Aaron’s Holdings Reports Record Third Quarter Revenues and Earnings

Aaron’s Holdings Company, Inc. (“Aaron’s” or the “Company”), a leading omnichannel provider of lease-purchase solutions, announced financial results for the three months ended September 30, 2020.

“We are pleased to announce record third quarter revenues and earnings. Progressive Leasing and the Aaron’s Business continued to perform well during this period of uncertainty caused by the ongoing pandemic. I am proud of our teams for executing at such a high level during the quarter despite supply chain disruptions, changing consumer behavior and ongoing retail restrictions in certain markets. Our team has done an outstanding job effectively managing our business in a very challenging environment,” said John Robinson, Chief Executive Officer at Aaron’s Holdings Company, Inc. “Regarding our previously announced separation, we believe the Company is on track to complete the transaction during the fourth quarter.”

Consolidated Results

For the third quarter of 2020, consolidated revenues were $1.05 billion compared with $963.8 million for the third quarter of 2019, an increase of 9.2%. The increase in consolidated revenues was due to continued strength in customer payment activity across our businesses, which the Company believes is partially a result of various government stimulus programs enacted in response to the COVID-19 pandemic.

Net earnings for the third quarter of 2020 were $109.3 million compared to net earnings of $39.8 million in the prior year period. Net earnings in the third quarter of 2020 included $8.3 million in pre-tax spin-related separation charges and $4.0 million in pre-tax restructuring charges. Net earnings in the third quarter of 2019 included $5.5 million in pre-tax restructuring charges.

Adjusted EBITDA for the Company was $178.3 million for the third quarter of 2020, compared with $87.1 million for the same period in 2019, an increase of $91.3 million, or 104.8%. As a percentage of revenues, adjusted EBITDA was 16.9% in the third quarter of 2020 compared with 9.0% for the same period in 2019.

Diluted earnings per share for the third quarter of 2020 were $1.60 compared with diluted earnings per share of $0.58 in the year ago period. On a non-GAAP basis, diluted earnings per share were $1.80 in the third quarter of 2020. This compares with non-GAAP diluted earnings per share of $0.73 for the same quarter in 2019, an increase of $1.07 or 147%.

The Company generated $551.8 million in cash from operations during the nine months ended September 30, 2020 and ended the third quarter with $470.2 million in cash, compared with a cash balance of $57.8 million at the end of 2019. Total available liquidity was $956.3 million as of September 30, 2020.

Progressive Leasing Segment Results

Progressive Leasing’s revenues in the third quarter of 2020 increased 13.7% to $601.1 million compared to $528.9 million in the third quarter of 2019. Third quarter invoice volume increased 3.4%, with improving customer demand partially offset by shortages of available products in many of its retail partners, primarily in the furniture, electronics and appliance categories. Invoice volume per active door was up 3.0% and active doors were up 0.4% to approximately 20,000. Progressive Leasing had 892,000 customers at September 30, 2020, a 1.9% decrease from September 30, 2019 primarily as a result of higher than prior year early lease buyout activity.

Earnings before income taxes for the third quarter of 2020 were $103.8 million compared to $53.5 million in the prior year period. Earnings before income taxes for the third quarter of 2020 included $1.8 million in spin-related separation charges. Adjusted EBITDA for the third quarter of 2020 was $115.2 million compared with $62.9 million for the same period of 2019, an increase of 83.4%. As a percentage of revenues, adjusted EBITDA was 19.2% for the third quarter of 2020, an increase of 730 basis points compared to the third quarter of 2019. The margin improvement was due primarily to strong portfolio performance and operating expense control.

The provision for lease merchandise write-offs was 2.1% of revenues in the third quarter of 2020 compared with 7.7% in the same period of 2019. The decrease in the provision for lease merchandise write-offs as a percent of revenues was due primarily to strong customer payment activity and the positive impact of more conservative decisioning implemented at the onset of the COVID pandemic.

The Aaron’s Business Segment Results

For the third quarter of 2020, total revenues for the Aaron’s Business increased 3.4% to $441.0 million from $426.3 million in the third quarter of 2019. The increase was due to strong customer payment activity and higher merchandise sales to our franchisees, partially offset by a reduction of 134 stores during the 15-month period ended September 30, 2020. Same-store revenues increased 7.3% due primarily to strong customer payment activity. Customer count on a same-store basis was down 3.7% during the third quarter of 2020 compared to the same period in 2019. Company-operated Aaron’s stores had 902,000 customers at September 30, 2020, an 8.3% decrease from September 30, 2019. At September 30, 2020, the Aaron’s Business had 1,086 Company-operated stores and 308 franchised stores compared to 1,163 and 341 company-operated and franchised stores, respectively, at the end of the prior year period.

Lease revenue and fees for the three months ended September 30, 2020 increased 1.7% compared with the same period in 2019. Retail sales increased 53.1% compared with the same period in 2019. Non-retail sales, which primarily consist of merchandise sales to the Company’s franchisees, increased 12.0% for the third quarter of 2020 compared with the prior year period.

Earnings before income taxes for the third quarter of 2020 were $39.8 million, which includes the impact of $6.5 million in spin-related separation charges and $4.0 million in restructuring charges. Adjusted EBITDA for the three months ended September 30, 2020 was $65.1 million compared to $25.7 million for the same period in 2019, an increase of $39.4 million or 153.1%. As a percentage of revenues, adjusted EBITDA was 14.8% in the third quarter of 2020 compared to 6.0% in the prior year quarter. The increase in adjusted EBITDA was due primarily to strong customer payment activity and lower merchandise write-offs, partially offset by the impact of a slightly lower portfolio balance entering the third quarter as compared to the same period in the prior year.

The provision for lease merchandise write-offs was 2.4% of revenues in the third quarter of 2020, compared with 7.4% for the same period last year. Contributing to the year-over-year improvement in write-offs was strong customer payment activity, in both our store and e-commerce channels.

Significant Components of Revenue and Franchise Performance

Consolidated lease revenues and fees for the three months ended September 30, 2020 increased 8.7% over the prior year period. Franchise royalties and fees were flat in the third quarter of 2020 compared with the same period a year ago. Franchisee revenues totaled $101.2 million for the three months ended September 30, 2020, a decrease of 2.2% from the prior year period. Same-store revenues for franchised stores increased 5.8% and same-store customer counts declined 5.8% for the third quarter of 2020 compared with the same quarter in 2019. Franchised stores had 210,000 customers at the end of the third quarter of 2020. Revenues and customers of franchisees are not revenues and customers of the Aaron’s Business or the Company.

2020 Outlook

For the fourth quarter, we expect consolidated revenues between $1.025 billion and $1.045 billion and Non-GAAP Diluted Earnings Per Share of between $1.20 and $1.30. This outlook assumes no significant deterioration in the current retail environment or in the state of the U.S. economy as compared to its current condition and a gradual improvement in global supply chain conditions. Estimated fourth quarter Non-GAAP Diluted Earnings Per Share assumes no reduction in the COVID-specific reserves established at the end of the first quarter of 2020.

For the full third quarter results, click here.

About Aaron’s Holdings Company, Inc.

Headquartered in Atlanta, Aaron’s Holdings Company, Inc. (NYSE: AAN), is a leading omnichannel provider of lease-purchase solutions. Progressive Leasing provides lease-purchase solutions through more than 20,000 retail and e-commerce partner locations in 46 states and the District of Columbia. The Aaron’s Business engages in the sales and lease ownership and specialty retailing of furniture, home appliances, consumer electronics and accessories through its approximately 1,400 Company-operated and franchised stores in 47 states, Puerto Rico and Canada, as well as its e-commerce platform, Aarons.com. Vive Financial provides a variety of second-look credit products that are originated through federally-insured banks. For more information, visit investor.aarons.com, Aarons.com, ProgLeasing.com, and ViveCard.com.

Contact:

Michael P. Dickerson – Vice President Corporate Communications & Investor Relations – mike.dickerson@aarons.com – (678) 402-3590

Source: Aaron’s, Inc.