UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________________________ FORM 10-Q ________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022 OR | --- | --- | |-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________________________ FORM 10-Q ________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022 OR | --- | --- | |----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------- ...

PART I. FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company's Q1 2022 financial statements show decreased revenues and net earnings, stable assets, reduced liabilities, increased operating cash flow, and a significant post-quarter acquisition Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2022 (In Thousands) | December 31, 2021 (In Thousands) | | :--- | :--- | :--- | | **Total Assets** | **$1,446,362** | **$1,441,265** | | Cash and Cash Equivalents | $13,518 | $22,832 | | Lease Merchandise, Net | $769,018 | $772,154 | | **Total Liabilities** | **$715,454** | **$723,099** | | Debt | $0 | $10,000 | | **Total Shareholders' Equity** | **$730,908** | **$718,166** | Condensed Consolidated Statements of Earnings Highlights (Unaudited) | Account | Three Months Ended March 31, 2022 (In Thousands) | Three Months Ended March 31, 2021 (In Thousands) | | :--- | :--- | :--- | | **Total Revenues** | **$456,082** | **$481,054** | | Operating Profit | $30,182 | $48,591 | | **Net Earnings** | **$21,532** | **$36,323** | | Earnings Per Share (Diluted) | $0.68 | $1.04 | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Activity | Three Months Ended March 31, 2022 (In Thousands) | Three Months Ended March 31, 2021 (In Thousands) | | :--- | :--- | :--- | | Cash Provided by Operating Activities | $29,052 | $20,199 | | Cash Used in Investing Activities | ($17,063) | ($23,425) | | Cash Used in Financing Activities | ($21,321) | ($11,835) | | **Decrease in Cash and Cash Equivalents** | **($9,314)** | **($15,059)** | - On April 1, 2022, the Company completed the acquisition of BrandsMart U.S.A. for approximately **$230 million** in cash, expected to strengthen product offerings and provide enhanced payment options to BrandsMart customers[17](index=17&type=chunk)[68](index=68&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the Q1 2022 revenue decrease to normalized lease renewal rates and fewer early purchase options, alongside increased write-offs, while highlighting the post-quarter BrandsMart acquisition and ongoing share repurchase program Q1 2022 vs Q1 2021 Financial Performance | Metric | Q1 2022 | Q1 2021 | Change | | :--- | :--- | :--- | :--- | | Revenues | $456.1M | $481.1M | -5.2% | | Same Store Revenues | - | - | -4.3% | | Net Earnings | $21.5M | $36.3M | -40.7% | | Diluted EPS | $0.68 | $1.04 | -34.6% | - The decrease in revenues was primarily driven by a **4.3% decrease** in same store revenues, reflecting an expected normalization in the lease renewal rate (**89.4%** in Q1 2022 vs **92.5%** in Q1 2021) and lower early purchase options following a stimulus-aided Q1 2021[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk) - The provision for lease merchandise write-offs increased to **5.4%** of lease revenues and fees, compared to **3.1%** in the prior-year period, reflecting a normalization of customer payment activity from historically strong levels in 2021[83](index=83&type=chunk)[97](index=97&type=chunk) - E-commerce revenues grew **3.9%** year-over-year, accounting for **15.4%** of total lease revenues and fees, up from **14.3%** in Q1 2021[83](index=83&type=chunk)[93](index=93&type=chunk) - Subsequent to the quarter end, on April 1, 2022, the company acquired BrandsMart U.S.A. and entered into a new credit facility consisting of a **$175 million** term loan and a **$375 million** revolving facility to finance the transaction[68](index=68&type=chunk)[69](index=69&type=chunk)[103](index=103&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate exposure on variable-rate debt, particularly future borrowings under the new SOFR-tied credit facility, with no outstanding borrowings as of March 31, 2022 - The company is exposed to interest rate risk through its variable-rate credit facilities, with future borrowings under the new Credit Facility tied to the Secured Overnight Financing Rate (SOFR), exposing the company to increased costs if interest rates rise[117](index=117&type=chunk) - As of March 31, 2022, the Company had no outstanding borrowings under its previous credit facility[117](index=117&type=chunk) [Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of the end of the reporting period, the CEO and CFO concluded that the Company's disclosure controls and procedures were **effective**[119](index=119&type=chunk) - **No changes** in the Company's internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[120](index=120&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various ordinary course legal proceedings, with management not expecting a material adverse impact, and an accrual of **$1.7 million** established for probable losses - The Company has accrued **$1.7 million** for pending legal and regulatory matters where losses are deemed probable and estimable[61](index=61&type=chunk) - In Q1 2021, Aaron's, LLC received a subpoena from the California Department of Financial Protection and Innovation (DFPI) regarding compliance with state consumer protection laws, and the company is cooperating with the inquiry[62](index=62&type=chunk) [Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the company's 2021 Annual Report on Form 10-K have been reported - There are **no material changes** to the risk factors previously disclosed in the 2021 Annual Report[123](index=123&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 2022, the company repurchased **261,924** shares for **$5.7 million**, with the Board increasing the share repurchase authorization to **$250 million** and extending it through December 31, 2024 Share Repurchase Activity (Q1 2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 1 - Jan 31, 2022 | 0 | N/A | | Feb 1 - Feb 28, 2022 | 0 | N/A | | Mar 1 - Mar 31, 2022 | 261,924 | $21.84 | - On March 2, 2022, the Board increased the share repurchase authorization to **$250.0 million** from **$150.0 million** and extended the program to **December 31, 2024**, with **$141.2 million** remaining available for repurchase as of March 31, 2022[107](index=107&type=chunk)[124](index=124&type=chunk) [Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) None reported [Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) None reported [Other Information](index=36&type=section&id=Item%205.%20Other%20Information) None reported [Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including the BrandsMart acquisition agreements and required officer certifications - Key exhibits filed include the Stock Purchase Agreement for BrandsMart, the new Credit Agreement, the new Franchise Loan Facility Agreement, and officer certifications[127](index=127&type=chunk)

Part I [Business](index=5&type=section&id=ITEM%201.%20BUSINESS) The company is an omni-channel lease-to-own provider of home goods, executing a strategic plan including the acquisition of BrandsMart - The Aaron's Company is a technology-enabled, omni-channel provider of lease-to-own (LTO) and purchase solutions for home goods, operating through a network of approximately 1,300 company-operated and franchised stores and the Aarons.com e-commerce platform[12](index=12&type=chunk) - On February 23, 2022, the company agreed to acquire BrandsMart U.S.A. for approximately **$230 million in cash**, a transaction expected to close in Q2 2022, aiming to expand product selection and payment options[13](index=13&type=chunk) - The company's strategic plan focuses on four core priorities: aligning its store footprint with its 'GenNext' concept, simplifying and digitizing the customer experience, promoting its value proposition, and advancing ESG initiatives[15](index=15&type=chunk) Store Count as of December 31, 2021 | Store Type | Count | | :--- | :--- | | Company-operated stores | 1,074 | | Independently-owned franchised stores | 236 | | **Total Stores** | **1,310** | Revenue by Merchandise Category (2019-2021) | Merchandise Category | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Furniture | 43% | 44% | 44% | | Home appliances | 31% | 29% | 27% | | Electronics | 23% | 24% | 26% | | Other | 3% | 3% | 3% | - Recurring revenue from contracted lease payments constituted approximately **89% of the company's total revenue** for the year ended December 31, 2021[21](index=21&type=chunk) [Risk Factors](index=19&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces material risks from the COVID-19 pandemic, regulatory scrutiny, operational challenges, and its separation from PROG Holdings - **COVID-19 Risks:** The pandemic may continue to materially affect business operations, financial condition, and cash flow due to potential new virus variants, governmental restrictions, supply chain disruptions, and impacts on labor availability and costs[58](index=58&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk) - **Regulatory and Legal Risks:** The company faces increased focus from federal (FTC) and state regulators on the LTO industry, potentially leading to new laws, pricing restrictions, fines, and significant compliance costs[61](index=61&type=chunk)[62](index=62&type=chunk) - **Business and Strategic Risks:** Challenges include the successful integration of the BrandsMart acquisition, execution of the strategic plan, intense competition from various retail and financing sources, and managing inventory to meet changing consumer demand[53](index=53&type=chunk)[72](index=72&type=chunk)[74](index=74&type=chunk) - **Cybersecurity and Technology Risks:** A failure to protect the security of customer and employee personal information from cyberattacks could result in significant costs, litigation, and reputational damage[69](index=69&type=chunk)[71](index=71&type=chunk) - **Inflation Risk:** An inflationary environment could adversely impact business through increased labor, raw material, and logistics costs, and could also lead to lower lease volumes if prices accelerate[65](index=65&type=chunk) - **Separation Risks:** As a company with a limited history of operating independently from PROG Holdings, historical financial data may not be indicative of future results, and the company faces costs of operating as a standalone public entity[86](index=86&type=chunk)[87](index=87&type=chunk) [Unresolved Staff Comments](index=38&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports no unresolved comments from SEC staff - None[96](index=96&type=chunk) [Properties](index=38&type=section&id=ITEM%202.%20PROPERTIES) The company leases most retail and corporate facilities and owns its furniture manufacturing plants - The company leases most of its store-based operations, call center space, and corporate offices, with leases expiring at various times through 2033[97](index=97&type=chunk) Principal Facilities as of December 31, 2021 | Location | Primary Use and How Held | Sq. Ft. | | :--- | :--- | :--- | | Atlanta, Georgia | Executive/Administrative Offices – Leased | 74,000 | | Kennesaw, Georgia | Administrative Office – Leased | 37,000 | | Various properties in Georgia | Furniture Manufacturing, Warehouse, Admin – Primarily Owned | 738,000 | [Legal Proceedings](index=38&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is involved in ordinary course legal matters and is cooperating with a California DFPI inquiry - The company does not currently believe that any outstanding legal proceedings will have a material adverse impact on its business, results of operations, or financial condition[99](index=99&type=chunk) - As of December 31, 2021, the company had accrued **$1.7 million** for pending legal matters, with a reasonably possible loss in excess of this accrual estimated between zero and **$3.0 million**[295](index=295&type=chunk) - In Q1 2021, Aaron's, LLC received a subpoena from the California Department of Financial Protection and Innovation (DFPI) regarding compliance with state consumer protection laws[296](index=296&type=chunk) [Mine Safety Disclosures](index=38&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section is not applicable to the company's operations - Not applicable[100](index=100&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=39&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT'S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's stock trades on the NYSE, it pays a quarterly dividend, and it actively repurchased shares in Q4 2021 - The company's common stock is listed on the NYSE under the symbol **'AAN'**, with 282 shareholders of record as of February 18, 2022[102](index=102&type=chunk) Share Repurchase Activity (Q4 2021) | Period | Total Shares Purchased | Average Price Paid per Share ($) | | :--- | :--- | :--- | | Oct 1 - Oct 31, 2021 | 282,623 | 28.16 | | Nov 1 - Nov 30, 2021 | — | — | | Dec 1 - Dec 31, 2021 | 537,715 | 23.62 | | **Total Q4 2021** | **820,338** | **N/A** | - A **$150 million** share repurchase program was authorized in March 2021, with approximately **$46.9 million** remaining available as of December 31, 2021[103](index=103&type=chunk) [[Reserved]](index=40&type=section&id=ITEM%206.%20%5BRESERVED%5D) This item is not applicable - Not applicable[107](index=107&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=ITEM%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Revenues grew 6.4% to $1.85 billion in 2021, with net earnings rebounding significantly due to the absence of a prior-year impairment charge Fiscal Year 2021 Financial Highlights vs. 2020 | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Revenues | $1.85 billion | $1.73 billion | +6.4% | | Net Earnings (Loss) | $109.9 million | ($265.9 million) | nmf | | Diluted EPS (Loss) | $3.26 | ($7.85) | nmf | | Same Store Revenues | N/A | N/A | +9.3% | | E-commerce Revenue Growth | N/A | N/A | +20.1% | - The significant improvement in net earnings in 2021 was primarily due to the absence of the **$446.9 million goodwill impairment charge** recorded in 2020[119](index=119&type=chunk) - The provision for lease merchandise write-offs as a percentage of lease revenues and fees was **stable at 4.2%** for both 2021 and 2020[119](index=119&type=chunk) - The company returned **$113.1 million** to shareholders in 2021 through share repurchases and dividends[119](index=119&type=chunk) - As of December 31, 2021, the company had **$22.8 million in cash** and **$222.7 million of availability** under its revolving credit facility[140](index=140&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risk is interest rate fluctuation on its variable-rate debt and the pending LIBOR transition - The company is exposed to interest rate risk from its $250.0 million Revolving Facility, with **$10.0 million outstanding** under this facility as of December 31, 2021[166](index=166&type=chunk) - The company faces additional interest rate risk from the planned discontinuation of certain LIBOR rates, to which current borrowings are tied[166](index=166&type=chunk) - The company does not use significant market risk sensitive instruments for hedging or speculative purposes[166](index=166&type=chunk) [Financial Statements and Supplementary Data](index=59&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section presents the audited financial statements, which received an unqualified opinion from Ernst & Young LLP - The independent auditor, Ernst & Young LLP, issued an **unqualified opinion** on the consolidated and combined financial statements[169](index=169&type=chunk) - The auditor also issued an **unqualified opinion on the effectiveness of the company's internal control** over financial reporting as of December 31, 2021[170](index=170&type=chunk)[179](index=179&type=chunk) - **Critical Audit Matters** identified by the auditor were the 'Estimated claims liabilities' and the 'Allowance for lease merchandise write-offs'[173](index=173&type=chunk)[174](index=174&type=chunk)[176](index=176&type=chunk) Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Total Assets** | **$1,441,265** | **$1,353,457** | | Cash and Cash Equivalents | $22,832 | $76,123 | | Lease Merchandise, Net | $772,154 | $697,235 | | **Total Liabilities** | **$723,099** | **$642,132** | | Operating Lease Liabilities | $309,834 | $278,958 | | **Total Shareholders' Equity** | **$718,166** | **$711,325** | Consolidated Statement of Earnings Highlights (in thousands) | Account | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | **Total Revenues** | **$1,845,504** | **$1,734,919** | **$1,784,477** | | Gross Profit | $1,159,489 | $1,083,542 | $1,112,016 | | Operating Profit (Loss) | $145,749 | ($386,038) | $47,356 | | **Net Earnings (Loss)** | **$109,934** | **($265,912)** | **$28,099** | | Earnings (Loss) Per Share - Diluted | $3.26 | ($7.85) | $0.83 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=104&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 accounting or financial disclosure matters - None[339](index=339&type=chunk) [Controls and Procedures](index=104&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that the company's disclosure controls and internal control over financial reporting were effective - Based on an evaluation by management, the CEO and CFO concluded that the company's disclosure controls and procedures were **effective as of December 31, 2021**[340](index=340&type=chunk) - Management's report and the independent auditor's report both concluded that the company's internal control over financial reporting was **effective as of December 31, 2021**[341](index=341&type=chunk) - No material changes were made to the company's internal control over financial reporting during the fourth fiscal quarter of 2021[342](index=342&type=chunk) [Other Information](index=104&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) The company reports no other information for this item - None[342](index=342&type=chunk) [Disclosure Regarding Foreign Jurisdictions That Prevent Inspections](index=104&type=section&id=ITEM%209C.%20DISCLOSURE%20REGARDING%20FOREIGN%20JURISDICTIONS%20THAT%20PREVENT%20INSPECTIONS) This disclosure requirement is not applicable to the company - Not applicable[343](index=343&type=chunk) Part III [Directors, Executive Officers of the Registrant and Corporate Governance](index=105&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20OF%20THE%20REGISTRANT%20AND%20CORPORATE%20GOVERNANCE) Information on directors, officers, and corporate governance is incorporated by reference from the 2022 Proxy Statement - The required information is incorporated by reference from the company's Proxy Statement for the 2022 annual meeting of shareholders[345](index=345&type=chunk) - The company has adopted a code of business conduct and ethics for all directors, officers, and team members, available on its investor website[346](index=346&type=chunk) [Executive Compensation](index=105&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Details regarding executive compensation are incorporated by reference from the company's 2022 Proxy Statement - The required information regarding executive compensation is incorporated by reference from the company's Proxy Statement[347](index=347&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=105&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Information on security ownership is incorporated by reference from the company's 2022 Proxy Statement - The required information regarding security ownership is incorporated by reference from the company's Proxy Statement[348](index=348&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=105&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) Details on related party transactions and director independence are incorporated by reference from the 2022 Proxy Statement - The required information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's Proxy Statement[349](index=349&type=chunk) [Principal Accountant Fees and Services](index=105&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Information on principal accountant fees and services is incorporated by reference from the 2022 Proxy Statement - The required information regarding principal accountant fees and services is incorporated by reference from the company's Proxy Statement[350](index=350&type=chunk) Part IV [Exhibits, Financial Statements and Schedules](index=106&type=section&id=ITEM%2015.%20EXHIBITS%2C%20FINANCIAL%20STATEMENTS%20AND%20SCHEDULES) This section lists all financial statements, schedules, and exhibits filed as part of the annual report - The financial statements and the Report of Independent Registered Public Accounting Firm are located in Item 8 of this report[352](index=352&type=chunk) - All financial statement schedules have been omitted because they are not applicable or the necessary information is already included in the financial statements or notes[353](index=353&type=chunk) - A detailed list of exhibits filed with the report is provided, including agreements related to the separation from PROG Holdings, debt facilities, and executive compensation plans[354](index=354&type=chunk)[357](index=357&type=chunk)[359](index=359&type=chunk)

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements for The Aaron's Company, Inc. as of September 30, 2021, including balance sheets, earnings, cash flows, and accompanying notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$1.416 billion** as of September 30, 2021, primarily due to higher lease merchandise, with liabilities and equity also rising Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and Cash Equivalents | $14,846 | $76,123 | | Lease Merchandise, Net | $775,012 | $697,235 | | **Total Assets** | **$1,416,412** | **$1,353,457** | | Total Liabilities | $694,882 | $642,132 | | **Total Shareholders' Equity** | **$721,530** | **$711,325** | [Condensed Consolidated and Combined Statements of Earnings](index=5&type=section&id=Condensed%20Consolidated%20and%20Combined%20Statements%20of%20Earnings) Q3 2021 revenues increased to **$452.2 million**, but net earnings decreased; nine-month net earnings swung to **$93.6 million** from a prior-year loss impacted by goodwill impairment Statements of Earnings Highlights (in thousands, except per share data) | Metric | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $452,153 | $440,961 | $1,400,702 | $1,304,747 | | Operating Profit (Loss) | $33,218 | $41,356 | $125,860 | ($393,018) | | Net Earnings (Loss) | $24,348 | $32,613 | $93,646 | ($268,787) | | Diluted EPS | $0.73 | $0.96 | $2.74 | ($7.94) | [Condensed Consolidated and Combined Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20and%20Combined%20Statements%20of%20Cash%20Flows) Cash from operations significantly decreased to **$90.4 million** for the nine months ended September 30, 2021, leading to a **$61.3 million** net cash decrease driven by share repurchases and dividends Cash Flow Summary - Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Cash Provided by Operating Activities | $90,394 | $337,238 | | Cash Used in Investing Activities | ($61,555) | ($44,406) | | Cash (Used in) Provided by Financing Activities | ($90,103) | $91,279 | | **(Decrease) Increase in Cash** | **($61,277)** | **$384,089** | [Notes to Financial Statements](index=8&type=section&id=Notes%20to%20Financial%20Statements) Detailed notes explain accounting policies, financial results, spin-off basis, revenue recognition, restructuring programs, and commitments and contingencies - The company is a technology-enabled, omni-channel provider of lease-to-own (LTO) and purchase solutions, operating through approximately **1,300 stores** and its e-commerce platform[21](index=21&type=chunk) - On November 30, 2020, the company completed its separation from its former parent, PROG Holdings, Inc., and became an independent, publicly traded company[20](index=20&type=chunk) Systemwide Store Count | Store Type | Sep 30, 2021 | Sep 30, 2020 | | :--- | :--- | :--- | | Company-operated | 1,084 | 1,086 | | Franchised | 237 | 308 | | **Total** | **1,321** | **1,394** | - The company initiated a real estate repositioning and optimization restructuring program in Q1 2020, resulting in the closure, consolidation, or relocation of **126 company-operated stores** through Q3 2021, with approximately **45 more stores** identified for similar actions[87](index=87&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 and nine-month 2021 financial performance, covering revenue growth, normalizing customer payments, write-offs, restructuring, liquidity, share repurchases, and dividends [Results of Operations – Three Months Ended September 30, 2021](index=33&type=section&id=Results%20of%20Operations%20%E2%80%93%20Three%20Months%20Ended%20September%2030%2C%202021) Q3 2021 revenues grew **2.5%** to **$452.2 million**, but operating profit fell **19.7%** and net earnings decreased **25.3%**, mainly due to increased write-offs as customer payments normalized Q3 2021 vs Q3 2020 Performance (in thousands) | Metric | Q3 2021 | Q3 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $452,153 | $440,961 | $11,192 | 2.5% | | Gross Profit | $284,642 | $279,564 | $5,078 | 1.8% | | Operating Profit | $33,218 | $41,356 | ($8,138) | (19.7%) | | Net Earnings | $24,348 | $32,613 | ($8,265) | (25.3%) | - Same-store revenues increased **4.6%**, driven by a larger lease portfolio size, which was up **6.1%** year-over-year to **$99.6 million** at quarter-end[103](index=103&type=chunk)[105](index=105&type=chunk) - The provision for lease merchandise write-offs more than doubled to **$19.8 million** from **$9.3 million** in Q3 2020, as customer payment activity normalized from historically strong levels supported by government stimulus[103](index=103&type=chunk)[122](index=122&type=chunk) - E-commerce revenues grew **13.3%** and constituted **14.3%** of total lease revenues and fees, up from **13.1%** in the prior year[103](index=103&type=chunk)[116](index=116&type=chunk) [Results of Operations – Nine Months Ended September 30, 2021](index=37&type=section&id=Results%20of%20Operations%20%E2%80%93%20Nine%20Months%20Ended%20September%2030%2C%202021) Nine-month revenues increased **7.4%** to **$1.4 billion**, with operating profit of **$125.9 million** reversing a prior-year loss of **$393.0 million**, driven by strong revenue growth and absence of goodwill impairment Nine Months 2021 vs 2020 Performance (in thousands) | Metric | 9 Months 2021 | 9 Months 2020 | Change ($) | | :--- | :--- | :--- | :--- | | Total Revenues | $1,400,702 | $1,304,747 | $95,955 | | Gross Profit | $882,390 | $810,732 | $71,658 | | Operating Profit (Loss) | $125,860 | ($393,018) | $518,878 | | Net Earnings (Loss) | $93,646 | ($268,787) | $362,433 | - Same-store revenues increased **10.6%**, contributing **$79.9 million** to revenue growth, driven by a larger lease portfolio and strong customer payment activity, partly due to government stimulus[129](index=129&type=chunk) - Restructuring expenses decreased significantly to **$8.1 million** from **$33.3 million** in the prior-year period[136](index=136&type=chunk) - The prior year's results included a **$446.9 million** goodwill impairment charge, which was not repeated in 2021[136](index=136&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and cash equivalents decreased by **$61.3 million** to **$14.8 million** for the nine months ended September 30, 2021, due to reduced operating cash flow and **$90.1 million** used in financing for repurchases and dividends - Cash provided by operating activities decreased to **$90.4 million** for the nine months ended Sep 30, 2021, down from **$337.2 million** in the prior year period, mainly due to higher lease merchandise purchases[143](index=143&type=chunk) - The company repurchased **2,751,474 shares** for **$82.4 million** during the first nine months of 2021 under a **$150.0 million** authorization[140](index=140&type=chunk)[146](index=146&type=chunk) - A quarterly dividend of **$0.10 per share** was approved in August 2021, with total dividend payments for the first nine months of 2021 amounting to **$10.0 million**[147](index=147&type=chunk) - As of September 30, 2021, the company had no outstanding borrowings under its revolving facility and was in compliance with all financial covenants[148](index=148&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risk is interest rate fluctuations on the variable-rate Revolving Credit Facility, with no outstanding borrowings as of September 30, 2021, minimizing immediate risk, and no derivative use - The company is exposed to interest rate risk through its Revolving Facility, where borrowings are indexed to LIBOR or the prime rate[155](index=155&type=chunk) - As of September 30, 2021, there were no outstanding borrowings under the Revolving Facility[155](index=155&type=chunk) [Item 4. Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including CEO and CFO, concluded the company's disclosure controls and procedures were effective as of September 30, 2021, with no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of the end of the reporting period, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[157](index=157&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[158](index=158&type=chunk) [PART II. OTHER INFORMATION](index=45&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, but management does not expect a material adverse impact on its financial position or results of operations - The company is party to various legal proceedings but does not expect them to have a material adverse impact on its business or financial results[160](index=160&type=chunk) [Item 1A. Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors affecting the company's business and financial results from those disclosed in its 2020 Annual Report on Form 10-K - No material changes to the risk factors previously disclosed in the 2020 Annual Report were identified[161](index=161&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details the company's share repurchase activity for Q3 2021, with **1,333,264 shares** repurchased under a **$150.0 million** authorization announced in March 2021 Share Repurchase Activity - Q3 2021 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2021 | 438,394 | $29.65 | | August 2021 | 408,180 | $28.06 | | September 2021 | 486,690 | $26.84 | | **Q3 Total** | **1,333,264** | **-** | - As of September 30, 2021, **$67.6 million** remained available for repurchase under the company's publicly announced plan[163](index=163&type=chunk) [Item 5. Other Information](index=45&type=section&id=Item%205.%20Other%20Information) No other information to report for this item - None[164](index=164&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the Quarterly Report on Form 10-Q, including CEO/CFO certifications and XBRL data files