Aarons Holdings Company, Inc.

Thank you for your patience, everyone. The Aaron's Company Q1 2024 earnings call will begin shortly. During the presentation, you'll have the opportunity to ask a question by pressing star followed by one on your telephone keypad. The call will begin shortly. Thank you. Good morning, everyone, and welcome to the Aaron's Company Q1 2024 earnings call. My name is Angela, and I'll be coordinating your call today. During the presentation, you can register to ask the question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by T. I will now hand you over to your host, Mark Levy, Vice President, Finance and Investor Relations. Please go ahead.

thank you and good morning everyone welcome to our first quarter 2024 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.airns.com we also posted a slide presentation that provides additional information about our first quarter 2024 results. 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 certain risks and uncertainties 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, 2023, and our 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 earnings 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 and for your interest in the Ahrens Company. Our performance in the first quarter was in line with our guidance, and I'm encouraged by the positive momentum that I'm seeing in the business so far this year. In the Ahrens business, we continue to significantly grow our e-commerce channel, driven by our new omni-channel lease decisioning and customer acquisition program that we launched in Q4 of last year. Due to the seasonal trends in the lease-to-own business, It's common for our lease portfolio size to decrease in the first quarter. This year, we experienced the smallest decrease in a decade. This improvement was driven by the actions we've taken to generate year-over-year growth in lease merchandise deliveries across all major categories. At BrandSmart, we exceeded our top and bottom line expectations for the quarter, despite continued demand pressure. While comparable sales remain negative, we did experience sequential improvements in demand each month in the first quarter. Based on our first quarter performance and the trends across both businesses, we are reaffirming our full year 2024 outlook provided on February 26th for revenues and adjusted EBITDA. And we are raising our outlook for non-GAAP diluted EPS due to a lower estimated tax rate. Kelly will speak to this in more detail in a few minutes. Now turning to the results of the first quarter, I'm pleased to report that we delivered consolidated revenues and adjusted earnings in line with expectations. At the Aaron's business, our lease merchandise deliveries increased 6.8% as compared to the prior year period. This led to year-over-year growth and recurring revenue written into the portfolio. We continue to close the gap from the beginning of the year. with our lease portfolio size ending the quarter down 4.8% after starting the year down 7%. On a same-store basis, our lease portfolio size ended the quarter down only 1.4%. This momentum has continued into April, with our lease merchandise deliveries up 18.6% year over year, driven by over 115% e-commerce growth. At the end of April, our same-store lease portfolio size was down only 20 basis points as compared to the prior year period. I'm happy to report that we've seen further improvement in May, and we've reached an inflection point where our same-store lease portfolio size is now larger than it was the same time last year. We remain excited about our new omni-channel lease decisioning and customer acquisition program, which provides leasing power to all Aaron's customers. As highlighted last quarter, this program is driving significantly higher conversion rates of lease applications, and we continue to expect it to drive mid-single-digit growth in our total lease portfolio size by end of year. Now turning to BrandSmart. While profitability remains challenging, BrandSmart ended the quarter with revenues and adjusted earnings slightly above our internal expectations, with a sequential quarterly improvement in comparable sales. We continue to expect improvements in customer demand in the second half of the year, primarily due to an anticipated rebound in our major product categories. We are also continuing to enhance our capabilities in merchandising, marketing, and technology to better position the business for long-term growth. Although the broader demand environment is still challenging, we remain confident in BrandSmart's compelling value proposition and potential to expand to new markets. Before I turn the call over to Steve, I want to reiterate how encouraged I am by the customer demand trends we're seeing in the Aarons business. As I just mentioned, we have reached an inflection point where our same store lease portfolio size is now larger than it was the same time last year. We expect this to lead to incremental flow through to profitability, benefiting earnings in the second half of the year and end of 2025. I will now turn the call over to Steve to discuss operational performance of each business segment.

Thanks, Douglas, and good morning, everyone. In the first quarter at the Aarons business, lease merchandise deliveries increased approximately 7% year-over-year and over 10% on a same-store basis. Our new omni-channel lease decisioning and customer acquisition program drove year-over-year growth in our major product categories of appliances, furniture, and consumer electronics. winning share in the market. Our lease portfolio size ended the quarter at $116.1 million. As Douglas mentioned, this is one of the best first quarters we have experienced in a decade. The portfolio declined only $1.7 million as compared to a decline of $4.6 million in the first quarter of 2023 and a decline of $4.5 million in 2022. Now moving to our key lease renewal metrics. The lease renewal rate for the quarter was 87.4% for all company-operated errand stores. This rate was down approximately 110 basis points year-over-year due to the increasing mix of e-commerce agreements written into the portfolio. Our 32-plus day non-renewal rate was 2.2% at the end of the first quarter, which was up 60 basis points year-over-year but improved 50 basis points from the last quarter. During the quarter, we also continued to improve our lease decision technology through enhanced controls to mitigate risk. We believe this will generate improvements in write-off over time. In the first quarter, write-offs as a percentage of lease revenues were 5.9%, which was up 50 basis points versus the prior year quarter, but improved 60 basis points from last quarter. As we mentioned last quarter, we do expect write-offs to be higher than our historical average due to the ongoing strong demand trends. As a reminder, In periods of high growth in merchandise deliveries, we incur inventory purchases, marketing costs, sales-based incentive compensation, and write-offs in advance of revenue recognition due to the portfolio nature of the business. Now turning to our strategic growth initiatives for the errands business. Our market optimization strategy, which includes our GenNext stores and Hub and Showroom program, continues to improve our in-store customer experience and operating models. In the first quarter, we opened 11 GenNext stores, including three in new markets, bringing the total to 265 company-operated GenNext stores since launching the program. At the end of the quarter, these stores accounted for more than 33% of our lease revenues in retail sales. That compares to over 26% in the prior year quarter. Now turning to the Aarons e-commerce channel. As Douglas mentioned, we continue to experience significant growth in this channel. In the first quarter, revenues generated from leases initiated on Errands.com increased 20.8% year over year and now represent 24% of total lease revenues as compared to approximately 18% in the prior year quarter. Recurring revenue written into the portfolio from e-commerce increased over 94% year over and represented approximately 34% of total recurring revenue written in the quarter. As Douglas mentioned earlier, we are excited about the momentum and positive trends that we are seeing in the Aarons business, which have continued into the second quarter. With the ongoing enhancements we are making to the business, combined with our compelling lease rates and flexible payment options, we are confident that we are attracting new customers and gaining market share. Now turning to BrandSmart. Despite the challenging customer demand environment for our product categories, BrandSmart experienced sequential improvements in comparable sales during the quarter, which we believe will continue to improve through the rest of the year. BrandSmart continued to experience weaker customer traffic and trade down to lower priced products in our key product categories of major appliances and consumer electronics. We also experienced credit tightening with our private label credit card provider. As a result of these trends, Comparable sales for the quarter were down 9.4% year-over-year. However, this is a 460 basis point improvement from the last quarter. We continue to invest in our e-commerce shopping experience and digital marketing strategies to attract new customers. We are optimistic that our investments in e-commerce will lead to growth in this channel as customer demand rebounds later this year. I also want to mention that our business-to-business sales experienced significant growth in the first quarter, and we are focused on growing this channel. Now turning to our strategic initiatives at BrandSmart. We are continuing to focus on improving our in-store shopping experience by rationalizing our product assortments and expanding our furniture product mix to attract new customers. In addition, we are excited about opening another new store later this quarter in Kennesaw, Georgia. The store will be similar in size and format to the new store that we opened in Augusta last year. We are looking forward to expanding BrandSmart's footprint and offering our compelling value proposition to more markets and customers. Now, I'll turn the call over to Kelly to provide further details on our financial performance for the quarter.

Thanks, Steve. We filed a Form 8-K after the market closed yesterday, which included our earnings release, investor presentation, and additional information. We also filed our Form 10-Q for the quarter. These documents can be found on our investor relations website. Please refer to these documents for additional detail regarding our financial performance and outlook for the consolidated company and the two business segments. Unless otherwise stated, any comparisons I make to prior periods will be on a year-over-year basis. Consolidated revenues for the first quarter of 2024 were $511.5 million, compared to $554.4 million. This year-over-year decrease is primarily due to lower lease revenues and fees at the errands business and lower retail sales at BrandsMart. Consolidated adjusted EBITDA was $22.7 million, compared to $45.9 million. This year-over-year decrease is primarily due to lower revenues at both business segments and higher other operating expenses and write-offs. partially offset by lower personnel costs. Other operating expenses were higher primarily due to increased investments in advertising. As a percentage of total revenues, adjusted EBITDA was 4.4%, and on a non-GAAP basis, loss per share was 15 cents. Adjusted free cash flow was a $33.2 million use of cash, lower than Q1 of the prior year. but favorable to our internal expectations. The year-over-year decrease was primarily driven by higher purchases of leased merchandise inventory to support the growth in new agreement deliveries at the errands business and lower consolidated earnings. This was partially offset by higher proceeds from real estate transactions. During the first quarter, the company paid $3.8 million in dividends. At the end of the quarter, the company had a cash balance of $41 million and total debt of $212.9 million, which were both favorable to our expectations. Now turning to our 2024 outlook. As Douglas mentioned, based on our performance so far this year and the trends we're seeing in the business, we are reaffirming our full-year outlook for revenues and adjusted EBITDA. we are raising outlook for non-GAAP diluted EPS due to a lower estimated effective tax rate. The revised estimated effective tax rate is approximately 38%, 12 percentage points lower than the prior guidance we provided last quarter. Full year provision for lease merchandise write-offs is still expected to be between 6% and 7% of lease revenues and fees. Before I hand the call back to Douglas, I want to review our capital allocation priorities. These priorities have not changed from our prior earnings call. We continue to focus on investing in the Aarons business and BrandsMart to drive revenue and earnings growth while maintaining a conservative leverage profile of 1 to 1.5 times net debt to adjusted EBITDA. After this, we look to return capital to the shareholders through dividends and share repurchases and we'll continue to evaluate acquisitions on an opportunistic basis. As it relates to returning capital to shareholders, yesterday we announced our quarterly dividend. We will pay 12.5 cents per share on July 3rd to shareholders of record as of close of business on June 14th. Now, I'll hand it back to Douglas to make a few remarks before we turn to Q&A.

Thanks, Kelly. As we look to the remainder of 2024 and beyond, I want to reiterate that our management team and board remain highly engaged and committed to taking all actions that will deliver additional value for our shareholders. We continue to execute our multi-year strategic plan, driving efficiencies and innovating our business to better serve our customers. I'm confident that the investments we are making will continue to enhance our distinct competitive advantages and allow us to increase market share at both Aarons and BrandSmart. And with that, I will now turn the call over to the operator for Q&A.

Thank you, Douglas. Everyone, if you would like to ask a question, please press star followed by 1 on your telephone keypad now. If you change your mind, please press star followed by 2. When preparing to ask your question, please ensure your device is unmuted locally. We'll pause here briefly as the questions are registered. We have the first question from Bobby Griffin with Raymond James. Your line is open.

Good morning. This is Alessandra Jimenez on for Bobby. Thank you for taking our questions. Maybe first on the store optimization efforts at Aaron. So we saw acceleration in store closures in one queue. Can you talk about how your store optimization efforts are progressing and then any updated thoughts on the right level of store count moving forward?

Yeah, Alexander, thanks for the question. As we stated previously, we continue to try to rationalize markets and lower our cost base in each market. And we're doing that, as you can see, through growing our e-com portfolio, but also make sure that we're serving our customers in as strong a way as we can in each market. And so in doing that, we're constantly assessing through our real estate committee the right number of stores, the right position of those stores. We did open 11 Gennex stores in the quarter, but we also closed 30 to 40 stores within the timeframe. We continue to do that over the course of the year. We're not gonna state a number in terms of the number of stores that we will ultimately close. All I'll say is that we're continuing to optimize our markets to best serve our customers and to be as cost efficient in those markets as possible. One thing we're super excited about is that we're now opening opening incremental net new stores both in full stores and showrooms and we think the showrooms in particular are a very efficient way to cover the markets we're in more thoroughly with lower working capital smaller footprints and sort of a more efficient box in terms of profitability okay that's helpful thank you and then

We were pleased to see a sequential improvement in the lease portfolio in April and May. Is there anything specific that you noticed to drive that improvement, like traffic, trade down, anything like that?

Yeah, well, we're super excited about what we're seeing in terms of our growth in the portfolio in Q1. As you heard, deliveries are up considerably and they continue to be year to date in the year. The way our business works is that, you know, because of our revenue recognition and cost of goods sold that we spread over the life of the agreement, we don't see the ultimate impact of that until later on. And in the current period, we incur things like marketing and incentive based compensation and near term write offs. But as we grow the portfolio, we see flow through to profitability. We noted that there is an inflection point that we're expecting this year that our portfolio starts to turn positive. And with that, once we start to turn positive, which we have in our same store portfolio, little movements in the growth there mean a lot to the bottom line. I'll just give you an example. For every million dollars of portfolio size growth we have, we get about 600,000 of gross margin a month. And if you look at that on an annual basis, that equates to about a little over seven million of gross margin addition Because of the high operating leverage we have in the business, we see significant flow through to adjusted EBITDA after write-offs. So we're super excited about that. As we think about the rest of the year, our projections assume not only do we hit an inflection point to growth, but that we grow our total monthly lease portfolio up by the end of the year by mid-single digits. We believe that'll benefit not only the second half of 2024, but the full year of 2025. And as you think about 25 being up mid single digits over at the end of 24, we started 2024 with about $117 million portfolio size. So being up mid single digits by the end of the year equates to kind of like a four to $8 million increase in portfolio value. And so that's very meaningful as we enter into, and that's 4 to 8 million a month. So that's very meaningful as we enter into 2025. So, I mean, really what we're seeing is just great success of this program. We still are in a challenging market in terms of demand for our products, but we are capturing more share of the business that's coming in and our customers are wanting to interact with us in a more omni-channel way. We mentioned that e-comm is up over 100% in the month of April, and that's very encouraging as we see this flow through to the bottom line.

Okay, thank you. That's very helpful. And then maybe just lastly for me, switching over to BrandSmart, what gives you confidence to accelerate the top-line growth at BrandSmart as we move throughout 2024 to hit that annual guidance? Is it primarily a factor of just comparisons get you during the back half on a multi-year basis?

Yeah, hi, this is Steve. Yes, exactly what you said. So it is comparisons, you know, definitely some slightly lower comps that we were comping over last year, but as well as the release of the pull-forward demand that we're expecting in the back half of the year, starting in consumer electronics and then moving on to furniture and appliances.

All right, thank you so much, and best of luck here in 2Q.

Thank you.

Thank you. The next question is from Kyle Joseph with Jefferies. Your line is open.

Hey, good morning, guys. Thanks for taking my questions. Just want to talk about margins on leasing or on leases in the quarter look really strong. Not sure if that's a function of uh, buyout activity or kind of gen next contribution or what's the driver there in the outlook for the rest of the year?

Yeah, I'd say that, uh, you know, college Kelly, the, the growth in the margin is, is again, you typically see an improvement as you go from Q4 into Q1 of any year. And as you mentioned that that is largely driven by, uh, you know, the cop, the higher early purchase option activity. And so we did kind of experience that as expected in the quarter. And then I think as Douglas mentioned, the team has done a great job balancing risk in the portfolio as we've achieved the growth quarter to date or improvement in the deliveries. And so while write-offs are up slightly, they continue to be in line with our expectations, again, which encourages us because you know, as we grow, the tools and processes that we've put in place to manage the risk in the portfolio is working.

Got it. And then just an update on BrandSmart. What kind of trends are you seeing in lease sales at BrandSmart? And, you know, are those more kind of akin to what you're seeing on the errand side of the business? Or just, yeah, I guess kind of update us on that. on the integration now that we are where we are post-deal?

Sure. Hey, Kyle, Steve, glad to answer that question. So first, I just state that we fully rolled out our integrated financial decision waterfall to all BrandSmart stores in the February timeframe. And the team, both on the BrandSmart leasing side with Aaron's and the BrandSmart store team continue to find ways to improve performance, both from an operations, customer experience, and technology standpoint. But specifically regarding your question on performance, we did see growth in the portfolio as well as the attach rate of BrandSmart leasing and the retail sales on a year-over-year basis at BrandSmart. So we continue to improve, but we're really focused on finding ways to drive efficiencies and effectiveness in the model.

Got it. Very helpful. Last one from me. Just appreciate the color on credit and appreciate, you know, growth and specifically econ growth is going to take that higher. But just give us an update on kind of the health of the underlying consumer, which obviously drives both demand and credit performance. And they just continue to chug along. I know inflation has been stubborn, but just an update on the health of the underlying consumer would be great.

Yeah, I mean, I think you've read about it, Kyle. I mean, underlying consumer inflation's eaten into them. You know, it's been tough. We found that, you know, our customer's been pretty resilient, as we've said in the past. Most of the increase you're seeing in write-offs and lowering of renewal rate is really just a mix shift between channels. Ultimately, the underlying trends are i would say decent and our models are predicting or sloping risk appropriately so we're really happy with lease decisioning and what's going on there and we continue to optimize that in certain ways to sort of maximize profitability but also set our customer up for success which is ultimately what our leasing power and our decisioning uh is all about um i'd say in terms of what we're seeing out there on things like trade down you know at brand smart we are seeing the providers above us tightening lease standards. So we know there's some pressure out there in the economy, and we saw that starting at the end of last year and going into this year. However, we haven't seen material signs of customer trade down yet at errands, but we're well poised to capture that when it does and when the opportunity arises. Last thing I would say just on the state of the customer is, you know, while the market for our product categories furniture appliances and electronics are slow across the broader economy we're seeing great success at aaron's capturing the opportunity that's out there customers are wanting more and more we're seeing even our existing and previous customers and our new customers wanting to transact with us in an omni-channel way and most of the growth that we're seeing right now has to do with the changes we've made to our omni-channel lease decisioning and customer acquisition program which is providing leasing power across all of our channels to all of our customers. And we believe that it's driving significantly higher. We know it's driving significantly higher conversion rates, but we're also getting add on sales. So we're seeing more customers do more deals with us and we're getting more share wallet, which is really encouraging. And you can sort of the numbers show that and being up 19% deliveries in April. really encouraged about what we're seeing and really encouraged about our ability to take share in this market.

Great. Thanks very much for taking my questions.

Thanks, Collin.

Thank you. The next question is from Scott Ciaccarelli with Truist. Your line is open.

Hey, guys. This is Joe on for Scott. I just had a quick question. Lease write-offs came in a little bit better than we were expecting. You guys kept, obviously, the 6% to 7% for the year. Just wanted to know if you could give a little color on the trajectory you're expecting through 2024.

Yeah, Joe, it's Kelly. As we stated on the call, we continue to expect write-offs for the full year to be between 6% and 7%. And kind of key in on what Douglas was saying earlier, right? The customer does continue to be challenged year over year. What we're seeing, though, in terms of the impact of write-offs is the increasing mix of the lease portfolio, including e-com originated deals. But, yeah, as you noted, we're performing in line with expectations and continue to feel really good about our forecast for the full year.

Yeah, the other thing I'd point out is that Sorry, if you look at our 32-plus day delinquency rate in our investor presentation, you know, we've seen sequential improvement in our trends from Q4, as with our write-offs in that same presentation, you'll see sequential improvement. So while we naturally see that during tax season, we think those trends are encouraging and in line with what we expected.

Gotcha. And then, um, just wanted to check in on the, uh, kind of long-term thoughts, like five to 6% long-term. Does that still make sense?

Yeah, I think long-term, um, uh, that's in line with kind of our general expectations. What I'd say is, uh, a lot will largely depend as we get into 2025 on the mix of the portfolio. So again, how, how much is originated, uh, through our, our e-comm channel versus versus in store. But we're not seeing anything at this point that leads us to believe any different going forward.

Got it. Thanks so much.

Thank you. The next question is from Anthony Chukumba with Loop Capital Markets. Your line is open.

Thank you. And great job pronouncing my last name correctly. So I guess my first question, two questions on BrandSmart. First one, I know it's still relatively early, but we'd love to, and I know there's a lot of noise, you know, because obviously there's just, you know, it's just tough right now in terms of consumer demand for major appliances and consumer electronics. But how is the Augusta, Georgia store performing relative to your expectations?

Hey, Anthony, it's Steve. Thanks for the question. So just to remind you, we opened the store at the end of September of last year. And so we're about six, seven months into it. And the store continues to ramp. And we're really excited about the market and the feedback we're getting from the customer, both on the in-store experience as well as the brand promise with great pricing and broad assortment. And we continue to train our team to improve their selling skills. So We're ramping where we thought, and we just continue to push our way through this challenging demand environment.

Anthony, one of the things I was encouraging about Augusta is we were able to, relative to our underwriting on that deal, we were able to sort of come in better than what we thought on our build-out. And it was our first store, so we're still learning about kind of how these stores ramp, I think, net-net. you know, our OpEx is coming in more favorable. We are seeing pressure in that store from the macro environment that's out there, but we feel good about where it's trending and the return on our capital there. And, you know, we continue to sort of find ways to sort of market to that market, if you will, and, you know, sort of break into our core customer base there. So it's really a great learning ground. I think what's encouraging to me is that, you know, this is a smaller format store, and that has lighter capex than what we've spent at BrandSmart historically. And when we look at that, you know, it's really informed how we do Kennesaw and how we potentially open stores in the future, which is really encouraging.

Got it. And then, yeah, so I guess that second new store will be also in Georgia. You know, should we read into that? I mean, do you see Georgia as a better opportunity in terms of new stores relative to Florida, or is it just, you know, just kind of happenstance?

Hey, it's Steve again. Now, Florida is a primary key market for us. As we look at our real estate strategy, it really comes down to availability of real estate sites and then what's the associated occupancy and development costs to build that out. So we are working hard to look across Florida, all the key major markets, and hopefully we'll find a site that works for us in the coming quarters.

Got it. Thanks for taking my question.

Thank you.

Thank you. The next question is from Huang Wei with TD Cohen. Your line is open.

Hi, team, and congrats on the quarter. I just want to ask about average ticket. Can you give some comment around that? I mean, in one queue and maybe into April and May, and I guess as a caller, really, maybe In terms, talk about, you know, dollar originations. Because I think, I mean, if you are up in deliveries by 19%, right, it's hard to imagine that, you know, you're not growing in gross dollar volume. Maybe can you talk a little bit more about that, too? Thank you.

Yeah, I mean, I'll just mention that, you know, as we said, in the quarter, we were up 6.8% deliveries, but only up, I wouldn't say only, it was a very strong quarter, but up 2.3%. recurring revenue written the delta between those two numbers is ticket and so we've seen take it down sort of four to five percent year-over-year and you know we continue to see that we're working on ways to and see if you talk about this a little bit more to position our product offerings to look at term and look at product mix in order to drive ticket but ultimately we're optimizing for for recurring revenue written and And so we are doing certain things at certain price points to drive volumes, and we're always looking at that tradeoff.

Yeah, just to add to it, you know, as Douglas mentioned, a little pressure on ticket at the Aaron's business in Q1. So we did see some trade down in some of our categories, especially appliances and consumer electronics. But with a lot of that growth we're seeing in deliveries, at least merchandise deliveries and the growth in our strategies around our marketing campaign, we're definitely focusing on putting strong price messages out there at really our key value items in those low price points and strong promotional offers to drive those particular products. So some of that obviously is trade down, but also some of it is our desire to drive new customers.

Yeah, the last thing I want to mention is not only trying to attract new customers, we're also trying to get more share wallet from our existing customers. So with our new omnichannel lease decisioning engine that provides leasing power to all of our customers, not only are we making that getting that first lease agreement, but we're getting add on lease agreements as a second deal within the customer's leasing power. And many of those new agreements are lower price points. And so there is sort of while we're getting more

agreements per customer the average ticket is down because of that add-on agreement that's putting some pressure on ticket as well but we we say that is a very good thing more share of wallet gotcha i think you mentioned about your private label provider um is slightly tightening i mean could you remind us maybe you know how much penetration do they have in your sales um

Yeah, hi, this is Steve. Be glad to answer that. So, yeah, just to recall, we start tightening in Q4 and again in Q1. From a private label credit card standpoint mix of our business, it's a little more than 25% of our overall sales, so a considerable amount. They've been a great partner for many years, and we work closely with them to drive marketing and our promotional activities around key holidays.

Got it. And my last one is on expenses. I mean, how should we think about personnel and other operating expenses going forward? Thank you.

Yeah, it's Kelly. I'd say that, um, again, or reaffirmed that we didn't change our guidance. So our, our margin expectations continue to be the same for, uh, for remainder of 24. And I believe what I may have mentioned in the last car was that from a personnel perspective, We are expecting, um, you know, kind of call it a 50 to a hundred basis point improvement, uh, as a percentage of revenue, as well as on the OpEx side, we're seeing a bit of the opposite, about a 50 basis point increase. Uh, the improvements that we're seeing in personnel, as well as improvements that we're seeing on the OpEx side is driven by, uh, the cost savings initiatives that, um, that we outlined on the prior call as well, uh, where we expect to deliver 40 to 45 million, I'm sorry, 30 to $35 million of cost savings this year. The increase in other OpEx year over year is driven by really two things. One, increased investment in advertising, particularly at T. Aaron's business, which is a component of what's kind of driving our growth that we're seeing there. Also, there are some new store opening costs associated with the store that we're opening at BrandSmart. So that's what's driving that 50 basis point increase in operating margin. I also want to just give you kind of a quick update on spread of earnings through the course of the year. We're currently expecting that consolidated revenues for the full year are in line with expectations, but that they're going to grow sequentially each quarter, with Q2 representing about 20% to 25% of the full year. And then as that translates down to adjusted EBITDA, we're expecting that Q2 is going to represent about 25%. of the full year there. And then you probably also heard us talk about a change in tax rate on the prepared remarks. So there, that 12 percentage point improvement did lead to our increase in outlook for non-GAAP EPS, but the tax rate will be different in each quarter of the year. I think more specifically, we're expecting that Q4 will be about 300 basis points lower than Q2 and Q3, with Q2 and Q3 roughly the same. So hopefully that helps you all with some of your modeling for the year.

Thank you. Thank you. We currently have no further questions. I will hand back to Douglas for any closing remarks.

Thank you, operator. Thank you for joining the call today, and thank you to all of our company and franchise team members at Aaron's BrandSmart Leasing in Woodhaven for your continued focus on delivering exceptional value and service to our customers each and every day. We look forward to speaking to each of you again next quarter. Thanks so much.

Thank you. This concludes today's call. Thank you for joining. You may now disconnect your lines.