• Consolidated revenues were $610.4 million, up 30.6%, benefiting from BrandsMart acquisition
  • Strong performance from Aaron's e-commerce channel and GenNext stores
  • Losses per share were $0.17; Non-GAAP earnings per share were $0.79, adjusted primarily for acquisition-related items
  • Net losses were $5.3 million; Non-GAAP net earnings were $24.8 million
  • Consolidated adjusted EBITDA was $48.1 million, down 26.4%, as high inflation pressured lower-income consumers
  • Updates full year adjusted EBITDA outlook to $150 million to $170 million

ATLANTA, July 25, 2022 /PRNewswire/ -- The Aaron's Company, Inc. (NYSE: AAN), a leading, technology-enabled, omnichannel provider of lease-to-own and retail purchase solutions, today announced financial results for the second quarter ended June 30, 2022. This quarter is the Company's first report on a consolidated basis, incorporating results from BrandsMart U.S.A., acquired April 1, 2022.

The Aaron's Company (PRNewsfoto/The Aaron's Company, Inc.)

"With the acquisition of BrandsMart U.S.A., consolidated revenues increased in the second quarter, and we are encouraged by the performance of this new business segment," said Douglas Lindsay, Chief Executive Officer of The Aaron's Company, Inc. "In the Aaron's Business, customer demand and payment activity progressively worsened through the quarter as high inflation impacted the lower-income consumer. In response to these challenging market conditions, we are leveraging our centralized lease decisioning and digital servicing platforms to maintain relationships with our customers and strengthening actions to control costs."

"We continue to strategically invest in our growing e-commerce channel, our high-performing GenNext store program, and the value creation opportunities available through the BrandsMart acquisition," Lindsay added. "Together with our strong balance sheet and liquidity, we believe these investments enable us to continue delivering a market leading value proposition to a large and increasingly diversified customer base that will expand our market share and position us for future growth."

Second Quarter 2022 Financial Highlights

The Aaron's Company, Inc. (the "Company") conducts its operations through two primary operating business segments: 1) the Aaron's Business segment, which includes, Company-operated Aaron's stores, the Aarons.com e-commerce platform, Aaron's franchise operations, BrandsMart Leasing, a lease-to-own solution offered to customers of BrandsMart U.S.A., and Woodhaven, a furniture manufacturing operation (collectively, the "Aaron's Business"); and 2) the BrandsMart segment, which includes, BrandsMart U.S.A. retail stores and the Brandsmartusa.com e-commerce platform (collectively, "BrandsMart"). The financial and operating results for the BrandsMart segment do not include BrandsMart Leasing and neither business segment results include unallocated corporate expenses. Additionally, the Company's financial and operating results for the second quarter of 2022 include the results of operations of BrandsMart subsequent to the April 1, 2022 acquisition, while financial and operating results for all periods prior to the April 1, 2022 acquisition do not include BrandsMart. For all periods presented, the Company has retroactively adjusted disclosures to align with the new reportable segments.

Consolidated Results

The Company's total revenues were $610.4 million in the second quarter of 2022 compared with $467.5 million for the second quarter of 2021. Net losses were $5.3 million for the second quarter of 2022 compared with net earnings of $33.0 million in the prior year period. Net losses for the second quarter of 2022 include the effects of a one-time, non-cash charge for a fair value adjustment to merchandise inventories of $23.0 million, BrandsMart acquisition-related costs of $8.0 million, restructuring charges of $5.6 million, acquisition-related intangible amortization expense of $2.8 million, and separation costs of $0.2 million. These charges were partially offset by a net tax benefit of $4.8 million related to a remeasurement of the Company's deferred state tax balances in conjunction with the BrandsMart acquisition. Net earnings in the second quarter of 2021 included restructuring charges of $1.8 million and separation costs of $1.2 million.

Adjusted EBITDA was $48.1 million in the second quarter of 2022, a decrease of 26.4% compared to the second quarter of 2021. As a percentage of total consolidated revenues, adjusted EBITDA was 7.9% in the second quarter of 2022 compared with 14.0% in the prior year second quarter. The declines in adjusted EBITDA and adjusted EBITDA margin were primarily due to lower lease renewal rates, higher provision for lease merchandise write-offs, and higher other operating expenses, partially offset by lower personnel costs in the Aaron's Business. The decline in adjusted EBITDA was also offset by $10.5 million of adjusted EBITDA generated from the BrandsMart acquisition.

Diluted losses per share were $0.17 in the second quarter of 2022 compared with diluted earnings per share of $0.95 in the second quarter of 2021. On a non-GAAP basis, diluted earnings per share were $0.79 for the second quarter of 2022 compared with $1.05 in the second quarter of 2021.

Aaron's Business Segment Results

Total revenues for the Aaron's Business were $430.2 million in the second quarter of 2022, a decrease of 8.0% compared to the second quarter of 2021, primarily due to lower lease revenues and retail sales. The lower lease revenues were primarily attributable to lower lease renewal rates and lower exercise of early purchase options. At the end of the second quarter of 2022 our overall lease portfolio size was $130.8 million, a decrease of 1.5% compared to the end of the second quarter of 2021. The lease renewal rate for the second quarter of 2022 was 88.5%, compared to 92.4% in the government stimulus-aided second quarter of 2021. E-commerce revenues increased 4.0% in the second quarter of 2022 compared to the same period in 2021 and represented 15.4% of lease revenues. During the quarter, the Aaron's Business opened 36 GenNext locations, bringing the total to 171 GenNext stores, or 16.1% of total Company-operated Aaron's stores. Lease originations in GenNext stores open less than one year continued growing at a rate of more than 20 percentage points higher than our average legacy stores.

Same store revenues decreased 6.7% as compared to the second quarter of 2021. The decrease was primarily driven by a lower lease renewal rate, lower exercise of early purchase options, and a reduction in retail sales. These factors were partially offset by a larger average same-store lease portfolio size during the quarter.

For the Aaron's Business, earnings before income taxes for the second quarter of 2022 were $29.5 million compared to $61.7 million in the second quarter of 2021.

Adjusted EBITDA for the Aaron's Business was $48.0 million in the second quarter of 2022, a decrease of 38.9% compared to the second quarter of 2021. As a percentage of total revenues for the Aaron's Business, adjusted EBITDA was 11.2% in the second quarter of 2022 compared with 16.8% in the prior year second quarter. The declines in adjusted EBITDA and adjusted EBITDA margin for the Aaron's Business were primarily due to lower lease renewal rates and higher provision for lease merchandise write-offs compared to the government stimulus-aided levels in the second quarter of 2021. Lease merchandise write-offs were 5.7% in the second quarter of 2022, as compared to 2.9% in the second quarter of 2021. Adjusted EBITDA was also impacted by higher other operating expenses offset by lower personnel costs.

BrandsMart Segment Second Quarter Results

The Company's consolidated financial and operating results for all periods prior to the April 1, 2022 acquisition do not include BrandsMart and therefore have not been addressed in the discussion below.

Total revenues for BrandsMart were $181.4 million in the second quarter of 2022. Losses before income taxes for the second quarter of 2022 were $15.9 million. Losses before income taxes in the second quarter of 2022 include a one-time $23.0 million non-cash charge related to a fair value adjustment of the acquired merchandise inventories.

Adjusted EBITDA was $10.5 million in the second quarter, and as a percentage of total revenues for the BrandsMart segment, adjusted EBITDA was 5.8%.

Second Quarter Share Repurchase Program and Dividend Activity

During the second quarter of 2022, the Company repurchased 254,216 shares of Aaron's common stock for a total purchase price of approximately $5.3 million. The total shares outstanding as of June 30, 2022 were 30,777,065, compared to 33,093,668 as of June 30, 2021. The remaining authorized share repurchase amount was $135.8 million as of June 30, 2022. In addition, the Board declared a quarterly cash dividend of $0.1125 per share which was paid to shareholders of record on July 5, 2022.

Updated Full Year 2022 Outlook

The Company has updated its full year 2022 outlook to reflect expectations that continued high inflation and related macroeconomic factors will adversely impact customer demand, lease portfolio size, lease renewal rates, the provision for lease merchandise write-offs, and Company expenses. For the full year 2022, we now expect consolidated total revenues between $2.19 billion and $2.27 billion, adjusted EBITDA between $150.0 million and $170.0 million, and non-GAAP earnings per share between $1.75 and $2.15.

The Company assumes depreciation and amortization of $85.0 million to $90.0 million, and a diluted weighted average share count of approximately 31.5 million shares.



Current Outlook1, 2,3

Previous Outlook1, 2



Low

High

Low

High

Consolidated Company






Total Revenues


$2.19 billion

$2.27 billion

$2.32 billion

$2.39 billion

Adjusted EBITDA


$150.0 million

$170.0 million

$200.0 million

$215.0 million

Non-GAAP EPS


$1.75

$2.15

$2.65

$2.90

Capital Expenditures


$100.0 million

$120.0 million

$100.0 million

$125.0 million

Free Cash Flow


$50.0 million

$60.0 million

$45.0 million

$55.0 million







Aaron's Business






Total Revenues


$1.65 billion

$1.71 billion

N/A

N/A

Adjusted EBITDA


$180.0 million

$195.0 million

N/A

N/A

Annual Same Store Revenues


-8.0 %

-6.0 %

N/A

N/A







BrandsMart






Total Revenues


$545.0 million

$565.0 million

$545.0 million

$565.0 million

Adjusted EBITDA


$20.0 million

$25.0 million

$20.0 million

$25.0 million



1

See the "Use of Non-GAAP Financial Information" section accompanying the press release.

2

BrandsMart outlook represents expected results for the nine months ended December 31,
2022.

3

The current outlook for the Aaron's Business and BrandsMart segments does not include
unallocated corporate expenses.

 

Conference Call and Webcast

The Company will hold a conference call to discuss its quarterly results on July 26, 2022, at 8:30 a.m. Eastern Time. The public is invited to listen to the conference call by webcast accessible through the Company's investor relations website, investor.aarons.com.

About The Aaron's Company Inc.

Headquartered in Atlanta, The Aaron's Company, Inc. (NYSE: AAN) is a leading, technology-enabled, omnichannel provider of lease-to-own and retail purchase solutions of appliances, electronics, furniture, and other home goods across its brands: Aaron's, BrandsMart U.S.A., BrandsMart Leasing, and Woodhaven. Aaron's offers a direct-to-consumer lease-to-own solution through its approximately 1,300 Company-operated and franchised stores in 47 states and Canada, as well as its e-commerce platform. BrandsMart U.S.A. is one of the leading appliance retailers in the country with ten retail stores in Florida and Georgia. BrandsMart Leasing offers lease-to-own solutions to customers of BrandsMart U.S.A. Woodhaven is our furniture manufacturing division. For more information, visit investor.aarons.com, aarons.com, and brandsmartusa.com.

Forward-Looking Statements

Statements in this news release regarding our business that are not historical facts are "forward-looking statements" that involve risks and uncertainties which could cause actual results to differ materially from those contained in the forward-looking statements.  Such forward-looking statements generally can be identified by the use of forward-looking terminology, such as "remain," "believe," "outlook," "expect," "assume," "assumed," and similar terminology.  These risks and uncertainties include factors such as (i) factors impacting consumer spending, including the current inflationary environment and general macroeconomic conditions; (ii) any ongoing impact of the COVID-19 pandemic due to new variants or efficacy and rate of vaccinations, as well as related measures taken by governmental or regulatory authorities to combat the pandemic (iii) the possibility that the operational, strategic and shareholder value creation opportunities expected from the separation and spin-off of the Aaron's Business into what is now The Aaron's Company, Inc. may not be achieved in a timely manner, or at all; (iv) the failure of that separation to qualify for the expected tax treatment; (v) the risk that the Company may fail to realize the benefits expected from the acquisition of BrandsMart U.S.A., including projected synergies; (vi) risks related to the disruption of management time from ongoing business operations due to the acquisition; (vii) failure to promptly and effectively integrate the BrandsMart U.S.A. acquisition; (viii) the effect of the acquisition on our operating results and businesses and on the ability of Aaron's and BrandsMart to retain and hire key personnel or maintain relationships with suppliers; (ix) changes in the enforcement and interpretation of existing laws and regulations and the adoption of new laws and regulations that may unfavorably impact our business; (x) legal and regulatory proceedings and investigations, including those related to consumer protection laws and regulations, customer privacy, third party and employee fraud, and information security; (xi) the risks associated with our strategy and strategic priorities not being successful, including our e-commerce and real estate repositioning and optimization initiatives or being more costly than anticipated; (xii) risks associated with the challenges faced by our business, including the commoditization of consumer electronics, our high fixed-cost operating model and the ongoing labor shortage; (xiii) increased competition from traditional and virtual lease-to-own competitors, as well as from traditional and online retailers and other competitors; (xiv) financial challenges faced by our franchisees; (xv) increases in lease merchandise write-offs, and the potential limited duration and impact of government stimulus and other government payments made by Federal and State governments to counteract the economic impact of the pandemic; (xvi) the availability and prices of supply chain resources, including products and transportation; (xvii) business disruptions due to political or economic instability due to the ongoing conflict between Russia and Ukraine; and (xviii) the other risks and uncertainties discussed under "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Statements in this press release that are "forward-looking" include without limitation statements about: (i) the execution of our key strategic priorities; (ii) the growth and other benefits we expect from executing those priorities; (iii) our 2022 financial performance outlook; (iv) the Company's goals, plans, expectations, and projections regarding the expected benefits of the BrandsMart acquisition; and (v) the expected impact on our 2022 financial performance of additional rounds of government stimulus payments. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except as required by law, the Company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances after the date of this press release.

 

THE AARON'S COMPANY, INC.

Consolidated Statements of Earnings

(In thousands, except per share amounts)




(Unaudited) 

 Three Months Ended

(Unaudited) 

Six Months Ended


June 30,

June 30,



2022

2021

2022

2021

REVENUES:






Lease Revenues and Fees


$    386,513

$    411,621

$    795,831

$    839,262

Retail Sales


190,848

16,877

203,455

33,323

Non-Retail Sales


27,042

32,455

54,869

62,404

Franchise Royalties and Other Revenues


5,981

6,542

12,311

13,560



610,384

467,495

1,066,466

948,549

COST OF REVENUES:






Depreciation of Lease Merchandise and Other Lease Revenue
Costs


127,772

132,319

264,436

273,296

Retail Cost of Sales


165,228

10,887

174,343

21,405

Non-Retail Cost of Sales


24,237

29,609

49,593

56,100



317,237

172,815

488,372

350,801

GROSS PROFIT


293,147

294,680

578,094

597,748

OPERATING EXPENSES:






Personnel Costs


130,257

121,426

251,367

246,289

Other Operating Expenses, Net


136,387

114,046

240,746

222,412

Provision for Lease Merchandise Write-Offs


22,113

12,117

44,070

25,534

Restructuring Expenses, Net


5,582

1,794

8,917

5,235

Separation Costs


230

1,246

770

5,636

Acquisition-Related Costs


8,033

11,497



302,602

250,629

557,367

505,106

OPERATING (LOSSES) PROFIT


(9,455)

44,051

20,727

92,642

Interest Expense


(2,463)

(451)

(2,813)

(795)

Other Non-Operating (Expense) Income, Net


(1,556)

744

(2,483)

1,146

(LOSSES) EARNINGS BEFORE INCOME TAXES


(13,474)

44,344

15,431

92,993

INCOME TAX (BENEFIT) EXPENSE


(8,132)

11,369

(759)

23,695

NET (LOSSES) EARNINGS


$       (5,342)

$      32,975

$      16,190

$      69,298







(LOSSES) EARNINGS PER SHARE


$         (0.17)

$           0.98

$           0.52

$           2.04

(LOSSES) EARNINGS PER SHARE ASSUMING DILUTION


$         (0.17)

$           0.95

$           0.51

$           1.99

WEIGHTED AVERAGE SHARES OUTSTANDING


30,827

33,812

30,944

34,036

WEIGHTED AVERAGE SHARES OUTSTANDING ASSUMING
DILUTION


30,827

34,561

31,490

34,739

 

THE AARON'S  COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

 (In thousands) 






(Unaudited)




June 30,
2022


December 31,
2021

ASSETS:




Cash and Cash Equivalents

$          28,249


$             22,832

Accounts Receivable (net of allowances of $7,886 at June 30, 2022 and $7,163 at
December 31, 2021)

41,020


29,443

Lease Merchandise (net of accumulated depreciation and allowances of $437,803 at
June 30, 2022 and $439,745 at December 31, 2021)

746,666


772,154

Merchandise Inventories, Net

106,255


Property, Plant and Equipment, Net

263,906


230,895

Operating Lease Right-of-Use Assets

459,828


278,125

Goodwill

75,242


13,134

Other Intangibles, Net

110,258


5,095

Income Tax Receivable

6,731


3,587

Prepaid Expenses and Other Assets

93,691


86,000

Total Assets

$     1,931,846


$        1,441,265

LIABILITIES & SHAREHOLDERS' EQUITY:




Accounts Payable and Accrued Expenses

$        236,624


$           244,670

Deferred Income Taxes Payable

93,744


92,306

Customer Deposits and Advance Payments

74,504


66,289

Operating Lease Liabilities

496,129


309,834

Debt

310,332


10,000

Total Liabilities

1,211,333


723,099





Shareholders' Equity:




Common Stock, Par Value $0.50 Per Share: Authorized: 112,500,000 Shares at
June 30, 2022 and December 31, 2021; Shares Issued: 36,037,069 at June 30, 2022 and
35,558,714 at December 31, 2021

18,019


17,779

Additional Paid-in Capital

731,891


724,384

Retained Earnings

107,611


98,546

Accumulated Other Comprehensive Losses

(608)


(739)


856,913


839,970

Less: Treasury Shares at Cost




                5,260,004 Shares at June 30, 2022 and 4,580,390 at December 31, 2021

(136,400)


(121,804)

Total Shareholders' Equity

720,513


718,166

Total Liabilities & Shareholders' Equity

$     1,931,846


$        1,441,265

 

THE AARON'S COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



(Unaudited)


Six Months Ended June 30,

(In Thousands)

2022


2021

OPERATING ACTIVITIES:




Net Earnings

$         16,190


$         69,298

Adjustments to Reconcile Net Earnings to Cash Provided by Operating Activities:




Depreciation of Lease Merchandise

260,507


269,600

Other Depreciation and Amortization

40,395


34,547

Provision for Lease Merchandise Write-Offs

44,070


25,534

Non-Cash Inventory Fair Value Adjustment

23,023


Accounts Receivable Provision

17,484


10,879

Stock-Based Compensation

6,835


6,882

Deferred Income Taxes

(1,644)


16,674

Impairment of Assets

6,048


2,810

Non-Cash Lease Expense

53,850


45,802

Other Changes, Net

(6,349)


(2,437)

Changes in Operating Assets and Liabilities:




Lease Merchandise

(279,949)


(335,262)

Merchandise Inventories

(2,480)


Accounts Receivable

(13,189)


(3,554)

Prepaid Expenses and Other Assets

5,829


(3,228)

Income Tax Receivable

(3,144)


(707)

Operating Lease Right-of-Use Assets and Liabilities

(59,642)


(63,169)

Accounts Payable and Accrued Expenses

(33,909)


(2,748)

Customer Deposits and Advance Payments

(16,849)


(10,766)

Cash Provided by Operating Activities

57,076


60,155

INVESTING ACTIVITIES:




Purchases of Property, Plant, and Equipment

(57,687)


(45,826)

Proceeds from Dispositions of Property, Plant, and Equipment

10,191


8,340

Acquisition of BrandsMart U.S.A., Net of Cash Acquired

(266,772)


Acquisition of Businesses and Customer Agreements, Net of Cash Acquired

(917)


(1,734)

Proceeds from Other Investing-Related Activities

968


1,974

Cash Used in Investing Activities

(314,217)


(37,246)

FINANCING ACTIVITIES:




Repayments on Swing Line Loans, Net

(10,000)


Proceeds from Revolver and Term Loan

291,700


Repayments on Revolver, Term Loan and Financing Leases

(4,200)


(753)

Borrowings on Inventory Loan Program, Net

8,121


Dividends Paid

(6,611)


(6,770)

Acquisition of Treasury Stock

(11,055)


(42,626)

Issuance of Stock Under Stock Option Plans

912


1,790

Shares Withheld for Tax Payments

(3,541)


(2,729)

Debt Issuance Costs

(2,758)


Cash Provided by (Used in) Financing Activities

262,568


(51,088)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

(10)


35

Increase (Decrease) in Cash and Cash Equivalents

5,417


(28,144)

Cash and Cash Equivalents at Beginning of Period

22,832


76,123

Cash and Cash Equivalents at End of Period

$         28,249


$         47,979

 

The Aaron's Company, Inc.

Quarterly Revenues by Segment

(In thousands)



(Unaudited)


Three Months Ended


June 30, 2022


Aaron's
Business

BrandsMart

Elimination of
Intersegment
Revenues

Total

Lease Revenues and Fees

$           386,513

$                     —

$           386,513

Retail Sales

10,709

181,442

(1,303)

190,848

Non-Retail Sales

27,042

27,042

Franchise Royalties and Fees

5,792

5,792

Other

189

189

Total Revenues

$           430,245

$           181,442

$              (1,303)

$           610,384






(Unaudited)


Three Months Ended


June 30, 2021


Aaron's
Business

BrandsMart

Elimination of
Intersegment
Revenues

Total

Lease Revenues and Fees

$           411,621

$                     —

$           411,621

Retail Sales

16,877

16,877

Non-Retail Sales

32,455

32,455

Franchise Royalties and Fees

6,253

6,253

Other

289

289

Total Revenues

$           467,495

$                     —

$                     —

$           467,495

 

The Aaron's Company, Inc.

Six Months Revenues by Segment

(In thousands)



(Unaudited)


Six Months Ended


June 30, 2022


Aaron's
Business

BrandsMart

Elimination of
Intersegment
Revenues

Total

Lease Revenues and Fees

$           795,831

$                     —

$                     —

$           795,831

Retail Sales

23,316

181,442

(1,303)

203,455

Non-Retail Sales

54,869

54,869

Franchise Royalties and Fees

11,910

11,910

Other

401

401

Total

$           886,327

$           181,442

$              (1,303)

$        1,066,466






(Unaudited)


Six Months Ended


June 30, 2021


Aaron's
Business

BrandsMart

Elimination of
Intersegment
Revenues

Total

Lease Revenues and Fees

$           839,262

$                     —

$                     —

$           839,262

Retail Sales

33,323

33,323

Non-Retail Sales

62,404

62,404

Franchise Royalties and Fees

12,962

12,962

Other

598

598

Total

$           948,549

$                     —

$                     —

$           948,549

 

Use of Non-GAAP Financial Information:

Non-GAAP net earnings, non-GAAP diluted earnings per share, EBITDA and adjusted EBITDA are supplemental measures of our performance that are not calculated in accordance with generally accepted accounting principles in the United States ("GAAP").  Non-GAAP net earnings and non-GAAP diluted earnings per share for 2022 exclude certain charges including amortization expense resulting from acquisitions, restructuring charges, separation costs associated with the separation and distribution transaction that resulted in our spin-off into a separate publicly-traded company, acquisition-related costs, and a one-time, non-cash charge for a fair value adjustment to merchandise inventories. Non-GAAP net earnings and non-GAAP diluted earnings per share for 2021 exclude certain charges including amortization expense resulting from acquisitions, restructuring charges and separation costs associated with the separation and distribution transaction that resulted in our spin-off into a separate publicly-traded company. The amounts for these pre-tax non-GAAP adjustments, which are tax-effected using estimated tax rates which are commensurate with non-GAAP pre-tax earnings, can be found in the Reconciliation of Net (Loss) Earnings and (Loss) Earnings Per Share Assuming Dilution to Non-GAAP Net Earnings and Non-GAAP Earnings Per Share Assuming Dilution table in this press release.

The EBITDA and adjusted EBITDA figures presented in this press release are calculated as the Company's (loss) earnings before interest expense, depreciation on property, plant and equipment, amortization of intangible assets and income taxes. Adjusted EBITDA also excludes the other adjustments described in the calculation of non-GAAP net earnings above. Adjusted EBITDA margin is defined as EBITDA as a percentage of revenue. The amounts for these pre-tax non-GAAP adjustments can be found in the Quarterly EBITDA table in this press release.

Management believes that non-GAAP net earnings, non-GAAP diluted earnings per share, EBITDA and Adjusted EBITDA provide relevant and useful information, and are widely used by analysts, investors and competitors in our industry as well as by our management in assessing both consolidated and business unit performance.

Non-GAAP net earnings and non-GAAP diluted earnings per share provide management and investors with an understanding of the results from the primary operations of our business by excluding the effects of certain items that generally arose from larger, one-time transactions that are not reflective of the ordinary earnings activity of our operations or transactions that have variability and volatility of the amount.  This measure may be useful to an investor in evaluating the underlying operating performance of our business.

EBITDA and Adjusted EBITDA also provide management and investors with an understanding of one aspect of earnings before the impact of investing and financing charges and income taxes.  These measures may be useful to an investor in evaluating our operating performance and liquidity because the measures:

  • Are widely used by investors to measure a company's operating performance without regard to items excluded from the calculation of such measure, which can vary substantially from company to company depending upon accounting methods, book value of assets, capital structure and the method by which assets were acquired, among other factors.
  • Are a financial measurement that is used by rating agencies, lenders and other parties to evaluate our creditworthiness.
  • Are used by our management for various purposes, including as a measure of performance of our operating entities and as a basis for strategic planning and forecasting.

The Free Cash Flow figures presented in this press release and in the press release dated April 25, 2022 are calculated as the Company's cash flows provided by operating activities, adjusted for acquisition-related transaction costs and proceeds from real estate transactions, less capital expenditures. Management believes that Free Cash Flow is an important measure of liquidity provides relevant and useful information, and are widely used by analysts, investors and competitors in our industry as well as by our management in assessing liquidity.

Non-GAAP financial measures, however, should not be used as a substitute for, or considered superior to, measures of financial performance prepared in accordance with GAAP, such as the Company's GAAP basis net earnings and diluted earnings per share, the Company's GAAP revenues and earnings before income taxes and GAAP cash from operating activities, which are also presented in the press release.  Further, we caution investors that amounts presented in accordance with our definitions of non-GAAP net earnings, non-GAAP diluted earnings per share, EBITDA, adjusted EBITDA and Free Cash Flow may not be comparable to similar measures disclosed by other companies, because not all companies and analysts calculate these measures in the same manner.

Reconciliation of Net (Loss) Earnings and (Loss) Earnings Per Share Assuming Dilution to Non-
GAAP Net Earnings and Non-GAAP Earnings Per Share Assuming Dilution

(In thousands, except per share)




(Unaudited) 

 Three Months Ended


(Unaudited) 

Six Months Ended



June 30,


June 30,



2022

2021


2022

2021

Net (Losses) Earnings


$          (5,342)

$         32,975


$         16,190

$         69,298

Income Taxes


(8,132)

11,369


(759)

23,695

(Losses) Earnings Before Income Taxes


$        (13,474)

$         44,344


$         15,431

$         92,993

Add: Acquisition-Related Intangible Amortization Expense


2,782

1,428


3,423

2,935

Add: Restructuring Expenses, Net


5,582

1,794


8,917

5,235

Add: Separation Costs


230

1,246


770

5,636

Add: Non-Cash Inventory Fair Value Adjustment


23,023


23,023

Add: Acquisition-Related Costs


8,033


11,497

Non-GAAP Earnings Before Income Taxes


26,176

48,812


63,061

106,799








Income taxes, calculated using a non-GAAP Effective Tax Rate


1,388

12,515


10,796

27,213

Non-GAAP Net Earnings


$         24,788

$         36,297


$         52,265

$         79,586















(Losses) Earnings Per Share Assuming Dilution


$            (0.17)

$             0.95


$             0.51

$              1.99

Add: Acquisition-Related Intangible Amortization Expense


0.09

0.04


0.11

0.08

Add: Restructuring Expenses, Net


0.18

0.05


0.28

0.15

Add: Separation Costs


0.01

0.04


0.02

0.16

Add: Non-Cash Inventory Fair Value Adjustment


0.74


0.73

Add: Acquisition-Related Costs


0.26


0.37

Tax Effect of Non-GAAP adjustments


(0.30)

(0.03)


(0.37)

(0.10)

Non-GAAP Earnings Per Share Assuming Dilution(1)


$              0.79

$             1.05


$             1.66

$              2.29








Weighted Average Shares Outstanding Assuming Dilution(2)


31,222

34,561


31,490

34,739



(1)

In some cases, the sum of individual EPS amounts may not equal total non-GAAP EPS calculations due to rounding.

(2)

For the three months ended June 30, 2022, the GAAP Weighted Average Shares Outstanding Assuming Dilution was 30,827 and
the Non-GAAP Weighted Average Shares Outstanding Assuming Dilution was 31,222.

 

The Aaron's Company, Inc.

Non-GAAP Financial Information

Quarterly EBITDA by Segment

(In thousands)



(Unaudited)


Three Months Ended June 30, 2022


Aaron's
Business

BrandsMart

Unallocated
Corporate

Elimination

Total

Net Earnings (Losses)

$         29,520

$        (15,919)

$        (18,604)

$              (339)

$          (5,342)

Income Taxes

(8,132)

(8,132)

Earnings (Losses) Before Income Taxes

$         29,520

$        (15,919)

$        (26,736)

$              (339)

$        (13,474)

Interest Expense

2,463

2,463

Depreciation

17,814

1,189

364

19,367

Amortization

700

2,178

2,878

EBITDA

$         48,034

$        (12,552)

$        (23,909)

$              (339)

$         11,234

Separation Costs

230

230

Restructuring Expenses, Net

5,582

5,582

Acquisition-Related Costs

8,033

8,033

Non-Cash Inventory Fair Value Adjustment

23,023

23,023

Adjusted EBITDA

$         48,034

$         10,471

$        (10,064)

$              (339)

$         48,102










(Unaudited)


Three Months Ended June 30, 2021


Aaron's
Business

BrandsMart

Unallocated
Corporate

Elimination

Total

Net Earnings (Losses)

$         61,665

$                 —

$        (28,690)

$                 —

$         32,975

Income Taxes

11,369

11,369

Earnings (Losses) Before Income Taxes

$         61,665

$                 —

$        (17,321)

$                 —

$         44,344

Interest Expense

451

451

Depreciation

15,377

504

15,881

Amortization

1,599

1,599

EBITDA

$         78,641

$                 —

$        (16,366)

$                 —

$         62,275

Separation Costs

1,246

1,246

Restructuring Expenses, Net

1,794

1,794

Adjusted EBITDA

$         78,641

$                 —

$        (13,326)

$                 —

$         65,315







 

The Aaron's Company, Inc.

Non-GAAP Financial Information

Six Months EBITDA by Segment

(In thousands)



(Unaudited)


Six Months Ended June 30, 2022


Aaron's
Business

BrandsMart

Unallocated
Corporate

Elimination

Total

Net Earnings (Losses)

$         81,681

$        (15,919)

$        (49,233)

$              (339)

$         16,190

Income Taxes

(759)

(759)

Earnings (Losses) Before Income Taxes

$         81,681

$        (15,919)

$        (49,992)

$              (339)

$         15,431

Interest Expense

2,813

2,813

Depreciation

34,802

1,189

761

36,752

Amortization

1,464

2,178

3,642

EBITDA

$       117,947

$        (12,552)

$        (46,418)

$              (339)

$         58,638

Separation Costs

770

770

Restructuring Expenses, Net

8,917

8,917

Acquisition-Related Costs

11,497

11,497

Non-Cash Inventory Fair Value Adjustment

23,023

23,023

Adjusted EBITDA

$       117,947

$         10,471

$        (25,234)

$              (339)

$       102,845










(Unaudited)


Six Months Ended June 30, 2021


Aaron's
Business

BrandsMart

Unallocated
Corporate

Elimination

Total

Net Earnings (Losses)

$       132,918

$                 —

$        (63,620)

$                 —

$         69,298

Income Taxes

23,695

23,695

Earnings (Losses) Before Income Taxes

$       132,918

$        (39,925)

$                 —

$         92,993

Interest Expense

795

795

Depreciation

30,216

1,048

31,264

Amortization

3,283

3,283

EBITDA

$       166,417

$        (38,082)

$                 —

$       128,335

Separation Costs

5,636

5,636

Restructuring Expenses, Net

5,235

5,235

Adjusted EBITDA

$       166,417

$                 —

$        (27,211)

$                 —

$       139,206







 

Reconciliation of 2022 Current Outlook for Adjusted EBITDA

(In thousands)



Fiscal Year 2022 Ranges


Aaron's Business

BrandsMart

Consolidated Total

Estimated Net Earnings



$10,000 - $24,000

Income Taxes



$250 - $750

Projected Earnings Before Income Taxes

$105,000 - $118,000

($11,000) - ($8,000)

$10,250 - $24,750

Interest Expense

$10,500 - $11,000

Depreciation and Amortization

$75,000 - $77,000

$8,000 - $10,000

$85,000 - $90,000

Projected EBITDA

$180,000 - $195,000

($3,000) - $2,000

$105,750 - $125,750

Other Adjustments, Net1

$23,000

$44,250

Projected Adjusted EBITDA

$180,000 - $195,000

$20,000 - $25,000

$150,000 - $170,000



(1)

Other Adjustments, Net includes non-GAAP charges related to restructuring charges, separation costs
associated with the separation and distribution transaction that resulted in our spin-off into a separate
publicly-traded company, BrandsMart one-time integration and other acquisition-related costs, and a
one-time, non-cash charge for a fair value adjustment to BrandsMart merchandise inventories.

 

Reconciliation of 2022 Current Outlook for Earnings Per Share

Assuming Dilution to Non-GAAP Earnings Per Share Assuming Dilution



Fiscal Year 2022 Range


Low

High

Projected Earnings Per Share Assuming Dilution

$                             0.30

$                             0.80

Add Sum of Other Adjustments1

1.45

1.35

Projected Non-GAAP Earnings Per Share Assuming Dilution

$                             1.75

$                             2.15



(1)

Includes the non-GAAP charges related to restructuring charges, separation costs associated with the
separation and distribution transaction that resulted in our spin-off into a separate publicly-traded company,
BrandsMart one-time integration and other acquisition-related costs, and a one-time, non-cash charge for a
fair value adjustment to BrandsMart merchandise inventories.

 

Reconciliation of 2022 Current Outlook for Free Cash Flow

(In thousands)



Fiscal Year 2022 Ranges


Consolidated Total

Cash Provided by Operating Activities

$126,500 - $154,500

Add: Proceeds from Real Estate Transactions

$12,000 - $14,000

Add: Acquisition-Related Transaction Costs

$11,500

Less: Capital Expenditures

($100,000 - $120,000)

Free Cash Flow

$50,000 - $60,000

 

Reconciliation of 2022 Previous

Outlook for Adjusted EBITDA

(In thousands)




Fiscal Year 2022 Ranges



Aaron's Business

BrandsMart1

Consolidated Total2

Estimated Net Earnings




$75,000 - $81,000

Income Taxes




26,000 - 28,000

Projected Earnings Before Income Taxes


N/A

$13,500 - $16,500

$101,000 - $109,000

Interest Expense


N/A

9,000 - 10,000

Depreciation and Amortization


N/A

4,000 - 5,000

80,000 - 85,000

Projected EBITDA


N/A

$17,500 - $21,500

$190,000 - $204,000

Projected Other Adjustments, Net


N/A

2,500 - 3,500

10,000 - 11,000

Projected Adjusted EBITDA


N/A

$20,000 - $25,000

$200,000 - $215,000



(1)

Amortization related to the acquired BrandsMart intangible assets was excluded from the Previous
Outlook provided April 25, 2022 as the respective fair values were pending the completion of the
purchase price valuation and could not be reasonably estimated as of that date. Projected Other
Adjustments, Net in the table above includes one-time integration and other acquisition-related costs.

(2)

Projected Other Adjustments, Net includes the non-GAAP charges related to restructuring charges,
separation costs associated with the separation and distribution transaction that resulted in our spin-off
into a separate publicly-traded company and BrandsMart one-time integration and other acquisition-
related costs. Amortization related to the acquired BrandsMart intangible assets was excluded from the
Previous Outlook provided April 25, 2022 as the respective fair values were pending the completion of
the purchase price valuation and could not be reasonably estimated as of that date.

 

Reconciliation of 2022 Previous Outlook for Earnings Per Share

Assuming Dilution to Non-GAAP Earnings Per Share Assuming Dilution



Fiscal Year 2022 Range


Low

High

Projected Earnings Per Share Assuming Dilution

$                             2.39

$                             2.57

Add Sum of Projected Other Adjustments1

0.26

0.33

Projected Non-GAAP Earnings Per Share Assuming Dilution

$                             2.65

$                             2.90



(1)

Includes the non-GAAP charges related to restructuring charges, separation costs associated with the
separation and distribution transaction that resulted in our spin-off into a separate publicly-traded company
and BrandsMart one-time integration and other acquisition-related costs. Amortization related to the acquired
BrandsMart intangible assets was excluded from the Previous Outlook provided April 25, 2022 as the
respective fair values were pending the completion of the purchase price valuation and could not be reasonably
estimated as of that date.

 

Reconciliation of 2022 Previous Outlook for Free Cash Flow

(In thousands)



Fiscal Year 2022 Ranges


Consolidated Total

Cash Provided by Operating Activities

$139,000 - $173,000

Add: Proceeds from Real Estate Transactions

6,000 - 7,000

Less: Capital Expenditures

(100,000 - 125,000)

Free Cash Flow

$45,000 - $55,000

 

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SOURCE The Aaron's Company, Inc.

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