Aarons Holdings Company, Inc.

Welcome to the Ahrens Company first quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's prepared remarks, there will be a question and answer session. Instructions will be provided at that time. Thank you. I'd like to hand the conference over to Keith Hancock, Senior Director of Corporate Affairs for the Ahrens Company. Mr. Hancock, please proceed.

Thank you, and good morning, everyone. Welcome to our first quarter 2023 earnings conference call. Joining me today are Aaron's Chief Executive Officer, Douglas Lindsay, President Steve Olson, and Chief Financial Officer, Kelly Wall. After our prepared remarks, we will open the call for questions. Yesterday, after the market closed, we posted our earnings release on the investor relations section of our website at investor.aarons.com. We also posted a slide presentation that provides additional information about our first quarter results and full year 2023 outlook. During today's call, certain statements we make may be forward-looking, including those related to our outlook for this year. For more information, including important cautionary notes about these forward-looking statements, please refer to the Safe Harbor provision that can be found at the end of the earnings release. The Safe Harbor provision identifies risks that may cause actual results to differ materially from the content of our forward-looking statements. Please see our Form 10-K for the year ended December 31st, 2022, and other filings with the SEC for a description of the risk related to our business that may cause actual results to differ materially from our forward-looking statements. On today's call and in the release, we refer to certain non-GAAP financial measures, including EBITDA and adjusted EBITDA, non-GAAP net earnings, non-GAAP EPS, and adjusted 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 on 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 Aarons Company. I'm pleased to report that we delivered consolidated company earnings for the first quarter that were ahead of internal expectations, despite lower revenues in both business segments. In the errands business, I'm pleased to report that we ended the quarter with a higher lease portfolio size than expected. As we've noted before, our lease portfolio size is a leading indicator for future revenues. And our strong performance in the quarter was a result of fewer customers exercising early purchase options and lower write-offs. The portfolio benefited from enhancements to our lease decisioning model. And we expect these benefits to carry forward in the year, as leases initiated under our tightened model reflect a greater percentage of the total portfolio. I'm also very pleased with the progress we've made in our market optimization and cost reduction initiatives, which contributed meaningfully to our bottom line in the first quarter. In addition, our e-commerce business continues to grow, and we continue to open more GenNext locations. Our GenNext stores now make up more than a quarter of Erin's lease and retail revenues. In the BrandSmart business, demand continues to be challenging. Macroeconomic factors continue to weigh on our customer, who remains cautious in their purchasing decisions, especially for big-ticket and discretionary product categories that we carry. We remain focused on enhancing profitability in this segment through direct procurement savings, strategic pricing actions, and cost controls, while also continuing to invest in enhancing and growing the business. We remain confident in BrandSmart's compelling value proposition. and its long-term growth opportunities. In particular, I'm excited to announce that we plan to open our first new BrandSmart store in Augusta, Georgia in the fourth quarter of this year. Now turning to the consolidated company results. I'm pleased to report that we reduced net debt by nearly $37 million in the quarter and ended the quarter with $352 million of available liquidity. This was primarily a result of strong cash flow from operations demonstrating the advantage of our recurring revenue model in the errands business. Given our performance in Q1 and the larger and healthier lease portfolio than expected to end the quarter, we have updated our outlook for the year, which reflects higher expected earnings for the errands business and lower expected earnings at BrandSmart. In addition, our updated outlook includes both higher earnings per share and higher free cash flow for the year. I do want to note that our outlook does not assume any further credit tightening above us. However, if that were to occur, we believe that the errands business would benefit over time from increased customer demand. As we look ahead, we remain focused on optimizing profitability in both businesses. We continue to make progress on the execution of our multi-year strategic plan. This includes our growth initiatives for both errands and brand smarts. as well as our cost reduction initiatives that we announced last quarter. I want to thank our teams at Aarons, BrandSmart, and Woodhaven for their hard work this quarter and for their continued focus on providing exceptional value and service to our customers. I will now turn the call over to Steve.