The Aaron's — Q4 2023 Earnings Presentation
32 slides from The Aaron's's earnings presentation, Feb 26, 2024
Slide 1: Q4 and FY 2023 Earnings Results & 2024 Outlook
Q4 and FY 2023 Earnings Results & 2024 Outlook February 26, 2024 0
Slide 2: Special Note Regarding Forward-Looking Information
Special Note Regarding Forward-Looking Information Statements in this presentation 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-look
Slide 3: CEO Comments
CEO Comments “In response to ongoing pressure in our key product categories at Aaron's and BrandsMart during 2023, we took strong actions to drive demand and reduce costs. In Q4, we launched a new omnichannel lease decisioning and customer acquisition program, which led to robust e-commerce growth t
Slide 4: Key Themes
Key Themes ▪ Delivered FY 2023 consolidated company revenues in line with the revised outlook we provided on October 23, 2023, and consolidated adjusted earnings below our outlook ▪ Aaron’s Business launched a new omnichannel lease decisioning and customer acquisition program in Q4, which led to 60%
Slide 5: Q4 Highlights
Q4 Highlights 4
Slide 6: Consolidated Q4 2023 Results of Operations
Consolidated Q4 2023 Results of Operations1 Three Months Ended December 31, Variance ($ in Thousands, except per share) 2023 2022 $ % or bps Consolidated $ 529,479 $ 589,584 $ (60,105) (10.2) % Revenues Aaron's Business 369,195 404,262 (35,067) (8.7) % BrandsMart 164,087 187,682 (23,595) (12.6) % Co
Slide 7: The Aaron's Company – Consolidated Q4 Highlights
The Aaron’s Company – Consolidated Q4 Highlights1 Revenues Adjusted EBITDA Highlights • Revenues decreased YoY primarily due to -10.2% lower lease revenues and fees at the -25.2% $589.6M $29.9M Aaron's Business and lower retail sales at $529.5M $22.4M BrandsMart • Adjusted EBITDA and adjusted EBITDA
Slide 8: Aaron's Business Q4 Highlights
Aaron’s Business Q4 Highlights Revenues Adjusted EBITDA1 Highlights • Revenues decreased YoY primarily due to -8.7% -6.6% a smaller lease portfolio size and lower $404.3M $369.2M $36.2M $33.8M lease renewal rate; the lower lease renewal rate primarily resulted from an increasing mix of e-commerce ag
Slide 9: Aaron's Business Q4 Highlights – E-commerce & GenNext Store Strategy
Aaron’s Business Q4 Highlights – E-commerce & GenNext Store Strategy E-commerce Highlights Recurring Revenue Written1 Revenues +60.0% +10.4% Q4 2022 Q4 2023 % of Lease Q4 2022 Q4 2023 Revenues 16.7% 20.6% GenNext Store Highlights % of Revenues2 GenNext Store Count Opened in the Quarter 32.4% Q4’23 I
Slide 10: Aaron's Business Q4 Highlights – Non-Renewal Rates & Write-offs
Aaron’s Business Q4 Highlights – Non-Renewal Rates & Write-offs1 32+ Day Non-Renewal Rate2 Highlights 2.9% • 32+ day non-renewal rate flat YoY 3.0 2.7% 2.5% from Q4 2022 (2.7% vs. 2.7%) 2.5 ‒ Sequential increase of 10 bps from Q3 2.6% 2.7% 2.0 1.6% 2.4% 2023 (2.7% vs. 2.6%) 1.5 1.6% • Lease merchand
Slide 11: BrandsMart Q4 Highlights
BrandsMart Q4 Highlights Revenues Gross Profit Highlights • Revenues decreased YoY driven primarily -12.6% +1.6% by ongoing weaker customer traffic and $187.7M $37.4M $38.0M customer trade down to lower priced $164.1M products across major categories ‒ Average transaction value decreased 6.5% YoY ‒
Slide 12: FY 2023 Highlights
FY 2023 Highlights 11
Slide 13: Consolidated FY 2023 Results of Operations
Consolidated FY 2023 Results of Operations1,2 Year Ended December 31, Variance ($ in Thousands, except per share) 2023 2022 $ % or bps Consolidated $ 2,139,890 $ 2,249,434 $ (109,544) (4.9) % Revenues Aaron's Business 1,546,473 1,703,503 (157,030) (9.2) % BrandsMart 604,413 552,465 51,948 9.4 % Cons
Slide 14: The Aaron's Company – Consolidated FY 2023 Highlights
The Aaron’s Company – Consolidated FY 2023 Highlights1,2 Revenues Adjusted EBITDA Highlights • Revenues decreased YoY primarily due to -4.9% -23.2% lower lease revenues and fees and lower $2.25B $2.14B $177.1M retail and non-retail sales at the Aaron's $136.0M Business, as well as lower retail sales
Slide 15: Aaron's Business FY 2023 Highlights
Aaron’s Business FY 2023 Highlights Revenues Adjusted EBITDA1 Highlights • Revenues decreased YoY primarily due to -9.2% -11.3% a smaller lease portfolio size, lower lease $1.70B $196.6M $1.55B $174.3M renewal rate, fewer exercises of early purchase options, and lower retail sales ‒ E-commerce reven
Slide 16: Aaron's Business FY 2023 Highlights – E-commerce & GenNext Store Strategy
Aaron’s Business FY 2023 Highlights – E-commerce & GenNext Store Strategy E-commerce Highlights Recurring Revenue Written1 Revenues +12.1% +6.6% 2022 2023 % of Lease 2022 2023 Revenues 15.9% 18.7% GenNext Store Highlights % of Revenues2 GenNext Store Count Opened in the Year 29.7% 2023 Initial Count
Slide 17: BrandsMart FY 2023 Highlights
BrandsMart FY 2023 Highlights Revenues Gross Profit Highlights +9.4% +41.7% • Revenues decreased YoY driven primarily by ongoing weaker customer traffic and $552.5M $604.4M $143.7M customer trade down to lower priced $101.4M products across major categories ‒ Average transaction value decreased 7.7%
Slide 18: Balance Sheet and Outlook
Balance Sheet and Outlook 17
Slide 19: Balance Sheet and Shareholder Returns
Balance Sheet and Shareholder Returns Company reduced net debt1 by $79.8 million YoY from the end of 2022, a reduction of 37% Cash and Cash Debt Liquidity2 Shareholder Returns Equivalents (As of 12/31/23) (As of 12/31/23) (As of 12/31/23) $3.8 million (Q4)3 $59.0 million $194.0 million $390.0 millio
Slide 20: 2024 Outlook
2024 Outlook1 The outlook below 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. Low High Revenues $2,055.0 million $2,155.0 million Net (Loss) Earnings $(12.0) million $0.0 million Adjust
Slide 21: 2024 Priorities
2024 Priorities Transform the Aaron’s Enhance and Grow Optimize Cost Business BrandsMart Structure • Grow e-commerce • Expand to new markets • Rationalize store labor, store support center personnel, and • Expand omnichannel customer • Grow e-commerce other overhead acquisition programs • Invest in
Slide 22: Overview of Capital Allocation Strategy
Overview of Capital Allocation Strategy 1 ▪ Invest in Aaron’s and BrandsMart Growth Initiatives 2 ▪ Maintain Conservative Leverage Profile (1.0x – 1.5x Net Debt-to-Adjusted EBITDA) 3 ▪ Return Capital to Shareholders through Dividends and Share Repurchases 4 ▪ Evaluate Acquisitions on an Opportunisti
Slide 23: Key Takeaways
Key Takeaways • 2023 earnings challenged by demand headwinds leading to lower portfolio size to begin 2024 • Innovation through new omnichannel lease decisioning and customer acquisition program delivering strong start to 2024 • Exceeded 2023 cost savings target with additional actions in 2024 • Str
Slide 24: Appendix
Appendix 23
Slide 25: Company Store Count By Ownership Type
Company Store Count By Ownership Type (Unaudited) As of December 31, 2023 2022 Company-operated Aaron’s Stores1 1,019 1,034 GenNext (included in Company-Operated) 254 211 Franchisee-operated Aaron’s Stores 224 232 BrandsMart U.S.A. Stores2 11 10 Systemwide Stores 1,254 1,276 Company-Operated Aaron’s
Slide 26: Use of Non-GAAP Financial Information
Use of Non-GAAP Financial Information Non-GAAP net earnings, non-GAAP diluted earnings per share, adjusted free cash flow, net debt, EBITDA and adjusted EBITDA are supplemental measures of our performance that are not calculated in accordance with generally accepted accounting principles in the Unit
Slide 27: Reconciliation to Non-GAAP Net Earnings and Non-GAAP Earnings Per Share
Reconciliation to Non-GAAP Net Earnings and Non-GAAP Earnings Per Share1 (Unaudited) (Unaudited) Three Months Ended Year Ended December 31, December 31, (In Thousands, except per share amounts) 2023 2022 2023 2022 Net (Loss) Earnings $ (12,355) $ (5,854) $ 2,823 $ (5,280) Income Taxes 1,660 (3,767)
Slide 28: Reconciliation to Quarterly Adjusted EBITDA by Segment
Reconciliation to Quarterly Adjusted EBITDA by Segment (Unaudited) (Unaudited) Three Months Ended Three Months Ended December 31, 2023 December 31, 2022 Aaron’s Unallocated Aaron’s Unallocated (In Thousands) BrandsMart Elimination1 Total BrandsMart Elimination1 Total Business Corporate Business Corp
Slide 29: Reconciliation to Twelve Months Adjusted EBITDA by Segment
Reconciliation to Twelve Months Adjusted EBITDA by Segment1 (Unaudited) (Unaudited) Year Ended Year Ended December 31, 2023 December 31, 2022 Aaron’s Unallocated Aaron’s Unallocated (In Thousands) BrandsMart Elimination2 Total BrandsMart Elimination2 Total Business Corporate Business Corporate Net E
Slide 30: Reconciliation to Adjusted Free Cash Flow
Reconciliation to Adjusted Free Cash Flow1 (Unaudited) (Unaudited) Three Months Ended Year Ended December 31, December 31, (In Thousands) 2023 2022 2023 2022 Cash Provided by Operating Activities $ 31,308 $ 46,561 $ 180,414 $ 170,432 Proceeds from Real Estate Transactions 9,429 1,600 11,092 16,519 A
Slide 31: Reconciliation to 2024 Current Outlook for Adjusted EBITDA
Reconciliation to 2024 Current Outlook for Adjusted EBITDA Fiscal Year 2024 Ranges (In Thousands) Aaron’s Business BrandsMart Consolidated Total Projected Net (Loss) Earnings $(12,000) - $0 Income Taxes 0 - 4,000 Projected Earnings (Loss) Before Income Taxes 64,500 - 77,500 (9,500) - (5,500) (12,000
Slide 32: investor.aarons.com
The Aaron's Company, Inc. i. . BreandsMart ey, Aarons BrandsMart:“ Leasing’ Woodhaven’ investor.aarons.com