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Rent a Center Inc De (RCII)

Participants
[01T5N9-M Daniel O'Rourke]
Mitchell E. Fadel Rent-A-Center, Inc.
Maureen B. Short Rent-A-Center, Inc.
Beryl Bugatch Raymond James & Associates, Inc.
Kyle Joseph Jefferies LLC
Bradley B. Thomas KeyBanc Capital Markets, Inc.
John Allen Baugh Stifel, Nicolaus & Co., Inc.
Carla Casella JPMorgan Securities LLC
Anthony Chukumba Loop Capital Markets LLC
Vincent Caintic Stephens, Inc.
John Rowan Janney Montgomery Scott LLC
Call transcript
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Operator

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

As a reminder, this conference is being recorded, Tuesday, May 1, 2018.

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

[01T5N9-M Daniel O'Rourke]

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

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

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

Mitchell E. Fadel

Daniel, Thank and everyone. joining for morning, us. you, Thank good you

the our considerable I been past has diligently few the has been on progress pleased months, am made. executing Over and company to initiatives strategic say

last on controllable around of built addressing As near-term aggressively I is strategy number call, to and our cash a drive profitability flow. items mentioned our

sales driven the growing in event. enhancements performance, proposition increase and milestone our sustainable March. segment. positive; both part the the demonstrate was sustainable of of profitability Core quarter, same-store Core the are again, the our demand generated business. XXXX throughout same-store of was plus and strategy positive the first sales revenue company to same-store and improvement a that the the This the portfolio a second important stores positive results, primarily progress It since an quarter sales that's also to quarter X.X% operating the been real the achieve toward In sequentially And for Core made key AcceptanceNOW improved value the building on Our in strong was quarter and And step milestone both first achieving the we line. the across top line quarter and Core time first bottom segments. is all the by in in

of year, the you agreement our a on business like the first about many same-stores last in the count rental portfolio the $X.X is forward Core is of In up $X.X of As million through made the the to portfolio portfolio average business the we're In hold the of ticket. of rolls multiplied the agreement month quarter year. quarter, future ended our million ahead customer variance. end ahead of know, The we leading indicator by that at balance portfolio March, each a assuming performance. end the at first of rest business, ours,

So $XX months depreciation line $X of merchandise million to for about top EBITDA; benefit revenue again, the and a costs or nine collected million to year, in some it'd the month variance about million holds. the another portfolio got of minus benefit, you remaining translate $XX if about

by demand to products were of first continued our changes. elastic expected and positive on us Pricing inelastic and In up Now, lines the QX those or quarter, through the pricing pricing both and positive and improvements comfort was business, Core, the of which further results the continue in in product Core build every business can trajectory depending about to QX also same-store But April. is move the on performance. the increase lowered portfolio adjusted give business offset results month sales in down positive ownership.

and allow terms value slightly rate, are These in to increase was as activity product ownership, of level and reduced to changes include to ticket. changed proposition In higher the QX conversion a to free Core the investment us also promotional contributing recoup shorter our in well. significantly sales the our expected positive faster. time Additionally, same-store drive AcceptanceNOW, our average higher was

Additionally, a programs, demand seeing and increase changes to making where we're in process initial payment in of AcceptanceNOW, that significant program. our in we we're the have started

All resulting a as offer customers demand day in made I every pricing, with said, are in changes more for that space. our of our better our competitive have these increasing kiosk for product and, us

free implemented in performance, the our April. a Regarding quarter the This and bottom most or line the of improvement, not even $XX in generated approximately million million is cost EBITDA initiatives quarter, approximately were in significant until first $XX company late and adjusted even flow. into in savings cash

reductions, our opportunities annualized $XX to identified, cost positions In already corporate savings, not with since that expected in to about reduced the realized made year. much $X expected Core progress rationalizing department. has changes be but have generate in and XX% realized. by million savings disrupt we're primarily negotiating positions. $XX business million field us realigned outside meet about was rationalization levels about of these $XX million primarily the Targeted been our reduce overhead expense as XXXX Between savings the resulting with better savings cost March, include more year. about and million outlined the expected the track rates savings guidance. savings approximately of efficient service rate an of These of in procurement been to Other corporate to XX% to about initiatives this of annual those of are the stores store by And will XXX the operations, are to or of on allow million be organization. on million leadership rate those April, $XX by in initiatives, XX with in by realized annualized field office, savings corporate to overhead $X Regarding $XX are in early run the this million run annually

to centers we've first up several chain collection Within our Moving utilized onto supply product made late-stage our pick supply initiatives, perform during activities. chain. collection the AcceptanceNOW, and changes historically to were return quarter,

responsibilities be to expected Core collection the rent annual the from expected rate $XX Core, closed were the centers our since to the this expense are very the of and savings stores, were are three business cash approximately related supply that and reduction of AcceptanceNOW in transferred net and ways. initiatives, increased coworkers, nearby we returns The Minimal inventory million minimal are locations. year. the to vehicle During store with expense Also March, to chain added labor over all to in low. other impact Core around our realized centers the run AcceptanceNOW $XX hours million, flow in profit of our moves made generate collection

one-time resulted First, we right-sized the a in working benefit of about inventory first quarter million. which capital the in $XX

third-party decision using to we're centers model a going we product believe and move to our our service the non-disruptive own be distribution as basically We augmented the will We a also made change back for seamless, way this did direct-to-store years. it to by back exit centers.

result in to we year. Now, benefit ways. this a $XX $XX this that reduction about half realized will second, incur will we'll DCs. working two in help with elimination those about goods the million One, estimate And, and savings, this about million of due of additional capital cost capital of annualized third-party us of one-time in run rate working

annualized from sitting product up store based impacts for we free centers, capital optimization we realized to the pay of now of for management: DCs. working about rate changes; in on we distribution with the right-sized we this million, our XX $X million XXXX. the inventory; that our quarter three product initiatives chain supply last implemented So in service in product point resulting the routes savings run $X less inventory and the on The is

annual about realized plan $XX ahead in the with chain cost supply $XX up million add working year, two-thirds you are million $XX million. million the up now We is of opportunities. benefits to benefits this chain all and and to year's $XX of our XXXX when supply our those range, savings savings working capital company cost million of that now Overall, between being $XX in additional of to expect So to million initiatives, the $XX enhancing initiatives. $XX million on this in the capital $XX million we just EBITDA in to be with

annual $XXX you numbers, is range add number the cost working savings when the up adding to million. plan the in of to So million to a this capital $XXX

our for the we quarter. raising yet enhancing we're numbers, earnings first So estimates consensus missed the EBITDA

suffice good ground. is about really obviously, So, a different our But profit bit analysts. feel we're than our is another say, to gaining running and are of it earnings franchising spread where that heading. our business is plan our the numbers of ahead Growing initiative

on franchisee During size transaction strategic proceeds as utilize an The in an to and refranchise company completed agreements pending with opportunity as formally large pursue We'll improve stores refranchising of locations. development existing underperforming XX through presence sale brand to company in the plan there for XXX franchise our approximately is partnering review transaction. a franchise with balance Core marketing quarter, enables as interested grow potential our franchisees us XXXX. opportunity, increasing the rationalization and Rent-A-Center Without the outcome sheet. the to maintain stores of number first of similar of store our closing refranchise the continue the the a opportunities well to

like profitability alternatives ongoing, to all for to and to cash more all thank the the were made help also building our of quarter forward turn look lot business is position for from for and and contributions our customers every great first opportunity to While better I'd they believe to flow out improve process of their significant changes necessary a and the the remains performance do in to continue company. and long-term company review strategic there around opportunity our growth our strongly on co-workers the the I profitability. day. have the to momentum we

Maureen walk the will quarter. the for financials through Now first

Maureen B. Short

overview everyone. sheet. and first of balance results morning, I'll our provide an financial in more Good Mitch. quarter detail our cover Thanks,

All of excluding be items. the will I speak special to financial information

charges up the primarily was special quarter approximately EBITDA sequentially. million, XXXX cost In to primarily which special were to During business per a share of returned This our by revenues sales loss promotional EBITDA total positive in were adjusted initiatives included lower quarter average to basis a better versus our consolidated first period is segment increase was were Same-store store sales higher positive were X.X% revenues the X.X%; $XX.X was point last million, basis XXX AcceptanceNOW Net the collections same in of in X.X% products. the to fourth due the diluted points improvement ticket. X.X%, expenses and basis on X.X% million profit down the severance Core in closures. quarter in Same-store the year costs. and by the of quarter due activity points consecutive related book segment, were and items The fifth Gross in $XX balance last the store $X.XX. first driven largely improvement excluding Core an closures. same-store XXX over of one-time by item XXX driven portfolio versus quarter. taken savings primarily down increase XX.X%, from an driven $XX.X the the value margin million consolidated a sequential margin for $XXX sales intercompany quarter; was total adjustment due year,

last to of no adjustment expenses sequentially. by call, revenue, were year, lower XXX points Core losses during by was and driven earnings the store margin and in financials. inventory lower wholesale to Core consolidated store million, this down Other year. $X.X negatively by Skip/stolen $XX driven advertising being purchased mentioned our retail impact XXX expenses. labor in the X.X% million down flat Store we in X.X%, last and of points rate, count. intercompany not which count timing was impacted product basis versus the longer $X.X related Core store expense the in Adjusted which AcceptanceNOW of As and EBITDA EBITDA was cost was will the basis the Core up results segment at instead million, were last was a excess

Skip/stolen primarily revenues basis year ownership encourage XX% better intercompany expenses store up down other X.X% one-time X.X%. sales prior metrics proposition by to year XXX $XX.X points losses QX, was Credit XXX quarter. business total sequentially. better XX.X%, year, margin million, amounts benefits offset revenue, due points points and primarily were was the compared initiatives basis value corporate to and year, a basis HHGregg compensation in changes. on in material Adjusted Conn's new and of million the lower adjustment a payout stock value to the see XXX down and did primarily to the the operating down the by XX year, due in turning down closures $X.X business, AcceptanceNOW AcceptanceNOW early took higher than last of also in points basis XXX throughout basis $X million versus from and same-store Corporate which discounting year of products, Gross granted versus count. store book returned AcceptanceNOW executives. Now previously we last Labor of margin store was the partially the decreased driven was by million last $X.X increased AcceptanceNOW EBITDA was EBITDA AcceptanceNOW to former expenses place the segment QX invested in points and savings which overhead XX.X%, quarter. improved Since was by to the reversal from last within benefit the cost prior not driven late sequentially. were

million in $XX.X sheet, balance the quarter our quarter operations, XXXX, $XXX $XXX of available the from by ended million refund, was quarter have end was have we end $XXX $XXX.X on million. no in million cash reduced The debt million the equivalents. in million liquidity and the revolver. letters at by of cash $XXX of QX on Since received Total quarter, of into cash and of million fixed generated $XX $XX the including the million the the reserve the account revolver at $XX currently outstanding taking with million balance the and given of the outstanding approximately first the paid $XX on our cash over and and hand Regarding the charge ratio of during our quarter million at million, tax first $XX $XXX drawn. debt first necessary approximately million quarter $XX coverage end down total million company $XX $XX was revolver approximately Total reduced the ended by and balance capacity in approximately credit. the revolver million, million

flow we will XXXX, cash from be during generated to operations business. addition, In fund sufficient believe the

be of million $XXX The as increased guidance month, initiatives previous total guidance. to initiatives million generate the for previous in all are expense expected to realized $XXX million our supply annualized annualized to expected are expected $XX $XX at other to we to now stated from million Overhead initiatives up and are expectations. million $XX previous guidance million $XX million flow with $XX unchanged issued generate have from still and $XX in to guidance. guidance, $XX XXXX. million store Working from exceeding million working benefits, up remain least of million release total of million. of Revenue, to free expected from now capital of savings $XX chain generate and capital earlier $XX $XX management's Regarding cash are cost to XXXX, two-thirds up savings savings our million $XX savings least to $XX savings, this at to guidance; $XX million initiatives million, previous million from cost

questions. open up will line for we your Now, the

Operator

first James. Our will question Raymond line the ahead. come Budd Bugatch from of with go Please

Beryl Bugatch

morning, Good morning, morning, Daniel. Good Mitch. Maureen. Good

Maureen B. Short

Good morning.

Beryl Bugatch

in quarter I'll been effective what the pen have guess, and I one. to cut just try cost to might savings

was you said the savings, guess the projected of give cost can adjust around that of us million or – $X number. You it my maybe wasn't somewhere help material,

Maureen B. Short

but far that's don't of have to of me. not I in front but there $X It's lot to to in savings occurred, probably estimate. $X probably wasn't number exact probably that range. the million that That's closer in good early off, a guess Since that I overhead savings a March, mid-March, happened million in

Beryl Bugatch

ahead. So – I'm that Go would sorry.

Mitchell E. Fadel

why because the and yet But... the – quarter. very is estimates. a we're we're first spreads our out not our that's our little numbers, quarter raising first an comment of different little, that in consensus That's than the the much we analyst there, missed our impact spread numbers, made though raising even why I That's

Beryl Bugatch

charged. as Guilty

Mitchell E. Fadel

so... is our little a Obviously, spread different,

Beryl Bugatch

second would Well, I a imply to $XX next some little quarters, the may something quarter be understand, for but million still being because light, three close bit of the you're actions? a that quarter implementing each with

Mitchell E. Fadel

That's right. right. That's

Beryl Bugatch

couple are can we actions you've those about sensitive, actions, contemplated. but people expect Okay. or talk in And that you actions any the involved then significant are that realize next that's actions more quarters? I other in got more there should if

Mitchell E. Fadel

will, little things next get We the we are year this done in think the quarters things things couple there We're the don't could that'll are on focused and plan. certainly I the a more of on list. things running things probably – we the impact Budd. on we're this list There them, of on picked next on be ahead year. executing not more other that's year, an impact

Beryl Bugatch

had by million or the $XXX to is or you've year I Does of said by think and it right And that. it at more? already of look $XX another free million cash that goes that the the Okay. that you of mean is debt end $XX way down million

Maureen B. Short

revolver paid off. is the fully Well,

Beryl Bugatch

Understood.

Maureen B. Short

we a cash And our not with when operation, we'll We're more enough we to alternatives the so, of But plan. the once year. process, generate pay strategic we'll outcome what the paid flow debt it in on forward comes use cost $XXX that. lot will debt. the million throughout And to our implement revolver sustain off that that the working off, to to review have pay to move plan initiatives. savings we there's And already the free refinancing be can with we off

Beryl Bugatch

Okay.

of from Just quick ones a couple me. other

XXX maybe of out to stores what's the how How year. or Core we through year? been number been this being in Core I flows the versus about that closed an ending Help look do what think merged. franchised, talked maybe at You what's kind that us is,

Mitchell E. Fadel

a through businesses due And versus with is gone as last franchisee close, pretty number we stores which an said that what a the as quarter last to the the we're of estimated XX And Budd, you store and little by we more year And front down first the getting like we the They're XXX spread that business is separate might little Well, improving, quarter. better. quarter recall, to from XXX. a analyze we've in XXX. store sold to at to we actually well over XXX lower load. bit existing

merged If down. there at locations but you the were end current looking XX release, in press the yes, first press release. the just at the quarter, are our Well, I'm look within of the year

first at XX leave merged right stores that about it's of in the about go. XX year. another would And So so us X,XXX about the end to the quarter,

Beryl Bugatch

you. Got

kind it's if of us kind comp That's area Okay. And the – least just to been challenging really for right. lastly where what of the get could an from us you give base ANOW. get me, to at is for revenues

So how about we that? think do

Maureen B. Short

The included the small And same-store stores, those store newer overall number number compared applies count still more favorable sales the little as know, have that AcceptanceNOW than a total. are they to in quarter. you for locations so this still bit a the average, trended is fairly

Beryl Bugatch

Okay. Thank others have cede you and very much. floor let questions. Thank I'll you. the

Maureen B. Short

Thanks, Budd.

Mitchell E. Fadel

Thanks, Budd.

Operator

of go line the Jefferies. from come ahead. with Joseph will Kyle question next Your Please

Kyle Joseph

Good questions. morning, taking my guys, thanks and for

Mitchell E. Fadel

Kyle. Good morning,

Maureen B. Short

Hey, Kyle.

Kyle Joseph

to Just apologies there the free would that in were well? want from be sure cash flow how include the analysts apples-to-apples cash guidance, free quarter; Anyway, we're and make for this flow the franchising off severance terms of guidance, in on just that. the given would sales proceeds as

Maureen B. Short

for – initiatives. the $XXX as included to at the well $XXX or the savings proceeds the sale the in as would sale the any franchise million the stores, of Yes, severance – incurred cost re-franchised from be franchise, million least

Kyle Joseph

but credit improved there, us on over some Thank being going And looks on color new pricing there. by much HHGregg Conn's just touched rolling of on is give like just just closures, can the helpful. you. what's How going That's the there? much out and Okay. that Budd I is you're you AcceptanceNOW, it, to driven how lapping then know

Mitchell E. Fadel

is of last the Conn's don't Kyle. first and least, end it quarter. of lapping we think in I Conn's not because the year Sure, of of first and sort at quarter the got out towards HHGregg much HHGregg, Yeah. end of the

collections those of numbers in every when And and a from hadn't last them the quarter the a have quarter first So ourselves of we're sequentially, month year. gone standpoint. loss We the most in exited we for at look first stores. down

of I we're I impact a probably improvement, that Shorter So seeing will split execution between terms operates. And some in the and proposition business of value just think think already that. lot primarily there's a big the changes. very make way

Kyle Joseph

you closure you completely? the on credit can or for on think then collections up of that stores impact do the anticipate performance AcceptanceNOW make facilities, of any the And sort there, do

Mitchell E. Fadel

The if think anything, will I it will better. stores get do... that,

Kyle Joseph

Okay.

Mitchell E. Fadel

doing ...a in the better do better a the job will collecting job. center. collection stores we're The them what

be impact, cost be a it I there's there's operational if the on believe side. positive if But has impact. will the So any any huge it Besides, savings the positive obviously impact, based on stores. will

good are So the pretty collecting. at stores

Kyle Joseph

for Great. answering questions. my Thanks much very

Mitchell E. Fadel

Thanks, Kyle.

Maureen B. Short

Kyle. Thanks,

Operator

of KeyBanc go Your ahead. Brad comes the Markets. line from next Capital question Thomas with Please

Bradley B. Thomas

for question. taking Hey, my good and morning, everybody, thank you

ANOW Let's quarters. I Obviously wanted and of number could. a the about zoom Conn's of see here, to we've HHGregg here loss known if first, I into for

the revenues I first rate than terms point? for revenues of and mid-teens there others. The quarter in would for be where probably is in at ANOW what worse ANOW unusual and looking in did of been run down tracking kind about XQ in payouts XQ had anything this this guess, I early come was

Mitchell E. Fadel

tax first think, refunds. no, ownership normal. unusual because It's income in They're the there's certainly I of about levels. quarter higher the nothing

that normal. So was

as spread year year stores on. I of the think that the those but with the the deficit would Conn's have subside HHGregg goes were last in think, we – don't I and first front the I in quarter the last of being quarter me, against

Bradley B. Thomas

Got or XQ to or worse as things would you of ANOW you the lapping some lesser you. of better in get tough try at the get with think guys we looking keep continue these XQ guess, a to in how quarter, comparisons? to in business. just Do could revenues decline be XQ at I rate models you are Do worst aligned mean, think our sort I

Mitchell E. Fadel

No.

of said, good against number of of year XXXX quarter with and that the see. absolutely the what you certainly appears lapping being it, my – we quarter the HHGregg think, the pretty first and majority Conn's first the we'll quarter former this certainty being that I the for from that's worse standpoint first quarter were the last last

Bradley B. Thomas

conversation Got quarter that wrap the there the you. have particular in you at look on should be a for really up when When this were these HHGregg, you're headwind up of of we originated does that really looking this. And are against? in I mean, then the roll leases line just to Conn's is off? terms where and to you immaterial

Mitchell E. Fadel

right seems last it the key about got It headwinds Yeah. was we've still the as left In the point now, in XX%, is stores. a but amount only of quarter, small to revenue you mentioned those year. lot compared two second

by we'll As fourth the quarter significant minus I said, it improve minimis. had XX%. a number; so and still upon de really pretty quarter was quarter, third the not much, But second the

quarters it the more next as third the just really two quarter quarters, quarters, So there declines more there's second but not first. I the as two be – think and big an two there's will impact,

Bradley B. Thomas

and changes hoping was Mitch, bit could you about you've just works some terms Core. how made operational the a of little management relative ANOW to the then, more And that talk of I Perfect. in

be? that out as that been gives integration will of cost you to Where you're both here are more an today been gone of we've operations know, well that terms that as still in the the favorable that does and pulling sure You what hearing on. be want making them where stand there's you that's that the confidence

Mitchell E. Fadel

still manage, over for things district those just if because having and they're the got was the it's standpoint, savings sales without easier, is know their on job but stores the off with guest from and can management primarily more I managers significant – kiosk the of in still because do AcceptanceNOW Core a collections manager level of couple now, their in managing now. the district stores, – the there lot stores, collection just can the they're the a AcceptanceNOW over calls changed. more they the job well, manage their AcceptanceNOW, and sales district centers the they're Well, managers to managing manage but And phone plate, taking don't collections,

savings lot AcceptanceNOW. they're there's that's was on more So, of team managing and but focused managers district where still management a a standpoint, stores whole the a of solely from

to course that district a a collections as span control going over up primarily people taking more So running it's think over the leverage little managers positive get said the because and picking of more. product with collections activity, could anyhow. And expand the Core all can up bit to sales of we and of on focus Core sales the I Core alley of earlier, those and the is the I now the the their side, and something certainly stores

positive all standpoint. it's think that I So from

Bradley B. Thomas

gross Core. little could April you're up strong Great, great. we've And a you XQ here dots Core if – portfolio Mitch, here evolving the should of bit here, seeing way is your be a margins lease the than it just more I a the sales as I where seeing business, XQ I it about same-store margin more has had would stay that We've and here done into been in that nice would Mitch? are better obviously, better moved like could the sounds on the like have guess a in squeeze year-over-year. the connecting and comps second Core, the in even one the the in talk you as look in way the right in improving you're here that it. job the quarter in row trajectory here Am

Mitchell E. Fadel

I think, you are.

other this the as grow and changes less the free sequential improvement. I that And at comps, impacts the where you the were directly I which we we there's continuing at and mentioned, just mentioned last used of March that as being made pricing continues to like quarter. time things without sequential look first the in April comps is as think, with year, also some portfolio the end I being than bigger

Ann about brought now always think proposition more it former stuff so focusing changes back, look execution. the sequentially some Davids, our on we've know, to just original even We're you CMO, you better. coming we're still the advertise programs As enhancements But working them, folks on we marketing good when of and point, the I traffic the from a made the starting made, so yes, and actually there's standpoint, forth. improving value advertising to obviously to and continues just Brad, your and to

Bradley B. Thomas

on Mitch. a all clearly Thank my questions, you there. going well, answering for Great, lot

Mitchell E. Fadel

Brad. Thanks

Operator

Your line from with Baugh ahead. Please go question next comes of Stifel. John the

John Allen Baugh

Thank you. Good morning.

with going what's ANOW, that know, me, the is, could initial start, on? Mitch, within Let's you about you payment changing, what I program comment tell think, change

Mitchell E. Fadel

on initial customers, think, but to started of month. is month initial The increases the of paying first XX day, forward, initial couple a pay that going something lowering on gives payment us payment a their due you their test might due-date ways, monthly the the a also their – when comes their not because in payday, payment quarter from demand the it the first the versus now. I versus be we shopping to it date the payment, they us at payment date customer best lower, end next align it helps pay it if And know, is of our in on days

monthly payday. start to So get payments. then And to their a their can they got making we just lower them first next their initial payment payday,

honestly the because it our it competition it. pretty with does consumer way of So collections, the increases their gets it's And space the that right on date. helps much demand, in all

initial catching the So lot to of in just that with ways, and competition up payment. a we're low

John Allen Baugh

through future any offset benefit am away, of ANOW? collection And side that the the items, some One, guess assumed Core I from maybe more more if I putting decision, better. there was product then but re-renting assuming closed, that is I is the that. am so have some you liquidated on Core in that ANOW rerouted collect And revenue Are on curious margin I I costs stores some and in appreciate to is those you resources just stores what go stores collect Thank you centers on that the fashion, the in collection questions. it'd other there? of be two for mentioned the benefit Great. being curious and not

Mitchell E. Fadel

back going the stores the to negative to all effect Really, point, first question no your Core was because or there's anyhow. product

the forth, closed and some the been year. but those think company clearance I centers so last has in have past tested

Core all So and directly collection a it control it that more little and without the business needs them. store over Core now in Core, going putting goes which to the district this the manager product up The it was the back center. has picking more

it goes and So improves there's to where the product negative no it. offset

on in of are a labor of stores million As that's don't any year, the a markets, $XX to few few need more little had million bit I certain when markets we around talk have a where markets in returns shorten low some returns There's down lot stores, ownership net year, the to are and little before. was $XX value to savings we so add go the little over continue labor we the so add that labor. about in proposition, the of of the a to a driving in a labor, and AcceptanceNOW far add as a most bit but as more a terms we and have labor low,

John Allen Baugh

Good.

You P&L cash those Were any mentioned Can and they in, stores, curious. sort sold rent stores? to understand of that bad coming of going your XX average for disclose impacted refranchised. you what you got how there's stores, or on forward? I stores, but good you stores just color multiple

Maureen B. Short

John. Yeah,

quarter disclosed So release was press stores in the from we $X.X in proceeds the the million. as of the sale

buckets to to utilize to identify way to going the markets franchise. the not good These of. the truly every stores partner to We with so from for the far proceeds help stores, third as It's wanted improve is and are that standpoint, believe forward were different the franchise that as going the we That's versus unload going some franchisee put the these our brand the that the different. stores. underperforming that deal in it As just average sheet. is forward. stores stores a right get strategy underperforming the the to that's that have look we franchising stores and company be and and how We they and were way believe is a continue we way can just we asked performed quartile, about profitability just in continue growing balance strategy at them rid not

Mitchell E. Fadel

– payments enough EBITDA those those John. numbers the going in And impact being on to is don't stores close an store, certainly not are royalty in there Maureen has are have me, front the stores the exact third the our I quartile said, but of not making they're of forward relative they going EBITDA but where impact they forward, materially,

John Allen Baugh

was kind what guide franchisee be revenue, of annualized than was say of or would price the on half revenue any that it fair And on basis? of the Okay. to less though sale a the

Mitchell E. Fadel

in probably leave at transaction. that roughly just release numbers it's press a it I'd million $X.X that the are the

John Allen Baugh

and versus was the Okay. the a of change maybe that, plan then XXXX for there what sort ad could XXXX advertising, timing And on of spend? mention you explain by is or

Maureen B. Short

Sure.

So take advertising. place expect expense in the the that's we depending when on activities quarter, when which to

timing of when activities when so, the we it's differences, impact the And primarily talk occurred. about year-over-year

done what As year. it's year-over-year, last we advertising far the as as about had same

John Allen Baugh

So XXXX? year versus that's for your a quarter one comment the plan that's or XXXX

Maureen B. Short

last year. year is to fairly similar Full

As impact, a far as was which timing you QX the difference benefited this year. the year-over-year, there quarter if look

John Allen Baugh

then And quickies, in are we, ANOW? the virtual where couple Okay. decisioning with sort of Mitch, of last

Mitchell E. Fadel

got our space that on and a going It we to that critical of lot we've We're solve do. so that's that. lot piece to XX Good looking our that. there. out space, and all a on on days and how forth, be a next that. There It on AcceptanceNOW of critical a some going in-licensing next Hope we have to need forward, lot of growth There's and white continuing question. something out going right? to done finalize of what days. going there work at in continues options XX the by are trying options just There's we're solve to can we're the over vehicle, piece to to the awful be and in is options

John Allen Baugh

quickly, missed bidders I'm I around process? And disclosures there. and the sorry of Okay. Thank strategic change anything interested can review was of versus And any add? on update that. timing one completion or little the in you last there Any you. a the nuance it, parties color, if some commented you

Mitchell E. Fadel

press let anticipate, reaching I'd still We a as quarter. release release the says, second itself. determination in press speak No. just the for

John Allen Baugh

you. Good Thank Okay. luck.

Mitchell E. Fadel

Thanks, John.

Maureen B. Short

you. Thank

Operator

Carla Your ahead. next Casella JPMorgan. question with comes of Please from the line go

Carla Casella

follow-ups. couple you give the skip/stolen Did A of rate? stores Core Hi.

Mitchell E. Fadel

did. as X.X%, Carla, Yes, quarter. last same we year in the first

Carla Casella

a of is capital, talked or supply and from business in side the coming inventory if great. Okay, improvement capital. And that working change And and working chain, in then the of payable lot of just from wondering reduction you I'm it's terms? any coming how much about improvements the vendor

Maureen B. Short

XXXX. $XX about within majority inventory. right-sizing the the expect coming to to capital of million we in from eliminating and inventory, million of the from $XX to right-sizing third-party distribution $X in million million $XX is the working is We in Carla, the numbers, costs lower the benefit Core centers, coming from talked benefit $XX from There the the model. change benefits one-time million of one-time direct-to-store product realize moving

Carla Casella

level what And Okay, the maintenance you is CapEx it where then, this great. CapEx? for side, then of see do on and year the

Maureen B. Short

$XX we – quarter, IT year is of million $XX this expect I related million is, CapEx we store the that to for year. mentioned, $XX CapEx The full reimaging in $XX around we up think, sorry, That made said $XX costs. million, to million to million Yeah. last as just expenses

we're those from lot A decrease similar of coming the levels. breakout this CapEx on the a past, lower So focused more to lower spend. but reducing technology to year is

Carla Casella

prior profit on And is little on SG&A business all that a change franchise and strange franchise, that refranchising reporting. in the the the because and side? one did a little Is of the the – gross and/or are compared the gross rates to we something just great. for bit profitability then of the looks profit SG&A. It percentages, reporting and just revenue last, the Okay,

Maureen B. Short

required There us the different royalties accounting that little was the advertising to past. a in treat bit change an than

from you'll income the as item. see to on item collect we hits the well now statement the now So cost advertising, that on that revenue the income amount as related franchisees statement, a a

just This company that the there the is a it is of the recognition change on So the balance that year. quarter now revenue reflected franchise related but here is statement adopted sheet the to income in net on of zero, being first previously. this versus

Carla Casella

Okay, great.

restate have just for to So through year? it'll you show year last quarter don't each this that,

Maureen B. Short

That's correct.

Carla Casella

you. Thank Awesome. Okay.

Mitchell E. Fadel

Thanks, Carla.

Maureen B. Short

Thanks, Carla.

Operator

next comes Markets. of Chukumba ahead. from Loop Anthony Your the line Capital with go Please question

Anthony Chukumba

Good thanks my morning, taking for and question.

capital a the center here from history why could question of direct-to-store bit you a on are a to change, back? I chain, I back why supply little had revert just distribution and if guess, with now, decided a in working I supply third-party in terms chain. So reverting of the terms us network, you guess, why went you aside give of to you just

Mitchell E. Fadel

third-party cost. Well, cost there, much goods analyzed centers is you a we how I a volume third-party related there. as A running to through cost, of this, through fixed as you And what think, redelivering the what fixed volume over has of when go the if buy our is and because are when running up product and were have lot it distribution to closings cost last of just store in direct the couple years a back higher with so of you add doing. than of we cost, changed the from with you ended forth, the we go DCs, get

from electronics over certainly moving. in I the in so sitting – said, analysis the at and fixed fixed time and to stores numbers there always overall, so is looked savings as as change Service a there's we then money only we And for volume store DCs in standpoint. a working the obviously capital as about less numbers by as not current So centers cost far different have everything National the augmenting product as are the get volume our our the cost but deflation the going numbers the changes, the with not forth, Product as level, it direct to

Anthony Chukumba

also incremental I risk executional there guess, any, there that change? change? is of is And terms And Okay. associated with any labor in that making

Mitchell E. Fadel

the is there in Product No. National Service centers. already The labor

things using of savings fact, actually talked efficient the is also more that In service by centers some as supply rerouting the in it's one a chain the routing $X about million there well. methodology in we've

in our routes optimizing as service to we're our it, is an by lowering cost not cost So extra but centers, the actually there doing not only there well.

it's of win-win ways, So from a a lot Anthony.

Anthony Chukumba

it. Got

so Thank you Okay. much.

Mitchell E. Fadel

Thanks.

Operator

line the ahead. go Vincent Your Caintic Please Stephens. next question from of from comes

Vincent Caintic

Good for morning. questions. Thanks. Thanks Hey. my taking

First on the cost savings.

I be cut if very initiatives? the redundancies, talk how expenses and while revenues to about laying you can appreciate could overhead business keeping the and out of I corporate the as significant guess overall supply the more you these the quickly, of these and expecting generations you and unchanged So we chain initiatives with improve any go how be revenue operations through should

Mitchell E. Fadel

certainly think us the cut Well, it's revenue we in the to negative cutting related a necessarily is a revenue over, that's don't way from impacting but improving standpoint. I not as overhead, and

office stores operate are and here I just way operates versus two we do there's overhead the that corporate way the can think the like things with without. the different an extra felt

every churning giving Sometimes at month we're when corporate them have, in but a you have the and you office. the have you overhead more the stores more projects actually more by office, in much the out going, so negative more way corporate more – impacting because a projects you're work

the probably I projects so. just overhead. when about lot question less corporate helps So less It if less the doesn't distraction on the Maureen technology mentioned less going asked a distraction, and by us them, a help office. less going there's Carla anything hurt having on can here stores, CapEx, it projects less projects, think with at projects, actually

Vincent Caintic

the the from just pricing months kind with great. some revenue we see place if of know the the impacts take to proposition, how more occasionally, and elastic changes seen wondering XXXX? products, of will detail, and inelastic value that could over on just the I'm on about price actions like pricing actions same should course secondly the website as earnings talk any the And cash, inelastic you in Okay, checking and the actions on we've the the changes six I of

Mitchell E. Fadel

Yeah.

improve. on seen less computers a and in now we six know, lies products", you or furniture we continues so because side, we've televisions haven't electronic negative as fact, where seen the side the our side, that's been more and I've impact I So margin no on five the price all, between the where Vince, as demand competitive said "inelastic far, making got any sensitivity think, it's up on furniture weeks, demand and lot of there's at and to there

Vincent Caintic

And actually questions last dozen little and bit ask. I was earlier, on so I'd touched one on investor the have Great. a might this be a gotten I trivial it I've but Okay. this, about and thought

instead releases of and changed So the strategic quarter phrase had bidders. review a past instead to multiple the you parties was the press session, in discussion this and about bidders

Just wondering if are into there's any reason that for reading if that? Thanks. people much too

Mitchell E. Fadel

don't than too what's much with comment are people want like Well, more from in that. at to just it into that the sound what you're release, any those saying I press it all queries it. I'll reading definitely does But leave

Vincent Caintic

it. much, very Thanks Mitch. Great. Appreciate Okay.

Mitchell E. Fadel

Vincent. Thanks,

Operator

of from Our go John Janney. question will Please come line next ahead. Rowan with the

John Rowan

everyone. Good morning,

Maureen B. Short

Good morning.

Mitchell E. Fadel

morning, Good John.

John Rowan

debt balance? cost of did commitment are housekeeping still forward couple continue paying fee that'll going revolving a the one, assuming the Overall, I that a expecting, we you're little questions. even bit kind was higher a Just facility on and of zero than with

Maureen B. Short

previous been have in quarters. that has which pay do is with Yeah, fee we a consistent on undrawn the what it we balance

John Rowan

to would would were back for I how What share obviously was we mean shares have Okay. quarter, And share loss that earnings. that a we assume there per guys if this the diluted at add be? then to a gain some count? into point many you have count

Maureen B. Short

diluted in XX about It's shares. million

John Rowan

you you you're of are dates, debt but guys an the generate trigger notes? me of Okay. cash, free you obviously the your of to on through how go functions just reducing else notes prepayment idea important the give sort about you the can refinance that penalties, can I what will the cash know you'll the out with build cash, said credit And what's revolving plan continue flow. facility, then to

Maureen B. Short

bonds capital to I we're million cash plan have building Well, John, process able would we're we'll structure, the existing see forward. to right look of able think that if refinance about the strategic look in be over a and rather generating since now, free more that structure. pay the excess meet the credit we to as But capital $XXX we'll our change time. then the the review and provide flow and and since take credit and make cash we the how at And the quarter, at And then completed cash, facility. process, alternative within of would we facility, it of than not at overall outcome going the strategic we'll second we review down we're way expect think a refinance the details

Mitchell E. Fadel

excess that I revolver now the with going us way The cash John. refinancing. help it the Yes, is just off, the is to about is paid think

Maureen B. Short

Right.

John Rowan

you. Thank Okay. All right.

Mitchell E. Fadel

Thanks, John.

Maureen B. Short

Thanks.

Operator

Capital Thomas Our the from a go Please follow up Markets. next is ahead. line question KeyBanc of Brad with

Bradley B. Thomas

if of me of prices $XX as guys, transportation ANOW potential of for $XX for of higher and things in. terms just headwinds terms at contemplating that headwinds make on of what Obviously, the and Obviously, anything and we're the to I have ask the I starting to high-level I to prices think guys Hey, clearly clearly kind we for back letting Core. should puts example? labor about the missing like of see in in think we're gasoline sure a just can million question these we of going of the higher of you of terms you things EBITDA from not takes. we year lot get labor against. be retailers trajectory how in about thanks you. tailwind, right last up wanted lot puts wanted hear and year, with prices, about because prices, takes about And you're talk mean, But and a year, this two-thirds hitting cost some cuts the year, million a with

Mitchell E. Fadel

of a we're trucks small bit and to the us really delivery on but little cities as prices, forth semis our like forecasting There's that compared way fuel and with with things material a not it's all the having headwind so the cost that. in

a side and so We've so kind potential employees have experience higher impacting so us and we pay and things. minimum range always they immaterial depending of they forth, the range in experience a forth, pretty more the within the on labor more the paid anyhow. it's isn't at and we And So wages would have this point. those make than

So that's us. not changing for

So I standpoint, only Brad, can the small of – a the Maureen... I think fuel, headwind from one of is don't amount

Maureen B. Short

Right.

Mitchell E. Fadel

one. is cost only fuel the ...and

internal about, going only not one the the we direction, know a As one I talked our in it's was game I about financials, thinking revised that that's that's we've changer. wrong

Bradley B. Thomas

those it perspective, again, like in are guess, a not after circling monitoring clearly the guess cuts some line the the from direction with seen most what were sure top executives things cuts don't then initiatives. these I I cuts And feels where impact back you or Great. when you moving cost these to closely would make are there question right business? the we've that were company, under to And be missteps cuts,

Mitchell E. Fadel

collection, impact, daily. at look our in metrics forth. so I stores, impact delivery Well, get but we the day, Actually, throughout reports the collection revenue and

or for see lot daily and basis and how something a and we a on least are our some an have hours day like VPs trending going especially event on pull the metrics are of big store monitor NOW we our Acceptance the there's on, So metrics up looking stores couple the contests if sales can their every and at that. numbers going –

So the Brad. so running of far, so and just it's collecting everyday good, and metrics

Bradley B. Thomas

here. for the Great. Thanks in get again queue letting back me

Mitchell E. Fadel

Brad. Thanks,

Maureen B. Short

Brad. Thanks,

Operator

time, any I'll conference the back to remarks. further turn Fadel this for Mr. over At

Mitchell E. Fadel

and appreciate Regina, I support. Glad thank updating update things as quarter see on we everyone to you continuing and you time, better. appreciate your Thank only get to to next your our turnaround you, look joining again us. forward here I is for program you

a appreciate your and great you we So day. time wish

Operator

conference. now joining disconnect. Thank all gentlemen, Ladies today's and and concludes this you you may for