The Aaron’s Company, Inc. Reports First Quarter 2022 Financial Results

“I am pleased to announce a strong start to 2022. Our customer lease portfolio continues to perform well, and the Aaron’s core business remains on track with the outlook shared last quarter,” said Douglas Lindsay, Chief Executive Officer of The Aaron’s Company. “The investments we continue to make in our key strategic initiatives, including our fast-growing e-commerce channel, digital origination and servicing platforms, and high-performing GenNext stores, have enabled us to deliver financial results consistent with our expectations for the quarter.

“In addition, I could not be more excited about the acquisition of BrandsMart U.S.A., which closed earlier this month, and the meaningful value creation opportunities it will provide. We continue to believe the consolidated company is capable of delivering strong revenue and double digit annual adjusted EBITDA growth over the next five years and beyond.”

First Quarter 2022 Financial Highlights

Financial and operating results for the first quarter of 2022 and prior periods do not include BrandsMart U.S.A. (“BrandsMart”). As the acquisition of BrandsMart occurred on April 1, 2022, results for BrandsMart will be included in the Company’s consolidated financial statements commencing in the second quarter of 2022.

Total revenues were $456.1 million in the first quarter of 2022, a decrease of 5.2% compared to the first quarter of 2021, primarily due to lower lease revenue attributed to the expected normalization in the lease renewal rate and lower exercise of early purchase options, which were partially offset by the increased size of our lease portfolio. At the end of the first quarter of 2022, our overall lease portfolio size was $131.7 million, an increase of 2.3% compared to the end of the first quarter of 2021. The lease renewal rate for the first quarter was 89.4%, compared to 92.5% in the government stimulus-aided first quarter of 2021. E-commerce revenues increased 3.9% in the first quarter of 2022 compared to the same period in 2021, and represented 15.4% of lease revenues. During the quarter, the Company opened 19 GenNext locations. Combined with the 116 locations open at the beginning of the quarter, GenNext stores contributed 13.2% of lease and retail revenues in the first quarter of 2022, with lease originations in GenNext stores open less than one year continuing to grow at a rate of more than 20 percentage points higher than our average legacy stores.

Same store revenues increased 9.6% as compared to the first quarter of 2020. In the first quarter of 2022, same store revenues decreased 4.3% as compared to the first quarter of 2021, versus a 14.8% increase in the first quarter of 2021 as compared to the first quarter of 2020. The decrease in the first quarter of 2022 was primarily driven by the expected normalization in the lease renewal rate and lower exercise of early purchase options by our customers. These factors were partially offset by the increased size of our same store lease portfolio.

Net earnings for the first quarter of 2022 were $21.5 million compared to $36.3 million in the first quarter of 2021. First quarter 2022 net earnings included acquisition-related costs of $3.5 million, restructuring charges of $3.3 million, and separation costs of $0.5 million. Net earnings in the first quarter of 2021 included separation costs of $4.4 million and restructuring charges of $3.4 million.

Adjusted EBITDA was $54.7 million in the first quarter of 2022, a decrease of 25.9% compared to the first quarter of 2021. As a percentage of total revenues, adjusted EBITDA margin was 12.0% in the first quarter of 2022 compared with 15.4% in the prior year first quarter. The declines in adjusted EBITDA and adjusted EBITDA margin were primarily due to the expected lower lease renewal rates and higher provision for lease merchandise write-offs compared to the government stimulus-aided levels in the first quarter of 2021, partially offset by lower personnel and other operating expenses.

Diluted earnings per share were $0.68 in the first quarter of 2022 compared with $1.04 in the first quarter of 2021. On a non-GAAP basis, diluted earnings per share were $0.87 for the first quarter of 2022 compared with $1.24 in the first quarter of 2021.

Share Repurchase Program and Dividend Activity

During the first quarter, the Company repurchased 261,924 shares of Aaron’s common stock for a total purchase price of approximately $5.7 million. The total shares outstanding as of March 31, 2022 were 30,963,018, compared to 34,169,998 as of March 31, 2021. On March 3, 2022, the Company’s Board of Directors increased the share repurchase authorization to $250.0 million from the original $150.0 million plan and extended the maturity to December 31, 2024. The remaining authorized share repurchase amount was $141.2 million as of March 31, 2022. In addition, the Board declared a quarterly cash dividend of $0.1125 per share which was paid to shareholders on April 5, 2022.

Full Year 2022 Outlook

The Company has updated its full year 2022 outlook to reflect the acquisition of BrandsMart that closed April 1, 2022. For the full-year 2022, we expect consolidated total revenues between $2.32 and $2.39 billion, adjusted EBITDA between $200 and $215 million, and non-GAAP earnings per share between $2.65 and $2.90.

Excluding the BrandsMart acquisition, the Aaron’s core business outlook for total revenues, adjusted EBITDA, and annual same store revenues remains consistent with the outlook provided on February 23, 2022. Due to global supply chain challenges, we are revising our forecast of new GenNext store remodels and repositionings to be completed in 2022 to 100 locations. We expect to complete the remaining 20 locations originally scheduled for the current year in 2023.

We are assuming an effective tax rate for 2022 of approximately 26%, depreciation and amortization of $80 million to $85 million, and a diluted weighted average share count of approximately 32.0 million shares. This outlook assumes no significant deterioration in the current retail environment, state of the U.S. economy, or global supply chain, as compared to its current condition.