Financial Performance - Consolidated revenues decreased approximately $143.7 million for the three months ended March 31, 2023, compared to the same period in 2022[124]. - Operating profit decreased approximately $46.2 million, primarily due to a decrease in gross profit of $39.8 million driven by lower revenues[124]. - Revenues in the Rent-A-Center Business segment decreased approximately $33.5 million, attributed to a 6.6% decrease in same store sales[125]. - Total revenues decreased by $143.7 million, or 12.4%, to $1,016.1 million for the three months ended March 31, 2023, compared to $1,159.7 million in 2022[130]. - Gross profit decreased by $39.8 million, or 7.3%, to $506.3 million for the three months ended March 31, 2023, with gross profit as a percentage of total revenue increasing to 49.8%[135]. - Operating profit decreased by $46.1 million to $(35.1) million for the three months ended March 31, 2023, with an operating loss margin of (3.5)%[140]. - Acima segment revenues decreased by approximately $115.5 million, or 13.0%, to $987.0 million for the three months ended March 31, 2023, compared to $1,134.3 million in the same period of 2022[131]. - Acima segment revenues decreased by 19.3% to $483.8 million for the three months ended March 31, 2023, compared to $599.4 million in 2022, primarily due to lower demand for durable goods[145]. - Operating cash flow generated was $105.4 million for Q1 2023, a decrease of $99.9 million from $205.3 million in Q1 2022, mainly due to increased inventory purchases[154]. Revenue Sources - E-commerce revenues represented approximately 25% of total lease-to-own store revenues for the three months ended March 31, 2023, up from 23% in the same period of 2022[118]. - Mexico segment revenues increased by 10.9%, contributing to a gross profit increase of 11.6%, or $1.3 million, for the three months ended March 31, 2023[127]. - Mexico segment revenues increased by 10.9% to $17.4 million in Q1 2023, driven by favorable exchange rate fluctuations[148]. - Franchising segment revenues rose by 14.0% to $29.8 million in Q1 2023, primarily due to increased merchandise purchases by franchisees[151]. Cost Management - Store labor decreased by $10.1 million, or 6.1%, to $156.5 million for the three months ended March 31, 2023, representing 15.9% of total store revenue[136]. - Cost of merchandise sold decreased by $66.0 million, or 26.4%, to $184.3 million for the three months ended March 31, 2023, with a gross margin percent of merchandise sales decreasing to (13.1)%[134]. - Other charges increased by $57.5 million, or 81.9%, to $127.6 million for the three months ended March 31, 2023, primarily due to stock compensation expenses related to the acquisition of Acima Holdings[139]. - Total merchandise losses decreased to $80.1 million in Q1 2023 from $109.6 million in Q1 2022, with customer stolen merchandise losses dropping to $72.0 million[159]. Cash and Debt Management - Cash flow from operations was $105.4 million for the three months ended March 31, 2023, with cash and cash equivalents totaling $171.7 million[128]. - The company ended Q1 2023 with $171.7 million in cash and cash equivalents and outstanding indebtedness of $1.4 billion[153]. - As of March 31, 2023, the company had outstanding borrowings of $817.6 million under the Term Loan Facility and available commitments of $397.1 million under the ABL Credit Facility[166]. - The company issued $450.0 million in senior unsecured notes with a fixed interest rate of 6.375%, due February 15, 2029, to fund part of the Acima Holdings acquisition[167]. Strategic Initiatives - The company is focused on enhancing technology platforms to improve consumer experience and streamline transaction processes[112]. - The company aims to leverage data analytics to attract new customers and mitigate risk across all business segments[112]. - The company is pursuing joint venture, partnership, or merger and acquisition opportunities to advance key initiatives[108]. Tax and Regulatory Matters - Income tax benefit for the three months ended March 31, 2023, was $110.1 million, compared to $3.6 million in 2022, primarily due to accelerated stock compensation expense[141]. - The company recorded $5.1 million in uncertain tax positions as of March 31, 2023, representing potential future cash liabilities[171]. Market and Economic Factors - Revenue mix is moderately seasonal, with the first quarter generally providing higher merchandise sales due to federal income tax refunds[172]. - A hypothetical 1.0% increase or decrease in market interest rates would result in an additional $9.2 million annualized pre-tax charge or credit to the condensed consolidated statement of operations[175]. - The company has not entered into any interest rate swap agreements as of March 31, 2023, to mitigate interest rate risk[175]. - The company is exposed to foreign exchange rate fluctuations between the Mexican peso and the U.S. dollar, affecting the financial position and operating results of its stores in Mexico[176].
RENT-A-CENTER(RCII) - 2023 Q1 - Quarterly Report