Revenue Segments - Acima segment accounted for approximately 48% of consolidated revenues for the year ended December 31, 2023[31]. - Rent-A-Center segment comprised approximately 47% of consolidated revenues for the year ended December 31, 2023[32]. - The company operates 131 stores in Mexico as of December 31, 2023[33]. - The company operates 21 Home Choice stores in Minnesota, 86 lease-to-own stores, and 14 Acima staffed locations in North Carolina as of December 31, 2023[62][63]. - Franchising segment revenues increased by $2.0 million, primarily due to an increase in merchandise sales of $3.7 million[211]. - E-commerce revenues represented approximately 26% of total lease-to-own store revenues for the year ended December 31, 2023, up from 25% in 2022[201]. - Acima segment revenues decreased approximately $179.0 million, primarily due to lower GMV and fewer customers electing early purchase options[209]. - Rent-A-Center segment revenues decreased approximately $85.7 million, with a 4.3% decrease in same store sales driven by lower rentals and fees revenues[208]. - Consolidated revenues decreased by approximately $253.0 million and gross profit decreased by $57.2 million for the year ended December 31, 2023 compared to 2022[207]. Store Operations - As of December 31, 2023, the company operated 1,839 company-owned stores in the United States and Puerto Rico[32]. - The company franchised 440 stores across 30 states as of December 31, 2023[35]. - The company leases space for its stores and support facilities, with most leases expiring between 2032 and 2034, and expects to find suitable space for new locations as needed[182]. Customer Experience and Technology - The company aims to enhance its competitive position by leveraging data analytics capabilities to attract new customers and mitigate risk[27]. - The company plans to accelerate the shift to e-commerce and improve the omni-channel customer experience[27]. - The company utilizes a proprietary automated decision engine for lease purchase agreement approvals[21]. - The company offers flexible payment options, allowing customers to pay weekly, bi-weekly, semi-monthly, or monthly[17]. - The company provides same-day or next-day delivery and installation of merchandise at no additional cost in its Rent-A-Center stores[23]. - The company is focused on developing robust virtual lease-to-own technology to enhance its retail partner business, following acquisitions that have accelerated this development[103]. Financial Performance and Challenges - The company has experienced negative trends in customer behavior since late 2021, leading to a tightening of underwriting policies and a reduction in active leases, which has decreased lease revenue and operating cash flows[81]. - The company is facing challenges due to a tight labor market contributing to wage inflation and global supply chain disruptions, resulting in reduced product availability and rising product costs[82]. - Effective cost management is crucial for profitability, as the company faces rising costs from suppliers, labor, and economic conditions, which may not be recoverable through price increases[98]. - The company has significant indebtedness, which could adversely affect its financial condition and operational flexibility[80]. - The company’s growth strategy is dependent on attracting and retaining experienced management and investing in technology capabilities, which are critical for executing future initiatives[91]. - The company may face significant tax liabilities due to the complex and evolving nature of indirect taxes applicable to its operations, particularly in the lease-to-own industry[150]. Regulatory and Legal Risks - The company’s operations are subject to various legal and regulatory risks, which could result in significant compliance costs and operational restrictions[80]. - Acima is currently facing investigations from the CFPB and state attorneys general, which may materially and adversely affect its business[132]. - The CFPB has indicated potential violations of multiple consumer protection laws, which could lead to legal actions and financial penalties against Acima[133]. - Acima's lease-to-own transactions are subject to varying state laws, with 46 states having regulations that impose significant compliance costs[140]. - The company is exposed to increased scrutiny from federal and state regulators, which could lead to higher compliance costs and operational changes[139]. - The company has incurred substantial costs related to compliance with evolving federal and state laws, which may continue to rise[140]. Competition and Market Conditions - The company faces intense competition in the lease-to-own industry, which could adversely affect lease volumes and pricing, impacting overall operating results[113]. - The Acima segment's growth may be hindered by increased competition from retail partners who may favor competitors' lease-to-own solutions[115]. - Competition in the e-commerce sector is increasing, necessitating innovation in technologies and digital solutions to maintain market share[104]. Cybersecurity and Internal Controls - There is a significant risk of cybersecurity threats, which could compromise customer and operational data, leading to potential liabilities and reputational damage[108][109]. - The company has a comprehensive cybersecurity program, with a dedicated team reporting to the Chief Executive Officer and regular assessments of cybersecurity risks[175][179]. - The company emphasizes the necessity of effective internal controls to provide reliable financial reports, as failure to do so could harm brand and operating results[110]. Debt and Financial Obligations - As of December 31, 2023, the company's total indebtedness was approximately $1.3 billion, with undrawn commitments available for borrowings of an additional $429.6 million under the ABL Credit Facility[151]. - The annual cash interest payments on the company's indebtedness are approximately $106 million, which may fluctuate depending on changes in interest rates[156]. - The company may face challenges in refinancing its indebtedness or obtaining additional financing, which could impair its financial position and operational flexibility[157]. - The company is subject to restrictive covenants that may limit its operational and financial flexibility, including restrictions on incurring additional indebtedness and paying dividends[160]. - A breach of covenants could result in an event of default, allowing debt holders to accelerate related debt, which may exceed the company's asset value[162]. Employee and Labor Considerations - As of December 31, 2023, the company employed a total of 12,970 coworkers, with 11,050 in U.S. operations, 1,340 in Mexico, and 580 at corporate facilities[58]. - The company has a history of promoting management personnel from within, enhancing operational leadership and strategic vision[49]. - The company relies heavily on retaining key employees, as their departure could materially affect business sustainability and growth[116]. - The company may face increased operating expenses due to potential liabilities arising from new labor regulations effective February 26, 2024, which could materially affect its results of operations[146]. Seasonal and Economic Factors - The first quarter of each fiscal year generally provides higher merchandise sales due to federal income tax refunds, while cash expenditures peak in the latter part of the third quarter[55]. - Seasonal fluctuations in revenue are expected, with the first quarter typically generating higher merchandise sales due to federal tax refunds[127]. - The company's business is sensitive to economic conditions, including consumer spending and payment behaviors, which are influenced by factors such as inflation and employment levels[79].
RENT-A-CENTER(RCII) - 2023 Q4 - Annual Report