Core Insights - Aaron's Company, Inc. reported a revenue of $511.5 million for the quarter ended March 2024, reflecting a year-over-year decline of 7.7% and an EPS of -$0.15 compared to $0.66 a year ago [1] - The reported revenue fell short of the Zacks Consensus Estimate of $517.36 million, resulting in a surprise of -1.13%, while the EPS surprise was -87.50% against a consensus estimate of -$0.08 [1] Revenue Breakdown - Lease revenues and fees & retail sales amounted to $346.01 million, exceeding the average estimate of $342.39 million by five analysts, but showing a year-over-year decline of 7.4% [2] - Non-retail sales generated $23.94 million, slightly above the estimated $23.37 million, with no change year-over-year [2] - Retail sales were reported at $136.93 million, below the average estimate of $144.63 million, indicating a year-over-year decrease of 9.1% [2] - Franchise royalties and other revenues reached $5.92 million, surpassing the average estimate of $5.78 million, with a year-over-year decline of 2.8% [2] - Other revenues from Aaron's Business were $0.19 million, slightly above the average estimate of $0.16 million, showing no change year-over-year [2] - Franchise royalties and fees totaled $5.90 million, exceeding the estimated $5.51 million, with no change compared to the previous year [2] Stock Performance - Over the past month, shares of Aaron's have returned -3.5%, compared to a -1.6% change in the Zacks S&P 500 composite, indicating potential underperformance in the near term with a Zacks Rank 4 (Sell) [3]

Company Performance - Aaron's Company, Inc. (AAN) reported a quarterly loss of $0.15 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.08, and a significant decline from earnings of $0.66 per share a year ago, indicating an earnings surprise of -87.50% [1] - The company posted revenues of $511.5 million for the quarter ended March 2024, missing the Zacks Consensus Estimate by 1.13%, and down from $554.36 million in the same quarter last year [1] - Over the last four quarters, Aaron's has only surpassed consensus EPS estimates once and has not beaten consensus revenue estimates during this period [1] Stock Performance - Aaron's shares have declined approximately 36.1% since the beginning of the year, contrasting with the S&P 500's gain of 7.5% [2] - The current Zacks Rank for Aaron's is 4 (Sell), indicating expectations of underperformance in the near future [4] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.06 on revenues of $511.72 million, and for the current fiscal year, it is $0.08 on revenues of $2.12 billion [4] - The trend for estimate revisions ahead of the earnings release has been unfavorable, which may impact future stock performance [4] Industry Context - The Consumer Services - Miscellaneous industry, to which Aaron's belongs, is currently ranked in the bottom 26% of over 250 Zacks industries, suggesting a challenging environment for the stock [5] - Another company in the same industry, Wag! Group Co. (PET), is expected to report a quarterly loss of $0.08 per share, reflecting a year-over-year change of +20%, with revenues projected at $24.5 million, up 18.8% from the previous year [5]

Company Operations - As of March 31, 2024, the Company operates approximately 1,220 stores and an e-commerce platform, focusing on lease-to-own and retail purchase solutions[18]. - The Company’s BrandsMart U.S.A. segment operates 11 stores in Florida and Georgia, contributing to its position as one of the largest appliance retailers in the country[20]. Financial Performance - Total revenues for the three months ended March 31, 2024, were $511,497, a decrease of 7.7% from $554,361 in the same period of 2023[75]. - Total revenues for the Aaron's Business segment were $381.1 million for the three months ended March 31, 2024, compared to $412.1 million for the same period in 2023, reflecting a decrease of approximately 7.5%[98]. - The BrandsMart segment generated total revenues of $132.5 million for the three months ended March 31, 2024, compared to $144.2 million in the same period in 2023, reflecting a decrease of approximately 8.1%[98]. - The company reported net losses of $14,181,000 for the three months ended March 31, 2024[55]. - The company reported a net loss before income taxes of $16.3 million for the three months ended March 31, 2024, compared to a profit of $8.9 million for the same period in 2023, indicating a significant decline[99]. Revenue and Expenses - Lease revenues and fees amounted to $346,009 for the three months ended March 31, 2024, down from $373,795 in the prior year, representing a decline of 7.4%[75]. - Franchise royalties and fees for the three months ended March 31, 2024, were $5,729, slightly down from $5,898 in the same period of 2023[75]. - Gross profit for the Aaron's Business segment was $244.6 million for the three months ended March 31, 2024, down from $260.7 million in the same period in 2023, representing a decline of about 6.2%[99]. - The company reported total restructuring expenses of $7.9 million for the three months ended March 31, 2024, compared to $5.3 million for the same period in 2023, indicating an increase of approximately 49.1%[99]. Accounts and Receivables - The net accounts receivable as of March 31, 2024, totaled $35.162 million, a decrease from $39.782 million as of December 31, 2023[32]. - The provision for uncollectible accounts receivable for the three months ended March 31, 2024, was $8.842 million, compared to $6.908 million for the same period in 2023[36]. - The allowance for accounts receivable as of March 31, 2024, was $7.632 million, an increase from $5.908 million as of March 31, 2023[33]. Inventory and Merchandise - Merchandise inventories decreased from $90,172,000 as of December 31, 2023, to $83,012,000 as of March 31, 2024, representing a decline of approximately 8.5%[40]. - The reserve for merchandise inventories decreased from $921,000 to $867,000, indicating a reduction of about 5.9%[40]. - The Company's lease merchandise, net of accumulated depreciation and allowances, was $629.581 million as of March 31, 2024, compared to $622.262 million as of December 31, 2023[37]. Debt and Financing - The company’s total debt as of March 31, 2024, was $212,913, an increase of 9.8% from $193,963 at December 31, 2023[69]. - Long-term debt increased to $205,432 as of March 31, 2024, compared to $187,575 at December 31, 2023, reflecting a rise of 9.5%[69]. - The company entered into a non-speculative interest rate swap agreement with a notional amount of $100 million, converting variable interest rate debt to a fixed rate of 3.87%[48]. - The company entered into an interest rate swap agreement with a notional amount of $100 million, with a fair value of $952 as of March 31, 2024[64]. - The company’s revolving credit facility commitment was amended from $375 million to $275 million on February 23, 2024[71]. Restructuring and Legal Matters - Total net restructuring expenses under the Operational Efficiency and Optimization Restructuring Program were $5.3 million for the three months ended March 31, 2024, compared to $2.9 million in the same period of 2023, indicating an increase of approximately 82.76%[91]. - The Company has incurred cumulative charges of $23.3 million under the Operational Efficiency and Optimization Restructuring Program since its inception[91]. - The real estate repositioning and optimization restructuring program resulted in total net restructuring expenses of $2.6 million for the three months ended March 31, 2024, compared to $2.4 million in the same period of 2023[93]. - Cumulative charges under the real estate repositioning and optimization program reached $73.4 million since its inception[93]. - The Company closed or consolidated 57 stores through March 31, 2024, as part of its restructuring efforts[91]. - As of March 31, 2024, the Company had accrued $1.1 million for pending legal and regulatory matters, up from $0.7 million as of December 31, 2023[87]. Other Financial Metrics - The total shareholders' equity decreased from $686,138,000 as of December 31, 2023, to $670,536,000 as of March 31, 2024, a decline of approximately 2.3%[55]. - Goodwill allocated to BrandsMart and BrandsMart Leasing was $29.2 million as of March 31, 2024, compared to $26.5 million as of December 31, 2023, reflecting an increase of approximately 10.2%[53]. - Prepaid expenses increased from $14,482,000 to $19,449,000, representing an increase of approximately 34.1%[44]. - The company reported a deferred compensation liability of $11,157 as of March 31, 2024, compared to $10,574 at December 31, 2023[64]. - Assets held for sale were valued at $2,509 as of March 31, 2024, up from $850 at December 31, 2023[66].

Core Insights - The Aaron's Company, Inc. reported its first quarter 2024 financial results, reaffirming its full-year outlook while raising the non-GAAP EPS forecast due to a lower estimated tax rate [1][2]. Financial Performance - Revenues for Q1 2024 were $511.5 million [2]. - Adjusted EBITDA for the same period was $22.7 million [2]. - The company reported a loss per share of $0.46, with a non-GAAP loss per share of $0.15 [2]. Business Highlights - Recurring revenue from Aaron's Business increased by 2.3%, driven by a 6.8% growth in lease merchandise deliveries [3]. - E-commerce recurring revenue surged by 94.1%, benefiting from new omnichannel lease decisioning and customer acquisition programs [3]. - The lease portfolio size at the end of Q1 decreased by 4.8% year-over-year, but showed a sequential improvement of 220 basis points from Q4 2023 [3]. - Same-store lease portfolio size decreased by 1.4% year-over-year, with a sequential improvement of 300 basis points from Q4 2023 [3]. - Lease merchandise deliveries in April increased by 18.6%, with e-commerce growth at 116.3% [3]. - Write-offs were reported at 5.9%, with expectations for full-year write-offs in line with guidance of 6% to 7% [3]. - BrandsMart comparable sales decreased by 9.4%, but showed a sequential improvement of 460 basis points [3]. - A quarterly cash dividend of $0.125 per share was announced, to be paid on July 3, 2024 [3]. Full Year 2024 Outlook - The company projects revenues between $2.055 billion and $2.155 billion for the full year [4]. - Adjusted EBITDA is expected to be between $105.0 million and $125.0 million [4]. - Non-GAAP diluted EPS is forecasted to range from $0.00 to $0.25 [4].

Core Viewpoint - The Aaron's Company, Inc. is expected to report a decline in both revenue and earnings for the first quarter of 2024, with a consensus estimate indicating a loss of 8 cents per share compared to earnings of 66 cents per share in the same quarter last year, and a revenue decline of 6.7% to $517.4 million [1][4]. Group 1: Financial Performance Expectations - The Zacks Consensus Estimate for the bottom line is a loss of 8 cents per share, a significant drop from earnings of 66 cents per share reported in the year-ago quarter [1]. - Revenue is expected to decline by 6.7% year-over-year, with a consensus mark of $517.4 million [1]. - The company experienced a negative earnings surprise of 966.7% in the last reported quarter and an average earnings miss of 199.4% over the trailing four quarters [1][2]. Group 2: Business Segment Challenges - The Aaron's Business segment is facing sluggishness, characterized by a smaller lease portfolio size, lower lease renewal rates, and weak retail sales [2][3]. - Weak lease revenues and fees, along with poor retail sales at both Aaron's and BrandsMart, are anticipated to negatively impact the company's results [2]. - The demand for discretionary products has been adversely affected by lower customer income, which is expected to continue affecting retail sales trends in the first quarter [3]. Group 3: Operational Insights - The company has projected a lower consolidated adjusted EBITDA for the first quarter, estimated to represent about 20% of the overall adjusted EBITDA for the year, alongside a net loss [4]. - Lease revenues and fees are expected to decline by 8.9%, with revenues for the Aaron's business and BrandsMart projected to decrease by 5.3% and 7%, respectively [4]. Group 4: Strategic Initiatives - The company is advancing its business through effective e-commerce strategies, including flexible payment options, competitive pricing, and a wider product variety [5]. - Investments in digital marketing, improved shopping experiences, and express delivery programs are expected to provide some support to the company's performance [5]. Group 5: Earnings Prediction Model - The Zacks model indicates that the company does not have a conclusive prediction for an earnings beat, with an Earnings ESP of 0.00% and a Zacks Rank of 4 (Sell) [6].

Group 1 - The Aaron's Company, Inc. will host a conference call and webcast on May 7, 2024, at 8:30 a.m. Eastern Time to discuss its first quarter 2024 financial results [1] - The earnings release will be issued after the market closes on May 6, 2024 [1] - The call will be hosted by CEO Douglas A. Lindsay, President Steve Olsen, and CFO C. Kelly Wall [1] Group 2 - The Aaron's Company, Inc. is a leading technology-enabled, omnichannel provider of lease-to-own and retail purchase solutions for appliances, electronics, furniture, and other home goods [2] - The company operates approximately 1,220 stores across 47 states and Canada, along with an e-commerce platform [2] - BrandsMart U.S.A. is a significant player in the appliance retail sector with 11 stores in Florida and Georgia [2]

Core Viewpoint - The market anticipates a year-over-year decline in earnings for Aaron's Company, Inc. (AAN) due to lower revenues, with a focus on how actual results will compare to estimates impacting stock price movements [1]. Financial Expectations - Aaron's is expected to report a quarterly loss of $0.08 per share, reflecting a year-over-year change of -112.1% [2]. - Revenues are projected to be $517.36 million, down 6.7% from the same quarter last year [2]. Estimate Revisions - The consensus EPS estimate has been revised 35.56% lower in the last 30 days, indicating a bearish sentiment among analysts regarding the company's earnings prospects [2]. - The Most Accurate Estimate for Aaron's is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -2.56% [5]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that a positive Earnings ESP is a strong predictor of an earnings beat, especially when combined with a favorable Zacks Rank [4]. - Aaron's currently holds a Zacks Rank of 4, which complicates the prediction of an earnings beat [5][6]. Historical Performance - In the last reported quarter, Aaron's was expected to post earnings of $0.03 per share but instead reported a loss of $0.26, resulting in a surprise of -966.67% [7]. - Over the past four quarters, Aaron's has beaten consensus EPS estimates twice [7]. Conclusion - Despite the potential for an earnings beat, Aaron's does not appear to be a compelling candidate for such an outcome, and investors should consider other factors before making decisions [8].

Group 1: Dividend Stocks and Returns - Dividends have contributed approximately 32% of the total return for the S&P 500 since 1926, while capital appreciation has contributed 68% [1] - A study from Hartford Funds found that dividend stocks delivered an annualized return of 9.18% from 1973 to 2023, more than double the 3.95% return for non-payers during the same period [1] Group 2: Mid-Cap Dividend Aristocrats - Mid-cap stocks are defined as companies with market capitalizations between $2 billion and $10 billion [2] - The S&P MidCap 400 Dividend Aristocrats index measures mid-sized companies that have consistently increased dividends for at least 15 years [2] - Four companies from the S&P MidCap 400 Dividend Aristocrats have been identified as having significant payouts and are currently rated as Buy by major Wall Street firms [2] Group 3: Company Profiles - **Aaron's Company (NYSE: AAN)**: Provides lease-to-own and retail purchase solutions for furniture, appliances, and electronics through various sales channels [5] - **NNN REIT**: Owns 3,532 properties across 49 states with a gross leasable area of approximately 36 million square feet and has increased annual dividends for 34 consecutive years [7] - **Omega Healthcare Investors**: Focuses on owning Skilled Nursing Facilities and has increased dividends every year since 2003, with an annual dividend growth rate of 4.80% [9] - **Southwest Gas Holdings**: Distributes natural gas in Arizona, Nevada, and California, and operates through multiple segments including utility infrastructure services [11]

Company Performance - Aaron's Company, Inc. (AAN) closed at $6.98, down 1.13% from the previous trading day, underperforming the S&P 500 which gained 1.12% [1] - Over the past month, shares of Aaron's Company have declined by 34.63%, contrasting with the Consumer Discretionary sector's gain of 1.03% and the S&P 500's gain of 2.06% [1] - The upcoming earnings report is anticipated to show an EPS of $0, indicating a 100% decline compared to the same quarter last year, with revenue expected to be $521.62 million, reflecting a 5.91% decline year-over-year [1] Analyst Estimates - For the full year, analysts expect earnings of $0.23 per share and revenue of $2.11 billion, representing declines of 71.6% and 1.33% respectively from the previous year [2] - Recent modifications to analyst estimates indicate shifting business dynamics, with positive revisions suggesting optimism regarding the company's profitability [2] - The Zacks Rank system, which incorporates estimate changes, currently ranks Aaron's Company at 4 (Sell), reflecting a significant 93.42% decrease in the consensus EPS estimate over the past month [3] Valuation and Industry Context - Aaron's Company has a Forward P/E ratio of 30.7, which is a premium compared to the industry average Forward P/E of 17.01 [3] - The Consumer Services - Miscellaneous industry, part of the Consumer Discretionary sector, holds a Zacks Industry Rank of 157, placing it in the bottom 38% of over 250 industries [3]

[Part I](index=6&type=section&id=PART%20I) [Item 1. Business](index=6&type=section&id=Item%201.%20Business) The Aaron's Company, Inc. is an omni-channel provider of lease-to-own and retail solutions for home goods through its Aaron's and BrandsMart U.S.A. brands - The Company is a technology-enabled, omni-channel provider of lease-to-own (LTO) and retail purchase solutions for home goods through its brands: Aaron's, BrandsMart U.S.A., BrandsMart Leasing, and Woodhaven Furniture Industries[12](index=12&type=chunk) Systemwide Store Count (as of December 31) | Store Type | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Company-operated Aaron's Stores | 1,019 | 1,034 | 1,074 | | Franchisee-operated Aaron's Stores | 224 | 232 | 236 | | BrandsMart U.S.A. Stores | 11 | 10 | — | | **Systemwide Stores** | **1,254** | **1,276** | **1,310** | - On April 1, 2022, the Company acquired BrandsMart U.S.A. for **$230 million in cash** to expand its customer reach and total addressable market[12](index=12&type=chunk) - Key strategic priorities include transforming the Aaron's Business through e-commerce and GenNext stores, enhancing and growing BrandsMart, and implementing enterprise-wide operational efficiencies and cost optimization[15](index=15&type=chunk)[17](index=17&type=chunk)[18](index=18&type=chunk) - The company operates two reportable segments: The Aaron's Business (including Aaron's stores, aarons.com, Woodhaven, and BrandsMart Leasing) and BrandsMart (retail and e-commerce operations of BrandsMart U.S.A.)[19](index=19&type=chunk) [Item 1A. Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) The company faces material risks across several categories including legal, operational, strategic, and economic factors - **Business Risks:** Subject to new or additional laws and regulations, potential for costly legal proceedings, product safety/recall issues, impacts from inflation, challenges in talent recruitment and retention, and significant cybersecurity threats including data breaches and AI-related risks[66](index=66&type=chunk) - **BrandsMart Acquisition Risks:** Potential failure to realize anticipated synergies and unexpected costs or difficulties in integrating the BrandsMart business[67](index=67&type=chunk) - **Operational & Strategic Risks:** Challenges from product commoditization, intense competition, execution of the strategic plan, managing inventory, and dependence on proprietary algorithms and third-party data[68](index=68&type=chunk) - **Industry & Franchise Risks:** Negative characterization of the LTO industry by advocacy groups and media, potential litigation with franchisees, and operational failures by franchisees impacting the brand[69](index=69&type=chunk)[70](index=70&type=chunk) - **Stock & General Risks:** No guarantee of dividend payments, requirement to maintain effective internal controls (failure of which could be adverse), dependence on consumer spending, and geographic concentration of stores[70](index=70&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) [Item 1B. Unresolved Staff Comments](index=36&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments - None[103](index=103&type=chunk) [Item 1C. Cybersecurity](index=36&type=section&id=Item%201C.%20Cybersecurity) The company has implemented an enterprise cybersecurity program based on the NIST Cybersecurity Framework to manage and mitigate threats - The company's enterprise cybersecurity program is based on the NIST Cybersecurity Framework and is designed to identify, protect, detect, respond to, and recover from threats[103](index=103&type=chunk) - Oversight is provided by the Board of Directors and the Audit Committee, with day-to-day management led by the Chief Information Security Officer and an Enterprise Information Security Steering Committee[105](index=105&type=chunk) - To date, no cybersecurity attack or threat has materially affected the Company's business, results of operations, or financial condition[104](index=104&type=chunk) [Item 2. Properties](index=38&type=section&id=Item%202.%20Properties) As of December 31, 2023, the company operates 1,019 company-owned Aaron's stores and 11 BrandsMart U.S.A. stores Company-Operated Aaron's Stores by Location (Top 5 States) | State | Stores | | :--- | :--- | | Texas | 143 | | Florida | 76 | | Georgia | 68 | | North Carolina | 62 | | Ohio | 58 | - The company's principal executive office is a **74,000 sq. ft. leased facility** in Atlanta, Georgia, and it also has significant furniture manufacturing facilities in Georgia totaling **738,000 sq. ft.**[108](index=108&type=chunk) [Item 3. Legal Proceedings](index=39&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in a lawsuit regarding wage scale disclosures in job postings, with no other material litigation reported - A lawsuit was filed on October 11, 2023 (Jacob Atkinson v. Aaron's, LLC) alleging violation of Washington's Equal Pay and Opportunity Act for not including wage scales in job postings, and the company filed a motion to dismiss[109](index=109&type=chunk) - The company states there is no other material pending or threatened litigation outstanding as of December 31, 2023[109](index=109&type=chunk) [Item 4. Mine Safety Disclosures](index=39&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[110](index=110&type=chunk) [Part II](index=40&type=section&id=PART%20II) [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=40&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock is listed on the NYSE, pays a quarterly dividend, and has an active share repurchase program - The company's common stock trades on the NYSE under the symbol 'AAN'[112](index=112&type=chunk) Share Repurchase Activity (Q4 2023) | Period | Total Shares Purchased | Average Price Paid per share | Max. Dollar Value Remaining ($) | | :--- | :--- | :--- | :--- | | Oct 2023 | — | $ — | $127,033,496 | | Nov 2023 | 1,945 | $8.07 | $127,017,800 | | Dec 2023 | — | $ — | $127,017,800 | | **Total** | **1,945** | | | - The Board's share repurchase authorization was increased to **$250.0 million** in March 2022 and extends through December 31, 2024, with **$127.0 million** remaining available as of year-end 2023[114](index=114&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=42&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In fiscal year 2023, consolidated revenues decreased 4.9% to $2.14 billion, impacted by a decline in the Aaron's Business segment and restructuring charges Consolidated Financial Highlights (Year Ended Dec 31) | Metric (in thousands) | 2023 | 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $2,139,890 | $2,249,434 | (4.9)% | | Gross Profit | $1,119,319 | $1,161,773 | (3.7)% | | Operating Profit (Loss) | $12,550 | $(2,548) | nmf | | Loss Before Income Taxes | $(1,058) | $(14,743) | 92.8% | | Net Earnings (Loss) | $2,823 | $(5,280) | nmf | - The decrease in 2023 consolidated revenues was primarily driven by a **$157.0 million decline** in the Aaron's Business segment, partially offset by the full-year inclusion of the BrandsMart segment[135](index=135&type=chunk)[147](index=147&type=chunk) - The Aaron's Business lease portfolio size ended 2023 at **$117.7 million**, a **7.0% decrease** from year-end 2022, reflecting lower customer demand[136](index=136&type=chunk)[139](index=139&type=chunk) - The company is actively implementing restructuring programs, including the Real Estate Repositioning and Optimization program (GenNext stores) and an Operational Efficiency program, incurring **$15.6 million** in related expenses in 2023[130](index=130&type=chunk)[133](index=133&type=chunk)[149](index=149&type=chunk) - Cash provided by operating activities was **$180.4 million** in 2023, an increase from **$170.4 million** in 2022, driven by improved earnings and lower lease merchandise purchases[163](index=163&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=57&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk on its variable-rate debt, partially mitigated by an interest rate swap - The company is exposed to interest rate risk from its variable-rate borrowings under the Credit Facility, which totaled **$194.5 million** at year-end 2023[177](index=177&type=chunk) - In March 2023, the company entered into an interest rate swap agreement on a notional amount of **$100.0 million** to hedge against rising interest rates, effective through March 2027[177](index=177&type=chunk) - A hypothetical **10% increase or decrease** in interest rates would change the company's annual interest expense by an estimated **$0.7 million** on its unhedged variable-rate debt[177](index=177&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=58&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements, including an adverse opinion on internal controls due to a material weakness - The independent auditor, Ernst & Young LLP, issued an **adverse opinion** on the Company's internal control over financial reporting as of December 31, 2023[188](index=188&type=chunk) - A material weakness was identified in the design of information technology general controls (ITGCs) related to user access, program change, and segregation of duties for certain IT applications within the BrandsMart segment[188](index=188&type=chunk)[193](index=193&type=chunk) Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$1,826,576** | **$1,858,463** | | Cash and Cash Equivalents | $59,035 | $27,716 | | Lease Merchandise, Net | $622,262 | $693,795 | | **Total Liabilities** | **$1,140,438** | **$1,163,061** | | Debt | $193,963 | $242,413 | | **Total Shareholders' Equity** | **$686,138** | **$695,402** | Consolidated Statement of Earnings Data (in thousands) | | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Total Revenues | $2,139,890 | $2,249,434 | | Gross Profit | $1,119,319 | $1,161,773 | | Operating Profit (Loss) | $12,550 | $(2,548) | | **Net Earnings (Loss)** | **$2,823** | **$(5,280)** | | **Diluted EPS** | **$0.09** | **$(0.17)** | [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=108&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no disagreements with its accountants on any accounting or financial disclosure matters - None[362](index=362&type=chunk) [Item 9A. Controls and Procedures](index=108&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls were not effective as of December 31, 2023, due to a material weakness in IT general controls within the BrandsMart segment - Management concluded that disclosure controls and procedures were **not effective** as of December 31, 2023[363](index=363&type=chunk) - A material weakness was identified in the BrandsMart segment related to the design of information technology general controls (ITGCs) concerning user access, program changes, and segregation of duties[365](index=365&type=chunk) - Remediation efforts are underway to modify access rights and standardize ITGCs, with the material weakness expected to be remediated in 2024[366](index=366&type=chunk) [Item 9B. Other Information](index=108&type=section&id=Item%209B.%20Other%20Information) During Q4 2023, CEO Douglas Lindsay terminated a Rule 10b5-1 trading arrangement - On November 10, 2023, CEO Douglas Lindsay terminated a Rule 10b5-1 trading arrangement that was adopted on November 2, 2023[369](index=369&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=109&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[370](index=370&type=chunk) [Part III](index=110&type=section&id=PART%20III) [Item 10. Directors, Executive Officers of the Registrant and Corporate Governance](index=110&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20of%20the%20Registrant%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Proxy Statement - The required information is incorporated by reference from the registrant's definitive Proxy Statement for the 2024 annual meeting of shareholders[372](index=372&type=chunk) [Item 11. Executive Compensation](index=110&type=section&id=Item%2011.%20Executive%20Compensation) Information on executive compensation is incorporated by reference from the 2024 Proxy Statement - The required information is incorporated by reference from the registrant's definitive Proxy Statement for the 2024 annual meeting of shareholders[373](index=373&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=110&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership and equity compensation plans is incorporated by reference from the 2024 Proxy Statement - The required information is incorporated by reference from the registrant's definitive Proxy Statement for the 2024 annual meeting of shareholders[375](index=375&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=110&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the 2024 Proxy Statement - The required information is incorporated by reference from the registrant's definitive Proxy Statement for the 2024 annual meeting of shareholders[376](index=376&type=chunk) [Item 14. Principal Accountant Fees and Services](index=110&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on principal accountant fees and services is incorporated by reference from the 2024 Proxy Statement - The required information is incorporated by reference from the registrant's definitive Proxy Statement for the 2024 annual meeting of shareholders[377](index=377&type=chunk) [Part IV](index=111&type=section&id=PART%20IV) [Item 15. Exhibits, Financial Statements and Schedules](index=111&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statements%20and%20Schedules) This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K - Lists the financial statements of The Aaron's Company, Inc. which are set forth in Item 8[379](index=379&type=chunk) - Provides a detailed list of exhibits filed with the report, including the Stock Purchase Agreement for BrandsMart, the Credit Agreement, and various management compensation plans[381](index=381&type=chunk)[383](index=383&type=chunk)[384](index=384&type=chunk) [Item 16. Form 10-K Summary](index=113&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has not provided a summary for this item - None[387](index=387&type=chunk)