Document

EX-99.1 2 a2023q3ex991thirdquarterea.htm EX-99.1 Document

Exhibit 99.1

The Aaron’s Company, Inc. Reports Third Quarter 2023 Financial Results,

Updates Full Year Outlook

Atlanta, GA, October 23, 2023 — The Aaron’s Company, Inc. (NYSE: AAN) today released its third quarter 2023 financial results. Complete financial results are available at  investor.aarons.com. Highlights of those results are included below and in the attached supplement.

Third Quarter 2023 Consolidated Results1:

•Revenues were $525.7 million, a decrease of 11.4%

•Adjusted EBITDA2,3 was $25.3 million, a decrease of 33.8%

•Loss per share was $0.13; Non-GAAP EPS2 was $0.01

•Write-offs were 6.1% in the Aaron's Business, an improvement of 140 basis points

•Cost optimization initiatives on track to achieve $35 to $40 million target for 2023

•Returned $9.5 million of capital to shareholders

•Updates 2023 full year outlook; narrows the range for all components

Third Quarter 2023 Key Items:

The Aaron's Company

•Earnings were ahead of internal expectations largely due to a larger lease portfolio size and lower write-offs at the Aaron's Business, and ongoing cost optimization

•Ended the quarter with cash and cash equivalents of $39.3 million and debt of $187.5 million

Aaron's Business

•Earnings before income taxes were $17.5 million; adjusted EBITDA was $36.4 million, a decrease of 14.2% as compared to the prior year quarter

•Write-offs were 6.1%, a 140 basis points improvement as compared to the prior year quarter due to ongoing lease decisioning enhancements

•Ended the quarter with 245 GenNext stores, which accounted for over 30% of lease revenues and fees and retail sales

•Ended the quarter with 111 Hub and Showroom pairs

•E-commerce revenues increased 1.3% as compared to the prior year quarter and represented 18.5% of lease revenues

BrandsMart

•Loss before income taxes was $2.4 million; adjusted EBITDA was $1.0 million, a decrease of 84.6% due to lower revenues as a result of ongoing customer demand pressure

•Gross profit margin was 22.9%, an increase of 50 basis points as compared to the prior year quarter

•Recently opened store located in Augusta, GA; first new store opened since acquiring the business in 2022

1.Comparisons are to the prior year quarter 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.

Exhibit 99.1

slides may be accessed at investor.aarons.com and the hosting website at https://events.q4inc.com/attendee/966851198. A transcript of the webcast will also be available at 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 1,250 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.

Contact:

Investor Relations – Call: 678-402-3590, Email: InvestorRelations@aarons.com

Media Relations – Call: 678-402-3591, Email: MediaRelations@aarons.com

1.Comparisons are to the prior year quarter 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.

The Aaron’s Company, Inc. Reports Third Quarter 2023 Financial Results,

Updates Full Year Outlook

Atlanta, GA, October 23, 2023 — The Aaron's Company, Inc. (NYSE: AAN) today released its third quarter 2023 financial results.


Third Quarter Consolidated1			•Revenues were $525.7 million, a decrease of 11.4% •Adjusted EBITDA2,3 was $25.3 million, a decrease of 33.8% •Loss per share was $0.13; Non-GAAP EPS2 was $0.01 •Write-offs were 6.1% in the Aaron's Business, an improvement of 140 basis points •Cost optimization initiatives on track to achieve $35 to $40 million target for 2023 •Returned $9.5 million of capital to shareholders •Updates 2023 full year outlook; narrows the range for all components


CEO Commentary – “I am pleased that we delivered third quarter consolidated company earnings ahead of our internal expectations. The Aaron's Business segment is benefiting from our lease decisioning enhancements, which led to lower write-offs and a larger than expected lease portfolio size, despite ongoing challenges in customer demand. During the quarter, we opened three Aaron's stores in new markets and our first new BrandsMart store since acquiring the business, and we remain focused on positioning both businesses for growth." – Douglas Lindsay, The Aaron’s Company CEO


Third Quarter 2023 Key Items
The Aaron's Company			•Earnings were ahead of internal expectations largely due to a larger lease portfolio size and lower write-offs at the Aaron's Business, and ongoing cost optimization •Ended the quarter with cash and cash equivalents of $39.3 million and debt of $187.5 million
Aaron's Business			•Earnings before income taxes were $17.5 million; adjusted EBITDA was $36.4 million, a decrease of 14.2% as compared to the prior year quarter •Write-offs were 6.1%, a 140 basis point improvement as compared to the prior year quarter due to ongoing lease decisioning enhancements •Ended the quarter with 245 GenNext stores, which accounted for over 30% of lease revenues and fees and retail sales •Ended the quarter with 111 Hub and Showroom pairs •E-commerce revenues increased 1.3% as compared to the prior year quarter and represented 18.5% of lease revenues
BrandsMart			•Loss before income taxes was $2.4 million; adjusted EBITDA was $1.0 million, a decrease of 84.6% due to lower revenues as a result of ongoing customer demand pressure •Gross profit margin was 22.9%, an increase of 50 basis points as compared to the prior year quarter •Recently opened store located in Augusta, GA; first new store opened since acquiring the business in 2022

1.Comparisons are to the prior year quarter unless otherwise noted.

2.Item is a Non-GAAP financial measure. Refer to the "Use of Non-GAAP Financial Information" and supporting reconciliation tables below.

Consolidated Results


($ in Millions, except EPS)	Q3'23		Q3'22		Change
Revenues	$	525.7	$	593.4	(11.4)	%
Net Loss	(4.1)		(15.6)		73.5	%
Adjusted EBITDA1,2	25.3		38.2		(33.8)	%
Diluted (Loss) Earnings Per Share	$	(0.13)	$	(0.51)	74.5	%
Non-GAAP Diluted Earnings Per Share1	0.01		0.31		(96.8)	%


Adjusted Free Cash Flow1	Q3'23		Q3'22		Change
Cash Provided by Operating Activities	$	34.7	$	66.8	(48.0)	%
Adjustments3	0.4		9.3		(95.4)	%
Capital Expenditures	(27.4)		(26.0)		5.2	%
Adjusted Free Cash Flow1	$	7.8	$	50.1	(84.4)	%


Returns to Shareholders	Q3'23		Q3'22		Change
Dividends Declared4	$	3.8	$	3.5	10.6	%
Share Repurchases	5.7		—		nmf

Discussion of Consolidated Results - Q3'23 vs. Q3'22:

•The 11.4% decrease in consolidated revenues was primarily due to lower lease revenues and fees and lower retail sales at the Aaron's Business, as well as lower retail sales at BrandsMart.

•Net loss included restructuring charges of $2.7 million, intangible amortization expense of $2.6 million, stock compensation expense of $3.1 million, and BrandsMart acquisition-related costs of $0.7 million.

•The 73.5% improvement in net loss was primarily due to lower total operating expenses at both business segments, including lower write-offs at the Aaron's Business segment, partially offset by lower revenues at both business segments.

•The 33.8% decrease in adjusted EBITDA was primarily due to lower lease revenues and fees at the Aaron's Business and lower retail sales at BrandsMart, partially offset by lower personnel costs at both business segments as well as lower write-offs at the Aaron's Business.

•As of September 30, 2023, the Company had cash and cash equivalents of $39.3 million, debt of $187.5 million, and $339.6 million of availability under its $375.0 million unsecured revolving credit facility.

1.Item is a Non-GAAP financial measure. Refer to the "Use of Non-GAAP Financial Information" and supporting reconciliation tables below.

2.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.

3.Adjustments include cash provided by operating activities related to acquisition-related transaction costs paid and real estate transaction related proceeds received during the quarter.

4.Disclosure based upon dividends declared but not paid for the three months ended September 30, 2023 and 2022.

Segment Results

Aaron's Business

The Aaron’s Business segment includes Aaron's branded Company-operated and franchise-operated stores, the Aarons.com e-commerce platform, Woodhaven, and BrandsMart Leasing. The financial and operating results for the Aaron's Business segment do not include unallocated corporate expenses.


($ in Millions)	Q3'23			Q3'22			Change
Revenues	$	376.2		$	412.9		(8.9)	%
Lease Portfolio Size1	$	116.4		$	125.8		(7.5)	%
Lease Renewal Rate1	86.2		%	86.3		%	(10)	bps
Gross Profit Margin	63.1		%	62.3		%	80	bps
Earnings Before Income Taxes	$	17.5		$	23.5		(25.5)	%
Adjusted EBITDA2	$	36.4		$	42.5		(14.2)	%
Adjusted EBITDA Margin2	9.7		%	10.3		%	(60)	bps
Write-Offs %3	6.1		%	7.5		%	(140)	bps


Ending Store Count4	Q3'23	Q3'22	Change
Total Stores	1,251	1,268	(17)
Company-Operated	1,024	1,034	(10)
GenNext (included in Company-Operated)	245	195	50
Franchised	227	234	(7)

Discussion of Aaron's Business Results - Q3'23 vs. Q3'22:

•The 8.9% decrease in revenues was primarily due to a smaller lease portfolio size, fewer exercises of early purchase options, and lower retail sales.

•The lease portfolio size began the quarter down 8.6% compared to the beginning of Q3 2022 and ended the quarter down 7.5% compared to the end of Q3 2022.

•The year-over-year decrease of 14.2% in adjusted EBITDA and 60 basis points in adjusted EBITDA margin were primarily due to higher other operating expenses as a percentage of revenues due to lower year-over-year gains on dispositions of store-related assets, partially offset by higher gross profit margin and lower write-offs.

•The provision for lease merchandise write-offs as a percentage of lease revenues and fees was 6.1% for Q3 2023, a 140 basis point improvement as compared to Q3 2022, as a result of the lease decisioning enhancements implemented in prior quarters.

•Opened 15 GenNext stores with three in new markets and ended the quarter with 245 GenNext 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 legacy store average.

•E-commerce revenues increased 1.3% and represented 18.5% of lease revenues.

1.Key operating metrics do not include BrandsMart Leasing.

2.Item is a Non-GAAP financial measure. Refer to the "Use of Non-GAAP Financial Information" and supporting reconciliation tables below.

3.Provision for Lease Merchandise Write-offs as a percentage of lease revenues and fees.

4.The typical layout for a Company-operated Aaron's store is a combination of showroom, customer service and warehouse space. Certain Company-operated Aaron's stores consist solely of a showroom.

BrandsMart

The BrandsMart segment includes BrandsMart U.S.A. retail stores and the Brandsmartusa.com e-commerce platform, but does not include BrandsMart Leasing. The financial and operating results for the BrandsMart segment also do not include unallocated corporate expenses.


($ in Millions)	Q3'23			Q3'22			Change
Revenues	$	152.4		$	183.3		(16.9)	%
Comparable Sales1,2	(17.0)		%	N/A			N/A
Gross Profit Margin	22.9		%	22.4		%	50	bps
(Loss) Earnings Before Income Taxes	$	(2.4)		$	3.0		(181.7)	%
Adjusted EBITDA3	$	1.0		$	6.6		(84.6)	%
Adjusted EBITDA Margin3	0.7		%	3.6		%	(290)	bps

Discussion of BrandsMart Results - Q3'23 vs. Q3'22:

•The 16.9% decrease in revenues was primarily due to a 17.0% year-over-year decrease in comparable sales, driven primarily by ongoing weaker customer traffic and customer trade down to lower priced products across major categories.

•E-commerce product sales were 8.9% of product sales, down from 9.3% in the prior year quarter.

•The year-over-year increase in gross profit margin was due to ongoing strategic pricing and procurement initiatives.

•The year-over-year decrease in adjusted EBITDA and adjusted EBITDA margin were primarily due to lower retail sales, offset by benefits of direct procurement savings, strategic pricing actions, and cost controls.

1.Comparable sales was calculated by comparing BrandsMart retail and other sales for the comparable period in 2022 for all BrandsMart stores open for the entire 15-month period ended September 30, 2023. Comparable sales includes retail sales generated at BrandsMart stores (including retail sales to BrandsMart Leasing), e-commerce sales initiated on the website or app, credit card revenues, warranty revenue, gift card breakage, and sales of merchandise to wholesalers and dealers, as applicable. Comparable sales excludes service center related revenues.

2.Results prior to Q2 2022 are prior to the April 1, 2022 acquisition date; therefore, Comparable Sales results are not available for Q3 2022.

3.Item is a Non-GAAP financial measure. Refer to the "Use of Non-GAAP Financial Information" and supporting reconciliation tables below.

Full Year 2023 Outlook

The Company is providing the following updated outlook of selected financial metrics for the full year 2023.

Current Outlook 1,2

Previous Outlook 1,3

Consolidated

Low

High

Low

High

Revenues

$2.12 billion

$2.17 billion

$2.12 billion

$2.22 billion

Net Earnings

$14.0 million

$17.5 million

$16.8 million

$25.5 million

Adjusted EBITDA4

$140.0 million

$150.0 million

$140.0 million

$160.0 million

Diluted EPS

$0.35

$0.50

$0.55

$0.80

Non-GAAP Diluted EPS

$1.00

$1.20

$1.00

$1.40

Cash Provided by Operating Activities

$156.2 million

$168.7 million

$164.9 million

$180.9 million

Capital Expenditures

$87.5 million

$95.0 million

$85.0 million

$100.0 million

Adjusted Free Cash Flow

$75.0 million

$80.0 million

$85.0 million

$95.0 million

Aaron’s Business

Revenues

$1.50 billion

$1.54 billion

$1.50 billion

$1.57 billion

Earnings Before Income Taxes

$98.0 million

$102.5 million

$101.0 million

$110.0 million

Adjusted EBITDA

$170.0 million

$177.5 million

$170.0 million

$185.0 million

BrandsMart

Revenues

$615.0 million

$630.0 million

$615.0 million

$645.0 million

Earnings Before Income Taxes

($2.5) million

($1.0) million

$(0.5) million

$2.5 million

Adjusted EBITDA

$12.5 million

$15.0 million

$12.5 million

$17.5 million

1.See the “Use of Non-GAAP Financial Information” section included in this release. Consolidated totals include unallocated corporate costs and intersegment elimination amounts.

2.The current outlook assumes no significant deterioration in the current retail environment, state of the U.S. economy, or global supply chain, as compared to its current condition.

3.As announced in the Form 8-K filed on July 31, 2023.

4.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.

Conference Call and Webcast

The Company will host an earnings conference call tomorrow, October 24, 2023, 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/966851198. A transcript of the webcast will also be available at investor.aarons.com.

About The Aaron's Company, Inc.

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.

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 "believe," "expect," "expectation," "anticipate," "may," "could," "should", "intend," "belief," "estimate," "plan," "target," "project," "likely," "will," "forecast,", "future", "outlook," and similar expressions. These risks and uncertainties include factors such as (i) factors impacting consumer spending, including the current inflationary environment, increasing consumer debt levels and reduced savings rates, general macroeconomic conditions and rising interest rates; (ii) the possibility that the operational, strategic and shareholder value creation opportunities expected from the separation and spin-off of the Aaron’s Business (as described in the 2022 Annual Report) into what is now The Aaron’s Company, Inc. may not be achieved in a timely manner, or at all; (iii) the failure of that separation to qualify for the expected tax treatment; (iv) the risk that the Company may fail to realize the benefits expected from the acquisition of BrandsMart U.S.A., including projected synergies; (v) risks related to the disruption of management time from ongoing business operations due to the BrandsMart U.S.A. acquisition; (vi) failure to promptly and effectively integrate the BrandsMart U.S.A. acquisition; (vii) the effect of the BrandsMart U.S.A. 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; (viii) 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; (ix) 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; (x) 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; (xi) 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; (xii) increased competition from traditional and virtual lease-to-own competitors, as well as from traditional and online retailers and other competitors; (xiii) financial challenges faced by our franchisees; (xiv) increases in lease merchandise write-offs; (xv) the availability and prices of supply chain resources, including products and transportation; (xvi) business disruptions due to political or economic instability due to the ongoing conflicts in Ukraine and the Middle East; and (xvii) the other risks and uncertainties discussed under “Risk Factors” in the Company’s most recent Annual Report on Form 10-K. Statements in this news 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 financial performance outlook; and (iv) the Company’s goals, plans, expectations, and projections regarding the expected benefits of the BrandsMart acquisition. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this news 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 news release.

Contacts


Investor Relations:	InvestorRelations@aarons.com	Media Relations:	MediaRelations@aarons.com
Phone:	678-402-3590	Phone:	678-402-3591

CONSOLIDATED STATEMENTS OF EARNINGS1


	(Unaudited) Three Months Ended				(Unaudited) Nine Months Ended
(In Thousands, except per share amounts)	September 30,				September 30,
	2023		2022		2023		2022
REVENUES:
Lease Revenues and Fees	$	340,805	$	372,127	$	1,068,351	$	1,167,958
Retail Sales	155,682		188,734		454,274		392,189
Non-Retail Sales	23,573		26,542		70,308		81,411
Franchise Royalties and Other Revenues	5,618		5,981		17,478		18,292
	525,678		593,384		1,610,411		1,659,850
COSTS OF REVENUES:
Depreciation of Lease Merchandise and Other Lease Revenue Costs	113,970		125,711		356,511		390,147
Retail Cost of Sales	119,732		146,292		344,545		320,635
Non-Retail Cost of Sales	20,068		23,634		59,481		73,227
	253,770		295,637		760,537		784,009
GROSS PROFIT	271,908		297,747		849,874		875,841
OPERATING EXPENSES:
Personnel Costs	125,907		134,001		382,297		385,368
Other Operating Expenses, Net	125,361		123,040		371,176		363,786
Provision for Lease Merchandise Write-Offs	20,730		28,022		59,891		72,092
Restructuring Expenses, Net	2,696		14,930		12,820		23,847
Impairment of Goodwill	—		12,933		—		12,933
Separation Costs	34		220		163		990
Acquisition-Related Costs	693		1,659		3,087		13,156
	275,421		314,805		829,434		872,172
OPERATING (LOSS) PROFIT	(3,513)		(17,058)		20,440		3,669
Interest Expense	(3,456)		(3,151)		(11,724)		(5,964)
Other Non-Operating (Expense) Income, Net	(288)		(344)		921		(2,827)
(LOSS) EARNINGS BEFORE INCOME TAXES	(7,257)		(20,553)		9,637		(5,122)
INCOME TAX BENEFIT	(3,120)		(4,937)		(5,541)		(5,696)
NET (LOSS) EARNINGS	$	(4,137)	$	(15,616)	$	15,178	$	574

(LOSS) EARNINGS PER SHARE	$	(0.13)	$	(0.51)	$	0.49	$	0.02
(LOSS) EARNINGS PER SHARE ASSUMING DILUTION	$	(0.13)	$	(0.51)	$	0.49	$	0.02
WEIGHTED AVERAGE SHARES OUTSTANDING	30,880		30,875		30,889		30,921
WEIGHTED AVERAGE SHARES OUTSTANDING ASSUMING DILUTION2	30,880		30,875		31,231		31,373

1.The Company's financial results do not include the results of BrandsMart U.S.A. prior to the April 1, 2022 acquisition.

2.For the three months ended September 30, 2023 and 2022, the GAAP Weighted Average Shares Outstanding had no dilutive effect due to the net loss incurred in the periods.

CONSOLIDATED BALANCE SHEETS


	(Unaudited)
(In Thousands)	September 30, 2023		December 31, 2022

ASSETS:
Cash and Cash Equivalents	$	39,313	$	27,716
Accounts Receivable (net of allowances of $8,022 at September 30, 2023 and $8,895 at December 31, 2022)	23,678		38,191
Lease Merchandise (net of accumulated depreciation and allowances of $420,599 at September 30, 2023 and $431,092 at December 31, 2022)	608,327		693,795
Merchandise Inventories, Net	99,407		95,964
Property, Plant and Equipment, Net	269,445		267,457
Operating Lease Right-of-Use Assets	459,771		459,950
Goodwill	55,750		54,710
Other Intangibles, Net	110,677		118,528
Income Tax Receivable	10,935		5,716
Prepaid Expenses and Other Assets	112,620		96,436
Total Assets	$	1,789,923	$	1,858,463
LIABILITIES & SHAREHOLDERS’ EQUITY:
Accounts Payable and Accrued Expenses	$	253,400	$	264,043
Deferred Tax Liabilities	83,477		87,008
Customer Deposits and Advance Payments	67,844		73,196
Operating Lease Liabilities	497,067		496,401
Debt	187,457		242,413
Total Liabilities	1,089,245		1,163,061

SHAREHOLDERS' EQUITY:
Common Stock, Par Value $0.50 Per Share: Authorized: 112,500,000 Shares at September 30, 2023 and December 31, 2022; Shares Issued: 36,622,558 at September 30, 2023 and 36,100,011 at December 31, 2022	18,311		18,050
Additional Paid-in Capital	747,135		738,428
Retained Earnings	82,477		79,073
Accumulated Other Comprehensive Loss	527		(1,396)
	848,450		834,155
Less: Treasury Shares at Cost
6,293,271 Shares at September 30, 2023 and 5,480,353 Shares at December 31, 2022	(147,772)		(138,753)
Total Shareholders’ Equity	700,678		695,402
Total Liabilities & Shareholders’ Equity	$	1,789,923	$	1,858,463

CONSOLIDATED STATEMENTS OF CASH FLOWS1


	Nine Months Ended September 30,
(In Thousands) Unaudited	2023		2022
OPERATING ACTIVITIES:
Net Earnings	$	15,178	$	574
Adjustments to Reconcile Net Earnings to Cash Provided by Operating Activities:
Depreciation of Lease Merchandise	350,941		384,268
Other Depreciation and Amortization	67,412		63,211
Provision for Lease Merchandise Write-Offs	59,891		72,092
Non-Cash Inventory Fair Value Adjustment	—		23,074
Accounts Receivable Provision	28,278		29,331
Stock-Based Compensation	8,935		9,998
Deferred Income Taxes	(12,038)		(5,833)
Impairment of Goodwill and Other Assets	2,478		28,929
Non-Cash Lease Expense	89,125		82,532
Other Changes, Net	(3,982)		(9,446)
Changes in Operating Assets and Liabilities:
Lease Merchandise	(327,081)		(401,002)
Merchandise Inventories	(3,270)		6,440
Accounts Receivable	(13,710)		(25,320)
Prepaid Expenses and Other Assets	(6,722)		(366)
Income Tax Receivable	(5,219)		(4,394)
Operating Lease Right-of-Use Assets and Liabilities	(90,469)		(90,877)
Accounts Payable and Accrued Expenses	(3,467)		(23,582)
Customer Deposits and Advance Payments	(7,174)		(15,758)
Cash Provided by Operating Activities	149,106		123,871
INVESTING ACTIVITIES:
Purchases of Property, Plant, and Equipment	(68,927)		(83,695)
Proceeds from Dispositions of Property, Plant, and Equipment	6,617		18,710
Acquisition of BrandsMart U.S.A., Net of Cash Acquired	—		(266,773)
Acquisition of Businesses and Customer Agreements, Net of Cash Acquired	—		(917)
Proceeds from Other Investing-Related Activities	—		1,145
Cash Used in Investing Activities	(62,310)		(331,530)
FINANCING ACTIVITIES:
Repayments on Swing Line Loans, Net	(2,900)		(10,000)
Proceeds from Revolver and Term Loan	31,094		291,700
Repayments on Revolver and Term Loan	(83,281)		(31,700)
Proceeds on Inventory Loan Program, Net	—		(793)
Dividends Paid	(11,163)		(10,067)
Acquisition of Treasury Stock	(6,480)		(11,055)
Issuance of Stock Under Stock Option Plans	81		911
Shares Withheld for Tax Payments	(2,539)		(3,563)
Debt Issuance Costs	—		(2,758)
Cash (Used in) Provided by Financing Activities	(75,188)		222,675
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	(11)		(69)
Increase in Cash and Cash Equivalents	11,597		14,947
Cash and Cash Equivalents at Beginning of Period	27,716		22,832
Cash and Cash Equivalents at End of Period	$	39,313	$	37,779

1.The Company's financial results do not include the results of BrandsMart U.S.A. prior to the April 1, 2022 acquisition.

QUARTERLY REVENUES BY SEGMENT


	(Unaudited)
	Three Months Ended
(In Thousands)	September 30, 2023
	Aaron’s Business		BrandsMart		Elimination of Intersegment Revenues1		Total
Lease Revenues and Fees	$	340,805	$	—	$	—	$	340,805
Retail Sales	6,208		152,392		(2,918)		155,682
Non-Retail Sales	23,573		—		—		23,573
Franchise Royalties and Fees	5,444		—		—		5,444
Other	174		—		—		174
Total Revenues	$	376,204	$	152,392	$	(2,918)	$	525,678


	(Unaudited)
	Three Months Ended
(In Thousands)	September 30, 2022
	Aaron’s Business		BrandsMart		Elimination of Intersegment Revenues1		Total
Lease Revenues and Fees	$	372,127	$	—	—		$	372,127
Retail Sales	8,264		183,341		(2,871)		188,734
Non-Retail Sales	26,542		—		—		26,542
Franchise Royalties and Fees	5,803		—		—		5,803
Other	178		—		—		178
Total Revenues	$	412,914	$	183,341	$	(2,871)	$	593,384

1.Intersegment sales between BrandsMart and the Aaron's Business pertaining to BrandsMart Leasing, are recognized at retail prices. Since the intersegment profit affects sales, cost of goods sold, depreciation and inventory valuation, they are adjusted when intersegment profit is eliminated in consolidation.

NINE MONTHS REVENUES BY SEGMENT1



	Nine Months Ended
(In Thousands)	September 30, 2023
	Aaron’s Business		BrandsMart		Elimination of Intersegment Revenues2		Total
Lease Revenues and Fees	$	1,068,351	$	—	$	—	$	1,068,351
Retail Sales	21,141		440,326		(7,193)		454,274
Non-Retail Sales	70,308		—		—		70,308
Franchise Royalties and Fees	16,930		—		—		16,930
Other	548		—		—		548
Total	$	1,177,278	$	440,326	$	(7,193)	$	1,610,411



	Nine Months Ended
(In Thousands)	September 30, 2022
	Aaron’s Business		BrandsMart		Elimination of Intersegment Revenues2		Total
Lease Revenues and Fees	$	1,167,958	$	—	$	—	$	1,167,958
Retail Sales	31,580		364,783		(4,174)		392,189
Non-Retail Sales	81,411		—		—		81,411
Franchise Royalties and Fees	17,713		—		—		17,713
Other	579		—		—		579
Total	$	1,299,241	$	364,783	$	(4,174)	$	1,659,850

1.The Company's financial results do not include the results of BrandsMart U.S.A. prior to the April 1, 2022 acquisition.

2.Intersegment sales between BrandsMart and the Aaron's Business pertaining to BrandsMart Leasing, are recognized at retail prices. Since the intersegment profit affects sales, cost of goods sold, depreciation and inventory valuation, they are adjusted when intersegment profit is eliminated in consolidation.

USE OF NON-GAAP FINANCIAL INFORMATION

Non-GAAP net earnings, non-GAAP diluted earnings per share, adjusted free cash flow, net debt, 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 2023 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 and acquisition-related costs. Non-GAAP net earnings and non-GAAP diluted earnings per share for 2022 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, acquisition-related costs, and a one time non-cash charge for a fair value adjustment to merchandise inventories. 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 Earnings and Earnings Per Share Assuming Dilution to non-GAAP Net Earnings and non-GAAP Earnings Per Share Assuming Dilution table in this news release. Beginning in 2023, adjusted EBITDA excludes stock-based compensation expense. For comparability purposes, the prior period adjusted EBITDA results for the three and nine months ended September 30, 2022 shown in the table below has been restated to also exclude stock-based compensation expense.

The EBITDA and adjusted EBITDA figures presented in this news release are calculated as the Company’s 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 adjusted 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 news 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 arise from larger, one-time transactions that are not reflective of the ordinary earnings activity of our operations. 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 adjusted free cash flow figures presented in this news release 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 adjusted free cash flow is an important measure of liquidity, provides relevant and useful information, and is widely used by analysts, investors and competitors in our industry as well as by our management team in assessing liquidity.

Net debt represents total debt less cash and cash equivalents. Management believes that net debt is an important measure of liquidity, provides relevant and useful information, and is widely used by analysts, investors and competitors in our industry as well as by our management team 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 provided by operating activities, which are also presented in the news 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 adjusted 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.