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Rent a Center Inc De (RCII)

Participants
Mitchell Fadel CEO
Maureen Short Executive VP & CFO
Daniel O’Rourke SVP of Finance, Real Estate
Bobby Griffin Raymond James
John Baugh Stifel
Brad Thomas KeyBanc Capital
John Rowan Janney
Kyle Joseph Jefferies
Vincent Caintic Stephens
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, Thursday, May 7, 2020.

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

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

Daniel O’Rourke

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

first All earnings market to website and investor.rentacenter.com. our the after was the financial of yesterday, for Our available distributed at outlines live close webcast release on a materials, related including and are it results quarter link XXXX. our operational

materially many yesterday this from earnings results statements which forward-looking a some reminder, are actual Please to will reconciliation first factors These most measures. of As quarter refer statements. publicly expectations. as obligation filings. release cause subject our be comparable revise the or the factors to earnings are call This to release our Rent-A-Center no could statements which SEC financial also company's any differ on a as provided to call references on to for in can in our that are website described well forward-looking measures the GAAP measures. to undertakes include found of our update financial financial non-GAAP non-GAAP issued

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

Mitchell Fadel

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

be We at on the also presentation will investor.rentacenter.com. voiceover shown providing It can be the webcast. a to found

customers' health our on pandemic. We sure coronavirus worked the put priority, So our Slide safety while measures we're the number which one combat social governmental our and starting the needs. is to of and adjust on suppliers, making X, distancing extremely our we to to significant economy, stress all has employees, as on our and organization and addressing ensure customers other hard

by this Many crisis. are affected

condition decades. Rent-A-Center trusted attributes their partner to for focused and sensitive the made X and a that over have are reinforcing We

of highlighted our responses The strength the organization.

smoothly. implementing us each our and proud dedication, above moving I'm pickup, every ways, in of curbside hard everyone co-workers, incredibly gone and to safe, from inspired efforts. work of providing frontline have of and e-commerce especially many the deliveries keeping of masks Very volume and their to keeping increased people so day Our beyond

model of case in strength the The the was response the be lease-to-own has traditional proving also outpaced It general retail. economic it's sales current relative case in our environment. when the versus Great lease-to-own Recession retail, and to underscored the

continues performing play than stimulus increases. government we this out, our pandemic solid far by e-commerce this metrics helped While expected April thus when to was situation better are initially started. month, and a

Financial lease-to-own outside more stress a to retailers is customers new for substantial serve. to and not channel slowdown be the the our impact we appears having

a as payments. stream Our low It payments, model return longer then loss make lease we they product had can features revenue is from it no the unique which also that rate in customers re-rent. generally if

by revenue even appliances for As a as been small demand continue portion computers and to of we and impacted a closures, though such showroom generate revenue has recurring been products essential has result, slightly strong.

high-single digits Turning ninth in to And revenue same-store still the in year perspective. Slide little X% at X growth Rent-A-Center first business. a quarter and marked deeper in our consecutive the sales stores, our a at positive of performance happening the quarter X, our into is digging over from what's

since open address to the Rent-A-Center And the of all activity from pandemic, our beginning credit-constrained our stores have needs-based of almost remained customers.

and come their XX% peak to economies. fully showroom. remain down open, local at operating our most move with locations, While That's XX% reopen the governments about of closed of our a state we're as

strong also XX%. allow. year invoice last we're through we local move with started versus applicable We openings our continue as operating preferred operating with buying segment and areas to CDC state We're forward have further lease of partners retail to showroom where guidelines compliance and well-prepared see

staff the locations lease XX% only and of were we from our agreements. retail at revenue benefited of that open March, now to stores, running nature While of the half closed recurring about are many our the compares and end open of of stores during partners March. those About in second with XX%

back Our levels. normal substantial leases not saw the virtual strategic Preferred world, of the in portion channel different important it's business applications business. trending demand and but April, March towards yet in but a our is

we're So results our to payment demand recap has our the as in pleased activity been really stores for overall the muted. impact program. lease-to-own operating I'm by those And segment. strong reopen, seeing

and quarter the preferred Sales growth of solution. last by April same-store year. we're in sales trends the X.X% merchant's over Rent-A-Center the increase driven modestly, by for virtual addition We're in which increased XXX% the encouraged of in versus experienced of seeing e-commerce, business,

last the impact First not year, on impact consistent There to revenue our an decline but as EBITDA. quarter lower for believe to it from second or quarter near traditional grew when compares the be in severe with the per by less it as we potential share a earnings remained non-GAAP will as expect adjusted XX%. we XXXX be pandemic a as will retail with EBITDA first XX% of be quarter almost

Slide by have Turning experience. potential we the priorities steep strategic improving to the X, of in customer our is clearly E-commerce committed investing of that long-term believe those. one to we're demand curve

options and are widespread on customers new and functionality. of We e-commerce improving responded customers. additional accelerating to existing initiatives traction customer These both enhance initiatives service, by bank distancing and payment implement to for social new [ph]

is our addition, Act qualify internal make CARES funds helped these customers of strategy's the to for our the stimulus stimulus, own government our overall demand digital majority many and The U.S. being ground payments. In of by programs. and

as in in waves a sent out, further In checks fact saw day benefits material from direct go out the the the all summer. we payments deposit revenue. stimulus mail stimulus expect government's increase And demand and were we

unemployed called which enables We're nice during Benefits an this keep which difficult internal underwritten benefit their Aon support. by Plus program providing time also to includes eligible an become offering unemployment customers is who additional that merchandise

working of help our the do them are products that keep, want even that, cases. expense Most just in the some in our with quarter. providing and Skip/stolen each expectations of losses performed customers line in segments necessities payment to we're for to

operations, In the really addition we're that able to I digital to We've smarter, work helped paying to to the and support react off. progress response are and the and streamline of want headwinds near-term continued offset to initiatives from stress adding to it's been capabilities demand, these some faster making virus.

Importantly, on benefits the focus optimizing have will as well. long-term cost

is one staffed as Here is centers opportunity efficient to believe labor contact additional hours long-term we stores. example. become store more to we a We preferred at just in support hours We sales. our reduced centralized enhancements collections made there up to the free as lease

move condition plans. with prioritized strategic debt with million is financial XXXX. forward as for We operations. we've And the in quarter our ended strong, Our substantial cash on and $XXX no cash we until our liquidity maturities

in historical improvement the continuing invest amounts. in and in We cash flow quarter to are dividend second strategic priorities. our consistent second are a expecting quarter declared with We've sequential also

Great during the experience Based our impact the move recessions. we demand for our our make products than scale. credit increases as continue the any up during and to subprime on more which Recession, back demand lenders services of short-term funnel see top for and historically increase at we The typically up expect prime to seen

improving strategic into and in to We've and be our a to effort on and it capture put ability initiatives of virtual. customer opportunity, we're the execute time lot experience, wide-spaced confident digital

enhancing also share traditional segment. And preferred for growth is believe gain the to opportunities the numerous see Rent-A-Center stress on retailers in we prospects our market We lease.

potential with ways improve as sales show virus that retail to they're conversations accelerates for partners Our their looking change. the

capitalized, versus well that particularly at have strong level, partner are not regional a flexible as us great model We there. a competitors balance really some sheet for and the opportunities

over it more turn first Maureen detail. I'll financials quarter to that the discuss with And to in

Maureen Short

Thanks, Mitch.

increase As a see slight EBITDA the increase to favorable margin. same decline earnings period last line total were of XX% the year. the quarter, versus and first $XXX on year you Slide with million in were the can an top Consolidated revenues consolidated X, in approximately in last adjusted an

The driven offset the a Rent-A-Center store of partially the by of addition sales increase and rationalizing X.X% same-store solution business, refranchising gain base. Preferred by in Merchants and was virtual the our

X.X% last margin quarter, period the diluted was was $XX.X X.X% XX.X% adjusted versus year. Non-GAAP was EBITDA the year. million EPS Adjusted up $X.XX, same in over EBITDA in and last

a versus first and of of to XX.X% the quarter interest benefits from included rate in Other XX.X%, year EPS down expense non-GAAP lower XXXX. diluted tax lower last

Turning our to revenues million for and were rentacenter.com increase the results, Rent-A-Center in stores U.S. largest corporate-owned with segment, quarter starting $XXX includes segment and same-store the first a business, in X.X% which sales. from benefited

payments. January, impact April of To provide same-store as by trends were government the the for U.S. increased Rent-A-Center in in in the improved across impact, in X.X% pandemic X.X% and February, down our stimulus took March initial context effect In driven the some X.X% business sequentially sales coronavirus

percentage as a continue was Adjusted $XX.X by margins EBITDA performance XXX versus better year. last up of same revenue driven basis we streamline as for quarter the Rent-A-Center The lower and million, segment business business. operating expenses the was gross points to the

As for from percentage versus points skip/stolen a year of of period. point business fourth a were revenues, decline X.X%, XX the basis Rent-A-Center basis and the XXXX the XX up losses quarter ago

of the XX% driven in the Lease reflects invoice a the increase last Preferred same solution. in first volume XX% quarter addition total Preferred increased the quarter year. by revenues performance versus Merchants virtual The

impact shift to was a the in from coronavirus the Preferred million location partner support sales was from March. of percentage retail Lease as and or The revenue. Adjusted of virtual EBITDA to the growth, $XX.X locations of the investments EBITDA half by second change mix year-over-year for X.X% closed driven during future

\

we for but were Profitability quarter, improve locations, scale up before segment year is to we the losses expected of the Preferred as increased the virtual XXX versus basis in XX.X% segment offering. the last mix points our of sequentially. first virtual Skip/stolen in down sales Lease

by sale and expenses of of rent grants. the award Finally, from the expenses corporate partial of million, resulting timing virtual our increased and annual solution, first the headquarters $X.X segment, the stock corporate the driven in addition Merchants lease Preferred quarter back

first $XX.X sheet flow generated and from of on The million. activities equivalents, cash of $XXX.X million highlights, to was cash the with and cash cash million the company Moving balance and the for ended first quarter. $XXX indebtedness quarter outstanding operating

outlined address Slide we update, the not as efforts and of and want our color these nature the to do and in for to That varied the by provide are contain Now on adjustments economy. state fluid said, challenges. March we're their given we spread X, reopen to the providing turning guidance outlook year we the the to coronavirus making our near-term the additional

many as compares second and to be lower year, Based not XX% an second overall collection. impact the expect know less will it as experiencing. what year, by we down lower revenue There quarter demand but we as to locations be in quarter closed versus last today, or are driven severe traditional retailers last from on

with our we variable the focus costs, expense the As range quarter on Mitch and decline a EBITDA the expect to on transformed slightly coupled reducing noted, ongoing an more in better have for same to incorporate that, result revenue. than structure the we to second impact in organization

interest Additionally, improved year earnings is be the versus expected capital structure during and quarter. the lower expense per essentially second last share given flat last to to year,

material for expect on pressure skip/stolen see do We to losses year. not the

As you a subprime returning know, for and an always lender, is option traditional unlike leases are contracts our merchandise customers. our the

as losses any paying non-cash the reflected Additionally, is return customers pressure merchandise. stop when of do skip/stolen write-off and inventory reduced the not on a

real including We've employees a hours office; estate made cases corporate stores in executive in adjustments some additional and expenses, our to operating renegotiating store to expenses. furloughing at pay leases. temporarily number reduction; and reducing where reduce Turning possible of

benefiting in some bill streamline further plan third to second the we have of low into our half the actions We potential quarter. will our back which as future said, and believe seasonally we costs impact the expenses year, move efficiency years. to improve That

purchases inventory the and the partially flow, reduced order of coronavirus. capital have in cash Regarding impact to expenditures been mitigate

payroll we a In as operating to loss of Act. CARES result of deferred back taxes and the the advantage addition, take able net carry available were

are a XXXX. in first improvement tracking flow the We compared free as to quarter sequential to cash

Our outlook of our the model to in our near action resiliency revenue quarter and of term second for lease-to-own reduce reflect down the and swift EBITDA less XX% costs. or

X. Slide to Turning

liquidity and the X.X of total net with times to strong times $XXX debt is to the year-ago at of position over in X.X at adjusted quarter first EBITDA million financial Our quarter. compared the end

of by performance quarter of April to end Our an million, of driven end April. the liquidity approximately $XX since up $XXX actually increase million strong the is in at

increased and million continue invest $X.XX capital business return $X.XX million shareholders. allocation to quarter, repurchased to million priorities we $XX.X $XX and the in are to dividend in X.XX Our from returning value to In approximately quarterly the capital shares first our shareholders. for to

quarter second healthy our financial earlier pay on dividend to given intend As position, and Mitch we June mentioned our X.

XX. As always, the XX-Q our May by filing to anticipate are segment website, posted statements on we Relations detailed income Investor and

you the over for your call Thank time, I'll questions. now turn for

Operator

Instructions] of James. [Operator question Thank Raymond be will Griffin you. first line And with from the Bobby your

Bobby Griffin

taking Maureen is nature hope I of Thank guess staying for doing and Good the healthy. to want everybody morning, I everybody. Mitch you or question my first I around is business. questions. the the portfolio ask well

are and low trying on opening, that improve XQ sequentially for could XQ Given portfolio we a trend the path same improving trends will to trends the be from Just going worse watermark the the understand business how here stay will revenue? decline actually to kind April starting openings than month? by on of this modestly and of if revenue more perspective? be are forward states the Or business mean that in impact largely side of does more

Mitchell Fadel

morning, Bobby. Good Yeah.

hard I in of third now the what's is going to think point drive too which to portfolio it's and the say end what the to quarter at happen revenue. between this will quarter, the

So low watermark to much it's if - don't forecast. hard too I or know it's too the not, it's really

tell is All we right now. you is really can strong demand

that was good, or the see, was not. watermark can't say we I where portfolio third the can is low the ends, As quarter yet demand predict the strong, know, don't quarter April second you but to

Bobby Griffin

in ask and they're QX guidance the in different way. revenue, XX% based contracts into today April? what Well, maybe doing modestly on that written you for let assuming I the portfolio a versus it of are May me improve June guess If down

Mitchell Fadel

demand strong the reasons. for expect of couple to we Well, stay a

getting is the is stimulus out all mailed still As checks going, summer paper there long.

seeing as the to credit the we've that pushes in tightening to help transactions. up, already continue in more credit talked lease-to-own yes, tightens expect we So - the demand that marketplace it as about we're

demand in thing. be expect to April to not not just just April, we to continue - So be an strong

Bobby Griffin

we your you are they then and tier second talk to to usually at partners, you kind from first and I you offerings pipeline look lastly kind already for tier there we're getting new third-party your shock in X, quick use change? more either leasing, rely guess Okay. rent that a there customers economic that And you're are that X and months is for to seeing current X, Or that that changing on briefly of me, people credit when but preferred mentioned typically zone credit that typically X or response, having the offering? does of happens customers starting the - how they after get conditions retail mention months like now,

Mitchell Fadel

already standpoint, staff it's already. that so happening have anecdotal we gets locations, we're standpoint, decision not own higher FICO see coming it's we the the - score into customer virtual think credit We both in quality comes decision from engine and partners, that from see engine the not seeing credit credit in Lease it's necessarily customer decisioning, a just and we but our a a engine into retail our locations the feedback mean, a business, Preferred I from - and -

Bobby Griffin

that. queue. for questions. helpful. answering jump Okay. appreciate the my Thank I'll both very you in I back Those

Mitchell Fadel

Bobby. Thanks,

Operator

And your with will next be Baugh question Stifel. John from

John Baugh

and congratulations I'm great stolens And you then first quarter to and Obviously right good a comment, having more on morning. what's are I'll a pick much in up happening Any tough Good today. environment. curious skips/losses, shape jump with Mitch, in. frequently the pickups? of in on re-rent

Mitchell Fadel

The pressure think the John. not is our essential bit to keep there than want customers under customers as any customers. I that we them. are majority you mean, we keep our The under No, our products are. time. customers know with products to necessarily haven't more normally They I they of want the yet, pressure - seen We all like work products.

to obviously for in a customer maybe This mind of that of essential don't specific it's our probably in necessarily workforce our majority time is tough lot the fits customer know but I than others. a demo. people, Keep the more

that we're dramatic anything with rent. keep them to seeing not people we're And need on So the it there. working help,

more in May Will in field We June We a it either. a there haven't seen pickups than few last and lot the the be weeks haven't yet. whole been six normal?

will and more product hand - we forth. the in demand pickups buy the more more as probably more saying are return the because a so the outrun any credit get pushed which there'd one comfortable to demand and tightens, - into flexible okay few people that think others as transaction I because is options less to way on for I'm be as re-rent people lease-to-own looking it

John Baugh

have for minuses customers seen so how the how And people what sort store benefit then benefits. kind seeing, I've that of kind and just that's of - working, that are and benefit the many you're utilizing Could Aon that's how my you and now of you side, review are pluses many that mentioned others and working of on the how far?

Mitchell Fadel

to XX% become gone customers Well, About I - will Benefits by eligible includes it's normal up from to unemployment underwritten allows attached before agreements unemployed our Aon their who tell that. we've their of like pluses. not avalanche which Plus claims the that and said the an of you merchandise. have benefit, circumstances, customers certainly it's all but keep agreement, have that I it's which

what an demo, not out majority have at - of we're is our I seeing - so impacting incomes. - think we're helpful, maybe it's workforce or our seeing it. higher is not it's like the our I'm we majority think there higher unemployment really I middle-income of the rate Again, than in essential demographic glad

but know, month the it's like the a support. not keep that it'll and payments it's We're mean, rates money kind be money normal and in just they it coming us the those in processing not our two to claims or [ph]. the John. customers It's like its Aon's XX% for, with seeing you it's a up and claims. - and million product but help someone course, sell we the not when like revenue I nice comes We it's handy anything make of customer Aon from now of than make product that, going or unemployment of more helps

the I out I number. don't -- it's think the exact the the tell I don't income just an number but what you worst that's there's there's it's the - case. got know impression can't lowest to be that not is, hurt exact and there the - that know is I

like the majority think is Obviously certainly essential the country helpful, time we will now our it's in of I we said, have glad But work I this tell. right customer, workforces I'm have it. so

John Baugh

And staying on I'm wrong, some the degree if that me some in Correct but payment mentioned the extensions you do time. same, you cases. to all

So it not no, doing that comments made, are there? or you more, just seeing the bad, to the you slightly are question is, it's you what more meaningfully

Mitchell Fadel

than more that of again, not makes. by more help it I'd avalanche Yeah, it's stores little product, make, the that. not say of decision to Preferred having keep circumstance latter. the but it's our but an for a centre slightly, customer to and the do that -- contact a do circumstance it's the We'll Lease

It's up, the year. forecasting from see we're what not be second to less in XX% than you the quarter, drop - but it's revenue last

worse we extension. that forecast for we're than not If a do the like obviously our would intervention, what number. the Because the it's that big, would So you. it count was telling towards if second be do we not quarter revenue revenue the huge it's if

John Baugh

Correct.

end that now partners And I your then at on you of the your retail think you Preferred Lease and normal. are Okay. closed customers toward reopen or of side and XX% mentioned were March the trending that XX%

would open off partners I recall Most even still of retail I of guess their being versus part two furniture if I assume pre-virus they're are substantially now, is correctly. open. kind question. business if those

most your normal business tracking, get sooner? find hard So like little and but I'm the to open revenue on all you're assume XX it we'll I of not getting days, wondering sounds what trending a And if expectations back that I to just within the close are towards believe, stores next back. that

Mitchell Fadel

only XX% XX% March, of open numbers only - the and at in XX%. the now end And it's we - the comments, Yes. prepared it's John, were

the So XX% the only closed we - XX% inverse had are of at XX% now that end open and open. of March, obviously XX%

of with all So quarter, the - by I end if think they'll and agree I you, be sooner, not the open.

pleasantly in has strong. demand we've furniture surprised, that the think the even I been been, we've been categories

I initially retailers think computers will you and middle essential so forth. I tell the they've will to because the back talk of them, - appliances a in you of and the like March, tell rush that furniture was lot surprised products been

furniture on the that people in well. their And in of are is what CEOs homes, the we're going I what - the is seeing the executives, some said, I belief and longer of bigger to anything some furniture to now seeing think they're home for talking they're as do based companies, is

as as and more are Anything, there's kinds less afterwards, more will inside and things, people not home through people only and belief of be even home more, the know. but staying out and to the pandemic, you those eat

they seems what in that is normal it demand lot not up of And stores levels year. - pent to home, furniture that thought - doing doing will better do getting - they would they're anything for and last saying reopen when than executives compared back like the a to I'm it opening thought are doing a you tell better a But But they're they demand they ourselves. lot what that we're high. there's than of lot and the And the there.

So we keep and as they be above tightens up. could XX% could off us still be John, in mind, doing credit more last year,

thought us. not some, a as much not they down When we think thought based all, furniture they bad because still and down started. I may in are credit be when to of they forth, this be reopened, above at they they're store on going were, tighter distancing people as not as and social being So down so as

Operator

Okay.

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

Brad Thomas

congratulations Maureen. execution morning me Mitch, late. some nice morning, And of good my here let good on add Hi,

questions if getting Let's wanted I'm on it. John's some just follow up. the of up to on deck missed of the business. slide apologize I side I the direct I hear, having trouble

you talk in can like early through those little how as But rates, it's growth have volume the and and bit trends April, May? about invoice more you what here went a what looked tracking March

Mitchell Fadel

XX% volume in of pretty invoice and of of the first Lease weeks last very, low, the weeks those was increase the much Preferred last in Well, March. the quarter two of we It closed. the March. stores XX% very lost two

if were two So the you back to those that gets last quarter factor XX% about XX% hadn't of weeks. we in if like in the a - XX% where weeks we those were two fourth lost I mean quarter. in range, that

they that So the quarter. we forecasting to what and revenue I line said, on I the invoice we a don't But as you expect be strong. think is the for of based forecast see, be quarter. will strong we're the as for - as pretty have kind on this reopen, in demand you it

Brad Thomas

Got you.

Preferred can And us Merchants revenue would volume as quarter and an contributed have to for how Okay. acquisition? the you here being much remind invoice

Maureen Short

it Lease as around the quarter Yeah, quarter. same pretty they number $XX the for contributed million for in the and revenue to similar last quarter revenue invoice volume was what range Preferred the generated

Brad Thomas

the the world new how as question think Lease we're I Preferred you in, guess, of it that Mitch, of a about change And great. the Okay, picture side here, how and the does business terms strategically? side does bigger of the Rent-A-Center business, in

the to going and like be investments making you about businesses these to years? you think next strategy some as of you're of the over position couple would How the

Mitchell Fadel

year in thing would it at And people in one-and-done double, isn't -- stay orders we we high. where double we investments so much online. more we're to this is I And web. in coming to as it the more this as stay far towards wouldn't - We're making web, as we far as And going going think of to is it's April, we're shopping business more expect a said, were be the e-com. going continue. think but It's expect the on as to it. we a ago

site, maybe of One their you, most of one e-com in site we our about about new website when long and we new the of two telling seen April our before, say customers web least - two two the through customers our - thirds last And is, I through the us as do thirds very customers give put a that e-com that is haven't time. at not Brad, double, thirds stats numbers come can with from holding and of that as the business was year. order in doubled the

to brand e-com real thirds only has stat. continue think is not the And business is - customers the doubled, website so too, two and So the double customers I being new a held there. we'll new invest that telling that's

lease made and those both can on in added a us, pay, collection fact that capabilities, the customer, this And partially the we'll flexibility, payment not customers, auto of I and for think up above texting up we've so sale, the it sign pay all added We've things continue side. to - that's multiple invest the partially because our value and is and kind propositions, because sales options for we've so of both additional of tightening credit there, non-bank they bank to easier places. the

wasn't a So you're not come from out so it going that on the the of Preferred of that - from it's we're April held. May, going the doubling customers just and be a lot more just fact the e-com important that's And is e-com or - more say, - a strategy. a we're new days and But few of in to more we're probably first lot the biggest thirds of that investment of we and standpoint, thrilled strategic change got this a about there. stronger with talking why And lot our Lease going part of Rent-A-Center, side. to two has investments and the through whether

new So customer and - at the And our the says to our a lot because with portion doubled coming like us a to it's think that's our as it of using sitting proposition. not about home has lot of do about brand customers I well. stay The home our store instead are value that of website orders. business just says

Brad Thomas

that's Thank Mitch. helpful. very you, Great,

Mitchell Fadel

Brad. Thanks,

Operator

And will question ahead come again. Janney. press question. one your line Rowan with you. Rowan, Thank your next go of from star the Please please with John John

Mitchell Fadel

on mute, John. may You be

Operator

is now. line Your open

John Rowan

Hi, hear now? can you me

Mitchell Fadel

Yes. John. Hi,

John Rowan

morning. Good guys. Hi,

about you look a big you So flow. your cash as and you've to having into reduce XQ? look maintain XQ would lot that level to in actually high are plans? and made What of of going in a comments liquidity you increase Or Are cash? a

Maureen Short

evaluating we're We initially sure the first make adequate liquidity. flow $XXX that. access to and uncertainty so an just to of when cash million had drew down we and the Yes, because started that our pandemic additional

in cash second be that flow that. evaluating we'll increases the expecting quarter, we're the Given in

lot the We'll state on have business comfortable know reduce opening and soon may up and our the debt. what economies quarter more a to at feel within that's their some to governments about impact point going that after

John Rowan

is store? don't created remind it for there Preferred? transaction primarily Okay. you can And business and then - is fully online? shop then Meaning that online-only Or the that merchandize online is actually virtual on lease-to-own any and in Merchants me you the you lease

Mitchell Fadel

speaking retailers yet It's the any business that in a with business about of combination. that do have but only generally are online retailer. Lease starts -- online, and We Preferred don't location XX%

we'll said, they not any anywhere XXX% business it's business yet do like have XX% -- not that stores. with it's don't but So that doesn't I about anybody where of

John Rowan

Okay. you. Thank

Mitchell Fadel

you. Thank

Operator

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

Kyle Joseph

- given sort I the virtual kind want an that for cover to Thanks retail if of you guys my Lease, wanted a Good questions Preferred looking suite? on earlier. was products. get to of for just you increase I hopped sorry, to Preferred have sense, but Hey. rent-to-own their and guys. seen demand morning, I Merchants to ask down or, I late, products virtual color on us in rent-to-own from do something apologies, taking the Have calls add retailers stated

Mitchell Fadel

small We think to there's us add accelerated through as it, don't a accounts, - you to for if retail accounts - It's an pretty so matter. opportunity for fast there and active huge want what large and know going great will. that I be to you change accounts the goes change call such such

So we ways for look primarily. be credit to going tightening if replace huge opportunity there's to think they

we Preferred before. business here the going coming so than it's of to And a even be out for environment Lease think better

Kyle Joseph

it. health Got your if then on consumer, underlying so unemployment. claims help up had for had we've we've a get lot, just you'll the thoughts unemployment sense a And and go federal stimulus the of obviously

where you can You that us customer obviously next over quarters? general right call point, some to the heading where and your you now scheduled end offset it months just that, see at and through but that's walk is in

Mitchell Fadel

I is shape think the Well, customer in now. good right pretty

With the levels. we're strong disposable stimulus they've really income, seeing got at demand more

times a said couple of the customer morning, our under this Kyle, time. all As I've is pressure

is more seen we've in top in recessions customers come as past what get funnel So pushed, of our credit to the tightens.

we've we struggle more seen they can't our extent out into And other a the too recession. that the pushed get the out and customers the in during that of we hard, of rent, there's to there's keep side on transaction transaction any pushed get the past lose of funnel

also belief our under be business to going I'd that our getting the coming darn like when ago think about being part it's e-com customers we doubled what well. and and say lot a doubling, And that's pushed a of there's as do it where recessions past pretty of the you number into transaction customers year was new -

Kyle Joseph

the for mix this Rent-A-Center modeled than outlook a sense us - there? can - for the Got and the environment impacts was sense at give so shift I that shift year-over-year, and it. shifted had I margins you can how much on believe to a the And better for then your business given you e-commerce, us and dropped sales give margins has your

Mitchell Fadel

products. because product Yes, was margins - of probably proposition, when on push the the this good not value the because changes there business just made more we in essential pretty the shift to in they probably of the are Certainly Rent-A-Center mix. necessarily started

TVs kids and But lot starting but adults appliances, all stay maybe it's move even as are days. into think trying awful or the give and and gamer, the it now something to freezers moving products going six I I'm - people these more the of to more the as is not a we right our game do or – home we and again spread a don't to now rent game I well people again like, consoles. mix know, I is furniture even, are Laptops getting weeks out pretty as demand good it's more. and over refrigerators home consoles with the of guess at

have are It's because work the well like to spread or all of home just kids categories so our out things now. real quick laptop they for had a and home-schooling to pretty It's product from the through they not forth.

Maureen Short

And fourth 'XX. which the of as XX.X% in the mix revenue of in of percentage was was from the quarter e-commerce quarter up sales a XX.X%

So cutthroat increase dramatic online and even of course saw then to past behavior this of and closed see to an the shop it some the we shared we shifting was continue some increase rooms more quarter. that of

Kyle Joseph

last Got to Obviously environment. impressive in offset should be highlight but we the quarter to is of what expenses down terms to extent, of it, that's in expect in modeling, certain you coming big this there? One have me line the one really from helpful. your a second terms for had outlook items very rents

Maureen Short

our employees is the shared of savings on Lease, partner operating the there's side cases furloughing closed, Yes, retail closed expense temporarily we've from of with store or a come rooms temporarily employees. Preferred where furloughed lot the

in leases rent or our seeing significant cost. of deferrals There taking real pretty either we're renegotiated estate that is even decreases landlords rent with a also number We've reductions.

the of try there's seeing then spend from to the - counteract some line. any that negative impacts of type And we're we evaluate top nonessential to did

quarter. increase We see modest losses the skip/stolen will second in a in

everything we offset doing try our can. being losses about costs can by to and we However where we're reducing smarter those costs to

Mitchell Fadel

line biggest the just But to summarize what the line. Maureen, would be you said, labor

Maureen Short

Right.

Mitchell Fadel

the than adjusting is as today, biggest in that we the forecasted - XX% model, and will revenue is down the line less down less labor EBITDA be right? well If less you're than XX% is as than XX% be a reason down - you would

Maureen Short

less expenses costs a that Right. there is like There's deliveries, lower. so are variable and we're more are example less others pickups for delivery doing

Mitchell Fadel

- prices and gas my gas yes. gosh, Well, -

Maureen Short

it are helps other and that so lower variable drive be think and that prices any will - type of I that down Gas quarter. expenses leaves in

Mitchell Fadel

us a a minimum into labor store, few and - don't a having couple we for variable of now And you this you've to model last thought we - of and number number a around this our in a of even real the cost really got company of we to have of got in of any the of years -- model said have trucks. we've something minimum years turned we really of more had Yes, like we call lot ago, people turn over minimums, model. years Kyle, of fixed we the you've a the a people

very soft were much were as out, showrooms some came reduce variable stimulus then we was now, And it's the demand closed able or and before to the if checks labor.

a line now So it been the what to the as labor in is variable us has compared past. for

Kyle Joseph

rough on echo much, Maureen, Mitch, congrats a despite so great others Really thanks helpful. operating appreciate and on quarter that, the very environment.

Mitchell Fadel

you, Thank Kyle.

Maureen Short

Kyle. you, Thank

Operator

ahead. from the Your go Caintic Vincent line next of question with will Stephens. come Please

Vincent Caintic

you very Could guidance by Rent-A-Center about segment Appreciate and for out quarter levels, you guidance. stores so the help the thinking it's Appreciate that strong and or second Thanks. Lease possibly Preferred the revenues versus it that. how break you're gave earnings?

Maureen Short

Yes.

Rent-A-Center side closures expense side the impact of seen the segments. more similar we've expect just impact many some as that's walked can impacts we a help more versus expense standpoint, to to that number address of Lease items through, side. between the to line So from of we where that top two But an fairly operating a offset the the and without more of on Preferred opportunities there's as address see we do the

at the looked temporary employees. well the Preferred within have have segment as labor and of Lease reducing done lines We furloughing

to shifted activities efficiency some try to improve of our help call centralized and the also We've to center collections the the improve margins.

Preferred a losses the So in to the on with Rent-A-Center the pick within and more skip/stolen of product, up very Rent-A-Center see a Lease of where business the we're the should relationship business. have we versus pressure able impact skip/stolen more see the on modest we losses segment will customer

Vincent Caintic

affect the very one helpful accounting to your at save That's how there? also question, maybe you depreciation skip/stolens and any on does but or that And all? I have new thoughts debt CECL related about And I I bad think the that and items, detail. methodology guess maybe when the of reserves take you think incremental about guess accounting

Maureen Short

did the for home is get businesses. [ph] needed, about the reserves quarter impact our the experienced not we Lease now - first it reserve pressure losses Preferred CECL were the The some only COVID-XX. And installment It Rent-A-Center talked potential adjustments quarter in choice and but was business. than was did $X address We'll we sales skip/stolen and less see affect not million adjustment losses. our at in likely or take that did a look adjustments skip/stolen to in significant second made in

Mitchell Fadel

into the think is within… fact need second anything down built be to the But think quarter we take that we will might we EBITDA still

Maureen Short

Right.

Mitchell Fadel

will year last interest pretty -- year. in factor savings the when and of total last with of EPS be XX% you flat

a huge tight, not when get it's this -- to not and return We're going just things a number, remind re-rent So sale. it is -- people still to it's to else. just -- there's we can mean, a be to other offsets. lease everybody, it, somebody can rent I

we they where off, work balance. this rent. much And loan on them isn't write the off the do a to with customers keep but nothing to But subprime have money, write there's don't if it

they're not it's can lease-to-own we've you So seen and model XXXX there. that, look losses back at go in and and a more just business much 'XX and flexible

Maureen Short

already they're they out, customers. until the record we are the to one cash-impacting pressure if reflected that's have not Right. our in And don't revenue other items. thing our seen revenue inventory we from but collect write-down, collections, then we point And since write-off, on numbers payments some

we down can margins the that And like. color this business we given and environment. look impacting decent our estimates believe second reserves So losses less. XX% our EBITDA revenue is with will and skip/stolen that's with already our in reflected the with about quarter or and perform reflected still lower being Those collections are for pretty the what

Mitchell Fadel

store operations management, team doing, Lease, Preferred And I not products what that reflects well frontline Vincent, what doing the co-workers of a new the job customer that they're a as in as great rent. think, that job times all our both specifically just keep get trying they're but people these more to on of help all Rent-A-Center help great -- and the even on during

than had just We payments ago, got as so online we for forth. additional pay customers as six to and ways far weeks

team really a and on store been pay a by great to there's effort great our effort for So the making employees. easier it customer

Vincent Caintic

are I so results. near guess the last shows the it or on maybe lenders at or question, prime a space, Yes, and recession, your stores, shopping of tightening in topic came profitable more competitors say who in aren't Appreciate a prime should the I in of last that. definitely ton you who share from typically tightening that your of grew but because down. lot the business people took

through maybe stores e-com the today higher-tier you seeing they actually of virtually terms in Or seeing different customers same you're are what who curious just business? - what interact and customers? of guess Are coming I with? who's you'd into customers, type your physically the

those might but normally you now, specific seeing not or types buying any for customers are of are there that or products then differentiators any like be And seeing, there?

Mitchell Fadel

us, than has comes because to seeing are or What getting transaction. a in we're a put higher -- higher through customer us above we're out quality the is Yes, before good we which a a pushing coming down lenders means better lenders with the them decision our -- know engine question. is this, that credit score we'll higher our sub-prime prime more it

customers want that there. that new what from the customer was just But not - the doubled. ago, I tells any a a website, and cast mean quality As it's credit they're the customer then quality there's new a I quality credit to and don't and aspersions that they're a the traffic that fact the higher quality higher from us decisioning, year customer person, fact it necessarily of standpoint lot far it higher on has a coming as doubled our and

new a as standpoint from e-com mix customers. doubled And with the traffic far and product as

it's on more a as but shift there. the things As early product far you'd mix, consider out. no, little not any seeing more spread it essential, was towards Again, now we're

was I essential of it even things days mean now televisions essential of and refrigerators normally furniture, products spread what so and laptops you early more the But appliances, pretty like more see. on, these and it's that forth. a we consider and

Vincent Caintic

Thank you for details. Thanks.

Mitchell Fadel

Thanks, Vincent.

Operator

time. no I'll at Mitch there over remarks. to the for turn call this other are questions CEO, back And final closing Fadel,

Mitchell Fadel

Thank you, operator.

thank mentioning, co-workers our customers was how credit, some in and I opportunity co-workers. our of we're deserve increase our themselves job, in great demand to of effort to all I'd the taking the be stores. want visiting our just was that of of and take products who've I can't out and I'd to like store more getting say and tremendous of care one I for services. we I I As more day out done thankful all a you while co-workers to safely store there dealing Because such frontline store and with an And appreciate a point much our stores just again, the you know out other amount want

to opportunity to want else you thank say your more and continued I job, call great and for this on to And us thank a take support. you. doing one You're everyone joined who

have on, really day and a everyone So good go stay safe.

Operator

conference. the concludes joining again, you. everyone, This today's Thank you, Thank for call.

You may now disconnect.