Financial Performance - Consolidated revenues decreased approximately $235.8 million for the six months ended June 30, 2023, compared to the same period in 2022[133]. - Operating profit decreased approximately $20.2 million, primarily due to a decrease in gross profit of $66.1 million driven by lower revenues[133]. - Revenues in the Rent-A-Center segment decreased approximately $57.5 million for the six months ended June 30, 2023, due to a 5.8% decrease in same store sales[134]. - Same store sales decline was driven by decreases in rentals and fees revenues of $31.4 million and merchandise sales of $22.2 million, respectively[134]. - Acima segment revenues decreased by approximately $181.3 million for the six months ended June 30, 2023, primarily due to decreases in rentals and fees revenues and merchandise sales[135]. - Total store revenue decreased by $235.3 million, or 10.8%, to $1,936.7 million for the six months ended June 30, 2023, primarily due to decreases in the Acima and Rent-A-Center segments[152]. - Gross profit decreased by $66.1 million, or 6.1%, to $1,012.5 million for the six months ended June 30, 2023, primarily due to decreases in the Rent-A-Center and Acima segments[145]. - Operating profit decreased by $20.2 million to $48.9 million for the six months ended June 30, 2023, with operating profit as a percentage of total revenue at 2.5%, down from 3.1% in 2022[161]. Cash Flow and Financial Position - Cash flow from operations was $142.0 million for the six months ended June 30, 2023, with cash and cash equivalents of $86.8 million and outstanding indebtedness of $1.3 billion[137]. - Operating cash flow for the six months ended June 30, 2023, was $142.0 million, a decrease of $145.1 million from $287.1 million in 2022, primarily due to increased inventory purchases[176]. - Cash used in investing activities decreased to $21.4 million for the six months ended June 30, 2023, from $31.3 million in 2022, mainly due to lower investment in store-related assets[177]. - Cash used in financing activities decreased to $180.0 million for the six months ended June 30, 2023, compared to $252.0 million in 2022, primarily due to higher debt repayments[178]. - The company ended the second quarter of 2023 with $86.8 million in cash and cash equivalents and outstanding indebtedness of $1.3 billion[175]. Segment Performance - Mexico segment revenues increased by 10.7% for the six months ended June 30, 2023, contributing to an increase in gross profit of 11.0%, or $2.5 million[136]. - Rent-A-Center segment revenues decreased by $23.994 million, or 4.9%, for the three months ended June 30, 2023, with a gross profit decrease of $21.807 million, or 6.3%[163]. - Acima segment revenues decreased by $65.812 million, or 12.4%, for the three months ended June 30, 2023, with gross profit decreasing by $5.394 million, or 3.3%[166]. - Mexico segment revenues increased by $1.753 million, or 10.5%, for the three months ended June 30, 2023, with gross profit increasing by $1.236 million, or 10.5%[169]. Expenses and Profitability - Cost of rentals and fees decreased by $69.8 million, or 10.6%, to $588.8 million for the six months ended June 30, 2023[153]. - Cost of merchandise sold decreased by $99.2 million, or 22.7%, to $336.9 million for the six months ended June 30, 2023[155]. - Other charges decreased by $25.9 million, or 48.2%, to $27.8 million for the three months ended June 30, 2023, compared to the previous year[149]. - Other charges increased by $31.6 million to $155.4 million for the six months ended June 30, 2023, primarily due to stock compensation expenses related to the acquisition of Acima Holdings[160]. - Store labor decreased by $22.2 million, or 6.7%, to $308.4 million for the six months ended June 30, 2023, with store labor as a percentage of total store revenue increasing to 15.9% from 15.2%[157]. - Other store expenses decreased by $48.7 million, or 11.4%, to $377.8 million for the six months ended June 30, 2023, with other store expenses as a percentage of total store revenue at 19.5% compared to 19.6% in 2022[158]. Tax and Regulatory - Income tax expense increased by $83.0 million to $102.4 million for the three months ended June 30, 2023, primarily due to the tax impact of accelerated stock compensation expense[151]. - Income tax benefit for the six months ended June 30, 2023 was $(7.7) million, compared to $15.7 million in 2022, primarily due to the tax impact of accelerated stock compensation expense[162]. Market Risks and Management - The company is exposed to market risk from foreign exchange rate fluctuations of the Mexican peso to the U.S. dollar, affecting the financial position and operating results of its stores in Mexico[200]. - A hypothetical 1.0% increase or decrease in market interest rates would result in an additional $8.3 million annualized pre-tax charge or credit to the condensed consolidated statement of operations[199]. - Monitoring and managing market risk related to interest rates is a continual process carried out by senior management[198]. - The company has not entered into any interest rate swap agreements as of June 30, 2023[199]. Strategic Initiatives - The company announced a quarterly cash dividend of $0.34 per share for the third quarter of 2023, paid on July 11, 2023[119]. - The company is focused on enhancing technology platforms to improve consumer experience and streamline transaction processes[121]. - The company aims to grow penetration with current Acima merchants and attract new merchants to its platform[121]. - The company is experiencing negative customer behavioral trends, including increases in delinquent payments and merchandise loss activity[123]. - The company has tightened its underwriting policies in response to declining revenues and increased operating expenses[123]. Accounting and Compliance - The company believes that recently issued accounting standards will not have a material impact on its consolidated financial statements upon adoption[197]. - The revenue mix is moderately seasonal, with the first quarter generally providing higher merchandise sales due to federal income tax refunds[196]. - The company recorded $1.3 million in uncertain tax positions as of June 30, 2023, representing potential future cash liabilities[195]. - As of June 30, 2023, the total remaining obligation for existing store lease contracts was approximately $345.0 million[192]. - As of June 30, 2023, the company had $450 million in Notes outstanding at a fixed interest rate of 6.375%[199]. - The company also had $815.5 million outstanding under the Term Loan Facility, with interest rates indexed to the Term SOFR rate or the prime rate[199].
RENT-A-CENTER(RCII) - 2023 Q2 - Quarterly Report