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Press Release

Rent-A-Center, Inc. Reports Third Quarter 2022 Results

Total Revenue of $1.024 Billion

GAAP Diluted Loss per Share $0.10; Non-GAAP Diluted EPS $0.94

Cash From Operations $412 Million Year-to-Date; Free Cash Flow $363 Million Year-to-Date

Repurchased $75 Million of Shares During the Third Quarter and October

Company Provides Guidance for the Fourth Quarter of 2022

PLANO, Texas--(BUSINESS WIRE)--Nov. 2, 2022-- Rent-A-Center, Inc. (the "Company" or "Rent-A-Center") (NASDAQ:RCII) today announced results for the quarter ended September 30, 2022.

"Our third quarter results demonstrated the resilient nature of the Company, as we continued to generate considerable profits and cash flow in the face of increasingly challenging external conditions that have strained the finances and spending of our traditional customers and, thus far, limited the inflow of non-traditional customers we have seen in past cycles,” said CEO Mitch Fadel.

"In response to this environment, we are taking action to support the Company’s near-term performance by focusing on controllable factors, like underwriting, cost management, and capital allocation, while also positioning us for long-term success with investments in areas like technology and talent, such as the recent addition of Fahmi Karam as CFO," continued Mr. Fadel.

"We expect that the environment will normalize over time, and we will be ready to capitalize on opportunities and push forward with our strategic agenda. We remain confident in the Company's compelling underlying fundamentals and ability to create value for underserved consumers and our shareholders," concluded Mr. Fadel.

Third Quarter Consolidated Results

  • Third quarter 2022 consolidated revenues of $1.0 billion decreased 13.3% year-over-year, primarily due to lower rental revenue in both Acima and the Rent-A-Center Business. The decrease in rental revenue was primarily attributable to Acima's smaller lease portfolio in the current year period. Merchandise sales revenue also decreased year-over-year, with most of the decrease attributable to lower Gross Merchandise Value (GMV) for Acima in the second and third quarters of 2022. Rent-A-Center Business Segment merchandise sales revenue was also down compared to the prior year period.
  • GAAP operating profit for the third quarter of 2022 was $37.1 million compared to $67.1 million in the prior year period. GAAP net loss for the third quarter of 2022 was $5.8 million and included $62.0 million of costs, net of tax, relating to special items described below, compared to $21.3 million of GAAP net income and $82.5 million of costs, net of tax, relating to special items in the prior year period.
  • Adjusted EBITDA in the third quarter of 2022 was $115.0 million and decreased 34.6% year-over-year primarily, due to lower revenues and higher loss rates compared to the prior year period, partially offset by lower costs in the current year period. Adjusted EBITDA margin was 11.2% in the third quarter of 2022 compared to 14.9% in the prior year period, with the decrease in margin attributable to the same factors that affected Adjusted EBITDA.
  • GAAP loss per share for the third quarter of 2022 was $0.10 compared to diluted earnings per share of $0.31 in the prior year period. Non-GAAP diluted earnings per share, which excludes the impact of special items described below, for the third quarter of 2022 was $0.94 compared to $1.52 in the prior year period.
  • For the nine months ended September 30, 2022, the Company generated $412.1 million of cash from operations and ended the third quarter with $165.6 million of cash and cash equivalents, $1.4 billion of debt outstanding, $540 million of liquidity that included $374 million of undrawn revolving credit availability, and a net debt to Adjusted EBITDA ratio of 2.6 times.
  • During the third quarter of 2022, the Company returned $50.7 million of cash to shareholders through a $0.34 per share quarterly dividend and share repurchases. In the third quarter and October, the Company repurchased 3.537 million shares at an average price per share of approximately $21.21.

Third Quarter Segment Highlights

Acima Segment: Third quarter 2022 GMV decreased 23.0% year-over-year primarily due to a decrease in lease applications compared to the prior year period that resulted from lower durable goods demand at merchant partners, which was mainly attributable to pressure on consumer discretionary income and cycling over the impact on demand from stimulus programs in 2021. A secondary factor behind the decrease in lease applications was tighter underwriting implemented during the first half of 2022 to address changes in customer payment behavior.

Third quarter revenues of $504.4 million decreased 19.1% year-over-year, on lower rental and fees revenues and lower merchandise sales revenue. The decrease in rental and fees revenues was primarily due to fewer open lease agreements during the current year period for the same reasons as described above, and increased delinquencies for the current year period resulting in lower accrued revenue. The decrease in merchandise sales revenues was primarily attributable to year-over-year decreases in GMV in the second and third quarters of 2022.

Skip/stolen losses were 9.0% of revenue in the third quarter of 2022 compared to 8.7% on an adjusted basis in the prior year period and 11.6% in the second quarter of 2022. On a GAAP basis, segment operating profit was $48.9 million with an operating profit margin of 9.7% in the third quarter of 2022, compared to $51.9 million and 8.3% in the third quarter of 2021 and $35.8 million and 6.8% in the second quarter of 2022. Adjusted EBITDA was $63.6 million with an Adjusted EBITDA margin of 12.6% in the third quarter of 2022, compared to $86.5 million and 13.9% in the third quarter of 2021 and $53.0 million and 10.0% in the second quarter of 2022. The decrease in Adjusted EBITDA from the prior year period was primarily attributable to lower revenues as a result of lower GMV over the past two quarters of 2022.

Rent-A-Center Business Segment: Third quarter 2022 revenues of $473.8 million decreased 5.4% year-over-year on a 5.3% decrease in same-store sales that was primarily attributable to lower rental and fee revenues. On a two-year stacked basis, same-store-sales were up 7.0%. The decrease in rental and fee revenues in the third quarter was primarily attributable to a lower percentage of payments collected and a lower lease portfolio value compared to the prior year period. Merchandise sales revenue also decreased year-over-year primarily due to fewer customers electing early payout options. At the end of the third quarter, the segment lease portfolio value was 1.7% lower than the prior year period. E-commerce accounted for approximately 23% of revenue in our lease-to-own stores in the third quarter, compared to approximately 21% in the prior year period.

Skip/stolen losses were 5.8% of revenue in the third quarter of 2022 compared to 3.4% in the prior year period and 4.2% in the second quarter of 2022. On a GAAP basis, segment operating profit in the quarter was $72.0 million with an operating profit margin of 15.2%, compared to $109.3 million and 21.8% in the third quarter of 2021 and $99.1 million and 20.2% in the second quarter of 2022. Adjusted EBITDA in the quarter was $77.0 million with an Adjusted EBITDA margin of 16.2%, compared to $114.6 million and 22.9% in the third quarter of 2021 and $104.1 million and 21.2% in the second quarter of 2022. The year-over-year decline in Adjusted EBITDA was primarily attributable to increased loss rates and lower revenues, both of which are attributable to pressure on customers' discretionary income. On September 30, 2022, the Rent-A-Center Business segment had 1,848 company-operated locations.

Franchising Segment: Third quarter 2022 revenues of $29.7 million decreased 27.4% year-over-year due to lower inventory purchases per store. Segment operating profit, on a GAAP basis, and Adjusted EBITDA were $5.1 million in the third quarter and increased $0.3 million year-over-year. On September 30, 2022, there were 452 franchise-operated locations.

Mexico Segment: Third quarter 2022 revenues of $16.0 million increased 1.9% year-over-year on a constant currency basis. Segment operating profit, on a GAAP basis, and Adjusted EBITDA were $1.0 million and $1.2 million, respectively. In the third quarter, Adjusted EBITDA decreased by $1.2 million year-over-year, primarily due to an increased loss rate compared to the prior year period. On September 30, 2022, the Mexico business had 125 company-operated locations.

Corporate Segment: Third quarter 2022 non-GAAP basis expenses decreased $3.5 million year-over-year or 7.6%, reflecting lower incentive compensation versus the prior year period. Sequentially, non-GAAP expenses decreased $4.6 million.

Key Operating Metrics

Gross Merchandise Volume (GMV): The Company defines Gross Merchandise Volume as the retail value in U.S. dollars of merchandise acquired by the Company that is leased to customers through a transaction that occurs within a defined period, net of cancellations.

Same Store Sales (SSS): Same store sales generally represents revenue earned in stores that were operated by us for 13 months or more and are reported on a constant currency basis as a percentage of total revenue earned in stores of the segment during the indicated period. The Company excludes from the same store sales base any store that receives a certain level of customer accounts from closed stores or acquisitions. The receiving store will be eligible for inclusion in the same store sales base in the 30th full month following account transfer. 

SAME STORE SALES

(Unaudited)

 

Table 1

 

 

Period

 

Rent-A-Center

Business

 

Mexico

Three Months Ended September 30, 2022

 

(5.3)%

 

0.2%

Three Months Ended June 30, 2022

 

(3.3)%

 

7.3%

Three Months Ended September 30, 2021

 

12.3%

 

15.3%

Fourth Quarter 2022 Guidance

The Company is providing the following guidance for the fourth quarter of 2022:

Table 2

 

 

Guidance

 

Fourth Quarter

2022

Consolidated (1)

 

 

Revenues ($'s billion)

 

$0.975 - $1.025

Adjusted EBITDA Excluding Stock Based Compensation (2) ($'s million)

 

$95.0 - $110.0

Non-GAAP Diluted Earnings Per Share (2)(3)

 

$0.65 - $0.85

(1) Consolidated includes Acima, Rent-A-Center Business, Franchising, Mexico and Corporate Segments.
(2) Non-GAAP financial measure. See descriptions below in this release. Because of the inherent uncertainty related to the special items identified in the tables below, management does not believe it is able to provide a meaningful forecast of the comparable GAAP measures or reconciliation to any forecasted GAAP measure without unreasonable effort. Adjusted EBITDA figures exclude stock based compensation beginning with the first quarter of 2022.
(3) Non-GAAP diluted earnings per share excludes the impact of incremental depreciation and amortization related to the estimated fair value of acquired Acima assets, stock compensation expense associated with the Acima Acquisition equity consideration subject to vesting conditions, and one-time transaction and integration costs related to the Acima Acquisition. Guidance excludes the impact of future share repurchases.

Additional Commentary on the Fourth Quarter 2022 Outlook

  • Fourth quarter guidance assumes no material change in the macro economic conditions that existed at the end of the third quarter of 2022
  • The Company has modified its definition of Adjusted EBITDA beginning with first quarter 2022 results to exclude stock-based compensation. Therefore, fourth quarter 2022 Adjusted EBITDA guidance excludes the impact of stock-based compensation. For comparability purposes, within the remainder of this press release, 2021 Adjusted EBITDA has also been adjusted to exclude the impact of stock-based compensation.

Webcast Information

Rent-A-Center, Inc. will host a conference call to discuss the third quarter results, guidance and other operational matters on the morning of Thursday, November 3, 2022, at 8:30 a.m. ET. For a live webcast of the call, visit https://investor.rentacenter.com. Certain financial and other statistical information that will be discussed during the conference call will also be provided on the same website. Participants can access the call by phone via this link (registration link), where the dial-in details will be provided.

About Rent-A-Center, Inc.

Rent-A-Center, Inc. (NASDAQ: RCII) is a leading provider of technology driven, flexible, no debt obligation leasing solutions that offer underserved consumers access to and potential ownership of high-quality durable goods that enhance their quality of life. The Company’s omnichannel model utilizes proprietary data and technology to facilitate transactions across a wide range of retail channels including its own Acima virtual lease-to-own platform, Rentacenter.com, e-commerce partner platforms, partner retail stores, and Rent-A-Center branded stores. For additional information about the Company, please visit our website Rentacenter.com or Investor.rentacenter.com.

Forward Looking Statements

This press release and the guidance above and the Company's related conference call contain forward-looking statements that involve risks and uncertainties. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "could," "estimate," "predict," "continue," "maintain," "should," "anticipate," "believe," or “confident,” or the negative thereof or variations thereon or similar terminology and including, among others, statements concerning (i) the Company's guidance for the fourth quarter 2022 and future outlook, (ii) the potential effects of the pandemic of the respiratory disease caused by a novel coronavirus ("COVID-19") and ongoing challenging macro-economic conditions on the Company's business operations, financial performance, and prospects, (iii) the future business prospects and financial performance of the Company following the acquisition of Acima Holdings, LLC ("Acima Holdings"), (iv) cost and revenue synergies and other benefits expected to result from the Acima Holdings acquisition, (v) the Company's expectations, plans and strategy relating to its capital structure and capital allocation, including any share repurchases under the Company's share repurchase program, and (vi) other statements that are not historical facts. However, there can be no assurance that such expectations will occur. The Company's actual future performance could differ materially and adversely from such statements. Factors that could cause or contribute to these differences include, but are not limited to: (1) risks relating to the Acima Holdings acquisition, including (i) the possibility that the anticipated benefits from the Acima Holdings acquisition may not be fully realized or may take longer to realize than expected, (ii) the possibility that costs, difficulties or disruptions related to the integration of Acima Holdings operations into the Company's other operations will be greater than expected, (iii) the Company's ability to (A) effectively adjust to changes in the composition of the Company's offerings and product mix as a result of acquiring Acima Holdings and continue to maintain the quality of existing offerings and (B) successfully introduce other new product or service offerings on a timely and cost-effective basis, and (iv) changes in the Company's future cash requirements as a result of the Acima Holdings acquisition, whether caused by unanticipated increases in capital expenditures or working capital needs, unanticipated liabilities or otherwise; (2) the Company's ability to identify potential acquisition candidates, complete acquisitions and successfully integrate acquired companies; (3) the impact of the COVID-19 pandemic and related government and regulatory restrictions issued to combat the pandemic, including adverse changes in such restrictions, the expiration of governmental stimulus programs, and impacts on (i) demand for the Company's lease-to-own products offered in the Company's operating segments, (ii) the Company's Acima retail partners, (iii) the Company's customers and their willingness and ability to satisfy their lease obligations, (iv) the Company's suppliers' ability to satisfy its merchandise needs and related supply chain disruptions, (v) the Company's employees, including the ability to adequately staff its operating locations, (vi) the Company's financial and operational performance, and (vii) the Company's liquidity; (4) the general strength of the economy and other economic conditions affecting consumer preferences and spending, including the availability of credit to the Company's target consumers and to other consumers, impacts from the high levels of inflation, central bank monetary policy initiatives to address inflation concerns and a possible recession; (5) factors affecting the disposable income available to the Company's current and potential customers; (6) changes in the unemployment rate; (7) capital market conditions, including availability of funding sources for the Company; (8) changes in the Company's credit ratings; (9) difficulties encountered in improving the financial and operational performance of the Company's business segments; (10) risks associated with pricing changes and strategies being deployed in the Company's businesses; (11) the Company's ability to continue to realize benefits from its initiatives regarding cost-savings and other EBITDA enhancements, efficiencies and working capital improvements; (12) the Company's ability to continue to effectively execute its strategic initiatives, including mitigating risks associated with any potential mergers and acquisitions, or refranchising opportunities; (13) failure to manage the Company's store labor and other store expenses, including merchandise losses; (14) disruptions caused by the operation of the Company's store information management systems or disruptions in the systems of the Company's host retailers; (15) risks related to the Company's virtual lease-to-own business, including the Company's ability to continue to develop and successfully implement the necessary technologies; (16) the Company's ability to achieve the benefits expected from its integrated virtual and staffed retail partner offering and to successfully grow this business segment; (17) exposure to potential operating margin degradation due to the higher cost of merchandise in the Company's Acima offering and higher merchandise losses than compared to our Rent-A-Center business segment; (18) the Company's transition to more-readily scalable, “cloud-based” solutions; (19) the Company's ability to develop and successfully implement digital or E-commerce capabilities, including mobile applications; (20) the Company's ability to protect its proprietary intellectual property; (21) the Company's ability or that of the Company's host retailers to protect the integrity and security of customer, employee and host retailer information, which may be adversely affected by hacking, computer viruses, or similar disruptions; (22) disruptions in the Company's supply chain; (23) limitations of, or disruptions in, the Company's distribution network; (24) rapid inflation or deflation in the prices of the Company's products and other related costs; (25) the Company's ability to execute and the effectiveness of store consolidations, including the Company's ability to retain the revenue from customer accounts merged into another store location as a result of a store consolidation; (26) the Company's available cash flow and its ability to generate sufficient cash flow to continue paying dividends; (27) increased competition from traditional competitors, virtual lease-to-own competitors, online retailers, Buy-Now-Pay-Later and other Fintech companies and other competitors, including subprime lenders; (28) the Company's ability to identify and successfully market products and services that appeal to its current and future targeted customer segments and to accurately estimate the size of the total addressable market; (29) consumer preferences and perceptions of the Company's brands; (30) the Company's ability to retain the revenue associated with acquired customer accounts and enhance the performance of acquired stores; (31) the Company's ability to enter into new, and collect on, its rental or lease purchase agreements; (32) changes in the enforcement of existing laws and regulations and the enactment of new laws and regulations adversely affecting the Company's business, including any legislative or regulatory enforcement efforts that seek to re-characterize store-based or virtual lease-to-own transactions as credit sales and to apply consumer credit laws and regulations to the Company's business; (33) the Company's compliance with applicable statutes or regulations governing its businesses; (34) changes in interest rates; (35) changes in tariff policies; (36) adverse changes in the economic conditions of the industries, countries or markets that the Company serves; (37) information technology and data security costs; (38) the impact of any breaches in data security or other disturbances to the Company's information technology and other networks (39) changes in estimates relating to self-insurance liabilities and income tax and litigation reserves; (40) changes in the Company's effective tax rate; (41) fluctuations in foreign currency exchange rates; (42) the Company's ability to maintain an effective system of internal controls, including in connection with the integration of Acima; (43) litigation or administrative proceedings to which the Company is or may be a party to from time to time; and (44) the other risks detailed from time to time in the Company's SEC reports, including but not limited to, its Annual Report on Form 10-K for the year ended December 31, 2021, and in its subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. 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 is not obligated to publicly release any revisions to these forward-looking statements to reflect the events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Rent-A-Center, Inc. and Subsidiaries

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

 

Table 3

Three Months Ended September 30,

(In thousands, except per share data)

 

2022

 

 

 

2021

 

Revenues

 

 

 

Store

 

 

 

Rentals and fees

$

829,459

 

 

$

930,849

 

Merchandise sales

 

147,616

 

 

 

192,016

 

Installment sales

 

16,718

 

 

 

17,028

 

Other

 

1,340

 

 

 

1,082

 

Total store revenues

 

995,133

 

 

 

1,140,975

 

Franchise

 

 

 

Merchandise sales

 

22,823

 

 

 

33,671

 

Royalty income and fees

 

6,001

 

 

 

6,622

 

Total revenues

 

1,023,957

 

 

 

1,181,268

 

Cost of revenues

 

 

 

Store

 

 

 

Cost of rentals and fees

 

310,079

 

 

 

344,623

 

Cost of merchandise sold

 

179,477

 

 

 

228,024

 

Cost of installment sales

 

6,032

 

 

 

6,291

 

Total cost of store revenues

 

495,588

 

 

 

578,938

 

Franchise cost of merchandise sold

 

22,834

 

 

 

33,570

 

Total cost of revenues

 

518,422

 

 

 

612,508

 

Gross profit

 

505,535

 

 

 

568,760

 

Operating expenses

 

 

 

Store expenses

 

 

 

Labor

 

156,192

 

 

 

163,945

 

Other store expenses

 

197,847

 

 

 

189,553

 

General and administrative expenses

 

40,002

 

 

 

45,958

 

Depreciation and amortization

 

12,798

 

 

 

13,835

 

Other charges

 

61,619

 

 

 

88,323

 

Total operating expenses

 

468,458

 

 

 

501,614

 

Operating profit

 

37,077

 

 

 

67,146

 

Debt refinancing charges

 

 

 

 

6,839

 

Interest expense

 

22,960

 

 

 

19,742

 

Interest income

 

(216

)

 

 

(30

)

Earnings before income taxes

 

14,333

 

 

 

40,595

 

Income tax expense

 

20,111

 

 

 

19,328

 

Net (loss) earnings

$

(5,778

)

 

$

21,267

 

Basic weighted average shares

 

55,380

 

 

 

58,267

 

Basic earnings per common share

$

(0.10

)

 

$

0.36

 

Diluted weighted average shares

 

55,380

 

 

 

68,194

 

Diluted earnings per common share

$

(0.10

)

 

$

0.31

 

 

Rent-A-Center, Inc. and Subsidiaries

 

SELECTED BALANCE SHEETS HIGHLIGHTS - UNAUDITED

 

Table 4

September 30,

(In thousands)

 

2022

 

 

 

2021

 

Cash and cash equivalents

$

165,627

 

$

158,830

Receivables, net

 

113,230

 

 

 

131,930

 

Prepaid expenses and other assets

 

71,276

 

 

 

51,480

 

Rental merchandise, net

 

 

 

On rent

 

943,878

 

 

 

1,121,038

 

Held for rent

 

128,708

 

 

 

147,755

 

Operating lease right-of-use assets

 

306,948

 

 

 

298,263

 

Goodwill

 

289,750

 

 

 

332,210

 

Total assets

 

2,768,596

 

 

 

3,053,670

 

 

 

 

 

Operating lease liabilities

$

310,099

 

 

$

300,410

 

Senior debt, net

 

931,973

 

 

 

846,060

 

Senior notes, net

 

437,461

 

 

 

435,497

 

Total liabilities

 

2,220,433

 

 

 

2,199,591

 

Stockholders' equity

 

548,163

 

 

 

854,079

 

 

Rent-A-Center, Inc. and Subsidiaries

 

SEGMENT INFORMATION HIGHLIGHTS - UNAUDITED

 

Table 5

Three Months Ended September 30,

(In thousands)

 

2022

 

 

 

2021

 

Revenues

 

 

 

Rent-A-Center Business

$

473,755

 

$

500,986

Acima

 

504,448

 

 

 

623,445

 

Mexico

 

16,041

 

 

 

15,917

 

Franchising

 

29,713

 

 

 

40,920

 

Total revenues

$

1,023,957

 

 

$

1,181,268

 

Table 6

Three Months Ended September 30,

(In thousands)

 

2022

 

 

 

2021

 

Gross profit

 

 

 

Rent-A-Center Business

$

334,892

 

$

356,590

Acima

 

152,434

 

 

 

193,527

 

Mexico

 

11,330

 

 

 

11,293

 

Franchising

 

6,879

 

 

 

7,350

 

Total gross profit

$

505,535

 

 

$

568,760

 

Table 7

Three Months Ended September 30,

(In thousands)

 

2022

 

 

 

2021

 

Operating profit

 

 

 

Rent-A-Center Business

$

71,999

 

 

$

109,272

 

Acima

 

48,885

 

 

 

51,884

 

Mexico

 

996

 

 

 

2,285

 

Franchising

 

5,077

 

 

 

4,816

 

Total segments

 

126,957

 

 

 

168,257

 

Corporate

 

(89,880

)

 

 

(101,111

)

Total operating profit

$

37,077

 

 

$

67,146

 

Table 8

Three Months Ended September 30,

(In thousands)

 

2022

 

 

 

2021

 

Depreciation and amortization

 

 

 

Rent-A-Center Business

$

4,629

 

$

4,792

Acima

 

439

 

 

 

570

 

Mexico

 

182

 

 

 

130

 

Franchising

 

35

 

 

 

24

 

Total segments

 

5,285

 

 

 

5,516

 

Corporate

 

7,513

 

 

 

8,319

 

Total depreciation and amortization

$

12,798

 

 

$

13,835

 

Table 9

Three Months Ended September 30,

(In thousands)

 

2022

 

 

 

2021

 

Capital expenditures

 

 

 

Rent-A-Center Business

$

10,714

 

$

6,637

Acima

 

16

 

 

 

276

 

Mexico

 

696

 

 

 

478

 

Franchising

 

166

 

 

 

 

Total segments

 

11,592

 

 

 

7,391

 

Corporate

 

6,949

 

 

 

13,084

 

Total capital expenditures

$

18,541

 

 

$

20,475

 

Table 10

On lease at September 30,

 

Held for lease at September 30,

(In thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

Lease merchandise, net

 

 

 

 

 

 

 

Rent-A-Center Business

$

444,174

 

$

442,578

 

$

118,329

 

$

139,441

Acima

 

480,317

 

 

659,534

 

 

417

 

 

858

Mexico

 

19,387

 

 

18,926

 

 

9,962

 

 

7,456

Total lease merchandise, net

$

943,878

 

$

1,121,038

 

$

128,708

 

$

147,755

Table 11

September 30,

(In thousands)

 

2022

 

 

 

2021

 

Assets

 

 

 

Rent-A-Center Business

$

1,022,173

 

$

1,006,779

Acima

 

1,195,982

 

 

 

1,525,741

 

Mexico

 

46,561

 

 

 

39,288

 

Franchising

 

19,346

 

 

 

16,151

 

Total segments

 

2,284,062

 

 

 

2,587,959

 

Corporate

 

484,534

 

 

 

465,711

 

Total assets

$

2,768,596

 

 

$

3,053,670

 

Non-GAAP Financial Measures

This release and the Company's related conference call contain certain financial information determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles (GAAP), including (1) Non-GAAP diluted earnings per share (net loss, as adjusted for special items (as defined below), net of taxes, divided by the number of shares of our common stock on a fully diluted basis), (2) Adjusted EBITDA (net earnings before interest, taxes, stock-based compensation, depreciation and amortization, as adjusted for special items) on a consolidated and segment basis and (3) Free Cash Flow (net cash provided by operating activities less capital expenditures). “Special items” refers to certain gains and charges we view as extraordinary, unusual or non-recurring in nature and which we believe do not reflect our core business activities. For the periods presented herein, these special items are described in the quantitative reconciliation tables included below in this release. Because of the inherent uncertainty related to the special items, management does not believe it is able to provide a meaningful forecast of the comparable GAAP measures or reconciliation to any forecasted GAAP measure without unreasonable effort.

These non-GAAP measures are additional tools intended to assist our management in comparing our performance on a more consistent basis for purposes of business decision-making by removing the impact of certain items management believes do not directly reflect our core operations. These measures are intended to assist management in evaluating operating performance and liquidity, comparing performance and liquidity across periods, planning and forecasting future business operations, helping determine levels of operating and capital investments and identifying and assessing additional trends potentially impacting our Company that may not be shown solely by comparisons of GAAP measures. Consolidated Adjusted EBITDA is also used as part of our incentive compensation program for our executive officers and others.

We believe these non-GAAP financial measures also provide supplemental information that is useful to investors, analysts and other external users of our consolidated financial statements in understanding our financial results and evaluating our performance and liquidity from period to period. However, non-GAAP financial measures have inherent limitations and are not substitutes for or superior to, and they should be read together with, our consolidated financial statements prepared in accordance with GAAP. Further, because non-GAAP financial measures are not standardized, it may not be possible to compare such measures to the non-GAAP financial measures presented by other companies, even if they have the same or similar names.

Reconciliation of net earnings to net earnings excluding special items and non-GAAP diluted earnings per share:

Table 12

Three Months Ended September 30, 2022

(In thousands)

Gross Profit

 

Operating

Profit

 

Earnings

Before

Income

Taxes

 

Tax (Benefit)

Expense

 

Net Earnings

(Loss)

 

Diluted

Earnings

(Loss) per

Share

GAAP Results

$

505,535

 

$

37,077

 

 

$

14,333

 

 

$

20,111

 

 

$

(5,778

)

 

$

(0.10

)

Plus: Special Items (Extraordinary, Unusual or Non-Recurring Gains or Charges)

 

 

 

 

 

 

 

 

 

 

 

Acima equity consideration vesting

 

 

 

42,059

 

 

 

42,059

 

 

 

(263

)

 

 

42,322

 

 

 

0.72

 

Acima acquired assets depreciation and amortization (1)

 

 

 

18,234

 

 

 

18,234

 

 

 

(114

)

 

 

18,348

 

 

 

0.31

 

IT Asset disposals

 

 

 

1,278

 

 

 

1,278

 

 

 

(8

)

 

 

1,286

 

 

 

0.02

 

Legal settlement

 

 

 

(533

)

 

 

(533

)

 

 

3

 

 

 

(536

)

 

 

(0.01

)

Store closure costs

 

 

 

216

 

 

 

216

 

 

 

(1

)

 

 

217

 

 

 

 

Cost savings initiatives

 

 

 

172

 

 

 

172

 

 

 

(1

)

 

 

173

 

 

 

 

Hurricane impacts

 

 

 

141

 

 

 

141

 

 

 

(1

)

 

 

142

 

 

 

 

Other

 

 

 

52

 

 

 

52

 

 

 

 

 

 

52

 

 

 

 

Discrete income tax items

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Adjusted Results

$

505,535

 

$

98,696

 

 

$

75,952

 

 

$

19,726

 

 

$

56,226

 

 

$

0.94

 

 

(1)Includes amortization of approximately $14.2 million related to the total fair value of acquired intangible assets and incremental depreciation of approximately $3.9 million.

Table 13

Three Months Ended September 30, 2021

(In thousands)

Gross Profit

 

Operating

Profit

 

Earnings

Before

Income

Taxes

 

Tax Expense

 

Net Earnings

 

Diluted

Earnings per

Share

GAAP Results

$

568,760

 

$

67,146

 

$

40,595

 

$

19,328

 

 

$

21,267

 

$

0.31

Plus: Special Items (Extraordinary, Unusual or Non-Recurring Gains or Charges)

 

 

 

 

 

 

 

 

 

 

 

Acima equity consideration vesting

 

 

 

42,829

 

 

 

42,829

 

 

 

6,383

 

 

 

36,446

 

 

 

0.53

 

Acima acquired assets depreciation and amortization (1)

 

888

 

 

34,121

 

 

 

34,121

 

 

 

5,086

 

 

 

29,035

 

 

 

0.43

 

Legal settlement reserves

 

 

 

7,250

 

 

 

7,250

 

 

 

1,081

 

 

 

6,169

 

 

 

0.09

 

Acima integration costs

 

 

 

3,958

 

 

 

3,958

 

 

 

590

 

 

 

3,368

 

 

 

0.05

 

Hurricane impacts

 

 

 

654

 

 

 

654

 

 

 

97

 

 

 

557

 

 

 

0.01

 

Acima transaction costs

 

 

 

225

 

 

 

225

 

 

 

34

 

 

 

191

 

 

 

 

State tax audit assessment reserves

 

 

 

161

 

 

 

161

 

 

 

24

 

 

 

137

 

 

 

 

Store closure costs

 

 

 

13

 

 

 

13

 

 

 

2

 

 

 

11

 

 

 

 

Debt refinancing charge

 

 

 

 

 

 

6,839

 

 

 

1,019

 

 

 

5,820

 

 

 

0.09

 

Discrete income tax items

 

 

 

 

 

 

 

 

 

(792

)

 

 

792

 

 

 

0.01

 

Non-GAAP Adjusted Results

$

569,648

 

$

156,357

 

 

$

136,645

 

 

$

32,852

 

 

$

103,793

 

 

$

1.52

 

 

(1)Includes amortization of approximately $29.3 million related to the total fair value of acquired intangible assets, incremental depreciation of approximately $4.0 million related to the fair value increase over net book value for acquired software assets, and a depreciation adjustment of approximately $0.9 million related to a step-up of estimated fair value under net book value for acquired lease merchandise.

Reconciliation of operating profit to Adjusted EBITDA (consolidated and by segment):

Table 14

Three Months Ended September 30, 2022

(In thousands)

Rent-A-

Center

Business

 

Acima

 

Mexico

 

Franchising

 

Corporate

 

Consolidated

GAAP Operating Profit (Loss)

$

71,999

 

$

48,885

 

$

996

 

$

5,077

 

$

(89,880

)

 

$

37,077

 

Plus: Amortization, Depreciation

 

4,629

 

 

439

 

 

182

 

 

35

 

 

7,513

 

 

 

12,798

 

Plus: Stock-based compensation

 

 

 

 

 

 

 

 

 

3,488

 

 

 

3,488

 

Plus: Special Items (Extraordinary, Unusual or Non-Recurring Gains or Charges)

 

 

 

 

 

 

 

 

 

 

 

Acima equity consideration vesting

 

 

 

 

 

 

 

 

 

42,059

 

 

 

42,059

 

Acima acquired assets depreciation and amortization (1)

 

 

 

14,262

 

 

 

 

 

 

3,972

 

 

 

18,234

 

IT Asset disposals

 

 

 

 

 

 

 

 

 

1,278

 

 

 

1,278

 

Legal settlement

 

 

 

 

 

 

 

 

 

(533

)

 

 

(533

)

Store closure costs

 

216

 

 

 

 

 

 

 

 

 

 

 

216

 

Cost savings initiatives

 

 

 

 

 

 

 

 

 

172

 

 

 

172

 

Hurricane impacts

 

141

 

 

 

 

 

 

 

 

 

 

 

141

 

Other

 

 

 

 

 

 

 

 

 

52

 

 

 

52

 

Adjusted EBITDA

$

76,985

 

$

63,586

 

$

1,178

 

$

5,112

 

$

(31,879

)

 

$

114,982

 

 

(1)Includes amortization of approximately $14.2 million related to the total fair value of acquired intangible assets and incremental depreciation of approximately $3.9 million.

Table 15

Three Months Ended September 30, 2021

(In thousands)

Rent-A-

Center

Business

 

Acima

 

Mexico

 

Franchising

 

Corporate

 

Consolidated

GAAP Operating Profit (Loss)

$

109,272

 

$

51,884

 

$

2,285

 

$

4,816

 

$

(101,111

)

 

$

67,146

Plus: Amortization, Depreciation

 

4,792

 

 

570

 

 

130

 

 

24

 

 

8,319

 

 

 

13,835

 

Plus: Stock-based compensation

 

 

 

 

 

 

 

 

 

5,612

 

 

 

5,612

 

Plus: Special Items (Extraordinary, Unusual or Non-Recurring Gains or Charges)

 

 

 

 

 

 

 

 

 

 

 

Acima equity consideration vesting

 

 

 

 

 

 

 

 

 

42,829

 

 

 

42,829

 

Acima acquired assets depreciation and amortization (1)

 

 

 

30,150

 

 

 

 

 

 

3,971

 

 

 

34,121

 

Legal settlement reserves

 

 

 

 

 

 

 

 

 

7,250

 

 

 

7,250

 

Acima integration costs

 

 

 

3,699

 

 

 

 

 

 

259

 

 

 

3,958

 

Hurricane impacts

 

506

 

 

148

 

 

 

 

 

 

 

 

 

654

 

Acima transaction costs

 

 

 

 

 

 

 

 

 

225

 

 

 

225

 

State tax audit assessment reserves

 

 

 

 

 

 

 

 

 

161

 

 

 

161

 

Store closure costs

 

13

 

 

 

 

 

 

 

 

 

 

 

13

 

Adjusted EBITDA

$

114,583

 

$

86,451

 

$

2,415

 

$

4,840

 

$

(32,485

)

 

$

175,804

 

 

(1)Includes amortization of approximately $29.3 million related to the total fair value of acquired intangible assets, incremental depreciation of approximately $4.0 million related to the fair value increase over net book value for acquired software assets, and a depreciation adjustment of approximately $0.9 million related to a step-up of estimated fair value under net book value for acquired lease merchandise.

Reconciliation of net cash provided by operating activities to free cash flow:

Table 16

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

(In thousands)

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net cash provided by operating activities

$

124,962

 

 

$

75,686

 

 

$

412,083

 

 

$

326,204

 

Purchase of property assets

 

(18,541

)

 

 

(20,475

)

 

 

(49,436

)

 

 

(45,876

)

Free cash flow

$

106,421

 

 

$

55,211

 

 

$

362,647

 

 

$

280,328

 

 

 

 

 

 

 

 

 

Proceeds from sale of stores

 

27

 

 

 

3

 

 

 

35

 

 

 

3

 

Acquisitions of businesses

 

(358

)

 

 

 

 

 

(775

)

 

 

(1,273,542

)

Free cash flow including acquisitions and divestitures

$

106,090

 

 

$

55,214

 

 

$

361,907

 

 

$

(993,211

)

 

Investors:
Rent-A-Center, Inc.
Brendan Metrano
VP, Investor Relations
972-801-1280
brendan.metrano@rentacenter.com

Source: Rent-A-Center, Inc.