[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited condensed consolidated financial statements provide a detailed financial snapshot for the quarter and nine months ended October 31, 2021 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$1,786.6 million**, liabilities decreased, and stockholders' equity rose, primarily driven by retained earnings Condensed Consolidated Balance Sheets (in thousands) | Metric | Oct 31, 2021 (in thousands) | Jan 31, 2021 (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | | Total Assets | $1,786,579 | $1,755,084 | | Total Liabilities | $1,123,064 | $1,197,929 | | Total Stockholders' Equity | $663,515 | $557,155 | | Inventories | $263,134 | $196,463 | | Long-term debt and finance lease obligations | $459,319 | $608,635 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Total revenues increased for both periods, with net income significantly improving to **$100.6 million** for the nine months ended October 31, 2021, from a prior-year loss Three Months Ended October 31 (in thousands) | Metric | 2021 | 2020 | Change | | :---------------- | :------- | :------- | :------- | | Total Revenues | $405,458 | $334,158 | +21.4% | | Net Income | $18,239 | $7,419 | +145.8% | | Basic EPS | $0.62 | $0.25 | +148.0% | | Diluted EPS | $0.60 | $0.25 | +140.0% | Nine Months Ended October 31 (in thousands) | Metric | 2021 | 2020 | Change | | :---------------- | :--------- | :--------- | :-------------------- | | Total Revenues | $1,187,543 | $1,018,234 | +16.6% | | Net Income (Loss) | $100,641 | $(28,263) | N/A (swing to profit) | | Basic EPS | $3.42 | $(0.97) | N/A (swing to profit) | | Diluted EPS | $3.34 | $(0.97) | N/A (swing to profit) | [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity increased from **$557.2 million** to **$663.5 million**, primarily driven by net income and stock-based compensation - Total Stockholders' Equity increased from **$557,155 thousand** at January 31, 2021, to **$663,515 thousand** at October 31, 2021[13](index=13&type=chunk) - Net income contributed **$18,239 thousand** in the three months ended October 31, 2021, and **$45,398 thousand** and **$37,004 thousand** in the preceding two quarters, respectively, to retained earnings[13](index=13&type=chunk) - Stock-based compensation added **$2,039 thousand**, **$1,713 thousand**, and **$2,630 thousand** across the three quarters of 2021[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow decreased significantly to **$167.7 million** for the nine months ended October 31, 2021, mainly due to increased inventory and lower collections, while investing and financing cash flows also decreased Nine Months Ended October 31 (in thousands) | Metric | 2021 | 2020 | Change | | :---------------------------------------- | :------- | :------- | :-------------------------- | | Net cash provided by operating activities | $167,676 | $385,462 | -56.5% | | Net cash used in investing activities | $(33,150) | $(46,644) | +28.9% (less cash used) | | Net cash used in financing activities | $(158,661) | $(233,477) | +32.0% (less cash used) | | Net change in cash, cash equivalents and restricted cash | $(24,135) | $105,341 | N/A (swing to outflow) | - Operating cash flow decrease primarily due to an increase in inventory and lower collections compared to the prior year[121](index=121&type=chunk) - Financing cash flow decrease was influenced by asset-backed note issuances (**$62.9 million** in 2021 vs **$240.1 million** in 2020) and the retirement of Senior Notes (**$141.2 million** in 2021)[121](index=121&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of accounting policies, financial instruments, and specific line items within the condensed consolidated financial statements [1. Summary of Significant Accounting Policies](index=9&type=section&id=1.%20Summary%20of%20Significant%20Accounting%20Policies) Conn's, Inc. operates retail and credit segments, consolidates Variable Interest Entities, and adopted recent accounting pronouncements with no material impact - The Company operates two reportable segments: retail and credit, which are managed independently[22](index=22&type=chunk) - Variable Interest Entities (VIEs) are consolidated as the Company is the primary beneficiary, retaining servicing and residual equity[23](index=23&type=chunk) - The adoption of ASU 2019-12 (Income Taxes) had no material impact, and ASU 2020-04 and 2021-01 (Reference Rate Reform) are not expected to have a material impact[38](index=38&type=chunk)[39](index=39&type=chunk) [2. Customer Accounts Receivable](index=14&type=section&id=2.%20Customer%20Accounts%20Receivable) Customer accounts receivable, net of allowances, decreased to **$887.0 million**, with a significant reduction in the allowance for credit losses due to an improved macroeconomic outlook and tighter underwriting Customer Accounts Receivable (in thousands) | Metric | Oct 31, 2021 | Jan 31, 2021 | Change | | :---------------------------------------------------------------- | :----------- | :----------- | :------- | | Carrying value of customer accounts receivable, net of allowance for credit losses | $887,028 | $909,483 | -2.5% | | Allowance for credit losses | $(194,377) | $(276,610) | -29.7% | | Customer accounts receivable 60+ days past due | $95,534 | $146,820 | -35.0% | | Re-aged customer accounts receivable | $198,279 | $306,845 | -35.3% | - The decrease in the allowance for credit losses was primarily due to an improved macroeconomic forecast, specifically a decrease in unemployment rates[42](index=42&type=chunk) - As of October 31, 2021, **75.0%** of the customer accounts receivable portfolio was current[45](index=45&type=chunk) [3. Finance Charges and Other Revenues](index=15&type=section&id=3.%20Finance%20Charges%20and%20Other%20Revenues) Total finance charges and other revenues decreased by **4.7%** for the three months and **13.5%** for the nine months ended October 31, 2021, primarily due to a decline in the average outstanding customer accounts receivable portfolio balance, despite an increased yield rate Finance Charges and Other Revenues (in thousands) | Metric | Three Months Ended Oct 31, 2021 | Three Months Ended Oct 31, 2020 | Nine Months Ended Oct 31, 2021 | Nine Months Ended Oct 31, 2020 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Interest income and fees | $63,621 | $69,996 | $196,303 | $235,438 | | Insurance income | $6,992 | $4,222 | $17,881 | $12,359 | | Other revenues | $262 | $168 | $695 | $599 | | Total finance charges and other revenues | $70,875 | $74,386 | $214,879 | $248,396 | - The decrease in finance charges and other revenues was primarily due to a **15.2%** (three months) and **20.9%** (nine months) decrease in the average outstanding balance of the customer accounts receivable portfolio[96](index=96&type=chunk)[105](index=105&type=chunk) - The yield rate increased from **21.1%** to **22.6%** for the three months and from **21.9%** to **23.1%** for the nine months ended October 31, 2021[96](index=96&type=chunk)[106](index=106&type=chunk) [4. Debt and Financing Lease Obligations](index=16&type=

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial information for Conn's, Inc., including financial statements, management's discussion, market risk, and controls [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, cash flows, and detailed notes on accounting policies and financial items [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at specific dates **Condensed Consolidated Balance Sheet Highlights (in thousands)** | Metric | July 31, 2021 | January 31, 2021 | | :------------------------------------ | :------------ | :--------------- | | Total Assets | $1,708,947 | $1,755,084 | | Total Liabilities | $1,066,497 | $1,197,929 | | Total Stockholders' Equity | $642,450 | $557,155 | | Cash and cash equivalents | $8,736 | $9,703 | | Customer accounts receivable, net | $461,491 | $478,734 | | Inventories | $223,662 | $196,463 | | Long-term debt and finance lease obligations | $438,242 | $608,635 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement presents the company's financial performance, detailing revenues, costs, expenses, and net income (loss) for specified periods **Condensed Consolidated Statements of Operations Highlights (in thousands, except per share amounts)** | Metric | Three Months Ended July 31, 2021 | Three Months Ended July 31, 2020 | Six Months Ended July 31, 2021 | Six Months Ended July 31, 2020 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $418,383 | $366,916 | $782,085 | $684,076 | | Operating income (loss) | $54,209 | $41,436 | $124,119 | $(20,806) | | Net income (loss) | $37,004 | $20,520 | $82,402 | $(35,682) | | Basic income (loss) per share | $1.26 | $0.71 | $2.80 | $(1.23) | | Diluted income (loss) per share | $1.22 | $0.70 | $2.74 | $(1.23) | [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement details changes in stockholders' equity, including common stock, additional paid-in capital, retained earnings, and treasury stock **Condensed Consolidated Statements of Stockholders' Equity Highlights (in thousands)** | Metric | July 31, 2021 | January 31, 2021 | | :------------------------------------ | :------------ | :--------------- | | Total Stockholders' Equity | $642,450 | $557,155 | | Retained Earnings | $573,412 | $491,010 | | Additional Paid-in Capital | $134,999 | $132,108 | | Common Stock (shares issued) | 32,967,808 | 32,711,623 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes cash inflows and outflows from operating, investing, and financing activities for the specified periods **Condensed Consolidated Statements of Cash Flows Highlights (in thousands)** | Metric | Six Months Ended July 31, 2021 | Six Months Ended July 31, 2020 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $176,939 | $305,725 | | Net cash used in investing activities | $(19,162) | $(32,459) | | Net cash used in financing activities | $(178,340) | $(283,900) | | Net change in cash, cash equivalents and restricted cash | $(20,563) | $(10,634) | | Cash, cash equivalents and restricted cash, end of period | $39,697 | $70,221 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations supporting the financial statements, covering accounting policies, specific line items, and other disclosures [1. Summary of Significant Accounting Policies](index=7&type=section&id=1.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the company's business model, accounting policies for various financial items, and recent accounting pronouncements - Conn's operates two reportable segments: **retail** and **credit**, with the retail segment selling goods and the credit segment providing financing solutions independently[22](index=22&type=chunk) - The company consolidates **Variable Interest Entities (VIEs)** as the primary beneficiary, directing activities and absorbing losses or receiving benefits[23](index=23&type=chunk) - For the six months ended July 31, 2021, the effective tax rate was **23.4%**, a decrease from **27.2%** in the prior year, primarily due to CARES Act tax loss carryback provisions[31](index=31&type=chunk) **Stock-based Compensation Expense (in thousands)** | Period | 2021 | 2020 | | :------------------------------------ | :--- | :--- | | Three months ended July 31 | $1,700 | $2,300 | | Six months ended July 31 | $3,800 | $4,700 | [2. Customer Accounts Receivable](index=12&type=section&id=2.%20Customer%20Accounts%20Receivable) This note details customer accounts receivable, including gross balances, allowances for credit losses, past due accounts, and re-aged and restructured accounts **Customer Accounts Receivable Summary (in thousands)** | Metric | July 31, 2021 | January 31, 2021 | | :------------------------------------ | :------------ | :--------------- | | Customer accounts receivable | $1,105,713 | $1,233,717 | | Allowance for credit losses | $(190,231) | $(276,610) | | Carrying value of customer accounts receivable, net of allowance for credit losses | $876,699 | $909,483 | | Customer accounts receivable 60+ days past due | $76,293 | $146,820 | | Re-aged customer accounts receivable | $218,086 | $306,845 | | Restructured customer accounts receivable | $130,725 | $178,374 | **Allowance for Credit Losses Activity (Six Months Ended July 31, 2021 vs. 2020) (in thousands)** | Metric | 2021 Total | 2020 Total | | :------------------------------------ | :--------- | :--------- | | Allowance at beginning of period | $298,037 | $233,803 | | Provision for (benefit from) credit losses | $7,911 | $180,936 | | Principal charge-offs | $(100,032) | $(149,047) | | Interest charge-offs | $(27,726) | $(42,680) | | Recoveries | $23,909 | $15,042 | | Allowance at end of period | $202,099 | $336,716 | - The allowance for credit losses for non-TDR customer receivables decreased from **$219.7 million** to **$150.7 million**, reflecting an improved macroeconomic outlook and decline in delinquencies[31](index=31&type=chunk)[46](index=46&type=chunk)[109](index=109&type=chunk) [3. Finance Charges and Other Revenues](index=13&type=section&id=3.%20Finance%20Charges%20and%20Other%20Revenues) This note details components of finance charges and other revenues, including interest income, fees, and insurance income from both segments **Finance Charges and Other Revenues (in thousands)** | Metric | Three Months Ended July 31, 2021 | Three Months Ended July 31, 2020 | Six Months Ended July 31, 2021 | Six Months Ended July 31, 2020 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest income and fees | $65,003 | $83,599 | $132,682 | $165,442 | | Insurance income | $6,371 | $3,385 | $10,889 | $8,137 | | Other revenues | $224 | $196 | $433 | $431 | | Total finance charges and other revenues | $71,598 | $87,180 | $144,004 | $174,010 | - Interest income and fees decreased by **$18.6 million** (three months) and **$32.8 million** (six months) year-over-year, primarily due to a decrease in the average outstanding customer accounts receivable portfolio balance[47](index=47&type=chunk)[50](index=50&type=chunk)[102](index=102&type=chunk) - Insurance income increased by **$3.0 million** (three months) and **$2.8 million** (six months) year-over-year[47](index=47&type=chunk)[102](index=102&type=chunk) [4. Debt and Financing Lease Obligations](index=14&type=section&id=4.%20Debt%20and%20Financing%20Lease%20Obligations) This note details the company's debt and financing lease obligations, including credit facilities, notes, securitization terms, and covenant compliance **Debt and Financing Lease Obligations (in thousands)** | Metric | July 31, 2021 | January 31, 2021 | | :------------------------------------ | :------------ | :--------------- | | Revolving Credit Facility | $219,000 | $52,000 | | Senior Notes | $0 | $141,172 | | Asset-backed Notes (total) | $215,533 | $413,988 | | Total debt and financing lease obligations | $440,584 | $613,232 | - The company redeemed all outstanding Senior Notes totaling **$141.2 million** on April 15, 2021[51](index=51&type=chunk)[119](index=119&type=chunk) - On February 24, 2021, the company sold **$62.9 million** of 2020-A Class C Asset Backed Notes, generating **$62.5 million** in net proceeds to repay the Revolving Credit Facility[56](index=56&type=chunk)[123](index=123&type=chunk) - As of July 31, 2021, the company had **$362.9 million** in immediately available borrowing capacity under its **$650.0 million** Revolving Credit Facility[56](index=56&type=chunk)[123](index=123&type=chunk)[126](index=126&type=chunk) - The company was in compliance with all debt covenants as of July 31, 2021, demonstrating strong interest coverage and leverage ratios[59](index=59&type=chunk)[125](index=125&type=chunk) [5. Contingencies](index=16&type=section&id=5.%20Contingencies) This note describes ongoing legal proceedings, including securities and derivative litigation, with uncertain timing and outcomes - The company is involved in securities litigation (MicroCapital Action) alleging false or misleading statements regarding credit, underwriting, accounting, and internal controls[60](index=60&type=chunk) - Multiple derivative lawsuits are ongoing, asserting claims against current and former directors and executive officers for breach of fiduciary duty, unjust enrichment, gross mismanagement, and insider trading[60](index=60&type=chunk)[63](index=63&type=chunk) - The company cannot reasonably estimate the possible loss from these claims but believes any probable and estimable loss is adequately reflected in financial statements[60](index=60&type=chunk)[63](index=63&type=chunk) [6. Variable Interest Entities](index=17&type=section&id=6.%20Variable%20Interest%20Entities) This note explains the company's securitization of customer accounts receivables through consolidated Variable Interest Entities (VIEs) - The company securitizes customer accounts receivables by transferring them to bankruptcy-remote **VIEs**, which then issue asset-backed notes[64](index=64&type=chunk) - Conn's retains servicing of the securitized portfolio, receiving an annualized monthly fee of **4.75%** and holding all residual equity, leading to VIE consolidation[64](index=64&type=chunk) **VIE Assets and Liabilities (in thousands)** | Metric | July 31, 2021 | January 31, 2021 | | :------------------------------------ | :------------ | :--------------- | | Total Assets | $248,809 | $487,076 | | Total Liabilities | $218,712 | $419,717 | | Restricted cash | $28,911 | $48,622 | | Total customer accounts receivable, net | $230,265 | $444,115 | | Total debt | $214,562 | $411,551 | [7. Segment Information](index=18&type=section&id=7.%20Segment%20Information) This note provides financial information for the retail and credit segments, detailing revenues, costs, expenses, and operating income - The retail segment's operating income for the three months ended July 31, 2021, was **$28.7 million**, up from **$23.2 million**, while the credit segment's operating income increased to **$25.5 million** from **$18.2 million**[71](index=71&type=chunk) - For the six months ended July 31, 2021, the retail segment's operating income was **$44.4 million**, and the credit segment's operating income was **$79.7 million**, a significant improvement from a **$49.2 million loss** in the prior year for the credit segment[74](index=74&type=chunk) **Segment Revenues (in thousands)** | Segment | Three Months Ended July 31, 2021 | Three Months Ended July 31, 2020 | Six Months Ended July 31, 2021 | Six Months Ended July 31, 2020 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Retail Total Revenues | $347,009 | $279,932 | $638,514 | $510,497 | | Credit Total Revenues | $71,374 | $86,984 | $143,571 | $173,579 | - The retail segment added **three new showrooms** in Florida during Q2 FY22, bringing the total to **155 stores** as of July 31, 2021, compared to **141 stores** at July 31, 2020[84](index=84&type=chunk)[90](index=90&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=21&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on financial condition and results, covering performance, key metrics, strategic initiatives, outlook, and liquidity [Forward-Looking Statements](index=21&type=section&id=Forward-Looking%20Statements) This section contains a disclaimer regarding forward-looking statements, noting that actual results may differ due to various risks and uncertainties - Forward-looking statements are subject to risks and uncertainties, including economic conditions, securitization execution, credit portfolio delinquency, litigation, regulatory oversight, and COVID-19 impacts[76](index=76&type=chunk) [Overview](index=21&type=section&id=Overview) The company monitors and responds to the COVID-19 pandemic's impact on supply chain and sales, with the full extent remaining uncertain - COVID-19 continues to impact business, increasing complexity in supply chain and sales, with its full future impact remaining uncertain[77](index=77&type=chunk) [Executive Summary](index=21&type=section&id=Executive%20Summary) Total revenues increased by 14.0% driven by retail growth, while credit revenues decreased, leading to a significant increase in net income **Executive Summary Financial Highlights (Three Months Ended July 31) (in millions, except per share)** | Metric | 2021 | 2020 | Change ($) | Change (%) | | :------------------------------------ | :--- | :--- | :--------- | :--------- | | Total revenues | $418.4 | $366.9 | $51.5 | 14.0% | | Retail revenues | $347.0 | $279.9 | $67.1 | 24.0% | | Credit revenues | $71.4 | $87.0 | $(15.6) | (17.9)% | | Retail gross margin | 37.7% | 36.9% | 0.8 pts | | | SG&A | $137.9 | $115.3 | $22.6 | 19.6% | | Provision for bad debts | $10.3 | $32.0 | $(21.7) | (67.8)% | | Interest expense | $6.1 | $13.2 | $(7.1) | (53.8)% | | Net income | $37.0 | $20.5 | $16.5 | 80.5% | | Diluted EPS | $1.22 | $0.70 | $0.52 | 74.3% | - Retail revenue growth was primarily driven by a **16.4% increase in same-store sales** and new store expansion, reflecting increased demand across home-related product categories[78](index=78&type=chunk) - The decrease in credit revenue was mainly due to a **22.7% decrease** in the average outstanding customer receivable portfolio balance, partially offset by a slight increase in yield rate (from **23.2% to 23.3%**) and higher insurance commissions[80](index=80&type=chunk) [How We Evaluate Our Operations](index=22&type=section&id=How%20We%20Evaluate%20Our%20Operations) Management evaluates operations using key indicators like same-store sales, retail gross margin, 60+ day delinquencies, and net yield - Key performance indicators include **same-store sales**, **retail gross margin**, **60+ day delinquencies**, and **net yield**, reflecting operational efficiency, credit quality, and portfolio income[81](index=81&type=chunk) [Company Initiatives](index=22&type=section&id=Company%20Initiatives) The company achieved record Q2 net earnings and strong sales growth, with strategic priorities focused on operational improvements and expansion - Net earnings reached a Q2 record of **$1.22 per diluted share**, up from **$0.70** in the prior year[82](index=82&type=chunk) - Same-store sales increased by **16.4%** year-over-year and **3.2%** on a two-year basis in Q2 FY22[82](index=82&type=chunk) - eCommerce sales grew **210.9% to $17.3 million**, and lease-to-own sales increased **70.3% to $41.6 million** in Q2 FY22[84](index=84&type=chunk) - The company opened **three new showrooms** in Florida during Q2 FY22, bringing the total to **155**[84](index=84&type=chunk) - Key strategic priorities for FY22 include increasing net income, opening **11-13 new stores**, optimizing product mix and logistics, growing lease-to-own and eCommerce, and disciplined SG&A oversight[84](index=84&type=chunk) [Outlook](index=23&type=section&id=Outlook) Despite COVID-19 uncertainty, the company anticipates continued growth through market penetration, expansion, and operational optimization - The full extent of the COVID-19 pandemic's impact on the supply chain and future operating results remains uncertain[85](index=85&type=chunk) - Government support programs, such as the American Rescue Plan and Child Tax Credit, are expected to continue providing financial means to customers, potentially benefiting the business[85](index=85&type=chunk) - The company plans to improve operating results by leveraging infrastructure, optimizing operations, and expanding its store base to increase purchase volumes and strengthen vendor relationships[85](index=85&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) This section analyzes consolidated and segment-specific financial performance, detailing revenues, costs, expenses, and profitability metrics **Consolidated Financial Performance (in thousands)** | Metric | Three Months Ended July 31, 2021 | Three Months Ended July 31, 2020 | Six Months Ended July 31, 2021 | Six Months Ended July 31, 2020 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $418,383 | $366,916 | $782,085 | $684,076 | | Cost of goods sold | $216,042 | $176,623 | $400,921 | $323,637 | | SG&A expense | $137,870 | $115,278 | $263,919 | $228,285 | | Provision for bad debts | $10,262 | $32,045 | $(6,874) | $149,371 | | Operating income (loss) | $54,209 | $41,436 | $124,119 | $(20,806) | | Net income (loss) | $37,004 | $20,520 | $82,402 | $(35,682) | [Three months ended July 31, 2021 compared to three months ended July 31, 2020](index=26&type=section&id=Three%20months%20ended%20July%2031%2C%202021%20compared%20to%20three%20months%20ended%20July%2031%2C%202020) Net sales increased by 24.0% driven by retail growth, while finance charges decreased, leading to improved retail gross margin and substantial net income growth **Retail Net Sales by Product Category (Three Months Ended July 31) (in thousands)** | Product Category | 2021 Sales | % of Total 2021 | 2020 Sales | % of Total 2020 | Change ($) | % Change | Same Store % Change | | :------------------------------------ | :--------- | :-------------- | :--------- | :-------------- | :--------- | :------- | :------------------ | | Furniture and mattress | $109,259 | 31.5% | $80,984 | 29.0% | $28,275 | 34.9% | 22.0% | | Home appliance | $135,444 | 39.1% | $107,682 | 38.5% | $27,762 | 25.8% | 17.8% | | Consumer electronics | $48,413 | 14.0% | $47,384 | 16.9% | $1,029 | 2.2% | 0.1% | | Home office | $17,986 | 5.2% | $14,979 | 5.4% | $3,007 | 20.1% | 10.4% | | Other | $9,143 | 2.6% | $5,113 | 1.8% | $4,030 | 78.8% | 71.3% | | Product sales | $320,245 | 92.4% | $256,142 | 91.6% | $64,103 | 25.0% | 16.7% | | Repair service agreement commissions | $23,700 | 6.8% | $20,164 | 7.2% | $3,536 | 17.5% | 13.6% | | Service revenues | $2,840 | 0.8% | $3,430 | 1.2% | $(590) | (17.2)% | | | Total net sales | $346,785 | 100.0% | $279,736 | 100.0% | $67,049 | 24.0% | 16.4% | **Key Portfolio Performance (Three Months Ended July 31) (in thousands)** | Metric | 2021 | 2020 | Change ($) | | :------------------------------------ | :--- | :--- | :--------- | | Interest income and fees | $65,003 | $83,599 | $(18,596) | | Net charge-offs | $(31,184) | $(75,118) | $43,934 | | Interest expense | $(6,088) | $(13,222) | $7,134 | | Net portfolio income | $27,731 | $(4,741) | $32,472 | | Average outstanding portfolio balance | $1,105,936 | $1,429,991 | $(324,055) | | Interest income and fee yield (annualized) | 23.3% | 23.2% | | | Net charge-off % (annualized) | 11.3% | 21.0% | | - Retail gross margin increased by **80 basis points to 37.7%**, driven by higher-margin products, decreased third-party credit fees, and leveraged fixed logistics costs[96](index=96&type=chunk) - Consolidated SG&A increased by **$22.6 million (19.6%) to $137.9 million**, primarily due to new store and operating costs in retail, partially offset by decreased credit segment labor costs[97](index=97&type=chunk) - Provision for bad debts decreased by **$21.7 million to $10.3 million**, mainly due to a **$43.8 million** decrease in net charge-offs and an improved forecasted unemployment rate[97](index=97&type=chunk) - Interest expense decreased by **$7.1 million (53.8%) to $6.1 million**, attributed to a lower average outstanding debt balance and a lower effective interest rate[99](index=99&type=chunk) [Six months ended July 31, 2021 compared to six months ended July 31, 2020](index=28&type=section&id=Six%20months%20ended%20July%2031%2C%202021%20compared%20to%20six%20months%20ended%20July%2031%2C%202020) Net sales increased by 25.1% driven by retail growth, while finance charges decreased, resulting in improved retail gross margin and substantial net income growth **Retail Net Sales by Product Category (Six Months Ended July 31) (in thousands)** | Product Category | 2021 Sales | % of Total 2021 | 2020 Sales | % of Total 2020 | Change ($) | % Change | Same Store % Change | | :------------------------------------ | :--------- | :-------------- | :--------- | :-------------- | :--------- | :------- | :------------------ | | Furniture and mattress | $203,750 | 31.9% | $149,877 | 29.4% | $53,873 | 35.9% | 24.3% | | Home appliance | $248,705 | 39.0% | $188,967 | 37.0% | $59,738 | 31.6% | 23.9% | | Consumer electronics | $86,451 | 13.5% | $83,160 | 16.3% | $3,291 | 4.0% | 1.7% | | Home office | $32,507 | 5.1% | $32,345 | 6.3% | $162 | 0.5% | (5.5)% | | Other | $18,043 | 2.8% | $8,991 | 1.8% | $9,052 | 100.7% | 90.9% | | Product sales | $589,456 | 92.3% | $463,340 | 90.8% | $126,116 | 27.2% | 19.4% | | Repair service agreement commissions | $42,831 | 6.7% | $40,265 | 7.9% | $2,566 | 6.4% | 3.1% | | Service revenues | $5,794 | 1.0% | $6,461 | 1.3% | $(667) | (10.3)% | | | Total net sales | $638,081 | 100.0% | $510,066 | 100.0% | $128,015 | 25.1% | 17.8% | **Key Portfolio Performance (Six Months Ended July 31) (in thousands)** | Metric | 2021 | 2020 | Change ($) | | :------------------------------------ | :--- | :--- | :--------- | | Interest income and fees | $132,682 | $165,442 | $(32,760) | | Net charge-offs | $(76,123) | $(134,006) | $57,883 | | Interest expense | $(15,292) | $(28,215) | $12,923 | | Net portfolio income | $41,267 | $3,221 | $38,046 | | Average outstanding portfolio balance | $1,142,080 | $1,493,250 | $(351,170) | | Interest income and fee yield (annualized) | 23.4% | 22.2% | | | Net charge-off % (annualized) | 13.3% | 17.9% | | - Retail gross margin increased by **70 basis points to 37.2%**, driven by higher-margin products, decreased third-party credit fees, and leveraged fixed logistics costs[105](index=105&type=chunk) - Consolidated SG&A increased by **$35.6 million (15.6%) to $263.9 million**, primarily due to new store and operating costs in retail, partially offset by decreased credit segment labor costs[106](index=106&type=chunk) - Provision for bad debts was a benefit of **$(6.9) million**, a **$156.3 million decrease** from the prior year's provision of **$149.4 million**, driven by a decrease in the allowance for bad debts due to improved macroeconomic outlook and lower delinquencies[107](index=107&type=chunk)[109](index=109&type=chunk) - Interest expense decreased by **$12.9 million (45.7%) to $15.3 million**, driven by a lower average outstanding debt balance, partially offset by a higher effective interest rate[110](index=110&type=chunk) [Customer Accounts Receivable Portfolio](index=30&type=section&id=Customer%20Accounts%20Receivable%20Portfolio) This section details the customer accounts receivable portfolio, highlighting improved credit scores, decreased delinquencies, and reduced allowance for uncollectible accounts - The weighted average credit score of outstanding balances improved to **608** as of July 31, 2021, from **596** as of July 31, 2020[114](index=114&type=chunk) - Balances **60+ days past due** as a percentage of total customer portfolio carrying value decreased to **7.2%** from **10.0%**, primarily due to increased cash collections and tighter underwriting standards[114](index=114&type=chunk)[116](index=116&type=chunk) - Re-aged balance as a percentage of total customer portfolio carrying value decreased to **20.4%** from **29.9%**, due to increased cash collections, changes in re-age policy, and tighter underwriting standards[114](index=114&type=chunk)[116](index=116&type=chunk) - The allowance for uncollectible accounts as a percentage of the total customer accounts receivable portfolio balance decreased to **18.3%** from **24.8%**[114](index=114&type=chunk) - The percent of bad debt charge-offs, net of recoveries, to average outstanding portfolio balance decreased to **11.3%** from **21.0%**, due to an increase in existing customer mix and tighter underwriting standards[118](index=118&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) The company relies on cash flow, credit facilities, and securitizations for liquidity, with changes in operating, investing, and financing cash flows detailed - Net cash provided by operating activities decreased to **$176.9 million** from **$305.7 million**, primarily due to increased inventory and higher prior year collections[119](index=119&type=chunk) - Net cash used in investing activities decreased to **$19.2 million** from **$32.5 million**, with current period investments in new/existing stores and technology[119](index=119&type=chunk) - Net cash used in financing activities decreased to **$178.3 million** from **$283.9 million**, driven by asset-backed note proceeds and Senior Notes retirement, partially offset by Revolving Credit Facility borrowings[119](index=119&type=chunk) - The company expects cash from operations, potential securitizations, and the Revolving Credit Facility to be sufficient for liquidity needs over the next **12 months**[126](index=126&type=chunk) - Planned capital expenditures for the remainder of fiscal year 2021 are between **$25.0 million and $35.0 million**, including for **11 to 13 new stores** planned for FY22[125](index=125&type=chunk) [Off-Balance Sheet Liabilities and Other Contractual Obligations](index=35&type=section&id=Off-Balance%20Sheet%20Liabilities%20and%20Other%20Contractual%20Obligations) The company has no off-balance sheet arrangements and details its minimum contractual commitments and obligations - The company does not have any off-balance sheet arrangements[129](index=129&type=chunk) **Minimum Contractual Commitments and Obligations (in thousands)** | Obligation Type | Total | Less Than 1 Year | 1-3 Years | 3-5 Years | More Than 5 Years | | :------------------------------------ | :-------- | :--------------- | :-------- | :-------- | :---------------- | | Debt, including estimated interest payments | $489,948 | $10,693 | $130,282 | $339,692 | $0 | | Financing lease obligations | $7,890 | $1,208 | $2,189 | $1,426 | $3,067 | | Operating leases (Real estate) | $519,682 | $84,539 | $161,508 | $119,783 | $153,852 | | Operating leases (Equipment) | $222 | $169 | $37 | $16 | $0 | | Contractual commitments (primarily inventory) | $131,957 | $122,445 | $9,236 | $276 | $0 | | Total | $1,144,718 | $222,844 | $303,752 | $461,203 | $156,919 | [Issuer and Guarantor Subsidiary Summarized Financial Information](index=36&type=section&id=Issuer%20and%20Guarantor%20Subsidiary%20Summarized%20Financial%20Information) This section presents summarized financial information for the Issuer and Guarantor Subsidiaries, excluding Non-Guarantor Subsidiaries **Issuer and Guarantor Subsidiaries Summarized Balance Sheet (in thousands)** | Metric | July 31, 2021 | January 31, 2021 | | :------------------------------------ | :------------ | :--------------- | | Total Assets | $1,461,537 | $1,270,918 | | Total Liabilities | $849,184 | $781,124 | | Cash, cash equivalents and restricted cash | $10,786 | $11,638 | | Customer accounts receivable | $302,153 | $218,923 | | Inventories | $223,662 | $196,463 | | Long-term debt | $223,680 | $197,084 | **Issuer and Guarantor Subsidiaries Summarized Statement of Operations (Six Months Ended July 31, 2021) (in thousands)** | Metric | Amount | | :------------------------------------ | :----- | | Total revenues | $738,559 | | Total costs and expenses | $694,280 | | Net income | $44,279 | [Critical Accounting Policies and Estimates](index=37&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section refers to the 2021 Form 10-K for critical accounting policies, with no material changes noted - The description of critical accounting policies is included in the **2021 Form 10-K**, with no material changes other than the additional policy mentioned in Note 1[134](index=134&type=chunk) [Recent Accounting Pronouncements](index=37&type=section&id=Recent%20Accounting%20Pronouncements) This section incorporates recent accounting pronouncements by reference from Note 1 of the financial statements - Information on recent accounting pronouncements is incorporated by reference from Note 1, Summary of Significant Accounting Policies[135](index=135&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=37&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses market risk exposure, primarily from interest rate fluctuations on the Revolving Credit Facility, noting fixed-rate asset-backed notes - The primary market risk stems from adverse changes in interest rates, specifically impacting the variable-rate Revolving Credit Facility[136](index=136&type=chunk) - Asset-backed notes bear **fixed interest rates** and are not affected by interest rate changes[136](index=136&type=chunk) - A **100 basis point increase** in interest rates on the Revolving Credit Facility would increase borrowing costs by **$2.2 million** over a **12-month period**, based on the **$219.0 million** outstanding balance at July 31, 2021[136](index=136&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=37&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) The CEO and CFO concluded that disclosure controls and procedures were effective, with no material changes in internal controls during the quarter - The CEO and CFO concluded that disclosure controls and procedures were **effective** as of July 31, 2021[137](index=137&type=chunk) - No material changes in internal controls over financial reporting occurred during the quarter ended July 31, 2021[137](index=137&type=chunk) [PART II. OTHER INFORMATION](index=37&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides other information, including legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=37&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section incorporates information on legal proceedings by reference from Note 5, Contingencies - Information on legal proceedings is incorporated by reference from Note 5, Contingencies, in the financial statements[138](index=138&type=chunk) [ITEM 1A. RISK FACTORS](index=37&type=section&id=ITEM%201A.%20RISK%20FACTORS) No material changes to risk factors have occurred since the filing of the company's 2021 Form 10-K - No material changes to risk factors have occurred since the filing of the **2021 Form 10-K**[139](index=139&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=37&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20PROCEEDS) No unregistered sales of equity securities or use of proceeds were reported for the period - No unregistered sales of equity securities or use of proceeds were reported[139](index=139&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=37&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) No defaults upon senior securities were reported for the period - No defaults upon senior securities were reported[140](index=140&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURE](index=39&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURE) This item is not applicable to the company's operations - Mine Safety Disclosure is not applicable to the company[142](index=142&type=chunk) [ITEM 5. OTHER INFORMATION](index=39&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No other information is reported for the period - No other information was reported[142](index=142&type=chunk) [ITEM 6. EXHIBITS](index=40&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the report, including corporate governance documents and regulatory certifications - The exhibits include corporate governance documents, executive agreements, and regulatory certifications, such as Rule 13a-14(a)/15d-14(a) and Section 1350 Certifications[144](index=144&type=chunk) [Signature](index=41&type=section&id=Signature) This section contains the signature of the authorized officer, certifying the filing of the report - The report is signed by **George L. Bchara**, Executive Vice President and Chief Financial Officer, on September 1, 2021[148](index=148&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 2021 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 001-34956 CONN'S, INC. (Exact name of registrant as specified in its charter) Delaware 06-1672840 (State or other jurisdiction of ...

Part I [Business](index=4&type=section&id=Item%201.%20Business) Conn's, Inc. operates as a specialty retailer with Retail and Credit segments, offering durable goods and proprietary financing across 146 stores in 15 states - Conn's operates two segments, Retail and Credit, with **146 stores** across 15 states as of January 31, 2021[12](index=12&type=chunk) FY2021 Sales by Financing Type | Financing Type | Percentage of Purchases | | :--- | :--- | | Proprietary In-house Credit | 52.1% | | Third-party Financing | 28.9% | | Cash or Credit Card | 19.0% | FY2021 Product Sales Breakdown | Product Category | % of Total Product Sales | | :--- | :--- | | Home Appliance | 40.2% | | Furniture and Mattress | 33.2% | | Consumer Electronics | 17.8% | | Home Office | 6.7% | - Six vendors accounted for **76.0% of total inventory purchases** in FY2021, with Samsung, LG, and GE as key suppliers[22](index=22&type=chunk) - The business is seasonal, with higher sales and operating profit in the **fourth quarter** and improved cash collection in the **first quarter** due to tax refunds[21](index=21&type=chunk) [Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant business and regulatory risks, including COVID-19 impacts, economic downturns, credit portfolio performance, and changes in consumer protection laws - The COVID-19 pandemic poses significant risks to customer traffic, store operations, and customer credit repayment ability[46](index=46&type=chunk)[51](index=51&type=chunk) - Economic downturns can reduce consumer purchases and impair customers' ability to repay credit obligations, impacting financial health[46](index=46&type=chunk)[53](index=53&type=chunk) - A significant portion of the credit portfolio comprises sub-prime borrowers, leading to a higher risk of default, delinquency, and increased credit losses[60](index=60&type=chunk) - The business is heavily regulated by federal and state consumer protection laws, where changes or CFPB actions could limit credit offerings and collections[50](index=50&type=chunk)[85](index=85&type=chunk)[87](index=87&type=chunk) - Store concentration in the southern U.S., especially Texas (**71 of 146 stores**), makes the company vulnerable to regional economic downturns and natural disasters[46](index=46&type=chunk)[74](index=74&type=chunk) [Unresolved Staff Comments](index=35&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments from the SEC - None [Properties](index=35&type=section&id=Item%202.%20Properties) Property details, including store count and locations, are referenced in the Business section of this report - Property details are disclosed in Part I, Item 1, under the "Store Operations" caption[94](index=94&type=chunk) [Legal Proceedings](index=35&type=section&id=Item%203.%20Legal%20Proceedings) Legal proceedings details are incorporated by reference from Note 12, Contingencies, in the Consolidated Financial Statements - Information on legal proceedings is located in Note 12 of the Consolidated Financial Statements[95](index=95&type=chunk) [Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - Not applicable Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=37&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 trades on NASDAQ under "CONN," with no cash dividends paid in FY2021 or FY2020, and none anticipated due to debt restrictions - The company's common stock is traded on the NASDAQ Global Select Market under the symbol **"CONN"**[100](index=100&type=chunk) - No cash dividends were declared or paid in **FY2021 or FY2020**, and none are anticipated in the foreseeable future[100](index=100&type=chunk) [Selected Financial Data](index=40&type=section&id=Item%206.%20Selected%20Financial%20Data) This section provides a five-year financial summary, showing FY2021 total revenues of **$1.39 billion**, a net loss of **$3.1 million**, and reduced total debt of **$609.6 million** Selected Financial Data (FY2017-FY2021) | (dollars in thousands) | 2021 | 2020 | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Total revenues** | $1,386,025 | $1,543,686 | $1,549,813 | $1,516,031 | $1,596,848 | | **Operating income** | $30,614 | $134,519 | $161,255 | $115,068 | $64,098 | | **Net income (loss)** | $(3,137) | $56,004 | $73,849 | $6,463 | $(25,562) | | **Diluted EPS** | $(0.11) | $1.82 | $2.28 | $0.20 | $(0.83) | | **Total assets** | $1,755,084 | $2,168,769 | $1,884,907 | $1,900,799 | $1,941,134 | | **Total debt, net** | $609,569 | $1,026,140 | $955,331 | $1,091,012 | $1,145,242 | | **Change in same store sales** | (12.8)% | (8.2)% | (2.2)% | (11.4)% | (6.3)% | | **Number of stores (End of year)** | 146 | 137 | 123 | 116 | 113 | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=42&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) FY2021 total revenues decreased by **10.2% to $1.39 billion**, resulting in a net loss of **$3.1 million**, while liquidity improved with **$462.1 million** in operating cash flow and **$416.6 million** debt reduction FY2021 vs. FY2020 Performance Summary | Metric | FY2021 | FY2020 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $1.39 billion | $1.54 billion | -10.2% | | Retail Revenues | $1.07 billion | $1.16 billion | -8.5% | | Credit Revenues | $320.9 million | $379.6 million | -15.5% | | Same Store Sales | -12.8% | -8.2% | -460 bps | | Retail Gross Margin | 37.2% | 40.0% | -280 bps | | Net Income (Loss) | ($3.1 million) | $56.0 million | -105.6% | | Diluted EPS | ($0.11) | $1.82 | -106.0% | - Retail revenue decreased due to a **12.8% decline in same-store sales**, tighter underwriting, reduced store hours, and COVID-19 related supply chain disruptions[114](index=114&type=chunk) - The company improved its financial position by reducing total debt by **$416.6 million** year-over-year, reaching a seven-year low[117](index=117&type=chunk) - FY2022 strategic priorities include improving financial metrics, growing sales via credit options, accelerating e-commerce, and opening **9 to 11 new stores**[120](index=120&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) FY2021 total revenues decreased **10.2% to $1.39 billion**, leading to a net loss of **$3.1 million** due to lower retail sales, reduced credit revenue, and a contracted retail gross margin Consolidated Results of Operations (FY2021 vs. FY2020) | (in thousands) | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | **Total revenues** | $1,386,025 | $1,543,686 | $(157,661) | | **Operating income** | $30,614 | $134,519 | $(103,905) | | **Net income (loss)** | $(3,137) | $56,004 | $(59,141) | Retail Net Sales by Product Category (FY2021 vs. FY2020) | (dollars in thousands) | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Furniture and mattress | $322,770 | $370,931 | (13.0)% | | Home appliance | $390,964 | $360,441 | 8.5% | | Consumer electronics | $172,932 | $221,449 | (21.9)% | | Home office | $65,405 | $73,074 | (10.5)% | | **Total net sales** | **$1,064,311** | **$1,163,235** | **(8.5)%** | - The provision for bad debts decreased slightly by **$3.2 million**, driven by a smaller portfolio allowance, partially offset by a **$28.0 million** increase in net charge-offs[132](index=132&type=chunk) [Customer Accounts Receivable Portfolio](index=52&type=section&id=Customer%20Accounts%20Receivable%20Portfolio) The customer accounts receivable portfolio decreased to **$1.23 billion**, with the allowance for bad debts rising to **24.2%** due to CECL adoption and in-house financing declining to **52.1%** Customer Portfolio Statistics (as of Jan 31) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Portfolio Balance (in thousands) | $1,233,717 | $1,602,037 | | Balances 60+ days past due % | 12.4% | 12.5% | | Re-aged balance % | 25.9% | 29.4% | | Allowance for bad debts % | 24.2% | 14.6% | - The percentage of retail sales financed in-house (including down payments) decreased significantly from **67.6% in FY2020 to 52.1% in FY2021**[160](index=160&type=chunk) - The net charge-off rate increased to **16.3% in FY2021** from **12.6% in FY2020**, driven by a lower average portfolio balance and higher bad debt charge-offs[164](index=164&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=Liquidity%20and%20Capital%20Resources) FY2021 liquidity strengthened with **$462.1 million** in operating cash flow, **$426.8 million** in debt repayments, and **$336.0 million** available under the Revolving Credit Facility Cash Flow Summary (in millions) | Cash Flow Activity | FY2021 | FY2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $462.1 | $80.1 | | Net cash used in investing activities | $(55.9) | $(56.8) | | Net cash used in financing activities | $(426.8) | $(7.3) | - As of January 31, 2021, the company had **$336.0 million** of immediately available borrowing capacity under its Revolving Credit Facility[171](index=171&type=chunk) - On December 28, 2020, the company retired **$85.8 million** of its **7.250% Senior Notes due 2022** through a tender offer[167](index=167&type=chunk)[251](index=251&type=chunk) - Anticipated capital expenditures for FY2022 are between **$35.0 million and $45.0 million**, primarily for opening **9 to 11 new stores** and renovating showrooms[173](index=173&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=61&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The primary market risk is interest rate fluctuations on the variable-rate Revolving Credit Facility, with **$52.0 million** outstanding as of January 31, 2021 - The primary market risk is interest rate fluctuations on the variable-rate Revolving Credit Facility, with an outstanding balance of **$52.0 million** as of January 31, 2021[184](index=184&type=chunk) - A **100 basis point increase** in interest rates on the Revolving Credit Facility would increase annual borrowing costs by an estimated **$0.5 million**[184](index=184&type=chunk) [Financial Statements and Supplementary Data](index=62&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for FY2021, including balance sheets, statements of operations, cash flows, and detailed notes on accounting policies and segment performance [Consolidated Balance Sheets](index=65&type=section&id=Consolidated%20Balance%20Sheets) As of January 31, 2021, total assets decreased to **$1.76 billion**, driven by reduced customer receivables, while total liabilities fell to **$1.20 billion** due to lower long-term debt Consolidated Balance Sheet Summary (in thousands) | | Jan 31, 2021 | Jan 31, 2020 | | :--- | :--- | :--- | | **Total current assets** | $844,063 | $1,058,866 | | **Total assets** | **$1,755,084** | **$2,168,769** | | **Total current liabilities** | $211,756 | $162,270 | | **Long-term debt and finance lease obligations** | $608,635 | $1,025,535 | | **Total liabilities** | **$1,197,929** | **$1,541,589** | | **Total stockholders' equity** | **$557,155** | **$627,180** | [Consolidated Statements of Operations](index=66&type=section&id=Consolidated%20Statements%20of%20Operations) FY2021 total revenues were **$1.39 billion**, with operating income at **$30.6 million**, resulting in a net loss of **$3.1 million** or **($0.11) per diluted share** Consolidated Statement of Operations (in thousands, except per share amounts) | | FY 2021 | FY 2020 | FY 2019 | | :--- | :--- | :--- | :--- | | **Total revenues** | $1,386,025 | $1,543,686 | $1,549,813 | | **Operating income** | $30,614 | $134,519 | $161,255 | | **Net income (loss)** | **$(3,137)** | **$56,004** | **$73,849** | | **Diluted EPS** | **$(0.11)** | **$1.82** | **$2.28** | [Consolidated Statements of Cash Flows](index=68&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) FY2021 net cash from operating activities significantly increased to **$462.1 million**, while **$426.8 million** was used in financing activities, ending with **$60.3 million** in cash Consolidated Statement of Cash Flows (in thousands) | | FY 2021 | FY 2020 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $462,115 | $80,066 | | **Net cash used in investing activities** | $(55,927) | $(56,822) | | **Net cash used in financing activities** | $(426,783) | $(7,326) | | **Net change in cash, cash equivalents and restricted cash** | $(20,595) | $15,918 | | **Cash, cash equivalents and restricted cash, end of period** | $60,260 | $80,855 | [Notes to Consolidated Financial Statements](index=70&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, including CECL adoption impacting retained earnings by **$76.5 million**, and provide breakdowns of receivables, debt, and segment performance for Retail and Credit divisions - Effective February 1, 2020, the company adopted the **CECL standard (ASU 2016-13)**, resulting in a net decrease to retained earnings of **$76.5 million**[232](index=232&type=chunk)[212](index=212&type=chunk) - The company securitizes customer receivables through consolidated bankruptcy-remote Variable Interest Entities (VIEs), whose assets collateralize asset-backed notes and are unavailable to general creditors[221](index=221&type=chunk)[280](index=280&type=chunk) Segment Operating Income (Loss) (in thousands) | Segment | FY 2021 | FY 2020 | | :--- | :--- | :--- | | Retail | $56,323 | $117,315 | | Credit | $(25,709) | $17,204 | | **Total** | **$30,614** | **$134,519** | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=99&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants regarding accounting and financial disclosure - None [Controls and Procedures](index=99&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of January 31, 2021, having remediated a prior material weakness in IT general controls - Management concluded that disclosure controls and procedures were **effective** as of January 31, 2021[299](index=299&type=chunk) - A material weakness in IT general controls (ITGCs) identified in the FY2020 10-K was **fully remediated** as of January 31, 2021[300](index=300&type=chunk) - Management's assessment concluded that internal control over financial reporting was **effective** as of January 31, 2021, a conclusion audited and confirmed by Ernst & Young LLP[301](index=301&type=chunk)[307](index=307&type=chunk) [Other Information](index=102&type=section&id=Item%209B.%20Other%20Information) On March 29, 2021, the company amended its revolving credit facility, extending its maturity to **March 2025** and modifying terms - On March 29, 2021, the company amended its revolving credit facility, extending its maturity to **March 2025** from May 2022 and implementing other modifications[311](index=311&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=102&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information for this item is incorporated by reference from the company's 2021 Annual Meeting Proxy Statement - Information is incorporated by reference from the **2021 Proxy Statement**[314](index=314&type=chunk) [Executive Compensation](index=102&type=section&id=Item%2011.%20Executive%20Compensation) Information for this item is incorporated by reference from the company's 2021 Annual Meeting Proxy Statement - Information is incorporated by reference from the **2021 Proxy Statement**[315](index=315&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=102&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information for this item is incorporated by reference from the company's 2021 Annual Meeting Proxy Statement - Information is incorporated by reference from the **2021 Proxy Statement**[315](index=315&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=102&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information for this item is incorporated by reference from the company's 2021 Annual Meeting Proxy Statement - Information is incorporated by reference from the **2021 Proxy Statement**[315](index=315&type=chunk) [Principal Accountant Fees and Services](index=102&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information for this item is incorporated by reference from the company's 2021 Annual Meeting Proxy Statement - Information is incorporated by reference from the **2021 Proxy Statement**[315](index=315&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=103&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed as part of the Form 10-K report - This section contains a list of all financial statements and exhibits filed with the **Form 10-K**[318](index=318&type=chunk)[319](index=319&type=chunk) [Form 10-K Summary](index=108&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company indicates that no Form 10-K summary is provided - None

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 001-34956 CONN'S, INC. (Exact name of registrant as specified in its charter) Delaware 06-1672840 (State or other jurisdiction o ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) Class Outstanding ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 001-34956 CONN'S, INC. (Exact name of registrant as specified in its charter) Delaware 06-1672840 (State or other ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) Class Outstanding x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 2020 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 001-34956 CONN'S, INC. (Exact name of registrant as specified in its charter) Delaware 06-1672840 (State or othe ...

PART I [ITEM 1. BUSINESS](index=4&type=section&id=ITEM%201.%20BUSINESS%2E) Conn's, Inc. operates as a specialty retailer of durable consumer goods with integrated retail and credit segments, offering proprietary financing to credit-constrained consumers and relying on a concentrated vendor base [Company Overview](index=4&type=section&id=Company%20Overview) Conn's, Inc. is a specialty retailer providing durable consumer goods and proprietary credit solutions to credit-constrained consumers through its integrated business model - Conn's operates as a specialty retailer with an integrated business model combining the sale of durable consumer goods with proprietary credit solutions for its core credit-constrained customer base[10](index=10&type=chunk) [Operating Segments](index=4&type=section&id=Operating%20Segments) The company operates through Retail and Credit segments, with Retail managing 137 stores and Credit providing proprietary and third-party financing, significantly serving repeat customers - The Retail segment operated **137 stores** in **14 states** as of January 31, 2020, offering furniture, mattresses, home appliances, consumer electronics, and home office products[11](index=11&type=chunk)[13](index=13&type=chunk) - The Credit segment offers proprietary in-house financing and partners with third-party providers like Synchrony Bank and Progressive Leasing to provide a spectrum of payment options based on customer creditworthiness[13](index=13&type=chunk) - Repeat customers are a key part of the credit business, accounting for **49% of originations** in fiscal year 2020 and **60% of outstanding balances** as of January 31, 2020[13](index=13&type=chunk)[14](index=14&type=chunk) [Industry and Market Overview](index=6&type=section&id=Industry%20and%20Market%20Overview) The company competes in large, diverse markets for home goods and consumer credit, facing intense competition from various retail formats across significant U.S. personal consumption expenditure categories U.S. Personal Consumption Expenditures (Calendar Year 2019) | Category | 2019 Expenditures (billions) | | :--- | :--- | | Furniture and Mattress | $132.7 | | Home Appliance | $58.9 | | Consumer Electronics | $248.4 | - The company's primary product categories by sales in fiscal year 2020 were furniture and mattresses (**35.6%**), home appliances (**34.6%**), and consumer electronics (**21.2%**)[15](index=15&type=chunk) - Competition is significant and comes from national mass merchants, specialized retailers, home improvement stores, internet retailers, and lease-to-own companies[15](index=15&type=chunk)[17](index=17&type=chunk) [Customers](index=7&type=section&id=Customers) The core customer base comprises working individuals with annual incomes between $25,000 and $60,000, residing in densely populated areas, with no single customer representing over 10% of total revenues - The core consumer demographic earns between **$25,000 and $60,000 annually**[18](index=18&type=chunk) [Seasonality](index=7&type=section&id=Seasonality) The business experiences seasonality, with peak sales and operating profit in the fourth quarter due to holidays, and improved credit portfolio performance in the first quarter from tax refunds - The **fourth quarter** is the strongest for sales and operating profit due to the holiday season[19](index=19&type=chunk) - The **first quarter** sees improved portfolio performance due to customers using tax refunds for payments[19](index=19&type=chunk) [Merchandising](index=7&type=section&id=Merchandising) The company sources merchandise from various manufacturers but exhibits significant vendor concentration, with six key vendors accounting for 85.7% of fiscal year 2020 inventory purchases - The company has significant vendor concentration, with **85.7% of fiscal year 2020 inventory purchases** coming from six vendors[20](index=20&type=chunk) Top Vendor Purchase Concentration (FY 2020) | Vendor | % of Total Inventory Purchases | | :--- | :--- | | Samsung | 33.6% | | LG | 16.3% | | Corinthian | 11.0% | [Credit Operations](index=7&type=section&id=Credit%20Operations) Credit operations are integral, with 67.6% of FY2020 purchases financed in-house, supported by proprietary underwriting models and a substantial collection team, with a quarter of payments made in-store Sales by Payment Type (FY 2020) | Payment Type | % of Purchases | | :--- | :--- | | In-house Credit | 67.6% | | Third-party Financing | 24.8% | | Cash or Credit Card | 7.6% | - The underwriting department is separate from retail sales and uses proprietary auto-decision algorithms for **59% of approved and utilized applications** in FY2020[21](index=21&type=chunk) - Collection activities are handled by approximately **440 in-house personnel** and **270 third-party agents**; in FY2020, **25.5% of credit payments** were made in-store[23](index=23&type=chunk) [Store Operations](index=9&type=section&id=Store%20Operations) As of January 31, 2020, the company operated 137 leased retail stores across 14 states, with 64 locations concentrated in Texas, averaging 36,000 square feet of selling space Store Count by State (as of Jan 31, 2020) | State | Number of Locations | | :--- | :--- | | Texas | 64 | | North Carolina | 11 | | Arizona | 11 | | Louisiana | 10 | | Colorado | 7 | | Other (9 states) | 34 | | **Total** | **137** | [E-Commerce](index=10&type=section&id=E-Commerce) The company is enhancing e-commerce to drive traffic, enabling online purchases, credit applications, and payments, with monthly credit applications increasing to 65,000 in FY2020 - The company's website averaged approximately **65,000 credit applications per month** in FY2020, up from 59,000 in FY2019[28](index=28&type=chunk) - In late FY2019, the company enabled certain credit-qualified customers to complete entire financed purchase transactions online through its proprietary in-house credit programs[28](index=28&type=chunk) [Regulation](index=11&type=section&id=Regulation) The company's credit business is extensively regulated by federal and state consumer credit laws, with the CFPB's broad authority posing significant regulatory and enforcement risks - The business is subject to extensive federal and state consumer credit laws, including TILA, ECOA, FCRA, and FDCPA[34](index=34&type=chunk) - The Consumer Financial Protection Bureau (CFPB) has broad authority to regulate and enforce consumer financial laws, including prohibiting 'unfair, deceptive or abusive acts or practices' (UDAAP), representing a significant regulatory risk[34](index=34&type=chunk) [ITEM 1A. RISK FACTORS](index=13&type=section&id=ITEM%201A.%20RISK%20FACTORS%2E) The company faces material risks from the COVID-19 pandemic, economic downturns, substantial indebtedness, operational challenges, a sub-prime credit portfolio, regulatory changes, and intense competition - The COVID-19 outbreak poses a significant risk by reducing customer traffic, forcing store closures or reduced hours, and potentially increasing credit defaults due to customer job losses[41](index=41&type=chunk) - A material weakness was identified in internal controls over financial reporting related to Information Technology General Controls (ITGCs), specifically in user access and program change management for new systems[43](index=43&type=chunk) - The company's significant level of indebtedness (**$1.03 billion** as of Jan 31, 2020) and reliance on capital markets for securitizing customer receivables create financial vulnerability[48](index=48&type=chunk)[45](index=45&type=chunk) - The credit portfolio is comprised of a significant portion of sub-prime borrowers, which entails a higher risk of default, delinquency, and losses[50](index=50&type=chunk) - The business is heavily regulated by consumer protection laws, and changes in regulations by agencies like the CFPB could adversely affect credit offerings and collection practices[64](index=64&type=chunk) - The company is highly dependent on a small number of key suppliers, with **six vendors accounting for 85.7% of inventory purchases** in fiscal year 2020, posing a supply chain risk[59](index=59&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS](index=32&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS%2E) The company reports no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[82](index=82&type=chunk) [ITEM 2. PROPERTIES](index=32&type=section&id=ITEM%202.%20PROPERTIES%2E) Details on the company's properties, including stores, distribution centers, and corporate offices, are incorporated by reference from the 'Store Operations' section in Part I, Item 1 - Details on company properties are incorporated by reference from the 'Store Operations' section in Part I, Item 1[83](index=83&type=chunk) [ITEM 3. LEGAL PROCEEDINGS](index=32&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS%2E) The company is involved in securities and shareholder derivative litigation, facing allegations of false and misleading statements regarding credit practices, which it intends to vigorously defend - The company is a defendant in the MicroCapital Action, a securities lawsuit alleging false and misleading statements about credit and underwriting practices[260](index=260&type=chunk) - Several shareholder derivative lawsuits have been filed against current and former directors and officers, asserting claims for breach of fiduciary duty, unjust enrichment, and insider trading[260](index=260&type=chunk)[262](index=262&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=32&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES%2E) This item is not applicable to the company's operations - Not applicable[84](index=84&type=chunk) PART II [ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=33&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES%2E) The company's common stock trades on NASDAQ under 'CONN', with no dividends paid in FY2020 or FY2019, and 348,000 shares repurchased in the quarter ended January 31, 2020 - The company's common stock is traded on the NASDAQ Global Select Market under the symbol '**CONN**'[90](index=90&type=chunk) - No cash dividends were declared or paid in fiscal year 2020 or 2019, and future dividends are not anticipated[90](index=90&type=chunk) Issuer Purchases of Equity Securities (Quarter Ended Jan 31, 2020) | Period | Total Shares Purchased (thousands) | Average Price Paid per Share | | :--- | :--- | :--- | | Nov 1 - 30 | 139 | $21.63 | | Dec 1 - 31 | 209 | $20.05 | | Jan 1 - 31 | — | $— | | **Total** | **348** | | [ITEM 6. SELECTED FINANCIAL DATA](index=36&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA%2E) Over FY2016-2020, total revenues remained stable around $1.5-$1.6 billion, while net income fluctuated, store count grew to 137, same-store sales declined, and in-house financed retail sales decreased to 67.6% Selected Historical Financial Data (in thousands, except per share amounts) | Metric | FY 2020 | FY 2019 | FY 2018 | FY 2017 | FY 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Total revenues** | **$1,543,686** | **$1,549,813** | **$1,516,031** | **$1,596,848** | **$1,613,178** | | Operating income | $134,519 | $161,255 | $115,068 | $64,098 | $113,716 | | **Net income (loss)** | **$56,004** | **$73,849** | **$6,463** | **($25,562)** | **$30,855** | | Diluted EPS | $1.82 | $2.28 | $0.20 | ($0.83) | $0.87 | | Total assets | $2,168,769 | $1,884,907 | $1,900,799 | $1,941,134 | $2,025,300 | | Total debt, net | $1,026,140 | $955,331 | $1,091,012 | $1,145,242 | $1,249,678 | | Change in same store sales | (8.2)% | (2.2)% | (11.4)% | (6.3)% | 0.5% | | Number of stores (End of year) | 137 | 123 | 116 | 113 | 103 | [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=38&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS%2E) FY2020 saw a slight revenue decrease to $1.54 billion, driven by retail declines offset by credit revenue growth, with net income falling to $56.0 million, while liquidity is maintained through operations, a revolving credit facility, and securitizations [Results of Operations](index=40&type=section&id=Results%20of%20Operations) In FY2020, total revenues decreased to $1.54 billion, with retail operating income falling due to lower sales and margins, while credit operating income significantly improved despite a higher provision for bad debts Consolidated Results of Operations (FY2020 vs. FY2019) | (in thousands) | FY 2020 | FY 2019 | Change | | :--- | :--- | :--- | :--- | | Total revenues | $1,543,686 | $1,549,813 | ($6,127) | | Operating income | $134,519 | $161,255 | ($26,736) | | Net income | $56,004 | $73,849 | ($17,845) | Retail Net Sales by Product Category (FY2020 vs. FY2019) | (in thousands) | FY 2020 | FY 2019 | % Change | | :--- | :--- | :--- | :--- | | Furniture and mattress | $370,931 | $382,975 | (3.1)% | | Home appliance | $360,441 | $332,609 | 8.4% | | Consumer electronics | $221,449 | $262,088 | (15.5)% | | Home office | $73,074 | $86,260 | (15.3)% | | **Total net sales** | **$1,163,235** | **$1,194,674** | **(2.6)%** | - Retail gross margin decreased by **120 basis points to 40.0%** in FY2020 from 41.2% in FY2019, attributed to higher margins in the prior year from tariff-related appliance price increases and increased logistics costs in the current year[120](index=120&type=chunk) - SG&A expenses increased by **$22.5 million (4.7%)** in FY2020, driven by new store occupancy costs in the retail segment and higher operational and legal expenses in the credit segment[122](index=122&type=chunk) [Customer Accounts Receivable Portfolio](index=48&type=section&id=Customer%20Accounts%20Receivable%20Portfolio) As of January 31, 2020, the $1.60 billion customer accounts receivable portfolio showed increased delinquency (12.5% for 60+ days past due) and a higher allowance for bad debts (14.6%), attributed to underwriting changes and system implementation challenges Key Portfolio Statistics (as of Jan 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Weighted average credit score | 591 | 593 | | Balances 60+ days past due % | 12.5% | 9.5% | | Re-aged balance % | 29.4% | 25.7% | | Allowance for bad debts % | 14.6% | 13.5% | - The increase in the **60+ day delinquency rate** was primarily driven by underwriting adjustments, an increase in new customers, and collection challenges from the implementation of a new loan management system[151](index=151&type=chunk)[153](index=153&type=chunk) [Liquidity and Capital Resources](index=50&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity relies on operations, a $650.0 million revolving credit facility, and securitizations, with FY2020 net cash from operations at $80.1 million and $416.8 million available borrowing capacity as of January 31, 2020 - Net cash provided by operating activities decreased to **$80.1 million** in FY2020 from $151.8 million in FY2019, mainly due to changes in working capital and a prior-year income tax refund[154](index=154&type=chunk) - The company has a **$650.0 million asset-based revolving credit facility** maturing in May 2022; as of January 31, 2020, available borrowing capacity was **$416.8 million**[162](index=162&type=chunk) - During FY2020, the company repurchased **3.5 million shares of common stock for $66.3 million** under its share repurchase program[157](index=157&type=chunk) - The company was in compliance with all debt covenants as of January 31, 2020, including its Interest Coverage Ratio and Leverage Ratio[164](index=164&type=chunk) [ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=56&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK%2E) The company's primary market risk is interest rate exposure from its variable-rate Revolving Credit Facility, where a 100 basis point increase would raise annual borrowing costs by $0.3 million - The main market risk is interest rate risk from the variable-rate Revolving Credit Facility[175](index=175&type=chunk) - A **100 basis point increase** in interest rates would increase annual borrowing costs by **$0.3 million**, based on the $29.1 million outstanding balance as of January 31, 2020[175](index=175&type=chunk) [ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](index=57&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA%2E) This section presents consolidated financial statements and Ernst & Young LLP's report, which includes an unqualified opinion on financials but an adverse opinion on internal controls, with notes detailing accounting policies, debt, and a restatement for Q3 FY2020 [Report of Independent Registered Public Accounting Firm](index=58&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Ernst & Young LLP issued an unqualified opinion on the consolidated financial statements but an adverse opinion on internal control over financial reporting due to a material weakness - The auditor, Ernst & Young LLP, issued an **adverse opinion on the Company's internal control over financial reporting** as of January 31, 2020[182](index=182&type=chunk) [Notes to Consolidated Financial Statements](index=66&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, a $1.6 billion customer accounts receivable portfolio, $1.03 billion in debt, segment data, litigation, a Q3 FY2020 restatement due to system errors, and subsequent events including a $275.0 million precautionary borrowing due to COVID-19 - The company adopted new accounting standards for leases (ASC 842) and revenue from contracts with customers (ASC 606) in fiscal years 2020 and 2019, respectively[208](index=208&type=chunk)[217](index=217&type=chunk) - As of January 31, 2020, total debt and financing lease obligations were **$1.03 billion**, consisting primarily of a Revolving Credit Facility, Senior Notes, and various series of Asset-Backed Notes[233](index=233&type=chunk) - Financial statements for the three and nine months ended October 31, 2019 were **restated** due to errors in the calculation of finance charges and provision for bad debts related to the implementation of a new loan management system[297](index=297&type=chunk) - Subsequent to year-end, on March 18, 2020, the company borrowed an additional **$275.0 million** under its Revolving Credit Facility as a precautionary measure due to uncertainty from the COVID-19 outbreak[306](index=306&type=chunk) [ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE](index=105&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE%2E) The company reports no disagreements with its accountants regarding accounting principles, financial disclosure, or auditing scope - None reported[308](index=308&type=chunk) [ITEM 9A. CONTROLS AND PROCEDURES](index=105&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES%2E) Management concluded that disclosure controls were ineffective as of January 31, 2020, due to a material weakness in IT general controls, with a remediation plan underway for completion in fiscal year 2021 - Management concluded that disclosure controls and procedures were **not effective** as of January 31, 2020[309](index=309&type=chunk) - A **material weakness** was identified in IT general controls (ITGCs) concerning user access and program change management for new financially significant applications[312](index=312&type=chunk) - A remediation plan is in progress to expand IT governance, enhance user access controls, and improve segregation of duties, with expected completion in fiscal year 2021[313](index=313&type=chunk)[314](index=314&type=chunk)[315](index=315&type=chunk) [ITEM 9B. OTHER INFORMATION](index=108&type=section&id=ITEM%209B.%20OTHER%20INFORMATION%2E) During the internal controls assessment, Mr. John Davis, President of Credit and Collections, resigned effective March 27, 2020, and entered a consulting agreement for transition services - The President of Credit and Collections, Mr. John Davis, resigned effective March 27, 2020, during the period when the company was assessing its internal controls[323](index=323&type=chunk) PART III [ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE](index=108&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2020 Annual Meeting of Stockholders Proxy Statement - Information is incorporated by reference from the 2020 Proxy Statement[324](index=324&type=chunk) [ITEM 11. EXECUTIVE COMPENSATION](index=108&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION%2E) Information concerning executive compensation is incorporated by reference from the company's 2020 Annual Meeting of Stockholders Proxy Statement - Information is incorporated by reference from the 2020 Proxy Statement[325](index=325&type=chunk) [ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS](index=108&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS%2E) Information regarding security ownership of certain beneficial owners and management is incorporated by reference from the company's 2020 Annual Meeting of Stockholders Proxy Statement - Information is incorporated by reference from the 2020 Proxy Statement[325](index=325&type=chunk) [ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE](index=108&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) Information concerning certain relationships, related transactions, and director independence is incorporated by reference from the company's 2020 Annual Meeting of Stockholders Proxy Statement - Information is incorporated by reference from the 2020 Proxy Statement[325](index=325&type=chunk) [ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES](index=108&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES%2E) Information regarding principal accountant fees and services is incorporated by reference from the company's 2020 Annual Meeting of Stockholders Proxy Statement - Information is incorporated by reference from the 2020 Proxy Statement[325](index=325&type=chunk) PART IV [ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES](index=109&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES%2E) This section provides a detailed index of all exhibits and financial statements filed with the Form 10-K report, noting the omission of inapplicable financial statement schedules - This item provides a list of the financial statements filed with the report and an index of all exhibits[328](index=328&type=chunk)[329](index=329&type=chunk) [ITEM 16. FORM 10-K SUMMARY](index=117&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY%2E) No summary is provided under this item in the report - None[338](index=338&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) Class Outstanding x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 2019 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 001-34956 CONN'S, INC. (Exact name of registrant as specified in its charter) Delaware 06-1672840 (State or ot ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 2019 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 001-34956 CONN'S, INC. (Exact name of registrant as specified in its charter) Delaware 06-1672840 (State or other jurisdiction of i ...