Q3 2019 Earnings Call
Good afternoon. My name is Andrea I won't be your conference coordinator.
At this time I would like to welcome everyone to the Aaron's, Inc. Third quarter 2019 earnings Conference call.
All lines have been placed on mute to prevent any background noise.
After the speaker's remarks, there will be a question and answer session.
I will now turn the conference over to Mr., Michael Dickerson, Vice President of corporate Communications and Investor Relations for Aaron's, Inc. You may begin your conference.
Thank you and good afternoon, everyone welcome to the Arizona Inc. third quarter 2019 earnings Conference call.
Joining me this morning, our John Robinson parents, <unk>, President and Chief Executive Officer, Ryan Woodley, Chief Executive Officer Progressive leasing.
Lindsay President of the Orange business, Steve Michaels, Aaron's, Inc, Chief Financial Officer, and President strategic operations.
Many of you have already seen a copy of our earnings release issued this afternoon.
Those of you who have not it is available on the Investor Relations section of our web site at Aarons Dot com.
During this call certain statements, we make forward looking I.
I want to call your attention to our safe Harbor provision for forward looking statements that can be found at the end of earnings release.
The safe Harbor provision identifies risks that may cause actual results to differ materially from the concept of our forward looking statements.
Also please see our Form 10-K for the year ended December 31 2018.
And subsequent filings with the FCC for a description of the risks related to our business that may cause actual results to differ materially from a forward looking statements.
Listeners are cautioned not to place undue emphasis on forward looking statements and we undertake no obligation to update any such statements.
On today's call will be referring to certain non-GAAP financial measures, including EBITDA and adjusted EBITDA non-GAAP earnings and non-GAAP , U.P.S., which have been adjusted for certain items, which may affect comparability of our performance with other companies.
These non-GAAP measures are detailed in the reconciliation tables included with our earnings release.
The company believes that these non-GAAP financial measures provide meaningful insight into the company's operational performance and cash flows and provides these measures to investors to help facilitate comparisons of operating results with prior periods and to assist them in understanding the companys ongoing operational performance.
Lastly, effective as of the first quarter 2019, the company adopted assay eight for two new standard related to accounting for leases.
Our press release, we have added some information to the revenue table to provide you a year over year comparison on an equivalent basis.
Throughout our call today, we will make comments related to the comparability of certain items with the prior year and assumed in these comments that the adoption of this new standard was made at the beginning of each period compared.
With that I'll now turn the call over to John Robinson.
Thanks, Mike and thank you all for joining us today.
While the third quarter was challenging, but progressive and the aarons business accomplished key objectives, which we believe significantly improve our long term prospects for growth.
On a consolidated basis, we achieved revenue growth of 8.4% over the same quarter in 2018.
This increase is primarily a result of continued strong invoice growth at progressive and the Aarons business acquisition or franchise locations in 2018.
Partially offset by the closure of underperforming Aaron's stores in the first half of 2019.
Adjusted EBITDA and diluted non-GAAP , EPS were 87.1 million and 73 cents per share respectively. Both up from the prior year third quarter.
The progressive team delivered another excellent quarter for both revenue and earnings invoice volume grew 18.6% over the prior year third quarter due to increased productivity from new and existing retailers, which along with the recent roll out of additional locations should drive accelerating invoice growth.
The fourth quarter.
We are encouraged by progressive is consistently strong results and continue to invest in people and systems to deliver future growth.
The aarons business had a challenging quarter with negative same store revenues and a year over year decline in adjusted EBITDA, resulting primarily from weaker collections performance.
The positive note the team was successful driving customer traffic and sales conversion leading to a 13.7% increase in revenues written into the portfolio.
We are encouraged by the team's ability to generate custard <unk> demand in both our store and ecommerce channels, which gives us confidence to continue investing in the aarons business.
We remain conservatively capitalized with a net debt to adjusted EBITDA ratio of less than half a turn and ended the third quarter with available liquidity of over $500 million.
Our strong balance sheet provides us flexibility to continue to invest in our businesses pursue M&A opportunities and return capital to shareholders.
During the quarter, we returned approximately 27 million to our shareholders through share repurchases and our quarterly cash dividends.
Now I'll turn the call labor to Ryan to discuss the progressive business.
Thanks, John .
I'm proud of the team for delivering another outstanding quarter of invoice revenue and earnings growth consistent with trends, we've been experiencing for the last several years.
Revenues were a record 529 million in the third quarter of 20.1% as compared to the third quarter of 2018.
Revenue growth was generated by year over year increase and the lease portfolio, resulting from consistently strong growth an invoice volume over the last several quarters.
In the third quarter invoice grew 18.6% to record a 421 million driven by a 20.5% increase in invoiced per active door.
The significant increase in Invoiced proactive doros due to strong year over year increases on lease transactions per location and nearly every vertical contributing to an all time high level of productivity across the portfolio.
While it is difficult to forecast the timing of invoice volume exactly we're very pleased with our position as we ended the fourth quarter. We're currently experiencing an acceleration in invoice growth as existing partnerships expand and new partnerships continue their ramp.
Our third quarter active door count was approximately 19900 down 1.6% from a third quarter of 2018.
Expect this metric to shift a positive in the fourth quarter as we begin to calm mattress and mobile reductions from the prior year and as the new retail partner locations. We have recently onboarded become active.
As previously mentioned however, we believe door count has become less predictive as a leading indicator of future revenue growth, particularly as our overall mix shifts towards larger footprint locations and ecommerce transactions.
EBITDA increased by 21.5% as compared to the same period last year, primarily due to the 20.1% increase in revenues.
On a consistent accounting basis, EBITDA was 11.9% of revenues, an increase of 20 basis points from 11.7% and a year ago period.
EBITDA margin expansion was driven by an increase in gross margin, partially offset by accelerating investments and SGN a to support the growth of new and existing retail partners.
Also calculated on a consistent accounting basis write offs were 7.7% of revenues in our third quarter 2019, slightly better than a 7.8% in a year ago period.
As demonstrated by the consistency of this metric our lease pool performance continues to be strong and we expect to end the year well within the annual write off range. We previously provided.
I'm excited about the momentum we're carrying into the remainder of the year and I'm pleased with the significant ongoing effort. The team is making toward providing the best possible experience for credit challenge consumers.
Ill now turn the call over to Douglas to discuss the Aarons business third quarter results. Thanks, Ryan you may recall from our second quarter update the Aarons business recently launched new marketing and sales programs designed to drive higher customer traffic and conversion through our in store and ecommerce channels.
The marketing initiative reallocated, our spend to direct response programs and brand advertising.
The sales initiative was a companywide program designed to further develop our team members selling skills and behaviors.
These combined initiatives drove a 13.7% increase in revenues written into the portfolio.
It was the highest quarter and several years and resulted in a sharp increase in deliveries to new customers.
Included in this growth was a 50% increase in ecommerce revenues written into the portfolio.
Which represented approximately 13% of deliveries in the quarter.
Because of the success of these initiatives are recurring revenue per store was higher entering the fourth quarter on a year over year basis.
Well, we're pleased with the demand generated from the sales and marketing initiatives. The significant increase in deliveries resulted in insufficient labor capacity to handle the elevated workload in our stores.
This capacity unbalanced credit a shortfall in collections performance, which had an unfavorable impact on lease revenues and write offs in the quarter.
During the quarter, we address this decline by adding collection resources across the system and rebalance our in store team members efforts between sales and collections.
We're already seeing our collection performance improve as a result, these actions and believe collections will return it or more normalized level as we exit the fourth quarter.
Ultimately our goal is to find the right balance of delivery and collections performance that will generate consistently profitable growth.
Despite a significant increase in revenues written into the portfolio and higher recurring revenue per store on a year over year basis same store revenues in the quarter declined 2.9% due to our collections performance.
Given these results we've adjusted our annual same store revenues outlook from a range of flat to up 2%.
To a new range of negative 1% to positive 1%.
Adjusted EBITDA decreased 7 million or 21.5% compared to the year ago quarter.
Adjusted EBITDA declined primarily due to the negative impact of collections in the quarter, partially offset by the benefit of increased revenue written into the portfolio and expense reductions related to close stores.
Write offs were 7.4% of revenues versus 5.4% on the same period last year.
The increase in ride also was primarily driven by operational imbalances created by our new sales initiatives.
Those are 155 stores in 2019, and an increasing mix of e-commerce revenues.
Despite some challenges I'm very encouraged by the progress, we're making in the insurance business, including the improved delivery activity experienced throughout the quarter. We continued to invest in key strategic initiatives that we believe will improve the customer experience and drive operational efficiencies to enable our associates to focused on the highest value added act.
Ladies.
I'll now turn the call over to stage.
Thanks, Douglas on a consolidated basis revenues for the third quarter of 2019 were 963.8 million an increase of 8.4% over the same period a year ago when calculated on a basis consistent with the 2019 adoption of assay a 42.
Adjusted EBITDA for the company was 87.1 million for the third quarter of this year compared to 82.5 million for the same period last year, an increase of 4.6 million or 5.6%.
Adjusted EBITDA was 9% of revenue in the third quarter of 2019 down slightly from the 9.3% in the third quarter of 2018 on a constant accounting basis.
Diluted EPS on a non-GAAP basis for the quarter increased 5.8% to 73 cents versus 69 cents in the prior year quarter.
Operating expenses decreased approximately 37.3 million.
Adjusting operating expenses in the third quarter of 2018 to be consistent with 2019 reporting operating expenses would have increased 27 million a third quarter of 2019 compared to the year ago period.
Approximately half of the increase in operating expenses relates to increases in write offs evenly split between progressive and the aarons business.
The balance relates to increased personnel costs at progressive an increased personnel and occupancy costs at the aarons business related to the acquisition of franchise stores in 2018.
These increases in the Aarons business were partially offset by the closure of underperforming stores as part of our restructuring actions.
During the third quarter the company reported restructuring costs of 5.5 million primarily related to changes in estimates made some prior quarter restructuring activities as well as the plant closure of an administrative building cash generated from operating activities was 351 million for the nine months ended September Thirtyth 2000.
Hi team.
We ended the quarter with 150 million in cash compared to $15 million at the end of 2018.
During the quarter, we repurchased 399000 shares of the company's common stock.
At an average price of $62.61 per share returning approximately 27 million to our shareholders through these repurchases and our quarterly cash dividend.
We remain conservative capitalized and ended the third quarter with available liquidity of $537 million and a net debt to adjusted EBITDA ratio of less than 0.5 turns.
You will note that we have narrowed our outlook for 2019, primarily in response to the shortfall in the third quarter, resulting in a revised 2019, non-GAAP EPS outlook of $3.75 to $3, an 85 cents compared to our previous outlook at $3, an 85 cents to $4.
Finally, as you may have seen in our Form 10-Q filed earlier. This afternoon, we've updated our disclosure relating to the Cds receive from the FTC in July 2018, and April 2090.
Because we are actively engaged with the FTC staff on these matters, we're not able to comment on them any further at this time.
I'll now turn the call over the operator, who assist with the question and answer period.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the Keith.
To withdraw your question. Please press Star then too.
Please limit yourself to one question and one follow up if you have further questions you may re enter the question queue.
At this time, we will pause momentarily to assemble our roster.
And our first question comes from Brad Thomas of Keybanc Capital markets. Please go ahead.
Hi, good afternoon guys.
Hi, Brad era.
A couple of questions if I if I could.
Maybe I'll start with progressive.
I guess could you maybe help us think through.
The adjustment that you are making here on the full year guidance for revenue for progressive.
And maybe talk a little over that why you're lowering the high end of the range and.
Whether thats coming from partners that are maybe more mature versus what you're seeing out of some of your younger partnerships.
I happened to Brad Thanks to the question Ryan here. It we're obviously happy with the strong rate of growth in the quarter asset it is difficult to get the timing of invoice exactly right.
When an opportunity will launch and the pace at which it will grow it shifted a bit later in the year than we'd anticipated when we revise the outlook and the second quarter, but that said we've had some very large launches and it takes time to integrate the program.
End of the store environment and drive awareness among retail sales associates and customers and we're very excited about the potential there as well as the ongoing productivity from existing doors is both of those both existing and new locations that are contributing to that acceleration and invoice draft that I mentioned.
In our prepared remarks that we're seeing currently in the for fourth quarter and leave us very optimistic about our ability to drive strong growth into the future, but that's essentially what it is just getting the timing of invoice nailed down in reflecting that.
And the in the range of Allison, we provided there, but we remain very optimistic that where we said.
Gotcha, and if I could ask a follow up question around around yearend.
Business and how you all are thinking about profitability. There I guess I guess the first part of that question would be.
Douglas can you help us think about.
Maybe when we look at margins and profitability in the core how much of the misstep this quarter as maybe execution. If some of the initiatives you have rolling out versus the end market being a bit more challenging today.
Sure, Brian Let me I would say is all Jonah putting the execution bucket.
So is that you guys you know we rolled out a new sales and marketing initiative.
That initiative drove a lot more demand into our stores, we had anticipated we had 14%.
Revenue written into the portfolio, which is a very large number and also big delivery number relative to where we've been on and we put pressure on our infrastructure and doing that and so.
As we think about the quarter, we feel like we have rebounded from that as I said in my prepared remarks, we've.
And then offsetting impact on collections that we felt in the quarter, but we've been trying to get the business back in balance both collecting and delivering which we believe we're seeing signs of and have seen evidence of in the last few weeks. So we feel good about the outlook, we don't think will fully recover.
Until the end of the fourth quarter and get back to normalized collections and the outlook. The we've put in place is really reflective of that is reflective of getting back in balance through the end of the year and putting through some cost savings that we've put and as well. So we feel like this is all on US. The good news is we've really broken through and found a way to come further traffic that is.
Coming into our stores and far more productive ways to go acquire the customer the bad news is.
It had a short term impact on collections, which were reacting to right now so.
In terms of external impact I would say, there's nothing there it's all really internal and Brad. This is John Robinson I would echo what Douglas said Weve, you've been follows for awhile and know that.
Pulling levers to drive traffic and conversion have been something we struggled with over the last few years of some really pleased with Douglas and the team for finding that lever in the third quarter.
But as Douglas said it.
If these things. These changes are difficult are challenging to doing that scale can be a little choppy ns and to what we've experienced but generally really pleased.
Our ability to do that and then we've got to just on that right balance and.
Overtime, the business has gotten better.
But changes that always linear and we've just got to keep working hard and really remain optimistic.
But.
This quarter was just a little shopping.
Got you. Thank you I'll turn it over Atish now.
Our next question comes from John Baugh Stifel. Please go ahead.
Thank you good evening.
Right in.
The increase there in the core business written.
My name is the customer count there was down 2.6% still year over year now I know you close some stores, but could you.
I don't know back there will be our or give us a sense for what this means if not for this quarter maybe for suing quarters.
In terms of the comp or the pace of that business assuming collections gets back.
Sure John has done well, so yes customer counts down 2.9% I think thats best numbers since Q4 2016, so it's moving in the right duration as you know that number kind of build upon itself in the portfolio business. The reason that's starting to move into right direction is.
We added.
Hi, or low single digit.
End of the portfolio in terms of deliveries this quarter and so it begins to move in the right duration as stated in my prepared remarks, when you're not just look at customers, but if you look at the value of the portfolio on a per store basis year over year at the end of Q3, we are actually up relative to last year, which is a very good leading indicator to wear.
Same store revenues can be if you're up in the dollar amount year over year for the same quarter, you just need to collect the money would happen. Unfortunately in this quarter as we didnt to like the money and therefore, we could not booked the lease revenue in full which caused the decline in comp store revenues of 2.9% I fully believe that when we get our comps back in line and we've been.
And to build on the portfolio and really leverage everything we've learned.
From our sales initiatives that has really good outlook for the future as we go forward. We did however, lower our comp guidance for this year and that is reflective of the 2.9% decrease were seeing and the fact that we probably will not get back totally in line with license totally under the fourth quarter.
Okay and then.
Is there a way to.
Parse out the weighting of the write offs being higher the between the new store program the store closures and the E Commerce.
Yes, I think as I've mentioned on our last call we are expecting the new normal.
To be higher than it's been historically.
That's due to a number of things ecommerce has become a bigger part of the business and there's more new customers need.
The promotional strategy and deals that were originating.
On Sunday business is driving more new customers, which naturally have a higher charge off rate.
You guys said and our prepared remarks or at least in the queue in a last quarter that would be the case on top of that were also experienced a temporary increase from the close of merge of these 155 stores. We did in the last nine months that should start to settle out by the end the year.
On top of that we've also this is the new fees. This quarter. We've also introduced this new marketing and sales training, which has caused us to slip back a bit and collections, but we also believe that will normalize by the end of the year. So what I would think in terms of.
Outlook on write offs is.
Close motor stores normalizing by the end of the year.
The sales and marketing initiative normalizing by the end of the year and then you're left with just the IRS and some new customers and makes of E com as we move forward.
So with with that be the letter to.
The.
If we settle back to a more normalized.
Loss, it's gone up any range, you want to give or because I guess, it would still be higher given new customer percentage and e-commerce percentage.
Yeah, I think we're going to put that in our guidance for next year, but if you look back to the comments. We've made previously on our calls I think we've got into higher new normalized levels of charge offs, Okay and last one will quickly I guess, Ron Nick I think you gave while the charge off number but it did.
No not see or hear bad debt expense and was that in line.
Bad debt was 12 I didnt given in the prepared remarks bad debt was 12.9 as a percent of gross revenue versus 12.7.
Last year, so again, very consistent with kind of year over year levels and leaves us in the ranges.
We provided previously for lease pool performance, so pleased with where we sit there.
And then finally, we get some kind of 2020 color on.
Progressive in terms of how the new accounts.
Any preliminary thoughts around how we see best buy and lose to be specific impacting next year. Thank you.
I fully expect that will be an R 22.
And Tony Tony outlook.
Nothing more on that now John Okay. Thank you good luck.
Thank you.
Our next question comes from Jason Hall of Bank of America Merrill Lynch. Please go ahead.
Great. Thanks for taking my question I wanted to ask about how you're thinking about progressive EBITDA margins as the business mix shifts to some of these larger retail partners. I know you you won't speak to any specific retail partner, but just generally if you could talk about the puts and takes avastin with larger large partners that'd be great. Thanks.
Sure happy too so we've we've previously provided.
Sort of goalpost on expected profitability for the business in the context of an EBITDA range that we said im should be between 11 and 13% on the year. It's an annual guide that we've put we provided Gulf those in the past and we'll obviously be well within that this year are trending toward the higher.
Higher end of that range and.
Now expects to be able to continue to deliver performance within that range.
Going forward.
Yes, that's true for the business overall.
As we think about both the existing.
The profitability profile, the existing book as well as.
How that grows over time.
Great. Thanks, and then as a follow up jumping over to the ARINC business could you talk about what's needed to get write off.
Kind of back in line with a level that you're more comfortable with is their need for any sort of investment or whether to opex or anything like that I additional labor hours on trying to get that number back in line or is it more jess.
Change and I guess, how you're managing the stores and operations. Thanks.
Yes.
Thank you for us in question the.
So we were again really proud of the team for driving such growth. It was a huge EFOR. We trained thousands of people and it was a big effort on our part do that the big opportunity. We saw there was in conversion we have the customer traffic coming into our store, we just need to be more proficient and disciplined about our sales process to convert that traffic I think.
We proved to ourselves not like we could drive more traffic, but we can convert that traffic and unfortunately I put some strain on the system. We're now in correction mode and what I would expect as collections comes back to normalized levels, but there will be an all set on deliveries and we just had a balance that it's really an iterative process to figure out what the right mixes.
As of collection.
And demand generation in our stores when do you have a finite.
Labour source in the stores.
We had really good pilots when we first roll this thing out and we were able to balance and we're just need to go back to the disciplines that we put in place.
In order to do that at long term.
I see stabilized collections, returning and sustained delivery growth in the business, which is really exciting what we're doing today is we're actually just trying to get more proficient and training and performance management with the staff. We have we have a number of stores out there that are both driving high deliveries and collecting.
At the same level that collected in the past and we're learning from them and we're really working with our stores that are only doing one of the two things well to try to get them back in balance we will selectively add labor if necessary, but that's not our first choice. We think theres a lot of opportunity just in our practices and management oversight and accountability.
And ultimately long term a lot of what we've been talking about you guys over the last few years flows into this which is our business transformation. What we're trying to do with that in a number of things were beginning to rollout as Ted take labor and tasks out of the stores. So our stores can focus on selling culture and that's everything from how do we.
We sign up the customer Halloween decision the customer how do we speak to the customer going forward and also by service to customers account. If we can make that more efficient for the customer we can free up time to get together these conversion opportunities and do both collides and deliver very well.
Great.
Thank you.
Our next question comes from Anthony Chukumba of Loop capital. Please go ahead.
Thanks for taking my questions.
So my first question just.
Kind of a fall through to the could prove to be questions just answered.
It sounds like I want to make sure I understand this I mean, you putting this new sales and marketing training. It sounds like your store employees for focusing probably a little bit too much on do or have.
Clearly conversion got better they suddenly had a lot more delivers the that they had to make theres a finite number of hours. So it should so it shifted some of time that they would have spent a collections.
So first of I want to make sure I understand that right and then second off.
What does that seem to imply that you should be more aggressive on centralize collections, which I know something that you've tested with some your concept stores.
Yes, it's a first of all the way the way you articulated is exactly right. We just put a lot of pressure on the financial resources, we had in our stores. Some are able to do it because we have some superstar managers and store employees and others weren't.
You're absolutely right.
Since lets collections is one opportunity other opportunities are just making it easier for our people and our customers to transact with us and whether it be auto pay or.
Which is recurring payments or just making having a better contacts strategy with our customer taking labor out of a model would do that in terms of centralized collections, we continue to test that.
We have it in 20 stores and are continuing down the road. We believe that's a huge opportunity and one thing we've learned through the process of centralizing collections as we can build platforms that even before centralizing the labor weekend leverage in our stores to be more efficient and what we do so that's absolutely there on a roadmap insulin.
We're working on.
Okay. That's helpful and then and just in terms of five once again to fall from an earlier question.
So in terms of progressive going forward I know that the long.
EBIT margin guide has always been sort of in the 11% to 13% range, but given the volume that you can be adding from these sort of large partners.
In understanding probably the gross margin will be lower because because these are generally higher credit customers looking to do more need a stream of cash, but I would just think with b b volume that is going to be picking up you would sort of leverage some progressive SGN a enough the.
EBITDA margin would improve overtime. So I guess I was just a little surprised by 11% to 13% kind of long term guys want make sure I understood that and if it is really kind of 11% to 13% why wouldn't it be higher given the.
Leverage adding the spine from these large partners.
Thanks for the question Anthony we continue to believe that this is a very large underserved market and as long as that holds true our bias will be toward optimizing for growth while.
Maintaining profitability rather than profit harvesting and I think there are lot of there are a lot of opportunities yet to be tackled in a market that we can invest in pursuing it I think our team has done an excellent job of doing that if you look at our offering to consumers and look at the pace at which has evolved over the recent periods, we've invested a lot and.
Our systems and our scalability in our field team servicing our partner relationships in our product and technology teams. We just done a tremendous amount to help prepare this business is scale and I'm pleased that growth is what we're seeing and scaling as result of all that investment as long as that continues to be true I think our bias will be toward.
You know sustain profitability as we grow rather than trying to maximize profitability and the current period. That's that's how we think about it.
Got it or sorry, and just one last clarification on that so is it safe to say look incremental margins on these new large partners are going to be above 11% to 13%, but you're going to take that and reinvest that in terms of trying to like you said are optimized for growth and trying to pick up more White Wales.
Had a fair way to think about it.
No I wouldn't say that I would just say across the portfolio, we've targeted 11% to 13% EBITDA margins and our bias will be to continue to invest in the business as we pursue this very large underserved market. But then we don't we don't think about that specific to anyone opportunity just globally, we think of that.
Attempting to maintain profitability, while pursuing in very large opportunity that remains.
Got it that's very helpful. Thank you.
Thank you.
Our next question comes from Kyle Joseph of Jefferies. Please go ahead.
Afternoon, guys. Thanks, very much for taking my questions.
I want to it looked like you had some some pipeline conversion costs at the progressive segment in the quarter can you give us any sense of the size of those and then second part of the question would be what's the what's a lag between revenues from new partnerships versus the expenses the upfront expenses.
Terms of timing.
Yes as gene a grew by about 40 bips year over year, which you can think about as being reflective of the investment we've made and the pipeline.
Growing our existing relationships as well as those new.
Relationships and and then as as Weve.
Discussed in the past just by definition all of that investment product and technology and getting our teams out in the field to support.
Those retailers and their retail sales associates precedes invoice volume so it's necessarily front loaded as we think about.
Rolling out those opportunities and then growing them over time and so invoice in revenue will consequently always follow initial investment in those launches.
Got it and then just just talking about progressive credit Ryan I know you said you guys are are well within sort of your field goal or your goal post I apologize.
Given the given the pipeline and new conversions can you give us a sense for your long term outlook for credit.
These new partnership is there any sort of potential for refining I know you guys are finding underwriting everyday but kind of refining.
Other areas in terms underwriting.
We have no current plans to revise the goal dose as we sit here today again, we're pleased with how the pools are performing and feel good about delivering performance well within those gold dose and as we look to the full year 2019 results.
And again.
Our team we've got a large team of folks working very hard.
Constantly evolving our decisioning algorithms and they've done a phenomenal job and doing it in a very complex environment with ongoing shifts in mix across the portfolio I think their efforts that success in their efforts.
Evidenced in the consistency of those lease pool performance metrics write offs and bad debt expense.
Sure. Thanks, and one last one from me appeal mine, yes, given given the progressive growth.
The new partnerships you guys have landed and this is kind of a longer term question I'm. Just wondering how you guys are thinking about.
Merchandise returns over time, and ultimately what you're going to deal with all that merchandise just given that the growth in the size. It progressed it has become.
Over the years, it's been well refined that reverse logistics process credit to the operations team manages that so well and weve.
These verticals that we recently had launches and our verticals that we've done business and for many years, we've got quite a bit of experience in.
And doing business in all the verticals, where we're currently growing our business and that sort of incorporated into the processes. We've established in the field for reverse logistics, but we don't expect any material departure from some the trends we're seeing there as we left.
Yes, the growth of the opportunities that we've recently launched kind of business as usual as far as that goes again Testament to the team for managing that well.
Got it thanks very much for answering my question.
Our next question comes from Bill Chappell Suntrust. Please go ahead.
Thanks, Good afternoon.
Okay. So.
Douglas.
On the store issue just to understand maybe when.
You recognize did intra quarter. When you started to put a I guess a correction plan in place and what signs you've had that things are starting to turn that give you confidence that it will be kind of more normalized by I guess 60 days from now by calendar year end.
Sure I'll, just give me a little bit the timeline. So we don't we began to train our stores call. Early may finished up at the end of June .
Carlos thousands some odd stores and thousands of employees.
It will began seeing a lift and.
Revenue in July and August it towards the end of July we started seeing some softening in collections.
We had seen some of this in our pilot early on but the normalized over time. So we thought it was just the normal.
Pattern that we're seeing on our pilot best normalizing overtime.
In August when we realized it was not normalizing as the pilot had we began apply more resources to it in the form of regional account people, who were drilling down dealing with underperforming stores. We had already put a framework in place to start dealing with stores that have gone out of the lines from the beginning of the project forward.
Well, we just stated apply more resources, we also applied more overtime and some more labor into the stores, we will fall out.
With that was sort of rebalancing initiative towards the end of the quarter and I would say.
I'm sorry towards the beginning of October end of quarter beginning of October in October we began to see some improvement in collections were just carried over into the first week in November and that's what gives us confidence.
Say that we're moving on the right direction.
Got it and then right on the progressive side.
Now that you.
Have expanded I guess two.
Sizable customers. This year I mean does that change the velocity of the pipeline I mean in terms of does that.
Others that are testing others that are looking do they now have kind of two proof of concept.
We're just hey, there they're closest competitors doing it maybe we should do it too or is it really still case by case basis.
Yes. Good question we've had.
What we consider to be a strong marquee roster partner for quite some time now we're very proud of the relationships that we developed over the years and it's nice to add these two that distinguish list of retailers and I think it's an evolution, we've seen a bit of a virtuous cycle as weve continued.
The Onboarding very large partners and they've spoken about the results that together, we driven in their business I think it's definitely helped.
So as you say increased the velocity the pipeline grease, the skids view on for sort of future future conversations and pipeline conversion. Obviously those are the ones that we recently talked about.
They've been very significant additions to our platform and we're very optimistic about the multiyear growth profile those represent for the business. We're also excited about the other opportunities that are in the pipeline.
I mentioned previously, but it is very large underserved market and it is a very competitive market that we compete in for that opportunity.
That said, we have opportunities that are still in the pipeline and they're progressing through it and the team is working hard to convert them.
Im pleased with the progress there making.
Got it thank you.
This concludes our question and answer session I would like to turn the conference back over to John Robinson for any closing remarks.
Thank you.
I hope that you come away from today's call with the same optimism we have about the future prospects for our business.
Now I'd like to thank our associates retail partners and franchisees for their dedication to our mission of providing high quality products to our customers.
Thank you very much for joining us today.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.