Aaron’s Reports Fourth Quarter and Full Year 2021 Financial Results; Provides 2022 Outlook

The Aaron’s Company, Inc. (NYSE: AAN), a leading, technology-enabled, omnichannel provider of lease-to-own and purchase solutions, today announced financial results for the fourth quarter and full year ended December 31, 2021.

Fourth Quarter 2021 Highlights

• Total Revenues of $444.8 Million, a 3.4% Increase
• Same Store Revenues Increased 4.8%; E-commerce Revenues Increased 13.0%
• Net Income of $16.3 Million; Adjusted EBITDA of $41.3 Million
• Diluted EPS of $0.50; Non-GAAP Diluted EPS of $0.60

Full Year 2021 Highlights

• Total Revenues of $1.85 Billion, a 6.4% Increase
• Same Store Revenues Increased 9.3%; E-commerce Revenues Increased 20.1%
• Net Income of $109.9 Million; Adjusted EBITDA of $234.1 Million
• Diluted EPS of $3.26; Non-GAAP Diluted EPS of $3.75
• Ended 2021 with 116 GenNext Stores

Refer to the “Basis of Presentation” section below for information regarding the consolidated and combined financial results for the periods discussed in this release.

“I am proud of our team members for once again delivering a strong quarter of financial results to cap off an outstanding 2021. We accelerated investments in our key strategic initiatives throughout the year and continue to perform ahead of our long-term plan. These investments are outperforming our expectations, and we are recognizing the benefits in customer growth, operating efficiencies, and improved portfolio health,” said Douglas Lindsay, Chief Executive Officer of The Aaron’s Company, Inc. “Additionally, 2021 financial results exceeded our expectations, which allowed us to maintain higher levels of inventory to mitigate the impacts of supply chain disruptions, and repurchase over 10% of the Company’s outstanding stock.”

Lindsay continued, “Today, I am very excited to announce our agreement to acquire BrandsMart U.S.A., a leading appliance and consumer electronics retailer with stores in Florida and Georgia. The acquisition strengthens Aaron’s ability to deliver on its mission of enhancing people’s lives by providing easy access to high quality furniture, appliances, electronics, and other home goods through affordable lease and retail purchase options. The acquisition is expected to provide meaningful value-creation opportunities, which include leveraging Aaron’s lease-to-own expertise to provide BrandsMart customers enhanced payment options and offering a wide selection of BrandsMart’s product assortment to millions of Aaron’s customers.  Importantly, we believe the acquisition of BrandsMart will expand our addressable market and create an additional platform for accelerated growth.”

A separate press release discussing the agreement to acquire BrandsMart U.S.A. (“BrandsMart”) can be found on the Company’s investor relations website at investor.aarons.com.

Fourth Quarter 2021 Financial Highlights

Total revenues were $444.8 million in the fourth quarter of 2021, an increase of 3.4% compared to the fourth quarter of 2020, primarily due to the increased size and quality of our lease portfolio, partially offset by the expected lower customer payment activity during the fourth quarter of 2021 and the reduction of 72 franchised stores during the 15-month period ended December 31, 2021. At the end of the fourth quarter 2021, our overall lease portfolio size was $136.3 million, an increase of 4.7% compared to the end of 2020. The average customer renewal rate for the fourth quarter was 87.7%, compared to 88.7% in the fourth quarter of 2020 and an average of 86.9% for the three-year pre-pandemic period. E-commerce revenues increased 13.0% in the fourth quarter of 2021 and represented 14.6% of lease revenues. During the quarter, the Company opened 30 new GenNext locations. Combined with the 86 locations open at the beginning of the quarter, GenNext stores contributed 11.6% of lease and retail revenues in the fourth quarter of 2021.

On a same store basis, lease and retail revenues increased 4.8%, primarily driven by a larger same store lease portfolio size to begin the quarter, partially offset by lower lease renewal rates.

Net earnings for the fourth quarter of 2021 were $16.3 million compared to $2.9 million in the fourth quarter of 2020. Fourth quarter 2021 net earnings included restructuring charges of $1.1 million and separation costs of $0.7 million. Net earnings in the fourth quarter of 2020 included restructuring charges of $9.2 million and separation and retirement charges of $19.1 million.

Adjusted EBITDA was $41.3 million in the fourth quarter of 2021, a decrease of $12.3 million, or 23.0% compared to the fourth quarter of 2020. As a percentage of revenues, Adjusted EBITDA margin was 9.3% in the fourth quarter of 2021 compared with 12.5% in the prior year fourth quarter. The decline in Adjusted EBITDA and Adjusted EBITDA margin was primarily due to the expected lower lease renewal rates and higher provision for lease merchandise write-offs compared to the stimulus-aided levels in the fourth quarter of 2020 and higher other operating expenses.

Diluted earnings per share were $0.50 in the fourth quarter of 2021 compared with $0.08 in the fourth quarter of 2020. On a non-GAAP basis, diluted earnings per share were $0.60 for the fourth quarter of 2021 compared with $0.79 in the fourth quarter of 2020.

During the fourth quarter, the Company repurchased 820,338 shares of Aaron’s common stock for a total purchase price of approximately $20.7 million. In addition, the Company’s Board of Directors declared a quarterly cash dividend of $0.10 per share which was paid on January 4, 2022.

Full Year 2021 Financial Highlights

Consolidated revenues were $1.85 billion in 2021, an increase of 6.4% compared to 2020 primarily due to an increase in the size and quality of our lease portfolio, partially offset by the reduction of 99 franchised stores in 2020 and 2021. At the end of 2021, our overall lease portfolio size was $136.3 million, an increase of 4.7%, while the average customer renewal rate for the year was 90.6% compared to 89.4% in 2020 and 87.9% average for the three year pre-pandemic period. E-commerce revenues grew 20.1% in 2021 and represented 14.3% of lease revenues compared to 12.7% in 2020. During the year, the Company opened 69 new GenNext locations. Combined with the 47 locations open at the beginning of the year, total GenNext stores contributed 8.2% of lease and retail revenues in 2021.

Net earnings for 2021 were $109.9 million compared to a net loss of $265.9 million in 2020. For 2021, net earnings included restructuring charges of $9.2 million and separation costs of $6.7 million. The net loss for the full year 2020 included goodwill impairment charges of $446.9 million, restructuring charges of $42.5 million, and separation costs and retirement charges of $20.8 million.

Adjusted EBITDA in 2021 was $234.1 million, an increase of $25.3 million or 12.1% compared to 2020. As a percentage of revenues, Adjusted EBITDA margin was 12.7% in 2021 compared to 12.0% in 2020. This increase is primarily due to a larger lease portfolio size and higher lease renewal rates in the first half of the year, partially offset by higher personnel, shipping and handling, advertising, occupancy, and public company costs.  Write-offs were 4.2% of lease revenues in 2021, which is consistent with 2020.

Diluted earnings per share were $3.26 in 2021 compared with a net loss of $7.85 in 2020. On a non-GAAP basis, diluted earnings per share were $3.75 in 2021 compared to the $3.02 in 2020.

During the year ended December 31, 2021, the Company repurchased 3,571,812 shares of Aaron’s common stock for a total purchase price of approximately $103.1 million and ended the year with approximately $46.9 million remaining under its $150 million share repurchase program.

The Company generated $136.0 million in cash from operations in 2021 and ended the year with $22.8 million in cash.

Franchise Performance

Franchisee revenues totaled $331.1 million for the full year of 2021, a decrease of 18.3% from the full year of 2020 primarily due to a reduction in franchise locations. Franchisee revenues totaled $80.0 million for the fourth quarter of 2021, a decrease of 17.6% from the fourth quarter of 2020 primarily due to a reduction in franchise locations.

Same store revenues for franchised stores increased 4.3% for the fourth quarter of 2021 compared with the same quarter in 2020. Revenues and customers of franchisees are not revenues and customers of the Company.

Dividend Declaration

On February 21, 2022, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.1125 per share, an increase of 12.5%, payable on April 5, 2022, to shareholders of record on March 17, 2022.

Full Year 2022 Outlook

For the full-year 2022, we expect consolidated revenues between $1.775 billion and $1.825 billion, same store revenues between -3.0% and -1.0%, and Adjusted EBITDA between $180 million and $190 million.

We are assuming an effective tax rate for 2022 of approximately 26%, depreciation and amortization of $70 million to $75 million, and a diluted weighted average share count of approximately 32.5 million shares. In addition, with the success of our GenNext store concept, which features larger showrooms, re-engineered store layouts, increased product selection, technology-enabled shopping and checkout, and a refined operating model. we expect to complete approximately 120 additional remodels and repositionings in 2022, more than doubling the number of GenNext locations as compared to the end of 2021.

This outlook does not include the impact of the acquisition of BrandsMart that was announced today. We expect to update our full year 2022 outlook for the acquisition subsequent to the closing of the transaction.

Basis of Presentation

The financial statements and related results discussed herein 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, Inc. The financial statements for the periods subsequent to December 1, 2020 and through December 31, 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 from PROG Holdings, Inc. related to certain corporate functions and actions. These costs 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 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.

About The Aaron’s Company

Headquartered in Atlanta, The Aaron’s Company, Inc. (NYSE: AAN) is a leading omnichannel provider of lease-to-own and purchase solutions. Aaron’s engages in direct-to-consumer sales and lease ownership of furniture, home appliances, consumer electronics and accessories through its approximately 1,300 company-operated and franchised stores in 47 states and Canada, as well as its e-commerce platform, Aarons.com. For more information, visit Aarons.com or investor.aarons.com.

For the complete press release, please click here.

Contact:

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

Source: The Aaron’s Company, Inc.