Q4 2023 The Aaron's Company Inc Earnings Call
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Charlie: ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Hello everyone and welcome to the Aaron'S Co. Hello everyone and welcome to the Aaron's Company Inc Q4 2023 Earnings Conference Call. My name is Charlie and I'll be coordinating the call today. You will have the opportunity to ask a question at the end of the presentation. If you'd like to register a question, please press star followed by one on your telephone keypad. I want to hand over to our host, Mark Levy, VP of Finance and Investor Relations, to begin. Mark, please go ahead.
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Hello, everyone and welcome to the Aaron's Company, Inc. Q4, 2023 earnings Conference call, we will begin shortly.
Register your question ready for the Q&A. Please press star followed by one on the telephone keypads.
Your patients.
Mark Levy: Thank you and good morning everyone. Welcome to our fourth quarter and full year 2023 earnings conference call. Joining me today are Aaron'S Chief Executive Officer Douglas, President Steve Olson, and Chief Financial Officer Kelly Wall. After our prepared remarks, we will open the call for questions.
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Mark Levy: Yesterday, after the market closed, we posted our earnings release on the investor relations section of our website at investor.aaron.com. We also posted a slide presentation that provides additional information about our fourth quarter and full year 2023 results and our full year 2024 outlook. During today's call, certain statements we make may be forward-looking, including those related to our outlook for this year. For more information, including important cautionary notes about these forward-looking statements, please refer to the safe harbor provision that can be found at the end of this earth.
Hello, everyone and welcome to the islands.
Hello, everyone and welcome to the Iron Inc, Q4 2020.
Three earnings Conference call. My name is Charlie and I will be coordinating the call today.
Mark Levy: The Safe Harbor Provision identifies risks that may cause actual results to differ materially from the content of our forward-looking data. Also, please see our Form 10-K for the year ended December 31, 2022, and other filings with the SEC, for a description of the risks related to our business that may cause actual results to differ materially from our forward-looking statements. We plan to file our Form 10-K for the year ended December 31, 2023. Later this, On today's call, in the earnings release and in the supplemental investor presentation, we refer to certain non-GAAP financial measures, including EBITDA and adjusted EBITDA. Non-GAAP Net Earnings. Nodgap EPF.
You will have the opportunity.
At the end of the presentation.
You'd like to register your question. Please press Star followed by one on your telephone keypad.
I'll now hand, it its a host Marc Levy VP of finance and Investor Relations to begin Marc. Please go ahead.
Thank you and good morning, everyone and welcome to our fourth quarter and full year 2023 earnings conference call.
Joining me today are <unk>, Chief Executive Officer, Douglas Lindsay, President, Steve Olsen, and Chief Financial Officer Kelly.
After our prepared remarks, we will open the call for questions.
Yesterday after the market closed we posted our earnings release on the Investor Relations section of our website at Investor Dot Dot com.
Douglas A. Lindsay: Adjusted Free Cash Flow and Net Debt, which have been adjusted for certain items which may affect the comparability of our performance with other companies. These non-GAAP measures are detailed in the Reconciliation Tables included in our earnings and the Supplemental Investor Presentation posted on our website. With that, I will now turn the call over to our CEO, Douglas Lindsay. Thanks, Mark. Good morning, everyone.
We also posted a slide presentation that provides additional information about our fourth quarter and full year 2023 results and our full year 2020 for outlook.
During today's call certain statements, we make may be forward looking including those related to our outlook for this year.
For more information, including important cautionary notes about these forward looking statements. Please refer to the safe Harbor provision that can be found at the end of the earnings release.
Douglas A. Lindsay: Thank you for joining us and for your interest in Aaron's company. Today, in addition to providing more detail on our fourth quarter and full year 2023 earnings, we'd like to discuss the strong actions we've taken. He continues to take steps to drive demand, further reduce costs, and improve performance across the company. However, the retail environment for consumer durables continues to experience headwinds, including elevated levels of employees. Low housing starts and increased consumer debt.
The safe Harbor provision identifies risks that may cause actual results to differ materially from the content of our forward looking statements.
Also please see our Form 10-K for the year ended December 31, 2022, and other filings with the SEC for a description of the risks related to our business that may cause actual results to differ materially from our forward looking statements.
We plan to file our Form 10-K for the year ended December 31, 2023 later this week.
Douglas A. Lindsay: Our lease-to-own business model remains resilient, and we continue to innovate to better serve our customers. We have recently enhanced our lease decisioning technology and customer acquisition program, which are leading to an improved customer experience, higher conversion rates, and greater efficiencies in our business. Because of this, in the fourth quarter of 2023, we experienced growth in most of our major product categories at Aerith. These benefits are carrying over into the first quarter of 2024, and we expect them to continue over the course of the year.
On today's call in the earnings release and in the supplemental Investor presentation, we refer to certain non-GAAP financial measures, including EBITDA and adjusted EBITDA.
non-GAAP net earnings.
non-GAAP EPS adjust.
Adjusted free cash flow and net debt, which have been adjusted for certain items, which may affect the comparability of our performance with other companies.
These non-GAAP measures are detailed in the reconciliation tables included in our earnings release and in the supplemental investor presentation posted on our website.
Douglas A. Lindsay: We have also continued to streamline our cost structure and delivered over $40 million of cost reductions in 2023, exceeding the high end of our target range. Today, we'll also provide our 2024 outline and why, given the fundamental strengths of our business, we believe we are well positioned to deliver enhanced long-term value to shareholders. Now I'll turn to our Consolidated Financial Performance and then cover each of the business segments. Consolidated company earnings for the fourth quarter were below our expectations, primarily due to softer than expected demand at brands. For the full year 2023, we delivered consolidated company revenues in line with the revised outlook we provided on October 23rd. We consolidated adjusted earnings of approximately $4 million below the low end of our outlook.
With that I will now turn the call over to our CEO Douglas Lindsay.
Thanks, Mark Good morning, everyone. Thank you for joining us and for your interest in the Aaron's company.
Today in addition to providing more detail on our fourth quarter and full year 2023 earnings wed like to discuss the strong actions we've taken.
To take to drive demand further reduce costs and improve performance across the company.
While the retail environment for consumer durables continues to experience headwinds, including elevated levels of inflation low housing starts and increased consumer that our lease to own business model remains resilient and we continue to innovate to better serve our customers.
We have recently enhanced our lease Decisioning technology and customer acquisition programs, which are leading to an improved customer experience higher conversion rates and greater efficiencies in our business.
Douglas A. Lindsay: We continue to maintain a strong balance, reducing our net debt balance from $215 million at the end of 2022 to $135 million at the end of 2023, a reduction of over 37%. We also delivered strong adjusted free cash flow in 2020 that exceeded the high end of our revised outload by approximately 28%. Now, turning to the business. The Aaron'S business delivered revenues for the year that exceeded our revised outlook and Adjusted Earnings that were within our revised outline. However, we ended the fourth quarter with our lease portfolio size down 7% year-over-year due to the ongoing challenging demand. Throughout 2023, we took actions to improve our lease decisioning technology, in-store operational procedures, and marketing. In the fourth quarter, we launched a new Omnichannel Lease Decisioning and Customer Acquisition program that provides leasing power to e-commerce customers, allowing them to shop across whatever channel they prefer. This has resulted in higher conversion rates of lease applications.
Because of this in the fourth quarter of 2023, we experienced growth in most of our major product categories at Aaron's.
These benefits are carrying over into the first quarter of 2024, and we expect them to continue over the course of the year.
We have also continued to streamline our cost structure and delivered over $40 million of cost reductions in 2023 exceeding the high end of our target range.
Today, we will also provide our 2020 for outlook and why given the fundamental strengths of our business. We believe we are well positioned to deliver enhanced long term value to shareholders.
Now I'll turn to our consolidated financial performance and then cover each of the business segments.
Consolidated company earnings for the fourth quarter were below our expectations, primarily due to softer than expected demand that brand smart.
For the full year 2023, we delivered consolidated company revenues in line with our revised outlook, we provided on October 23rd.
Douglas A. Lindsay: In the first eight weeks of 2024, we're seeing total leased merchandise deliveries up high single digits, and our e-commerce channel is up over 100% as compared to the prior year period. Our 2024 earnings outlook for the Aaron's business reflects the benefits of our enhanced customer acquisition, which is partially offsetting the impact of a lower lease portfolio size to start the year. We expect our lease portfolio size to grow sequentially beginning in the second quarter and to end the year up mid-single digits as compared to year-end 2023. Now turning to BrandsMart. BrandsMart continued to experience softness and customer demand during the fourth quarter due to lower customer traffic and continued trade-down to lower-priced products across our major product categories. As a result, BrandSmart ended the year with revenues and adjusted earnings below our revised outlook.
Consolidated adjusted earnings were approximately $4 million below the low end of our outlook range.
We continue to maintain a strong balance sheet reducing.
Reducing our net debt balance from $215 million at the end of 2022.
$135 million at the end of 2023.
A reduction of over 37%.
We also delivered strong adjusted free cash flow in 2023.
We exceeded the high end of our revised outlook by approximately 28%.
Now turning to the business segments, the Aaron's business delivered revenues for the year that exceeded our revised outlook and adjusted earnings that were within our revised outlook.
However, we ended the fourth quarter with our lease portfolio size down 7% year over year due to the ongoing challenging demand trends.
Throughout 2023, and we took actions to improve our lease decisioning technology and store operational procedures and marketing programs.
Douglas A. Lindsay: Although demand is challenging, we remain confident in BrandSmart's compelling value proposition, the strength of the brand, and its potential to expand its market. Our full-year 2024 outlook for BrandsMart assumes that high inflation and other macroeconomic factors experienced in 2023 will continue to put pressure on customer demand in the first half of the year, followed by improvements in demand in the second half of the year, primarily due to the anticipated rebound in our product category. As we look to 2024 and beyond, I want to reiterate that our management team and board are highly engaged and committed to taking actions that will deliver additional value for shareholders. We continue to execute our strategy, including transforming the Aaron'S business and Enhancing and Growing Brands. We also remain focused on streamlining our call structure and generating greater efficiencies across both businesses. In the first quarter, we reduced our store support center personnel by approximately 15% and adjusted the compensation of our top executives to better align with company performance.
In the fourth quarter, we launched our new omni channel lease Decisioning and customer acquisition program that provides leasing power to ecommerce customers, allowing them to shop across whatever channel they prefer.
This has resulted in higher conversion rate of lease applications.
In the first eight weeks of 2024, we're seeing total lease merchandise deliveries up high single digits.
And our E Commerce channel is up over 100% as compared to the prior year period.
Our 2020 for earnings outlook for the Aaron's business reflects the benefits of our enhanced customer acquisition program.
Which is partially offsetting the impact of a lower lease portfolio size.
Throughout the year.
We expect our lease portfolio size to grow sequentially beginning in the second quarter and to end the year up mid single digits as compared to year end 2023.
Now turning to brand smart brands.
<unk> continued to experience softness in customer demand during the fourth quarter.
Due to lower customer traffic and continued trade down to lower priced products across our major product categories.
As a result brand smart ended the year with revenues and adjusted earnings below our revised outlook.
Although demand is challenging we remain confident and brand smarts compelling value proposition.
Douglas A. Lindsay: We also plan to implement additional expense reduction initiatives throughout 2024. With the investments we've made to innovate our business and the strength of our balance, we are better positioned than ever to drive long-term profitable growth at Aaron's and Brands. I will now turn the call over to Steve to speak about the operational performance of each business segment. Thanks, Douglas, and good morning, everyone.
<unk> of the brand and potential to expand its market.
Our full year 2020 for outlook for brand Smart assumes that high inflation and other macroeconomic factors experienced in 2023, we'll continue to put pressure on customer demand in the first half of the year.
Followed by improvements in demand in the second half of the year, primarily due to the anticipated rebound in our product categories.
As we look to 2024 and beyond I want to reiterate that our management team and board are highly engaged and committed to taking actions that will deliver additional value for shareholders.
Steve Olson: The Aaron'S business delivered revenues in the fourth quarter that were in line with our internal expectations, despite experiencing choppy customer demand in the quarter. Lease merchandise deliveries increased 1.4% year-over-year, largely due to our new omni-channel lease decisioning and customer acquisition. This new program not only drove a higher conversion rate but also improved customer shopping. During the quarter, we continued to see pressure on the average ticket as customers selected lower-priced items across all major product categories. Our lease portfolio entered the quarter at $117.7 million.
We continue to execute our strategy, including transforming the aaron's business and enhancing and growing brand smart.
We also remain focused on streamlining our cost structure and generating greater efficiencies across both businesses.
In the first quarter, we reduced our store support center personnel by approximately 15%.
And adjusted the compensation of our top executives to better align to company performance.
We also plan to implement additional expense reduction initiatives throughout 2024.
Steve Olson: This represented a 1.1% increase as compared to Q3, but was 7% lower than the prior year quarter. Now moving to our key lease renewal rate, the least renewal rate for the quarter was 85.2% for all company-operated errands.
With the investments we've made to innovate our business and the strength of our balance sheet, we are better positioned than ever to drive long term profitable growth at Aaron's brand smart.
I will now turn the call over to Steve to speak about the operational performance of each business segment.
Steve Olson: This rate was down approximately 60 basis points year over year. Additionally, our 32-plus day non-renewal rate was 2.7% at the end of the fourth quarter, flat year-over-year. We are pleased with enhancements to our Lease Decisioning Technology, which we believe will continue to contribute to improvement in our ride-on. In the fourth quarter, write-offs as a percentage of lease revenues were 6.5 percent, which is an improvement of 60 basis points versus the prior year quarter. Now turning to our important strategic growth issues for the Aaron'S business. Our market optimization strategy, which includes our GenNext stores and Hub and Showroom programs, continues to deliver meaningful financial performance through the transformation of our in-store customer experience and operating model. In the quarter, we opened nine Gennex stores, bringing the year-to-date total to 43 stores and 254 company-operated Gennex stores since launching.
Thanks, Douglas and good morning, everyone.
The Arris business delivered revenues in the fourth quarter that were in line with our internal expectations, despite experiencing choppy customer demand in the quarter.
Ladies merchandise deliveries increased one 4% year over year, largely due to our new omni channel lease Decisioning and customer acquisition program.
This new program not only drove a higher conversion rate, but also improve customer shopping experience.
During the quarter, we continue to see pressure on average ticket as customer selected lower price items across all major product categories.
Our lease portfolio ended the quarter with a value of $117 7 million.
This represented a one 1% increase as compared to Q3 was 7% lower than the prior year quarter.
Now moving to our key lease renewal metrics.
The lease renewal rate for the quarter was 85, 2% for our company operated Aaron's stores.
Steve Olson: At the end of the quarter, these stores accounted for more than 32% of our leased revenues and retail sales. That compares to just over 25% in the prior year quarter. Occurring revenue written in GenX stores opened less than one year ago continued growing at a rate of more than 20 percentage points higher than our legacy store average. In addition, we ended the fourth quarter with a total of 114 showrooms in the chain, and are pleased with the cost savings this program has delivered. I'm excited to report that we opened seven Amherst stores in new markets in 2020, including four Gen X doors and three showrooms. In 2024, we plan to open approximately 20 GenX stores, including 5 to 10 stores in Newmark.
<unk> was down approximately 60 basis points year over year.
Our 32, plus a non renewal rate was two 7% at the end of the fourth quarter.
That year over year.
We are pleased with enhancements to our lease Decisioning technology, which we believe will continue to contribute to improvement in our write offs in the fourth quarter write offs as a percentage of lease revenues was six 5%, which is an improvement of 60 basis points versus the prior year quarter.
Now turning to our important strategic growth initiatives for the Aaron's business.
Our market optimization strategy, which includes our Gen next doors and hub and showroom program continues to deliver a meaningful financial performance through the transformation of our in store customer experience and operating model.
In the quarter, we opened nine <unk> stores, bringing the year to date totaled 43 stores and 254 company operated Gen next door since launching the program.
At the end of the quarter these stores accounted for more than 32% of our lease revenues in retail sales.
Steve Olson: Now turning to Aaron's e-commerce. During the fourth quarter, we rolled out a new Omnichannel Lease Decisioning and Customer Acquisition Program, which now allows customers to shop across all of our channels by submitting just one lease application. We now approve customers through a consistent lease decision process
That compares to just over 25% in the prior year quarter.
Recurring revenue written in <unk> stores opened less than one year continue growing at a rate of more than 20 percentage points higher than our legacy store average.
In addition, we ended the fourth quarter with a total of 114 showrooms in the chain and are pleased with the cost savings. This program is delivering.
Steve Olson: As part of this, each approved e-commerce customer now receives what we call the Leasing Power, which is the customer's maximum total monthly lease payment amount that can be used to shop our full product selection both online and in-store. While leasing power had previously been available in our stores, expanding it to e-commerce has improved the overall customer shopping experience and led to higher approval and conversion rates during the fourth quarter. Also, during the fourth quarter, we continue to focus on improving our digital marketing strategy. Enhancing the online shopping experience and expanding the assortment with over 11,600 products on Aaron's.com, In the fourth quarter, revenues generated from leases initiated on Aaron's.com increased 10.4% year-over-year and now represent over 20% of total lease revenues as compared to approximately 17% in the prior year quarter. Recurring revenue written into the portfolio from e-commerce increased 60% year-over-year.
I'm excited to report that we opened seven <unk> stores in new markets in 2023, including <unk> next doors and three showrooms.
In 2024, we plan to open approximately 20 jet next doors, including five to 10 stores in new markets.
Now turning to the Aarons ecommerce channel.
During the fourth quarter, we rolled out our new Omnichannel Decisioning and customer acquisition program, which now allows customers shop across all of our channels by submitting just one lease application.
Now approved customers that were consistently decisioning model.
As part of this each approved e-commerce customer obviously is what we call leasing dollars.
Leasing power is our customers maximum total monthly lease payment amount that can be used to shop, our full product selection, both online and in stores.
While leasing power had previously been available in our stores expanding its E. Commerce is improve the overall customer shopping experience that led to higher approval and conversion rates during the fourth quarter.
Also during the fourth quarter, we continue to focus on improving our digital marketing strategies enhancing the online shopping experience and expanded the assortment with over 11600 products on Aerostar call.
Steve Olson: With continued enhancements to our e-commerce channel, we expect e-commerce to represent over 30% of our total recurring revenue written in 2020. We also continue to see growth in our weekly payment options, both in stores and on Aaron's.com. We believe our compelling lease rates and payment options will continue to attract new customers and help us gain market share over time. As Douglas mentioned earlier, we are excited about the trends we are seeing in Aaron's business so far this year. Through the first eight weeks of the year, we are up high single digits in leased merchandise deliveries as compared to the same period last year, and we expect to end 2024 with a larger leased portfolio than the end of 2020. Now, turning to BrandsMart.
In the fourth quarter revenue is generated from leases initiate on Aaron's dot com increased 10, 4% year over year and now represent over 20% of total lease revenues as compared to approximately 17% in the prior year quarter.
Recurring revenue written into the portfolio from E Commerce increased 60% year over year.
With continued enhancements to our E Commerce channel, we expect e-commerce to represent over 30% of our total recurring revenue in 2024.
We also continue to see growth in our weekly payment option, both in stores and on <unk> Dot com.
We believe our compelling lease rates and payment options will continue to attract new customers and help us gain market share overtime.
As Douglas mentioned earlier, we are excited about the trends we are seeing in the Aaron's business. So far this year.
Through the first eight weeks of the year, we are up high single digits and lease merchandise deliveries as compared to the same period last year and we expect to end 2024 with a larger lease portfolio then the end of 2023.
Steve Olson: As Douglas mentioned, we continue to operate in a challenging macroeconomic environment where customer demand for our product category has not rebounded from the demand pull-forward that occurred during the pandemic. During the fourth quarter, BrandSmart continued to experience weaker customer traffic and trade down to lower priced products in our key product categories of major appliances and consumer electronics. As a result, BrandsMart's comparable sales were down 14% year-over-year.
Now turning to brand smart.
As Douglas mentioned, we continue to operate in a challenging macroeconomic environment, where customer demand for our product categories has not rebounded from the demand pull forward that occurred during the pandemic.
During the fourth quarter <unk> continued to experience weaker customer traffic and trade down to lower price products in our key product categories of major appliances consumer electronics.
As a result, <unk> comparable sales were down 14% year over year.
Steve Olson: Consistent with overall sales performance, we experienced pressure in our e-commerce business; e-commerce product sales represented about 10% of total product sales in the quarter, down from 10.5% in the prior year quarter. We continue to invest in our e-commerce channel and digital marketing strategies to attract new customers. We are optimistic that our investments will equip BrandSmart to improve sales performance as customer demand rebounds later this year. Also in 2024, we plan to focus on improving our in-store shopping experience by rationalizing our product assortment, expanding our furniture product category to attract new customers, and opening another new store in the second half. In addition, we will continue to focus on cost control and optimizing profitability of the business. Now, I'll turn the call over to Kelly to provide further details on our financial performance and outlook for 2020. Thanks, Steve.
Consistent with overall sales performance, we experienced pressure in our ecommerce channel E.
E Commerce product sales represented about 10% of total product sales in the quarter down from 10, 5% in the prior year quarter.
We continue to invest in our E Commerce channel and digital marketing strategies to attract new customers. We are optimistic that our investments will equip brands block to improve sales performance as customer demand rebounds later this year.
Also in 2024, we plan to focus on improving our in store shopping experience by rationalizing our product assortment.
Spanning our furniture product categories to attract new customers and opening another new store in the second half of the year.
In addition, we continue to focus on cost control and optimizing profitability of the business.
Now I'll turn the call over to Kelly to provide further details on our financial performance and outlook for 2024.
Thanks, Steve we filed a form 8-K after the market closed yesterday, which included in our earnings release Investor presentation and additional information.
Kelly Wall: We filed a Form 8K after the market closed yesterday, which included our earnings release, investor presentation, and additional information. These documents can be found on our Investor Relations website. Please refer to these documents for additional detail regarding our financial performance and outlook for the Consolidated Company and the two business sectors. We plan to file our Form 10-K for the year ended December 31, 2023, later this week. Unless stated otherwise, any comparisons I make to prior periods will be on a year-over-year basis. Let's start with the fourth quarter.
These documents can be found on our Investor Relations website.
Please refer to these documents for additional detail regarding our financial performance and outlook for the consolidated company and the two business segments.
We plan to file our Form 10-K for the year ended December 31, 2023 later this week.
Unless stated otherwise any comparisons I make to prior periods will be on a year over year basis.
Let's start with the fourth quarter.
Kelly Wall: Consolidated revenues for the fourth quarter of 2023 were $529.5 million, compared to $589.6 million. This year-over-year decrease is primarily due to lower lease revenues and fees at the Aaron'S business and lower retail sales at BrandsMart. Consolidated Adjusted EBITDA was $22.4 million compared to $29.9 million. If you're over your allowance, this is primarily due to lower revenues at both business sites, partially offset by lower total consolidated operating expenses, including Laura Rydolf at Aaron'S Co. As a percentage of total revenues, adjusted EBITDA was 4.2% compared to 5.1%, on a non-gap basis. The loss per share was $0.26 compared to earnings of $0.09.
Consolidated revenues for the fourth quarter of 2023 were $529 $5 million.
Compared to $589 6 million.
This year over year decrease is primarily due to lower lease revenues and fees at the Aaron's business and lower retail sales at brands Mark.
Consolidated adjusted EBITDA was $22 4 million compared to $29 9 million.
This year over year decrease is primarily due to the lower revenues at both business segments, partially offset by lower total consolidated operating expenses.
<unk> lower write offs at the Aaron's business.
As a percentage of total revenues adjusted EBITDA was four 2% compared to five 1%.
On a non-GAAP basis diluted loss per share was <unk> 26.
Compared to earnings of <unk>.
Kelly Wall: Adjusted free cash flow was $15.9 million, a decrease of $8.8 million. This decrease was driven by lower earnings and higher inventory purchases to meet increased demand. This was partially offset by increases in working capital and proceeds from real estate transactions that were $7.8 million higher. Now, I'll summarize our full year 2023 consolidated financial results. Again, comparisons here are year over year. Consolidated revenues were $2.14 billion, down 4.9% due to lower lease revenues and fees and retail and non-retail sales at Aaron'S, as well as lower retail sales at BrandsMart. Adjusted EBITDA was $136 million, down from $177.1 million, due primarily to the same factors that impacted the fourth quarter year-over-year performance that I discussed earlier. As a percentage of total revenues, adjusted EBITDA was 6.4%, compared to 7.9%. On a non-GAAP basis, diluted earnings per share were $0.81, compared to $2.70.
Adjusted free cash flow was $15 9 million a decrease of $8 8 million.
This decrease was driven by lower earnings and higher inventory purchases to meet increased demand.
This was partially offset by increases in working capital and proceeds from real estate transactions that were $7 $8 million higher.
Now I'll summarize our full year 2023 consolidated financial results.
Again comparisons here are year over year.
Consolidated revenues were $2, one 4 billion.
Down four 9% due to lower lease revenues and fees and retail and non retail sales at the Aaron's business.
As well as lower retail sales that brand smart.
Adjusted EBITDA was $136 million down.
Down from $177 $1 million due primarily to the same factors that impacted the fourth quarter year over year performance that I discussed earlier.
As a percentage of total revenues adjusted EBITDA was six 4% compared to seven 9%.
On a non-GAAP basis diluted earnings per share or 81.
<unk> to $2 seven.
Kelly Wall: During 2023, the company paid $15 million in dividends and repurchased about $6.5 million of the company's common stock at the end of 2023. The company had a cash balance of $59 million and total debt of $194 million. This represents a $13.2 million reduction to our net net balance from the end of the third quarter and a $79.8 million reduction from the end of 2022. Now, turning to our 2024 outlook. Our full year 2024 outlook for total revenues at the consolidated company. $2.055 billion to $2.155 billion, and adjusted EBITDA is $105 million to $125 million. Our 2024 non-GAAP EPS Outlook ranges from a loss of $0.10 per share to earnings of $0.25 per share, which has been impacted by lower adjusted EBITDA, higher depreciation expense, higher interest expense, and a higher effective tax rate versus last year. For the full year 2024, we are assuming an effective non-gap tax rate of about 50%, a diluted weighted average share count of 31.1 million shares, and no share repurchase.
During 2023.
Company paid $15 million in dividends and repurchased about $6 $5 million of the company's common stock.
At the end of 2023, the company had a cash balance of $59 million and total debt of $194 million.
This represents a $13 $2 million reduction to our net debt balance from the end of the third quarter.
And a $79 $8 million reduction from the end of 2022.
Now turning to our 2020 for outlook.
Our full year 2020 for outlook for total revenues at the consolidated company is 2.055 billion to $2, one and $5 5 billion.
And adjusted EBITDA is $105 million to $125 million.
Our 2024, non-GAAP EPS outlook ranges from a loss of <unk> 10 per share to earnings of 25 per share.
Which has been impacted by lower adjusted EBITDA higher depreciation expense higher interest expense and a higher effective tax rate versus last year.
For the full year of 2024, we are assuming an effective non-GAAP tax rate of about 50%.
Our diluted weighted average share count of 31 1 million shares and no share repurchases.
Kelly Wall: The non-GAAP tax rate includes the impact of certain permanent items impacting the 2024 outlook. Our Adjusted Free Cash Flow Outlook is $15 to $30 million. This reduction year over year is from the purchase of higher levels of leased merchandise at the Aaron'S business and merchandise inventories at BrandsMart. At Aaron'S, the additional investment in inventory is driven by the continued increase in demand that we are currently experiencing. At BrandsMart, this investment in merchandise inventory is driven by growth in comparable sales and the new store we plan to open in the second half of the year. Additionally, several factors are influencing our 2024 outlook. He started the year with a 7% lower lease portfolio size at Aaron's Co. Our outlook assumes the lease portfolio size grows mid-single digits in 2024 and reflects the growth in recurring revenue written that we are currently experiencing. And, as Douglas mentioned, we expect the portfolio to grow sequentially beginning in the second quarter. We also expect that lease renewal rates will be lower and write-offs will be higher, driven by an increasing mix of e-commerce agreements written into the portfolio.
The non-GAAP tax rate includes the impact of certain permanent items impacting the 2020 for outlook.
Our adjusted free cash flow outlook is $15 million to $30 million.
This reduction year over year as from the purchase of higher levels of lease merchandise at the Aaron's business and merchandize inventories at brand smart.
At the Aaron's business the additional investment in inventory is driven by the continued increase in demand that we're currently experiencing.
That brand smart this investment in merchandise inventory is driven by growth in comparable sales and the new store, we plan to open in the second half of the year.
Several factors are influencing our 2020 for outlook.
We started the year with a 7% lower lease portfolio size at the Aaron's business.
Our outlook assumes the lease portfolio size grows mid single digits in 2024.
And reflects the growth in recurring revenue written that we're currently experiencing.
And as Douglas mentioned, we expect the portfolio to grow sequentially beginning in the second quarter.
We also expect that lease renewal rates will be lower and write offs will be higher.
<unk> by an increasing mix of e-commerce agreements written into the portfolio.
Kelly Wall: At BrandsMart, our outlook assumes that demand improves in the back half of the year with sequential improvement and comparable sales in each quarter of the year. We expect higher operating costs in 2024 to be partially offset by the additional cost reductions we began to implement in Q1 of this year and the full run rate of actions taken in 2023. We expect to recognize these savings primarily in the Aaron'S business segment and within unallocated corporate expenses.
At brand Smart our outlook assumes that demand improves in the back half of the year with sequential improvement in comparable sales in each quarter of the year.
We expect higher operating cost in 2024 to be partially offset by the additional cost reductions we began to action in Q1 of this year and the full run rate of actions taken in 2023.
We expect to recognize these savings primarily at the Aaron's business segment and within unallocated corporate expenses.
Kelly Wall: We have identified additional areas to improve efficiencies across our stores, supply chain network, and corporate functions. As we think about the financial performance over the course of 2024, the lower lease portfolio size at the Aaron'S business to begin the year, combined with incremental marketing investments, will put pressure on the P&L, and earnings increases will lag the expected lease portfolio size. As a reminder, our lease portfolio typically shrinks in the first quarter due to customers exercising early purchase options during the income tax refund season. In addition, we continue to experience pressure on demand at BrandsMart that we expect to persist through the first half of the year. As a result, we expect first quarter consolidated adjusted EBITDA to be lower year over year and to represent roughly 20% of total adjusted EBITDA for the year.
We have identified additional areas to improve efficiencies across our stores supply chain network and corporate functions.
As we think about the financial performance over the course of 2024.
A lower lease portfolio size at the Aaron's business to begin the year combined with incremental marketing investments will put pressure on the P&L.
And earnings increases will lag the expected lease portfolio size growth.
As a reminder, our lease portfolio typically shrinks in the first quarter due to customers exercising early purchase options during the income tax refund season.
In addition, we continue to experience pressure on demand at brand smart that we expect to persist through the first half of the year.
As a result, we expect first quarter consolidated adjusted EBITDA to be lower year over year and to represent roughly 20% of total adjusted EBITDA for the year.
Kelly Wall: We also expect Q1 to be a net loss. The latter part of the year is expected to benefit from the demand improvements at both businesses, harshly offset by a lower lease renewal rate and higher write-offs, with Q2 and Q3 generating the majority of earnings in 2024. We also expect non-gap EPS to follow a similar spread, with Q1 being the low point, and the middle of the year, the high point. Given the continued demand environment challenges and uncertainty, which have impacted our 2023 results and 2024 outlook. We are withdrawing the multi-year adjusted EBITDA margin outlook we provided last year and are not providing an update at this time. Before I hand the call back to Douglas, I want to review our capital allocation priorities. These priorities have largely been unchanged.
We also expect Q1 to be a net loss.
The latter part of the year is expected to benefit from the demand improvements at both businesses, partially offset by a lower lease renewal rate and higher write offs with Q2 and Q3 generating the majority of earnings in 2024.
We also expect non-GAAP EPS to follow a similar spread with Q1 being the low point in the middle of the year the high point.
Given the continued demand environment challenges and uncertainty, which have impacted our 2023 results and 2020 for outlook.
We are withdrawing the multi year adjusted EBITDA margin outlook, we provided last year and are not providing an update at this time.
Before I hand, the call back to Douglas I want to review our capital allocation priorities.
These priorities remain largely unchanged.
Kelly Wall: We continue to focus on investing in the Aaron's business and BrandsMart to drive revenue and earnings growth while maintaining a conservative leverage profile of 1 to 1.5 times net debt to adjust expenses. After this, we look to return capital to shareholders through dividends and share repurchase, and we'll continue to evaluate acquisitions on an opportunistic basis. As it relates to returning capital to shareholders, yesterday, we announced our quarterly dividends. We will pay 12.5 cents per share on April 3rd to shareholders of record as of the close of business on March 14th.
We continue to focus on investing in the Aaron's business and brand smart to drive revenue and earnings growth, while maintaining a conservative leverage profile of one to one five times net debt to adjusted EBITDA.
After this we look to return capital to shareholders through dividends and share repurchases and we'll continue to evaluate acquisitions on an opportunistic basis.
As it relates to returning capital to shareholders yesterday, we announced our quarterly dividend.
We will pay 12, and a half cents per share on April three to shareholders of record as of close of business on March 14th.
Douglas A. Lindsay: Now, I'll hand it back to Douglas to make a few remarks before we turn to Q&A. Thank you, Kelly. While 2023 was a challenging year, we've taken decisive actions to improve performance, and I'm excited about what we're seeing so far in 2024. We have a resilient business model and a healthy financial program, and I believe we're well positioned to take advantage of the significant opportunities in front of us. Now we will take your questions. Thank you. If you'd like to ask a question, please press star followed by 1 on your telephone keypad. If you'd like to withdraw your question, please press star followed by 2. When preparing to ask your question, please ensure you are unmuted locally. As a reminder, that's a star followed by 1 on your keypad now.
Now I'll hand, it back to Douglas to make a few remarks before we turn to Q&A.
Thank you Kelly, while 2023 was a challenging year, we've taken decisive actions to improve performance and I'm excited about what we're seeing so far in 2024, we have a resilient business model and a healthy financial profile.
And I believe we're well positioned to take advantage of the significant opportunities in front of us.
Now we will take your questions.
Thank you if you'd like to ask a question. Please press star followed by one on your telephone keypad you cannot to be truly a question. Please press star followed by two.
Parents you ask your question. Please ensure you're on mute locally as a reminder, about star followed by one of your key thoughts now.
Douglas A. Lindsay: Our first question comes from Bobby Griffin of Raymond James. Bobby, your line is open. Please go ahead. Good morning, guys. Thanks for taking my questions. I guess first up, you guys, we talked about seeing some written signs of written growth here in the core Aaron'S business around the holiday and then carrying some of that forward into 2024. But we do probably have a mix of higher e-commerce, so that's driving, you know, the lease renewal rate to be a little of a headwind, I guess, into the lease revenue. So as you think about this business changing, the composition of it changing, does the underlying earning stream that we're used to in this business look different? Or is it just a function that we have to kind of lap some of these comparisons before we'll start to get some more of the earnings kind of, you know, bleed in that we're used to?
Our first question comes from Bobby Griffin of Raymond James will be your line is open. Please go ahead.
Good morning, guys. Thanks for taking my questions.
I guess first off.
You guys talked about seeing some.
Signs of written growth here in the core Aaron's business around the holidays and carrying some of that forward into 2024, but we do have probably a mix of higher E. Commerce. So that's driving the lease renewal rate to be a little of a headwind I guess into the lease revenue. So as you think about this business changing the composition of it changing.
Underlying earnings stream that we're used to in this business look different or or is it just a function that we got to kind of lap. Some of these comparisons before we will start to get some more of the earnings kind of.
Bleed in that we're used to.
Douglas A. Lindsay: Yeah, hey, Bobby, Douglas, I would say, first of all, we're seeing really strong signs that this new customer acquisition program that we rolled out, and it's specifically benefiting eCom, but it's also benefiting our stores. We're seeing more and more customers getting approved online, shopping in stores with their remaining leasing power, which is encouraging. You know, e-commerce was up 60%, and the quarter and recurring revenue written, and we said it was going to be, you know, tracking in the first eight weeks to over 100% for the first quarter. And so that's really encouraging as we think about the business going forward, you know, post-pandemic, with more and more customers. But their existing and new customers have decided to come to us via the e-com channel. That's just the way the customer wants to interact. So that's a really important channel that we're investing in. Our customer wants flexibility and optionality to shop with us in a really omni-channel way.
Yeah, Hey, Bob Douglas I would say first of all we're seeing a really strong signs and with.
With this new customer acquisition program that we rolled out and it's specifically benefiting.
E Comm, but is also benefiting our stores, we're seeing more and more customers getting approved online shopping in stores with their remaining leasing barrel, which is encouraging.
E Com was up 60% in the quarter in recurring revenue written and we said it's going to be tracking in the first eight weeks over 100%.
In the first quarter and so that's really encouraging as we think about the business going forward post pandemic more and more customers with our existing and new customers have decided to come to us.
The E Comm channel and that's just the way the customer wants to interact so that's a really important channel that we're investing in our customer wants flexibility and optionality to shop with us in a really an omnichannel way.
Douglas A. Lindsay: It's important to note, though, that our EECOM-originated agreements are serviced by our stores. Our stores are a very critical component to this. We have customers applying online, and conversions are actually happening in our stores.
It's important to note that our E. Com originated agreements are serviced by our stores our stores are a very critical component to this.
We have customers applying online and conversions are actually happening in our stores. Our folks are calling from stores to follow up on drop card leads and other remaining leasing power opportunities.
Douglas A. Lindsay: Our folks are calling from stores to follow up on dropped cart leads and other remaining leasing power opportunities. We're also servicing these customers out of our stores, so renewals, deliveries, returns, and pre-leased product are all coming out of our stores. And while we expect...
We're also servicing these customers out of our stores are renewals deliveries returns pre leased product is all coming out of our stores and while we expect renewal rate and write offs to be up.
Douglas A. Lindsay: .. .. .. .. ....
Kelly Wall: Probably equally as important, I know we say this all the time, is that our decisioning model is solving for risk-adjusted margin on a dollar basis, and we're making each decision on an application-by-application basis, regardless of the cost. Okay, so to maybe take that just a step further, just like as this composition continues to change a little, does it change the historical margin profile of the business, or do you still kind of look at the business combined kind of being able to deliver what we're, I guess when I say we just the investors or the street are kind of used to seeing from uh, you know, margin EBITDA growth here of the business. I'm just trying to, you know, e-commerce has taken off, but the lease portfolio is still kind of trending down, so just trying to wrap my head around the mix and how it's changing, and then how we get kind of that path back into growing the lease portfolio and as well as growing earnings of the store business, the Aaron's store business. Yeah, hey, Bobby. It's Kelly.
We believe the decisions, we're making are managing risk appropriately and driving incremental revenue and earnings.
Probably equally as important I know, we say this all the time as our Decisioning model of solving for risk adjusted margin on a dollar basis, and we're making each decision on application by application basis, regardless of the channel that it comes out.
Okay. So can we take that as a step further just like as this composition continues to change a little does it seems like the historical margin profile of the business or do you still kind of look at the business combined kind of being able to deliver what we're I guess when I say, we just the investors in the street are kind of used to seeing from <unk>.
Margin EBITDA growth here of the business I'm just trying to.
Ecommerce is taken off with the lease portfolio is still kind of trending down so just trying to wrap my head around.
The mix and how it's changing and then how do we get kind of that path back into growing the lease portfolio and as well as growing earnings of the store business their in store business.
Yeah, Hey, Bob It's Kelly so.
Kelly Wall: So as we're seeing growth in EECOM here in the near term, it is putting pressure on, as we've talked about in the past, to be lower for our agreements that are originated in the United States, and Rydolphs tend to be higher. But as the portfolio, so that is in the near term again putting pressure on margins also, on the marketing side, really in the first half, in the back half, is also impacting margins. But as the lease portfolio size grows, whether it's coming from ecom or through store-originated deals that, by virtue of a large release portfolio size, more gross profit dollars flow through, which would help with overall EBITDA margins as well. But again, as I mentioned in my prepared remarks, you will see that last one, http://TheBusinessProfessor.com, down the road. Yeah, And Bobby, just one last thing.
We're seeing growth in E com here in the near term it is putting pressure on margin as we've talked about in the past right. The lease renewal rates are tend to be lower.
Or agreements that were originated in that channel and write offs tend to be higher.
But as the portfolio. So that is in the near term again, putting pressure on margin also.
Our increased.
Investment on the marketing side really in the first half of the year and continuing into the back half of the year is also impacting margin.
This year, but as our lease portfolio size grows.
Whether it's coming from E com or <unk>.
Through store originated deals that by virtue of a larger lease portfolio side size, we're getting more gross profit dollars flow through which is which would help with overall EBITDA margins as well, but again as I mentioned in my in my prepared remarks, you would see that lag right portfolio would grow first in gross margin.
Prove it would come.
Down the road, Yeah, and Bobby just one lastly, as I mentioned in my comments, we're expecting to see sequential Hum.
Douglas A. Lindsay: I mentioned in my comments that we're expecting to see sequential lease portfolio growth after Q2. The way the least, as you know, the way the least own business operates as we incur marketing costs and incur initially more write-offs in the first 90 days. And also working capital to fuel the growth. But once we get beyond there, we really will, which will carry over for our average lease is a little over 20 months written, and so we get that benefit.
Portfolio growth after Q2, the way the lease as you know the way we used to own business.
So as we incur marketing costs and incur initially more write offs in the first 90 days.
And also working capital to fuel the growth, but once we get beyond there, we really start to see the margin flow through benefits in the portfolio, which will carryover for and our average leases.
Little over 20 months written and so we get that benefit over a multiyear period.
Douglas A. Lindsay: Okay, very helpful. I guess I have two final questions for you. I mean, one, tax refunds off to, I guess, depending on, there's some commentary out there, a little bit of a delay. So just anything there you guys are seeing for us to keep in mind. And then two, just on the BrandsMart side of things, if we're kind of in this environment of rough comps or kind of tough comps, are there further costs to be removed there to kind of help maintain the EBITDA profile? Or is it really just revenue dependent on getting EBITDA margins back up to kind of the mid-single-digit level or low-single-digit level? Sure, I'll take tax season first.
Okay very helpful. I guess two final questions for me I mean, one tax refunds. After I guess, some commentary out there a little bit of a delay. So if there's anything there you guys are seeing that for us to keep in mind.
And then two just on on the brands more excited things if we're kind of in this environment of a rough comps are kind of tough comps is there further cost to be removed there to kind of maintain the EBITDA profile or is it really just revenue dependent.
On getting EBITDA margins back up to kind of the mid.
Mid single digit level or low single digit level.
Sure I'll take taxi as diverse.
Douglas A. Lindsay: As you know, refund season's just started, and we'll provide more detail on our Q1 earnings call, which will be right around the corner. But you know, tax season is a little delayed in starting. I'm sure everybody is aware of that.
As you know refunding season's just started and we will provide more detail on our Q1 earnings call, which will be right around the corner.
But.
Tax season's a little delayed in starting and I'm sure everybody is aware of that and we're just starting to get in some impacts of checks being released here. Our 2024 outlook assumes that this year's tax season will be similar to last years.
Douglas A. Lindsay: And we're just starting to get the impact of checks being released here. Our 2024 outlook assumes that this year's tax season will be similar to last year. And, as you know, tax season is never over until it's over.
As you know tax season was never over till it's over and.
Douglas A. Lindsay: And, you know, we expect that because, similar to the last year, we should see similar payment early. In regards to BrandSmart, you know, we continue to look to optimize the cost structure, but ultimately, you're right, it's going to really be about top-line demand and winning share in this market. The marketplace for appliances and electronics has been challenging, and we're forecasting demand to improve over the course of the year. A bright spot is the new store we opened in Augusta is off to a good start, and as we mentioned earlier, we're going to open another store in the back half of this year. We really believe in the growth opportunity, the market growth opportunity at BrandSmart, and the compelling brand positioning that we have in South Florida and Georgia, in particular.
We expect that because similar to last year, we should see similar payment activity and early purchase options as we did last year.
In regards to brand smart.
<unk> to look to optimize the cost structure, but ultimately you are right its going to really be about topline demand and winning share in this market the marketplace for appliances and electronics has been challenging and we're forecasting demand to improve over the course of the year a bright spot as the new store reopened in Augusta is off to a.
Good start and as we've mentioned earlier, we're going to open another store in.
In the back half of this year, we really believe in the growth opportunity a market growth opportunity at brand smart and.
Compelling.
Brand positioning that we have in South, Florida, and Georgia in particular, the four wall economics of these stores are very compelling and we can layer. This on top of our existing store support and corporate overhead structure and we believe win.
Douglas A. Lindsay: The four-wall economics of these stores are very compelling, and we can layer this on top of our existing store support and corporate everhood structure. And we believe when demand does improve in the second half of the year, we'll see great flow through. Steve and his team have done a really good job of managing costs and improving margins in that market, and ultimately, it's going to be a top, top one. Thank you. I appreciate the details this morning. Best of luck here in the first quarter.
Demand does improve in the second half of the year, we will see great plus flow through Steve and his team have done a really good job on.
Managing costs and improving margin in that business and ultimately it's going to be a top line.
Top line story going forward.
Thank you I appreciate the details this morning best of luck here in the first quarter.
Douglas A. Lindsay: Thank you, Bobby. Thank you. Our next question comes from Kyle Joseph of Jefferies. Kyle, your line is open. Please proceed. Hey, good morning guys.
Thank you Bobby.
Thank you. Our next question comes from Kyle Joseph with Jefferies. Your line is open. Please proceed.
Hey, good morning, guys. Thanks for taking my questions.
Steve Olson: Thanks for taking my question. Just want to, you know, obviously it sounds like Aaron was consistent with your expectations for brand smart flagging, and don't get me wrong, we understand how difficult consumer retail is right now. But, you know, in your perspective, is that a function of... the customer base at the respective stores, or is that kind of a function of the discretionary nature of the purchases between the two? You know, what's really driving the variance in performance in recent periods? Hey Kyle, this is Steve.
Just wanted to obviously it sounds like and that was consistent with your expectations for asthma flagging in doesn't mean, you're on we understand.
How difficult consumer retailers right now.
But in your.
Perspective is that is that a function of.
<unk>.
The customer base as to add there.
Respective stores.
Or is that.
Kind of a function of the discretionary nature of the purchases between the two what's really driving the variance in performance in recent periods.
Hey, Kyle this is Steve.
Steve Olson: I would say it's a combination of what one is, you know, these being durable goods that we really drive at BrandsMart, appliances, consumer electronics, and furniture. But the breakdown of that is really between transactions and tickets is what's driving the decline in comparable sales. So you know, that's about, call it two thirds of a mix on transactions and one third on, Okay, got it. And then you did bring up kind of the difference between our least, And again, we've talked about this in the past, Aaron'S.., has the benefit of being a portfolio. So, you know, we're originating these leases, and then customers are renewing them, and we're, which is probably providing a bit more. So, when you see growth in demand in general for consumer durable goods, to see greater growth in a pure retail company than you would typically in your own business, and the same thing happens on the downside. And again, part of that, as you mentioned, is related to the customer mix. Most of our customers, on more of a needs-based transaction, need a new refrigerator. They don't have access to traditional payment options, and so we're there to help.
I would say, it's a combination what wanted these being durable goods that we really drive the brand smart appliances consumer electronics and furniture.
But the breakdown of that is really between transactions and ticket.
Is what's driving the decline in comparable sales so that's about.
Call. It two thirds of our mix on transactions and one third on ticket.
Okay.
Then.
You did bring up kind of the difference between our lease to own business and in <unk>, which is a pure retail business.
Again, we've talked about this in the past our Aaron's business has the benefit of being a portfolio business. So we're originating these leases and then customers are renewing them and we're receiving payments over time, which is.
A bit more consistency so when you see growth and demand in general for consumer durable goods.
You see greater growth on a pure retail company you would typically in a lease to own business and the same thing happens on the on the downside and again part of that as you mentioned is related to the customer mix most of our customers on the lease to own side, it's more of a needs based.
Transaction, they need a new refrigerator.
Need new furniture, they don't have access to traditional payment options and so we're there to meet their needs.
Steve Olson: Got it. Very helpful. And then one follow-up for me, probably for Douglas.
Got it very helpful. And then one follow up for me.
Douglas A. Lindsay: On credit, I know you talked about higher write-offs being a function of e-com growth, but aside from that, any changes to underwriting or kind of the outlook for the health of your consumer? No changes really, you know; we continue to optimize our decisioning model, obviously the rollout of this. One decision model across all of our origination channels has been very helpful in approving customers, and our algorithms and models continue to slope risk and continue to predict. We have great confidence in them.
Or does this on credit I know you guys in the IRI data being a function of.
He comes to us but.
Aside from that any changes to underwriting or kind of the outlook for the health of your consumer.
No changes really we continue to after we continue to say we continue to optimize our Decisioning model, obviously the rollout of this.
One decisioning model across all of our origination channels has been very helpful in improving customers than we are.
Our algorithms and models continue to slope risk continues to be <unk>.
Predictive so we have great confidence, there and I'm really happy with what we've done there and continue to do.
Douglas A. Lindsay: And I'm really happy with what we've done there and will continue to do. In terms of the consumer, you know, Kelly said it right. I mean, Aaron's model has really held up.
In terms of the consumer.
Kelly said it right I mean, we've Aaron's model has been really resilient we've seen are.
Douglas A. Lindsay: We've seen our, you know, Aaron's customer be very resilient as a needs-based customer. You know, if you look at our recurring revenue written in the portfolio, which was down in the mid 4% range as compared to retail, we feel like the business is hung in there pretty well. As Kelly said, also, you know, in terms of pull-forward of demand, Aaron didn't have as much pull-forward in the stimulated period. And so we don't expect as much release there.
The Aaron's customer would be very resilient as a needs based customer.
If you look at our recurring revenue written in the portfolio, which was down in the mid 4% range as compared to retail we feel like the business has hung in there pretty well.
As Kelly said also in terms of pull forward of demand Aaron's didn't have as much pull forward in the stimulus added period and so we don't expect as much relief there, albeit we do expect to release.
Douglas A. Lindsay: Albeit, we do expect to release it. But most of the ups, we think, will be more material at BrandsMart Business, but BrandsMart continues to be challenging going into Q1. We are expecting 3% comps, favorable comps at BrandSmart in Q1 and sequential, I mean, I'm sorry, for the full year of 24, sequential improvement throughout the year, but we are expecting Q1 EBITDA at BrandsMart to be negative, and Comps, Comps Hale. The other thing I'd like to point out here, Kyle, is the write-off of the percentage of lease revenue.
But most of the ups, we think will be more materially seen in the in the brands for our business, but <unk> continues to be challenging going into Q1.
We are expecting.
3% comps favorable comps at brand smart in Q1, and sequential I mean, I'm sorry for the full year of 24 and sequential improvement throughout the year, but we are expecting Q1 EBITDA at brand smart to be negative due to these demand trends and comps comp sales add brands want to be negative in Q1.
Well.
The other thing I'd point out here.
Kyle is from.
Write offs as a percentage of lease revenues.
Douglas A. Lindsay: Our view on 2024 is that they will be higher, again driven by a greater mix of ecom-originated agreements, as well as more new customers. And so our view of this year is that we're going to land on a full year basis somewhere 6% and 7% higher in each quarter of this year, year over year, and Kyle, one last thing just to wrap that conversation up, as we are seeing those higher right officers because of the growth that we're seeing eComGrowth and the high single digit overall delivery growth. I'm super excited about that for Deploying Working Capital. I got it. That's it for me. Thanks for answering my questions. Showtime.
Our view on 2024 is that they will be higher again, driven by greater mix of E. Com originated agreements as well as more of your customers.
And so are our view for this year is that we're in a land on a full year basis somewhere between 6%, 7% and it will be higher in each quarter of this year year over year.
One last thing just to just to wrap that conversation up as we're seeing those higher write offs are because of the growth that we're seeing this 100% E comm growth in the high single digit overall delivery growth in the business that we're super excited about that and we're deploying working capital into this growth cycle.
Got it that's it for me thanks for answering my questions.
Douglas A. Lindsay: Be safe. KEEP IT HERE ON MID-MORNING negative. Thank you. As a reminder, if you wish to submit a question via the telephone lines, please dial star followed by one on your keypad. Our next question comes from Scott Ciccarelli of Truist. Scott, your line is open, please go ahead. Hey guys, this is Joe Chiavello on for Scott.
Thanks Scott.
Thank you as a reminder, if you wish to submit a question by the telephone lines. Please dial star followed by one on your keypad.
Our next question comes from Scott Ciccarelli Altruists Scott. Your line is open. Please go ahead.
Hey, guys. This is Joe <unk> on for Scott, Thanks for taking my questions.
Steve Olson: Thanks for taking my questions. Just wanted to follow up on the BrandSmart discussion a little bit, you know, the recovery you're kind of thinking about in the second half. If you could just talk about the drivers of that, you know, on the product side maybe or anything, any color we can get there would be great. Thank you. Yeah, Joseph Steve.
Just wanted to follow up on the brand smart discussion a little bit.
Cover you're kind of thinking about in the second half.
Could you just talk about the drivers of value on the product side, maybe or anything any color. We can get there would be great. Thank you.
Hey, Joe This is Steve.
Steve Olson: Um, so what we believe what we're expecting is some of the demand pull forward that we experienced during the pandemic to release. And, we're already seeing some signs of that in some of the short life cycle products like computers, cell phones, gaming systems, and things like that. So what we believe is, as we move further and further away from those peak periods during the pandemic, even these are larger, durable categories like appliances, like start seeing some of that demand pull forward. We're also obviously comping over weaker comps last year, so that's helping with the guidance.
So what we believe what we're expecting is.
Some of the demand pull forward that we experienced during the pandemic to release.
And we're already seeing some some signs of that in some of the short lifecycle products like computers.
El phones gaming systems and things like that so what we believe is as we move further and further away from those peak periods. During the pandemic that even these are larger durable categories like appliances like Tvs, we should start seeing some of that demand pull forward release.
Got you all right and then just real.
Real quick they were also obviously comping over.
Weaker comps last year, so that that's helping with the guide as well.
Steve Olson: Got it. Great. And then just switching gears a little bit.
Got it great and then just switching gears a little bit I think last quarter, you guys talked about being slightly higher income credit customer shopping a little bit.
Steve Olson: I think last quarter you guys talked about seeing slightly higher income credit customers shopping a little bit. Can you just talk about any trends there? Yeah, you know, we haven't really seen anything material at this time in terms of changes in our customers coming into errands. However, BrandSmart, as we mentioned before, we've got a first and second look credit provider there that represents about 30% of our business. And we're seeing them tighten credit standards. Tighter credit standards started at the end of last year, and that's continued through the first quarter.
Can you just talk about any trends there.
Yes, we haven't really seen anything material at this time in terms of changes in our customer coming into Aaron's. However, it brand Smart I think we've mentioned before we've got a first and second look credit provider there that represents about 30% of our business and we're.
We're seeing them tightening.
Credit standards.
It started at the end of last year and that's continued through the first quarter that is helping our brands for our leasing business, but we've not seen any material increase the decisioning scores there.
Steve Olson: That's helping our BrandSmart leasing business, but we've not seen any, material increase in the decisioning scores of Aaron'S. I think importantly, we have not also baked in any benefit from a credit trade down in 2024 in the Aaron's business out. Got it. Thanks so much. Thanks Joe.
I think importantly, we have not also baked in any benefit from a credit trade down in 2024 in the Aaron's business outlook provided.
Got it thanks, so much.
Thanks, Joe.
Douglas A. Lindsay: As a final reminder, if you wish to submit a question, please dial star followed by one on your telephone keypad now. At this stage, we have no further questions registered, so I'll hand over to Douglas Lindsay for any closing remarks. Thank you, operator. Thank you for joining the call today. And thank you to all of our company and franchise team members at Aaron's, BrandsMart, BrandsMart Leasing, and Woodhaven for your continued contribution. We look forward to speaking with you again next. Take care. Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines. www.globalonenessproject.org
Thank you as a final reminder, if you wish to submit your question. Please dial star followed by one on your telephone keypad now.
At this stage, we have no further questions registered so I'll hand back over to Douglas Lindsay for any closing remarks.
Thank you operator, thank you for joining the call today and thank you for all of our thank you to all of our company and franchise team members at Aaron's brand Smart brand Smart leasing of Wood Haven for your continued contributions we look forward to speaking with you again next quarter take care.
Yeah.
Ladies and gentlemen. This concludes today's call. Thank you for joining you may now disconnect your lines.
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