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Rent a Center Inc De (RCII)

Participants
Mitch Fadel Chief Executive Officer
Maureen Short Chief Financial Officer
Daniel O'Rourke Vice President of Finance
Budd Bugatch Raymond James
John Rowan Janney
Kyle Joseph Jefferies
Bradley Thomas KeyBanc Capital Markets
John Baugh Stifel
Vincent Caintic Stephens
Anthony Chukumba Loop Capital Markets
Call transcript
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Operator

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

As a reminder, this conference is being recorded Tuesday, August 08, 2019.

Your speakers today are Mr. Mitch Fadel, Chief Executive Officer of Rent-A-Center; Maureen Short, Chief Financial Officer; and Daniel O'Rourke, Vice President of Finance and Real-Estate.

the to turn now will conference Mr. over I O'Rourke. go ahead, sir. Please

Daniel O'Rourke

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

Our closed yesterday, are available financial distributed a link after our material, our live All was second and webcast the XXXX. the results earnings operational for website including of related on to which release outlines quarter market at Investor.rentacenter.com.

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

to to over like now Mitch. call the turn I'd

Mitch Fadel

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

We shown providing presentation over on to the will the a be voice webcast.

be can investor.rentacenter.com. If webcast, the you presentation to the are found at view also unable

of strategic on it last on moving Now, the company cost laid refranchising. optimization, The value year plan updates. highlights out focused enhancing to we our and and strategic proposition first the page and

The execution same-store-sales and of in has our EBITDA. instrumental successful been driving strategy

of annually. over $XX the goes last interest and savings we've the months due the cost and forward, approximately million to $XXX million to of $XX million refinancing expected up expense business taken XX annualized of out now Over completed number between the with $XXX that million moving

but big details fill This our share additional of $X.XX the per Maureen third forward. the regarding in initiation capital a new to dividend in capital cash has step quarterly of structure also enabled will our the board certainly starting allocation, approve quarter.

as our made proposition positive a same-store-sales reflected enhancements growth. value having are The in continued we’ve impact

traffic, of is almost the up for which online year focused driving key the this quarter. One XX% on is we’ve initiatives

those and XXX that’s points. rate we've improved improving focused orders conversion basis of also We about by on which the also done,

steps e-commerce this more really web driver becomes a a growth hit in and key really as a We’ll few minute, us. for

intention our strategy. acquire Merchants fast-tracks nationwide virtual as team leverage our the growth rent-to-own On and virtual well. provider rent-to-own potential, top a business the virtual to to is in a take experience a the Preferred, Merchants to intend of The moment we July announced Preferred advantage full XX which now becoming on priority we more existing that of

Finally been executed. have franchising third pillar, which our has we selectively

the During quarter locations. we second refranchised XX

owned stabilizing of results locations, Given a corporate be footprint. means operating refranchising utilized the our improving brick-and-mortar strength and markets underperforming of as our will in

this in any for X.X%, store to plan, of strategic same and second significant retailer. quarter the consolidated sales continue result we see top our progress a considerable bottom increased a results. As both line our Highlighting achievement

is top-line shown were same-store which our graph, year stabilized As our consolidated X.X%, stack testament same-store over how sales last the has to on two the sales a XX months.

are the annual of half in strong guidance year, speaks lighter far we revised our bar the line. what guidance. as color and a second will are the results early of the and as on EBITDA line and we month shown raising our improved quarter, trailing XX bottom our are The a month XX our The on cost to be the reflected the recent expect last is shown savings basis, in year has each bottom result to-date trailing performance refinancing, sequentially right EBITDA since fully

X.X% second in Driven the the proposition by the moving value of to increase better of same-store than specifically the produced the core more core Now quarter. expected sales segment. execution on to changes, the

moment is by The especially ago. of sales traffic I year-over-year mentioned online revenues reflect same-store the overall are our While higher increase increases driven primarily increases to year-over-year, refranchising the pulse our our and due store a down comp efforts, rationalization business. the customer

X% sales comparable is higher in approximately future Our this same-store quarter as the for good of year, a portfolio because last metrics indicator on a than expectations most know leading same-store core the the quarter finished you basis business.

traffic, up was year is XX% last that As converting over I almost mentioned to quarter. on we earlier, in focus the less, our which continue online

think the conversion traffic, XX% rate XX% being we revenue. our of the increase agreements more converting XX% of written we all about a that orders traffic, of and about got With also our and now being in but up, the of about closed you a are that XX.X% represents in so rent-to-own increase off web,

platform. significant this in us increase gives online the of in confidence and e-com or So growth agreements our sustainability continued the

core A business. other on of comments couple the

down year-over-year consistent very remain of quarter the very came as well. year points losses during and actually executing basis team they skip/stolen XX Our this the first is

impact a about get purchases based coming seen lot get our impact any virtually tariff report pleased I’m and days we foresee future where from, and who any product tariffs. nor do we products on on impact we tariffs, asked from no These to-date have our we from to

EBITDA positive and versus adjusted the $XX of improved result points a momentum, quarter year. in basis As this XXX last million

moving invoice Now of million same-store changes was the X% on volume increases drove value our proposition $XXX for the quarter, for our last Acceptance higher to the for than X.X% sales Now, year. quarter and

in first increase we quarter losses impact Our second and a have does of low of year-and-year about where driven it this basis year-over-year by driven going a in related Now losses skip/stolen abnormally are they expectations. and recoveries. with there quarter versus improved Acceptance are the so they down, the we row But of by to in – our points sequentially, it’s a feel quarter XX the good in-line are XXXX third the

sequential lack to is our teams quarter, quarter to compared in business in base the as of versus customer The a despite the of first the our segments. money losses refund of indication both first, second execute the our in in key tax further improvements skip/stolen ability

means expands Merchants Now on Preferred and model five retail into forward transaction this slide the the looking opportunity; integrate to partners. of the the to Acceptance XXXX segment expect Acceptance our over business to Merchants the Now and we Preferred and what half back soft

million total As acquisitions we to approximately Preferred the value of this unanimously in announced a was Directors expected Rent-A-Center July Merchants $XX.X and close Board by it month. approved is for pending of

on after early in noted rent-to-own expansion. call our the As virtual we quarter, of were own stages up the earnings our standing first

Preferred we opportunities fill enable had technology is are In in space speed least to companies, at looking us by Acquiring start-up plan the parallel, we us for their the time XX their our expected accelerate to holes months. locations right and looking at to our we is expansion numerous acquisition Merchants X,XXX and infrastructure the in initiative. to at Preferred match after up And believe our Merchants line. the

in on founded nationwide you as a for a non-prime XX Merchants It’s month generated XXXX. of June $XX I revenue services virtual was as Preferred rent-to-own in approximately They've year. think provider know million basis trailing XX of of customers. this

partners. President leading The furniture, we build, tires scalable led for and retail model. Officer, retail technology edge Chief infrastructure other They existing partners will years by over our are that appliances, virtual bedding, of business staffed believe Joe seven acceptance Executive now Corona and and what and is independent include complement the past rent-to-own

this It the to gets also can is building next and the our business starting where over two capabilities Strategically advancement acquisition due ahead Merchants us across when take infrastructure be think very past three our enhances a years. the up can we phase, business. over we costly see appealing key Preferred the capabilities. which new the next we slides Looking several

not made established and least when at at them accelerate already rent-to-own as time we They've just investments, they a starting virtual infrastructure, by profitable stand-up month. to the now are they start-up were and and said, necessary the should I they XX we buy our

They we can over bring the significant people. virtual believe market. nationwide this cost team team rent-to-own capture a share team With sales in capital, virtual XX to $XX experience access in of lower management over in billion a rent-to-own of

the up, engine. risk Next decision

locations, of an this forward early to While in where present a decision Acceptance in space, [inaudible] different step are this tuning the utilizes significant decision and staff engine. Now now standalone Preferred is is innings been we Merchants today a engine basis the able does the fine from in automated as do which virtual has on virtual challenges our

also both improve Preferred leading call industry is track we Utilizing is Intelligence efficiently Artificial Merchants scalable to center that practices. brings to retailers. upon to enabled a best compliance and table and technology means believe the customers the service that provides

Preferred reporting, portal name to real-time built very They Merchants quickly as intuitive. technology with live-chat also to with ability such tutorial retail the for into to utilize reference has capabilities along just Partner a the portal were. marketing than and partners integrated facing where that the provides further The build right and speed, call Retailer we much to is also get center lists platform and up platform is core retailer a the few.

generates filled Merchants via accelerates e-commerce with be integrate to And will of at providers. its XX% approximately convert traffic business about of advancement which only online in focus. store, ability and the is retail our currently a this for applications with to acquisition that. online half Now of Similarly, Acceptance platforms integration continue Preferred online

technology to will for customers technology foundation servicing, ability with us Preferred our platform build means that an our and to is Consumer accelerates Merchants the area facing this facing Generally evolve. functionality. the consumer interact from is through origination

Preferred us a customer Both retail seamless to integration Waterfall ensure point Acceptance and have technology that Merchants wire Now experience. [ph] capabilities from

committed XX% capability are partners of fully in of application matter in generates technology. have a We're partner we’ll convenient with and As integrated we Merchants retailer and Now so to providing platform shoot or both to a Preferred. do Now in approximately any Waterfall Acceptance fact, seamless and process Acceptance its where revenue the

retail the hybrid industry we virtual combined believe staffed be offering a will during for use model our Looking seasons offer model most selling forward, the model, to the peak we comprehensive will a in as partner. or

flexibility now Our in land model and their be With sale. more best retailers. international better much position will large to partners maximize suits a select and to will retail this to which we needs save added revenues assess the able be

the approximately combined versus current annual $XXX over So XX% and to what pro-forma three grow expectations we growth in approximately of an growth billion rate $X.X are expect over businesses. increase By years? next revenues our XXXX million the of

our out of the will goals position with and capital aggressively believe to the the ability achievable gate to be respective We sell pipeline. our improved

to that hybrid move model, product we introduce verticals put more mentioned and into national earlier, forward, I As new position expand as partnership. ourselves in land we’ll

when is slight businesses, a our Acceptance dip of margin Merchants excited a a see higher two combine about margin we'll once although meaningful we'll with be percentage Now’s initially at in business. overall opportunities Really we And part the these Preferred. virtual

I'll turn on additional financial for call the highlights Maureen results. our now over to And

Maureen Short

overview some guidance increased our call we for refinancing Thanks Mitch. an for Good morning the financial everyone. second before the close recently XXXX I’ll highlights quarter; up with and for the of cover provide questions. completed opening

flat million, same-store offset $XXX the total quarter, approximately During sales the of our last increase second consolidated same rationalization driven by of period and primarily refranchising consolidated versus a were revenues year, store-base. X.X%, by

in margin share was the the last diluted over EBITDA XXX EBITDA profit up items special million was points was XX.X%, basis Adjusted year. $X.XX. and $XX.X per Net same quarter period excluding

the core primarily of by X.X%. U.S. total offset decreased a of revenues X% same-store refranchising segment, to base, rationalization store second quarter the in and In increase partially last due period our year, versus our same sales

labor and XXX Store decreased $XX XX.X%, EBITDA by was $XX.X store EBITDA prior the up in million, store initiatives. driven by lower other and savings points cost was the count year. million, expenses quarter Adjusted versus margin and basis primarily approximately

certain recovery due year-over-year NOW by million, due the same-store X%. increase the increased to primarily credits in Acceptance expenses and Now to second of business, revenues partners, Acceptance the total higher Store partially turning primarily XXXX. to of offset other store losses a X.X%, Skip/stolen quarter in to second the of sales $X.X labor quarter run-offs due Now by decreased

Acceptance quarter XX.X%; first EBITDA in Adjusted up XXX $XX.X of XX.X% the basis margin last in EBITDA NOW points million year XXXX. and lower than was from segment but was the

as as year, look business Conn's I HHGregg the last and from from just Acceptance of at benefited you well. Remember the mentioned and the accounts recoveries run-off Now skip/stolen

million. and million quarter revenue generated In and second in was by in grew $X.X million segment adjusted-EBITDA. revenue franchise was XX.X% the adjusted-EBITDA $X.X $XX.X the Mexico

by Corporate quarter million of quarter approximately the to compared prior and $X.X incentive expenses in primarily executive by operating to the savings the year, higher the severance partially cost initiatives, due offset decreased compensation. realization second in

on balance Moving sheet to highlights. cash-flow the and

offset year, activities million, operating prior of merger termination was from working million For partially capital than settlement prior by generated $XX the operating in XXXX, the and the quarter year. the second higher $XXX driven one-time by stronger performance, cash benefits

metrics liquidity over ended shown X.Xx. the improvement in to The We quarter liquidity net to $XXX cash and of the to the with of ratio debt XX net the highlight and balance past our in adjusted EBITDA our EBITDA on ratio debt million and the net EBITDA strong debt sheet the position graph months.

facility XX, the redemption of as the page senior to Mitch of we completed recently credit Moving refinancing outstanding and our mentioned notes. our

refinancing a X and new the was for initial agreement into full the loan was With year, and the borrowed year credit million million The company the a B. $XXX draw under entered Term million on facility, asset $XX B. Term based million credit $XXX the X loan revolver revolving $XXX

proceeds The million refinancing, $XXX notes. the used prepay from was the senior $XXX to fold cash-on-hand plus of million and

debt Following the refinancing, completion with $XXX outstanding million. of the

significantly million an balance, expected is net that debt Given approximately run-rate million lower to to basis. $XX expense the $XX by interest decrease on annualized

our our account the revolver letters of credit. balance $XXX sheet $XXX at availability taking the time of million, and closing was into Cash was on million on total

our I'll bit framework. a Now about allocation little capital talk

to on the the Our billion rent-to-own business would first be priority virtual focus investing with $XX-plus opportunity. the grow

maintaining are going committed to forward. sheet We balance a also conservative

ratio also to debt now we XXXX. and able through not we our $X.XX financial to per target share value quarterly currently refinancing Our exceed the return in the are net performance, quarter dividend improved up a a to EBITDA third shareholders long our of and to Through have starting is X.Xx X.Xx. range

Board Also, we as Directors share-repurchase program. authorized program, under of reminder million and June the XXXX of XX, as remaining had a a the $XXX previously

flexibility the With refinancing, the the of company to has new repurchase shares. now option the

not our Merchants note acquisition, out Preferred XXXX. XX, the refinancing do include do but ranges Please these include the slide to for Moving transaction. guidance lays it revised

$XX strength remained due prior of be in billion was and revenue million $X.XXX Total is to core consolidated range by Acceptance the to flat billion. our $X.XXX and expected increased revenue revenue now to Now of portfolio guidance. to increase the The

Non-GAAP Adjusted expected was be $X.XX range. are earnings to and of to low to is $X.XX high $X.XX, the mid-single increased $X.XX between of Same EBITDA between the and low and million. guidance end store diluted up now digits. $XXX per digits, million share to be from sales the be end mid-single $XXX increase an expected on on

second in previous and refinancing. the to half versus performance The are in the due quarter Adjusted EPS year savings to the back the EBITDA increases of guidance the and due the the interest

include wanted payment. been has and note $XXX Free $XXX that million, is cash net the flow expected and dividend between I also the to be million debt to adjusted to

increases refranchise The fourth after the transaction second Due in not expected the guidance seasonality, of to most does any XXXX. new quarter. the quarter include to are of the materialize guidance

income As always, second detailed XX-Q the the for segment by filed will our later pro are be posted on and form quarter today. website statement company

for you your Thank time.

for up open the I’ll call Now question. your

Operator

Thank you. [Operator Instructions].

ahead. from line question Raymond the comes Please of first Bugatch go Budd Your from James.

Budd Bugatch

read to of the what that’s of morning Preferred us just you questions; Good since thank Merchants I’ll for Merchants and us To will and taking bit terms that doors of a just steps their a going what more of give give are you initiative. couple plan growth in flavor you year-over-year kind maybe can and a doors of on first Preferred? Mitch current with the kind questions. to integrate historical? How the is start of newest and of start your little be

Mitch Fadel

even haven’t can won't results, I morning. too Probably of of Budd, into much give closed we the historical that Yeah, get you some good yet.

get even bit into talk it, yet. I So but we we quite too can with said, about like I a it, closed depth won't much haven’t

speaking going But have going forward the to business. we're generally integrate

Preferred Corona run team staff the Atlanta least people at have initially and running continue model. the virtual out to run and the of will model his staff with the will going Joe here to are Merchants – model We

you’ll to the numbers the virtual. are runs each of leads, experts Joe So will and going we co-leads see kind us going to are together, work have the the we running of integrated, – CEO person on Now who for Acceptance side that then their you if

doing research on research term working still doing will on whether we So both brands we some both term, initially not, keep on. long co-leads, – brand we're we long consumer keep or the whether names customer branding,

doors. started in million. their got a They've X,XXX about turn the to year revenue about or profit LTM is $XX have two. They in I last mentioned

with so we on what unleash taken pipeline XX infrastructure, the to that an sales start-up capital already they’ve Acceptance Now mentioned, losses about built like team. lot their person I the into They’ve from we that we're As they large a is dive plus to world. already embark virtual standpoint been constrained, got a the have can pipeline,

will over Merchants think grow we becomes years, we We’ve next of the there or we three Now there. know with $XXX we the X.X which $XXX a million to businesses have and can virtual. are and got say how verticals. that be for can that of new the will initially we when on manned The think based – two numbers, only pipeline a verticals, have do out Acceptance offering we combination over confident went virtual and new we combination We that go the I can large out the are will Preferred the very ones offerings, or the to you million

tires, and tires, not They that’s new we vertical there’s other verticals in to in are about. talk are new so

should are this integrating on two working we excited. month close and businesses. get the So It

Budd Bugatch

that how what investors works a be little saw affecting you up margins? cost bit a to Can a us I expect? performance was give Okay, days. flavor and sales merchandise quarter of the the gross core, issues this little should showed was in and what's you bit quarter margin we and year-over-year. let bit it about could me looks like just significantly maybe about year-over-year. it; about quickly XXX turn the to, It gross if of one talked last the on talk the little up a Talk quarter may

Mitch Fadel

Yeah, forget think I were the I showed this it think making value don’t When quarter quarter. when second is year-over-year, last year go – just we don't changes. the in you proposition

four sequentially last If last the it’s four you quarters, in quarters. the the look highest business margin the core in gross

put as only percentages So it from They've started up it of gross up soon in to quarter third XX.X we it and was been showing there about the the have slightly. show as our quarter. margin up at By beginning every gone XXXX.

I’d been consistent expect at that stay at and pretty it's them So least to range.

quarter a baked of margins changes third EBITDA the It’s already that’s beginning its of only almost year-over-year since was quite like the They quarter, actually points lot first few, a they are improved margins. over of in. dropping I the they’ve last I the to forever, last of think are in is so and basis year, year, improvement made the Sequentially not ago. EBITDA the just than it the quarter because bit and XXX we a year in XX.X% highest higher The and point dropping.

made but dropping. It's is only value dropping it we if quarter propositions, is if and I it not back margins before quarters gross made up from like is is second a last just the So four it's was and you I EBITDA like basis before the even margin points, margin go number, profit almost the marginally said, forever. think EBITDA lower the the the year the all it's value is gross the looking than XXX last important in highest proposition, down ago, we again to way at year which and

so are only like go a back lot It’s money overall early dropping to a we They got the it’s pretty now. than value not you we've used cost when gross already the anymore last they making to are – proposition, but more are we taken year. dropping So out, in. and backed better margins we’ve

really the are happy with those margins, we EBITDA margins. overall with So

Budd Bugatch

average What’s for that. Can see us of kind looks now per I door? you the core contracts count number the – is? of customer How what that give Agreed, contracts like?

Mitch Fadel

three effect I was it on page You the know compared count in know count red slides customer XXXX; on the page top to don’t front me. shows the is The blue I per have the where three. back that of of customer line of per on right store in store line. one

was, top the on four ever So we customer in our finishing say point of quarter are years high its point for I say ever three high – me, the going is I second of can’t presentation. of account don’t I’d have our basis last accounts of I account that’s but where the – higher relative account right which will accounts and same. the on than about in a comparable be to but close. the mean front are customer pretty customer kind be the the

Budd Bugatch

a those B filed last I me, savings. $XX Maureen Great! bit Term like? million will flavor rates how to the maybe the know does on get $XX that look document the million can look? and When talk of revolver, agreements about in us And and you can just a a loan those for you be little inside of annual interest give little what we

Maureen Short

Sure Budd.

Within filed XXX the rates are the the is that’s later points XXX it about loan on the AVL LIBOR. LIBOR. range Its B to plus all the basis about dependent can from basis points leverage basis credit points and the information today, that plus XXX on XXX XX-Q include initially will Term agreement, and

Budd Bugatch

basis points LIBOR? XXX above

Maureen Short

Yes.

Budd Bugatch

is Okay, that FILO a working? that’s and that is how loan,

Maureen Short

traditional base. Term Its loan on a based a it’s borrowing not a bot B, FILO. No,

Budd Bugatch

you have? want to, kind flexibility do Repayment of if what capability, you

Maureen Short

able full have penalties. be we’ll months, prepay we six before no flexibility Yes, debt to either with the

Budd Bugatch

bank any the charges for will quarter? third refinancing the lastly, up that in Okay show

Maureen Short

Yes, $X $X within between fees the and quarter there refinancing million is of third million.

Budd Bugatch

the complete turnaround. Thanks. and Terrific! Really Thank lovely you congratulations! much. see to very luck Good

Mitch Fadel

Budd. Thanks

Operator

from next Please Rowan Your question from comes ahead. of John go line the Janney.

John Rowan

Good morning everyone.

Mitch Fadel

John. morning Good

John Rowan

a little information the that including rate cost and I debt of back commitment on know have you you of might just ABL. the the I Maureen B that But just, simpler, fees it now, cost the have. the wondering, up blended just was what's maybe I what making the, of – any you appreciate

the to get facility of what to sense a is trying cost the of Just you today? overall

Maureen Short

and plus X%. XXX The $XXX blended be million XXX-plus then the LIBOR. the rate on is, at It at million points would I LIBOR a under believe X%, AVL basis the $XX it's the little around

John Rowan

And does well? include commitment fees that as X%, the

Maureen Short

on XX basis the of commitment there Yes, XX.X fees letters credit, and that ranges to points. are from

John Rowan

the of gave guys includes guidance And assumption of you period, that assumption basically I repurchases? that asking the mean an your net guidance at the for debt repurchases. then I'm end for include if does the

Maureen Short

It not include repurchases guidance. does our share in

John Rowan

can to Is covenants it be much or through whether you dividends, how there a acquisitions limiter return, in the repurchases?

Maureen Short

long certain thresholds, those as basket As we meet liquidity payment within facilities. unlimited is the restricted

John Rowan

Okay, rate going forward? any tax guidance

Maureen Short

between Any tax XX.X%. rate Yes, guidance. in it’s XX.X%

John Rowan

Okay acquisition what and then just on one strategy that you did, their dealing for question is the with return merchandise?

Mitch Fadel

Well, different they ways do that. have they few a

I say think few the key they point when there; I merchandise. ways a different want to recover

they don’t the Of for of stores all brick-and-mortar these whether re-ramp virtual providers find to kinds things, the that things sales, other so things, and course to those is merchandise, to is another it’s up have discard which like most liquidator do, and things they of have what have like for online that.

agreements, based core value do level monetize the higher point it's The they've without, what our they we can stores, not but at with of works agreement, do their can they lot, with hurt a with a brick-and-mortar we get don't though proposition core able key monetization having that month have way to there to our level returns we the they that’s XX the going – improve stores. us a John few can brick-and-mortar the get them the shorter in monetization, – on XX, term than been is like

John Rowan

the tell be relative return you their Rent-A-Center? rate what would willing is to us Yeah, to

Now. core the to relative and Acceptance Well, Rent-A-Center

Mitch Fadel

front business, on it’s of haven't it’s I yet, high. we any high, a few to is, so have much reasons; No, not in we one me, situation later, wouldn’t can able are the in monetize and closed it’s their returns course, for we’ll current a in there what of rental But get it two they real don't real have data I way. be to not that give but but better

John Rowan

do think plug the merchandise? you and them will your returned And getting on margin be know that into they you you gross improve to brick-and-mortar are stores able

Mitch Fadel

Correct.

John Rowan

clear. be To

Mitch Fadel

Correct.

John Rowan

you thank much. Alright, very

Mitch Fadel

Thanks John.

Operator

Kyle line a of from from comes go question Jefferies. Please next Joseph Your ahead.

Kyle Joseph

Hey, taking good for busy congratulations quarter. questions guys. Thanks on my and morning a good

Mitch Fadel

Kyle. Thanks

Kyle Joseph

related the talked I one Should up, modeling in as third costs the quarter perspective? about one-time time for acquisition credit facilities. we guys following Just from know costs expect the any you to well

Mitch Fadel

A little banking there banker lot, but not, of banking investment a Investment fees not bit, amount a from be or it’s whole will a fees. standpoint. small

Kyle Joseph

Got out potential being to consolidated you go it. Preferred, quickly and know you have how able And platform you business the retail then pitch new line sort time the and what there? thinking do partners, do about two to Merchants anticipate of

Mitch Fadel

They so some kind – of constrained, we the right Well, large a been with can immediately come it virtual; they've now phases capital that will Kyle. offerings. issue pipeline for based current got the of only on

technology As next far probably we’d combination a where store, stores of same looking it’s a year. within at to manned offering hybrid early as the we're the different do be from quickly. standpoint able or in virtual that pretty In same-store the

month on baked but as as starts current full of that one. window the the and unleashing their day that offering far time on being capital team six kind constrained, the So offerings, sales

Kyle Joseph

and of may there know of a not there I be Merchants then perspective you the said the Preferred the And profitable. just – bit little understandable it. of Got thinking EBITDA bit margin a Now from term you margins Acceptance time. consolidated combination little highlighted know you business, over compression. but I’m about a near given That's sorry,

how in EBITDA Now puts margin know has it obviously, and understand takes of But terms versus virtual some there's you the of about some as less is well. fully over where trending, costs, given combination the do that business, EBITDA and but Acceptance you been employee think the time there given margin offsets

Mitch Fadel

standpoint. it little in gross for is then certainly profit virtual some from you make a up world, lower the there's Yeah gross, a but labor

I as where is becomes more it it will be think but today. margins, meaningful, Acceptance will higher the margins initially Now drop than the

Kyle Joseph

Thanks answering Got very it. questions. my much for

Mitch Fadel

Kyle. Thanks

Operator

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

Unidentified Analyst

you're been keeping morning Good that Brad. Merchants had question from this we've an additional well. one for the will investors complement out acquisitions like eye Andrew is just I on for forward? Now going this like on a not whether getting question Acceptance A It or acquisition seems Preferred.

Mitch Fadel

Well, and us numerous Preferred fit best looked Merchants Preferred – at Merchants we for needed. companies we what the we decided for believe the is

capital you You have are won't buy our that so with to know we we forth need and structure the certainly buying. we’ll infrastructure do more the know opportunity and to yeah,

have say a would at never. to differently, never look So I we'd but little it

opportunities, We now one integrating rapidly just going are just we're on bought. focused growing with but and always we at look to the right

but is right, Andrew, again course there’s companies at this can first, and But look But if look things, a lot an there economics awful buying it we’d your look forth. because so at we’d to are virtual different we at be right look, sure, it, and lot it. out of infrastructure a of question answer about would under the

Unidentified Analyst

Right, talk that the merchandising question if trends business, And second was you core comp on guys that is could will my the wondering more that some you and doing I drive sense. the initiatives last makes about are of half? in

Mitch Fadel

when the XX% growing and revenue in that grew growing web it’s conversion you XX% XX%, side Well, second quarter, quarter. the – points combine rates are our really two. that online about It’s our already agreements business, the XXX of orders the our at growing it e-com it's those are every of up basis so

really lot very value attractive the are are and and confident very customer online made we’ve proposition a we sustainable. getting the that that's So changes to traffic we're more

Unidentified Analyst

that's thanks, me. great all Okay, from

Mitch Fadel

Thanks Andrew.

Operator

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

John Baugh

you. Good at get comp progress particularly was sheet. calculations, the a and all. we clarification just your morning balance could first, wondering on hasn’t changed I Maureen. That on Thank the of congrats

then months door benefit store right what back for it into when it We are comes and closed of an comp. XX taking still like the the out into folds a existing

Maureen Short

store of count Now XX percentage there Its out for that pulled a this whether the into a If certain weren't location months. quarter that a and particularly coming the a side. a receives occurred full comps, be on stores Acceptance or quite closures, from had previously of new hurricanes from closed bit with changes the

John Baugh

months that last you number the but Mitch mentioned there constrained, willing capital Merchants And volume XX Preferred any great. for been kind the Okay, know are offer. of invoice to you has is growth rough I XX,

Mitch Fadel

about know don't $XX growing. I is their invoice was have growth, XX and last the the months XXXX was revenue million I the volume $XX million. revenue revenue

capital nice percentage from So can being to having constraint standpoint, trend grow. and spots where they pick a especially a their that's

but in rate have basis even we be But year is and get it’s range. the by immaterial months be to about the only the year, said when their of a effect don't we because profits slightly in only growing this me, growing the we going I over. of in we with take now, current to going though end once run So in million four left been and year, are the synergies $X it the front on this it’s synergies we're profit, volume their even an revenue -- invoice they are profitably looking

million be over range. of and any get So from in the months. besides Like this buying year, of the speeding profit. said, $X said we and synergies get didn’t the the or we’re it’s synergies infrastructure a those next standpoint, process we up obviously because We to not timing had revenue couple virtual to going our immaterial like with I

John Baugh

cash generate Okay and how hit Maureen does use then there is impact you does goal cash, if that you cash? or this – self-funding, does it Preferred it know growth, any flow? Merchants Is it for

Maureen Short

as the profitable believe we believe clearly potential over There will grow but from Merchants growth the capital Preferred working growth of point a we that’s time and stand definitely business. in be business, EBITDA outflow a that and

ongoing free generate will will we’ll initially as generate cash out but put investments investments. time, as flow the an there inventory over business, cash it and work be capital working flow So yeah, to we

John Baugh

mentioned Great, has My that up and/or and it’s seeing is you risk understanding higher you early anticipating are a is Are you that? core? what jumping to it. growing. I’m that to it core write-offs, on see wondering mentioned write-offs little it and XX%. online to You is back experiencing or too and

Mitch Fadel

was than, were probably X.X%. the were was quarter said it agreements I less well as ago online XX%, business and skip/stolens in up the a Our X.X% quarter, second online the when in year

right on even year, top of with the the customers coming are So all last web. we from new

we're in, going not of them it that not anticipating coming kind to seeing risk so So forward. customer happen from a we're that

that. mid said, Like the right on well yet. it sequentially threes down last top from we are we significantly seen of are on haven’t We I year and expecting very

with So driving we web the a customers not our losses. problem seeing are

John Baugh

business. the balance that my you the grow you your total give Can capital I and then to with and it great about mean and the business structure can that announced and as virtual to around Okay, when obviously you Mitch's is addressable puts question how pitching know the capital debate the a being so relates takes support just curious the thought the last sheet sheet me – you important on how have balance large? dividend. market I’m opportunity it internally that allocation to is around

Mitch Fadel

and simply where we is to billion grow put, can you that do we and to comes and both know rate now. think business priority we debt are business grow the at first dividend place that X.Xx into a $XX our Sure, from

awful from keep want balance we less, conservative As but a anyhow. that’s today at Maureen basis cash to X.Xx an monthly flow a it said, and stay lot sheet on of or standpoint

short So both. do we the John can answer is

John Baugh

alright. luck. and Okay, you Terrific! good Thank

Mitch Fadel

Thanks John.

Operator

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

Vincent Caintic

Hey is on question thanks, good guys. rent-to-own. virtual the morning The

for cycle for rent-to-own if reason insight what year seems I gave like year there, the three guidance ask, with and appreciate retailers. what a revenue can have I of wondering you I the So Kind us virtual billion. it kind two outlook of line the you $X.X the and have you of sales give of flavor in confidence typical a you guess of

already you running? Is that share? programs pilot can progress any there have there are any you So

Mitch Fadel

much there. comes there, confidence from pipelines how are opportunity our Vincent out is there, the that’s out space the white that out still Well,

know Preferred we to able grow We model today. to constrained. a able going pilots, grow we’ve the any You been are been manned capital it sales as model have don't not great we've speak Merchants to being even that to team. We’ve got virtual the

partners partner accelerate our furniture As that. do large national renting, some will already national have we large far as and we to believe opportunity this

billion short country. be believe the that comes one – But and the getting answer Its it’s is in retailers going largest the on $X.X the guess improve I would actually is not not based here that earlier. conservative of more but that, do to not other it's I to verticals defending able number some it players, we're to – is mentioned going when We our than regional like billion. that $X.X

get million we to year big on. it's So $XXX going to or on not we're that based that on $XXX million got do a a year one retailer

Vincent Caintic

at And step view virtual kind taking your Okay, maybe guess I of and rent-to-own your helpful. got a it, of back plan. that’s expansion

your So offering. you've now, got manned existing acceptance

Now Merchants Vyze and before have your is I partnership with Preferred, by you the virtual we with Mastercard [ph]. one about, another think offering haven’t talked

think Depot, you’ve partnership could of Home that. there got talk couple if wondering retail I’m I with about so a you already like

you see beginning integrated you rent-to-own Merchants give get once So Preferred us you could year, you – how this how the a XXXX. in competing and broad virtual offering do Rent-A-Center overview

Mitch Fadel

companies. of other other Well, with the stores, some Versatile have one Vyze relationships and and like of integrators like we of those different do those and a companies few waterfall Vyze some

retail We partners. right systems also integrate directly into POS with

whether know comes the with third mentioned or a and waterfall, own partners I our that or it's XX% Vyze waterfall, the went IT through you As that department business a it’s into partner into party retail built of that earlier, has the department like we, Versatile. IT a about our

lot and with times to but waterfall those you retail as So are companies, you as are growth we doing also all those be that we using business vehicle. a companies not are those relationships partners, great with talking integrators will of grow, all just a

TD We we’re the where the primary only offered were month. in deal tertiary just is that last called being started something recently did and in TD The Complete, Bank a there just

also retail integrators in retailer. partners to to online business these direct the direct know So play in is world partners yeah, there's going a lot the of waterfall a necessarily you virtual not activity online and too, big but around not there be just just the

Vincent Caintic

that's yeah, And retailers I private with think the a TD perfect. credit Okay, label and cards of big has exciting. couple really

quick one. last one Just

any proposition now should to we in changes proposition know there since third I we year or gross talked profit to So value the some last the margin second driving of about but be the of quarter. the quarter decline, expecting Thanks. the recent virtual value been proposition comp value proposition, has

Mitch Fadel

Yeah the second no okay, Vincent, Budd changes second quarter was and that’s good margin a right, the any last It’s point. value been a the I year what core, understood I major there talking about from proposition the it’s of quarter about standpoint. June, since hasn’t but asked totally when question last that kind

that’s EBITDA gross of latter side, the profit with get more email part consistent to it of you level, but we the Virtual and goes much third virtual. grows the into start not you Vicente see more then you expect more and because EBITDA what as last there's consistent margin, its If and you drop see. quarter, up level to you see a for going except year drops gross know as and profit on

some point other on Bank, you when TD yes, earlier, one said have were of and talking exclusive we up what you And about these offerings. followed – some

provider is, exclusive their there. Complete the program TD rent-to-own exclusive and and are are online it’s called we in what We

Vincent Caintic

Okay, so guys. much that’s great, Thanks really helpful.

Mitch Fadel

Vicente. Thanks

Operator

the ahead. Loop Markets. next from Your line Please Instructions] question [Operator Capital of from comes Anthony Chukumba go

Anthony Chukumba

that congratulations, work let particularly my Merchants around. the turn in me the Good the all deal got of done add guys refinancing this executing quarter, and morning, Preferred terms and you the

are long all off hopefully I’m soon, So a for vacation sometime marine. you thinking

question. you related to So I last question, of had a kind know the

bit quarter know were core You the gross down, leverage has know you talked value you I the and guess since about right. business, a business, off, – through you know core that the know Now, coming both obviously In the of been core you margins in because better proposition. business you you you Acceptance in expense not this that's know

So you operating up margin. had that and the came higher with

is was time This actually in Acceptance just five operating I Acceptance year-over-year. first my sort quarters in went decline back looking margin through items model. wasn't one-time the the and and Now Now case That of that

there you So there? missing sort I’m that’s Now, of working of to trying not if I’m the of in business, that I know guess in working just Acceptance why is it’s core something kind reconcile sort now

Mitch Fadel

made. couple of I that a comments Well,

coming you quarter in and quarters higher the They reiterate, business gross the the the if ago, margins third very a to lower, lower actually at than its last core look four year. want are than last are I all margins it's stable of year of First profit down. not been but

So as last quarter second were of they than year are implemented. value not drop. proposition They only being the continuing the lower to are

XXX the basis overall basis points. points, quarter EBITDA XXX up third margins last it’s up And against year and the

only down if So ago. it they quarters coming coming are are down, to you they not five compare

was and in if our in there. look mid to the Now Maureen they quarter are in the where XXs, a XX% as XX% they third performed from were are you we’ve which gone well and at significantly they X.X%. range quarters, the then We've last On the X% quarter side, down. mentioned this now Acceptance last row is dropped now, and skip/stolens out of of the They’ve three the

declared HHGregg it. a XXXX, go XXXX you year we ago, to second quarter But mentioned of In back some when left five quarters recoveries Maureen Conn's the have and bankruptcy.

XX up agreement, off the large So part. partners with accounts those revenue that early two running was especially month to in XXXX, those from

with closed kiosks. kiosks little revenue those because we the into revenue stream of run So cost, accounts we is off very other which to put those and had driving

end we at had we there of at stores, we had put the were second losses real the of are losses what with looking recovery, helping associated the early was year, some last and the larger as amount us closing accretion the stores recoveries. the recoveries, some the closed those So those XXXX quarter, we where in recover

an So number. low, a skip/stolen we had abnormally low

basis skip/stolen our XXX points quarter year than expectations, past this its is So even in-line though higher number ago. a with

where XXX year, excuse you or where right top expect points, or are pretty to XX%, think it you’d basis that right margin be those me when of close was you top on XX% – is of last it So on the range. in

last and this EBITDA It’s abnormally because high year’s had are they margin just We quarter. disappointed with XX.X not the under recoveries. run-offs

Anthony Chukumba

the hear that’s were affect just talking and I guidance – I something EBITDA was sure mean did I refinancing this was – make the EBITDA you or and expense said helpful I that’s correct. so part hear that increase wouldn’t no I clarification. right I your in And Okay, got about interest thing, one right, incorrectly? you your of mean the to that be debt correctly, did very that wanted factored wouldn’t I because just

Maureen Short

impacted by yeah. [Cross the EPS No, Talk] refinancing. was the

Anthony Chukumba

No, okay. it, for up. that got thanks clearing Okay,

thanks Okay, so guys. much

Mitch Fadel

Thanks Anthony.

Maureen Short

Thanks Anthony.

Operator

time. further for are questions no back remarks. Fadel the I at call this closing There over turn to Mr.

Mitch Fadel

everyone, you for thanks Well, your time. thank

Merchants solid and pleased board. the good back are kind growth the go to to Preferred really report on quarter the numbers, these acquisition out We and there of now same-store sales another numbers work getting go and revenue numbers we'll maintaining and on done getting closed refinancing these and put

So we grow really excited our for we're are Merchants to acquisition. about Preferred the working hard working shareholders, hard done the business our and getting refinancing in

your that, time. with for you thank So

Operator

today's you. conference concludes Thank This call.

disconnect. now may You