Exhibit 99.1
The Aaron’s Company, Inc. Reports Third Quarter 2023 Financial Results,
Updates Full Year Outlook
Atlanta, GA, October 23, 2023 — The Aaron’s Company, Inc. (NYSE: AAN) today released its third quarter 2023 financial results. Complete financial results are available at investor.aarons.com. Highlights of those results are included below and in the attached supplement.
Third Quarter 2023 Consolidated Results1:
•Revenues were $525.7 million, a decrease of 11.4%
•Adjusted EBITDA2,3 was $25.3 million, a decrease of 33.8%
•Loss per share was $0.13; Non-GAAP EPS2 was $0.01
•Write-offs were 6.1% in the Aaron's Business, an improvement of 140 basis points
•Cost optimization initiatives on track to achieve $35 to $40 million target for 2023
•Returned $9.5 million of capital to shareholders
•Updates 2023 full year outlook; narrows the range for all components
Third Quarter 2023 Key Items:
The Aaron's Company
•Earnings were ahead of internal expectations largely due to a larger lease portfolio size and lower write-offs at the Aaron's Business, and ongoing cost optimization
•Ended the quarter with cash and cash equivalents of $39.3 million and debt of $187.5 million
Aaron's Business
•Earnings before income taxes were $17.5 million; adjusted EBITDA was $36.4 million, a decrease of 14.2% as compared to the prior year quarter
•Write-offs were 6.1%, a 140 basis points improvement as compared to the prior year quarter due to ongoing lease decisioning enhancements
•Ended the quarter with 245 GenNext stores, which accounted for over 30% of lease revenues and fees and retail sales
•Ended the quarter with 111 Hub and Showroom pairs
•E-commerce revenues increased 1.3% as compared to the prior year quarter and represented 18.5% of lease revenues
BrandsMart
•Loss before income taxes was $2.4 million; adjusted EBITDA was $1.0 million, a decrease of 84.6% due to lower revenues as a result of ongoing customer demand pressure
•Gross profit margin was 22.9%, an increase of 50 basis points as compared to the prior year quarter
•Recently opened store located in Augusta, GA; first new store opened since acquiring the business in 2022
The Company will host an earnings conference call tomorrow, October 24, 2023, at 8:30 a.m. ET. Chief Executive Officer Douglas A. Lindsay will host the call along with President Steve Olsen and Chief Financial Officer C. Kelly Wall. A live audio webcast of the conference call and presentation
1.Comparisons are to the prior year quarter unless otherwise noted.
2.Item is a Non-GAAP financial measure. Refer to the "Use of Non-GAAP Financial Information" and supporting reconciliation tables in the attached supplement.
3.Starting in 2023, adjusted EBITDA excludes stock-based compensation expense. All prior period adjusted EBITDA metrics included herein have been adjusted to exclude stock compensation expense for comparability purposes.
Exhibit 99.1
slides may be accessed at investor.aarons.com and the hosting website at https://events.q4inc.com/attendee/966851198. A transcript of the webcast will also be available at investor.aarons.com.
About The Aaron's Company, Inc.
Headquartered in Atlanta, The Aaron’s Company, Inc. (NYSE: AAN) is a leading, technology-enabled, omnichannel provider of lease-to-own and retail purchase solutions of appliances, electronics, furniture, and other home goods across its brands: Aaron’s, BrandsMart U.S.A., BrandsMart Leasing, and Woodhaven. Aaron’s offers a direct-to-consumer lease-to-own solution through its approximately 1,250 Company-operated and franchised stores in 47 states and Canada, as well as its e-commerce platform. BrandsMart U.S.A. is one of the leading appliance retailers in the country with 11 retail stores in Florida and Georgia, as well as its e-commerce platform. BrandsMart Leasing offers lease-to-own solutions to customers of BrandsMart U.S.A. Woodhaven is the Company's furniture manufacturing division. For more information, visit investor.aarons.com, aarons.com, and brandsmartusa.com.
Contact:
Investor Relations – Call: 678-402-3590, Email: InvestorRelations@aarons.com
Media Relations – Call: 678-402-3591, Email: MediaRelations@aarons.com
1.Comparisons are to the prior year quarter unless otherwise noted.
2.Item is a Non-GAAP financial measure. Refer to the "Use of Non-GAAP Financial Information" and supporting reconciliation tables in the attached supplement.
3.Starting in 2023, adjusted EBITDA excludes stock-based compensation expense. All prior period adjusted EBITDA metrics included herein have been adjusted to exclude stock compensation expense for comparability purposes.
The Aaron’s Company, Inc. Reports Third Quarter 2023 Financial Results,
Updates Full Year Outlook
Atlanta, GA, October 23, 2023 — The Aaron's Company, Inc. (NYSE: AAN) today released its third quarter 2023 financial results.
Third Quarter Consolidated1 | •Revenues were $525.7 million, a decrease of 11.4% •Adjusted EBITDA2,3 was $25.3 million, a decrease of 33.8% •Loss per share was $0.13; Non-GAAP EPS2 was $0.01 •Write-offs were 6.1% in the Aaron's Business, an improvement of 140 basis points •Cost optimization initiatives on track to achieve $35 to $40 million target for 2023 •Returned $9.5 million of capital to shareholders •Updates 2023 full year outlook; narrows the range for all components | ||||
CEO Commentary – “I am pleased that we delivered third quarter consolidated company earnings ahead of our internal expectations. The Aaron's Business segment is benefiting from our lease decisioning enhancements, which led to lower write-offs and a larger than expected lease portfolio size, despite ongoing challenges in customer demand. During the quarter, we opened three Aaron's stores in new markets and our first new BrandsMart store since acquiring the business, and we remain focused on positioning both businesses for growth." – Douglas Lindsay, The Aaron’s Company CEO | |||||
Third Quarter 2023 Key Items | |||||
The Aaron's Company | •Earnings were ahead of internal expectations largely due to a larger lease portfolio size and lower write-offs at the Aaron's Business, and ongoing cost optimization •Ended the quarter with cash and cash equivalents of $39.3 million and debt of $187.5 million | ||||
Aaron's Business | •Earnings before income taxes were $17.5 million; adjusted EBITDA was $36.4 million, a decrease of 14.2% as compared to the prior year quarter •Write-offs were 6.1%, a 140 basis point improvement as compared to the prior year quarter due to ongoing lease decisioning enhancements •Ended the quarter with 245 GenNext stores, which accounted for over 30% of lease revenues and fees and retail sales •Ended the quarter with 111 Hub and Showroom pairs •E-commerce revenues increased 1.3% as compared to the prior year quarter and represented 18.5% of lease revenues | ||||
BrandsMart | •Loss before income taxes was $2.4 million; adjusted EBITDA was $1.0 million, a decrease of 84.6% due to lower revenues as a result of ongoing customer demand pressure •Gross profit margin was 22.9%, an increase of 50 basis points as compared to the prior year quarter •Recently opened store located in Augusta, GA; first new store opened since acquiring the business in 2022 | ||||
1.Comparisons are to the prior year quarter unless otherwise noted.
2.Item is a Non-GAAP financial measure. Refer to the "Use of Non-GAAP Financial Information" and supporting reconciliation tables below.
3.Starting in 2023, adjusted EBITDA excludes stock-based compensation expense. All prior period adjusted EBITDA metrics included herein have been adjusted to exclude stock compensation expense for comparability purposes.
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Consolidated Results | ||||||||||||||
($ in Millions, except EPS) | Q3'23 | Q3'22 | Change | |||||||||||
| Revenues | $ | 525.7 | $ | 593.4 | (11.4) | % | ||||||||
Net Loss | (4.1) | (15.6) | 73.5 | % | ||||||||||
Adjusted EBITDA1,2 | 25.3 | 38.2 | (33.8) | % | ||||||||||
| Diluted (Loss) Earnings Per Share | $ | (0.13) | $ | (0.51) | 74.5 | % | ||||||||
Non-GAAP Diluted Earnings Per Share1 | 0.01 | 0.31 | (96.8) | % | ||||||||||
Adjusted Free Cash Flow1 | Q3'23 | Q3'22 | Change | |||||||||||
Cash Provided by Operating Activities | $ | 34.7 | $ | 66.8 | (48.0) | % | ||||||||
Adjustments3 | 0.4 | 9.3 | (95.4) | % | ||||||||||
| Capital Expenditures | (27.4) | (26.0) | 5.2 | % | ||||||||||
Adjusted Free Cash Flow1 | $ | 7.8 | $ | 50.1 | (84.4) | % | ||||||||
| Returns to Shareholders | Q3'23 | Q3'22 | Change | |||||||||||
Dividends Declared4 | $ | 3.8 | $ | 3.5 | 10.6 | % | ||||||||
Share Repurchases | 5.7 | — | nmf | |||||||||||
Discussion of Consolidated Results - Q3'23 vs. Q3'22:
•The 11.4% decrease in consolidated revenues was primarily due to lower lease revenues and fees and lower retail sales at the Aaron's Business, as well as lower retail sales at BrandsMart.
•Net loss included restructuring charges of $2.7 million, intangible amortization expense of $2.6 million, stock compensation expense of $3.1 million, and BrandsMart acquisition-related costs of $0.7 million.
•The 73.5% improvement in net loss was primarily due to lower total operating expenses at both business segments, including lower write-offs at the Aaron's Business segment, partially offset by lower revenues at both business segments.
•The 33.8% decrease in adjusted EBITDA was primarily due to lower lease revenues and fees at the Aaron's Business and lower retail sales at BrandsMart, partially offset by lower personnel costs at both business segments as well as lower write-offs at the Aaron's Business.
•As of September 30, 2023, the Company had cash and cash equivalents of $39.3 million, debt of $187.5 million, and $339.6 million of availability under its $375.0 million unsecured revolving credit facility.
1.Item is a Non-GAAP financial measure. Refer to the "Use of Non-GAAP Financial Information" and supporting reconciliation tables below.
2.Starting in 2023, adjusted EBITDA excludes stock-based compensation expense. All prior period adjusted EBITDA metrics included herein have been adjusted to exclude stock compensation expense for comparability purposes.
3.Adjustments include cash provided by operating activities related to acquisition-related transaction costs paid and real estate transaction related proceeds received during the quarter.
4.Disclosure based upon dividends declared but not paid for the three months ended September 30, 2023 and 2022.
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Segment Results | ||||||||||||||
Aaron's Business | ||||||||||||||
| The Aaron’s Business segment includes Aaron's branded Company-operated and franchise-operated stores, the Aarons.com e-commerce platform, Woodhaven, and BrandsMart Leasing. The financial and operating results for the Aaron's Business segment do not include unallocated corporate expenses. | ||||||||||||||
| ($ in Millions) | Q3'23 | Q3'22 | Change | |||||||||||
| Revenues | $ | 376.2 | $ | 412.9 | (8.9) | % | ||||||||
Lease Portfolio Size1 | $ | 116.4 | $ | 125.8 | (7.5) | % | ||||||||
Lease Renewal Rate1 | 86.2 | % | 86.3 | % | (10) | bps | ||||||||
| Gross Profit Margin | 63.1 | % | 62.3 | % | 80 | bps | ||||||||
| Earnings Before Income Taxes | $ | 17.5 | $ | 23.5 | (25.5) | % | ||||||||
Adjusted EBITDA2 | $ | 36.4 | $ | 42.5 | (14.2) | % | ||||||||
Adjusted EBITDA Margin2 | 9.7 | % | 10.3 | % | (60) | bps | ||||||||
Write-Offs %3 | 6.1 | % | 7.5 | % | (140) | bps | ||||||||
Ending Store Count4 | Q3'23 | Q3'22 | Change | |||||||||||
| Total Stores | 1,251 | 1,268 | (17) | |||||||||||
| Company-Operated | 1,024 | 1,034 | (10) | |||||||||||
| GenNext (included in Company-Operated) | 245 | 195 | 50 | |||||||||||
| Franchised | 227 | 234 | (7) | |||||||||||
Discussion of Aaron's Business Results - Q3'23 vs. Q3'22:
•The 8.9% decrease in revenues was primarily due to a smaller lease portfolio size, fewer exercises of early purchase options, and lower retail sales.
•The lease portfolio size began the quarter down 8.6% compared to the beginning of Q3 2022 and ended the quarter down 7.5% compared to the end of Q3 2022.
•The year-over-year decrease of 14.2% in adjusted EBITDA and 60 basis points in adjusted EBITDA margin were primarily due to higher other operating expenses as a percentage of revenues due to lower year-over-year gains on dispositions of store-related assets, partially offset by higher gross profit margin and lower write-offs.
•The provision for lease merchandise write-offs as a percentage of lease revenues and fees was 6.1% for Q3 2023, a 140 basis point improvement as compared to Q3 2022, as a result of the lease decisioning enhancements implemented in prior quarters.
•Opened 15 GenNext stores with three in new markets and ended the quarter with 245 GenNext stores.
•Lease originations in GenNext stores, open less than one year, continued growing at a rate of more than 20 percentage points higher than our legacy store average.
•E-commerce revenues increased 1.3% and represented 18.5% of lease revenues.
1.Key operating metrics do not include BrandsMart Leasing.
2.Item is a Non-GAAP financial measure. Refer to the "Use of Non-GAAP Financial Information" and supporting reconciliation tables below.
3.Provision for Lease Merchandise Write-offs as a percentage of lease revenues and fees.
4.The typical layout for a Company-operated Aaron's store is a combination of showroom, customer service and warehouse space. Certain Company-operated Aaron's stores consist solely of a showroom.
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BrandsMart | ||||||||||||||
| The BrandsMart segment includes BrandsMart U.S.A. retail stores and the Brandsmartusa.com e-commerce platform, but does not include BrandsMart Leasing. The financial and operating results for the BrandsMart segment also do not include unallocated corporate expenses. | ||||||||||||||
| ($ in Millions) | Q3'23 | Q3'22 | Change | |||||||||||
| Revenues | $ | 152.4 | $ | 183.3 | (16.9) | % | ||||||||
Comparable Sales1,2 | (17.0) | % | N/A | N/A | ||||||||||
| Gross Profit Margin | 22.9 | % | 22.4 | % | 50 | bps | ||||||||
(Loss) Earnings Before Income Taxes | $ | (2.4) | $ | 3.0 | (181.7) | % | ||||||||
Adjusted EBITDA3 | $ | 1.0 | $ | 6.6 | (84.6) | % | ||||||||
Adjusted EBITDA Margin3 | 0.7 | % | 3.6 | % | (290) | bps | ||||||||
Discussion of BrandsMart Results - Q3'23 vs. Q3'22:
•The 16.9% decrease in revenues was primarily due to a 17.0% year-over-year decrease in comparable sales, driven primarily by ongoing weaker customer traffic and customer trade down to lower priced products across major categories.
•E-commerce product sales were 8.9% of product sales, down from 9.3% in the prior year quarter.
•The year-over-year increase in gross profit margin was due to ongoing strategic pricing and procurement initiatives.
•The year-over-year decrease in adjusted EBITDA and adjusted EBITDA margin were primarily due to lower retail sales, offset by benefits of direct procurement savings, strategic pricing actions, and cost controls.
1.Comparable sales was calculated by comparing BrandsMart retail and other sales for the comparable period in 2022 for all BrandsMart stores open for the entire 15-month period ended September 30, 2023. Comparable sales includes retail sales generated at BrandsMart stores (including retail sales to BrandsMart Leasing), e-commerce sales initiated on the website or app, credit card revenues, warranty revenue, gift card breakage, and sales of merchandise to wholesalers and dealers, as applicable. Comparable sales excludes service center related revenues.
2.Results prior to Q2 2022 are prior to the April 1, 2022 acquisition date; therefore, Comparable Sales results are not available for Q3 2022.
3.Item is a Non-GAAP financial measure. Refer to the "Use of Non-GAAP Financial Information" and supporting reconciliation tables below.
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Full Year 2023 Outlook | ||||||||||||||
The Company is providing the following updated outlook of selected financial metrics for the full year 2023.
Current Outlook 1,2 | Previous Outlook 1,3 | ||||||||||||||||||||||
| Consolidated | Low | High | Low | High | |||||||||||||||||||
| Revenues | $2.12 billion | $2.17 billion | $2.12 billion | $2.22 billion | |||||||||||||||||||
| Net Earnings | $14.0 million | $17.5 million | $16.8 million | $25.5 million | |||||||||||||||||||
Adjusted EBITDA4 | $140.0 million | $150.0 million | $140.0 million | $160.0 million | |||||||||||||||||||
| Diluted EPS | $0.35 | $0.50 | $0.55 | $0.80 | |||||||||||||||||||
| Non-GAAP Diluted EPS | $1.00 | $1.20 | $1.00 | $1.40 | |||||||||||||||||||
| Cash Provided by Operating Activities | $156.2 million | $168.7 million | $164.9 million | $180.9 million | |||||||||||||||||||
| Capital Expenditures | $87.5 million | $95.0 million | $85.0 million | $100.0 million | |||||||||||||||||||
| Adjusted Free Cash Flow | $75.0 million | $80.0 million | $85.0 million | $95.0 million | |||||||||||||||||||
| Aaron’s Business | |||||||||||||||||||||||
| Revenues | $1.50 billion | $1.54 billion | $1.50 billion | $1.57 billion | |||||||||||||||||||
| Earnings Before Income Taxes | $98.0 million | $102.5 million | $101.0 million | $110.0 million | |||||||||||||||||||
| Adjusted EBITDA | $170.0 million | $177.5 million | $170.0 million | $185.0 million | |||||||||||||||||||
| BrandsMart | |||||||||||||||||||||||
| Revenues | $615.0 million | $630.0 million | $615.0 million | $645.0 million | |||||||||||||||||||
| Earnings Before Income Taxes | ($2.5) million | ($1.0) million | $(0.5) million | $2.5 million | |||||||||||||||||||
| Adjusted EBITDA | $12.5 million | $15.0 million | $12.5 million | $17.5 million | |||||||||||||||||||
1.See the “Use of Non-GAAP Financial Information” section included in this release. Consolidated totals include unallocated corporate costs and intersegment elimination amounts.
2.The current outlook assumes no significant deterioration in the current retail environment, state of the U.S. economy, or global supply chain, as compared to its current condition.
3.As announced in the Form 8-K filed on July 31, 2023.
4.Starting in 2023, adjusted EBITDA excludes stock-based compensation expense. All prior period adjusted EBITDA metrics included herein have been adjusted to exclude stock compensation expense for comparability purposes.
Conference Call and Webcast | ||||||||||||||
The Company will host an earnings conference call tomorrow, October 24, 2023, at 8:30 a.m. ET. Chief Executive Officer Douglas A. Lindsay will host the call along with President Steve Olsen and Chief Financial Officer C. Kelly Wall. A live audio webcast of the conference call and presentation slides may be accessed at investor.aarons.com and the hosting website at https://events.q4inc.com/attendee/966851198. A transcript of the webcast will also be available at investor.aarons.com.
About The Aaron's Company, Inc. | ||||||||||||||
Headquartered in Atlanta, The Aaron’s Company, Inc. (NYSE: AAN) is a leading, technology-enabled, omnichannel provider of lease-to-own and retail purchase solutions of appliances, electronics, furniture, and other home goods across its brands: Aaron’s, BrandsMart U.S.A., BrandsMart Leasing, and Woodhaven. Aaron’s offers a direct-to-consumer lease-to-own solution through its approximately 1,250 Company-operated and franchised stores in 47 states and Canada, as well as its e-commerce platform. BrandsMart U.S.A. is one of the leading appliance retailers in the country with 11 retail
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stores in Florida and Georgia, as well as its e-commerce platform. BrandsMart Leasing offers lease-to-own solutions to customers of BrandsMart U.S.A. Woodhaven is the Company's furniture manufacturing division. For more information, visit investor.aarons.com, aarons.com, and brandsmartusa.com.
Forward-Looking Statements | ||||||||||||||
Statements in this news release regarding our business that are not historical facts are “forward-looking statements” that involve risks and uncertainties which could cause actual results to differ materially from those contained in the forward-looking statements. 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. These risks and uncertainties include factors such as (i) factors impacting consumer spending, including the current inflationary environment, increasing consumer debt levels and reduced savings rates, general macroeconomic conditions and rising interest rates; (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 described in the 2022 Annual Report) 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) the risk that the Company may fail to realize the benefits expected from the acquisition of BrandsMart U.S.A., including projected synergies; (v) risks related to the disruption of management time from ongoing business operations due to the BrandsMart U.S.A. acquisition; (vi) failure to promptly and effectively integrate the BrandsMart U.S.A. acquisition; (vii) the effect of the BrandsMart U.S.A. acquisition on our operating results and businesses and on the ability of Aaron's and BrandsMart to retain and hire key personnel or maintain relationships with suppliers; (viii) 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; (ix) 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; (x) 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; (xi) risks associated with the challenges faced by our business, including the commoditization of consumer electronics, our high fixed-cost operating model and the ongoing labor shortage; (xii) increased competition from traditional and virtual lease-to-own competitors, as well as from traditional and online retailers and other competitors; (xiii) financial challenges faced by our franchisees; (xiv) increases in lease merchandise write-offs; (xv) the availability and prices of supply chain resources, including products and transportation; (xvi) business disruptions due to political or economic instability due to the ongoing conflicts in Ukraine and the Middle East; and (xvii) the other risks and uncertainties discussed under “Risk Factors” in the Company’s most recent Annual Report on Form 10-K. Statements in this news release that are “forward-looking” include without limitation statements about: (i) the execution of our key strategic priorities; (ii) the growth and other benefits we expect from executing those priorities; (iii) our financial performance outlook; and (iv) the Company’s goals, plans, expectations, and projections regarding the expected benefits of the BrandsMart acquisition. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this news release. Except as required by law, the Company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances after the date of this news release.
Contacts | ||||||||||||||
| Investor Relations: | InvestorRelations@aarons.com | Media Relations: | MediaRelations@aarons.com | ||||||||
| Phone: | 678-402-3590 | Phone: | 678-402-3591 | ||||||||
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CONSOLIDATED STATEMENTS OF EARNINGS1 | ||||||||||||||
| (Unaudited) Three Months Ended | (Unaudited) Nine Months Ended | ||||||||||||||||
| (In Thousands, except per share amounts) | September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| REVENUES: | |||||||||||||||||
| Lease Revenues and Fees | $ | 340,805 | $ | 372,127 | $ | 1,068,351 | $ | 1,167,958 | |||||||||
| Retail Sales | 155,682 | 188,734 | 454,274 | 392,189 | |||||||||||||
| Non-Retail Sales | 23,573 | 26,542 | 70,308 | 81,411 | |||||||||||||
| Franchise Royalties and Other Revenues | 5,618 | 5,981 | 17,478 | 18,292 | |||||||||||||
| 525,678 | 593,384 | 1,610,411 | 1,659,850 | ||||||||||||||
| COSTS OF REVENUES: | |||||||||||||||||
| Depreciation of Lease Merchandise and Other Lease Revenue Costs | 113,970 | 125,711 | 356,511 | 390,147 | |||||||||||||
| Retail Cost of Sales | 119,732 | 146,292 | 344,545 | 320,635 | |||||||||||||
| Non-Retail Cost of Sales | 20,068 | 23,634 | 59,481 | 73,227 | |||||||||||||
| 253,770 | 295,637 | 760,537 | 784,009 | ||||||||||||||
| GROSS PROFIT | 271,908 | 297,747 | 849,874 | 875,841 | |||||||||||||
| OPERATING EXPENSES: | |||||||||||||||||
| Personnel Costs | 125,907 | 134,001 | 382,297 | 385,368 | |||||||||||||
| Other Operating Expenses, Net | 125,361 | 123,040 | 371,176 | 363,786 | |||||||||||||
| Provision for Lease Merchandise Write-Offs | 20,730 | 28,022 | 59,891 | 72,092 | |||||||||||||
| Restructuring Expenses, Net | 2,696 | 14,930 | 12,820 | 23,847 | |||||||||||||
| Impairment of Goodwill | — | 12,933 | — | 12,933 | |||||||||||||
| Separation Costs | 34 | 220 | 163 | 990 | |||||||||||||
| Acquisition-Related Costs | 693 | 1,659 | 3,087 | 13,156 | |||||||||||||
| 275,421 | 314,805 | 829,434 | 872,172 | ||||||||||||||
OPERATING (LOSS) PROFIT | (3,513) | (17,058) | 20,440 | 3,669 | |||||||||||||
| Interest Expense | (3,456) | (3,151) | (11,724) | (5,964) | |||||||||||||
| Other Non-Operating (Expense) Income, Net | (288) | (344) | 921 | (2,827) | |||||||||||||
(LOSS) EARNINGS BEFORE INCOME TAXES | (7,257) | (20,553) | 9,637 | (5,122) | |||||||||||||
| INCOME TAX BENEFIT | (3,120) | (4,937) | (5,541) | (5,696) | |||||||||||||
NET (LOSS) EARNINGS | $ | (4,137) | $ | (15,616) | $ | 15,178 | $ | 574 | |||||||||
| (LOSS) EARNINGS PER SHARE | $ | (0.13) | $ | (0.51) | $ | 0.49 | $ | 0.02 | |||||||||
| (LOSS) EARNINGS PER SHARE ASSUMING DILUTION | $ | (0.13) | $ | (0.51) | $ | 0.49 | $ | 0.02 | |||||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING | 30,880 | 30,875 | 30,889 | 30,921 | |||||||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING ASSUMING DILUTION2 | 30,880 | 30,875 | 31,231 | 31,373 | |||||||||||||
1.The Company's financial results do not include the results of BrandsMart U.S.A. prior to the April 1, 2022 acquisition.
2.For the three months ended September 30, 2023 and 2022, the GAAP Weighted Average Shares Outstanding had no dilutive effect due to the net loss incurred in the periods.
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CONSOLIDATED BALANCE SHEETS | ||||||||||||||
| (Unaudited) | |||||||||||
| (In Thousands) | September 30, 2023 | December 31, 2022 | |||||||||
| ASSETS: | |||||||||||
| Cash and Cash Equivalents | $ | 39,313 | $ | 27,716 | |||||||
| Accounts Receivable (net of allowances of $8,022 at September 30, 2023 and $8,895 at December 31, 2022) | 23,678 | 38,191 | |||||||||
| Lease Merchandise (net of accumulated depreciation and allowances of $420,599 at September 30, 2023 and $431,092 at December 31, 2022) | 608,327 | 693,795 | |||||||||
| Merchandise Inventories, Net | 99,407 | 95,964 | |||||||||
| Property, Plant and Equipment, Net | 269,445 | 267,457 | |||||||||
| Operating Lease Right-of-Use Assets | 459,771 | 459,950 | |||||||||
| Goodwill | 55,750 | 54,710 | |||||||||
| Other Intangibles, Net | 110,677 | 118,528 | |||||||||
| Income Tax Receivable | 10,935 | 5,716 | |||||||||
| Prepaid Expenses and Other Assets | 112,620 | 96,436 | |||||||||
| Total Assets | $ | 1,789,923 | $ | 1,858,463 | |||||||
| LIABILITIES & SHAREHOLDERS’ EQUITY: | |||||||||||
| Accounts Payable and Accrued Expenses | $ | 253,400 | $ | 264,043 | |||||||
| Deferred Tax Liabilities | 83,477 | 87,008 | |||||||||
| Customer Deposits and Advance Payments | 67,844 | 73,196 | |||||||||
| Operating Lease Liabilities | 497,067 | 496,401 | |||||||||
| Debt | 187,457 | 242,413 | |||||||||
| Total Liabilities | 1,089,245 | 1,163,061 | |||||||||
| SHAREHOLDERS' EQUITY: | |||||||||||
| Common Stock, Par Value $0.50 Per Share: Authorized: 112,500,000 Shares at September 30, 2023 and December 31, 2022; Shares Issued: 36,622,558 at September 30, 2023 and 36,100,011 at December 31, 2022 | 18,311 | 18,050 | |||||||||
| Additional Paid-in Capital | 747,135 | 738,428 | |||||||||
| Retained Earnings | 82,477 | 79,073 | |||||||||
| Accumulated Other Comprehensive Loss | 527 | (1,396) | |||||||||
| 848,450 | 834,155 | ||||||||||
| Less: Treasury Shares at Cost | |||||||||||
| 6,293,271 Shares at September 30, 2023 and 5,480,353 Shares at December 31, 2022 | (147,772) | (138,753) | |||||||||
| Total Shareholders’ Equity | 700,678 | 695,402 | |||||||||
| Total Liabilities & Shareholders’ Equity | $ | 1,789,923 | $ | 1,858,463 | |||||||
8
CONSOLIDATED STATEMENTS OF CASH FLOWS1 | ||||||||||||||
| Nine Months Ended September 30, | |||||||||||
| (In Thousands) Unaudited | 2023 | 2022 | |||||||||
| OPERATING ACTIVITIES: | |||||||||||
| Net Earnings | $ | 15,178 | $ | 574 | |||||||
| Adjustments to Reconcile Net Earnings to Cash Provided by Operating Activities: | |||||||||||
| Depreciation of Lease Merchandise | 350,941 | 384,268 | |||||||||
| Other Depreciation and Amortization | 67,412 | 63,211 | |||||||||
| Provision for Lease Merchandise Write-Offs | 59,891 | 72,092 | |||||||||
| Non-Cash Inventory Fair Value Adjustment | — | 23,074 | |||||||||
| Accounts Receivable Provision | 28,278 | 29,331 | |||||||||
| Stock-Based Compensation | 8,935 | 9,998 | |||||||||
| Deferred Income Taxes | (12,038) | (5,833) | |||||||||
| Impairment of Goodwill and Other Assets | 2,478 | 28,929 | |||||||||
| Non-Cash Lease Expense | 89,125 | 82,532 | |||||||||
| Other Changes, Net | (3,982) | (9,446) | |||||||||
| Changes in Operating Assets and Liabilities: | |||||||||||
| Lease Merchandise | (327,081) | (401,002) | |||||||||
| Merchandise Inventories | (3,270) | 6,440 | |||||||||
| Accounts Receivable | (13,710) | (25,320) | |||||||||
| Prepaid Expenses and Other Assets | (6,722) | (366) | |||||||||
| Income Tax Receivable | (5,219) | (4,394) | |||||||||
| Operating Lease Right-of-Use Assets and Liabilities | (90,469) | (90,877) | |||||||||
| Accounts Payable and Accrued Expenses | (3,467) | (23,582) | |||||||||
| Customer Deposits and Advance Payments | (7,174) | (15,758) | |||||||||
| Cash Provided by Operating Activities | 149,106 | 123,871 | |||||||||
| INVESTING ACTIVITIES: | |||||||||||
| Purchases of Property, Plant, and Equipment | (68,927) | (83,695) | |||||||||
| Proceeds from Dispositions of Property, Plant, and Equipment | 6,617 | 18,710 | |||||||||
| Acquisition of BrandsMart U.S.A., Net of Cash Acquired | — | (266,773) | |||||||||
| Acquisition of Businesses and Customer Agreements, Net of Cash Acquired | — | (917) | |||||||||
| Proceeds from Other Investing-Related Activities | — | 1,145 | |||||||||
| Cash Used in Investing Activities | (62,310) | (331,530) | |||||||||
| FINANCING ACTIVITIES: | |||||||||||
| Repayments on Swing Line Loans, Net | (2,900) | (10,000) | |||||||||
| Proceeds from Revolver and Term Loan | 31,094 | 291,700 | |||||||||
| Repayments on Revolver and Term Loan | (83,281) | (31,700) | |||||||||
| Proceeds on Inventory Loan Program, Net | — | (793) | |||||||||
| Dividends Paid | (11,163) | (10,067) | |||||||||
| Acquisition of Treasury Stock | (6,480) | (11,055) | |||||||||
| Issuance of Stock Under Stock Option Plans | 81 | 911 | |||||||||
| Shares Withheld for Tax Payments | (2,539) | (3,563) | |||||||||
| Debt Issuance Costs | — | (2,758) | |||||||||
| Cash (Used in) Provided by Financing Activities | (75,188) | 222,675 | |||||||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (11) | (69) | |||||||||
| Increase in Cash and Cash Equivalents | 11,597 | 14,947 | |||||||||
| Cash and Cash Equivalents at Beginning of Period | 27,716 | 22,832 | |||||||||
| Cash and Cash Equivalents at End of Period | $ | 39,313 | $ | 37,779 | |||||||
1.The Company's financial results do not include the results of BrandsMart U.S.A. prior to the April 1, 2022 acquisition.
9
QUARTERLY REVENUES BY SEGMENT | ||||||||||||||
| (Unaudited) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| (In Thousands) | September 30, 2023 | |||||||||||||
| Aaron’s Business | BrandsMart | Elimination of Intersegment Revenues1 | Total | |||||||||||
| Lease Revenues and Fees | $ | 340,805 | $ | — | $ | — | $ | 340,805 | ||||||
| Retail Sales | 6,208 | 152,392 | (2,918) | 155,682 | ||||||||||
| Non-Retail Sales | 23,573 | — | — | 23,573 | ||||||||||
| Franchise Royalties and Fees | 5,444 | — | — | 5,444 | ||||||||||
| Other | 174 | — | — | 174 | ||||||||||
| Total Revenues | $ | 376,204 | $ | 152,392 | $ | (2,918) | $ | 525,678 | ||||||
| (Unaudited) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| (In Thousands) | September 30, 2022 | |||||||||||||
| Aaron’s Business | BrandsMart | Elimination of Intersegment Revenues1 | Total | |||||||||||
| Lease Revenues and Fees | $ | 372,127 | $ | — | — | $ | 372,127 | |||||||
| Retail Sales | 8,264 | 183,341 | (2,871) | 188,734 | ||||||||||
| Non-Retail Sales | 26,542 | — | — | 26,542 | ||||||||||
| Franchise Royalties and Fees | 5,803 | — | — | 5,803 | ||||||||||
| Other | 178 | — | — | 178 | ||||||||||
| Total Revenues | $ | 412,914 | $ | 183,341 | $ | (2,871) | $ | 593,384 | ||||||
1.Intersegment sales between BrandsMart and the Aaron's Business pertaining to BrandsMart Leasing, are recognized at retail prices. Since the intersegment profit affects sales, cost of goods sold, depreciation and inventory valuation, they are adjusted when intersegment profit is eliminated in consolidation.
10
NINE MONTHS REVENUES BY SEGMENT1 | ||||||||||||||
| Nine Months Ended | ||||||||||||||
| (In Thousands) | September 30, 2023 | |||||||||||||
| Aaron’s Business | BrandsMart | Elimination of Intersegment Revenues2 | Total | |||||||||||
| Lease Revenues and Fees | $ | 1,068,351 | $ | — | $ | — | $ | 1,068,351 | ||||||
| Retail Sales | 21,141 | 440,326 | (7,193) | 454,274 | ||||||||||
| Non-Retail Sales | 70,308 | — | — | 70,308 | ||||||||||
| Franchise Royalties and Fees | 16,930 | — | — | 16,930 | ||||||||||
| Other | 548 | — | — | 548 | ||||||||||
| Total | $ | 1,177,278 | $ | 440,326 | $ | (7,193) | $ | 1,610,411 | ||||||
| Nine Months Ended | ||||||||||||||
| (In Thousands) | September 30, 2022 | |||||||||||||
| Aaron’s Business | BrandsMart | Elimination of Intersegment Revenues2 | Total | |||||||||||
| Lease Revenues and Fees | $ | 1,167,958 | $ | — | $ | — | $ | 1,167,958 | ||||||
| Retail Sales | 31,580 | 364,783 | (4,174) | 392,189 | ||||||||||
| Non-Retail Sales | 81,411 | — | — | 81,411 | ||||||||||
| Franchise Royalties and Fees | 17,713 | — | — | 17,713 | ||||||||||
| Other | 579 | — | — | 579 | ||||||||||
| Total | $ | 1,299,241 | $ | 364,783 | $ | (4,174) | $ | 1,659,850 | ||||||
1.The Company's financial results do not include the results of BrandsMart U.S.A. prior to the April 1, 2022 acquisition.
2.Intersegment sales between BrandsMart and the Aaron's Business pertaining to BrandsMart Leasing, are recognized at retail prices. Since the intersegment profit affects sales, cost of goods sold, depreciation and inventory valuation, they are adjusted when intersegment profit is eliminated in consolidation.
11
USE OF NON-GAAP FINANCIAL INFORMATION | ||||||||||||||
Non-GAAP net earnings, non-GAAP diluted earnings per share, adjusted free cash flow, net debt, EBITDA and adjusted EBITDA are supplemental measures of our performance that are not calculated in accordance with generally accepted accounting principles in the United States (“GAAP”). Non-GAAP net earnings and non-GAAP diluted earnings per share for 2023 exclude certain charges including amortization expense resulting from acquisitions, restructuring charges, separation costs associated with the separation and distribution transaction that resulted in our spin-off into a separate publicly-traded company and acquisition-related costs. Non-GAAP net earnings and non-GAAP diluted earnings per share for 2022 exclude certain charges including amortization expense resulting from acquisitions, restructuring charges and separation costs associated with the separation and distribution transaction that resulted in our spin-off into a separate publicly-traded company, acquisition-related costs, and a one time non-cash charge for a fair value adjustment to merchandise inventories. The amounts for these pre-tax non-GAAP adjustments, which are tax-effected using estimated tax rates which are commensurate with non-GAAP pre-tax earnings, can be found in the Reconciliation of Net Earnings and Earnings Per Share Assuming Dilution to non-GAAP Net Earnings and non-GAAP Earnings Per Share Assuming Dilution table in this news release. Beginning in 2023, adjusted EBITDA excludes stock-based compensation expense. For comparability purposes, the prior period adjusted EBITDA results for the three and nine months ended September 30, 2022 shown in the table below has been restated to also exclude stock-based compensation expense.
The EBITDA and adjusted EBITDA figures presented in this news release are calculated as the Company’s earnings before interest expense, depreciation on property, plant and equipment, amortization of intangible assets and income taxes. Adjusted EBITDA also excludes the other adjustments described in the calculation of non-GAAP net earnings above. Adjusted EBITDA margin is defined as adjusted EBITDA as a percentage of revenue. The amounts for these pre-tax non-GAAP adjustments can be found in the Quarterly EBITDA table in this news release.
Management believes that non-GAAP net earnings, non-GAAP diluted earnings per share, EBITDA and adjusted EBITDA provide relevant and useful information, and are widely used by analysts, investors and competitors in our industry as well as by our management in assessing both consolidated and business unit performance.
Non-GAAP net earnings and non-GAAP diluted earnings per share provide management and investors with an understanding of the results from the primary operations of our business by excluding the effects of certain items that generally arise from larger, one-time transactions that are not reflective of the ordinary earnings activity of our operations. This measure may be useful to an investor in evaluating the underlying operating performance of our business.
EBITDA and adjusted EBITDA also provide management and investors with an understanding of one aspect of earnings before the impact of investing and financing charges and income taxes. These measures may be useful to an investor in evaluating our operating performance and liquidity because the measures:
•Are widely used by investors to measure a company’s operating performance without regard to items excluded from the calculation of such measure, which can vary substantially from company to company depending upon accounting methods, book value of assets, capital structure and the method by which assets were acquired, among other factors.
•Are a financial measurement that is used by rating agencies, lenders and other parties to evaluate our creditworthiness.
•Are used by our management for various purposes, including as a measure of performance of our operating entities and as a basis for strategic planning and forecasting.
12
The adjusted free cash flow figures presented in this news release are calculated as the Company’s cash flows provided by operating activities, adjusted for acquisition-related transaction costs and proceeds from real estate transactions, less capital expenditures. Management believes that adjusted free cash flow is an important measure of liquidity, provides relevant and useful information, and is widely used by analysts, investors and competitors in our industry as well as by our management team in assessing liquidity.
Net debt represents total debt less cash and cash equivalents. Management believes that net debt is an important measure of liquidity, provides relevant and useful information, and is widely used by analysts, investors and competitors in our industry as well as by our management team in assessing liquidity.
Non-GAAP financial measures, however, should not be used as a substitute for, or considered superior to, measures of financial performance prepared in accordance with GAAP, such as the Company’s GAAP basis net earnings and diluted earnings per share, the Company’s GAAP revenues and earnings before income taxes and GAAP cash provided by operating activities, which are also presented in the news release. Further, we caution investors that amounts presented in accordance with our definitions of non-GAAP net earnings, non-GAAP diluted earnings per share, EBITDA, adjusted EBITDA and adjusted free cash flow may not be comparable to similar measures disclosed by other companies, because not all companies and analysts calculate these measures in the same manner.
13
NON-GAAP FINANCIAL INFORMATION AND RECONCILIATION NON-GAAP NET EARNINGS AND NON-GAAP EARNINGS PER SHARE ASSUMING DILUTION1 | ||||||||||||||
| (Unaudited) Three Months Ended | (Unaudited) Nine Months Ended | ||||||||||||||||
| (In Thousands, except per share amounts) | September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||
Net (Loss) Earnings | $ | (4,137) | $ | (15,616) | $ | 15,178 | $ | 574 | |||||||||
| Income Taxes | (3,120) | (4,937) | (5,541) | (5,696) | |||||||||||||
(Loss) Earnings Before Income Taxes | $ | (7,257) | $ | (20,553) | $ | 9,637 | $ | (5,122) | |||||||||
| Acquisition-Related Intangible Amortization Expense | 2,589 | 2,878 | 7,829 | 6,301 | |||||||||||||
| Restructuring Expenses, Net | 2,696 | 14,930 | 12,820 | 23,847 | |||||||||||||
| Separation Costs | 34 | 220 | 163 | 990 | |||||||||||||
| Non-Cash Inventory Fair Value Adjustment | — | 51 | — | 23,074 | |||||||||||||
| Acquisition-Related Costs | 693 | 1,659 | 3,087 | 13,156 | |||||||||||||
| Add: Impairment of Goodwill | — | 12,933 | — | 12,933 | |||||||||||||
Non-GAAP (Loss) Earnings Before Income Taxes | (1,245) | 12,118 | 33,536 | 75,179 | |||||||||||||
| Income taxes, calculated using a non-GAAP Effective Tax Rate | (1,459) | 2,450 | 614 | 13,247 | |||||||||||||
| Non-GAAP Net Earnings | $ | 214 | $ | 9,668 | $ | 32,922 | $ | 61,932 | |||||||||
| (Loss) Earnings Per Share Assuming Dilution | $ | (0.13) | $ | (0.51) | $ | 0.49 | $ | 0.02 | |||||||||
| Acquisition-Related Intangible Amortization Expense | 0.08 | 0.09 | 0.25 | 0.20 | |||||||||||||
| Restructuring Expenses, Net | 0.09 | 0.48 | 0.41 | 0.76 | |||||||||||||
| Separation Costs | — | 0.01 | 0.01 | 0.03 | |||||||||||||
| Non-Cash Inventory Fair Value Adjustment | — | — | — | 0.74 | |||||||||||||
| Acquisition-Related Costs | 0.02 | 0.05 | 0.10 | 0.42 | |||||||||||||
| Add: Impairment of Goodwill | — | 0.42 | — | 0.41 | |||||||||||||
| Tax Effect of Non-GAAP adjustments | (0.05) | (0.24) | (0.20) | (0.60) | |||||||||||||
Non-GAAP Earnings Per Share Assuming Dilution2 | $ | 0.01 | $ | 0.31 | $ | 1.05 | $ | 1.97 | |||||||||
Weighted Average Shares Outstanding Assuming Dilution3 | 31,145 | 31,138 | 31,231 | 31,373 | |||||||||||||
1.The Company's financial results do not include the results of BrandsMart U.S.A. prior to the April 1, 2022 acquisition.
2.In some cases, the sum of individual EPS amounts may not equal total non-GAAP EPS calculations due to rounding.
3.For the three months ended September 30, 2023 and 2022, the GAAP Weighted Average Shares Outstanding were 30,880 and 30,875, which had no dilutive effect due to the net GAAP loss incurred in both periods; however, the Non-GAAP Weighted Average Shares Outstanding Assuming Dilution were 31,145 and 31,138 during those same periods.
14
NON-GAAP FINANCIAL INFORMATION AND RECONCILIATION QUARTERLY ADJUSTED EBITDA BY SEGMENT | ||||||||||||||
| (Unaudited) | |||||||||||||||||
| (In Thousands) | Three Months Ended September 30, 2023 | ||||||||||||||||
| Aaron’s Business | BrandsMart | Unallocated Corporate | Elimination1 | Total | |||||||||||||
Net Loss | $ | (4,137) | |||||||||||||||
| Income Taxes | (3,120) | ||||||||||||||||
Earnings (Loss) Before Income Taxes | $ | 17,510 | $ | (2,415) | $ | (22,144) | $ | (208) | $ | (7,257) | |||||||
| Interest Expense | — | — | 3,456 | — | 3,456 | ||||||||||||
| Depreciation | 18,560 | 1,204 | 222 | — | 19,986 | ||||||||||||
| Amortization | 362 | 2,227 | — | — | 2,589 | ||||||||||||
| EBITDA | $ | 36,432 | $ | 1,016 | $ | (18,466) | $ | (208) | $ | 18,774 | |||||||
| Separation Costs | — | — | 34 | — | 34 | ||||||||||||
| Restructuring Expenses, Net | — | — | 2,696 | — | 2,696 | ||||||||||||
| Acquisition-Related Costs | — | — | 693 | — | 693 | ||||||||||||
Stock-Based Compensation2 | — | — | 3,068 | — | 3,068 | ||||||||||||
| Adjusted EBITDA | $ | 36,432 | $ | 1,016 | $ | (11,975) | $ | (208) | $ | 25,265 | |||||||
| (Unaudited) | |||||||||||||||||
| Three Months Ended September 30, 2022 | |||||||||||||||||
| Aaron’s Business | BrandsMart | Unallocated Corporate | Elimination1 | Total | |||||||||||||
Net Loss | $ | (15,616) | |||||||||||||||
| Income Taxes | (4,937) | ||||||||||||||||
Earnings (Loss) Before Income Taxes | $ | 23,493 | $ | 2,955 | $ | (46,664) | $ | (337) | $ | (20,553) | |||||||
| Interest Expense | — | — | 3,151 | — | 3,151 | ||||||||||||
| Depreciation | 18,376 | 1,237 | 247 | — | 19,860 | ||||||||||||
| Amortization | 586 | 2,371 | — | — | 2,957 | ||||||||||||
| EBITDA | $ | 42,455 | $ | 6,563 | $ | (43,266) | $ | (337) | $ | 5,415 | |||||||
| Separation Costs | — | — | 220 | — | 220 | ||||||||||||
| Restructuring Expenses, Net | — | — | 14,930 | — | 14,930 | ||||||||||||
| Impairment of Goodwill | — | — | 12,933 | — | 12,933 | ||||||||||||
| Acquisition-Related Costs | — | — | 1,659 | — | 1,659 | ||||||||||||
| Non-Cash Inventory Fair Value Adjustment | — | 51 | — | — | 51 | ||||||||||||
Stock-Based Compensation2 | — | — | 2,969 | — | 2,969 | ||||||||||||
| Adjusted EBITDA | $ | 42,455 | $ | 6,614 | $ | (10,555) | $ | (337) | $ | 38,177 | |||||||
1.Intersegment sales between BrandsMart and the Aaron's Business pertaining to BrandsMart Leasing are recognized at retail prices. Since the intersegment profit affects sales, cost of goods sold, depreciation and inventory valuation, they are adjusted when intersegment profit is eliminated in consolidation.
2.Beginning in 2023, adjusted EBITDA excludes stock-based compensation expense. For comparability purposes, the prior period results for the three months ended September 30, 2022 shown in the table above have been restated to also exclude stock-based compensation expense.
15
NON-GAAP FINANCIAL INFORMATION AND RECONCILIATION NINE MONTHS ADJUSTED EBITDA BY SEGMENT1 | ||||||||||||||
| (Unaudited) | |||||||||||||||||
| (In Thousands) | Nine Months Ended September 30, 2023 | ||||||||||||||||
| Aaron’s Business | BrandsMart | Unallocated Corporate | Elimination2 | Total | |||||||||||||
| Net Earnings | $ | 15,178 | |||||||||||||||
| Income Taxes | (5,541) | ||||||||||||||||
Earnings (Loss) Before Income Taxes | $ | 84,209 | $ | (2,220) | $ | (71,948) | $ | (404) | $ | 9,637 | |||||||
| Interest Expense | — | — | 11,724 | — | 11,724 | ||||||||||||
| Depreciation | 55,130 | 3,787 | 666 | — | 59,583 | ||||||||||||
| Amortization | 1,150 | 6,679 | — | — | 7,829 | ||||||||||||
| EBITDA | $ | 140,489 | $ | 8,246 | $ | (59,558) | $ | (404) | $ | 88,773 | |||||||
| Separation Costs | — | — | 163 | — | 163 | ||||||||||||
| Restructuring Expenses, Net | — | — | 12,820 | — | 12,820 | ||||||||||||
| Impairment of Goodwill | — | — | — | — | — | ||||||||||||
| Acquisition-Related Costs | — | — | 3,087 | — | 3,087 | ||||||||||||
Stock Based Compensation3 | — | — | 8,748 | — | 8,748 | ||||||||||||
| Adjusted EBITDA | $ | 140,489 | $ | 8,246 | $ | (34,740) | $ | (404) | $ | 113,591 | |||||||
| (Unaudited) | |||||||||||||||||
| (In Thousands) | Nine Months Ended September 30, 2022 | ||||||||||||||||
| Aaron’s Business | BrandsMart | Unallocated Corporate | Elimination2 | Total | |||||||||||||
| Net Earnings | $ | 574 | |||||||||||||||
| Income Taxes | (5,696) | ||||||||||||||||
Earnings (Loss) Before Income Taxes | $ | 105,174 | $ | (12,964) | $ | (96,656) | $ | (676) | $ | (5,122) | |||||||
| Interest Expense | — | — | 5,964 | — | 5,964 | ||||||||||||
| Depreciation | 53,178 | 2,426 | 1,008 | — | 56,612 | ||||||||||||
| Amortization | 2,050 | 4,549 | — | — | 6,599 | ||||||||||||
| EBITDA | $ | 160,402 | $ | (5,989) | $ | (89,684) | $ | (676) | $ | 64,053 | |||||||
| Separation Costs | — | — | 990 | — | 990 | ||||||||||||
| Restructuring Expenses, Net | — | — | 23,847 | — | 23,847 | ||||||||||||
| Impairment of Goodwill | — | 12,933 | — | 12,933 | |||||||||||||
| Acquisition-Related Costs | — | — | 13,156 | — | 13,156 | ||||||||||||
| Non-Cash Inventory Fair Value Adjustment | — | 23,074 | — | — | 23,074 | ||||||||||||
Stock Based Compensation3 | — | — | 9,171 | — | 9,171 | ||||||||||||
| Adjusted EBITDA | $ | 160,402 | $ | 17,085 | $ | (29,587) | $ | (676) | $ | 147,224 | |||||||
1.The Company's financial results do not include the results of BrandsMart U.S.A. prior to the April 1, 2022 acquisition.
2.Intersegment sales between BrandsMart and the Aaron's Business pertaining to BrandsMart Leasing, are recognized at retail prices. Since the intersegment profit affects sales, cost of goods sold, depreciation and inventory valuation, they are adjusted when intersegment profit is eliminated in consolidation.
3.Beginning in 2023, adjusted EBITDA excludes stock-based compensation expense. For comparability purposes, the prior period results for the nine months ended September 30, 2022 shown in the table above have been restated to also exclude stock-based compensation expense.
16
NON-GAAP FINANCIAL INFORMATION AND RECONCILIATION ADJUSTED FREE CASH FLOW1 | ||||||||||||||
| (Unaudited) | ||||||||
| Three Months Ended | ||||||||
| September 30, | ||||||||
| (In Thousands) | 2023 | 2022 | ||||||
| Cash Provided by Operating Activities | $ | 34,742 | $ | 66,795 | ||||
| Proceeds from Real Estate Transactions | — | 7,537 | ||||||
| Acquisition-Related Transaction Costs | 425 | 1,747 | ||||||
| Capital Expenditures | (27,362) | (26,008) | ||||||
| Adjusted Free Cash Flow | $ | 7,805 | $ | 50,071 | ||||
| (Unaudited) | ||||||||
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| (In Thousands) | 2023 | 2022 | ||||||
| Cash Provided by Operating Activities | $ | 149,106 | $ | 123,871 | ||||
| Proceeds from Real Estate Transactions | 1,663 | 14,919 | ||||||
| Acquisition-Related Transaction Costs | 4,549 | 12,779 | ||||||
| Capital Expenditures | (68,927) | (83,695) | ||||||
| Adjusted Free Cash Flow | $ | 86,391 | $ | 67,874 | ||||
1.The Company's financial results do not include the results of BrandsMart U.S.A. prior to the April 1, 2022 acquisition.
17
NON-GAAP FINANCIAL INFORMATION AND RECONCILIATION 2023 CURRENT OUTLOOK FOR ADJUSTED EBITDA1 | ||||||||||||||
| Fiscal Year 2023 Ranges | |||||||||||
| (In Thousands) | Aaron’s Business | BrandsMart | Consolidated Total | ||||||||
| Projected Net Earnings | $14,000 - $17,500 | ||||||||||
| Income Taxes | ($6,000) - ($5,000) | ||||||||||
| Projected Earnings Before Income Taxes | $98,000 - $102,500 | ($2,500) - ($1,000) | $8,000 - $12,500 | ||||||||
| Interest Expense | — | — | $15,500 - $17,000 | ||||||||
| Depreciation and Amortization | $72,000 - $75,000 | $15,000 - $16,000 | $88,500 - $92,500 | ||||||||
| Projected EBITDA | $170,000 - $177,500 | $12,500 - $15,000 | $112,000 - $122,000 | ||||||||
| Stock-Based Compensation | — | — | $12,000 | ||||||||
Other Adjustments2 | — | — | $16,000 | ||||||||
| Projected Adjusted EBITDA | $170,000 - $177,500 | $12,500 - $15,000 | $140,000 - $150,000 | ||||||||
NON-GAAP FINANCIAL INFORMATION AND RECONCILIATION 2023 CURRENT OUTLOOK FOR EARNINGS PER SHARE ASSUMING DILUTION | ||||||||||||||
| Fiscal Year 2023 Range | ||||||||
| Low | High | |||||||
| Projected Earnings Per Share Assuming Dilution | $ | 0.35 | $ | 0.50 | ||||
Sum of Other Adjustments3 | $ | 0.65 | $ | 0.70 | ||||
| Projected Non-GAAP Earnings Per Share Assuming Dilution | $ | 1.00 | $ | 1.20 | ||||
NON-GAAP FINANCIAL INFORMATION AND RECONCILIATION 2023 CURRENT OUTLOOK FOR ADJUSTED FREE CASH FLOW | ||||||||||||||
| Fiscal Year 2023 Ranges | |||||
| (In Thousands) | Consolidated Total | ||||
| Cash Provided by Operating Activities | $156,200 - $168,700 | ||||
| Proceeds from Real Estate Transactions | $1,700 | ||||
| Acquisition-Related Transaction Costs | $4,600 | ||||
| Capital Expenditures | $(87,500) - $(95,000) | ||||
| Adjusted Free Cash Flow | $75,000 - $80,000 | ||||
1.In 2022 and prior periods, adjusted EBITDA included stock-based compensation expense. Starting in 2023, adjusted EBITDA excludes stock-based compensation expense.
2.Includes non-GAAP charges related to restructuring charges, separation costs associated with the separation and distribution transaction that resulted in our spin-off into a separate publicly-traded company and acquisition-related costs.
3.Includes non-GAAP charges related to restructuring charges, separation costs associated with the separation and distribution transaction that resulted in our spin-off into a separate publicly-traded company, acquisition-related costs and intangible amortization expense resulting from acquisitions.
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NON-GAAP FINANCIAL INFORMATION AND RECONCILIATION 2023 PREVIOUS OUTLOOK FOR ADJUSTED EBITDA1 | ||||||||||||||
| Fiscal Year 2023 Ranges | |||||||||||
| (In Thousands) | Aaron’s Business | BrandsMart | Consolidated Total | ||||||||
| Projected Net Earnings | $16,800 - $25,450 | ||||||||||
| Income Taxes | $(800) - $550 | ||||||||||
| Projected Earnings Before Income Taxes | $101,000 - $110,000 | $(500) - $2,500 | $16,000 - $26,000 | ||||||||
| Interest Expense | — | — | $15,000 - $17,000 | ||||||||
| Depreciation and Amortization | $69,000 - $75,000 | $13,000 - $15,000 | $84,000 - $92,000 | ||||||||
| Projected EBITDA | $170,000 - $185,000 | $12,500 - $17,500 | $115,500 - $135,500 | ||||||||
| Stock-Based Compensation | — | — | $12,000 | ||||||||
Other Adjustments2 | — | — | $13,000 | ||||||||
| Projected Adjusted EBITDA | $170,000 - $185,000 | $12,500 - $17,500 | $140,000 - $160,000 | ||||||||
NON-GAAP FINANCIAL INFORMATION AND RECONCILIATION 2023 PREVIOUS OUTLOOK FOR EARNINGS PER SHARE ASSUMING DILUTION | ||||||||||||||
| Fiscal Year 2023 Range | ||||||||
| Low | High | |||||||
| Projected Earnings Per Share Assuming Dilution | $ | 0.55 | $ | 0.80 | ||||
Sum of Other Adjustments3 | $ | 0.45 | $ | 0.60 | ||||
| Projected Non-GAAP Earnings Per Share Assuming Dilution | $ | 1.00 | $ | 1.40 | ||||
NON-GAAP FINANCIAL INFORMATION AND RECONCILIATION 2023 PREVIOUS OUTLOOK FOR ADJUSTED FREE CASH FLOW | ||||||||||||||
| Fiscal Year 2023 Ranges | |||||
| (In Thousands) | Consolidated Total | ||||
| Cash Provided by Operating Activities | $164,900 - $180,900 | ||||
| Proceeds from Real Estate Transactions | $1,000 - $10,000 | ||||
| Acquisition-Related Transaction Costs | $4,100 | ||||
| Capital Expenditures | $(85,000) - $(100,000) | ||||
| Adjusted Free Cash Flow | $85,000 - $95,000 | ||||
1.In 2022 and prior periods, adjusted EBITDA included stock-based compensation expense. Starting in 2023, adjusted EBITDA excludes stock-based compensation expense.
2.Includes non-GAAP charges related to restructuring charges, separation costs associated with the separation and distribution transaction that resulted in our spin-off into a separate publicly-traded company and acquisition-related costs.
3.Includes non-GAAP charges related to restructuring charges, separation costs associated with the separation and distribution transaction that resulted in our spin-off into a separate publicly-traded company, acquisition-related costs and intangible amortization expense resulting from acquisitions.
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