Aarons Holdings Company, Inc.

Good morning, my name is Charlie and I'll be the conference operator today. At this time, I'd like to welcome everybody to the second quarter 2022 conference call for Aaron's company. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a Q&A session. If you'd like to ask a question during this time, simply press star followed by one on your telephone keypad. If you'd like to withdraw your question, please press star followed by two. Thank you. Mr. Hancock, you may begin your conference.

Thank you and good morning, everyone. Welcome to the Aarons Company's second quarter 2022 earnings conference call. Joining me this morning are Douglas Lindsay, our chief executive officer, Steve Olson, our president, and Kelly Wall, our 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 yesterday afternoon. 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 forward-looking statements related to our financial performance outlook for 2022. 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 report. 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, 2021, and other subsequent periodic filings with the SEC for a description of the risks related to our business that may cause the 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, non-GAAP EPS, and free cash flow, 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 and the supplemental investor presentation posted to our website. With that, I will now turn the call over to our CEO, Douglas Lindsay.

Thanks, Keith. Good morning, everyone. Thank you for joining us today and for your interest in the Ahrens Company. Today, we are pleased to report consolidated company results for the first time since our acquisition of BrandsMart USA, which closed on April 1st. As a result of the acquisition, consolidated revenues increased in the second quarter. BrandSmart is off to a strong start, and we are encouraged by the performance of this new business segment. In the second quarter, the Aarons business faced a challenging economic environment, as high inflation put significant financial pressure on the lower-income customer that we serve. With gas, food, and housing prices rising, more of our customers' income is needed to cover these basic necessities. making less available for leasing new merchandise or renewing lease agreements. Customer demand and payment activity progressively worsen through the quarter, leading to second quarter revenues, earnings, and earnings per share for the errands business coming in lower than prior year quarter and below our expectations. In light of these trends, we now expect additional pressure on the company's financial performance in the back half of the year, And as a result, we have lowered our 2022 outlook. We have already taken a number of actions to optimize performance and reduce expenses in light of the changing market conditions. We have reduced operating expenses and staffing levels in our errand stores and store support center. We have announced the closure of one of our corporate office locations. and we plan to close and consolidate additional Aarons stores by year end. Also, we have reduced inventory purchases to align with current demand trends. Despite the challenging macroeconomic environment, we remain confident in the resiliency of the Aarons business. Since 1955, our business model has repeatedly proven that it can withstand economic downturns thanks to the loyalty of our more than 1 million active customers who count on us to be there for them when times are tough. We are leveraging our deep expertise and our strong relationships in the communities we serve to navigate this challenging environment. Further, we believe that the investments we've made over the past five years to transform the Aarons business are allowing us to provide our customers with even better service and greater value. For example, Our lease decisioning platforms enable us to optimize our lease origination activity. We have already tightened lease decisioning in response to the declining customer payment trends, and we will continue to monitor our portfolio performance and assess our lease approval rates as the economic landscape evolves. Meanwhile, our innovations in our e-commerce channels and our GenNext program allows us to meet our customers where they prefer to shop. whether in a beautiful errand store or online. We remain very encouraged by the growth of our e-commerce channels and the high performance of our Gen Next store strategy, and we will continue to invest in these initiatives. We will also continue to invest in BrandSmart, which we believe is the low-price leader and retailer of choice for appliances and consumer electronics in the markets we serve. This new segment performed well in the second quarter, exceeding our internal expectations and increasing our optimism about the additional value creation opportunities available through this acquisition. Together with our strong balance sheet and liquidity, we believe that our focus on innovation in the errands and brand smart businesses will enable us to continue delivering a market-leading value proposition to a large and diversified customer base. and will position us for future growth. Now I'd like to welcome Steve Olson, our president, to discuss the operational performance of both Aarons and BrandSmart before Kelly Wall provides additional details on our financial performance.