Aarons Holdings Company, Inc.

Thank you for your patience. The Aarons Company third quarter 2021 earnings conference call will be starting in a few moments time. Thank you. Thank you. Thank you. Good morning. My name is Brika and I will be your conference coordinator. At this time, I would like to welcome everyone to the ARRENS Company third quarter 2021 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. I will now turn the call over to Mr Michael Dickerson, Vice President of Corporate Communications and Investor Relations for ARRENS. You may begin your conference.

Thank you and good morning, everyone. Welcome to the Aaron's Company Third Quarter 2021 Earnings Conference Call. Joining me this morning are Douglas Lindsay, Aaron's Chief Executive Officer, Steve Olson, Aaron's President, and Kelly Wall, Aaron's Chief Financial Officer. After our prepared remarks, we will open the call for questions. Many of you have already seen a copy of our earnings release issued this morning. For those of you that have not, it is available on the investor relations section of our website at investor.ehrens.com. During this call, certain statements we make will be forward-looking, including our financial performance outlook for 2021. I want to call your attention to our Safe Harbor provision for forward-looking statements that can be found at the end of our earnings release. The Safe Harbor provision identifies risks that may cause actual results to differ materially from the content of our forward-looking statements. Also, please see our Form 10-K for the year ended December 31, 2020, and other subsequent periodic filings with the SEC for a description of the risks related to our business that may cause actual results to differ materially from our forward-looking statements. On today's call, we will be referring to certain non-GAAP financial measures, including EBITDA and adjusted EBITDA, 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. These non-GAAP measures are detailed in the reconciliation tables included in our earnings release. With that, I will now turn the call over to our CEO, Douglas Lindsay.

Thanks, Mike, and thank you for joining us today to discuss our third quarter results. I'm pleased to report another quarter of strong operating performance and continued positive momentum at the Ahrens Company. In the nearly one year since our separation, we have significantly strengthened our leadership position in the direct-to-consumer lease-to-own market and are tracking well ahead of our long-term strategic plan. Continued investments in our best-in-class e-commerce channel, predictive lease decisioning engine, and our high-performing GenNext stores are driving greater productivity and growth in our business. Through the tremendous efforts of our team, we continue to transform Aaron's go-to-market strategy by delivering customer-friendly digital solutions, easy lease approvals, and an enhanced shopping experience. Since 1955, Aaron's has been committed to serving a customer base that has too often been overlooked or excluded from preferred retail experiences. Today, we are leveraging our long and deep understanding of this customer segment to say yes when others say no, to provide our customers with access to great products on flexible and affordable terms, and to deliver a seamless customer experience, not only across our distributed store network, but also digitally through our award-winning e-commerce platform. Whether our customers interact with us in one of our beautiful new GenNext stores or via their mobile device, we continue to provide a growing assortment of products they want and need with low monthly payments that fit their budget and best-in-class customer service. I'm pleased to announce that our third quarter 2021 results have again exceeded our expectations through continued growth in the size of our lease portfolio same-store revenues, and e-commerce revenues. As a result, we returned another $37.5 million to shareholders in the quarter in the form of share repurchases. This brings us to a total of nearly $100 million of capital returned to shareholders thus far this year. With strong third quarter results, we are again raising our revenue and earnings outlook for the full year 2021. In the third quarter, same store revenues grew 4.6% compared to the prior year, the sixth consecutive quarter of positive same store revenue growth. The improvement was primarily driven by an 8.7% larger lease portfolio size entering the third quarter, partially offset by a lower level of customer payment activity compared to the prior year. Our same store lease portfolio size continues to grow at a healthy pace, ending the third quarter up 6.1% compared to the prior year. We attribute this growth primarily to strong demand for our products, higher average ticket, the favorable impact of centralized lease decisioning, and the residual impact of government stimulus on the portfolio. As discussed previously, our predictive lease decisioning engine is working very well and enables us to better match the customer's lease payment with their financial position, with the goal of helping more customers achieve ownership and lowering our overall cost to serve. In addition, our lease decisioning algorithms allow us to be flexible in responding to changes in the macroeconomic environment and to optimize outcomes that drive profitability. As of the end of the third quarter, more than 83% of our total lease portfolio is comprised of lease agreements that were originated through our centralized decisioning platforms. This compares to approximately 60% at the beginning of 2021. As I mentioned last quarter, lease payment activity in 2021 has exceeded historical levels due to the government stimulus provided to our customer, leading to higher lease renewal rates, and lower write-offs. As we saw in the third quarter and expect to see over the next three to four quarters, customer payment activity continues to normalize. Because of investments we've made in centralized decisioning and lease servicing technologies, we expect 2022 lease renewal rates to ultimately settle above pre-pandemic levels, but below the level we expect for the full year 2021. We also expect lease merchandise write-offs in 2022 to settle below pre-pandemic levels, but above the level we expect for full year 2021. In addition to investments in our decisioning technology, we also continue to invest in our e-commerce channel and our GenNext strategy. Our e-commerce channel continues to grow at double-digit rates, representing 14.3% of total lease revenues in the quarter. The growth in our portfolio of leases generated online is driving improvements to our overall margin performance as we leverage the fixed cost structure of our store and supply chain assets to serve customers that are seeking a virtual shopping experience, low monthly payments, and free delivery. Ongoing investments in digital marketing and our customers' online experience are driving growth in this important channel. Specifically, e-commerce investments are leading to an enhanced shopping experience driven by personalization and richer product content, improved customer visibility into products that are available for same or next day delivery, and a broader assortment that includes new product categories. Today, we have more than 3,000 products on errands.com, which has doubled from a year ago. And our express delivery program accounts for approximately 30% of e-commerce volume. Because of this, we're generating a higher customer conversion rate, lowering our effective acquisition costs, and delivering higher customer satisfaction. I could not be happier with the efforts of our team and the growing marketplace we're creating on errands.com. As we discussed last quarter, our GenNext stores continue to perform at a high level. During the third quarter, we increased the size of our GenNext store set by 22 to end the quarter with 86 locations, and we believe we remain on track to have more than 100 GenNext stores by the end of the year. To date, our portfolio of GenNext stores is generating results that are exceeding our targeted 25% internal rate of return and five-year payback period. Equally as encouraging, monthly lease originations in GenNext stores opened for less than one year, again, grew at a rate of more than 20 percentage points higher than our average legacy stores. As we accelerate the rollout of new GenNext stores, we continue to maintain a disciplined approach around our execution of this strategy. Before I turn the call over to Kelly, let me reiterate how pleased I am with the company's strong performance in the third quarter. Our merchandising and supply chain teams have performed exceptionally well by getting ahead of market disruptions, by procuring inventory and expanding output from our Woodhaven manufacturing facilities. As a result, we are entering the holiday season with strong inventory levels in both our stores and distribution centers. And we've been increasing prices to respond to inflationary pressures and maintain product margins. I remain encouraged by the underlying performance of both our store and e-commerce channels as we're tracking well ahead of our five-year plan on revenue and earnings. I'll now turn the call over to Kelly to discuss our financial results.