The Aaron's Company, Inc.

Consolidated Q1 2024 revenue was $511.5 million, down from $554.4 million year over year. Consolidated adjusted EBITDA was $22.7 million versus $45.9 million a year ago, and non-GAAP loss per share was $0.15. Adjusted EBITDA margin was 4.4%. Adjusted free cash flow was a $33.2 million use of cash. At quarter end, cash was $41 million and total debt was $212.9 million. On the operating side, Aaron’s lease merchandise deliveries increased 6.8% year over year, lease renewal rate was 87.4%, 32-plus day nonrenewal rate was 2.2%, and write-off to lease revenues was 5.9%. BrandsMart comparable sales declined 9.4% year over year. For 2024, management reaffirmed full-year revenue and adjusted EBITDA outlook, raised non-GAAP diluted EPS guidance due to a lower estimated tax rate, now about 38%, and still expects full-year lease merchandise write-offs of 6% to 7% of lease revenues and fees.

Douglas Lindsay said the quarter was in line with guidance and that he is encouraged by the momentum in the business, especially at Aaron’s. He emphasized the success of the new omnichannel lease decisioning and customer acquisition program, saying it is driving higher conversion rates, stronger e-commerce growth, and an inflection point in the same-store portfolio. His tone was confident but measured: he acknowledged the demand environment remains challenging, especially at BrandsMart, while expressing optimism that portfolio growth should flow through to profitability in the second half of 2024 and into 2025.

Kelly Wall focused on the financial bridge and outlook. She said Q1 revenue of $511.5 million and adjusted EBITDA of $22.7 million were down year over year mainly because of lower revenues, higher other operating expenses, and higher write-offs, partly offset by lower personnel costs. She noted adjusted free cash flow was a $33.2 million use of cash due mainly to higher lease merchandise inventory purchases and lower earnings, though this was still favorable to internal expectations. On capital allocation, she reiterated a conservative leverage target of 1x to 1.5x net debt to adjusted EBITDA, plus dividends, repurchases, and opportunistic acquisitions; the quarterly dividend was set at $0.125 per share payable July 3. She also said cost savings initiatives are expected to deliver $30 million to $35 million this year and explained the EPS raise came from an estimated tax rate of about 38%, 12 points below prior guidance.

Analysts pressed on Aaron’s store optimization, the improving portfolio trend in April and May, BrandsMart demand, lease write-offs, average ticket, and consumer health. Management said it is actively rationalizing markets, closed 30 to 40 stores during the quarter, and prefers a flexible mix of full stores and smaller showrooms rather than committing to a fixed store count. On portfolio growth, management pointed to the omnichannel program, saying it is driving higher conversion and could add meaningful gross margin as the portfolio turns positive. They also said write-offs should remain in the 6% to 7% range for the year, with the current mix shift toward e-commerce affecting renewal and delinquency metrics. For BrandsMart, management said the second-half outlook depends on easier comparisons and an expected rebound in major categories, while noting private-label credit card tightening impacted roughly a little more than 25% of sales.