Business Wire | Feb 24, 2021 04:30PM EST

Rent-A-Center, Inc. Reports Fourth Quarter 2020 Results

Feb. 24, 2021

PLANO, Texas--(BUSINESS WIRE)--Feb. 24, 2021--Rent-A-Center, Inc. (the "Company" or "Rent-A-Center") (NASDAQ/NGS: RCII) today announced results for the quarter ended December 31, 2020.

"This past year was pivotal for Rent-A-Center," said Mitch Fadel, Chief Executive Officer. "Strong performance in our Rent-A-Center business and growth in the retail partner channel drove record revenues and earnings despite operational challenges from the COVID-19 pandemic. We made important investments to support our digital strategy, and ended the year with the announcement of our acquisition of Acima, which we believe can significantly accelerate long-term growth and profitability."

"We expect Acima to drive significant accretion to non-GAAP Diluted EPS in 2021 and 2022," continued Mr. Fadel. "The acquisition dramatically increases our growth profile, and we believe we can achieve $6 billion in consolidated total revenue with mid-teens consolidated EBITDA margins in 2023 as we benefit from scale, profitability, and free cash flow generation. Acima's approach to origination, decisioning, servicing and collections is best in class, and its platform should support more opportunities to drive invoice volume growth and pursue new retail partner relationships."

"We're similarly confident that our omni-channel strategy can maintain strong long-term growth for Rent-A-Center," continued Mr. Fadel. "E-commerce and digital payments are enhancing our engagement with our customers, and we have a strategic advantage compared to other firms competing in the virtual lease-to-own ('LTO') industry to further leverage our last-mile capabilities."

"We believe there is a substantial opportunity in front of us, and our two platforms allow us to serve customers across multiple touchpoints as the LTO industry experiences broad based adoption via digital technology and growing popularity with a younger generation."

"The hurdles we overcame in 2020 underscored the dedication of our co-workers throughout the organization to serve our customers and our ability to perform across economic cycles, and we could not be more excited about our prospects to drive the business forward," concluded Mr. Fadel.

Consolidated Results

On a consolidated basis, total revenues increased in the fourth quarter of 2020 to $716.5 million, or by 7.3 percent compared to the same period in 2019, primarily due to an increase in same store sales revenue of 13.7 percent in the Rent-A-Center Business segment and a 4.8 percent increase in total revenues in the Preferred Lease segment, partially offset by a lower store count in the Rent-A-Center Business as a result of our refranchising efforts and the rationalization of our Rent-A-Center Business store base.

On a GAAP basis, the Company generated $54.6 million in operating profit in the fourth quarter of 2020 compared to $67.8 million in the fourth quarter of 2019, with the decrease primarily due to the gain on the sale-leaseback of our corporate headquarters in 2019. Net earnings and diluted earnings per share, on a GAAP basis, were $56.3 million and $1.00 respectively in the fourth quarter of 2020 compared to net earnings and diluted earnings per share of $40.5 million and $0.72 respectively in the fourth quarter of 2019 representing increases in net earnings and diluted earnings per share of 39.0 percent and 38.9 percent, respectively.

Special items in the fourth quarter of $28.8 million were primarily related to the loss incurred upon the sale of our Rent-A-Center Business stores in California to a franchisee, service costs related to the execution of the definitive merger agreement to acquire Acima Holdings LLC, and legal settlement reserves. These impacts were offset by the release of approximately $19.2 million in domestic and foreign tax valuation allowances.

The Company's Non-GAAP fourth quarter 2020 diluted earnings per share were $1.03 compared to $0.58 in the fourth quarter of 2019, an increase of 77.2 percent. Adjusted EBITDA in the fourth quarter was $97.0 million compared to $63.7 million in the fourth quarter of 2019, an increase of 52.2 percent. Adjusted EBITDA margin as a percentage of total revenues in the fourth quarter was 13.5 percent, an increase of 400 basis points compared to the fourth quarter of 2019.

For the twelve months ended December 31, 2020, the Company generated $236.5 million of cash from operations. The Company ended the fourth quarter of 2020 with $159.4 million of cash and cash equivalents and $197.5 million of outstanding indebtedness. The Company's net debt to Adjusted EBITDA ratio ended the fourth quarter at 0.1 compared to 0.7 times as of the end of the fourth quarter 2019. The Company ended the fourth quarter of 2020 with $369 million of liquidity which included $209 million of remaining availability on its previous revolving credit facility.

Acima Holdings, LLC Acquisition

On February 17, 2021, the Company completed its previously announced acquisition of Acima Holdings. The acquisition combines Acima's capabilities with Rent-A-Center's Preferred Dynamix platform creating flexible LTO solutions across e-commerce, digital and mobile channels. The Company engaged AlixPartners to advise on the integration and synergy identification processes, and integration is currently underway and proceeding on schedule with internal timelines.

In connection with the acquisition of Acima, on February 17, 2021, the Company refinanced its prior debt facilities, entering into credit agreements providing for a five year asset-based revolving credit facility with commitments of $550 million (which commitments may be increased by up to an additional $125 million in the aggregate, subject to certain conditions), and a seven-year term loan in the amount of $875 million, which was fully drawn at the closing of the Acima acquisition. On such date, the Company also issued in an unregistered offering $450 million aggregate principal amount of 6.375% Senior Unsecured Notes due 2029, which will mature on February 15, 2029 unless earlier redeemed in accordance with their terms.

Recent Dividend

As previously announced, the Rent-A-Center Board of Directors declared on December 2, 2020 a cash dividend of $0.31 per share for the first quarter of 2021, which was paid on January 12, 2021 to stockholders of record at the close of business on December 15, 2020. The cash dividend of $0.31 per share represents an increase of 6.9% over the fourth quarter of 2020.

Preferred Lease Segment

Fourth quarter 2020 revenues increased 4.8 percent to $201.1 million as compared to the fourth quarter of 2019 and were driven primarily by virtual retail partner growth partially offset by challenges with availability of products at many retail partners. Preferred Lease invoice volume increased approximately 25 percent as compared to the fourth quarter of 2019 through new virtual retail partner additions and organic growth in virtual and staffed locations. As a percent of revenue, skip/stolen losses were 11.6 percent, 260 basis points lower than in the fourth quarter of 2019. Skip/stolen losses benefited by approximately 130 basis points as a result of reversing our remaining incremental merchandise loss reserve created earlier in the year to address potential COVID-19 losses. On a GAAP basis, segment operating profit was $17.3 million in the fourth quarter, representing an increase of $0.3 million versus the prior year. Adjusted EBITDA was $18.3 million, representing an increase of $0.7 million versus the prior year, driven by higher revenue, partially offset by lower gross profit margin due to a higher mix of virtual and merchandise sales, and lower operating expenses.

Beginning in Q1 2021, the Preferred Lease Segment will include the results of the acquired Acima operations from the date of acquisition and will be referred to as the Acima Segment.

Rent-A-Center Business Segment

Fourth quarter 2020 revenues of $464.3 million increased 5.8 percent as compared to the fourth quarter of 2019, primarily due to an increase in same store sales revenue of 13.7 percent driven by 53 percent growth in e-commerce sales, and despite the impact of refranchising approximately 100 stores in California which are no longer reflected in the Rent-A-Center Business segment revenues. Skip/stolen losses as a percent of revenue were 2.6 percent, 150 basis points lower than in the fourth quarter of 2019. Lower skip/stolen losses are partially due to the increased adoption of digital payments which has resulted in improved collections. On a GAAP basis, segment operating profit was $80.4 million in the fourth quarter, representing an increase of $14.8 million versus the prior year. Adjusted EBITDA was $102.9 million, representing an increase of $30.8 million versus the prior year. Both the segment operating profit and Adjusted EBITDA increases were driven primarily by increased operating leverage as a result of higher revenues and lower operating expenses due, in part, to a lower store count. At December 31, 2020, the Rent-A-Center Business segment had 1,845 company-operated locations.

Franchising Segment

Fourth quarter 2020 revenues of $36.8 million increased 57.0 percent compared to the fourth quarter of 2019, primarily due to a higher store count, resulting from the refranchising of approximately 100 California stores during 2020 and higher inventory purchases by franchisees. On a GAAP basis, segment operating profit was $3.9 million in the fourth quarter, representing an increase of $1.4 million versus the prior year. Adjusted EBITDA was $3.9 million, representing an increase of $1.4 million versus the prior year. At December 31, 2020, there were 462 franchise-operated locations.

Mexico Segment

Fourth quarter 2020 revenues of $14.3 million represent an increase of 11.4 percent on a constant currency basis compared to the fourth quarter of 2019. On a GAAP basis, segment operating profit was $2.1 million in the fourth quarter, representing an increase of $0.6 million versus the prior year. Adjusted EBITDA was $2.2 million, representing an increase of $0.6 million versus the prior year. At December 31, 2020, the Mexico business had 121 company-operated locations.

Corporate Segment

Fourth quarter 2020 expenses decreased by $1.5 million, or approximately 3.8 percent, versus the prior year.

SAME STORE SALES(Unaudited)



Table 1

Rent-A-CenterPeriod Mexico Business

Three Months Ended December 31, 2020 ^(1) 13.7 % 10.5 %

Three Months Ended September 30, 2020^ (1) 12.9 % 4.3 %

Three Months Ended December 31, 2019 1.2 % 7.6 %

Note: Same store sale methodology - Same store sales generally represents revenue earned in stores that were operated by us for 13 months or more and are reported on a constant currency basis as a percentage of total revenue earned in stores of the segment during the indicated period. The Company excludes from the same store sales base any store that receives a certain level of customer accounts from closed stores or acquisitions. The receiving store will be eligible for inclusion in the same store sales base in the 30th full month following account transfer.

(1) Due to the COVID-19 pandemic and related temporary store closures, all 32 stores in Puerto Rico were excluded starting in March 2020 and will remain excluded for 18 months.

2021 Guidance

Beginning in Q1 2021, the Preferred Lease Segment will include the results of the acquired Acima operations from the date of acquisition and will be referred to as the Acima Segment. Acima's corporate related expense will be reflected in the Corporate Segment.

Consolidated(1)

* Revenues of $4.305 to $4.455 billion * Adjusted EBITDA of $570 to $620 million(2) * Non-GAAP diluted earnings per share of $5.00 to $5.55(2)(4) * Free cash flow of $145 to $195 million(2)

Acima Segment (3)

* Revenues of $2.290 to $2.390 billion * Adjusted EBITDA of $320 to $350(2) million

Rent-A-Center Business Segment

* Revenues of $1.830 to $1.880 billion * Adjusted EBITDA of $375 to $395(2) million

Note: Same store sale methodology - Same store sales generally representsrevenue earned in stores that were operated by us for 13 months or more and arereported on a constant currency basis as a percentage of total revenue earnedin stores of the segment during the indicated period. The Company excludes fromthe same store sales base any store that receives a certain level of customeraccounts from closed stores or acquisitions. The receiving store will beeligible for inclusion in the same store sales base in the 30^th full monthfollowing account transfer.

^(1) Due to the COVID-19 pandemic and related temporary store closures, all 32stores in Puerto Rico were excluded starting in March 2020 and will remainexcluded for 18 months.

2021 Guidance

Beginning in Q1 2021, the Preferred Lease Segment will include the results of the acquired Acima operations from the date of acquisition and will be referred to as the Acima Segment. Acima's corporate related expense will be reflected in the Corporate Segment.

Consolidated(1)

* Revenues of $4.305 to $4.455 billion * Adjusted EBITDA of $570 to $620 million(2) * Non-GAAP diluted earnings per share of $5.00 to $5.55(2)(4) * Free cash flow of $145 to $195 million(2)

Acima Segment (3)

* Revenues of $2.290 to $2.390 billion * Adjusted EBITDA of $320 to $350(2) million

Rent-A-Center Business Segment

* Revenues of $1.830 to $1.880 billion * Adjusted EBITDA of $375 to $395(2) million

^(1) Consolidated includes Acima (referred to as Preferred Lease through Q12021), Rent-A-Center Business, Franchising, Mexico and Corporate Segments.

^(2) Non-GAAP financial measure. See descriptions below in this release.Because of the inherent uncertainty related to the special items identified inthe tables below, management does not believe it is able to provide ameaningful forecast of the comparable GAAP measures or reconciliation to anyforecasted GAAP measure without unreasonable effort.

^(3) Acima Segment refers to the historical Preferred Lease Segment and newlyacquired Acima business as of the acquisition date.

^(4) Non-GAAP diluted earnings per share excludes the impact of intangibleamortization assets created as a result of the Acima acquisition.

Webcast Information

Rent-A-Center, Inc. will host a conference call to discuss the fourth quarter results, guidance and other operational matters on the morning of Thursday, February 25, 2021, at 10:00 a.m. ET. For a live webcast of the call, visit https://investor.rentacenter.com. Certain financial and other statistical information that will be discussed during the conference call will also be provided on the same website. Residents of the United States and Canada can listen to the call by dialing (800) 399-0012. International participants can access the call by dialing (404) 665-9632.

About Rent-A-Center, Inc.

Rent-A-Center, Inc. (NASDAQ: RCII) is an industry leading omni-channel lease-to-own provider for the cash and credit constrained customer. The Company focuses on improving the quality of life for its customers by providing access and the opportunity to obtain ownership of high-quality, durable products via small payments over time under a flexible lease-purchase agreement and no long-term debt obligation. Preferred Lease (which, beginning in Q1 2021, will include the Acima business) provides virtual and staffed lease-to-own solutions to retail partners in stores and online enabling our partners to grow sales by expanding their customer base utilizing our differentiated offering. The Rent-A-Center Business and Mexico segments provide lease-to-own options on products such as furniture, appliances, consumer electronics, and computers in approximately 1,970 Rent-A-Center stores in the United States, Mexico, and Puerto Rico and on its e-commerce platform, Rentacenter.com. The Franchising segment is a national franchiser of approximately 460 franchise locations. Rent-A-Center is headquartered in Plano, Texas. For additional information about the Company, please visit our website at Rentacenter.com or Investor.rentacenter.com.

Forward Looking Statements

This press release and the guidance above and the Company's related conference call contain forward-looking statements that involve risks and uncertainties. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "could," "estimate," "predict," "continue," "maintain," "should," "anticipate," "believe," or "confident," or the negative thereof or variations thereon or similar terminology and including, among others, statements concerning (i) the potential effects of the COVID-19 pandemic on the Company's business operations, financial performance, and prospects, (ii) the future business prospects and financial performance of our Company following the closing of the Company's merger with Acima (the "Merger"), (iii) cost and revenue synergies and other benefits expected to result from the Merger, (iv) the Company's guidance and expected financial results for 2021 and future periods, (v) other statements regarding the Company's strategy and plans and other statements that are not historical facts. However, there can be no assurance that such expectations will occur. The Company's actual future performance could differ materially and adversely from such statements. Factors that could cause or contribute to these differences include, but are not limited to: (1) risks relating to the Merger, including (i) the possibility that the anticipated benefits from the Merger may not be fully realized or may take longer to realize than expected, (ii) the possibility that costs, difficulties or disruptions related to the integration of Acima operations into the Company's other operations will be greater than expected, (iii) the Company's ability to (A) effectively adjust to changes in the composition of the Company's offerings and product mix as a result of the Merger and continue to maintain the quality of existing offerings and (B) successfully introduce other new product or service offerings on a timely and cost-effective basis, (iv) changes in the Company's future cash requirements as a result of the Merger, whether caused by unanticipated increases in capital expenditures or working capital needs, unanticipated liabilities or otherwise, and (v) the impacts of the Company's additional debt incurred to finance the Merger; (2) the Company's ability to identify potential acquisition candidates, complete acquisitions and successfully integrate acquired companies; (3) the impact of the COVID-19 pandemic and related government and regulatory restrictions issued to combat the pandemic, including adverse changes in such restrictions, and impacts on (i) demand for the Company's lease-to-own products offered in the Company's operating segments, (ii) the Company's Preferred Lease retail partners, (iii) the Company's customers and their willingness and ability to satisfy their lease obligations, (iv) the Company's suppliers' ability to satisfy its merchandise needs, (v) the Company's employees, including the ability to adequately staff its operating locations, (vi) the Company's financial and operational performance, and (vii) the Company's liquidity; (4) the general strength of the economy and other economic conditions affecting consumer preferences and spending, including the availability of credit to the Company's target consumers; (5) factors affecting the disposable income available to the Company's current and potential customers; (6) changes in the unemployment rate; (7) capital market conditions, including availability of funding sources for the Company; (8) changes in the Company's credit ratings; (9) difficulties encountered in improving the financial and operational performance of the Company's business segments; (10) risks associated with pricing changes and strategies being deployed in the Company's businesses; (11) the Company's ability to continue to realize benefits from its initiatives regarding cost-savings and other EBITDA enhancements, efficiencies and working capital improvements; (12) the Company's ability to continue to effectively execute its strategic initiatives, including mitigating risks associated with any potential mergers and acquisitions, or refranchising opportunities; (13) failure to manage the Company's store labor and other store expenses, including merchandise losses; (14) disruptions caused by the operation of the Company's store information management systems; (15) risks related to the Company's virtual lease-to-own business, including the Company's ability to continue to develop and successfully implement the necessary technologies; (16) the Company's ability to achieve the benefits expected from its integrated virtual and staffed retail partner offering and to successfully grow this business segment; (17) exposure to potential operating margin degradation due to the higher cost of merchandise in the Company's Preferred Lease offering and potential for higher merchandise losses; (18) the Company's transition to more-readily scalable, "cloud-based" solutions; (19) the Company's ability to develop and successfully implement digital or E-commerce capabilities, including mobile applications; (20) the Company's ability to protect its proprietary intellectual property; (21) disruptions in the Company's supply chain; (22) limitations of, or disruptions in, the Company's distribution network; (23) rapid inflation or deflation in the prices of the Company's products; (24) the Company's ability to execute and the effectiveness of store consolidations, including the Company's ability to retain the revenue from customer accounts merged into another store location as a result of a store consolidation; (25) the Company's available cash flow and its ability to generate sufficient cash flow to continue paying dividends; (26) increased competition from traditional competitors, virtual lease-to-own competitors, online retailers and other competitors, including subprime lenders; (27) the Company's ability to identify and successfully market products and services that appeal to its current and future targeted customer segments; (28) consumer preferences and perceptions of the Company's brands; (29) the Company's ability to retain the revenue associated with acquired customer accounts and enhance the performance of acquired stores; (30) the Company's ability to enter into new, and collect on, its rental or lease purchase agreements; (31) changes in the enforcement of existing laws and regulations and the enactment of new laws and regulations adversely affecting the Company's business, including any legislative or regulatory enforcement efforts that seek to re-characterize store-based or virtual lease-to-own transactions as credit sales and to apply consumer credit laws and regulations to the Company's business; (32) the Company's compliance with applicable statutes or regulations governing its businesses; (33) the impact of any additional social unrest such as that experienced in 2020 or otherwise, and resulting damage to the Company's inventory or other assets and potential lost revenues; (34) changes in interest rates; (35) changes in tariff policies; (36) adverse changes in the economic conditions of the industries, countries or markets that the Company serves; (37) information technology and data security costs; (38) the impact of any breaches in data security or other disturbances to the Company's information technology and other networks and the Company's ability to protect the integrity and security of individually identifiable data of its customers, employees and retail partners; (39) changes in estimates relating to self-insurance liabilities and income tax and litigation reserves; (40) changes in the Company's effective tax rate; (41) fluctuations in foreign currency exchange rates; (42) the Company's ability to maintain an effective system of internal controls, including in connection with the integration of Acima; (43) litigation or administrative proceedings to which the Company is or may be a party to from time to time; and (44) the other risks detailed from time to time in the Company's SEC reports, including but not limited to, its Annual Report on Form 10-K for the year ended December 31, 2019, its Annual Report on Form 10-K for the year ended December 31, 2020 (when filed) and in its subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except as required by law, the Company is not obligated to publicly release any revisions to these forward-looking statements to reflect the events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Rent-A-Center, Inc. and Subsidiaries



CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED



Table 2 Three Months Ended Twelve Months Ended December December 31, 31,

(In thousands,except per share 2020 2019 2020 2019 data)

Revenues

Store

Rentals and fees $ 580,781 $ 558,573 $ 2,263,091 $ 2,224,402

Merchandise sales 78,024 63,766 378,717 304,630

Installment sales 19,530 20,776 68,500 70,434

Other 1,504 1,833 3,845 4,795

Total store 679,839 644,948 2,714,153 2,604,261 revenues

Franchise

Merchandise sales 30,470 18,828 80,023 49,135

Royalty income and 6,182 4,086 20,015 16,456 fees

Total revenues 716,491 667,862 2,814,191 2,669,852

Cost of revenues

Store

Cost of rentals and 166,006 161,877 655,612 634,878 fees

Cost of merchandise 85,288 69,006 382,182 319,006 sold

Cost of installment 7,281 7,250 24,111 23,383 sales

Total cost of store 258,575 238,133 1,061,905 977,267 revenues

Franchise cost of 30,502 18,591 80,134 48,514 merchandise sold

Total cost of 289,077 256,724 1,142,039 1,025,781 revenues

Gross profit 427,414 411,138 1,672,152 1,644,071

Operating expenses

Store expenses

Labor 144,909 156,875 579,125 630,096

Other store 146,078 153,721 609,370 617,106 expenses

General andadministrative 39,414 36,812 153,108 142,634 expenses

Depreciation and 13,587 15,316 56,658 61,104 amortization

Other charges and 28,787 (19,420 ) 36,555 (60,728 ) (gains)

Total operating 372,775 343,304 1,434,816 1,390,212 expenses

Operating profit 54,639 67,834 237,336 253,859

Debt refinancing - - - 2,168 charges

Interest expense 3,367 4,817 15,325 31,031

Interest income (207 ) (167 ) (768 ) (3,123 )

Earnings before 51,479 63,184 222,779 223,783 income taxes

Income tax (4,821 ) 22,693 14,664 50,237 (benefit) expense

Net earnings $ 56,300 $ 40,491 $ 208,115 $ 173,546

Basic weighted 54,190 54,730 54,187 54,325 average shares

Basic earnings per $ 1.04 $ 0.74 $ 3.84 $ 3.19 common share

Diluted weighted 56,028 56,571 55,754 55,955 average shares

Diluted earnings $ 1.00 $ 0.72 $ 3.73 $ 3.10 per common share

Rent-A-Center, Inc. and Subsidiaries

SELECTED BALANCE SHEET HIGHLIGHTS - UNAUDITED

Table 3

December 31,

(In thousands)

2020

2019

Cash and cash equivalents

$

159,449

$

70,494

Receivables, net

90,003

84,123

Prepaid expenses and other assets

50,006

46,043

Rental merchandise, net

On rent

762,886

697,270

Held for rent

146,266

138,418

Operating lease right-of-use assets

283,422

281,566

Goodwill

70,217

70,217

Total assets

1,750,980

1,582,798

Operating lease liabilities

$

285,354

$

285,041

Senior debt, net

190,490

230,913

Total liabilities

1,158,900

1,123,835

Stockholders' equity

592,080

458,963

Rent-A-Center, Inc. and Subsidiaries

SELECTED BALANCE SHEET HIGHLIGHTS - UNAUDITED

Table 3 December 31,

(In thousands) 2020 2019

Cash and cash equivalents $ 159,449 $ 70,494

Receivables, net 90,003 84,123

Prepaid expenses and other assets 50,006 46,043

Rental merchandise, net

On rent 762,886 697,270

Held for rent 146,266 138,418

Operating lease right-of-use assets 283,422 281,566

Goodwill 70,217 70,217

Total assets 1,750,980 1,582,798



Operating lease liabilities $ 285,354 $ 285,041

Senior debt, net 190,490 230,913

Total liabilities 1,158,900 1,123,835

Stockholders' equity 592,080 458,963

Rent-A-Center, Inc. and Subsidiaries

SEGMENT INFORMATION HIGHLIGHTS - UNAUDITED

Table 4

Three Months Ended December 31,

Twelve Months Ended December 31,

(In thousands)

2020

2019

2020

2019

Revenues

Rent-A-Center Business

$

464,261

$

438,836

$

1,852,641

$

1,800,486

Preferred Lease

201,122

191,863

810,151

749,260

Mexico

14,267

13,694

50,583

53,960

Franchising

36,841

23,469

100,816

66,146

Total revenues

$

716,491

$

667,862

$

2,814,191

$

2,669,852

Rent-A-Center, Inc. and Subsidiaries



SEGMENT INFORMATION HIGHLIGHTS - UNAUDITED



Table 4 Three Months Ended December Twelve Months Ended December 31, 31,

(In thousands) 2020 2019 2020 2019

Revenues

Rent-A-Center $ 464,261 $ 438,836 $ 1,852,641 $ 1,800,486 Business

Preferred Lease 201,122 191,863 810,151 749,260

Mexico 14,267 13,694 50,583 53,960

Franchising 36,841 23,469 100,816 66,146

Total revenues $ 716,491 $ 667,862 $ 2,814,191 $ 2,669,852

Table 5

Three Months Ended December 31,

Twelve Months Ended December 31,

(In thousands)

2020

2019

2020

2019

Gross profit

Rent-A-Center Business

$

328,348

$

309,761

$

1,294,695

$

1,255,153

Preferred Lease

82,677

86,977

321,110

333,798

Mexico

10,050

9,522

35,665

37,488

Franchising

6,339

4,878

20,682

17,632

Total gross profit

$

427,414

$

411,138

$

1,672,152

$

1,644,071

Table 5 Three Months Ended December Twelve Months Ended December 31, 31,

(In thousands) 2020 2019 2020 2019

Gross profit

Rent-A-Center $ 328,348 $ 309,761 $ 1,294,695 $ 1,255,153 Business

Preferred Lease 82,677 86,977 321,110 333,798

Mexico 10,050 9,522 35,665 37,488

Franchising 6,339 4,878 20,682 17,632

Total gross profit $ 427,414 $ 411,138 $ 1,672,152 $ 1,644,071

Table 6

Three Months Ended December 31,

Twelve Months Ended December 31,

(In thousands)

2020

2019

2020

2019

Operating profit

Rent-A-Center Business

$

80,354

$

65,553

$

333,379

$

235,964

Preferred Lease

17,319

16,989

57,847

83,066

Mexico

2,055

1,451

5,798

5,357

Franchising

3,876

2,489

12,570

7,205

Total segments

103,604

86,482

409,594

331,592

Corporate

(48,965

)

(18,648

)

(172,258

)

(77,733

)

Total operating profit

$

54,639

$

67,834

$

237,336

$

253,859

Table 6 Three Months Ended December Twelve Months Ended 31, December 31,

(In thousands) 2020 2019 2020 2019

Operating profit

Rent-A-Center $ 80,354 $ 65,553 $ 333,379 $ 235,964 Business

Preferred Lease 17,319 16,989 57,847 83,066

Mexico 2,055 1,451 5,798 5,357

Franchising 3,876 2,489 12,570 7,205

Total segments 103,604 86,482 409,594 331,592

Corporate (48,965 ) (18,648 ) (172,258 ) (77,733 )

Total operating $ 54,639 $ 67,834 $ 237,336 $ 253,859 profit

Table 7

Three Months Ended December 31,

Twelve Months Ended December 31,

(In thousands)

2020

2019

2020

2019

Depreciation and amortization

Rent-A-Center Business

$

5,153

$

5,203

$

19,912

$

20,822

Preferred Lease

524

493

2,066

1,533

Mexico

121

84

413

401

Franchising

12

3

40

45

Total segments

5,810

5,783

22,431

22,801

Corporate

7,777

9,533

34,227

38,303

Total depreciation and amortization

$

13,587

$

15,316

$

56,658

$

61,104

Table 7 Three Months Ended Twelve Months Ended December 31, December 31,

(In thousands) 2020 2019 2020 2019

Depreciation and amortization

Rent-A-Center Business $ 5,153 $ 5,203 $ 19,912 $ 20,822

Preferred Lease 524 493 2,066 1,533

Mexico 121 84 413 401

Franchising 12 3 40 45

Total segments 5,810 5,783 22,431 22,801

Corporate 7,777 9,533 34,227 38,303

Total depreciation and $ 13,587 $ 15,316 $ 56,658 $ 61,104 amortization

Table 8

Three Months Ended December 31,

Twelve Months Ended December 31,

(In thousands)

2020

2019

2020

2019

Capital expenditures

Rent-A-Center Business

$

4,664

$

4,661

$

14,869

$

10,255

Preferred Lease

55

16

161

141

Mexico

187

107

392

172

Total segments

4,906

4,784

15,422

10,568

Corporate

7,082

4,363

19,123

10,589

Total capital expenditures

$

11,988

$

9,147

$

34,545

$

21,157

Table 8 Three Months Ended December Twelve Months Ended 31, December 31,

(In thousands) 2020 2019 2020 2019

Capital expenditures

Rent-A-Center $ 4,664 $ 4,661 $ 14,869 $ 10,255 Business

Preferred Lease 55 16 161 141

Mexico 187 107 392 172

Total segments 4,906 4,784 15,422 10,568

Corporate 7,082 4,363 19,123 10,589

Total capital $ 11,988 $ 9,147 $ 34,545 $ 21,157 expenditures

Table 9

On Lease at December 31,

Held for Lease at December 31,

(In thousands)

2020

2019

2020

2019

Lease merchandise, net

Rent-A-Center Business

$

444,945

$

411,482

$

136,219

$

131,086

Preferred Lease

299,660

268,845

2,228

1,254

Mexico

18,281

16,943

7,819

6,078

Total lease merchandise, net

$

762,886

$

697,270

$

146,266

$

138,418

Table 9 On Lease at December 31, Held for Lease at December 31,

(In thousands) 2020 2019 2020 2019

Lease merchandise, net

Rent-A-Center Business $ 444,945 $ 411,482 $ 136,219 $ 131,086

Preferred Lease 299,660 268,845 2,228 1,254

Mexico 18,281 16,943 7,819 6,078

Total lease $ 762,886 $ 697,270 $ 146,266 $ 138,418 merchandise, net

Table 10

December 31,

(In thousands)

2020

2019

Assets

Rent-A-Center Business

$

999,252

$

953,151

Preferred Lease

389,650

357,859

Mexico

42,278

33,707

Franchising

14,729

11,095

Total segments

1,445,909

1,355,812

Corporate

305,071

226,986

Total assets

$

1,750,980

$

1,582,798

Non-GAAP Financial Measures

This release and the Company's related conference call contain certain financial information determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles (GAAP), including (1) Non-GAAP diluted earnings per share (net earnings, as adjusted for special items (as defined below), net of taxes, divided by the number of shares of our common stock on a fully diluted basis), (2) Adjusted EBITDA (net earnings before interest, taxes, depreciation and amortization, as adjusted for special items) on a consolidated and segment basis and (3) Free Cash Flow (net cash provided by operating activities less capital expenditures). "Special items" refers to certain gains and charges we view as extraordinary, unusual or non-recurring in nature and which we believe do not reflect our core business activities. For the periods presented herein, these special items are described in the quantitative reconciliation tables included below in this release. Because of the inherent uncertainty related to the special items, management does not believe it is able to provide a meaningful forecast of the comparable GAAP measures or reconciliation to any forecasted GAAP measure without unreasonable effort.

These non-GAAP measures are additional tools intended to assist our management in comparing our performance on a more consistent basis for purposes of business decision-making by removing the impact of certain items management believes do not directly reflect our core operations. These measures are intended to assist management in evaluating operating performance and liquidity, comparing performance and liquidity across periods, planning and forecasting future business operations, helping determine levels of operating and capital investments and identifying and assessing additional trends potentially impacting our Company that may not be shown solely by comparisons of GAAP measures. Consolidated Adjusted EBITDA and Free Cash Flow have also been used as part of our incentive compensation program for our executive officers and others.

We believe these non-GAAP financial measures also provide supplemental information that is useful to investors, analysts and other external users of our consolidated financial statements in understanding our financial results and evaluating our performance and liquidity from period to period. However, non-GAAP financial measures have inherent limitations and are not substitutes for or superior to, and they should be read together with, our consolidated financial statements prepared in accordance with GAAP. Further, because non-GAAP financial measures are not standardized, it may not be possible to compare such measures to the non-GAAP financial measures presented by other companies, even if they have the same or similar names.

Table 10 December 31,

(In thousands) 2020 2019

Assets

Rent-A-Center Business $ 999,252 $ 953,151

Preferred Lease 389,650 357,859

Mexico 42,278 33,707

Franchising 14,729 11,095

Total segments 1,445,909 1,355,812

Corporate 305,071 226,986

Total assets $ 1,750,980 $ 1,582,798

Non-GAAP Financial Measures

This release and the Company's related conference call contain certain financial information determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles (GAAP), including (1) Non-GAAP diluted earnings per share (net earnings, as adjusted for special items (as defined below), net of taxes, divided by the number of shares of our common stock on a fully diluted basis), (2) Adjusted EBITDA (net earnings before interest, taxes, depreciation and amortization, as adjusted for special items) on a consolidated and segment basis and (3) Free Cash Flow (net cash provided by operating activities less capital expenditures). "Special items" refers to certain gains and charges we view as extraordinary, unusual or non-recurring in nature and which we believe do not reflect our core business activities. For the periods presented herein, these special items are described in the quantitative reconciliation tables included below in this release. Because of the inherent uncertainty related to the special items, management does not believe it is able to provide a meaningful forecast of the comparable GAAP measures or reconciliation to any forecasted GAAP measure without unreasonable effort.

These non-GAAP measures are additional tools intended to assist our management in comparing our performance on a more consistent basis for purposes of business decision-making by removing the impact of certain items management believes do not directly reflect our core operations. These measures are intended to assist management in evaluating operating performance and liquidity, comparing performance and liquidity across periods, planning and forecasting future business operations, helping determine levels of operating and capital investments and identifying and assessing additional trends potentially impacting our Company that may not be shown solely by comparisons of GAAP measures. Consolidated Adjusted EBITDA and Free Cash Flow have also been used as part of our incentive compensation program for our executive officers and others.

We believe these non-GAAP financial measures also provide supplemental information that is useful to investors, analysts and other external users of our consolidated financial statements in understanding our financial results and evaluating our performance and liquidity from period to period. However, non-GAAP financial measures have inherent limitations and are not substitutes for or superior to, and they should be read together with, our consolidated financial statements prepared in accordance with GAAP. Further, because non-GAAP financial measures are not standardized, it may not be possible to compare such measures to the non-GAAP financial measures presented by other companies, even if they have the same or similar names.

Reconciliation of net earnings to net earnings excluding special items andnon-GAAP diluted earnings per share:

Table 11 Three Months Ended December 31, Twelve Months Ended December 31,

2020 2019 2020 2019

(inthousands, Amount Per Amount Per Amount Per Amount Perexcept per Share Share Share Shareshare data)

Net $ 56,300 $ 1.00 $ 40,491 $ 0.72 $ 208,115 $ 3.73 $ 173,546 $ 3.10 earnings

Specialitems, net of taxes:

Other(gains)charges(See Tables 20,859 0.55 (13,777 ) (0.24 ) 26,801 0.48 (46,725 ) (0.83 )12 and 13below foradditionaldetail)

Debtrefinancing - - - - - - 1,470 0.03 charges

Discreteincome tax (19,724 ) (0.52 ) 6,009 0.10 (37,986 ) (0.68 ) (3,194 ) (0.06 )items^(1)

Netearningsexcluding $ 57,435 $ 1.03 $ 32,723 $ 0.58 $ 196,930 $ 3.53 $ 125,097 $ 2.24 specialitems

(1) Discrete income tax items for the three and twelve months ended December 31, 2020 were benefited by the release of domestic and foreign tax valuation allowances of approximately $19.2 million. In addition, discrete income tax items for the twelve months ended December 31, 2020 included benefits of approximately $16.7 million related to the carry back of income tax net operating losses available through the Coronavirus Aid, Relief, and Economic Security Act.

^(1) Discrete income tax items for the three and twelve months ended December31, 2020 were benefited by the release of domestic and foreign tax valuationallowances of approximately $19.2 million. In addition, discrete income taxitems for the twelve months ended December 31, 2020 included benefits ofapproximately $16.7 million related to the carry back of income tax netoperating losses available through the Coronavirus Aid, Relief, and EconomicSecurity Act.

Reconciliation of operating profit to Adjusted EBITDA (consolidated and by segment):

Table 12

Three Months Ended December 31, 2020

(In thousands)

Rent-A-

Center

Business

Preferred

Lease

Mexico

Franchising

Corporate

Consolidated

GAAP Operating Profit (Loss)

$

80,354

$

17,319

$

2,055

$

3,876

$

(48,965

)

$

54,639

Plus: Amortization, Depreciation

5,153

524

121

12

7,777

13,587

Plus: Special Items (Extraordinary, Unusual or Non-Recurring Gains or Charges)

California refranchise store sale

16,600

-

-

-

-

16,600

Acima transaction Costs

-

-

-

-

6,400

6,400

Legal settlement reserves

-

-

-

-

3,500

3,500

Asset disposals

6

4

-

-

1,269

1,279

Store closure costs

389

-

23

-

-

412

State tax audit assessment reserves

-

400

-

-

-

400

COVID-19 impacts

284

-

-

-

50

334

Cost savings initiatives

(8

)

37

-

-

(306

)

(277

)

Nationwide protest impacts

139

-

-

-

-

139

Adjusted EBITDA

$

102,917

$

18,284

$

2,199

$

3,888

$

(30,275

)

$

97,013

Reconciliation of operating profit to Adjusted EBITDA (consolidated and bysegment):

Table 12 Three Months Ended December 31, 2020

Rent-A- Preferred(In thousands) Center Mexico Franchising Corporate Consolidated Lease Business

GAAP Operating $ 80,354 $ 17,319 $ 2,055 $ 3,876 $ (48,965 ) $ 54,639 Profit (Loss)

Plus:Amortization, 5,153 524 121 12 7,777 13,587 Depreciation

Plus: SpecialItems(Extraordinary,Unusual or Non-RecurringGains orCharges)

Californiarefranchise 16,600 - - - - 16,600 store sale

Acimatransaction - - - - 6,400 6,400 Costs

Legalsettlement - - - - 3,500 3,500 reserves

Asset disposals 6 4 - - 1,269 1,279

Store closure 389 - 23 - - 412 costs

State tax auditassessment - 400 - - - 400 reserves

COVID-19 284 - - - 50 334 impacts

Cost savings (8 ) 37 - - (306 ) (277 )initiatives

Nationwide 139 - - - - 139 protest impacts

Adjusted EBITDA $ 102,917 $ 18,284 $ 2,199 $ 3,888 $ (30,275 ) $ 97,013

Table 13

Three Months Ended December 31, 2019

(In thousands)

Rent-A-

Center

Business

Preferred

Lease

Mexico

Franchising

Corporate

Consolidated

GAAP Operating Profit (Loss)

$

65,553

$

16,989

$

1,451

$

2,489

$

(18,648

)

$

67,834

Plus: Amortization, Depreciation

5,203

493

84

3

9,533

15,316

Plus: Special Items (Extraordinary, Unusual or Non-Recurring Gains or Charges)

Headquarters sale

-

-

-

-

(21,819

)

(21,819

)

Store closures

1,251

-

30

-

-

1,281

State tax audit assessments

-

-

-

-

527

527

Legal settlement reserves

-

-

-

-

440

440

Legal and professional fees

-

-

-

-

227

227

Cost savings initiatives

222

115

-

-

(191

)

146

Insurance reimbursement proceeds

(118

)

-

-

-

-

(118

)

Legal settlement

-

-

-

-

(104

)

(104

)

Adjusted EBITDA

$

72,111

$

17,597

$

1,565

$

2,492

$

(30,035

)

$

63,730

Table 13 Three Months Ended December 31, 2019

Rent-A- Preferred(In thousands) Center Mexico Franchising Corporate Consolidated Lease Business

GAAP Operating $ 65,553 $ 16,989 $ 1,451 $ 2,489 $ (18,648 ) $ 67,834 Profit (Loss)

Plus:Amortization, 5,203 493 84 3 9,533 15,316 Depreciation

Plus: SpecialItems(Extraordinary,Unusual or Non-RecurringGains orCharges)

Headquarters - - - - (21,819 ) (21,819 )sale

Store closures 1,251 - 30 - - 1,281

State tax audit - - - - 527 527 assessments

Legalsettlement - - - - 440 440 reserves

Legal andprofessional - - - - 227 227 fees

Cost savings 222 115 - - (191 ) 146 initiatives

Insurancereimbursement (118 ) - - - - (118 )proceeds

Legal - - - - (104 ) (104 )settlement

Adjusted EBITDA $ 72,111 $ 17,597 $ 1,565 $ 2,492 $ (30,035 ) $ 63,730

Table 14

Twelve Months Ended December 31, 2020

(In thousands)

Rent-A-

Center

Business

Preferred

Lease

Mexico

Franchising

Corporate

Consolidated

GAAP Operating Profit (Loss)

$

333,379

$

57,847

$

5,798

$

12,570

$

(172,258

)

$

237,336

Plus: Amortization, Depreciation

19,912

2,066

413

40

34,227

56,658

Plus: Special Items (Extraordinary, Unusual or Non-Recurring Gains or Charges)

California refranchise store sale

16,600

-

-

-

-

16,600

Legal settlement reserves

-

-

-

-

7,900

7,900

Acima transaction costs

-

-

-

-

6,400

6,400

Legal settlement

-

-

-

-

(2,800

)

(2,800

)

Store closure costs

2,052

-

37

-

-

2,089

Asset disposals

531

4

-

-

1,269

1,804

Cost savings initiatives

577

193

-

-

813

1,583

State tax audit assessment reserves

261

400

-

-

564

1,225

COVID-19 impacts

883

115

-

-

155

1,153

Nationwide protest impacts

942

-

-

-

-

942

Insurance reimbursement proceeds

(341

)

-

-

-

-

(341

)

Adjusted EBITDA

$

374,796

$

60,625

$

6,248

$

12,610

$

(123,730

)

$

330,549

Table 14 Twelve Months Ended December 31, 2020

Rent-A- Preferred(In thousands) Center Mexico Franchising Corporate Consolidated Lease Business

GAAP Operating $ 333,379 $ 57,847 $ 5,798 $ 12,570 $ (172,258 ) $ 237,336 Profit (Loss)

Plus:Amortization, 19,912 2,066 413 40 34,227 56,658 Depreciation

Plus: SpecialItems(Extraordinary,Unusual or Non-RecurringGains orCharges)

Californiarefranchise 16,600 - - - - 16,600 store sale

Legalsettlement - - - - 7,900 7,900 reserves

Acimatransaction - - - - 6,400 6,400 costs

Legal - - - - (2,800 ) (2,800 )settlement

Store closure 2,052 - 37 - - 2,089 costs

Asset disposals 531 4 - - 1,269 1,804

Cost savings 577 193 - - 813 1,583 initiatives

State tax auditassessment 261 400 - - 564 1,225 reserves

COVID-19 883 115 - - 155 1,153 impacts

Nationwide 942 - - - - 942 protest impacts

Insurancereimbursement (341 ) - - - - (341 )proceeds

Adjusted EBITDA $ 374,796 $ 60,625 $ 6,248 $ 12,610 $ (123,730 ) $ 330,549

Table 15

Twelve Months Ended December 31, 2019

(In thousands)

Rent-A-

Center

Business

Preferred

Lease

Mexico

Franchising

Corporate

Consolidated

GAAP Operating Profit (Loss)

$

235,964

$

83,066

$

5,357

$

7,205

$

(77,733

)

$

253,859

Plus: Amortization, Depreciation

20,822

1,533

401

45

38,303

61,104

Plus: Special Items (Extraordinary, Unusual or Non-Recurring Gains or Charges)

Vintage Merger termination settlement

-

-

-

-

(92,500

)

(92,500

)

Headquarters sale

-

-

-

-

(21,819

)

(21,819

)

Legal and professional fees

-

-

-

-

21,429

21,429

Legal settlements

-

-

-

-

12,896

12,896

Cost savings initiatives

8,141

500

-

-

1,593

10,234

Store closures

7,222

-

136

-

-

7,358

State tax audit assessments

-

-

-

-

2,381

2,381

Insurance reimbursement proceeds

(1,147

)

-

-

-

-

(1,147

)

Legal settlement reserves

-

-

-

-

440

440

Adjusted EBITDA

$

271,002

$

85,099

$

5,894

$

7,250

$

(115,010

)

$

254,235

Table 15 Twelve Months Ended December 31, 2019

Rent-A- Preferred(In thousands) Center Mexico Franchising Corporate Consolidated Lease Business

GAAP Operating $ 235,964 $ 83,066 $ 5,357 $ 7,205 $ (77,733 ) $ 253,859 Profit (Loss)

Plus:Amortization, 20,822 1,533 401 45 38,303 61,104 Depreciation

Plus: SpecialItems(Extraordinary,Unusual or Non-RecurringGains orCharges)

Vintage Mergertermination - - - - (92,500 ) (92,500 )settlement

Headquarters - - - - (21,819 ) (21,819 )sale

Legal andprofessional - - - - 21,429 21,429 fees

Legal - - - - 12,896 12,896 settlements

Cost savings 8,141 500 - - 1,593 10,234 initiatives

Store closures 7,222 - 136 - - 7,358

State tax audit - - - - 2,381 2,381 assessments

Insurancereimbursement (1,147 ) - - - - (1,147 )proceeds

Legalsettlement - - - - 440 440 reserves

Adjusted EBITDA $ 271,002 $ 85,099 $ 5,894 $ 7,250 $ (115,010 ) $ 254,235

Reconciliation of net cash provided by operating activities to free cash flow:

Table 16

Three Months Ended December 31,

Twelve Months Ended December 31,

(In thousands)

2020

2019

2020

2019

Net cash provided by operating activities

$

(59,724

)

$

(12,713

)

$

236,502

$

215,416

Purchase of property assets

(11,988

)

(9,147

)

(34,545

)

(21,157

)

Hurricane insurance recovery proceeds

-

118

158

1,113

Free cash flow

$

(71,712

)

$

(21,742

)

$

202,115

$

195,372

Proceeds from sale of stores

14,281

52,795

14,477

69,717

Acquisitions of businesses

-

(193

)

(700

)

(28,915

)

Free cash flow including acquisitions and divestitures

$

(57,431

)

$

30,860

$

215,892

$

236,174

View source version on businesswire.com: https://www.businesswire.com/news/home/20210224006091/en/

CONTACT: Investors: Rent-A-Center, Inc. Maureen Short EVP, Chief Financial Officer 972-801-1899 maureen.short@rentacenter.com