ATLANTA, Oct. 26, 2021 // PRNewswire // -
Refer to the "Basis of Presentation" section below for information regarding the consolidated and combined financial results for the periods discussed in this release.
The Aaron's Company, Inc. (NYSE: AAN), a leading, technology-enabled, omnichannel provider of lease-to-own and purchase solutions, today announced financial results for the third quarter ended September 30, 2021.
"I am pleased to announce that Aaron's third quarter results exceeded our expectations as we continue to track ahead of our long-term strategic plan. In the nearly one-year since our spin transaction, we have strengthened Aaron's leadership position in the direct-to-consumer lease-to-own market. Through continued investments in our fast-growing e-commerce channel, predictive lease decisioning engine and high-performing GenNext stores, we are delivering a better customer experience, greater productivity and long-term growth in our business.
"With strong third quarter results, we are again raising our revenue and earnings outlook for the full year 2021. I am encouraged by the continued year-over-year growth in our lease portfolio and the robust inventory position we have built as we enter the peak demand season," said Douglas Lindsay, Chief Executive Officer of The Aaron's Company.
For the third quarter of 2021, total revenues were $452.2 million compared with $441.0 million for the third quarter of 2020, an increase of 2.5%. The increase in revenues was primarily due to the increasing size and quality of our lease portfolio, partially offset by lower customer payment activity during the quarter and the reduction of 79 franchised stores during the 15-month period ended September 30, 2021. E-commerce revenues were up 13.3% compared to the prior year quarter and represented 14.3% of lease revenues compared to 13.1% in the prior year quarter.
On a same store basis, lease and retail revenues increased 4.6% in the third quarter compared to the prior year quarter. Same store revenue growth was primarily driven by a larger same store lease portfolio size to begin the quarter, partially offset by lower customer payment activity as compared to the prior year.
Net earnings for the third quarter of 2021 were $24.3 million compared to $32.6 million in the prior year period. Net earnings in the third quarter of 2021 included $2.9 million in pre-tax restructuring charges and $0.4 million in pre-tax spin-related separation charges. Net earnings in the third quarter of 2020 included $4.0 million in pre-tax restructuring charges and $1.7 million in pre-tax spin-related separation and retirement charges.
Adjusted EBITDA for the Company was $53.6 million for the third quarter of 2021, compared with $64.3 million for the same period in 2020, a decrease of $10.7 million, or 16.6%. As a percentage of revenues, Adjusted EBITDA margin was 11.9% in the third quarter of 2021 compared with 14.6% for the same period in 2020. The decline in Adjusted EBITDA and Adjusted EBITDA margin was primarily due to the expected increase in lease merchandise write-offs and lower customer payment activity compared to the stimulus-aided levels in the third quarter of last year.
Diluted earnings per share for the third quarter of 2021 were $0.73 compared with diluted earnings per share of $0.96 in the year ago same period. On a non-GAAP basis, diluted earnings per share were $0.83 in the third quarter of 2021 compared with non-GAAP diluted earnings per share of $1.10 for the same quarter in 2020.
During the third quarter, the Company repurchased 1,333,264 shares of Aaron's common stock for a total purchase price of approximately $37.5 million. For the year-to-date period through October 22, 2021, the Company repurchased 3,034,097 shares of Aaron's common stock for a total purchase price of approximately $90.4 million. As of October 22, 2021, the Company had approximately $59.6 million remaining under its $150 million share repurchase program.
During the quarter, the Company's Board of Directors declared a quarterly cash dividend of $0.10 per share which was paid on October 5, 2021.
As of September 30, 2021, the company had no debt and total available liquidity of $247.5 million, which includes $14.8 million of cash and $232.7 million of availability under the Company's existing revolving credit facility.
Franchisee revenues totaled $79.8 million for the three months ended September 30, 2021, a decrease of 21.2% from the three months ended September 30, 2020 primarily due to a reduction in franchise locations. Same store revenues for franchised stores increased 2.1% for the three months ended September 30, 2021 compared with the same quarter in 2020. Revenues and customers of franchisees are not revenues and customers of the Company.
The Company has revised its full year 2021 outlook. For the full year 2021, we increased our expected total revenues to between $1.820 billion and $1.830 billion. We also increased our expected Adjusted EBITDA to between $225 million and $230 million.
For the full year 2021 updated outlook, we have assumed an effective tax rate for 2021 of approximately 26%, depreciation and amortization of approximately $70 million, and a diluted weighted average share count of approximately 34 million shares. We have lowered our 2021 annual free cash flow outlook to between $30 million and $40 million primarily as a result of incremental lease merchandise purchased during the third quarter. This outlook assumes no significant deterioration in the current retail environment, state of the U.S. economy or global supply chain as compared to its current condition.
The benefits to our customers from government stimulus programs declined in the third quarter, and as expected, resulted in lower customer payment activity as compared to the prior year. Over the next three to four quarters, we expect customer payment activity to remain above pre-pandemic levels but below that experienced in the 2021 year-to-date period.
The financial statements and related results discussed herein for periods prior to and through the date of the separation and distribution, November 30, 2020, were prepared on a combined standalone basis and were derived from the consolidated financial statements and accounting records of PROG Holdings, Inc. The financial statements for the periods subsequent to December 1, 2020 and through September 30, 2021 are consolidated financial statements of the Company and its subsidiaries, each of which is wholly-owned, and is based on the financial position and results of operations of the Company as a standalone company.
The combined financial statements prepared through November 30, 2020 include all revenues and costs directly attributable to the Company and an allocation of expenses from PROG Holdings, Inc. related to certain corporate functions and actions. These costs include executive management, finance, treasury, tax, audit, legal, information technology, human resources and risk management functions and the related benefit cost associated with such functions, including stock-based compensation. These expenses have been allocated to the Company based on direct usage or benefit where specifically identifiable, with the remaining expenses allocated primarily on a pro rata basis using an applicable measure of revenues, headcount or other relevant measures.
The Company will hold a conference call to discuss its quarterly results on October 26, 2021, at 8:30 a.m. Eastern Time. The public is invited to listen to the conference call by webcast accessible through the Company's investor relations website. The webcast will be archived for playback at that same site.
Use of Non-GAAP Financial Information:
Non-GAAP net earnings, non-GAAP diluted earnings per share, EBITDA and adjusted EBITDA are supplemental measures of our performance that are not calculated in accordance with generally accepted accounting principles in the United States ("GAAP"). Non-GAAP net earnings and non-GAAP diluted earnings per share for 2021 exclude certain charges including amortization expense resulting from franchisee acquisitions, restructuring charges, and separation costs associated with the separation and distribution transaction that resulted in our spin-off into a separate publicly-traded company. Non-GAAP net earnings and non-GAAP diluted earnings per share for 2020 exclude certain charges including amortization expense resulting from franchisee acquisitions, early termination charges incurred to terminate a sales and marketing agreement, goodwill impairment charges, restructuring charges, separation and retirement costs associated with the separation and distribution transaction that resulted in our spin-off into a separate publicly-traded company, and an income tax benefit resulting from the revaluation of a net operating loss carryback. The amounts for these pre-tax non-GAAP adjustments, which are tax-effected using estimated tax rates which are commensurate with non-GAAP pre-tax earnings, can be found in the Reconciliation of Earnings (Loss) Before Income Taxes and Earnings (Loss) Per Share Assuming Dilution to Non-GAAP Net Earnings and Non-GAAP Earnings Per Share Assuming Dilution table in this press release.
The EBITDA and adjusted EBITDA figures presented in this press release are calculated as the Company's earnings before interest expense, depreciation on property, plant and equipment, amortization of intangible assets and income taxes. Adjusted EBITDA also excludes the other adjustments described in the calculation of non-GAAP net earnings above. Adjusted EBITDA margin is defined as EBITDA as a percentage of revenue. The amounts for these pre-tax non-GAAP adjustments can be found in the Quarterly EBITDA tables in this press release.
Management believes that non-GAAP net earnings, non-GAAP diluted earnings per share, EBITDA and Adjusted EBITDA provide relevant and useful information, and are widely used by analysts, investors and competitors in our industry as well as by our management in assessing both consolidated and business unit performance.
Non-GAAP net earnings and non-GAAP diluted earnings per share provide management and investors with an understanding of the results from the primary operations of our business by excluding the effects of certain items that generally arose from larger, one-time transactions that are not reflective of the ordinary earnings activity of our operations or transactions that have variability and volatility of the amount. This measure may be useful to an investor in evaluating the underlying operating performance of our business.
EBITDA and adjusted EBITDA also provide management and investors with an understanding of one aspect of earnings before the impact of investing and financing charges and income taxes. These measures may be useful to an investor in evaluating our operating performance and liquidity because the measures:
The Free Cash Flow figures presented in this press release are calculated as the Company's cash flows provided by operating activities less capital expenditures. Management believes that Free Cash Flow is an important measure of liquidity provides relevant and useful information, and are widely used by analysts, investors and competitors in our industry as well as by our management in assessing liquidity.
Non-GAAP financial measures, however, should not be used as a substitute for, or considered superior to, measures of financial performance prepared in accordance with GAAP, such as the Company's GAAP basis net earnings and diluted earnings per share, the Company's GAAP revenues and earnings before income taxes and GAAP cash from operating activities, which are also presented in the press release. Further, we caution investors that amounts presented in accordance with our definitions of non-GAAP net earnings, non-GAAP diluted earnings per share, EBITDA, adjusted EBITDA and Free Cash Flow may not be comparable to similar measures disclosed by other companies, because not all companies and analysts calculate these measures in the same manner.
SOURCE The Aaron's Company Inc.
Headquartered in Atlanta, Aaron's, Inc. is the sales and lease ownership and specialty retailing of furniture, consumer electronics, home appliances and accessories.