Conn's, Inc.

For the fourth quarter, total revenues were $366.1 million, up 9.3% year over year. GAAP net income was $43.3 million versus a GAAP net loss of $42.8 million in the prior-year quarter, and GAAP net income included a $104.9 million bargain purchase gain, $16.3 million of transaction costs, and a $14.2 million loss on extinguishment of debt. On an adjusted basis, the company reported a net loss of $31 million versus a loss of $36.7 million last year. Retail segment revenue was $296.9 million, up 9.6%, and retail segment operating loss was $38.1 million; adjusted retail segment operating loss was $21.8 million versus $11.7 million last year. Credit segment revenue was $70.8 million, up 10.4%, and adjusted credit segment operating income was $1.4 million versus an operating loss of $13.9 million a year ago. Retail gross margin was 38.3% versus 33.5% in the quarter prior to the transaction. Net charge-offs were 15.9% of average portfolio balance versus 17.1% last year, 60-day delinquencies were 12.2% versus 12.7%, and re-aged accounts were 18.8% versus 16.5%. Cash/borrowing capacity included $155.3 million available under the revolver and $50 million under the delayed draw term loan, for $205.3 million total available borrowing capacity. Looking ahead, management expects more than $100 million of annualized cost synergies and over $50 million of revenue synergies over the next 18 months, and reiterated a target of annual adjusted EBITDA of $180 million to $220 million on total annual sales of $2 billion to $2.2 billion by the end of the next fiscal year.

Norm Miller’s message was centered on integration and synergy capture from the Badcock deal. He said the acquisition has exceeded initial expectations, that the combined company is moving quickly on credit, merchandising, supply chain, e-commerce, and cost actions, and that these steps should drive year-over-year improvement in sales and profitability. His tone was confident and upbeat, with repeated emphasis on “strong momentum,” “transformative” potential, and confidence in the company’s path over the coming quarters.

Tim Santo focused on the financial impact of the acquisition, one-time transaction costs, and the balance sheet. He noted the quarter included about six weeks of Badcock results, called out the $104.9 million bargain purchase gain, the $16.3 million in transaction costs, and the $14.2 million loss on extinguishment of debt, and then highlighted the $252.6 million ABS transaction completed on January 26, 2024. He also pointed to $155.3 million of revolver availability and $50 million under the delayed draw term loan, and said the company expects two to three additional ABS transactions this year.

Analysts asked about near-term store count, gross margin drivers, credit application trends, financing rollout across Badcock stores, and tax refund season. Management said it expects no change from the current 550 stores in the near term, though some overlap-store consolidation in Florida and North Carolina could come next fiscal year. On gross margin, Norm said product mix was about 80% of the improvement and that freight costs also helped; on credit, he said application growth is moderating because of tougher comparisons, but usage and average ticket are improving. He also said Conn’s financing is already being rolled out in Badcock stores and that tax season has been solid, though consumer spending on big-ticket home goods is less robust than before the pandemic.