Financial Performance - Consolidated revenues and gross profit decreased by approximately $280.6 million and $74.5 million, respectively, for the nine months ended September 30, 2023 [130]. - Operating profit increased by approximately $0.8 million, primarily due to a decrease in other store expenses of $55.0 million and labor expenses of $26.3 million [130]. - Revenues in the Rent-A-Center segment decreased approximately $77.6 million, driven by a 5.2% decrease in same store sales [131]. - Same store sales decline was attributed to decreases in rentals and fees revenues of $45.1 million and merchandise sales of $25.4 million, respectively [131]. - Acima segment revenues decreased by approximately $210.6 million for the nine months ended September 30, 2023, primarily due to decreases in rentals and fees revenues and merchandise sales [132]. - Mexico segment revenues increased by 14.6% for the nine months ended September 30, 2023, contributing to a gross profit increase of 15.1% or $5.2 million [133]. - Total store revenue decreased by $281.2 million, or 8.9%, to $2,885.9 million for the nine months ended September 30, 2023, compared to $3,167.1 million for the same period in 2022 [149]. - Operating profit increased by $21.0 million, or 56.6%, to $58.1 million for the three months ended September 30, 2023, compared to $37.1 million in 2022 [147]. - Net earnings for the three months ended September 30, 2023, were $4.4 million, a significant improvement compared to a loss of $5.8 million in the same period of 2022 [142]. Cost and Expenses - Cost of rentals and fees decreased by $83.0 million, or 8.6%, to $885.7 million for the nine months ended September 30, 2023, compared to $968.7 million in 2022 [150]. - Cost of merchandise sold decreased by $122.7 million, or 19.9%, for the nine months ended September 30, 2023, compared to the same period in 2022 [150]. - Total cost of revenues decreased by $206.1 million, or 12.3%, to $1.464 billion for the nine months ended September 30, 2023 [150]. - Cost of merchandise sold decreased by $122.6 million, or 19.9%, to $492.9 million for the nine months ended September 30, 2023, from $615.5 million in 2022 [152]. - General and administrative expenses increased by $13.9 million, or 34.7%, to $53.9 million for the three months ended September 30, 2023 [145]. - General and administrative expenses increased by $9.1 million, or 6.5%, to $150.4 million for the nine months ended September 30, 2023, with expenses as a percentage of total revenue rising to 5.1% from 4.3% [156]. - Store labor decreased by $26.3 million, or 5.4%, to $460.5 million for the nine months ended September 30, 2023, with store labor as a percentage of total store revenue increasing to 16.0% from 15.4% [154]. - Other store expenses decreased by $55.0 million, or 8.8%, to $569.3 million for the nine months ended September 30, 2023, with other store expenses as a percentage of total store revenue remaining at 19.7% [155]. Cash Flow and Financing - Cash flow from operations was $219.9 million for the nine months ended September 30, 2023 [134]. - Cash provided by operating activities decreased by $192.2 million to $219.9 million for the nine months ended September 30, 2023, from $412.1 million in 2022, primarily due to an increase in inventory purchases [173]. - Cash used in financing activities decreased to $223.8 million for the nine months ended September 30, 2023, compared to $304.5 million in 2022, primarily due to a decrease in debt repayments [174]. - As of September 30, 2023, the company had outstanding borrowings of $815.5 million under the Term Loan Facility and available commitments of $485.6 million under the ABL Credit Facility [186]. - The company ended the third quarter of 2023 with $105.7 million of cash and cash equivalents and outstanding indebtedness of $1.3 billion [172]. Market and Economic Conditions - The company is facing macroeconomic challenges, including wage inflation and global supply chain disruptions, impacting product availability and costs [121]. - The company has experienced negative customer behavioral trends, including increases in delinquent payments and merchandise loss activity [120]. - Total merchandise losses for the nine months ended September 30, 2023 were $229.3 million, down from $288.8 million in 2022, with customer stolen merchandise losses at $208.4 million [178]. - The company is exposed to market risk from foreign exchange rate fluctuations of the Mexican peso to the U.S. dollar [197]. Strategic Initiatives - The company is focused on enhancing technology platforms to improve consumer experience and streamline transactions [118]. - The company aims to grow penetration with current Acima merchants and attract new merchants to its platform [118]. - Revenue mix is moderately seasonal, with the first quarter generally providing higher merchandise sales due to federal income tax refunds [193]. Tax and Obligations - Income tax expense decreased by $16.4 million to $19.4 million for the nine months ended September 30, 2023, with the effective tax rate decreasing to 76.1% from 78.7% [159]. - The company has recorded $1.4 million in uncertain tax positions as of September 30, 2023, representing a potential future cash liability [192]. - As of September 30, 2023, the total remaining obligation for existing vehicle lease contracts in Mexico was approximately $2.9 million [191]. Capital Expenditures - Capital expenditures decreased to $36.2 million for the nine months ended September 30, 2023, compared to $49.4 million in 2022, primarily due to lower investment in store-related assets [178]. - During the first nine months of 2023, the company acquired one lease-to-own store location for an aggregate purchase price of approximately $39.0 thousand [179]. Interest Rate Exposure - As of September 30, 2023, the company had $450 million in Notes outstanding at a fixed interest rate of 6.375% [196]. - The company had $815.5 million outstanding under the Term Loan Facility, with interest rates indexed to the Term SOFR rate or the prime rate [196]. - 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 [196].
RENT-A-CENTER(RCII) - 2023 Q3 - Quarterly Report