-Q, the novel coronavirus ("COVID-19") pandemic led to significant market disruption and has impacted various aspects of our operations, directly and indirectly. Throughout these notes to the condensed consolidated and combined financial statements, the impacts of the COVID-19 pandemic on the financial results for the three and six months ended June 30, 2021 and comparable prior periods have been identified to the best of our ability under the respective sections. For a discussion of trends that we believe have affected our business as a result of the COVID-19 pandemic, see Item 2. "Management’s Discussion and Analysis of Financial Condition and Results of Operations", including the "Recent Developments and Operational Measures Taken by Us in Response to the COVID-19 Pandemic," "Results of Operations" and "Liquidity and Capital Resources", below, and Part I, Item 1A "Risk Factors" of our Current Report on Form 10-K, filed with the United States Securities and Exchange Commission on February 23, 2021 (the "2020 Annual Report").

Description of Spin-off Transaction

On October 16, 2020, management of Aaron’s, Inc. finalized the formation of a new holding company structure in anticipation of the separation and distribution transaction described below. Under the holding company structure, Aaron’s, Inc. became a direct, wholly owned subsidiary of a newly formed company, Aaron’s Holdings Company, Inc. Aaron's, Inc. was subsequently converted to a limited liability company ("Aaron’s, LLC") holding the assets and liabilities historically associated with the historical Aaron's Business segment (the "Aaron's Business"). Upon completion of the holding company formation, Aaron’s Holdings Company, Inc. became the publicly traded parent company of the Progressive Leasing segment ("Progressive Leasing"), Aaron’s Business, and Vive segment ("Vive").

On November 30, 2020 (the "separation and distribution date"), Aaron's Holdings Company, Inc. completed the previously announced separation of the Aaron's Business from Progressive Leasing and Vive and changed its name to PROG Holdings, Inc. (referred to herein as "PROG Holdings" or "Former Parent"). The separation of the Aaron's Business was effected through a distribution (the "separation", the "separation and distribution", or the "spin-off transaction") of all outstanding shares of common stock of a newly formed company called The Aaron's Company, Inc., a Georgia corporation ("Aaron's", "The Aaron's Company" or "the Company"), to the PROG Holdings shareholders of record as of November 27, 2020. Upon the separation and distribution, Aaron's, LLC became a wholly-owned subsidiary of The Aaron's Company. Shareholders of PROG Holdings received one share of The Aaron's Company for every two shares of PROG Holdings' common stock. Upon completion of the separation and distribution transaction, The Aaron's Company became an independent, publicly traded company under the ticker "AAN" on the New York Stock Exchange.

Unless the context otherwise requires or we specifically indicate otherwise, references to "we," "us," "our," "the Company," and "Aaron's" refer to The Aaron's Company, Inc., which holds, directly or indirectly, the Aaron’s Business prior to the separation and distribution date. References to "the Company", "Aaron's, Inc.", or "Aaron's Holdings Company, Inc." for periods prior to the separation and distribution date refer to transactions, events, and obligations of Aaron's, Inc., which took place prior to the separation and distribution. Historical amounts herein include revenues and costs directly attributable to the Company and an allocation to the Company of expenses of the Aaron's Business related to certain PROG Holdings' corporate functions prior to the separation and distribution date.

We describe in these footnotes the business held by us after the separation as if it were a standalone business for all historical periods described. However, we were not a standalone separate entity with independently conducted operations before the separation.

Description of Business

Aaron's is a leading, technology-enabled, omni-channel provider of lease-to-own ("LTO") and purchase solutions generally focused on serving the large, credit-challenged segment of the population. Through our portfolio of approximately 1,300 stores and our Aarons.com e-commerce platform, we provide consumers with LTO and purchase solutions for the products they need and want, including furniture, appliances, electronics, computers and a variety of other products and accessories. In addition, the Company includes the operations of Woodhaven Furniture Industries ("Woodhaven"), which manufactures and supplies the majority of the bedding and a significant portion of the upholstered furniture leased and sold in Company-operated and franchised stores.

The following table presents store count by ownership type:

Stores as of June 30 (Unaudited)	2021	2020
Company-operated Stores	1,087	1,098
Franchised Stores	247	316
Systemwide Stores	1,334	1,414

Basis of Presentation

The financial statements 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. The financial statements for the period from December 1, 2020 through December 31, 2020, and three and six months ended June 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. Intercompany balances and transactions between consolidated entities have been eliminated. These condensed consolidated and combined financial statements reflect the historical results of operations, financial position and cash flows of the Company in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The historical results of operations and cash flows of the Company prior to the separation and distribution presented in these condensed consolidated and combined financial statements may not be indicative of what they would have been had the Company been an independent standalone entity, nor are they necessarily indicative of the Company's future results of operations, financial position and cash flows.

The condensed combined balance sheets for periods prior to and through the separation and distribution date include the assets and liabilities associated with the historical Aaron’s Business and certain assets and liabilities where Aaron's, Inc. is the legal beneficiary or obligor. The combined statements of earnings for periods prior to and through the separation and distribution date include all revenues and costs directly attributable to the Company and an allocation of expenses related to certain PROG Holdings corporate functions. These allocated costs and expenses 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 costs and 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. The Company considers these allocations to be a reasonable reflection of the utilization of services or the benefit received.

The preparation of the Company's condensed consolidated and combined financial statements in conformity with U.S. GAAP for interim financial information requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates. Generally, actual experience has been consistent with management's prior estimates and assumptions. However, as described above, the extent to which the normalization of business trends since the start of the COVID-19 pandemic, and the resulting measures taken by the Company and federal and state governments, will impact the Company's business will depend on future developments, which are uncertain and cannot be precisely predicted at this time. In many cases, management's estimates and assumptions are dependent on estimates of such future developments and may change in the future.

The accompanying unaudited condensed consolidated and combined financial statements do not include all information required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included in the accompanying unaudited condensed consolidated and combined financial statements. These financial statements should be read in conjunction with the financial statements and notes thereto included in the 2020 Annual Report. The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of operating results for the full year.

Accounting Policies and Estimates

See Note 1 to the consolidated and combined financial statements in the 2020 Annual Report for an expanded discussion of accounting policies and estimates. Discussions of accounting estimates and application of accounting policies herein have also been updated as applicable to describe the uncertainty associated with the impacts of the COVID-19 pandemic described above.

Earnings Per Share

Earnings per share is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. The computation of earnings per share assuming dilution includes the dilutive effect of stock options, restricted stock units ("RSUs"), restricted stock awards ("RSAs"), performance share units ("PSUs") and other awards issuable under the Company's employee stock purchase plan ("ESPP") (collectively, "share-based awards") as determined under the treasury stock method, unless the inclusion of such awards would have been anti-dilutive.

The Company's basic earnings per share calculations for the periods prior to the separation and distribution assumes that the weighted average number of common shares outstanding was 33,841,624, which is the number of shares distributed to shareholders on the separation and distribution date, November 30, 2020. The same number of shares was used in the calculation of diluted earnings per share for the periods prior to the separation and distribution, as there were no equity awards of The Aaron's Company outstanding prior to the distribution date.

The following table shows the calculation of weighted-average shares outstanding assuming dilution:

	Three Months Ended June 30,		Six Months Ended June 30,
(Shares In Thousands)	2021	2020	2021	2020
Weighted Average Shares Outstanding	33,812	33,842	34,036	33,842
Dilutive Effect of Share-Based Awards	749	—	703	—
Weighted Average Shares Outstanding Assuming Dilution	34,561	33,842	34,739	33,842

The weighted-average anti-dilutive share-based awards that were excluded from the computation of earnings per share assuming dilution during the three and six months ended June 30, 2021 were not significant.

Revenue Recognition

The Company provides lease merchandise, consisting of furniture, appliances, electronics, computers and a variety of other products and accessories to its customers for lease under certain terms agreed to by the customer. Our stores and e-commerce platform offer leases with flexible ownership plans that can be renewed monthly up to 12, 18 or 24 months. The Company also earns revenue from the sale of merchandise to customers and its franchisees, and earns ongoing revenue from its franchisees in the form of royalties and through advertising efforts that benefit the franchisees. See Note 3 to these condensed consolidated and combined financial statements for further information regarding the Company's revenue recognition policies and disclosures.

Accounts Receivable

Accounts receivable consist primarily of receivables due from customers on lease agreements, corporate receivables incurred during the normal course of business (primarily for vendor consideration and real estate leasing activities) and franchisee obligations.

Accounts receivable, net of allowances, consist of the following: 

(In Thousands)	June 30, 2021		December 31, 2020
Customers	$	7,154	$	8,399
Corporate	9,969		12,771
Franchisee	9,446		12,820
	$	26,569	$	33,990

The Company maintains an accounts receivable allowance, under which the Company's policy is to record a provision for returns and uncollectible contractually due renewal payments based on historical payments experience, which is recognized as a reduction of lease and retail revenues within the condensed consolidated and combined statements of earnings. Other qualitative factors are considered in estimating the allowance, such as current and forecasted business trends. The Company writes off customer lease receivables that are 60 days or more past due on pre-determined dates twice monthly.

The Company also maintains an allowance for outstanding franchisee accounts receivable. The Company's policy is to estimate a specific allowance on accounts receivable to estimate future losses related to certain franchisees that are deemed to have a higher risk of non-payment and a general allowance based on historical losses as well as the Company's assessment of the financial health of all other franchisees. The estimated allowance on franchisee accounts receivable includes consideration of broad macroeconomic trends, such as the uncertainty surrounding the impacts of the normalization of current and future business trends associated with the COVID-19 pandemic on the franchisees' ability to satisfy their obligations. Accordingly, actual accounts receivable write-offs could differ from the allowance. The provision for uncollectible franchisee accounts receivable is recorded as bad debt expense in other operating expenses, net within the condensed consolidated and combined statements of earnings.

The following table shows the components of the accounts receivable allowance:

	Six Months Ended June 30,
(In Thousands)	2021		2020
Beginning Balance	$	7,613	$	10,720
Accounts Written Off, net of Recoveries	(12,825)		(19,200)
Accounts Receivable Provision	10,879		14,957
Ending Balance	$	5,667	$	6,477

The following table shows the components of the accounts receivable provision, which includes amounts recognized for bad debt expense and the provision for returns and uncollected payments:

	Six Months Ended June 30,
(In Thousands)	2021		2020
Bad Debt (Reversal) Expense	$	(734)	$	960
Provision for Returns and Uncollectible Renewal Payments	11,613		13,997
Accounts Receivable Provision	$	10,879	$	14,957

Lease Merchandise

The Company’s lease merchandise is recorded at the lower of depreciated cost or net realizable value. The cost of merchandise manufactured by our Woodhaven operations is recorded at cost and includes overhead from production facilities, shipping costs and warehousing costs. The Company begins depreciating merchandise at the earlier of 12 months and one day from its purchase of the merchandise or when the item is leased to customers. Lease merchandise depreciates to a 0% salvage value over the lease agreement period when on lease, generally 12 to 24 months, and generally 36 months when not on lease. Depreciation is accelerated upon early payout.

The following is a summary of lease merchandise, net of accumulated depreciation and allowances:

(In Thousands)	June 30, 2021		December 31, 2020
Merchandise on Lease, net of Accumulated Depreciation and Allowances	$	478,396	$	473,964
Merchandise Not on Lease, net of Accumulated Depreciation and Allowances1	258,909		223,271
Lease Merchandise, net of Accumulated Depreciation and Allowances	$	737,305	$	697,235

1 Includes Woodhaven raw materials, finished goods and work-in-process inventory that has been classified within lease merchandise in the condensed consolidated balance sheets of $17.2 million and $10.4 million as of June 30, 2021 and December 31, 2020, respectively.

The Company's policies require weekly merchandise counts at its store-based operations, which include write-offs for unsalable, damaged, or missing merchandise inventories. In addition to monthly cycle counting, full physical inventories are generally taken at the fulfillment and manufacturing facilities annually and appropriate provisions are made for missing, damaged and unsalable merchandise. The Company also monitors merchandise levels and mix by division, store, and fulfillment center, as well as the average age of merchandise on hand. If obsolete merchandise cannot be returned to vendors, its carrying amount is adjusted to its net realizable value or written off. Generally, all merchandise not on lease is available for lease or sale. On a monthly basis, all damaged, lost or unsalable merchandise identified is written off.

The Company records a provision for write-offs using the allowance method, which is included within lease merchandise, net within the condensed consolidated balance sheets. The allowance method for lease merchandise write-offs estimates the merchandise losses incurred but not yet identified by management as of the end of the accounting period based primarily on historical write-off experience. Other qualitative factors are considered in estimating the allowance, such as uncertainty surrounding the impacts of the normalization of current and future business trends associated with the COVID-19 pandemic. Therefore, actual lease merchandise write-offs could differ from the allowance. The provision for write-offs is included in provision for lease merchandise write-offs in the accompanying condensed consolidated and combined statements of earnings. The Company writes off lease merchandise on lease agreements that are 60 days or more past due on pre-determined dates twice monthly.

The following table shows the components of the allowance for lease merchandise write-offs:

	Six Months Ended June 30,
(In Thousands)	2021		2020
Beginning Balance	$	11,599	$	13,823
Merchandise Written off, net of Recoveries	(27,656)		(36,978)
Provision for Write-offs	25,534		38,174
Ending Balance	$	9,477	$	15,019

Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist of the following:

(In Thousands)	June 30, 2021		December 31, 2020
Prepaid Expenses1	$	19,262	$	17,411
Insurance Related Assets1	27,094		27,020
Company-Owned Life Insurance	15,348		16,223
Assets Held for Sale	7,453		8,956
Deferred Tax Asset	7,014		7,014
Other Assets1	13,008		13,271
	$	89,179	$	89,895

1 During the second quarter of 2021, the Company recategorized items within the components of prepaid expenses and other assets. The presentation of prior period amounts has been reclassified to be consistent with the current period presentation. Such reclassification has no impact on the total prepaid expenses and other assets balance as of December 31, 2020.

Assets Held for Sale

Certain properties, consisting of parcels of land and commercial buildings, met the held for sale classification criteria as of June 30, 2021 and December 31, 2020. Assets held for sale are recorded at the lower of their carrying value or fair value less estimated cost to sell and are classified within prepaid expenses and other assets in the condensed consolidated balance sheets. Depreciation is suspended on assets upon classification to held for sale. Gains and losses related to the sale of assets held for sale are recorded in other operating expenses, net of restructuring expenses, net (if the asset is a part of the Company's restructuring programs further described in Note 5 to these condensed consolidated and combined financial statements) in the condensed consolidated and combined statements of earnings. Such gains and losses were not significant for the three and six months ended June 30, 2021 and June 30, 2020.

Management estimated the fair values of real estate properties using the market values for similar properties. These properties are considered Level 2 assets as defined below. The carrying amount of the properties held for sale as of June 30, 2021 and December 31, 2020 is $7.5 million and $9.0 million, respectively.

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:

(In Thousands)	June 30, 2021		December 31, 2020
Accounts Payable 1	$	63,983	$	84,738
Estimated Claims Liability Costs	53,804		49,272
Accrued Salaries and Benefits	54,576		53,396
Accrued Real Estate and Sales Taxes1	24,153		23,968
Other Accrued Expenses and Liabilities1	33,763		19,474
	$	230,279	$	230,848

1 During the second quarter of 2021, the Company recategorized items within the components of accounts payable and accrued expenses. The presentation of prior period amounts has been reclassified to be consistent with the current period presentation. Such reclassification has no impact on the total accounts payable and accrued expenses balance as of December 31, 2020.

Estimated Claims Liability Costs

Estimated claims liability costs are accrued primarily for workers compensation, vehicle liability, general liability and group health insurance benefits provided to employees. These liabilities are recorded within estimated claims liability costs within accounts payable and accrued expenses in the condensed consolidated balance sheets. Estimates for these claims liabilities are made based on actual reported but unpaid claims and actuarial analysis of the projected claims run off for both reported and incurred but not reported claims. This analysis is based upon an assessment of the likely outcome or historical experience. The Company makes periodic prepayments to its insurance carriers to cover the projected claims run off for both reported and incurred but not reported claims, considering its retention or stop loss limits. In addition, we have prefunding balances on deposit and other insurance receivables with the insurance carriers which are recorded within prepaid expenses and other assets in our condensed consolidated balance sheets.

Goodwill

The Company’s goodwill is not amortized but is subject to an impairment test at the reporting unit level annually as of October 1 and more frequently if events or circumstances indicate that an impairment may have occurred. An interim goodwill impairment test is required if the Company believes it is more likely than not that the carrying amount of one or more reporting units exceeds the reporting units' fair value. The Company concluded that the need for an interim goodwill impairment test was triggered as of March 31, 2020. Factors that led to this conclusion included: (i) a significant decline in the Aaron's, Inc. stock price and market capitalization in March 2020; (ii) the temporary closure of all Company-operated store showrooms due to the COVID-19 pandemic, which impacted our financial results and was expected to adversely impact future financial results; (iii) the significant uncertainty with regard to the short-term and long-term impacts that macroeconomic conditions arising from the COVID-19 pandemic and related government emergency and executive orders would have on the financial health of our customers and franchisees; and (iv) consideration given to the amount by which the Aaron's Business reporting unit's fair value exceeded the carrying value from the October 1, 2019 annual goodwill impairment test.

As of March 31, 2020, management of Aaron's, Inc. determined its existing goodwill was fully impaired and recorded a goodwill impairment loss of $446.9 million during the three months ended March 31, 2020. Management engaged the assistance of a third-party valuation firm to perform the interim goodwill impairment test, which entailed an assessment of the Aaron's Business reporting unit’s fair value relative to the carrying value that was derived using a combination of both income and market approaches and performing a market capitalization reconciliation, which included an assessment of the control premium implied from the Company's estimated fair values of its reporting units. The fair value measurement involved significant unobservable inputs (Level 3 inputs, as discussed more fully below). The income approach utilized the discounted future expected cash flows, which required assumptions about short-term and long-term revenue growth or decline rates, operating margins, capital requirements, and a weighted-average cost of capital. The income approach reflected assumptions and estimates made by management regarding direct and indirect impacts of the COVID-19 pandemic on the short-term and long-term cash flows for the reporting unit. Due to the significant uncertainty associated with the impacts of the COVID-19 pandemic, the assumptions and estimates used by management were highly subjective. The weighted-average cost of capital used in the income approach was adjusted to reflect the specific risks and uncertainties associated with the COVID-19 pandemic in developing the cash flow projections. Given the uncertainty discussed above, the Company performed certain sensitivity analyses including considering reasonably possible alternative assumptions for short-term and long-term growth or decline rates, operating margins, capital requirements, and weighted-average cost of capital rates. Each of the sensitivity analyses performed supported the conclusion of a full impairment of the existing goodwill balance within the Aaron's Business reporting unit.

The market approach, which includes the guideline public company method, utilized pricing multiples derived from an analysis of comparable publicly traded companies. We believe the comparable companies we evaluate as marketplace participants serve as an appropriate reference when calculating fair value because those companies have similar risks, participate in similar markets, provide similar products and services for their customers and compete with us directly. However, we considered that such publicly available information regarding the comparable companies evaluated likely did not reflect the impact of the COVID-19 pandemic in determining the multiple assumptions selected.

The Company completed acquisitions of certain franchisees and third party rent-to-own stores subsequent to March 31, 2020, which resulted in a goodwill balance of $8.5 million and $7.6 million as of June 30, 2021 and December 31, 2020, respectively. The Company determined that there were no events that occurred or circumstances that changed during the three or six months ended June 30, 2021 that would more likely than not reduce the fair value of its reporting unit below its carrying amount.

Segment Reporting

Management concluded that the Company has one operating and reportable segment based on the nature of the financial information regularly reviewed by the chief operating decision maker to assess performance and allocate resources. We have also concluded that the Company has one reporting unit due to the fact that the components included within the operating segment have similar economic characteristics, such as the nature of the products and services provided, the nature of the customers we serve, and the interrelated nature of the components that are aggregated to form the sole reporting unit. The Company evaluates performance and allocates resources as a single operating segment based on revenue growth and pre-tax profit or loss from operations.

Related Party

The Aaron's Company was a related party to PROG Holdings prior to the separation and distribution date.

All intercompany transactions between the Company and PROG Holdings were included within invested capital in the historical combined balance sheets prior to the separation and distribution date, and are classified as changes in invested capital within stockholders' equity for the historical periods prior to the separation and distribution date. The total net effect of the settlement of these intercompany transactions is reflected in the condensed consolidated and combined statements of cash flows as a financing activity for the six months ended June 30, 2020.

Corporate Allocations

The Company's previous operating model included a combination of standalone and combined business functions with PROG Holdings. The condensed consolidated and combined financial statements in the 2020 Annual Report include corporate allocations to the Company through the separation and distribution date for expenses related to activities that were previously provided on a centralized basis within PROG Holdings. These expenses primarily related to 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. See Note 12 to the consolidated and combined financial statements in the 2020 Annual Report for more information regarding stock-based compensation. Corporate allocations to the Company during the three and six months ended June 30, 2020 also include expenses related to the separation and distribution. These expenses have been allocated to the Company based on direct usage or benefit where specifically identifiable, with the remainder allocated primarily on a pro rata basis using an applicable measure of revenues, headcount or other relevant measures. The Company considers these allocations to be a reasonable reflection of the utilization of services or the benefit received. These allocated expenses are included within personnel costs and other operating expenses, net in the condensed consolidated and combined statements of earnings and as an increase to invested capital in the historical condensed combined balance sheets prior to the separation and distribution date. General corporate expenses allocated to the Company during the three and six months ended June 30, 2020 were $5.3 million and $11.9 million, respectively.

Management believes the assumptions regarding the allocation of general corporate expenses from PROG Holdings are reasonable. However, the consolidated and combined financial statements may not include all of the actual expenses that would have been incurred and may not reflect the Company's consolidated and combined results of operations, financial position and cash flows had it been a standalone company during the periods presented. Actual costs that would have been incurred if the Company had been a standalone company would depend on multiple factors, including organization structure and various other strategic decisions.

Post-Separation Arrangements

In connection with the separation and distribution, the Company entered into several agreements with PROG Holdings, which (i) govern the separation and our relationship with PROG Holdings after the separation, and (ii) provide for the allocation between the two companies of PROG Holdings' assets, employees, liabilities and obligations (including its investments, property and employee benefits and tax-related assets and liabilities) attributable to periods prior to, at, and after the separation. These agreements are further described in Note 14 to the consolidated and combined financial statements in the 2020 Annual Report. Amounts incurred and due to or from PROG Holdings for transition services were not significant during the three and six months ended June 30, 2021.

Stockholders' Equity

Changes in stockholders' equity for the three and six months ended June 30, 2021 and 2020 are as follows:

	Treasury Stock			Common Stock		Invested Capital		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
(In Thousands, Except Per Share)	Shares	Amount
Balance, December 31, 2020	(895)	$	(15,977)	$	17,550	$	—	$	708,668	$	1,881	$	(797)	$	711,325
Cash Dividends, $0.10 per share	—	—		—		—		—		(3,472)		—		(3,472)
Stock-Based Compensation	—	—		—		—		3,551		—		—		3,551
Issuance of Shares under Equity Plans	(114)	(2,729)		165		—		378		—		—		(2,186)
Acquisition of Treasury Stock	(252)	(6,280)		—		—		—		—		—		(6,280)
Net Earnings	—	—		—		—		—		36,323		—		36,323
Foreign Currency Translation Adjustment	—	—		—		—		—		—		127		127
Balance, March 31, 2021	(1,261)	$	(24,986)	$	17,715	$	—	$	712,597	$	34,732	$	(670)	$	739,388
Cash Dividends, $0.10 per share	—	—		—		—		—		(3,387)		—		(3,387)
Stock-Based Compensation	—	—		—		—		1,714		—		—		1,714
Issuance of shares under equity plans	—	—		45		—		1,202		—		—		1,247
Acquisition of Treasury Stock	(1,166)	(38,642)		—		—		—		—		—		(38,642)
Net Earnings	—	—		—		—		—		32,975		—		32,975
Foreign Currency Translation Adjustment	—	—		—		—		—		—		220		220
Balance, June 30, 2021	(2,427)	$	(63,628)	$	17,760	$	—	$	715,513	$	64,320	$	(450)	$	733,515

	Treasury Stock			Common Stock		Invested Capital		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
(In Thousands, Except Per Share)	Shares	Amount
Balance, December 31, 2019	—	$	—	$	—	$	837,800	$	—	$	—	$	(19)	$	837,781
Stock-Based Compensation	—	—		—		2,725		—		—		—		2,725
Net increase in Invested Capital	—	—		—		90,211		—		—		—		90,211
Net Loss	—	—		—		(323,774)		—		—		—		(323,774)
Foreign Currency Translation Adjustment	—	—		—		—		—		—		(1,754)		(1,754)
Balance, March 31, 2020	—	$	—	$	—	$	606,962	$	—	$	—	$	(1,773)	$	605,189
Stock-Based Compensation	—	—		—		2,892		—		—		—		2,892
Net increase in Invested Capital	—	—		—		35,994		—		—		—		35,994
Net Earnings	—	—		—		22,374		—		—				22,374
Foreign Currency Translation Adjustment	—	—		—		—		—		—		331		331
Balance, June 30, 2020	—	$	—	$	—	$	668,222	$	—	$	—	$	(1,442)	$	666,780

Fair Value Measurement

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Valuations based on unobservable inputs reflecting the Company's own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

The Company measures a liability related to its non-qualified deferred compensation plan, which represents benefits accrued for participants that are part of the plan and is valued at the quoted market prices of the participants' investment election, at fair value on a recurring basis. The Company measures assets held for sale at fair value on a nonrecurring basis and records impairment charges when they are deemed to be impaired.

The fair values of the Company's other current financial assets and liabilities, including cash and cash equivalents, accounts receivable and accounts payable, approximate their carrying values due to their short-term nature. The Company also measures certain non-financial assets at fair value on a nonrecurring basis, such as goodwill, intangible assets, operating lease right-of-use assets, and property, plant, and equipment, in connection with periodic evaluations for potential impairment.

Recent Accounting Pronouncements

Adopted

Income Taxes. In December 2019, the Financial Accounting Standards Board (the "FASB") issued ASU 2019-12, Simplifying the Accounting for Income Taxes. This guidance simplifies the accounting for income taxes by removing certain exceptions to general principles in Income Taxes (ASC 740). It also simplifies certain aspects of accounting for franchise taxes and clarifies and amends existing guidance to improve consistent application and reduce complexity. There was no material impact on the consolidated financial statements of the Company upon adoption of the standard during the first quarter of 2021.

Pending Adoption

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). The standard provides temporary guidance to ease the potential burden in accounting for reference rate reform primarily resulting from the discontinuation of the London Interbank Overnight ("LIBO") rate, which is currently expected to occur on December 31, 2021. The Company's $250.0 million senior unsecured revolving credit facility (the "Revolving Facility"), as further described in Note 8 to the consolidated and combined financial statements in the 2020 Annual Report, currently references the LIBO rate for determining interest payable on outstanding borrowings. The amendments in ASU 2020-04 are elective and apply to all entities that have contracts referencing the LIBO rate. The new guidance provides an expedient which simplifies accounting analyses under current GAAP for contract modifications if the change is directly related to a change from the LIBO rate to a new interest rate index. The Company will adopt the standard in the first quarter of 2022, and is continuing to evaluate the provisions of ASU 2020–04 and the impacts of transitioning to an alternative rate; however, we do not expect it to have a material impact to the Company's consolidated financial statements or to any key terms of our Revolving Facility other than the discontinuation of the LIBO rate.

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Fair Value Measurement

6 Months Ended

Jun. 30, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurement

FAIR VALUE MEASUREMENT

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes financial liabilities measured at fair value on a recurring basis:

(In Thousands)	June 30, 2021						December 31, 2020
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Deferred Compensation Liability	$	—	$	(11,074)	$	—	$	—	$	(10,450)	$	—

The Company maintains The Aaron's Company, Inc. Deferred Compensation Plan, which is an unfunded, nonqualified deferred compensation plan for a select group of management, highly compensated employees and non-employee directors. The liability represents benefits accrued for plan participants and is valued at the quoted market prices of the participants’ investment elections, which consist of equity and debt "mirror" funds. As such, the Company has classified the deferred compensation liability as a Level 2 liability, which is recorded in accounts payable and accrued expenses in the condensed consolidated balance sheets.

Non-Financial Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The following table summarizes non-financial assets measured at fair value on a nonrecurring basis:

(In Thousands)	June 30, 2021						December 31, 2020
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets Held for Sale	$	—	$	7,453	$	—	$	—	$	8,956	$	—

Assets classified as held for sale are recorded at the lower of carrying value or fair value less estimated costs to sell, and any adjustment is recorded in other operating expenses, net or restructuring expenses, net (if the asset is a part of the Company's restructuring programs as described in Note 5 to these condensed consolidated and combined financial statements) in the condensed consolidated and combined statements of earnings. The highest and best use of the assets held for sale is as real estate land parcels for development or real estate properties for use or lease; however, the Company has chosen not to develop or use these properties, and plans to sell the properties to third parties as quickly as practicable.

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Revenue Recognition

6 Months Ended

Jun. 30, 2021

Revenue from Contract with Customer [Abstract]

Revenue Recognition

REVENUE RECOGNITION

The following table disaggregates revenue by source:

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2021		2020		2021		2020
Lease Revenues and Fees	$	411,621	$	380,237	$	839,262	$	769,616
Retail Sales	16,877		14,020		33,323		23,551
Non-Retail Sales	32,455		33,044		62,404		59,890
Franchise Royalties and Fees	6,253		3,365		12,962		10,089
Other	289		289		598		640
Total1	$	467,495	$	430,955	$	948,549	$	863,786

1 Includes revenues from Canadian operations of $6.1 million and $12.0 million during the three and six months ended June 30, 2021, respectively (three and six months ended June 30, 2020: $5.3 million and $10.7 million, respectively). The revenues are primarily lease revenues and fees.

Lease Revenues and Fees

The Company provides lease merchandise, consisting of furniture, appliances, electronics, computers, and a variety of other products and accessories to its customers for lease under certain terms agreed to by the customer. The Company’s stores and its e-commerce platform offer leases with flexible ownership plans that can be renewed monthly up to 12, 18 or 24 months. The Company does not require deposits upon inception of customer agreements. The customer has the right to acquire ownership either through an early purchase option or through payment of all required lease payments through the end of the ownership plan. Our store-based operations also offer customers the option to obtain a membership in the Aaron’s Club program. The benefits to customers of the Club program are separated into three general categories: (a) product protection benefits; (b) health & wellness discounts; and (c) dining, shopping and consumer savings. Lease agreements and Aaron's Club program memberships are cancelable at any time by either party without penalty, and as such, we consider these offerings to be to be month-to-month arrangements.

Lease revenues related to the leasing of merchandise and Aaron's Club membership fees are recognized as revenue in the month they are earned. Payments received prior to the month earned are recorded as deferred lease revenue, and this amount is included in customer deposits and advance payments in the accompanying condensed consolidated balance sheets. Lease revenues are recorded net of a provision for returns and uncollectible renewal payments.

All of the Company's customer lease agreements are considered operating leases. The Company maintains ownership of the lease merchandise until all payment obligations are satisfied under sales and lease ownership agreements. Initial direct costs related to customer agreements are expensed as incurred and have been classified as other operating expenses, net in the condensed consolidated and combined statements of earnings. The statement of earnings effects of expensing the initial direct costs as incurred are not materially different from amortizing initial direct costs over the lease ownership plan.

Substantially all lease revenues and fees were within the scope of ASC 842, Leases, during the three and six months ended June 30, 2021 and 2020. Included in lease revenues and fees above, the Company had $6.8 million and $13.0 million of other revenue during the three and six months ended June 30, 2021, respectively (three and six months ended June 30, 2020: $6.4 million and $12.3 million, respectively) within the scope of ASC 606, Revenue from Contracts with Customers. Lease revenues and fees are recorded within lease and retail revenues in the accompanying condensed consolidated and combined statements of earnings.

Retail and Non-Retail Sales

Revenues from the retail sale of merchandise to individual consumers are recognized at the point of sale. Generally, the transfer of control occurs near or at the point of sale for retail sales. Revenues for the non-retail sale of merchandise to franchisees are recognized when control transfers to the franchisee, which is upon delivery of the merchandise.

Sales of lease merchandise to franchisees and to other customers are recorded within non-retail sales and lease and retail revenues, respectively, in the accompanying condensed consolidated and combined statements of earnings. All retail and non-retail sales revenue is within the scope of ASC 606, Revenue from Contracts with Customers, during the three and six months ended June 30, 2021 and 2020.

Franchise Royalties and Fees

Franchisees pay an ongoing royalty of 6% of the weekly cash revenue payments received, which is recognized as the fees become due. In response to the COVID-19 pandemic, the Company temporarily suspended, as opposed to deferring, the royalty fee obligation in March 2020, effectively forgiving the franchisee royalty payments that otherwise would have been due during the suspension period. The Company reinstated the requirement that franchisees make royalty payments during the second quarter of 2020.

The Company guarantees certain debt obligations of some of the franchisees and receives guarantee fees based on the outstanding debt obligations of such franchisees. Refer to Note 4 to these condensed consolidated and combined financial statements for additional discussion of the franchise-related guarantee obligation. The Company also charges fees for advertising efforts that benefit the franchisees, which are recognized at the time the advertising takes place.

Substantially all franchise royalties and fees revenue is within the scope of ASC 606, Revenue from Contracts with Customers. Of the franchise royalties and fees, $4.9 million and $10.3 million during the three and six months ended June 30, 2021, respectively, (three and six months ended June 30, 2020: $2.6 million and $7.6 million, respectively) is related to franchise royalty income that is recognized as the fees become due. The remaining revenue is primarily related to advertising fees charged to franchisees. Franchise royalties and fees are recorded within franchise royalties and other revenue in the accompanying condensed consolidated and combined statements of earnings.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

Guarantees

The Company has guaranteed certain debt obligations of some of its franchisees under a franchise loan program (the "Franchise Loan Facility") as described below with several of the banks in our Revolving Facility. In the event these franchisees are unable to meet their debt service payments or otherwise experience an event of default, the Company would be unconditionally liable for the outstanding balance of the franchisees’ debt obligations under the Franchise Loan Facility, which would be due in full within 75 days of the event of default. The Franchise Loan Facility has a total commitment of $25.0 million and expires on November 16, 2021. We are able to request additional 364-day extensions of our franchise loan facility, as long as we are not in violation of any of the covenants under that facility or our Revolving Facility, and no event of default exists under those agreements, until such time as our Revolving Facility expires. We currently expect to include a franchise loan facility as part of any future extension or renewal of our Revolving Facility. At June 30, 2021, the maximum amount that the Company would be obligated to repay in the event franchisees defaulted was $10.8 million. The Company is subject to financial covenants under the Franchise Loan Facility that are consistent with the Revolving Facility, which are more fully described in Note 8 to the consolidated and combined financial statements in the 2020 Annual Report.

The Company has recourse rights to franchisee assets securing the debt obligations, which consist primarily of lease merchandise and fixed assets. Since the inception of the franchise loan program in 1994, the Company's losses associated with the program have been immaterial. However, such losses could be material in a future period due to adverse trends in the liquidity and/or financial performance of the Company's franchisees. The Company records a liability related to estimated future losses from repaying the franchisees' outstanding debt obligations upon any possible future events of default. This is included in accounts payable and accrued expenses in the condensed consolidated balance sheets and was $2.2 million and $2.4 million at June 30, 2021 and December 31, 2020, respectively. The balances at June 30, 2021 and December 31, 2020 included qualitative consideration of potential losses, including uncertainties surrounding the normalization of current and future business trends associated with an anticipated end to the COVID-19 pandemic, and the corresponding unknown effect on the operations and liquidity of our franchisees.

Legal Proceedings

From time to time, the Company is party to various legal and regulatory proceedings arising in the ordinary course of business, certain of which have been described below. The Company establishes an accrued liability for legal and regulatory proceedings when it determines that a loss is both probable and the amount of the loss can be reasonably estimated. The Company continually monitors its litigation and regulatory exposure and reviews the adequacy of its legal and regulatory reserves on a quarterly basis. The amount of any loss ultimately incurred in relation to matters for which an accrual has been established may be higher or lower than the amounts accrued for such matters due to the inherent uncertainty in litigation, regulatory and similar adversarial proceedings, and substantial losses from these proceedings or the costs of defending them could have a material adverse impact upon the Company’s business, financial position, and results of operations.

At June 30, 2021 and December 31, 2020, the Company had accrued $1.5 million and $0.8 million, respectively, for pending legal and regulatory matters for which it believes losses are probable and is management’s best estimate of its exposure to loss. The Company records these liabilities in accounts payable and accrued expenses in the condensed consolidated balance sheets. The Company estimates that the aggregate range of reasonably possible loss in excess of accrued liabilities for such probable loss contingencies is between zero and $2.6 million.

At June 30, 2021, the Company estimated that the aggregate range of loss for all material pending legal and regulatory proceedings for which a loss is reasonably possible, but less likely than probable (i.e., excluding the contingencies described in the preceding paragraph), is between zero and $0.5 million. Those matters for which a reasonable estimate is not possible are not included within estimated ranges and, therefore, the estimated ranges do not represent the Company’s maximum loss exposure. The Company’s estimates for legal and regulatory accruals, aggregate probable loss amounts and reasonably possible loss amounts, are all subject to the uncertainties and variables described above.

Regulatory Inquiries

In the first quarter of 2021, Aaron's, LLC, along with a number of other lease-to-own companies, received a subpoena from the California Department of Financial Protection and Innovation (the "DFPI") requesting the production of documents regarding the Company’s compliance with state consumer protection laws. The Company is cooperatively engaging with the DFPI in response to its inquiry. Although the Company believes it is in compliance with all applicable consumer protection laws and regulations in California, this inquiry ultimately could lead to an enforcement action and/or a consent order, and substantial costs, including legal fees, fines, penalties, and remediation expenses.

Other Contingencies

Management regularly assesses the Company’s insurance deductibles, monitors litigation and regulatory exposure with the Company’s attorneys, and evaluates its loss experience. The Company also enters into various contracts in the normal course of business that may subject it to risk of financial loss if counterparties fail to perform their contractual obligations.

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Restructuring

6 Months Ended

Jun. 30, 2021

Restructuring and Related Activities [Abstract]

Restructuring

RESTRUCTURING

Real Estate Repositioning and Optimization Restructuring Program

During the first quarter of 2020, the Company initiated a real estate repositioning and optimization restructuring program. This program includes a strategic plan to remodel, reposition, and consolidate our Company-operated store footprint over the next three to four years. We believe that such strategic actions will allow the Company to continue to successfully serve our markets while continuing to utilize our growing Aarons.com shopping and servicing platform. Management expects that this strategy, along with our increased use of technology, will enable us to reduce store count while retaining a significant portion of our existing customer relationships as well as attract new customers. Since initiation, the program has resulted in the closure, consolidation, or relocation of 111 Company-operated stores during 2020 and the first six months of 2021. As of June 30, 2021, we have identified approximately 76 remaining stores for closure, consolidation, or relocation that have not yet been closed and vacated, nearly all of which are expected to be vacated by December 31, 2021. During the three and six months ended June 30, 2020, we also further rationalized our store support center staff, which resulted in a reduction in employee headcount in those areas to more closely align with current business conditions.

Total net restructuring expenses of $0.9 million and $4.0 million were recorded for the three and six months ended June 30, 2021 under the real estate repositioning and optimization restructuring program. Restructuring expenses were comprised mainly of operating lease right-of-use asset and fixed asset impairment charges related to the vacancy or planned vacancy of stores identified for closure, continuing variable occupancy costs incurred related to closed stores, and offset by gains related to the sale of vehicle and real estate assets previously impaired in conjunction with the repositioning and optimization program in prior periods.

As management continues to execute on its long-term plan, additional restructuring charges will result from our real estate repositioning and optimization initiatives, primarily related to operating lease right-of-use asset and fixed asset impairments. However, the extent of future restructuring charges is not estimable at this time, as the specific relocation site for the locations noted above have not yet been identified by management. Additionally, we expect future restructuring expenses (reversals) due to potential future early buyouts of leases with landlords, as well as continuing variable occupancy costs related to closed stores.

2019 Restructuring Program

During the first quarter of 2019, the Company initiated a restructuring program to optimize its Company-operated Aaron's store portfolio, which resulted in the closure and consolidation of 155 underperforming Company-operated stores during 2019. The Company also rationalized its store support center and field support staff, which resulted in a reduction in associate headcount in those areas to more closely align with current business conditions.

Total net restructuring expenses of $0.8 million and $1.0 million were recorded for the three and six months ended June 30, 2021 under the 2019 restructuring program. Restructuring expenses were primarily comprised of continuing variable occupancy costs incurred related to closed stores. These costs were included in restructuring expenses, net in the condensed consolidated and combined statements of earnings. We expect future restructuring expenses (reversals) due to potential future early buyouts of leases with landlords as well as continuing variable occupancy costs.

The following table summarizes restructuring charges for the three and six months ended June 30, 2021 and 2020, respectively, under both of the Company's restructuring programs:

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2021		2020		2021		2020
Right-of-Use Asset Impairment	$	401	$	2,456	$	2,272	$	18,634
Operating Lease Charges	1,660		1,557		2,751		2,570
Fixed Asset Impairment	95		263		416		2,952
Severance	113		2,694		150		4,725
Other Expenses	50		21		171		396
Gain on Asset Sale	(525)		—		(525)		—
Total Restructuring Expenses, Net1	$	1,794	$	6,991	$	5,235	$	29,277

1 Includes expenses related to our 2016 and 2017 restructuring programs as described within Note 11 to the consolidated and combined financial statements in the 2020 Annual Report, which were not significant during the three and six months ended June 30, 2021.

To date, the Company has incurred charges of $46.2 million under the 2019 restructuring program, and $37.9 million under the real estate repositioning and optimization restructuring program. These cumulative charges are primarily comprised of operating lease right-of-use asset and fixed impairment charges, losses recognized related to contractual lease obligations, and severance related to reductions in store support center and field support staff headcount.

The following table summarizes the activity for the six months ended June 30, 2021 and the corresponding accrual balance as of June 30, 2021 for the restructuring programs:

(In Thousands)	Severance
Balance at January 1, 2021	$	773
Restructuring Severance Charges	150
Payments	(923)
Balance at June 30, 2021	$	—

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Basis and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Description of Business

Description of BusinessAaron's is a leading, technology-enabled, omni-channel provider of lease-to-own ("LTO") and purchase solutions generally focused on serving the large, credit-challenged segment of the population. Through our portfolio of approximately 1,300 stores and our Aarons.com e-commerce platform, we provide consumers with LTO and purchase solutions for the products they need and want, including furniture, appliances, electronics, computers and a variety of other products and accessories. In addition, the Company includes the operations of Woodhaven Furniture Industries ("Woodhaven"), which manufactures and supplies the majority of the bedding and a significant portion of the upholstered furniture leased and sold in Company-operated and franchised stores.

Basis of Presentation

Basis of Presentation

The financial statements 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. The financial statements for the period from December 1, 2020 through December 31, 2020, and three and six months ended June 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. Intercompany balances and transactions between consolidated entities have been eliminated. These condensed consolidated and combined financial statements reflect the historical results of operations, financial position and cash flows of the Company in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The historical results of operations and cash flows of the Company prior to the separation and distribution presented in these condensed consolidated and combined financial statements may not be indicative of what they would have been had the Company been an independent standalone entity, nor are they necessarily indicative of the Company's future results of operations, financial position and cash flows.

The condensed combined balance sheets for periods prior to and through the separation and distribution date include the assets and liabilities associated with the historical Aaron’s Business and certain assets and liabilities where Aaron's, Inc. is the legal beneficiary or obligor. The combined statements of earnings for periods prior to and through the separation and distribution date include all revenues and costs directly attributable to the Company and an allocation of expenses related to certain PROG Holdings corporate functions. These allocated costs and expenses 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 costs and 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. The Company considers these allocations to be a reasonable reflection of the utilization of services or the benefit received.

The preparation of the Company's condensed consolidated and combined financial statements in conformity with U.S. GAAP for interim financial information requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates. Generally, actual experience has been consistent with management's prior estimates and assumptions. However, as described above, the extent to which the normalization of business trends since the start of the COVID-19 pandemic, and the resulting measures taken by the Company and federal and state governments, will impact the Company's business will depend on future developments, which are uncertain and cannot be precisely predicted at this time. In many cases, management's estimates and assumptions are dependent on estimates of such future developments and may change in the future.

The accompanying unaudited condensed consolidated and combined financial statements do not include all information required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included in the accompanying unaudited condensed consolidated and combined financial statements. These financial statements should be read in conjunction with the financial statements and notes thereto included in the 2020 Annual Report. The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of operating results for the full year.

Accounting Policies and Estimates

Accounting Policies and Estimates

See Note 1 to the consolidated and combined financial statements in the 2020 Annual Report for an expanded discussion of accounting policies and estimates. Discussions of accounting estimates and application of accounting policies herein have also been updated as applicable to describe the uncertainty associated with the impacts of the COVID-19 pandemic described above.

Earnings Per Share

Earnings Per ShareEarnings per share is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. The computation of earnings per share assuming dilution includes the dilutive effect of stock options, restricted stock units ("RSUs"), restricted stock awards ("RSAs"), performance share units ("PSUs") and other awards issuable under the Company's employee stock purchase plan ("ESPP") (collectively, "share-based awards") as determined under the treasury stock method, unless the inclusion of such awards would have been anti-dilutive.

Revenue Recognition

Revenue Recognition The Company provides lease merchandise, consisting of furniture, appliances, electronics, computers and a variety of other products and accessories to its customers for lease under certain terms agreed to by the customer. Our stores and e-commerce platform offer leases with flexible ownership plans that can be renewed monthly up to 12, 18 or 24 months. The Company also earns revenue from the sale of merchandise to customers and its franchisees, and earns ongoing revenue from its franchisees in the form of royalties and through advertising efforts that benefit the franchisees. See Note 3 to these condensed consolidated and combined financial statements for further information regarding the Company's revenue recognition policies and disclosures.

Accounts Receivable

Accounts Receivable

Accounts receivable consist primarily of receivables due from customers on lease agreements, corporate receivables incurred during the normal course of business (primarily for vendor consideration and real estate leasing activities) and franchisee obligations.

Accounts receivable, net of allowances, consist of the following: 

(In Thousands)	June 30, 2021		December 31, 2020
Customers	$	7,154	$	8,399
Corporate	9,969		12,771
Franchisee	9,446		12,820
	$	26,569	$	33,990

The Company maintains an accounts receivable allowance, under which the Company's policy is to record a provision for returns and uncollectible contractually due renewal payments based on historical payments experience, which is recognized as a reduction of lease and retail revenues within the condensed consolidated and combined statements of earnings. Other qualitative factors are considered in estimating the allowance, such as current and forecasted business trends. The Company writes off customer lease receivables that are 60 days or more past due on pre-determined dates twice monthly.

The Company also maintains an allowance for outstanding franchisee accounts receivable. The Company's policy is to estimate a specific allowance on accounts receivable to estimate future losses related to certain franchisees that are deemed to have a higher risk of non-payment and a general allowance based on historical losses as well as the Company's assessment of the financial health of all other franchisees. The estimated allowance on franchisee accounts receivable includes consideration of broad macroeconomic trends, such as the uncertainty surrounding the impacts of the normalization of current and future business trends associated with the COVID-19 pandemic on the franchisees' ability to satisfy their obligations. Accordingly, actual accounts receivable write-offs could differ from the allowance. The provision for uncollectible franchisee accounts receivable is recorded as bad debt expense in other operating expenses, net within the condensed consolidated and combined statements of earnings.

The following table shows the components of the accounts receivable allowance:

	Six Months Ended June 30,
(In Thousands)	2021		2020
Beginning Balance	$	7,613	$	10,720
Accounts Written Off, net of Recoveries	(12,825)		(19,200)
Accounts Receivable Provision	10,879		14,957
Ending Balance	$	5,667	$	6,477

Lease Merchandise

Lease Merchandise

The Company’s lease merchandise is recorded at the lower of depreciated cost or net realizable value. The cost of merchandise manufactured by our Woodhaven operations is recorded at cost and includes overhead from production facilities, shipping costs and warehousing costs. The Company begins depreciating merchandise at the earlier of 12 months and one day from its purchase of the merchandise or when the item is leased to customers. Lease merchandise depreciates to a 0% salvage value over the lease agreement period when on lease, generally 12 to 24 months, and generally 36 months when not on lease. Depreciation is accelerated upon early payout.

The following is a summary of lease merchandise, net of accumulated depreciation and allowances:

(In Thousands)	June 30, 2021		December 31, 2020
Merchandise on Lease, net of Accumulated Depreciation and Allowances	$	478,396	$	473,964
Merchandise Not on Lease, net of Accumulated Depreciation and Allowances1	258,909		223,271
Lease Merchandise, net of Accumulated Depreciation and Allowances	$	737,305	$	697,235

1 Includes Woodhaven raw materials, finished goods and work-in-process inventory that has been classified within lease merchandise in the condensed consolidated balance sheets of $17.2 million and $10.4 million as of June 30, 2021 and December 31, 2020, respectively.

The Company's policies require weekly merchandise counts at its store-based operations, which include write-offs for unsalable, damaged, or missing merchandise inventories. In addition to monthly cycle counting, full physical inventories are generally taken at the fulfillment and manufacturing facilities annually and appropriate provisions are made for missing, damaged and unsalable merchandise. The Company also monitors merchandise levels and mix by division, store, and fulfillment center, as well as the average age of merchandise on hand. If obsolete merchandise cannot be returned to vendors, its carrying amount is adjusted to its net realizable value or written off. Generally, all merchandise not on lease is available for lease or sale. On a monthly basis, all damaged, lost or unsalable merchandise identified is written off.

The Company records a provision for write-offs using the allowance method, which is included within lease merchandise, net within the condensed consolidated balance sheets. The allowance method for lease merchandise write-offs estimates the merchandise losses incurred but not yet identified by management as of the end of the accounting period based primarily on historical write-off experience. Other qualitative factors are considered in estimating the allowance, such as uncertainty surrounding the impacts of the normalization of current and future business trends associated with the COVID-19 pandemic. Therefore, actual lease merchandise write-offs could differ from the allowance. The provision for write-offs is included in provision for lease merchandise write-offs in the accompanying condensed consolidated and combined statements of earnings. The Company writes off lease merchandise on lease agreements that are 60 days or more past due on pre-determined dates twice monthly.

Assets Held for Sale

Assets Held for Sale

Certain properties, consisting of parcels of land and commercial buildings, met the held for sale classification criteria as of June 30, 2021 and December 31, 2020. Assets held for sale are recorded at the lower of their carrying value or fair value less estimated cost to sell and are classified within prepaid expenses and other assets in the condensed consolidated balance sheets. Depreciation is suspended on assets upon classification to held for sale. Gains and losses related to the sale of assets held for sale are recorded in other operating expenses, net of restructuring expenses, net (if the asset is a part of the Company's restructuring programs further described in Note 5 to these condensed consolidated and combined financial statements) in the condensed consolidated and combined statements of earnings. Such gains and losses were not significant for the three and six months ended June 30, 2021 and June 30, 2020.

Management estimated the fair values of real estate properties using the market values for similar properties. These properties are considered Level 2 assets as defined below. The carrying amount of the properties held for sale as of June 30, 2021 and December 31, 2020 is $7.5 million and $9.0 million, respectively.

Estimated Claims Liability Costs

Estimated Claims Liability Costs

Estimated claims liability costs are accrued primarily for workers compensation, vehicle liability, general liability and group health insurance benefits provided to employees. These liabilities are recorded within estimated claims liability costs within accounts payable and accrued expenses in the condensed consolidated balance sheets. Estimates for these claims liabilities are made based on actual reported but unpaid claims and actuarial analysis of the projected claims run off for both reported and incurred but not reported claims. This analysis is based upon an assessment of the likely outcome or historical experience. The Company makes periodic prepayments to its insurance carriers to cover the projected claims run off for both reported and incurred but not reported claims, considering its retention or stop loss limits. In addition, we have prefunding balances on deposit and other insurance receivables with the insurance carriers which are recorded within prepaid expenses and other assets in our condensed consolidated balance sheets.

Goodwill

Goodwill

The Company’s goodwill is not amortized but is subject to an impairment test at the reporting unit level annually as of October 1 and more frequently if events or circumstances indicate that an impairment may have occurred. An interim goodwill impairment test is required if the Company believes it is more likely than not that the carrying amount of one or more reporting units exceeds the reporting units' fair value. The Company concluded that the need for an interim goodwill impairment test was triggered as of March 31, 2020. Factors that led to this conclusion included: (i) a significant decline in the Aaron's, Inc. stock price and market capitalization in March 2020; (ii) the temporary closure of all Company-operated store showrooms due to the COVID-19 pandemic, which impacted our financial results and was expected to adversely impact future financial results; (iii) the significant uncertainty with regard to the short-term and long-term impacts that macroeconomic conditions arising from the COVID-19 pandemic and related government emergency and executive orders would have on the financial health of our customers and franchisees; and (iv) consideration given to the amount by which the Aaron's Business reporting unit's fair value exceeded the carrying value from the October 1, 2019 annual goodwill impairment test.

As of March 31, 2020, management of Aaron's, Inc. determined its existing goodwill was fully impaired and recorded a goodwill impairment loss of $446.9 million during the three months ended March 31, 2020. Management engaged the assistance of a third-party valuation firm to perform the interim goodwill impairment test, which entailed an assessment of the Aaron's Business reporting unit’s fair value relative to the carrying value that was derived using a combination of both income and market approaches and performing a market capitalization reconciliation, which included an assessment of the control premium implied from the Company's estimated fair values of its reporting units. The fair value measurement involved significant unobservable inputs (Level 3 inputs, as discussed more fully below). The income approach utilized the discounted future expected cash flows, which required assumptions about short-term and long-term revenue growth or decline rates, operating margins, capital requirements, and a weighted-average cost of capital. The income approach reflected assumptions and estimates made by management regarding direct and indirect impacts of the COVID-19 pandemic on the short-term and long-term cash flows for the reporting unit. Due to the significant uncertainty associated with the impacts of the COVID-19 pandemic, the assumptions and estimates used by management were highly subjective. The weighted-average cost of capital used in the income approach was adjusted to reflect the specific risks and uncertainties associated with the COVID-19 pandemic in developing the cash flow projections. Given the uncertainty discussed above, the Company performed certain sensitivity analyses including considering reasonably possible alternative assumptions for short-term and long-term growth or decline rates, operating margins, capital requirements, and weighted-average cost of capital rates. Each of the sensitivity analyses performed supported the conclusion of a full impairment of the existing goodwill balance within the Aaron's Business reporting unit.

The market approach, which includes the guideline public company method, utilized pricing multiples derived from an analysis of comparable publicly traded companies. We believe the comparable companies we evaluate as marketplace participants serve as an appropriate reference when calculating fair value because those companies have similar risks, participate in similar markets, provide similar products and services for their customers and compete with us directly. However, we considered that such publicly available information regarding the comparable companies evaluated likely did not reflect the impact of the COVID-19 pandemic in determining the multiple assumptions selected.

Segment Reporting

Segment ReportingManagement concluded that the Company has one operating and reportable segment based on the nature of the financial information regularly reviewed by the chief operating decision maker to assess performance and allocate resources. We have also concluded that the Company has one reporting unit due to the fact that the components included within the operating segment have similar economic characteristics, such as the nature of the products and services provided, the nature of the customers we serve, and the interrelated nature of the components that are aggregated to form the sole reporting unit. The Company evaluates performance and allocates resources as a single operating segment based on revenue growth and pre-tax profit or loss from operations.

Fair Value Measurement

Fair Value Measurement

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Valuations based on unobservable inputs reflecting the Company's own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

The Company measures a liability related to its non-qualified deferred compensation plan, which represents benefits accrued for participants that are part of the plan and is valued at the quoted market prices of the participants' investment election, at fair value on a recurring basis. The Company measures assets held for sale at fair value on a nonrecurring basis and records impairment charges when they are deemed to be impaired.

The fair values of the Company's other current financial assets and liabilities, including cash and cash equivalents, accounts receivable and accounts payable, approximate their carrying values due to their short-term nature. The Company also measures certain non-financial assets at fair value on a nonrecurring basis, such as goodwill, intangible assets, operating lease right-of-use assets, and property, plant, and equipment, in connection with periodic evaluations for potential impairment.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Adopted

Income Taxes. In December 2019, the Financial Accounting Standards Board (the "FASB") issued ASU 2019-12, Simplifying the Accounting for Income Taxes. This guidance simplifies the accounting for income taxes by removing certain exceptions to general principles in Income Taxes (ASC 740). It also simplifies certain aspects of accounting for franchise taxes and clarifies and amends existing guidance to improve consistent application and reduce complexity. There was no material impact on the consolidated financial statements of the Company upon adoption of the standard during the first quarter of 2021.

Pending Adoption

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). The standard provides temporary guidance to ease the potential burden in accounting for reference rate reform primarily resulting from the discontinuation of the London Interbank Overnight ("LIBO") rate, which is currently expected to occur on December 31, 2021. The Company's $250.0 million senior unsecured revolving credit facility (the "Revolving Facility"), as further described in Note 8 to the consolidated and combined financial statements in the 2020 Annual Report, currently references the LIBO rate for determining interest payable on outstanding borrowings. The amendments in ASU 2020-04 are elective and apply to all entities that have contracts referencing the LIBO rate. The new guidance provides an expedient which simplifies accounting analyses under current GAAP for contract modifications if the change is directly related to a change from the LIBO rate to a new interest rate index. The Company will adopt the standard in the first quarter of 2022, and is continuing to evaluate the provisions of ASU 2020–04 and the impacts of transitioning to an alternative rate; however, we do not expect it to have a material impact to the Company's consolidated financial statements or to any key terms of our Revolving Facility other than the discontinuation of the LIBO rate.

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Basis and Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Schedule Of Company Operated Store Activity

The following table presents store count by ownership type:

Stores as of June 30 (Unaudited)	2021	2020
Company-operated Stores	1,087	1,098
Franchised Stores	247	316
Systemwide Stores	1,334	1,414

Calculation of Dilutive Stock Awards

The following table shows the calculation of weighted-average shares outstanding assuming dilution:

	Three Months Ended June 30,		Six Months Ended June 30,
(Shares In Thousands)	2021	2020	2021	2020
Weighted Average Shares Outstanding	33,812	33,842	34,036	33,842
Dilutive Effect of Share-Based Awards	749	—	703	—
Weighted Average Shares Outstanding Assuming Dilution	34,561	33,842	34,739	33,842

Accounts Receivable Net of Allowances

Accounts receivable, net of allowances, consist of the following: 

(In Thousands)	June 30, 2021		December 31, 2020
Customers	$	7,154	$	8,399
Corporate	9,969		12,771
Franchisee	9,446		12,820
	$	26,569	$	33,990

Components of the Accounts Receivable Provision

The following table shows the components of the accounts receivable allowance:

	Six Months Ended June 30,
(In Thousands)	2021		2020
Beginning Balance	$	7,613	$	10,720
Accounts Written Off, net of Recoveries	(12,825)		(19,200)
Accounts Receivable Provision	10,879		14,957
Ending Balance	$	5,667	$	6,477

The following table shows the components of the accounts receivable provision, which includes amounts recognized for bad debt expense and the provision for returns and uncollected payments:

	Six Months Ended June 30,
(In Thousands)	2021		2020
Bad Debt (Reversal) Expense	$	(734)	$	960
Provision for Returns and Uncollectible Renewal Payments	11,613		13,997
Accounts Receivable Provision	$	10,879	$	14,957

Schedule of Lease Merchandise

The following is a summary of lease merchandise, net of accumulated depreciation and allowances:

(In Thousands)	June 30, 2021		December 31, 2020
Merchandise on Lease, net of Accumulated Depreciation and Allowances	$	478,396	$	473,964
Merchandise Not on Lease, net of Accumulated Depreciation and Allowances1	258,909		223,271
Lease Merchandise, net of Accumulated Depreciation and Allowances	$	737,305	$	697,235

1 Includes Woodhaven raw materials, finished goods and work-in-process inventory that has been classified within lease merchandise in the condensed consolidated balance sheets of $17.2 million and $10.4 million as of June 30, 2021 and December 31, 2020, respectively.

Allowance for Lease Merchandise

The following table shows the components of the allowance for lease merchandise write-offs:

	Six Months Ended June 30,
(In Thousands)	2021		2020
Beginning Balance	$	11,599	$	13,823
Merchandise Written off, net of Recoveries	(27,656)		(36,978)
Provision for Write-offs	25,534		38,174
Ending Balance	$	9,477	$	15,019

Schedule of Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist of the following:

(In Thousands)	June 30, 2021		December 31, 2020
Prepaid Expenses1	$	19,262	$	17,411
Insurance Related Assets1	27,094		27,020
Company-Owned Life Insurance	15,348		16,223
Assets Held for Sale	7,453		8,956
Deferred Tax Asset	7,014		7,014
Other Assets1	13,008		13,271
	$	89,179	$	89,895

1 During the second quarter of 2021, the Company recategorized items within the components of prepaid expenses and other assets. The presentation of prior period amounts has been reclassified to be consistent with the current period presentation. Such reclassification has no impact on the total prepaid expenses and other assets balance as of December 31, 2020.

Schedule of Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:

(In Thousands)	June 30, 2021		December 31, 2020
Accounts Payable 1	$	63,983	$	84,738
Estimated Claims Liability Costs	53,804		49,272
Accrued Salaries and Benefits	54,576		53,396
Accrued Real Estate and Sales Taxes1	24,153		23,968
Other Accrued Expenses and Liabilities1	33,763		19,474
	$	230,279	$	230,848

1 During the second quarter of 2021, the Company recategorized items within the components of accounts payable and accrued expenses. The presentation of prior period amounts has been reclassified to be consistent with the current period presentation. Such reclassification has no impact on the total accounts payable and accrued expenses balance as of December 31, 2020.

Schedule of Stockholders Equity

Changes in stockholders' equity for the three and six months ended June 30, 2021 and 2020 are as follows:

	Treasury Stock			Common Stock		Invested Capital		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
(In Thousands, Except Per Share)	Shares	Amount
Balance, December 31, 2020	(895)	$	(15,977)	$	17,550	$	—	$	708,668	$	1,881	$	(797)	$	711,325
Cash Dividends, $0.10 per share	—	—		—		—		—		(3,472)		—		(3,472)
Stock-Based Compensation	—	—		—		—		3,551		—		—		3,551
Issuance of Shares under Equity Plans	(114)	(2,729)		165		—		378		—		—		(2,186)
Acquisition of Treasury Stock	(252)	(6,280)		—		—		—		—		—		(6,280)
Net Earnings	—	—		—		—		—		36,323		—		36,323
Foreign Currency Translation Adjustment	—	—		—		—		—		—		127		127
Balance, March 31, 2021	(1,261)	$	(24,986)	$	17,715	$	—	$	712,597	$	34,732	$	(670)	$	739,388
Cash Dividends, $0.10 per share	—	—		—		—		—		(3,387)		—		(3,387)
Stock-Based Compensation	—	—		—		—		1,714		—		—		1,714
Issuance of shares under equity plans	—	—		45		—		1,202		—		—		1,247
Acquisition of Treasury Stock	(1,166)	(38,642)		—		—		—		—		—		(38,642)
Net Earnings	—	—		—		—		—		32,975		—		32,975
Foreign Currency Translation Adjustment	—	—		—		—		—		—		220		220
Balance, June 30, 2021	(2,427)	$	(63,628)	$	17,760	$	—	$	715,513	$	64,320	$	(450)	$	733,515

	Treasury Stock			Common Stock		Invested Capital		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
(In Thousands, Except Per Share)	Shares	Amount
Balance, December 31, 2019	—	$	—	$	—	$	837,800	$	—	$	—	$	(19)	$	837,781
Stock-Based Compensation	—	—		—		2,725		—		—		—		2,725
Net increase in Invested Capital	—	—		—		90,211		—		—		—		90,211
Net Loss	—	—		—		(323,774)		—		—		—		(323,774)
Foreign Currency Translation Adjustment	—	—		—		—		—		—		(1,754)		(1,754)
Balance, March 31, 2020	—	$	—	$	—	$	606,962	$	—	$	—	$	(1,773)	$	605,189
Stock-Based Compensation	—	—		—		2,892		—		—		—		2,892
Net increase in Invested Capital	—	—		—		35,994		—		—		—		35,994
Net Earnings	—	—		—		22,374		—		—				22,374
Foreign Currency Translation Adjustment	—	—		—		—		—		—		331		331
Balance, June 30, 2020	—	$	—	$	—	$	668,222	$	—	$	—	$	(1,442)	$	666,780

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Fair Value Measurement (Tables)

6 Months Ended

Jun. 30, 2021

Fair Value Disclosures [Abstract]

Summary of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table summarizes financial liabilities measured at fair value on a recurring basis:

(In Thousands)	June 30, 2021						December 31, 2020
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Deferred Compensation Liability	$	—	$	(11,074)	$	—	$	—	$	(10,450)	$	—

Assets Measured at Fair Value on Nonrecurring Basis

The following table summarizes non-financial assets measured at fair value on a nonrecurring basis:

(In Thousands)	June 30, 2021						December 31, 2020
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets Held for Sale	$	—	$	7,453	$	—	$	—	$	8,956	$	—

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Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2021

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

The following table disaggregates revenue by source:

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2021		2020		2021		2020
Lease Revenues and Fees	$	411,621	$	380,237	$	839,262	$	769,616
Retail Sales	16,877		14,020		33,323		23,551
Non-Retail Sales	32,455		33,044		62,404		59,890
Franchise Royalties and Fees	6,253		3,365		12,962		10,089
Other	289		289		598		640
Total1	$	467,495	$	430,955	$	948,549	$	863,786

1 Includes revenues from Canadian operations of $6.1 million and $12.0 million during the three and six months ended June 30, 2021, respectively (three and six months ended June 30, 2020: $5.3 million and $10.7 million, respectively). The revenues are primarily lease revenues and fees.

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Restructuring (Tables)

6 Months Ended

Jun. 30, 2021

Restructuring and Related Activities [Abstract]

Restructuring and Related Costs

The following table summarizes restructuring charges for the three and six months ended June 30, 2021 and 2020, respectively, under both of the Company's restructuring programs:

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2021		2020		2021		2020
Right-of-Use Asset Impairment	$	401	$	2,456	$	2,272	$	18,634
Operating Lease Charges	1,660		1,557		2,751		2,570
Fixed Asset Impairment	95		263		416		2,952
Severance	113		2,694		150		4,725
Other Expenses	50		21		171		396
Gain on Asset Sale	(525)		—		(525)		—
Total Restructuring Expenses, Net1	$	1,794	$	6,991	$	5,235	$	29,277

1 Includes expenses related to our 2016 and 2017 restructuring programs as described within Note 11 to the consolidated and combined financial statements in the 2020 Annual Report, which were not significant during the three and six months ended June 30, 2021.

Schedule of Restructuring Reserve

The following table summarizes the activity for the six months ended June 30, 2021 and the corresponding accrual balance as of June 30, 2021 for the restructuring programs:

(In Thousands)	Severance
Balance at January 1, 2021	$	773
Restructuring Severance Charges	150
Payments	(923)
Balance at June 30, 2021	$	—

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Basis and Summary of Significant Accounting Policies - Narrative (Details) $ in Millions		3 Months Ended	6 Months Ended
	Nov. 30, 2020	Jun. 30, 2020 USD ($) store	Jun. 30, 2021 store segment	Jun. 30, 2020 USD ($) store
Significant Accounting Policies [Line Items]
Number of retail stores | store		1,414	1,334	1,414
Number of operating segments			1
Number of reportable segments			1
General corporate expenses allocated | $		$ 5.3		$ 11.9
PROG Holdings
Significant Accounting Policies [Line Items]
Shares issued per entity share, conversion ratio	0.5

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Basis and Summary of Significant Accounting Policies - Store Count by Ownership Type (Details) - store	Jun. 30, 2021	Jun. 30, 2020
Significant Accounting Policies [Line Items]
Number of retail stores	1,334	1,414
Company-operated Stores
Significant Accounting Policies [Line Items]
Number of retail stores	1,087	1,098
Franchised Stores
Significant Accounting Policies [Line Items]
Number of retail stores	247	316

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Basis and Summary of Significant Accounting Policies - Calculation of Dilutive Stock Awards (Details) - shares		3 Months Ended		6 Months Ended
	Nov. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Accounting Policies [Abstract]
Anti-dilutive securities excluded from the computation of earnings per share assuming dilution (in shares)	33,841,624
Weighted Average Shares Outstanding (in shares)		33,812,000	33,842,000	34,036,000	33,842,000
Dilutive Effect of Share-Based Awards (in shares)		749,000	0	703,000	0
Weighted Average Shares Outstanding Assuming Dilution (in shares)		34,561,000	33,842,000	34,739,000	33,842,000

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Basis and Summary of Significant Accounting Policies - Revenue Recognition Narrative (Details) - Sales And Lease Ownership	Jun. 30, 2021
Agreement One
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Lease agreement period	12 months
Agreement Two
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Lease agreement period	18 months
Agreement Three
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Lease agreement period	24 months

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Basis and Summary of Significant Accounting Policies - Accounts Receivable Net of Allowances (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable, net of allowances	$ 26,569	$ 33,990
Threshold period past due for write-off of trade accounts receivable	60 days
Customers
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable, net of allowances	$ 7,154	8,399
Corporate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable, net of allowances	9,969	12,771
Franchisee
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable, net of allowances	$ 9,446	$ 12,820

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Business and Summary of Significant Accounting Policies - Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Accounts Receivable, Allowance for Credit Loss [Roll Forward]
Beginning Balance	$ 7,613	$ 10,720
Accounts Written Off, net of Recoveries	(12,825)	(19,200)
Accounts Receivable Provision	10,879	14,957
Ending Balance	$ 5,667	$ 6,477

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Basis and Summary of Significant Accounting Policies - Components of the Accounts Receivable Provision (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Accounting Policies [Abstract]
Bad Debt (Reversal) Expense	$ (734)	$ 960
Provision for Returns and Uncollectible Renewal Payments	11,613	13,997
Accounts Receivable Provision	$ 10,879	$ 14,957

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Basis and Summary of Significant Accounting Policies - Lease Merchandise (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Significant Accounting Policies [Line Items]
Lease merchandise salvage value percentage	0.00%
Lease Merchandise, net of Accumulated Depreciation and Allowances	$ 737,305		$ 697,235
Components of the allowance of leases merchandise write-offs:
Beginning Balance	11,599	$ 13,823
Merchandise Written off, net of Recoveries	(27,656)	(36,978)
Provision for Write-offs	25,534	38,174
Ending Balance	9,477	$ 15,019
Manufacturing | Operating Segments
Significant Accounting Policies [Line Items]
Inventory (principally raw materials and work-in-process)	17,200		10,400
Merchandise on Lease, net of Accumulated Depreciation and Allowances
Significant Accounting Policies [Line Items]
Lease Merchandise, net of Accumulated Depreciation and Allowances	$ 478,396		473,964
Merchandise on Lease, net of Accumulated Depreciation and Allowances | Minimum
Significant Accounting Policies [Line Items]
Lease merchandise useful life	12 months
Merchandise on Lease, net of Accumulated Depreciation and Allowances | Maximum
Significant Accounting Policies [Line Items]
Lease merchandise useful life	24 months
Merchandise Not on Lease, net of Accumulated Depreciation and Allowances
Significant Accounting Policies [Line Items]
Lease merchandise useful life	36 months
Lease Merchandise, net of Accumulated Depreciation and Allowances	$ 258,909		$ 223,271

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Basis and Summary of Significant Accounting Policies - Components of Prepaid Expenses and Other Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Accounting Policies [Abstract]
Prepaid Expenses	$ 19,262	$ 17,411
Insurance Related Assets	27,094	27,020
Company-Owned Life Insurance	15,348	16,223
Assets Held for Sale	7,453	8,956
Deferred Tax Asset	7,014	7,014
Other Assets	13,008	13,271
Prepaid Expense and Other Assets	$ 89,179	$ 89,895

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Basis and Summary of Significant Accounting Policies - Assets Held for Sale (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Accounting Policies [Abstract]
Assets Held for Sale	$ 7,453	$ 8,956

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Basis and Summary of Significant Accounting Policies - Accounts Payable and Accrued Expenses (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Accounting Policies [Abstract]
Accounts Payable	$ 63,983	$ 84,738
Estimated Claims Liability Costs	53,804	49,272
Accrued Salaries and Benefits	54,576	53,396
Accrued Real Estate and Sales Taxes	24,153	23,968
Other Accrued Expenses and Liabilities	33,763	19,474
Accounts Payable and Accrued Liabilities	$ 230,279	$ 230,848

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Basis and Summary of Significant Accounting Policies - Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Goodwill [Line Items]
Impairment loss	$ 0	$ 0		$ 0	$ 446,893
Goodwill	$ 8,482			$ 8,482		$ 7,569
Aaron's Business
Goodwill [Line Items]
Impairment loss			$ 446,900

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Basis and Summary of Significant Accounting Policies - Statements of Stockholders' Equity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2021	Jun. 30, 2020
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning Balance	$ 739,388	$ 711,325	$ 605,189	$ 837,781	$ 711,325	$ 837,781
Cash Dividends	(3,387)	(3,472)
Stock-Based Compensation	1,714	3,551	2,892	2,725
Issuance of Shares under Equity Plans	1,247	(2,186)
Net increase in Invested Capital			35,994	90,211
Acquisition of Treasury Stock	(38,642)	(6,280)
Net Earnings (Loss)	32,975	36,323	22,374	(323,774)	69,298	(301,400)
Foreign Currency Translation Adjustment	220	127	331	(1,754)	347	(1,423)
Ending Balance	$ 733,515	$ 739,388	$ 666,780	$ 605,189	$ 733,515	$ 666,780
Treasury Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning Balance (in shares)	(1,261)	(895)	0	0	(895)	0
Beginning Balance	$ (24,986)	$ (15,977)	$ 0	$ 0	$ (15,977)	$ 0
Issuance of Shares under Equity Plans (in shares)		(114)
Issuance of Shares under Equity Plans		$ (2,729)
Acquisition of Treasury Stock (in shares)	(1,166)	(252)
Acquisition of Treasury Stock	$ (38,642)	$ (6,280)
Ending Balance (in shares)	(2,427)	(1,261)	0	0	(2,427)	0
Ending Balance	$ (63,628)	$ (24,986)	$ 0	$ 0	$ (63,628)	$ 0
Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning Balance	17,715	17,550	0	0	17,550	0
Issuance of Shares under Equity Plans	45	165
Ending Balance	17,760	17,715	0	0	17,760	0
Invested Capital
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning Balance			606,962	837,800		837,800
Stock-Based Compensation			2,892	2,725
Net increase in Invested Capital			35,994	90,211
Net Earnings (Loss)			22,374	(323,774)
Ending Balance			668,222	606,962		668,222
Additional Paid-in Capital
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning Balance	712,597	708,668	0	0	708,668	0
Stock-Based Compensation	1,714	3,551
Issuance of Shares under Equity Plans	1,202	378
Ending Balance	715,513	712,597	0	0	715,513	0
Retained Earnings
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning Balance	34,732	1,881	0	0	1,881	0
Cash Dividends	(3,387)	(3,472)
Net Earnings (Loss)	32,975	36,323
Ending Balance	$ 64,320	$ 34,732	0	0	64,320	0
Dividends, per share (in dollars per share)	$ 0.10	$ 0.10
Accumulated Other Comprehensive Loss
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning Balance	$ (670)	$ (797)	(1,773)	(19)	(797)	(19)
Foreign Currency Translation Adjustment	220	127	331	(1,754)
Ending Balance	$ (450)	$ (670)	$ (1,442)	$ (1,773)	$ (450)	$ (1,442)

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Basis and Summary of Significant Accounting Policies - Recent Accounting Pronouncements (Details)	Mar. 31, 2020 USD ($)
Revolving Credit Facility | Credit Facility
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Line of credit, maximum borrowing capacity	$ 250,000,000.0

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Fair Value Measurement - Summary of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - Fair value on a recurring basis - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred Compensation Liability	$ 0	$ 0
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred Compensation Liability	(11,074)	(10,450)
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred Compensation Liability	$ 0	$ 0

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Fair Value Measurement - Assets Measured At Fair Value on Nonrecurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets Held for Sale	$ 7,453	$ 8,956
Level 1 | Fair value on a nonrecurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets Held for Sale	0	0
Level 2 | Fair value on a nonrecurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets Held for Sale	7,453	8,956
Level 3 | Fair value on a nonrecurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets Held for Sale	$ 0	$ 0

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Revenue Recognition - Disaggregation Of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Disaggregation of Revenue [Line Items]
Revenues	$ 467,495	$ 430,955	$ 948,549	$ 863,786
Lease Revenues and Fees
Disaggregation of Revenue [Line Items]
Revenues	411,621	380,237	839,262	769,616
Lease Revenues and Fees | Canada
Disaggregation of Revenue [Line Items]
Revenues	6,100	5,300	12,000	10,700
Retail Sales
Disaggregation of Revenue [Line Items]
Revenues	16,877	14,020	33,323	23,551
Non-Retail Sales
Disaggregation of Revenue [Line Items]
Revenues	32,455	33,044	62,404	59,890
Franchise Royalties and Fees
Disaggregation of Revenue [Line Items]
Revenues	6,253	3,365	12,962	10,089
Other
Disaggregation of Revenue [Line Items]
Revenues	$ 289	$ 289	$ 598	$ 640

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Revenue Recognition (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Disaggregation of Revenue [Line Items]
Revenues	$ 467,495	$ 430,955	$ 948,549	$ 863,786
Leases
Disaggregation of Revenue [Line Items]
Revenues	6,800	6,400	13,000	12,300
Franchise Royalties and Fees
Disaggregation of Revenue [Line Items]
Revenues	6,253	3,365	12,962	10,089
Franchise Royalties and Fees | Transferred over Time
Disaggregation of Revenue [Line Items]
Revenues	$ 4,900	$ 2,600	$ 10,300	$ 7,600
Sales and Lease Ownership and HomeSmart | Maximum
Disaggregation of Revenue [Line Items]
Royalty payment rate			6.00%

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Commitments and Contingencies (Details) - USD ($)	6 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
Other Commitments [Line Items]
Event of default, loan due In full, term	75 days
Loan facility to franchisees, maximum commitment amount	$ 25,000,000.0
Portion that company might be obligated to repay in the event franchisees defaulted	10,800,000
Fair value of franchisee-related borrowings	2,200,000	$ 2,400,000
Loss contingency accrual	1,500,000	800,000
Minimum
Other Commitments [Line Items]
Range of possible loss not accrued	0	$ 2,600,000
Maximum
Other Commitments [Line Items]
Range of possible loss not accrued	$ 500,000

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Restructuring - Narrative (Details) $ in Thousands	3 Months Ended			6 Months Ended			18 Months Ended
	Jun. 30, 2021 USD ($)	Jun. 30, 2020 USD ($)	Mar. 31, 2019 store	Dec. 31, 2021 store	Jun. 30, 2021 USD ($)	Jun. 30, 2020 USD ($)	Jun. 30, 2021 USD ($) store
Restructuring Cost and Reserve [Line Items]
Restructuring expenses, net	$ 1,794	$ 6,991			$ 5,235	$ 29,277
Real Estate Repositioning and Optimization Restructuring Program
Restructuring Cost and Reserve [Line Items]
Number of store closures | store							111
Restructuring expenses, net	900				4,000
Restructuring and related cost incurred to date	37,900				$ 37,900		$ 37,900
Real Estate Repositioning and Optimization Restructuring Program | Minimum
Restructuring Cost and Reserve [Line Items]
Strategic plan, term					3 years
Real Estate Repositioning and Optimization Restructuring Program | Maximum
Restructuring Cost and Reserve [Line Items]
Strategic plan, term					4 years
Restructuring Program 2019
Restructuring Cost and Reserve [Line Items]
Number of store closures | store			155
Restructuring expenses, net	800				$ 1,000
Restructuring and related cost incurred to date	$ 46,200				$ 46,200		$ 46,200
Forecast | Real Estate Repositioning and Optimization Restructuring Program
Restructuring Cost and Reserve [Line Items]
Number of store closures | store				76

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Restructuring - Summary of Restructuring Charges (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Restructuring Cost and Reserve [Line Items]
Restructuring Expenses, Net	$ 1,794	$ 6,991	$ 5,235	$ 29,277
Right-of-Use Asset Impairment
Restructuring Cost and Reserve [Line Items]
Restructuring Expenses, Net	401	2,456	2,272	18,634
Operating Lease Charges
Restructuring Cost and Reserve [Line Items]
Restructuring Expenses, Net	1,660	1,557	2,751	2,570
Fixed Asset Impairment
Restructuring Cost and Reserve [Line Items]
Restructuring Expenses, Net	95	263	416	2,952
Severance
Restructuring Cost and Reserve [Line Items]
Restructuring Expenses, Net	113	2,694	150	4,725
Other Expenses
Restructuring Cost and Reserve [Line Items]
Restructuring Expenses, Net	50	21	171	396
Gain on Asset Sale
Restructuring Cost and Reserve [Line Items]
Restructuring Expenses, Net	$ (525)	$ 0	$ (525)	$ 0

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Restructuring - Summary of Accruals of Restructuring Programs (Details) - Severance $ in Thousands	6 Months Ended
	Jun. 30, 2021 USD ($)
Restructuring Reserve [Roll Forward]
Balance at January 1, 2021	$ 773
Restructuring Severance Charges	150
Payments	(923)
Balance at June 30, 2021	$ 0