The Aaron's Company, Inc. Reports Fourth Quarter & Full Year 2023 Financial Results, and Announces 2024 Outlook

Rhea-AI Summary

The Aaron's Company, Inc. (NYSE: AAN) reported its fourth quarter and full year 2023 financial results, showing a decrease in revenues and adjusted EBITDA. Despite improvements in write-offs, the company faced challenges in its Aaron's Business segment. The outlook for 2024 includes a revenue range of $2.055 billion to $2.155 billion, with a conference call scheduled for February 27, 2024.

Positive

• The Aaron's Company, Inc. released its Q4 and full year 2023 financial results.
• Revenues for Q4 2023 were $529.5 million, a 10.2% decrease compared to the previous year.
• Adjusted EBITDA for Q4 2023 was $22.4 million, a 25.2% decrease year-over-year.
• Loss per share in Q4 was $0.41, with a non-GAAP loss per share of $0.26.
• Full year 2023 revenues were $2.14 billion, a 4.9% decrease from the prior year.
• Adjusted EBITDA for the full year 2023 was $136.0 million, a 23.2% decrease year-over-year.
• The company's net debt decreased by $79.8 million in 2023, a 37.2% reduction.
• Key business highlights include a decrease in Aaron's Business recurring revenue written in Q4 and a growth in e-commerce recurring revenue.
• The company expects its lease portfolio size to grow by mid single digits by the end of 2024.
• The outlook for full year 2024 includes revenue expectations of $2.055 billion to $2.155 billion.
• The company will host an earnings conference call on February 27, 2024, with key executives participating.

Negative

• Revenue and adjusted EBITDA saw significant decreases in Q4 and full year 2023.
• The company faced challenges in its Aaron's Business segment with a decrease in recurring revenue written.
• The outlook for 2024 includes a range of non-GAAP diluted EPS from $(0.10) to $0.25.
• Comparisons to the prior year period showed declines in various financial metrics.

Financial Analyst

The Aaron's Company's financial results for Q4 and full year 2023 indicate a contraction in revenues and adjusted EBITDA, which are critical metrics for assessing a company's operational performance. The reported 10.2% decrease in quarterly revenues and 23.2% decrease in annual adjusted EBITDA suggest a challenging operational environment. These declines could be attributed to market saturation, increased competition, or a shift in consumer preferences. The improvement in write-offs, however, reflects better credit management and risk assessment practices within the company.

The reduction in net debt by 37.2% is a strong indicator of the company's commitment to improving its balance sheet and reducing financial risk. This could potentially lead to an improved credit rating and lower interest expenses in the future. The increase in adjusted free cash flow by 10.5% is also a positive sign, indicating that the company is generating more cash from its operations, which can be used for reinvestment, debt reduction, or shareholder returns.

Investors might be concerned with the 2024 outlook, which forecasts a continued decline in revenues and adjusted EBITDA. The projected range for non-GAAP diluted EPS also suggests the possibility of a loss, which could impact investor sentiment and the stock price. These projections could lead to a reevaluation of the company's future earnings potential and growth trajectory.

Market Research Analyst

The decrease in Aaron's Business recurring revenue and the shrinkage of the lease portfolio size by 7.0% in 2023 highlight shifting consumer behaviors and possibly increased competition in the lease-to-own market. The 60% increase in e-commerce recurring revenue underscores the importance of a strong omnichannel strategy, as consumers continue to embrace online shopping. This pivot to digital platforms could be a key driver for future growth.

BrandsMart's 14.0% decline in comparable sales in Q4, despite being a sequential improvement, could indicate a broader issue in consumer electronics retail, such as decreased consumer spending or increased competition from online retailers. The company's cost-saving initiatives exceeding $40 million are a testament to its ability to control expenses and improve operational efficiency in a challenging retail environment.

From a market perspective, these results and the outlook for 2024 may affect investor confidence. The anticipated mid-single-digit growth in lease portfolio size by year-end 2024 offers a glimmer of hope for recovery, but the company must navigate the headwinds it faces, including potential macroeconomic challenges and evolving industry dynamics.

Economist

The financial performance of The Aaron's Company reflects broader economic trends, such as consumer spending patterns and credit market conditions. The decline in revenues may be symptomatic of a contracting economy or reduced disposable income among consumers. The improvement in write-offs indicates that the company is potentially tightening credit standards, which could be in response to a perceived increase in credit risk in the economy.

The cost savings and debt reduction efforts are consistent with strategies companies employ during economic downturns to preserve capital and maintain liquidity. The company's ability to generate positive adjusted free cash flow in such an environment is commendable and provides it with a buffer against economic shocks.

The outlook for 2024, with projected declines in revenue and adjusted EBITDA, may suggest that the company is not expecting a rapid economic turnaround. This conservative outlook could be factoring in ongoing economic uncertainties, such as inflationary pressures, interest rate hikes, or a potential recession, which could have a cascading effect on consumer finance companies like Aaron's.

ATLANTA, Feb. 26, 2024 /PRNewswire/ -- The Aaron's Company, Inc. (NYSE: AAN) today released its fourth quarter and full year 2023 financial results. Highlights of those results and the 2024 outlook are included below, in the attached supplement, and at investor.aarons.com.

Fourth Quarter 2023 Consolidated Results¹:

• Revenues were $529.5 million, a decrease of 10.2%
• Adjusted EBITDA^2,3 was $22.4 million, a decrease of 25.2%
• Loss per share was $0.41; Non-GAAP loss per share² was $0.26
• Write-offs were 6.5% in the Aaron's Business, an improvement of 60 basis points

Full Year 2023 Consolidated Results¹:

• Revenues were $2.14 billion, a decrease of 4.9%
• Adjusted EBITDA^2,3 was $136.0 million, a decrease of 23.2%
• EPS was $0.09; Non-GAAP EPS² was $0.81
• Write-offs were 5.8% in the Aaron's Business, an improvement of 60 basis points
• Adjusted free cash flow was $102.3 million, an increase of 10.5%
• Net debt lowered by $79.8 million, a reduction of 37.2%

Key Business Highlights¹:

• Aaron's Business recurring revenue written decreased 4.2% in Q4 due to lower average ticket, partially offset by 1.4% growth in lease merchandise deliveries
• Aaron's Business e-commerce recurring revenue written increased 60.0% in Q4 driven by new omnichannel customer acquisition program
• Aaron's Business lease portfolio size decreased 7.0% in 2023 but is expected to grow mid single digits by year-end 2024
• BrandsMart comparable sales decreased 14.0% in Q4, a sequential improvement of 300 basis points
• 2023 cost savings exceeded $40 million, with additional cost actions taken in Q1 2024

Full Year 2024 Consolidated Outlook:

• Revenues of $2.055 billion to $2.155 billion
• Adjusted EBITDA² of $105.0 million to $125.0 million
• Non-GAAP Diluted EPS² of $(0.10) to $0.25

The Company will host an earnings conference call tomorrow, February 27, 2024, at 8:30 a.m. ET. Chief Executive Officer Douglas A. Lindsay will host the call along with President Steve Olsen and Chief Financial Officer C. Kelly Wall. A live audio webcast of the conference call and presentation slides may be accessed at investor.aarons.com and the hosting website at https://events.q4inc.com/attendee/751317386. A transcript of the webcast will also be available at investor.aarons.com. The Company's Annual Report on Form 10-K for the year ended December 31, 2023 will be filed by the end of week of February 26, 2024.

1.	Comparisons are to the prior year period unless otherwise noted.
2.	Item is a Non-GAAP financial measure. Refer to the "Use of Non-GAAP Financial Information" and supporting reconciliation tables in the attached supplement.
3.	Starting in 2023, adjusted EBITDA excludes stock-based compensation expense. All prior period adjusted EBITDA metrics included herein have been adjusted to exclude stock compensation expense for comparability purposes.

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 1,240 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 11 retail stores in Florida and Georgia, as well as its e-commerce platform. BrandsMart Leasing offers lease-to-own solutions to customers of BrandsMart U.S.A. Woodhaven is the Company's furniture manufacturing division. For more information, visit investor.aarons.com, aarons.com, and brandsmartusa.com.

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SOURCE The Aaron’s Company, Inc.

FAQ

What were the revenues for Q4 2023 for The Aaron's Company, Inc. (NYSE: AAN)?

The revenues for Q4 2023 were $529.5 million, a 10.2% decrease from the previous year.

What was the adjusted EBITDA for Q4 2023 for The Aaron's Company, Inc. (NYSE: AAN)?

The adjusted EBITDA for Q4 2023 was $22.4 million, reflecting a 25.2% decrease year-over-year.

What was the full year 2023 revenue for The Aaron's Company, Inc. (NYSE: AAN)?

The full year 2023 revenues were $2.14 billion, a 4.9% decrease from the prior year.

What was the net debt reduction in 2023 for The Aaron's Company, Inc. (NYSE: AAN)?

The company's net debt lowered by $79.8 million in 2023, representing a reduction of 37.2%.

What is the revenue outlook for full year 2024 for The Aaron's Company, Inc. (NYSE: AAN)?

The company expects revenues of $2.055 billion to $2.155 billion for full year 2024.

When is the earnings conference call scheduled for The Aaron's Company, Inc. (NYSE: AAN)?

The company will host an earnings conference call on February 27, 2024, at 8:30 a.m. ET with key executives participating.