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summarize:For those of you that have not, it is available on the Investor
Relations section of our website at investor. Non-GAAP net earnings and
non-GAAP EPS, which have been adjusted for certain items which may affect
the comparability of our performance with other companies. I'm very
pleased with the strong start to 2021 and the positive momentum in revenue
and margins we delivered in the first quarter, demonstrating the strong
operating leverage in our business. Consolidated revenues increased 11.1%
year-over-year in our first full quarter as a stand-alone public company.
The revenue increase included same-store revenue growth of 14.8% and we
reported adjusted EBITDA margin that improved to 15.4% of revenues. This
is the first quarter in over a decade that the Company has delivered
double-digit same-store revenue growth. Our teams in the field and our
store support centers and Woodhaven are performing at a very high level
and are energized and engaged. As I visit Aaron's stores around the
country to support our operations team, I'm seeing a strong sense of pride
and optimism about our brand and our competitive position. Our team
members and customers are embracing the innovation that we are delivering
and the dynamic lease-to-own market. Over the last five years, we've
significantly transformed the company for the goal of continuing to
provide an exceptional customer and team member experience while also
driving greater efficiencies in our operating model. I'm proud to say that
as of today we have a centralized decisioning platform that provides
greater control and predictability resulting in a higher quality lease
portfolio. We have enhanced digital payment platforms that are enabling
over 75% of monthly customer payments to be made outside of our stores. We
have an industry-leading, fully transactional e-commerce platform that is
attracting a new and younger customer, and we have a portfolio of 51
GenNext stores that is currently outperforming our expectations with many
more store openings in the pipeline. All of these initiatives are
underpinned by the investments that we have made in enhanced analytics and
when combined with our more efficient operations are enabling us to
deliver strong revenue and earnings growth. These transformations to our
business model are contributing to our outstanding performance in the
first quarter of 2021. We are encouraged by the continuing improvement and
the quality and size of our same-store lease portfolio, which ended the
quarter up 6.2% compared to the end of the first quarter of 2020. This
improvement was primarily driven by strong demand for our products, few
release merchandise returns, and lower inventory write-offs. In addition,
our customer continues to benefit from the ongoing government stimulus,
one of the most meaningful contributors to our strong portfolio
performance was centralized decisioning, which we implemented across all
Company-operated stores in the U.S., in the spring of 2020. Today, nearly
70% of our portfolio is made up of lease agreements that were originated
using this technology. Centralized decisioning delivers consistency and
predictability in the performance of our lease portfolio. It enables store
managers the flexibility to focus their time on growth-oriented activities
such as sales and lease servicing. We believe our algorithms provide
better outcomes for both the customer and Aaron's with the goal of having
a greater number of customers achieve ownership while at the same time
reducing our cost to serve. We continue to refine this decisioning across
our various channels, and we expect this will continue to drive greater
productivity from our lease portfolio. Another contributor to our strong
performance in the quarter was our e-commerce channel, which represented
more than 14% of lease revenues. Our e-commerce team has really delivered,
driving traffic growth to aarons.com by 12.8% and increasing revenues by
42% in the first quarter as compared to the prior-year quarter. E-commerce
lease originations increased as compared to the year-ago quarter despite
the significant shift of customer activity through our online platform in
March of 2020 as stores closed during the early days of the COVID-19
pandemic. In addition, e-commerce write-offs improved by more than 50%
compared to last year's quarter, primarily as a result of ongoing
decisioning optimization, operational enhancements, and strong customer
payment activity. Our e-commerce team continues to deliver ongoing
improvements through our online customer acquisition, conversion, and
servicing capabilities, which is leading to margin growth and continued
positive momentum in this important channel. Our e-commerce growth in the
quarter is enabled by our stores, which are not just showrooms and service
centers but are also last-mile logistics hubs delivering an expanded
assortment of products with same or next day delivery. Finally, our Real
estate repositioning and reinvestment strategy is gaining momentum and we
expect it will drive future growth. Our new GenNext stores have larger and
more modern showrooms, expanded product assortment, and improved brand
imaging and digital technologies. To date, we have opened 51 new GenNext
stores and have generated results that are meeting or exceeding our
targeted internal rate of return equally as encouraging, monthly lease
originations in the first quarter. Our plan for 2021 is to plan to open in
the second and third quarters. While we're excited about both the early
financial results and the infrastructure we're building to accelerate our
progress, we continue to maintain a disciplined approach around our
execution of this strategy. We remain focused on our key strategic
initiatives of simplifying and digitizing the customer experience,
aligning our store footprint to our customer opportunity and promoting the
Aaron's value proposition of low payments high approval rates and
best-in-class service. For the first quarter of 2021, revenues were $481.1
million compared to $432.8 million for the first quarter of 2020, an
increase of 11.1%. The increase in revenues was primarily due to the
improving quality and increased size of our lease portfolio and strong
customer payment activity during the quarter, aided in part by government
stimulus and partially offset by the net reduction of 166 Company-operated
and franchised stores compared to the prior year. As Douglas called out
earlier, e-commerce revenues were up 42% compared to the first quarter of
the prior year and represented 14.2% of overall lease revenues compared to
11.3% in 2020. On a same-store revenue basis, revenues increased 14.8% in
the first quarter compared to the prior-year quarter, the first
double-digit, same-store revenue growth since 2009, and our fourth
consecutive positive quarter. Same-store revenue growth was primarily
driven by a larger same-store lease portfolio and strong customer payment
activity, including retail sales and early purchase option exercises. We
believe this growth is partially a result of the government stimulus
programs passed in 2020 and 2021. Additionally, the company ended the
first quarter of 2021 with a lease portfolio size for all company operated
stores of $128.8 million, an increase of 3.6% compared to the lease
portfolio size as of March 31, 2020. Lease portfolio size represents the
next month's total collectible lease payments from our aggregate
outstanding customer lease agreements. Operating expenses excluding
restructuring expenses, spin-related transaction costs and the impairment
of goodwill and other expenses, which were both recorded in the first
quarter of 2020 were down $1.5 million as compared to the first quarter of
last year. This decrease was primarily due to a reduction in write-offs,
store closures and the impact of the COVID-related reserves recorded in
2020, partially offset by higher personnel costs related to variable
performance compensation, higher marketing expenses and an increase in
bank and credit card related fees. Adjusted EBITDA was $73.9 million for
the first quarter of 2021 compared with $34.7 million for the same period
in 2020, an increase of $39.2 million or 112.9%. As a percentage of total
revenues, adjusted EBITDA was 15.4% in the first quarter of 2021 compared
with 8% for the same period last year, an improvement of 740 basis points.
The improvement in adjusted EBITDA margin was primarily due to the items
that drove the total revenues increase and a 310 basis point reduction in
overall write-offs to 3.1% of lease revenues, including both improvement
in the e-commerce and store origination channels compared to the prior
year. The improvement in write-offs was due primarily to the
implementation of new decisioning technology, improved operations, the
benefit of government stimulus and the impact of COVID-related lease
merchandise reserves recorded in the first quarter of 2020 and not
repeated in 2021. On a non-GAAP basis, diluted earnings per share were
$1.24 in the first quarter of 2021 compared to non-GAAP diluted earnings
per share of $0.30 for the same quarter in 2020, an increase of $0.94 or
313.3%. Cash generated from operating activities was $20.2 million for the
first quarter of 2021, a decline of $36.6 million compared to the first
quarter of 2020, primarily due to higher inventory purchases, partially
offset by higher customer payments and other changes in working capital.
During the quarter, the company purchased 252,200 shares of Aaron's common
stock for a total purchase price of approximately $6.3 million. As of the
end of the quarter, we had approximately $143.7 million remaining under
the company's share repurchase authorization that was approved by our
Board on March 3rd of this year. The Company's Board of Directors also
declared our first quarterly cash dividend of $0.10 per share last month
and we paid the dividend on April 6. As of March 31, 2021 the company had
a cash balance of $61.1 million, less than $500,000 of debt and total
available liquidity of $295.5 million. Turning to our outlook, based on
our performance in the first quarter of 2021 and the passage of the
American Rescue Plan Act in March, we have revised our full-year 2021
outlook. For the full year, we expect consolidated revenues of between
$1.725 billion and $1.775 billion representing an increase in our revenue
outlook of $75 million. We also expect adjusted EBITDA of between $190 and
$205 million, representing an increase in our adjusted EBITDA outlook of
$35 million. For the full year 2021, our outlook for the effective tax
rate, depreciation and amortization and diluted weighted average share
count are unchanged. We have also increased our full-year same-store
revenue outlook from a range of 0% to 2% to a range of 4% to 6%. Similar
to our original outlook, total revenue and adjusted EBITDA in the first
half of 2021 are expected to be higher in the second half of 2021. This
outlook assumes no impact from the expansion and acceleration of the child
tax credit payments expected to begin in July 2021. Additionally, our
updated outlook assumes no significant deterioration in the current retail
environment or in the state of the U.S. economy, as compared to its
current condition and a continued improvement in global supply chain
conditions
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