Aarons Holdings Company, Inc.

Ladies and gentlemen, welcome to the Earnings Company Incorporation Second Quarter 2023 Earnings Conference Call. My name is Glenn, and I'll be the operator for today's call. If you'd like to ask a question during the presentation, you may do so by pressing star 1 on a telephone keypad. I will now hand over to your host, Mark Levy, VP Finance and Investor Relations, to begin. Mark, please go ahead.

Thank you. Good morning, everyone. Welcome to our Second 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.aaron.com. We also posted a slide presentation that provides additional information about our second 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. Also, please see our Form 10-K for the year ended December 31, 2022. and other 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, in the release and in the supplemental investor presentation, we refer to certain non-GAAP financial measures, including EBITDA and adjusted EBITDA, non-GAAP net earnings, non-GAAP EPS, adjusted free cash flow, and net debt, 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, Mark. 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 second quarter that were ahead of internal expectations. driven in part by our ongoing focus on cost controls. We also benefited from a healthier lease portfolio, resulting from optimization of our lease decisioning model in prior quarters. The recurring revenue nature of our errands business and its strong cash flow dynamics continue to be an advantage. During the quarter, we generated $53 million in cash flow from operations and improved the strength of our balance sheet by reducing net debt by over $30 million. Over the last four quarters, we've cut our net debt nearly in half while continuing to invest in our strategic growth initiatives. Now turning to the business segments. In the Aarons business, I'm pleased to report that we ended the quarter with a larger than expected lease portfolio size. We've also made great progress on our market optimization initiatives by adding more Gennext and Hub and Showroom stores. We are executing well on the cost reduction initiatives that we previously announced. And our lease decisioning enhancements continue to improve portfolio performance. These items contributed significantly to our strong bottom line performance in the second quarter, offsetting continued challenging customer demand trends. As we look to the back half of the year, We expect these demand trends to persist, but we expect to see sequential improvements as we begin to lap our lease decisioning cuts made in the back half of last year. Now turning to BrandSmart. Macroeconomic factors continue to impact our customers' retail purchasing decisions at BrandSmart to a greater extent than in the errands business. Meanwhile, we are focused on managing profitability through enhanced cost controls and strategic procurement and pricing actions. We recently celebrated our one-year anniversary of the BrandSmart acquisition. We remain confident in BrandSmart's compelling value proposition and our long-term strategic growth opportunities, including expanding into new markets and growing our e-commerce channel. As we discussed, the customer demand environment remains challenging in both business segments. This is reflected in the updated outlook we provided yesterday and our earnings release. We lowered our consolidated revenues for the year, but maintained our adjusted EBITDA and non-GAAP EPS outlook. We have also increased our adjusted free cash flow outlook for the year. As we look ahead, we remain focused on optimizing profitability in both businesses, and we continue to make progress on the execution of our multi-year strategic plan. We are confident that the investments we are making will continue to enhance our distinct competitive advantages and allows us to increase market share at both Aarons and BrandSmart. Before I turn the call over to Steve, I want to let you know that we've posted new videos on our investor website that showcase both our Aarons GenNext and BrandSmart stores. I encourage you to watch these videos. Our stores have a unique retail format, a broad product assortment, and an enhanced in-store shopping experience. We believe our Aarons and Brandthorne stores provide the most compelling customer value proposition in the markets we serve. Now I'll turn the call over to Steve.