PLANO, Texas - (BUSINESS WIRE) - February 23, 2022 - Rent-A-Center, Inc. (the "Company" or "Rent-A-Center") (NASDAQ:RCII) today announced results for the quarter and year ended December 31, 2021.
"2021 was a dynamic year for the Company with significant progress and some challenges. We generated revenues of $4.6 billion, which grew 17.3% on a pro-forma basis, and non-GAAP EPS of $5.57, driven by strong organic growth for both the Rent-A-Center Business segment and the Acima business that we acquired in February of 2021,” said Mitch Fadel, Chief Executive Officer.
“In the fourth quarter, the combined effect of significantly reduced government pandemic relief, decades-high rates of inflation, and supply chain disruptions impacted our target customers’ ability to access and afford durable goods, which negatively impacted our results. We anticipate these external headwinds will continue for the foreseeable future, resulting in year-over-year declines in revenue and earnings for 2022, on a pro forma basis, while free cash flow should increase for the year," continued Mr. Fadel.
"Looking forward to a normal post-pandemic environment, our mission to provide flexible leasing solutions for the financially underserved will be even more important as consumers adjust their spending choices to a less stimulative economic setting. Moreover, with the Acima acquisition and the Acima digital ecosystem test we launched in August, we are transforming into a leading consumer Fintech platform business, with omni-channel capabilities." concluded Mr. Fadel.
Acima Segment: Fourth quarter 2021 revenues of $611.9 million increased 204.3% year-over-year due to the Acima Acquisition, completed in the first quarter of 2021. On a pro-forma1 basis, revenues increased 12.3%, and GMV increased 5% year-over-year, with growth in merchant partners and lease applications partially offset by the effects of tighter lease underwriting, supply chain disruptions on merchant partners, and headwinds on consumer discretionary income from elevated rates of inflation and the wind down of government pandemic financial relief. Revenue was also negatively impacted by higher projected delinquency rates based on recent payment activity. Skip/stolen losses were 11.8% of revenue in the fourth quarter of 2021 compared to 10.8% in the prior year period on a pro-forma basis. On a GAAP basis, segment operating profit was $31.7 million with an operating profit margin of 5.2% in the fourth quarter of 2021, compared to $17.3 million and 8.6% in the prior year period. Adjusted EBITDA was $58.6 million with an Adjusted EBITDA margin of 9.6% in the fourth quarter of 2021, compared to $81.6 million and 15.0% in the prior year period on a pro-forma1 basis. The year-over-year decline in Adjusted EBITDA was primarily attributable to higher delinquency and loss rates, which the Company believes largely stemmed from the effect of the wind down of government pandemic relief and elevated rates of inflation on customer discretionary income.
Rent-A-Center Business Segment: Fourth quarter 2021 revenues of $506.2 million increased 9.0% year-over-year, primarily due to a 10.4% increase in same store sales, including 17.9% growth in e-commerce sales and strong lease portfolio performance, partially offset by the impact of refranchising approximately 100 stores in California in the fourth quarter of 2020. Skip/stolen losses were 4.0% of revenue in the fourth quarter of 2021 compared to 2.6% in the prior year period. On a GAAP basis, segment operating profit was $91.9 million with an operating profit margin of 18.2% in the fourth quarter of 2021, compared to $80.4 million and 17.3% in the prior year period. Adjusted EBITDA was $97.8 million with an Adjusted EBITDA margin of 19.3% in the fourth quarter of 2021, compared to $102.9 million and 22.2% in the prior year period. The decline in segment operating profit and Adjusted EBITDA was primarily attributable to higher loss rates that the Company believes stemmed from the wind down of government pandemic relief, and higher labor expense due to wage inflation that more than offset revenue growth. On December 31, 2021, the Rent-A-Center Business segment had 1,846 company-operated locations.
Franchising Segment: Fourth quarter 2021 revenues of $37.6 million increased 2.1% year-over-year due to higher store count as a result of the Company refranchising approximately 100 California stores during 2020 and partially offset by lower inventory purchases per store. Segment operating profit, on a GAAP basis, and Adjusted EBITDA were $4.9 million in the fourth quarter and increased $0.9 million year-over-year. On December 31, 2021, there were 466 franchise-operated locations.
Mexico Segment: Fourth quarter 2021 revenues of $15.7 million increased 9.9% year-over-year on a constant currency basis. Segment operating profit, on a GAAP basis, and Adjusted EBITDA were $1.2 million and $1.3 million, respectively. In the fourth quarter, GAAP operating profit decreased $0.9 million year-over-year. On December 31, 2021, the Mexico business had 123 company-operated locations.
Corporate Segment: Fourth quarter 2021 non-GAAP basis expenses increased $7.9 million year-over-year or 20.7%, reflecting our addition of Acima related costs and investments we have been making in talent and technology to support our growth initiatives.
Gross Merchandise Volume (GMV): The Company defines Gross Merchandise Volume as the retail value in U.S. dollars of merchandise acquired by the Company that is leased to customers through a transaction that occurs within a defined period, net of cancellations.
1) The disclosed pro forma results and metrics in this release and the Company's related earnings conference call represent estimated financial results and metrics as if the acquisition of Acima had been completed on January 1, 2020. The pro forma results and metrics may not necessarily reflect the actual results of operations or metrics that would have been achieved had the acquisition been completed on January 1, 2020, nor are they necessarily indicative of future results of operations or metrics.
Full Year 2022 Guidance
The Company is providing the following guidance for its 2022 fiscal year:
2022 guidance assumes the macro headwinds that affected the business in late 2021, including supply chain disruptions, high rates of inflation, and the effect of lower levels of government support for our core consumers, will continue throughout the year.
The Company has modified its definition of Adjusted EBITDA beginning with first quarter 2022 results to exclude stock-based compensation. Therefore, 2022 Adjusted EBITDA guidance excludes the impact of stock-based compensation, whereas prior period Adjusted EBITDA within the remainder of this press release includes the impact of stock-based compensation.
Rent-A-Center, Inc. will host a conference call to discuss the fourth quarter results, guidance and other operational matters on the morning of Thursday, February 24, 2022, at 9:30 a.m. ET. Certain financial and other statistical information that will be discussed during the conference call will also be provided on the same website.
Non-GAAP Financial Measures
This release and the Company's related conference call contain certain financial information determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles (GAAP), including (1) Non-GAAP diluted earnings per share (net earnings, as adjusted for special items (as defined below), net of taxes, divided by the number of shares of our common stock on a fully diluted basis), (2) Adjusted EBITDA (net earnings before interest, taxes, depreciation and amortization, as adjusted for special items) on a consolidated and segment basis and (3) Free Cash Flow (net cash provided by operating activities less capital expenditures). “Special items” refers to certain gains and charges we view as extraordinary, unusual or non-recurring in nature and which we believe do not reflect our core business activities. For the periods presented herein, these special items are described in the quantitative reconciliation tables included below in this release. Because of the inherent uncertainty related to the special items, management does not believe it is able to provide a meaningful forecast of the comparable GAAP measures or reconciliation to any forecasted GAAP measure without unreasonable effort.
These non-GAAP measures are additional tools intended to assist our management in comparing our performance on a more consistent basis for purposes of business decision-making by removing the impact of certain items management believes do not directly reflect our core operations. These measures are intended to assist management in evaluating operating performance and liquidity, comparing performance and liquidity across periods, planning and forecasting future business operations, helping determine levels of operating and capital investments and identifying and assessing additional trends potentially impacting our Company that may not be shown solely by comparisons of GAAP measures. Consolidated Adjusted EBITDA is also used as part of our incentive compensation program for our executive officers and others.
We believe these non-GAAP financial measures also provide supplemental information that is useful to investors, analysts and other external users of our consolidated financial statements in understanding our financial results and evaluating our performance and liquidity from period to period. However, non-GAAP financial measures have inherent limitations and are not substitutes for or superior to, and they should be read together with, our consolidated financial statements prepared in accordance with GAAP. Further, because non-GAAP financial measures are not standardized, it may not be possible to compare such measures to the non-GAAP financial measures presented by other companies, even if they have the same or similar names.
Reconciliation of net earnings to net earnings excluding special items and non-GAAP diluted earnings per share:
Reconciliation of operating profit to Adjusted EBITDA (consolidated and by segment):
Reconciliation of net cash provided by (used in) operating activities to free cash flow:
SOURCE Rent-A-Center, Inc.
Rent-A-Center, Inc., headquartered in Plano, Texas, is the largest rent-to-own operator in North America.