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Rent a Center Inc De (RCII)

Participants
Mitchell E. Fadel Director & CEO
Joel M. Mussat COO & Executive VP
Maureen B. Short Interim CFO
Daniel O'Rourke VP of Finance, IR, and Treasury
Kyle Joseph Jefferies LLC
John Rowan Janney Montgomery Scott LLC
Bradley Thomas KeyBanc Capital Markets, Inc.
Katherine West Raymond James & Associates
Carla Casella JP Morgan Chase & Co
Karru Martinson Jefferies LLC
Call transcript
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Operator

Good morning, and thank you for holding. Welcome to Rent-A-Center's Fourth Quarter Earnings Conference Call.

As a reminder, this conference is being recorded, Wednesday, February 21, 2018.

Your speakers today are Mr. Mitch Fadel, Chief Executive Officer of Rent-A-Center; Maureen Short, Interim Chief Financial Officer; Joel Mussat, Chief Operating Officer; and Daniel O'Rourke, Vice President of Finance, Investor Relations, and Treasury. turn over to Mr. like now the to conference I'd O'Rourke. Please sir. go ahead,

Daniel O'Rourke

and Good for Maria. you, thank morning, Thank everyone, you joining us.

Our close yesterday, investor.rentacenter.com. financial distributed available on after our materials site All was fourth and at Web XXXX. the results earnings operational for are of related our which release outlines quarter market

Rent-A-Center publicly statements, cause some to revise expectations. in many subject reminder, to Company's provided no actual a from are to undertakes over the to As materially or as yesterday any update like factors on forward-looking call this that the are our could to as which Mitch. statement. described statements of SEC in call issued now the results differ These filings. I'd are forward-looking earnings obligation factors release turn well our

Mitchell E. Fadel

morning, Good Thank everyone. joining you us. Daniel. you, Thank for

Before provide to plan? consultants press some company I in Board why midst I some from the Well, is prepared I the and clarification confusion believe into get yesterday's remarks, strategic a restructuring details review is work on process. a alternative there to release. certain want financial the my as to of regarding hired

a hire that strategic of has in analysis savings independent experts you mistakenly our have of company. company. financial was have an we’ve announcement that cost result the also AlixPartners it savings the shareholders discuss sold outside The case. a process remained target outlined completion opportunity would major and not the that clearly and concluded. and savings a that’s process the to the this recognized significant will belief where December, or as validated strategic made today. Some financial alternatives substantial I’m competent to benefit company decision our This alternatives we Board its using here on evidence based existed tell cost inside taken plan to Board believed the The because the

update alternatives the has alternatives the ongoing this was Board does press remain the As process, investors release, and process an financial work strategic in stated to provide once and to concluded. plan

believe this concluded. years those know may to you business. XX the been credit financial XX hope has back like years of understand and was have I’m process to at said not but be Many Chief Rent-A-Center the the how I’d I in alternatives that, helps excited strategic I the So XXXX. and cash you Having of and Officer, situation over been and who position President say as clarify previously confused, to in of Rent-A-Center. having left for the I strongly part Operating that and mid customer constrained served for

of challenges a still gone years, Although products need the and large the over they has our population still company rent-to-own past in segment services. through and three customer the in the is

line than controllable line to improve business the revenue to not needed use aggressively XXXX, of top loss than of counting items, where future. was than offers, results the to to payment to should been impact over addressing made in in acceptable the lower Rico, sales was is of core a hurricanes turnaround. profitability growth and especially and low cash on fall, rather our year. improving a throughout My My Puerto have due drive is most to plan of performance profitability behind Rent-A-Center company strategy and should fourth bottom improving position a number successful much the revenue primarily performance average made, an specifically trial to Even progress Revenue increasing same-store the progress near-term last built flow. Some was delinquencies expenses. around without performance the drive are as Therefore, as higher strategy well lingering though was the in it in ticket quarter This expected. the changes me. resulted for expected of due several

laser achieving said, growth, combined that certainty forecast. reductions conservative should our focused would with which on This we’re line sustainable controllable being provide our be revenue expense top more plan Now internal around additive plans. to

the the since operations, amount much of primarily opportunity but I December, As business I such metrics available of expenses, line We’ve EBITDA allow firm and company. we plan a can in use measuring improvements monitored identified the have Board Directors $XX million be assist savings turnaround costs. alluded expected bottom were actions us implement to key progress they as consulting investments working initiatives store to profit company of also to capital identifying significant an to be of of AlixPartners, there chain, will to in our are We’ve and business overhead $XX against identified financial other $XX opportunities organization. Cash areas improve cost Company opportunities. enhancing believe earlier to the ensure disrupt the will million realize closely very well-known XXXX in efficient annualized more cash of expenses in plans engaged as the outside flow. is to strongly efficiencies. These of the profitability in $XX take and flow million one in range. supply result we not million will improved to store improvements procurement a the and be to we in

drive drive place my will represents to put key the to this though revenue number and revenue plan we to The is I return is to diligently even growth. plan. continue not initiatives dependent will a growth. on upside to a point I’ve turnaround transaction in growth, work volume outline Now, of customer

by occur, to offset reduced growth. This in fact the year deliveries and to shortening better sustainable order and need and pricing company returns in but focused increasing in to continue would be be in on was a modestly, drop average rates likely deliveries than our increased more Last volume the does offset but balance ticket. The strike between needs core terms. reversed expectation we decline business. First, will

we our our and portfolio opportunity building way we the product continue the sustainable assortment. year, to to a metrics see more As in balanced pricing more this surgical and being by turn around

pricing drive than live a we our in in. margins We nearly world category pave are mix product stores. in is in Today margins For additional are some mark the other same blanket must true example, equal electronics The in categories not up more approach. can that's and and positioning margin for the be of specific competitive order retail our furniture more way with simply our to categories. rather the

and of traffic that best -- product pricing better reduce pricing also investment will will drivers. compared covered categories The there certain traffic are by product time increased products allow more our categories. last require While free More be required the margin is promotional strategy inelastic to in carry these year. to amount driving fine, specific us to

drive I offers mentioned in fourth we As earlier, the to traffic. free used quarter, time excessively

successful delayed revenue these quarter. were the While negatively in the profit portfolio, largely and the in growing payments promotions impacted

We our in product that our do is compelling between belief even balance as tweaking our drive increase to will mentioned, things pricing there product means, free are to ability Now promotional. we everyday furniture, ensuring categories price the And COO traffic other more demand. away. categories, a are prices pattern things like customers, good news offer opportunities will customer which it be is I can like TVs company giving much is elastic, strategy This strike need I competitively, we’ve without my did drive the and still again. many more our growth years nearly more less without and certain the a drive and to or for while need these and promotions a this be value priced promotions pricing by time customers proposition much our of proved too to better relevant. for I believes the as as

in over company. today. In marketing of but who throughout I'm also and back XXXX customer to I’ve years, her asked actually help an back the back. more come addition, And led Davids, excited is first to Ann to have ever focus assured for function increased traffic XX Rent-A-Center have drive day left our

and opportunity pursue Being franchise brand a big way in relationship our sheet. to franchise be franchisees. less believe our and markets, refranchising. is I’m capital-intensive proceeds plan had The use franchised will brand company company of be business we a for the less to and have business certain Another once marketing strong grow our started last the we model At the sorry, upgrading the deleverage the with in better we’ve potential will systems a to opportunity month, -- attendance to the record competitive in balance XXXX preparing success start rent-to-own, owner/operator for and within expansion the certain demand I franchisees. of to our convention heavily support we held

our into be to is franchising just XXXX our built clear, expanding plan. not footprint Now

cost Our to franchising. are not savings related

to In expand year small being made investment this prepare our footprint. franchising fact, a there's to

optimization addition, determine to our and merge franchise. which which any and course profitability and markets typically In in with those results of evaluation XXXX, stores store stores if to also better place in is which within to taking markets other close

benefit a investment. of driving approval by consists We payback engine is well The and to more our Now, with ownership it the of company, better it be quicker customer for and our of flow for our to a to with a and continues lower cost assess returns on lower handled the portfolio higher still a will quality company product business. a monthly cash activity. ownership us customers, believe market. recent core to to showing of customers, with drive new our on as early partners to rolled to be customer in enhanced our transaction January the rate Turning company. number get change, more based path but results less terms, for believe cash months will providing we the and line The to as this to a decision It's in model customers signs lower Acceptance overall was proposition value improving the ownership out our the for

expenses Now reducing improving continue and to on our accounts unmanned profitability have manned on to that locations. of and a to in needed more this capability is existing locations do and as the business. flow I to to come to by profitably lower able run solution there Acceptance large better unmanned the the improve volume building We of evaluate However, profitability national scale segment. to the cash path be Now best More Acceptance forward to

earlier, driven expectations position our to lowering approach costs performance, I’ve our on my top is risk by reducing and competitive targeted plan pricing more franchise by conservative expanding improving footprint. line said store with As and

the we continues this financial patience as your process Board mentioned alternative remains is company work. appreciate our review currently a I and going and as process that I through earlier, -- strategic As said, and ongoing their

business the Board's to and Now the me to exactly intend that’s do. we execute my And a turnaround parallel what for to to is in the job team successful process.

So thank to lastly, I’d now Mussat. our welcome serve and like the our the the to like do that, they and to our over all coworkers company back franchisees to all I’d call turn customers. for with And Joel to great warm for of

Joel M. Mussat

first per I growth. to core to retention quarter, will agreements. quarter, the XXXX in we compared ticket to Thanks, we customer on the we overall positive as start growth quarter due portfolio in the third where trend of and to grow This size a portfolio a mainly year-over-year able these the basis we're drive five Mitch. trends essentially with able continued fourth with flat In be are enabled This were was portfolio to business. as fourth months consecutive to while in began our well. store

improved sequentially the XXX saw we basis in improvement comps and quarterly throughout fourth quarter. XXXX, Our point

in sales quarter came negative our the same-store fourth However, and in X.X%. was at not of positive goal met

had we growth. a to payment mentioned, quarter low customer promotion the with Mitch As drive initial in fourth offers

promotions collect far hit so we agreements and back seeing our in the the in XXXX expect. these our We’ve sequential business accordingly However we adjusted did revenue we’re we'd trajectory see not new on revenue improvements right sufficient goal. and to as

were example, quarter. in approximately the same-store flat For sales January

by XX%. about improved Our ownership year-over-year rates

better points Our and the our line XXXX loss estimates in quarter were of a in in rate. fourth improvement XXX our with quarter delinquency a similar than basis rates with

plans from we our Going approach we on conversions levels of somewhere will drive within as comes drive categories competitive both to payouts we more heighted can the We how be believe more volume. are expand customer specific back our forward we and season within price category. In we margin current first pricing the it first see pricing, historically different in need capitalizing the we quarter, on price category surgical a customer half upcoming we are to the by quarter. be focusing and and customers to there on will these tax to quarter, the to focused and ticket get in on when growth. balanced touched around Mitch much

traffic rates XXXX We web a growth conversion will driving leads web significant channel. our saw web by also our we leverage as heightened higher activity as lead in for in generation

initiative, a success deliver is I new which use customer in solid point-of-purchase teams to a store for and great our training last outlined tool close rate mystery experience. shop our Additionally, their call, improve in-store our to to

see, can us you we a sales via grow base quarter. As in opportunity the help we capture come multiple customer to amount our of can that the larger believe channels us to

of the core after impact we the back Florida, $X series running the the Regarding impact of South and Rico. to hurricane get impact, about hurricane. the third quickly Overall quarter, up the in to in tremendous the core operations due Puerto efforts a in in we saw as made hurricanes Texas, revenue and possible million as quarter. Including

we positive quarter. number our Acceptance the same-store is XXXX. sales This X.X% versus For Now point brand, saw improvement in XXX of basis fourth a

and each As year. added and us expected added income hhgregg down these system. profit, XXX October, collection XX and forward-looking increased the store about see for the in dollars We revenue of store both peaked versus basis Conn's were basis by December. agreements year-over-year. a the improvement an these the last of and revenue reduction in has and end seeing our And points the leave losses dropped in in November toward and hhgregg did in of the total the business. Overall, gets comp our percent move at a the XXXX. We quality and stores XXX continue as stores, Now improvements Revenue, to quarter point a new metrics rate the since of in quarter fourth a in to stores end QX due continue our to losses as the spring in of closures, and quarter, Acceptance and began gross to both Conn's in declined exit in we XXX at XXXX. of XXX count portfolio about the brands QX, We delinquency which to a this reminder, as higher saw of are improvement

back half in since have of we first improvement continued Additionally, seen XXXX. our payment rate, default the

an numbers quarter enhancing third bring our to As for of to a RTO result who to made historical engine, we much our outlined using sales balanced tool, back partners to levels. routing and implementing return we our tactics improvements to we're to collections. of collection rate both exiting on down a higher our a improve verification on decision Enhancements fundamentally operations examples number customer base new in call, operational and our delinquency a take cater focus software feature, and and collection AutoPay approvals, are

our numbers averages With business. historical with line trending we are the in with loss best December collection our and these improvements, ended numbers our forward-looking more summer this since for

year-over-year quarter with approximately from $X Core Now and for $XX improved quarter by XXXX a overall and in Delinquencies special levels quality quarter was our We comp is as year-over-year. consolidated XXX the sequential a loss management. efforts that, across XX% operating basis the hurricanes was XX,XXX fourth last like the focus affected we’ve X% Overall fourth company from our a cash saw XX% $X.XX about both our improvement delivery to a in XX XXXX. the their we in our million of non-GAAP locations. on a of had been and on a and about with coworkers flow of thanks And gain continued hurricane. those quarter, EPS thank dedication versus about all our entirety the coming Regarding XXX the of at the impacted quarter, of Acceptance up in and We Now. loss by portfolio. estimates XX% revenue to With In with year-over-year points ticket year year-over-year points, during by Acceptance from the million coming levels I’d both and points from improved affected refocusing revenues quarter. efforts fourth against hurricane basis building the basis the in our a view, agreement nice by Mexico, business improvement last fourth the profit and decline for

turn Now I discuss will the financial company. it over the Maureen to performance to of Maureen?

Maureen B. Short

financial for turning Good our then close sheet, results an in Mitch. detail, reform. provide morning, before Joel. Thanks, of with XXXX fourth I overview quarter targets cover to I will from our it company walk and through our balance will financial everyone. benefits the tax back more

a basis Adjusted During the of versus $XXX per share points million GAAP were our quarter XXXX. the Net from of year. total XXXX, closures, by impacted $X.XX. million, closures. share primarily diluted the Same-store year U.S related of and the of same-store to $X.XX growth labor hurricane in the margin the from was merchandise and the Rental passed period segment, of total and on to and down higher due the a Skip/stolen share hurricane. special versus million higher diluted driven million to excluding and to sequentially the decline lower quarter. $X.XX earnings prior revenues average by rent higher free partially XXXX was in impact in were $X.X EBITDA of higher increased $X.X EBITDA and X.X%, ticket, prior portfolio X% basis driven losses Core store prior was X.X% was revenues down and agreements sales were in points were positively were December deleverage. points, earnings same-store quality Tax a and Jobs driven compared by by In expense Act increase the a basis in fourth improved decline year sales impact count customers U.S. store from down line X.X% the driven primarily the top the down margin delinquencies million were prior in store portfolio. per and loss Store in million by lower $XX store million fourth QX, XXX same Cuts consolidated $X.X to and negative compared by time. Core sales promotional quarter was store count. X% QX growth year, other expenses an prior items on by by EBITDA $XX net driven offset to quarter lower highlighting lower fourth of basis the fourth XXX down and $XX.X in down the GAAP X.X% per EBITDA year was in losses quarter XXX due the the quarter

to adjusting a in financials. inventory buyout year, compensation XXX rate. higher points Skip/stolen value revenues book decreased Acceptance XX.X%, was gross were $X.X products. basis Now cost fourth lower Acceptance that Now expenses driven of gross incentive turning from write-off returned of retail the EBITDA X.X%, merchandised profit consolidated to segment profit wholesale adjusted due Acceptance sales in primarily -- gross closures decline margin, basis in expected million burdened by by invoices of point no and business. and store is Now primarily nonrecurring. at of $X.X a $X.X by in Other impact and Acceptance of same-store million hurricanes, and Now core prior XXX point operating in charge lower the to $X.X decreased Total compared XXX losses the one-time Acceptance to encourage unreconciled were improvement Corporate with the Acceptance and margin, store down instead the Now purchased expenses start XX.X% is included down driven returned This from ownership business to on impact Beginning revenue not result company by reduce year Now profit product at noncash from which in quarter. in discounting prior will amount the expense. to customer so executive Now million, an margin and the Gross X.X%. the the offset sales million excess the the core to the core was is XXXX, basis

will Tax to lower Jobs tax estimated in benefits the mentioned, will XXXX, have Act in which see tax XX%. of between significant federal of Mitch and statutory beginning As QX rate XXXX the that December Rent-A-Center XXXX. from will Cuts was a rate XX.X% of our passed and company lower XX%

XXXX rate, deferred liability was GAAP tax million Our the earnings. for to to one-time $XX.X benefit of million tax new $XXX revalued was of QX a in which lower of adjust

by rate, the purchases. $XXX the quarter and estimated temporary reform will revolver cash we by to lower $XX a federal company's addition improve differences the merchandised ended tax hand company $XXX including million of revolver deleveraging of strengthen flow rule, the $XXX to the benefit years, the cash of $XX.X and the was XXX% $XX $XX Total $XXX.X The our during letters XXXX, was quarter, outstanding approximately reduced $XXX quarter. million revolver merchandise million of operations which receive debt million taking at million also credit. million liquidity, fourth using the sheet approximately Since million our generated depreciation leverage. in $XX due quarter, charge In pay the position the against million. cash in We capacity equivalents down to coverage on new of outstanding cash between sheet. the $XX into million. and and expects total lower to million. benefit is the help plans balance to a the three $XXX.X debt the million $XX including tax end timing by total company tax capital given company the The reducing of our million cash of taxes primarily us million the of excess of our At available with fourth cash expense of by the were our in to that drew end the will depreciation quarter on allows to paid the Total balance next balance Through to the tax immediately fixed the million the cash its million we��ve million, approximately refund $XX due account which ratio from debt, of XXXX, bonus on and revolver. end end customers. company drawn down $XX the $XXX move The on from accelerated necessary, over

turning Now to target. XXXX

million. XXXX. expenditure XXXX to and savings. As in the are Mitch identified expect $XX me to estimated $XXX we million With turn Mitch $XX recent in Mitch? realized at XXXX the store $XX million earlier, million mentioned in million years, benefits $XX are savings, million the to your $XX to questions. expense million $XX of overhead, and has to through savings $XX supply to over company in line opportunities for XXXX. $XX lower million cost be $XX is we in This call be least that, million and million closing annualized million, about be let before to million two-thirds to million cash some Capital be to than to open $XX expected other Working flow and expected between to back $XX capital free includes $XX for comments, chain

Mitchell E. Fadel

Maureen. Thanks, Thanks, Joel.

plan it questions process update, say mentioned don’t that, and -- But because process. strategic than more we it review appreciate the any we ongoing, don’t update other so to that, its is avoiding a have a turnaround We further the now. and on to are review being when We Board working said questions on have ongoing as couple concluded. open complete times in other our to we’ve questions parallel is we’re running going the we of with I it have up will with strategic the anything

let's So, open that, questions. with it to up

Operator

from Instructions] Kyle first Jefferies. Joseph Our of of [Operator line the question comes

Kyle Joseph

assume us Mitch, into fair thanks and taking Good it back, was more Any much one-time the related? just Maureen, get Is wanted related. primarily credit questions. I expense believe color my Acceptance that and could that very store you Now. other for to in Conn's give to was morning, hhgregg guys. there? Welcome

Maureen B. Short

was the charge to Acceptance unreconciled delivered. noncash matching rental up will after the the we the one-time invoices an pay then product agreement. The vendors, certain difficulty And is our invoice Now before with have of fact we Sure. invoice a write-off

not so And Now It's certain project for credit related, payables write-off was of our Acceptance over inventory the special of a reconciliation result our Kyle. a process partners.

reconcile But basically XXXX and and it's statements, the a one-time We’ve within write-off. invoices restatement this believe been concern is a that occurred these improvements making not financial no a a of process write-off we our item. it's manual So but items. of to that nonrecurring There's with related credit the number it's of on resolve issues XXXX. to and

Kyle Joseph

it. Got

Sorry, ahead. go

Mitchell E. Fadel

I over two years in XXXX all XXXX Kyle, than said, well done was under just was and as those add, to Maureen was invoices. going overall, was X%. It less it that X% of the invoicing

said the size to its of nonrecurring. We cash, have I point Still and think key cash unfortunate, the are: charge, of the points it's forward. problem believe but but I like the take going it's we unfortunate not you key give is X%. it's under it, to practicality And that nonrecurring. fixed just not was So it the is

Kyle Joseph

wound if just hhgregg, a of Now it. of the as how on a Got is And much any you down? percentage Conn's give that color could of little sense and remaining of Acceptance that more and us size portfolio

Joel M. Mussat

become Yes, portion I as in time the of portfolio general, a think it's has by. gone smaller much

agreements think for overall overall the now. a XX% we’re percent of somewhere south I right as now of

Kyle Joseph

there. follow to just then last one And Okay. on

when of give should sense difficult those loss timing could of we us anticipate and of hhgregg, In refresh the a comps? sort you terms of us could you the Conn's of lapping on and that

Joel M. Mussat

of our spring the in brands those exited last We We April. agreements wrote in XXXX. probably

Kyle Joseph

Okay.

Joel M. Mussat

Yes.

Mitchell E. Fadel

Now probably at of majority -- same-store same-store said because least down Joel I’d a the the for that’s because fourth the stress been and till XX% say Acceptance our of to sales put diluted will it year, and under going think quarter, that Acceptance in the now. it's agreements over the sales Now, I on we’re as comping revenue it be

is of last Kyle, there, left past aren't most the the that as news good the that affecting due was adversely case year. numbers now the our So are agreements

is that. part that news over, story good the in So of is a which

Kyle Joseph

then, Yes, wanted back, of on it sense. just your on get sort Core? at and cyclical, to stepping thoughts that industry? Is sort the of Thank Mitch, headwinds secular, makes just you. what’s more of the the sort driving pressures, competitive And and I the your industry get view

Mitchell E. Fadel

Sure, Kyle.

a of think I it's combination things.

there's options. have customer I the think So does more

self the do wounds that think bad from we a can't think more for it's year company combination. and over when has now, They I for have about kid I options talking ourselves you a inflicted been with standpoint. -- that the that the combine

there's more the January, the tweaked hurt time business. now track. little a to also right the then company was Even some was lot overhead I need to that fix free January got to quarter but little as there mentioned mentioned, build line was help standpoint, promotional that done the in to almost pricing I -- traffic. a mentioned to though -- options I bringing about by on fourth back incentives. they But the that as put The category the Joel less in to the have that our organization, traffic year-over-year, portfolio. flat in only last year I to in revenue Officer think well be give to our year the was was years the enhancements. just that build us pricing ended strong, flat that portfolio exist that the ago our -- side So today it the essentially revenue, drive left Marketing Chief as from mean that six the the is in fourth talked on offers we’ve portfolio not things the with more as Core quarter Joel the and cost of product customer

I brick-and-mortar a of So customer some to enhancements some we’re that few in of as enhancements that mentioning, said and these is in wounds that comes self inflicted the we there the think, sure, and far. it so probably more traffic the of back positive options stores, a doing, with get direction we’re when but correcting some has out the best I’m I can January indicator the

Kyle Joseph

us then, tax magnitude this Got it. give refunds. Can the versus on the you for have one those me for last? and sense one And timing year any of you last

Maureen B. Short

we late be week year. come starting think to to tax and last to similar refunds similar expect I to be last Yes, in the this year to

Kyle Joseph

Great. for answering That’s Thanks a helpful. questions. my lot

Mitchell E. Fadel

Thanks, Kyle.

Operator

comes from John Rowan next Our question of the line of Janney.

John Rowan

Good morning, everyone.

Mitchell E. Fadel

Hi, John.

John Rowan

Cash paid depreciation? flow -- possibly the me bonus give that what an and the the is Just guidance XXXX, no for $XXX because possibility does idea cash that consists of million tax of of being refund of? include

Maureen B. Short

to free value include in tax of And of changes initiatives does savings million then Yes, closures million the $XX achieve two-thirds million. $XX the from to around capital the cost then in million customers. John. top million working achieved proposition $XX the The cost Sure. includes million base getting XXXX, side. to our $XX expect faster improving that $XX back includes XXXX. we’re business. capital $XX And includes $XX a the to where gave million to will and cash the million. which CapEx EBITDA in refund from cost cash our to that million assumption flow is additional $XX million, $XX guidance it It also includes due $XX to in I million working a from about that $XXX of be the benefits on of the also It It savings we savings an benefits store benefit

John Rowan

tax million in paid -- bonus How is much being the cash I $XX that XXXX? which refunds. depreciation? lack of include number so from is does increases of And that tax the How is much okay, the $XX $XXX of includes to DTL, in but, million assume

Maureen B. Short

is based the to adjustment liability. of tax the majority deferred our refund due our free tax just And also then The on tax of expected earnings.

John Rowan

That’s was what too. Okay. I getting

$XXX So, million over is years, refund? to years refund million that next couple or assume -- three of tax $XX million lower you to million bonus that from that $XX next have $XX $XXX of million in $XX included or -- over from the to is the $XXX in million depreciation, addition the I of benefit million

Maureen B. Short

included in million. The is is $XXX It refund the included.

John Rowan

three were your basically for in what are is that years? the mean, tax you to expected million to savings, if take gross million next pre-tax that the projections out I over income $XX $XX up So,

Maureen B. Short

on to depreciation. would -- that earning bonus the pre-tax benefits the pay estimates tax based be forecast from in Yes, as the that the we is majority of cash taxes the as our expect well

John Rowan

open -- Okay. one additional there's What’s the Board seat, correct?

Mitchell E. Fadel

Correct.

John Rowan

What’s the around the other to color of up going what’s seat happen that non-engaged Board any is this plan and kind of and year? Board for there members composition where with the Board -- for the are election the

Mitchell E. Fadel

on a and announced can -- strategic Board corporation seat. Engaged add I Board and think with alternatives unified are going is and add to and that working member this process we I at going seat I together Well, working more we’re The well Capital, the in we’re point. the it. as as very a financial think review hard Board one we on to is to speak agreement

So add and I unison. Board important forward another member think will we move in

John Rowan

just to just then is explain that you franchises lastly, what strategy refranchising markets, selling probably a what selling looks I exactly And frame or stores Okay. like? can refranchising like? out just mean, looks

Mitchell E. Fadel

a question. great It's

working still it's mentioned, -- are John. its of both a on you which We that just probably and

its sell. certain be may there of franchisees, selling we that markets Some to stores

And plan. later to mentioned is this might in bit no its in a for cash is Now and gave franchise so more comments, with -- XXXX really prepared as the flow multiyear we guidance be stores, year a our position there's cost in for I and this We my -- a preparing it that, in there's more this there's benefit. its year do in associated some preparation that’s small, really that cost franchising, little you -- year. fact of but some in to but a year

think out stores. the though, you of So years four as you current five if next some is think -- sell to plan our our

it so which will help when the we because stores. fill the in those markets, and expand few now a company what footprint, of sold far markets, then the we sell also as us seen we’ve you will franchisees, think I we're not doing

what if fill the will openings. So see we market, we’ve is -- particular far I franchisees sell a seen like so in we said,

Rent-A-Center well. So I as flags out more help there can put think you

for selling markets think some I markets, a refranchising -- franchising So as just strategy you mostly well there. selling to it's for robust a combination but the or it's it a reasons here think store as stores, versus said. of selling And a when store things, I growth I sell those we’ve strategy do existing got model you’ve

hear robust it and the on something really about goes this doesn’t the on, and markets that. working in late part we’re as become the still we’re still more something strategy really year And year around year. So marketing plan as our it's it's really you on whole that’s which but working of

John Rowan

very All much. you right. Thank

Mitchell E. Fadel

John. Thanks,

Operator

of Our of Capital next line Brad KeyBanc the Thomas question comes from Markets.

Bradley Thomas

good Hi, welcome company. morning and to the Yes. back Mitch

Mitchell E. Fadel

Thanks, Brad. Good morning.

Bradley Thomas

follow-up to number? assumed to connect million think Maureen it questions. give get kind that of $XXX guidance wanted I was walking a helpful But trying EBITDA the free to last with EBITDA, free and is to to could cash just with, what dots sense Just the flow I on through the cash the us you flow guess, of

Maureen B. Short

close providing most Brad, EBITDA. pretty our EBITDA. be, EBITDA to not guidance what guidance but we’re not guidance would we’re providing components that on I can of get you projections the outlined around

Mitchell E. Fadel

process then Yes, the versus because to annualized we’ve decided EBITDA on, we of this the how of we the put review to Brad, savings decided and out Again, it the going we’ve not review that the strategic cash much course strategic just and we guidance. EBITDA number. realize process year savings flow with identified, that hold can

Bradley Thomas

you. Got

we should these done million? of off 'XX as and in get on you it building think of the you’ve you’re that’s here kind So of on initiatives, how and layering more what to $XXX

Mitchell E. Fadel

'XX, quarter. you just happened the the obviously, I the long some in with of -- wouldn’t I issues say expense on in would wouldn’t happened time, you as agree use I use with would way it. and the quarter free as hurricane of I said some based Yes, that the -- fourth fourth what whole the impact expense year

So XXXX. I I quarter, but wouldn’t build fourth would off build the off

Bradley Thomas

Got you.

starting to Mitch, I And hearing guess, raising prices of maybe just like in you you’re that basically the It to that business Now. time changes increase model, you and get Acceptance closer Is on shortening Am the Okay. to what’s try the initiate then, with term happening? some cash maybe the correctly trying term. this I the shorten to sounds you flow agreements?

Mitchell E. Fadel

That’s correct.

term you overall get from be terms term the and more to an in I -- competitive shorten with more ownership. also it's you model, think standpoint. the than And higher previous I ultimately more the the get out lower a marketplace previous When that think it. from model, when know following you ownership, realized started even if the is projected is turn the pricing you

on you margins, will turns rates bit, our by lowered we term cash overall and Not the flow the help of the with concerned the still agreement, overall So with price. mentioned. more competitive as raising margins the ownership a the and little because lowering more much competitive the

and model for cash more better it's us. flow So model a standpoint a from a competitive

Bradley Thomas

on taking think more do to of you. to the I lowering on with the mean, the be respect number do to guess, references prices? Obviously, you needing core? in the competitively Got I the Core priced. happens And a then be What -- to whole, intend you whole

Mitchell E. Fadel

something, as I much -- traffic more just more it's drivers the neutral bit on But that we categories, categories at some There's net and It's for as looked some talked that side that think year make put other what a use but really can little it, appliances. than up like some on but inelastic furniture I was pretty it, a so model before was the that. in drivers, up we’ve little much categories it more happening help margin it's about. certainly needs and neutral bit for targeted better traffic pricing margin needs was last that, we standpoint. approach, make just think from and targeted a can and the electronic there's

Bradley Thomas

need you. about pruning store company And recent you mean, do been has XX next years. in base, here over or store the with the the Got base thoughtful what think on XX months? the overlapping to know stores do I you Mitch, I

Mitchell E. Fadel

as the close or sell franchising in do on. and than more a combining the looking looking the moves it's possibly at non-productive to as whether cases just merge with rather and wanting years year a store on identified working as it and move stores We’ve alternatives some at franchisees. and There's we’re

now. through So that we’re going process

say or in other to stores there's one at to the the with. range of that fair it's do range XXX that think we’re somewhere looking I in

So there's start it's or significant you when XXX talking a something there pretty but so. stores not huge, certainly about

It's will -- all, up XXX may we we the the here we of them sell be store whether analysis range But next store range. in extent the whole not and that and closures. that I’m will them we’re them or close potential them. able franchise sell we the it the still on weeks, that’s have that’s in of to So sure finished couple some of

Bradley Thomas

Got you.

Okay. Well, turn Thank I will much. to so it over you others.

Mitchell E. Fadel

Brad. Thanks,

Operator

of from comes question of the next line Budd James. Our Bugatch Raymond

Katherine West

you of explain Budd. is the Katherine that release to and Thank know core your on of are but In question. improve for what thoughts trends? commented trends. pressure, you on kind commented impacted my negatively This initiative initiatives line for the the strategic competitive you kind taking on Can Hi. I traffic traffic the you what further there?

Mitchell E. Fadel

year the model was and the on the of performance last ticket long. sequential shortening the pricing and And -- the about pricing. business there already we probably throughout that drive terms in Certainly put all the January expectation mean, was core was that comps less be raising by little and as with flat. saw -- the a in the really was think I that I talked year you fact helped Well, improvement fantastic approximately year most traffic

We words, it other accept a sustainable be you than make or you more of more that. of than little to I rather to get In back little still model. less little want traffic flat, more try get growth more to to -- pull So a better drive to traffic, that as that. there's want good think a traffic a news in to lot able a

targeted a make up and So categories I pricing. traffic with that. a a the can drivers for matter that a little think bit more few categories it's of just few some being around Again,

conversion talked some with initiatives shop model. place the think about I execution our to a yet there's to that -- program Joel and pricing, execution full help haven't stores time as quite back in help the few done to almost the is back we whether mystery execution, labor mentioned, that there's -- beyond going in our there's putting a some we’re it's

overall coming So I today an Officer customer and a just mentioned us I think to is back Officer/Marketing pricing. the actually part experience. big it traffic Marketing drive help the and and help beyond execution with Dave's the Chief Officer, of Chief standpoint Customer advertising from

So there's there. -- bigger those are in the things

certainly up store. issue starting We moved to able that’s we be that system not an far issues as XXXX, enhance late IT came have that to being continue in beyond to the program, operate the as but

lot a ticket on there's better. quarter and get delinquency and the year of able that’s So in good even nice things going that on last height to performance be take to

Katherine West

you’ve solved? seen you. Now, had are turning merchandise? that’s All you Have any do think that you that’s Acceptance managing with of the the Thank How you return delinquency kind an rate And quarter. there higher right. lately problems or now been over issue

Mitchell E. Fadel

higher losses let were that is The for about coming a the credit. improvements will But delinquency losses. in keep Yes, while but talk the quarter. I The Joel just we on the made down, before delinquency takes in see you mind the that it wasn’t.

direction the delinquency. we’ve and we’re the on delinquent like So -- on accounts, we’re got trends some going good we going

delinquency. course, are done of what four Of or charge-offs months five the after

you the quarter well enhancements a making, few question. the mentioned in and as things earlier as seeing trail the product of that to the first we’re about improvements had they you return So Joel, we’re but talk the want improvements about

Joel M. Mussat

the think Putting us tweaks a helps process engine. to improvements that tool software I for things. lot makes now much percentage comes very much done when route of -- good decision new to place in made it we’ve AutoPay some put just feature, number our collections. which We And up higher a our activity or we’ve overall, of we’ve our our Yes, easier enhancements collections on -- portfolio a us.

the half the half default So of down back have XXXX. our in payment substantially first back come rate of since --

those in far down, toward the mentioned so good loss we if those will, prepared shown back levels ingredients, which in are results of rates see losses historical our all as couple in quarter. bringing getting months in more So my here see first comments, I you good last have overall to is the do

Mitchell E. Fadel

we And even within quarter, October speakers]. was the [multiple saw

Joel M. Mussat

Yes, October and peak it was down December came and after in that. in November,

business good direction, it's to the news. model. for Those great are see all right which So in numbers going is that

past. had better it a be to collections comes the for in us and got balance to it it's So sales when been

a a place to to process the for to item terms core product, our In store where we -- -- our we returned rerenting. own process rent in have returned store do of

some of the given certain customer, duration won't or agreement cases, kind of we some rent, their has our been and with with that a mitigation and kind the try payment in home do that -- on -- forward. plan item strategy keep For some a age we��ve on got going them

Acceptance adolescent quarters of and core mitigation So we’re more the items really too in we’ve customers' stores. of homes plan to for help of keep Now for the couple the out over returns own and to rent utilized last

Katherine West

Thank you.

Mitchell E. Fadel

as this that news model the pricing fact this lot issue returns lot enhancements in be of new -- are the -- there's that year some year the and some that. company. to not of with made the with last pricing from a we’ve The been good I model in used There's mentioned, already

So that’s really good news.

Katherine West

Thank you.

Joel M. Mussat

Welcome.

Mitchell E. Fadel

Katherine. Thanks,

Operator

the line Our Casella of Carla next comes Morgan. from of question JP

Carla Casella

Hi.

million left structure mentioned revolver. on only the You on got you’ve capital side, your $XX

focus cash to some to point of where your take debt. these out going cash to using you’re Is flow bonds? year on flow there paying for Your down dated excess is be a longer the

Maureen B. Short

say I’m can part that you sorry, again? Carla, last

Carla Casella

flow or consider bonds? use to refinancing out some some your cash of dated you of the longer Would taking

Maureen B. Short

of did the currently kind assumptions options. exploring is Regarding refinancing not our refinancing include projections. refinancing, in We company any

does into and be that refund the regarding first best refund in cash made, The that our in we the is customers forward to outcome the the facility decide about returns. will $XX earlier in credit the our expire an strategic review next once tax I XXXX week process will season just week. company expect later to rest our Our alternative quarter And that million XXXX expect and path structure. and come this will March we determined, clarify tax of for receive occurs once we the file the of on point capital

will be that So in year. later the

to Just that clarify point. wanted

Carla Casella

you increase you a Okay, agreements. stand your great. environment? can at the the number has you then, the on per and goal and/or And number back say either -- as of you stores look been you you’ve customer had just would today think been today’s basis where in where to at been peak Where core store it get versus

Joel M. Mussat

down ahead Well, numbers, basis the store the last a bit comes to mean, When year-over-year gone as on four the our have our it's historical costs as it portfolio. per be years. little since going -- with I we’re overall customer down three,

Mitchell E. Fadel

not from bit -- last so that’s little morning up Carla, historical down from dramatically. and management. it's little ballooned Corporate business years, I’ve at but it has of EBITDA just lot not the is all overhead Honestly, even news. bit. It's a think make, a is the think been just highs, a at -- is this closures I the average of talking use when balloon, to store this down of down you is that because the about -- corporate continued overhead, about field has year-over-year, overhead couple And as to the faster. the good it

down like So revenue because is our store per not XX% dramatically reduced we’ve anything footprint. like though, it's average that, or not the

a but And size of not we front an -- is where here. dramatically. there's all but me, to awful if the match it of to overhead I opportunity today, have think don’t down down it's lot little, I So the exact our right it's numbers in that

Carla Casella

Okay, great. Thank you.

Mitchell E. Fadel

Carla. Thanks,

Operator

of Our Karru comes question Jefferies. from next line of Martinson the

Karru Martinson

Good morning. from does My savings, the what is and apologies separate number million cost if is or cash the the the I flow that? flow expense into $XXX that -- that it, for was free missed that

Mitchell E. Fadel

being two-thirds million believe It's this recognize it can of an about to year. -- -- two-thirds on it's about annualized million with $XX -- we $XX we basis, part

of to million $XX -- to million into is the $XX flow. $XXX million two-thirds flowing free of at least cash So

Karru Martinson

to $XX to are Okay. $XX costs there to the million associated with million, is savings? million $XX that realize with But it the costs or associated million the of $XX expenses

Mitchell E. Fadel

that. million, savings with the [multiple in to -- flow $XX $XX million achieving in that within guidance, have those the to $XX million cash $XX The But costs not associated doesn’t of in it's the it cost is million speakers]. the

Karru Martinson

in Okay. It is guidance. the

Okay.

Mitchell E. Fadel

Yes.

Karru Martinson

of what how the in the at talked and breakeven review guys today, about steps you you there. do are point mean, to kind And Mexico guys have next separate strategic doing? from that evaluating coming Mexico Okay. look a the I you were past,

Mitchell E. Fadel

at breaking Well, it's part -- strategic for flow from from way to strategic years cash review, we the at look Maureen. We even. flow cash two it's it's standpoint, been what, separate look hard now, the review. the it is, it's because of haven't it positive a But

Maureen B. Short

Self-sustaining.

Mitchell E. Fadel

to doing not have obviously to model. We down and invest grow of Positive not we’re in things today. self-sustaining. go cash we’re to anything there that going our and plan not do, flow, That’s Obviously, part growing it. bigger

strategic what review So that’s prior makes process. it to

group We’ve the we of job, it's part there, process. a what, review good looked nice down guess folks Its it, a great of doing at self-sustaining. that’s news. got So, strategic and

Karru Martinson

best, or we there up kind value kind say, just those was -- of quality. more inventory are opening into about, price And better we inventory talk the where and our that the movement that is of prior move points, of to still management, chain? and away of today kind there Okay. from want and up calls the to move aspirational I prior would lot a that get in channel under

Mitchell E. Fadel

Absolutely.

we earlier, that As I said going continue to are strategy.

inventory the mix more traffic occasionally, promotional feel up inelastic in we from some a Certainly, traffic we devil's mix us the now a drivers traffic. drivers some then of few things in, a today bit areas drive help details. to It's going traffic taking the a matter those categories, always are standpoint, it little can just and what tweaking a with and more of make is other but in in good to kinds drivers. for We really that

I do inventory buy when per that if many to -- bring the it's say and doesn't traffic. way could how you of it pieces store couple traffic sure drive the you a make gets ticket down store of So drivers,

So how But, all about and aspirational growing better ticket best it. the that the and into you that overall, strategy it's of do more will certainly continue. products items

Karru Martinson

you Thank guys. it. very I appreciate much,

Maureen B. Short

Thank you.

Mitchell E. Fadel

Karru. you, Thank

Operator

any back over or our like the was that additional to to Mitch question. turn for final call I’d now closing And remarks.

Mitchell E. Fadel

for through. morning, you the turnaround job on in of excited It's thank the with do. what do Board's couple we’ve But we the we to need business, parallel everyone we’re the of a me and you that, time in exactly earlier, business, for turnaround team process got something a plan today. now successful lot thank be to is my and that’s that going intend of I support. to to execute and that this parallel with And Well, said covered a enjoying back. your as ground been I’m your this We’ve about I’m I’m passionate I’ve months. for it. back

everybody wish you I you. enjoy that, with And we will So to day, a it. Thank great soon. talk

Operator

Thank this conclude and today’s gentlemen, does conference you. Ladies call.

disconnect You wonderful day. have may a and now