Q2 2019 Earnings Call
Please hold and operator will be with you shortly.
Welcome to the chorus call leasehold.
Chorus call what color would you like to join.
The erring Inc. earnings call.
Okay can I have your name for that call.
Kevin from K.E., the eye and L.A. as a and E.
And your company.
Errol A.I.E.R. J.
In Q that call is being recorded I'll join you in listen only mode a pretty.
The increase in gross margin was partially offset by accelerating investments and SGN AE to support the growth of existing retail partners as well as future pipeline conversion.
Also calculated on a consistent accounting basis write offs were 7.6% of revenues in the second quarter of 2019 compared to 7.5% in the year ago period.
As demonstrated by the consistency of this metric our lease pools continue to perform well and are in line with our expectations. Our risk team led by Tanner Barnie is doing an excellent job designing and executing decisioning strategies that account for ongoing shifts in portfolio mix, while enabling us to deliver results within the target ranges of profitability we provided.
I remain excited about the momentum we are carrying into the second half of the year and Im pleased with a significant effort. The team has made toward providing the best possible experience for credit challenged consumers.
I'll now turn the call over to Douglas to discuss the Aaron's business second quarter results.
Thanks Ryan.
I'm pleased with the performance of the Aaron's business in the second quarter, despite entering the period with a lower portfolio balance than we expected.
Same store revenues were up 0.1% in the quarter and represent a year over year improvement of 190 basis points.
Same store revenues have been near flat for four consecutive quarters and we expect this trend to continue for the second half of the year.
In the quarter, we returned to positive year over year recurring revenue written into the portfolio.
Including a 68% increase in our ecommerce channel.
As a reminder, recurring revenue written into the portfolio is a key indicator of future revenue performance.
Revenues increased 1.9% as compared to the second quarter of 2018.
Lease revenue increased 8% as compared to the same quarter last year, primarily driven by the franchise stores acquired in 2018.
Aaron's dot com as a key pillar of our omni channel strategy and continues to attract the younger higher ticket customer who prefers a mobile shopping experience.
Adjusted EBITDA decreased 2.7 million or 6.4%.
And was 8.9% of revenues versus 9.7% in the year ago quarter.
Adjusted EBITDA declined primarily due to the planned timing of 2019 marketing spend and higher write offs.
Partially offset by a $3.6 million insurance recovery from hurricane losses incurred in 2017.
Write offs were 5.6% of revenues versus 4% in the same period last year.
Contributing to the increase in write offs was a planned increase in the number and type of promotional offerings.
Higher ticket leases.
And the closure of 151 stores in the first half of 2019.
In an increasing mix of e-commerce as a percent of revenues.
Our first half of 2019 store closures are a continuation of our market repositioning strategy.
Which includes store merges relocations and investments in our next generation store concepts.
The impact of store closures on write offs.
Results, primarily from the initial attrition of customers who are transferred to other Aaron's locations.
And these closures will result in improved net margin performance in the future periods.
I am encouraged by the progress, we're making on the Aaron's business, including the improved delivery activity experienced in the latter part of the quarter.
We believe this improvement is primarily driven by our new direct response marketing programs and redesigned sales training and incentive plans.
We continue to invest in key strategic initiatives to improve the customer experience and drive operational efficiencies.
We're pleased with the progress of these initiatives and will continue to evaluate their results as we scale them more broadly.
I will now turn the call over to Steve.
Thanks, Douglas now I'll review, some financial highlights for the quarter.
On a consolidated basis revenues for the second quarter of 2019 were $968.1 million, an increase of 10.3% over the same period a year ago when calculated on a basis consistent with the 2019 adoption of Asea 42.
Adjusted EBITDA for the company was $107.4 million for the second quarter of this year compared to $97 million for the same period last year, an increase of $10.4 million or 10.7%.
Adjusted EBITDA was 11.1% of revenue in the second quarter of 2019, consistent with the second quarter of 2018 on a constant accounting basis.
Diluted EPS on a non-GAAP basis for the quarter increased 10.7% to 93 cents versus 84 cents in the prior year quarter.
Operating expenses decreased approximately $4.7 million.
Adjusting operating expenses in the second quarter of 2018 to be consistent with 2019 reporting.
Operating expenses would have increased $45 million in the second quarter of 2019 compared to the year ago period.
Approximately half of the increase in operating expenses relates to the acquisition of franchise stores throughout 2018.
The balance relates to the incremental write offs evenly split between progressive in the Aaron's business the acceleration of Aarons business planned marketing spend into the second quarter and increased personnel costs at progressive.
During the second quarter. The company closed approximately 70 Aaron's store locations as a result of management's strategic review of the existing store portfolio.
The company recorded restructuring charges of $18.7 million, primarily consisting of impairment charges associated with the closed stores.
Cash generated from operating activities was $245 million for the six months ended June Thirtyth 2019, and we ended the quarter with $100 million in cash compared to $15 million at the end of 2018.
In mid April we made a scheduled principal payment on our senior unsecured notes of $60 million.
The remaining outstanding balance of our senior unsecured notes is a $120 million with no additional scheduled principal payments on these notes until April of 2020.
During the quarter, we repurchased 242860 shares of the company's common stock for approximately $59.35 per share.
Returning approximately $17 million to our shareholders through these repurchases and our quarterly cash dividend.
We remain conserve recapitalize and ended the second quarter with available liquidity of $486 million and a net debt to adjusted EBITDA ratio 0.6 turns.
We are raising our EPS outlook from a range of 365 to 385 due to an updated range of 385 to $4 per share.
Primarily reflecting the strengthen our progressive segment.
Year to date, we've achieved low double digit consolidated revenue growth and expect to continue to do so for the balance of the year.
We have increased our adjusted EBITDA outlook for the year as we expect progressive to continue to achieve high EBITDA growth rates in the second half of 2019.
Despite a lower than expected portfolio balanced entering the second quarter, we are maintaining the previous range previously provided full year outlook for the Aaron's business.
Overall, we are pleased that we again reported strong consolidated results this quarter.
With that I will turn the call over to the operator to assist with taking your questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys.
To withdraw from the question queue. Please press Star then too.
The first question comes from Kyle Joseph of Jefferies. Please go ahead.
Hey, good morning, guys and congratulations on a good quarter.
I wanted to start on the progressive side of the business Ryan If you could give us a sense for.
The rollout with recently announced partnerships any color you can provide would provide us with there.
Okay. Thanks for the question we're on.
Continue to be very proud to partner with.
Got it and then if you could just I think this question is probably for Steve.
Just give us a sense for.
The cash efficiency of that progressive model and how much power how how much the business can grow on the existing balance sheet, and then refresh us on your capital allocation plans as well.
Yes. Thanks.
Yes, I mean thats one of the one of the many beautiful elements of the progressive.
Model, which I assume you're speaking of specifically.
Airs business generally has a great cash efficiency and cash generation as well, but as it relates to progressive and its gross.
Because of the 12 month lease pools with an average life of seven months the cash.
Turns over very quickly it has a very efficient cash conversion cycle. So we have.
The progressive business grow in the last several years in the call. It mid Twentys and has generated cash and depending on the timing of the invoice.
It could certainly grow in excess of 40% and still sell fund.
But then obviously beyond that one of our strengths is our is our conservatively capitalized balance sheet and access to liquidity. So we've got plenty of opportunity in.
And dry powder, if you will to a lot of.
Able to support growth in excess of that but at the at the levels in the size of progressive is those are some.
Very nice growth rate so they can sell fund.
Thats very helpful. Thanks, a lot for answering my questions.
Thanks.
The next question is from Anthony Chukumba of loop capital markets. Please go ahead.
Good morning, and let me add my congrats on nice quarter as well.
So just had a question.
From a sequential acceleration in terms of invoice volume per active door growth, particularly including our two year stack basis, and you raised your guidance but.
For progressive EBITDA for the year, but you didnt raise your guidance for progressive revenues for the year. So I was just trying to sort of reconcile.
That thank you.
Yes, Anthony this is Steve I mean, as we as we talked about in the prepared remarks, we we believe and we said we expect.
Low double digits are consistent.
Year over year growth rates in the back half of the year that we achieved in the front half of the year.
And we did not as as you noted tightening or change the revenue range, but we expect to continue that the trends that.
That we've been delivering thus far.
Got it that's helpful. Thank you.
The next question is from Brad Thomas of Keybanc. Please go ahead.
Hey, good morning.
Great quarter.
And I guess.
Thanks.
Business segment, and how thats, playing out relative relative to expectations and and how if at all your outlook for that.
Line item is changing as we think about the back half of the year.
Hey, Brad its Douglas.
As we mentioned that I believe we mentioned this last call you we'd be experiencing.
Elevated write offs last few quarters.
It's mainly being driven by our acquisition of new customers, we've talked about our promotional strategy is driving new customers in the door.
We've also opened on Sunday in all of our stores now, which is attracting a lot more new customers in the E com.
Hi, E com was over 12% of our GAAP written.
Into the portfolio this quarter and thats, attracting mainly a new customers. So with all the new customer entry into the into the each of the pools were seeing higher write offs. We also mentioned on the call. We are seeing a temporary increase in write offs due to the closure of 151 stores in the first six months of the year and this is just basically were merging customers from one store into another and as we move them.
We did the best we can to increase the customer service and connectivity with that customer, but we're moving them a longer away from their home to another store, we bake all of this into our underwriting and our Decisioning when we closed stores, but we do experience higher write offs when that happens. So we're happy with the ROI on that decision, but we will have a temporary period of increased write offs. We expect to have elevated write offs. As we go forward just due to the promotional strategy the growth in e-commerce , and attracting new customers at a higher rate, but thats all reflected in our guidance.
And so just to be clear does this do you think that the.
The write offs, probably continue to be higher year over year through the second half.
Yes, we would expect.
Yes, an elevated amount of write offs, even once the merger settle down.
Okay great.
And Ryan could you comment a bit more am I hearing that right after that.
Yes on a same accounting basis, rather us were 7.6 versus seven five a year ago and.
We Didnt I don't think we mentioned bad debt.
Changed accounting, but just for information bad debt was flat.
On a same accounting basis, 10.3% of revenues versus 10.3% last year and I'd say it was to strengthen our decisioning activities I mentioned that in the prepared remarks and at a payment assistance team is doing excellent as well and that combined is delivering very consistent performance.
We've provided that annual range on the write offs.
6% to 8% and we're well positioned and they're on the year.
Great and if I could ask.
Faulty Ryan about.
Revenue growth.
I know you don't want to break out for us sales occurring at specific accounts, but could you maybe give us a little bit more flavor, a little bit more help thinking about where your revenue growth today is coming from and just how we should think about how much is coming from some of these big large national accounts versus what you're seeing from some of the regional or smaller players that you work with.
Particularly in the context of us watching that active door number be down a little bit you every year right now.
Sure happy to.
I mentioned that was driven by strong increases in productivity per door, which we measure as invoice volume per door. It was actually a record level in the quarter, which was great to see and I did mentioned, we're seeing that pretty broad base.
Some nice new additions to the portfolio that are also productive and doing well for us and we've just been really focused on trying to help our partners drive more of those opportunities to the top of the funnel and and optimize our efforts to convert them through the bottom of the funnel into and they're doing great I, obviously, those larger accounts given their scale.
Our driving a big portion of the growth and we expect that trend to continue what we're pleased with.
And what we're seeing across the book.
Great. Thank you so much.
Thanks, Brad.
The next question is from John Baugh Stifel. Please go ahead.
Thank you good morning.
I wanted to get to the store side, if I could and.
Is there a better sense and I guess this is for John or does it was where we might sort out and in the longer term on store count and.
But we still retaining sort of a similar.
12 months after closure and moving.
Kind of retention rate or is that is that changing in any way.
Hey, John Thanks for the question is John Robinson.
In terms of the where we think we'll settle out on stores I think that is an ongoing.
Evolving process.
Really pleased with the growth in E com and ability to serve a broader market with that and potentially fewer stores. We certainly think the number of stores by market in say a mature market in the Metro market. For example would probably be less than we have today. We can't tell you. The exact number because were kind of honing in on that as we continue to learn from the data.
But certainly our expectation is we'll have probably fewer stores in a more robust E com platform, which includes a mobile platform as we move forward. So that's that's the direction, we're broadly going in terms of the mergers and I'll, let that was coming if this is incorrect but.
We are having good results from that Thats. The reason we've continued to do these clothes merge is that we have been pleased with the predictability and they kind of run off and retention of merge to customers over time and that's one of the advantages we have versus a traditional retailers. We do have a portfolio of leases in these stores with a recurring revenue base and so our ability to retain that when we close immersion to another stores very accretive from a profitability standpoint.
And we've seen good predictability around that.
And then there is a there is a mileage component depending on how far away. The stores are apart, but we've been pleased with the performance of that and that's one of the reasons, we continue to execute that strategy.
Yes, the only thing I'd add to that John is this is all part of our larger market repositioning strategy, which includes closing stores relocating stores and opening our next Gen store concepts and we opened six next gen stores in the quarter and we're continuing to refine our national marketing plans optimizing the footprint.
As John said, a rural market store versus an urban store and really value engineering, what we're doing I think the magic and a lot of what we're doing right now and the momentum we're starting to see as in the operating model.
Not just in the way we sort of.
For our people up to go sell and convert the customers are walking the doors, but also.
Reducing our being more efficient and our and our dollars we spend in our operating model and getting greater productivity through things like digital Decisioning and centralized collecting and so we'll continue to pursue that with as real estate strategy.
Okay, and then if I could a quick question on progressive for Ryan.
I appreciate we're not going to.
Get the rollout of the retailers are talking with but im curious on the.
You said.
Frankly ever since.
Progressive as part of Aarons that you're spending.
For future growth and.
The question is.
Where where are we.
In terms of the half we spent enough we spent too much based on what you know again won't share necessarily but.
To get a sense of whether or not.
The business is growing about the pace you saw it in your infrastructure is ready or.
Do you have some retailers are talking with maybe you're having to hold off because you're you're growing maybe faster than you thought thank you.
Yes, thanks for the question.
At seven just broad broad based comment obviously, our belief in the merits of investing into the business derived from the fact that we think it's a large underserved market. We really believe it's a 20 plus billion dollar market a fraction of which is currently being served and.
We think we're well positioned very well positioned to capture the bulk of that opportunity which is.
Why we have sort of the interest in investing I'd say, we're very pleased that we've been able to do that while generating margin expansion.
And at the pace at which we then.
Invested in the business has been very measured we try to be thoughtful about pacing that investment with the pace of evolution in the pipeline and I think we've managed to pace that pretty well.
I'm very confident that we can handle any of the volume sitting in our pipeline and.
We've made and Thats the appropriate investments I'd say, an infrastructure and team to be able to support that it's.
We talk a lot about investing in people and systems and that really is what it is we have extremely talented team across all the functions in the business and every one of those has grown.
Over the last year, and we're continuing to invest in those so that we really can handle any opportunity out there and I feel good about where we're at I feel good about where the pipeline sits today I feel good about our ability to manage those opportunities and John This is John Robinson, I'll say, just having been around progressive a while now.
I think all those things Ryan said is exactly right I feel better about our ability to capture the opportunity in front of us today than I've ever felt.
And relative to the pipeline, we have in front of us our ability to handle that management not only from an operational standpoint, but from a capital standpoint for sure.
It really all aspects of the business I think the business is very well positioned to continue to capitalize on the opportunity and we've said this in the past and I'll just repeat it but we are in Ryan and his team have done a great job of balancing managing margin EBITDA margin.
In the context of this big Unserved market, but we really are focused on capturing the opportunity more than trying to capture every last dollar of margin right now because we just think it's such a big opportunity and being the incumbent being the first to to a retailer is important.
And has proven to be overtime, and we just want to continue to kind of win that race. We think we have an advantage in the market right now from a product and teams standpoint, and we want to continue to kind of build on that advantage.
So that we can can you didn't have these wins and have used these growth rates, which these guys have put up now for really consistently for a number of years.
And John on that front really quickly is obviously this is a growing industry and is attracting competitors and capital are you seeing any change in competition.
Which I know you've always cited there is always somebody the walks in and offers a better conversion rate or or approval rate whatever.
Is it changing for the degree is impacting you obviously your margins are good but.
I'm just curious on the competitive landscape. Thank you.
Yes, I mean, its good question, it's definitely I mean back all the way back to when Aaron's acquired progressive we like its attracted more and more competitors and.
The awareness around the industry's higher among capital providers. So theres certainly more competitors probably than we've ever seen in the market. We are going to think of it is.
Those competitors who are serving.
The regions versus the ones that were serving the large enterprise accounts I feel like we have a real.
Unmatched product and team to serve a large retailer and just as I mentioned before we want to continue to.
Build on leave we think we have there and.
It's definitely there is some good competitors, we think we're the best provider out there, but we've got to stay on our toes and we've got to keep investing to stay ahead. So that's part of what you see if you asking the question, where we're investing we're investing across all functional areas to get better across the whole enterprise to be able to continue to be the best provider out there, but it's been competitive it remains competitive it's always changing.
And we just put a lot of pressure on ourselves to keep getting better and have the best solution in the market and Thats, how we think about it we're always feeling a great sense of urgency to improve and we have a great.
Kind of.
Roadmap of product and how we need to having to change and grow and get better and were working down that pipeline as fast as we can.
Great. Thanks, Good luck.
Thank you.
The next question is from Bill Chappell of Suntrust. Please go ahead.
Thanks, Good morning.
Good morning Bill.
If you hopefully quick questions in one longer.
On the air side Doug.
I guess would you expect to see a little more clarification kind of the write offs to be at this level for the next few quarters or would they go higher before they go lower and then also on same store sales, what's kind of the outlook on same store sales growth as we start to lap some of the Sunday openings by the time, we get to the fourth quarter.
Yes, Hey, Bill, it's just addressing the rentals first.
Well you know we just closed the second so 70 stores at the end of the quarter. So I would expect.
In the third quarter to see sort of the same as what you see in the second quarter adjusted for our normal seasonal third quarter.
Increased year over year, you should expect to see kind of what you're seeing here in the second quarter, given the store closure pace.
That will moderate towards the end of the year, but we've been up about 100 basis points year over year and I expect that's where it will settle back down we will continue to try to drive new customers into the pipeline that incur.
Higher.
Write off rate one because there.
They've got a higher a book value of the assets are riding off into they just write off at a higher rate.
As new customers normally do.
And as far as same store comps.
I'm really proud of the team we had another quarter of positive comps I think were 190 basis points over last year and as you recall first quarter.
It was our first positive comp since 2013, so teams done an awesome job on that what I'm most excited about.
Is that we rebounded on our key leading indicator of recurring revenue written into the portfolio, which was up.
This quarter and continues that streak from last year that we were seeing we're attracting more new customers and probably importantly, we saw strength in the latter part of the quarter, which we're excited about so we've kept our guidance zero to 2%, we see ourselves coming in within that guidance and.
Thats, it will be sort of flat to 0.2%.
For the year, what's driving a lot of that right. Now is this reinvestment that I mentioned on the call and marketing and sales training and incentive programs.
Along with these merchandising strategies that continue to.
Get traction on of course, we talked about E. Com It was up 67% and revenue we put into the portfolio year over year. So those are all.
Helping us with comps considerably.
Got it and then Ryan switching progressive.
I understand your commentary that the store count to becoming less and less.
Relevant, but there is certainly some of your.
Some of your existing customers that are being doors shrink and we will continue that way I mean do you expect this trend.
Looking at your door count to be at this level for a while in terms of down a couple percentage points year over year does it get worse does it get better as others start to expand a little bit faster.
Yes. Good question. So we you know we talked about the specific drivers of the decline were currently seeing in the business on the base of 19800, we did have some nice additions from new and existing.
Partnerships.
Inside of that number obviously overcome by the two drivers we mentioned on the last call.
The decline in mattress firm one of our partners there and then in mobile.
As well so that that being said, we'll we'll still be comping those declines throughout this year.
But there are there are obviously significant bases of doors still out there.
Left to win and onboard on the.
Platform, so that opportunity is out there and then once we comp those two specific reductions obviously.
We won't be we won't be facing that headwind as well on the existing base, which.
Hi seen some growth inside of it that was just offset by those two declines so.
We'll be Comping short answer is we'll be comping those for this year and.
We've got some opportunity to grow it going forward and Bill obviously, it's John a lot of the opportunity and the pipeline is our E comm and or larger footprint.
Type doors, so they can bring a lot of invoice.
Without necessarily moving the door metric as much as.
We might have seen in the past, but other other types of doors. So.
That's been the case in the last couple of years for US as we've just had very productive doors come into the system.
The perfect segue into my last question just.
Right and maybe just if you were to have signed a large kind of online E. Commerce customers. How does that work in terms of you know versus a traditional door how quickly it ramps just because.
The signage is obviously different the customer interaction is different and so I don't know if it takes significantly longer than.
Bricks and mortar retailer that has the similar revenue base or if it's if it's much much faster.
Hi.
Fair question I would say it.
I expect it to be very similar to our offline partnerships, which is a very dramatically partner to partner and it depends on both the nature and the integration and the level of.
Collaboration between the teams and the extent to which the offering is being promoted on the site as a corollary of being promoted in store PLP and all of those will be live a significant influence on the pace of growth.
In our online opportunities we're super excited about the channel. We've spent a lot of time and resource investing in building out our technology offering there as well as our team I'm pleased with where we're at excited about where we're going and our goal is to develop the tool kit we need to help.
A broad base of ecommerce retailers serve this customer as we've done over the past two decades offline I think its a really large opportunity and I think works were sort of uniquely positioned to help execute on that strategy for online partners. We were very bullish on.
Online and mobile representing a big portion of the business years into the future.
Got it thank you.
The next question is from God buckets of Raymond James. Please go ahead.
Hi, good morning.
Everyone. Thank you for taking my questions.
Right.
Yes, you are talking about the 130 basis points of.
Gross margin expansion due primarily I think if I recall properly.
From a lower penetration of 90 day or significantly from that can you talk a little bit about that maybe give us some color of any indication of share the verticals that may be in or whether that's commentary about that.
The.
Of the credit challenged consumer.
Sure well do.
So not not necessarily a health of the consumer really.
An artifact of the shift in mix and and Thats a function of a lot of variables. There that go into our portfolio mix I'll give you. Some examples so when we.
Onboard a new partner that that partner may have a naturally different level of 90 day organic level of 90 day buyouts based on their customer composition.
If we see different rates of growth across partners that can influence. It if we see different pricing overall growth of the portfolio. All those things have the ability to influence levels of 90 day were.
We saw 190.
Basis points of expansion in Q1, so it's moderated a bit from that level to the 130 in Q2, we expected to continue to moderate and it really just depends on the timing and mix.
Invoice, especially new invoice being added.
Okay, that's helpful and Douglas rapid customer on boarding how is that.
Progressing how many how many stores are going back and.
What does it look like in the portfolio.
Sure.
Glad you asked because we've been working hard on that we've been testing it in about 200 stores, we've seen great success and adoption.
Our team members love It takes considerable amount of labor out of the stores and leaves the processing to us versus processing of the store.
What they like.
Probably most about it as a digital interface, where we can onboard a customer and offer them all of our products, Nissan or docs and send them away with digital docs.
Which is a convenience to the customer and it also helps us to lead them through the onboarding process and a more uniform way.
In terms of the Decisioning, we've seen really strong results there we continue to optimize it.
We should be with digital tablets onboarding tablets in every store by the end of the year and then shortly following with Decisioning platform that will allow us to.
May go sort of size the customer and if you think about the journey. This way you come into an errand store Phil on your information. We tell you what your leasing power is and then you go shop and then we check you out digitally on the tablet and the vision of.
That experience is coming to light right now in our stores and will probably be in the first half of 2020, and but I'll add one thing this is John .
Following the last question or questions one of the exciting parts about rapid customer on boarding and as Douglas said it is an evolution of our business you know this business well it's.
We're going through a transformation and you've got to do it in steps and Douglas and his team John Smith, and Steve Olson, they're doing amazing job executing this but we've got to do it we've got a sequence. It right. They are doing that one of the exciting parts about rapid customer onboarding is the ability.
Once it's in place to centrally manage risk better than we've ever been able to do it before that's one of the huge advantages we have at progressive is our ability to.
To turn on and off.
Different pools of opportunity and approval rates and the things that we can change really agile have the very agile in changing we can do that at progressive we can't you do to Aaron but rapid customer on boarding will get us to that point, which gives you a much better ability to kind of dial up your risk adjusted margin you're looking for.
And the progressive guys have been hugely helpful getting us there on the air inside but it's a big opportunity that we don't really get the benefit of this year, but we're excited about in the future.
One last thing, but I mean, not just that we get data capture and sales conversion data and have additional labor hours, we can deploy into the selling process, which are also great benefits of those as well.
Let's make sure I understand that I thought I think you said you're going to have but in all stores by the end of the year, but right now it's only 200. So that's like a 100 from where it was earlier so you're you really backend loading that's going into 2020.
Yes Vance.
The 2019.
Yes, let me be clear or we're going to have the digital platform and our checkout process in all stores by the end of the year and that's going to allow our associates to get comfortable with the process and we will layer on the decisioning part of that in the first part of 2020, and we should get the benefits through throughout 2020.
But to further clarify and the 200 and the 200 plus stores today, we have the digital and the decision. Yes, we have both of them and their which has enabled us to get a lot of data and to understand performance of lease pools.
Based on the Decisioning.
Okay and last for me you closed.
About.
Just under 70 stores and if our math is right at the end of the quarter. You said the balance of the year look like are you going to do some more closed mergers.
Okay size or are we pretty well done for 2019.
Yes, I mean, we're going to follow our normal crop course process, but.
But we don't expect any large scale closures between now and the end of the year.
Okay. Thank you very much good luck on the balance of the year.
Thank you.
The next question is a follow up from Anthony Chukumba of loop capital markets. Please go ahead.
Hi, Thanks for allowing me, Doug double dip here a bit.
Good you talked briefly about the.
For the.
New store concept the pack.
And I know that you've seen some pretty impressive results from that.
I guess I was just looking for an update in terms of.
Rolling out some of the learnings from those concept stores to the right store base. Thank you.
Sure. We're now up to 10 stores that we've opened up a new store concept. We initially had a prototype store.
Where are we as you might imagine you know sort of spin when we needed to spend to get it right and drive volume we learned that we could.
Drive the topline and we needed to optimize the the rest of the model we've been working hard to do that and so we've been working on value engineering, our build out and figure out what our new labor model is and really refining what's in the store I mean, if you think about our new store concept, it's a larger showroom really removing removing the servicing offices completely remodeled exterior and interior new brand look and as totally static in the main part of the showroom. So no pre leased and we have dedicated.
Pre leased areas and then we have as we've talked about with our CEO .
Digital onboarding in a hole in a virtual shopping experiences in those stores layering on that we've put in a centralized servicing.
There and so we've learned a lot from that.
The biggest thing we've learned as we can not only value engineer, but we can optimize the operating model too.
Give us a return within the lease periods that were signing so we are gaining confidence. We've also learned that slightly bigger stores operate better and.
With that confidence has allowed us to sort of accelerate the pace of our our build out of the stores. So weve got a number of stores in the pipeline as we've communicated previously and we are building a team on the real estate side.
That is much more strategic in terms of the way, we think about markets already put these things it will not be a one size fits all so in Iran's US pass, Texas. We may have a smaller store that has more remote than a store we might put in Atlanta, where we have other stores nearby we could foresee in the future where in our high density markets, having higher stores with smaller surrounding satellite stores that may potentially be service through.
Hubs in the shared resources, but we're really optimistic about the concept and Anthony I'll add just to make sure on your question. The things some of the things that we are scaling across the system already and we just talk about digital customer Onboarding thats been one of the kind of pieces of the new store concept.
That Douglas and the team have tested seeing great results from seeing great customer adoption and feedback from customers on and were announced as we've just discussed scaling across the whole system. This year.
We've also learned in part of our new store concept was new incentive programs and we were also adopting some new sales training and those are.
To effective and big projects right now that we are scaling across the whole system. So these are all things.
That had been part of this transformation effort that are getting across the whole system. The real estate part as Douglas just discussed as a.
Longer term process that we are trying to get right given that theres more capital involved in we want to make sure. We're very prudent about how we spend that capital. So we're refining it and it's going to be a little different by market as Douglas said, there's going to be a big economy economic component.
And Douglas and his team did an awesome job figuring out the right mix by market.
Got it Thats helpful. And then just one last question.
You mentioned that the strong progressive invoice volume per door growth, which is driven by increase in lease transacted in nearly every vertical.
I guess I was wondering as you add.
Larger.
Partners is that a reasonable expectation to think that.
Your invoice volume per active door growth will continue to be quite robust.
As you layer in the larger partners, who can do a lot more volume than.
Hosting wireless reseller.
On the whole Anthony Yes, I'd say, that's true it's also going to be true as the mix shift toward online more as well it just.
Given how we count those stores, we're going to see higher levels of average store door productivity coming from online but.
But yeah, and one thing I'll emphasize that I think Ryan said early on to make sure everyone understands is.
The team has done an amazing job of bringing on new retailers with big footprint doors, but they're doing an equally.
Admirable job of driving more volume in the existing doors that we have with our existing retail partners. So a lot of the investment much of the investment.
That we make is to make our existing partners more successful in the team has done an excellent job of doing that and that's showing up in these numbers.
Got it that's helpful and sorry, just one last clarification with 50% increase in E. Commerce revenues was that just on the Aaron's business is that overall.
And that's just in the Aaron's business and just to further clarify that 68% increase in revenue recurring revenue written into the portfolio, which is our leading indicator.
But it's not a revenue number but it's what we put into the portfolio, 68% higher than we did last year. So effectively the recurring revenue that you expect.
If you think about a transaction you have a recurring payment is just the recurring payments aggregated that we've written into portfolio in any given period.
That's helpful clarification. Thank so much.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to John Robinson for closing remarks.
Thank you to summarize we are pleased with the strong first half of 2019.
We recognize we must continue to execute on our plan to achieve the improved results indicated by our updated outlook and our team is up to the task. We are pleased with ongoing performance at progressive and the progress being made by the Aaron's business in its transformation efforts.
I'd like to thank all of our associates retail partners and franchisees for their dedication to 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.