The Aaron's Company, Inc. Reports First Quarter 2022 Financial Results
The Aaron's Company (NYSE: AAN) reported Q1 2022 earnings, with total revenues of $456.1 million, a 5.2% year-over-year decline. Net earnings dropped to $21.5 million, significantly down from $36.3 million in Q1 2021, influenced by a decrease in lease revenues. Diluted EPS stood at $0.68, down from $1.04. Despite challenges, same-store revenues rose 9.6% on a two-year basis. The company successfully acquired BrandsMart U.S.A., which is expected to enhance revenue and EBITDA growth in the future. The 2022 outlook remains unchanged, forecasting total revenues between $2.32 billion and $2.39 billion.
- Acquisition of BrandsMart U.S.A. expected to create value.
- Same store revenues increased 9.6% on a two-year basis.
- Continued growth in e-commerce revenues, up 3.9% year-over-year.
- Total revenues decreased 5.2% compared to Q1 2021.
- Net earnings fell from $36.3 million to $21.5 million.
- Adjusted EBITDA decreased by 25.9% year-over-year.
- First Quarter Same Store Revenues Increased
9.6% on a Two-Year Basis - Lease Portfolio Size Ended First Quarter Up Year-Over-Year
- Diluted EPS of
$0.68 ; Non-GAAP Diluted EPS of$0.87 - 2022 Aaron's Core Business Outlook Remains Unchanged
- Updated Consolidated Outlook for 2022 Includes BrandsMart U.S.A., Acquired April 1, 2022
ATLANTA, April 25, 2022 /PRNewswire/ -- The Aaron's Company, Inc. (NYSE: AAN), a leading, technology-enabled, omnichannel provider of lease-to-own and retail purchase solutions, today announced financial results for the first quarter ended March 31, 2022.
"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
Same store revenues increased
Net earnings for the first quarter of 2022 were
Adjusted EBITDA was
Diluted earnings per share were
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
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
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
Current Outlook1, 2 | ||
Low | High | |
Consolidated - Total Revenues | ||
Consolidated - Adjusted EBITDA | ||
Consolidated - Non-GAAP EPS | ||
Consolidated - Capital Expenditures | ||
Consolidated - Free Cash Flow | ||
BrandsMart - Total Revenues | ||
BrandsMart - Adjusted EBITDA |
1 See the "Use of Non-GAAP Financial Information" section accompanying the press release. |
2 BrandsMart outlook represents expected results for the nine months ended December 31, 2022. |
Conference Call and Webcast
The Company will hold a conference call to discuss its quarterly results on April 26, 2022, at 8:30 a.m. Eastern Time. The public is invited to listen to the conference call by webcast accessible through the Company's investor relations website, investor.aarons.com. The webcast will be archived for playback at that same site.
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 and BrandsMart U.S.A. Aaron's offers a direct-to-consumer lease-to-own solution through its 1,300 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 ten retail stores in Florida and Georgia. 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 "remain," "believe," "outlook," "expect," "assume," "assumed," and similar terminology. 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 the impact of federal vaccine mandates on our workforce and 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 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, including projected synergies;
(v) risks related to the disruption of management time from ongoing business operations due to the acquisition; (vi) failure to promptly and effectively integrate the BrandsMart acquisition; (vii) the effect of the 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 and our high fixed-cost operating model; (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, and the potential limited duration and impact of government stimulus and other government payments made by Federal and State governments to counteract the economic impact of the pandemic; (xv) the availability and prices of supply chain resources, including products and transportation; and (xvi) 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, 2021. Statements in this press 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 2022 financial performance outlook; (iv) the Company's goals, plans, expectations, and projections regarding the expected benefits of the BrandsMart acquisition; and
(v) the impact on our 2022 financial performance of additional rounds of government stimulus payments. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press 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 press release.
THE AARON'S COMPANY, INC. | |||
Consolidated Statements of Earnings | |||
(In thousands, except per share amounts) | |||
(Unaudited) Three Months Ended | |||
March 31, | |||
2022 | 2021 | ||
REVENUES: | |||
Lease and Retail Revenues | $ 421,925 | $ 444,087 | |
Non-Retail Sales | 27,827 | 29,949 | |
Franchise Royalties and Other Revenues | 6,330 | 7,018 | |
456,082 | 481,054 | ||
COST OF REVENUES: | |||
Cost of Lease and Retail Revenues | 145,779 | 151,495 | |
Non-Retail Cost of Sales | 25,356 | 26,491 | |
171,135 | 177,986 | ||
GROSS PROFIT | 284,947 | 303,068 | |
OPERATING EXPENSES: | |||
Personnel Expenses | 121,110 | 124,863 | |
Other Operating Expenses, Net | 104,359 | 108,366 | |
Provision for Lease Merchandise Write-Offs | 21,957 | 13,417 | |
Restructuring Expenses, Net | 3,335 | 3,441 | |
Separation Costs | 540 | 4,390 | |
Acquisition-Related Costs | 3,464 | — | |
254,765 | 254,477 | ||
OPERATING PROFIT | 30,182 | 48,591 | |
Interest Expense | (350) | (344) | |
Other Non-Operating (Expense) Income, Net | (927) | 402 | |
EARNINGS BEFORE INCOME TAX EXPENSE | 28,905 | 48,649 | |
INCOME TAX EXPENSE | 7,373 | 12,326 | |
NET EARNINGS | $ 21,532 | $ 36,323 | |
EARNINGS PER SHARE | $ 0.69 | $ 1.06 | |
EARNINGS PER SHARE ASSUMING DILUTION | $ 0.68 | $ 1.04 | |
WEIGHTED AVERAGE SHARES OUTSTANDING | 31,062 | 34,262 | |
WEIGHTED AVERAGE SHARES OUTSTANDING ASSUMING DILUTION | 31,760 | 34,919 |
THE AARON'S COMPANY, INC. | |||
CONSOLIDATED BALANCE SHEETS | |||
(In thousands) | |||
(Unaudited) | |||
March 31, | December 31, | ||
ASSETS: | |||
Cash and Cash Equivalents | $ 13,518 | $ 22,832 | |
Accounts Receivable (net of allowances of | 26,930 | 29,443 | |
Lease Merchandise (net of accumulated depreciation and allowances of | 769,018 | 772,154 | |
Property, Plant and Equipment, Net | 230,945 | 230,895 | |
Operating Lease Right-of-Use Assets | 288,131 | 278,125 | |
Goodwill | 13,022 | 13,134 | |
Other Intangibles, Net | 4,288 | 5,095 | |
Income Tax Receivable | 2,711 | 3,587 | |
Prepaid Expenses and Other Assets | 97,799 | 86,000 | |
Total Assets | $ 1,446,362 | $ 1,441,265 | |
LIABILITIES & SHAREHOLDERS' EQUITY: | |||
Accounts Payable and Accrued Expenses | $ 242,702 | $ 244,670 | |
Deferred Income Taxes Payable | 98,565 | 92,306 | |
Customer Deposits and Advance Payments | 56,203 | 66,289 | |
Operating Lease Liabilities | 317,984 | 309,834 | |
Debt | — | 10,000 | |
Total Liabilities | 715,454 | 723,099 | |
Shareholders' Equity: | |||
Common Stock, Par Value | 17,984 | 17,779 | |
Additional Paid-in Capital | 727,842 | 724,384 | |
Retained Earnings | 116,494 | 98,546 | |
Accumulated Other Comprehensive Loss | (347) | (739) | |
861,973 | 839,970 | ||
Less: Treasury Shares at Cost | |||
5,005,788 Shares at March 31, 2022 and 4,580,390 at December 31, 2021 | (131,065) | (121,804) | |
Total Shareholders' Equity | 730,908 | 718,166 | |
Total Liabilities & Shareholders' Equity | $ 1,446,362 | $ 1,441,265 |
THE AARON'S COMPANY, INC. | |||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
(Unaudited) | |||
Three Months Ended March 31, | |||
(In Thousands) | 2022 | 2021 | |
OPERATING ACTIVITIES: | |||
Net Earnings | $ 21,532 | $ 36,323 | |
Adjustments to Reconcile Net Earnings to Cash Provided by Operating Activities: | |||
Depreciation of Lease Merchandise | 134,713 | 139,212 | |
Other Depreciation and Amortization | 18,149 | 17,067 | |
Provision for Lease Merchandise Write-Offs | 21,957 | 13,417 | |
Accounts Receivable Provision | 6,753 | 3,763 | |
Stock-Based Compensation | 3,611 | 3,593 | |
Deferred Income Taxes | 6,241 | 8,741 | |
Impairment of Assets | 1,585 | 2,272 | |
Non-Cash Lease Expense | 23,971 | 23,030 | |
Other Changes, Net | (4,576) | (831) | |
Changes in Operating Assets and Liabilities: | |||
Lease Merchandise | (153,711) | (160,895) | |
Accounts Receivable | (4,190) | 2,265 | |
Prepaid Expenses and Other Assets | (11,610) | 1,440 | |
Income Tax Receivable | 876 | 270 | |
Operating Lease Right-of-Use Assets and Liabilities | (27,009) | (37,776) | |
Accounts Payable and Accrued Expenses | 846 | (21,563) | |
Customer Deposits and Advance Payments | (10,086) | (10,129) | |
Cash Provided by Operating Activities | 29,052 | 20,199 | |
INVESTING ACTIVITIES: | |||
Purchases of Property, Plant, and Equipment | (25,103) | (27,032) | |
Proceeds from Dispositions of Property, Plant, and Equipment | 8,136 | 2,695 | |
Acquisition of Businesses and Customer Agreements, Net of Cash Acquired | (286) | (1,062) | |
Proceeds from Other Investing-Related Activities | 190 | 1,974 | |
Cash Used in Investing Activities | (17,063) | (23,425) | |
FINANCING ACTIVITIES: | |||
Repayments on Revolving Facility, Net | (10,000) | — | |
Repayments on Debt | — | (492) | |
Dividends Paid | (3,110) | (3,430) | |
Acquisition of Treasury Stock | (4,722) | (5,727) | |
Issuance of Stock Under Stock Option Plans | 52 | 543 | |
Shares Withheld for Tax Payments | (3,541) | (2,729) | |
Cash Used in Financing Activities | (21,321) | (11,835) | |
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH | 18 | 2 | |
Decrease in Cash and Cash Equivalents | (9,314) | (15,059) | |
Cash and Cash Equivalents at Beginning of Period | 22,832 | 76,123 | |
Cash and Cash Equivalents at End of Period | $ 13,518 | $ 61,064 |
Use of Non-GAAP Financial Information:
Non-GAAP net earnings, non-GAAP diluted earnings per share, 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 2022 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 2021 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. 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 press release.
The EBITDA and adjusted EBITDA figures presented in this press 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 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 press 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 arose from larger, one-time transactions that are not reflective of the ordinary earnings activity of our operations or transactions that have variability and volatility of the amount. 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.
The Free Cash Flow figures presented in this press release and in the press release dated February 23, 2022 are calculated as the Company's cash flows provided by operating activities and proceeds from real estate transactions, less capital expenditures. Management believes that Free Cash Flow is an important measure of liquidity provides relevant and useful information, and are widely used by analysts, investors and competitors in our industry as well as by our management 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 from operating activities, which are also presented in the press 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 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.
Reconciliation of Net Earnings and Earnings Per Share Assuming Dilution to Non-GAAP Net | ||
(In thousands, except per share) | ||
(Unaudited) Three Months Ended | ||
March 31, | ||
2022 | 2021 | |
Net Earnings | $ 21,532 | $ 36,323 |
Income Taxes | 7,373 | 12,326 |
Earnings Before Income Taxes | $ 28,905 | $ 48,649 |
Add: Acquisition-Related Intangible Amortization Expense | 641 | 1,507 |
Add: Restructuring Expenses, Net | 3,335 | 3,441 |
Add: Separation Costs | 540 | 4,390 |
Add: Acquisition-Related Costs | 3,464 | — |
Non-GAAP Earnings Before Income Taxes | 36,885 | 57,987 |
Income taxes, calculated using a non-GAAP Effective Tax Rate | 9,409 | 14,692 |
Non-GAAP Net Earnings | $ 27,476 | $ 43,295 |
Earnings Per Share Assuming Dilution | $ 0.68 | $ 1.04 |
Add: Acquisition-Related Intangible Amortization Expense | 0.02 | 0.04 |
Add: Restructuring Expenses, Net | 0.11 | 0.10 |
Add: Separation Costs | 0.02 | 0.13 |
Add: Acquisition-Related Costs | 0.11 | — |
Tax Effect of Non-GAAP adjustments | $ (0.06) | $ (0.07) |
Non-GAAP Earnings Per Share Assuming Dilution(1) | $ 0.87 | $ 1.24 |
Weighted Average Shares Outstanding Assuming Dilution | 31,760 | 34,919 |
(1) In some cases, the sum of individual EPS amounts may not equal total non-GAAP EPS calculations due to rounding. |
The Aaron's Company, Inc. | |||
Non-GAAP Financial Information | |||
Quarterly EBITDA | |||
(In thousands) | |||
(Unaudited) | |||
Three Months Ended | |||
March 31, 2022 | March 31, 2021 | ||
Net Earnings | $ 21,532 | $ 36,323 | |
Income Taxes | 7,373 | 12,326 | |
Earnings Before Income Taxes | $ 28,905 | $ 48,649 | |
Interest Expense | 350 | 344 | |
Depreciation | 17,385 | 15,383 | |
Amortization | 764 | 1,684 | |
EBITDA | $ 47,404 | $ 66,060 | |
Separation Costs | 540 | 4,390 | |
Acquisition-Related Costs | 3,464 | — | |
Restructuring Expenses, Net | 3,335 | 3,441 | |
Adjusted EBITDA | $ 54,743 | $ 73,891 |
Reconciliation of 2022 Current Outlook for Adjusted EBITDA | ||
(In thousands) | ||
Fiscal Year 2022 Ranges | ||
BrandsMart U.S.A.1 | Consolidated Total2 | |
Estimated Net Earnings | ||
Income Taxes | 26,000 - 28,000 | |
Projected Earnings Before Income Taxes | ||
Interest Expense | — | 9,000 - 10,000 |
Depreciation and Amortization | 4,000 - 5,000 | 80,000 - 85,000 |
Projected EBITDA | ||
Projected Other Adjustments, Net | 2,500 - 3,500 | 10,000 - 11,000 |
Projected Adjusted EBITDA |
(1) | Amortization related to the acquired BrandsMart intangible assets has been excluded from this Outlook as the respective fair values are pending the completion of the purchase price valuation and cannot be reasonably estimated. Projected Other Adjustments, Net includes one-time integration and other acquisition-related costs. |
(2) | Projected Other Adjustments, Net includes the projected 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 BrandsMart one-time integration and other acquisition-related costs. Amortization related to the acquired BrandsMart intangible assets has been excluded from this Outlook as the respective fair values are pending the completion of the purchase price valuation and cannot be reasonably estimated. |
Reconciliation of 2022 Current Outlook for Earnings Per Share | ||
Assuming Dilution to Non-GAAP Earnings Per Share Assuming Dilution | ||
Fiscal Year 2022 Range | ||
Low | High | |
Projected Earnings Per Share Assuming Dilution | $ 2.39 | $ 2.57 |
Add Sum of Projected Other Adjustments1 | 0.26 | 0.33 |
Projected Non-GAAP Earnings Per Share Assuming Dilution | $ 2.65 | $ 2.90 |
(1) | Includes the projected 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 BrandsMart one-time integration and other acquisition-related costs. Amortization related to the acquired BrandsMart intangible assets has been excluded from this Outlook as the respective fair values are pending the completion of the purchase price valuation and cannot be reasonably estimated. |
Reconciliation of 2022 Current Outlook for Free Cash Flow | |
(In thousands) | |
Fiscal Year 2022 Ranges | |
Consolidated Total | |
Cash Provided by Operating Activities | |
Add: Proceeds from Real Estate Transactions | |
Less: Capital Expenditures | (100,000 - 125,000) |
Free Cash Flow |
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SOURCE The Aaron's Company, Inc.
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