Conn’s, Inc. (NASDAQ: CONN) (“Conn’s” or the
“Company”), a specialty retailer of home goods, including
furniture, appliances, and consumer electronics, with a mission to
elevate home life to home love, today announced its financial
results for the quarter ended July 31, 2022.
“Challenging macroeconomic conditions continued
to pressure consumer spending during our second quarter, which
disproportionately affected year-over-year sales to our financial
access customer segment and sales of our discretionary product
categories. While we entered the second quarter with a cautious
outlook for the remainder of the fiscal year, the retail
environment has continued to deteriorate prompting us to accelerate
our efforts to reduce operating costs, and lower capital
expenditures as well continue to maintain conservative credit
underwriting. In July, we successfully completed our latest ABS
transaction and ended the second quarter with over $211.0 million
of available liquidity and cash. This provides us with the
financial flexibility to support the current needs of our business,
while investing in our long-term growth and transformation,” stated
Chandra Holt, Conn's Chief Executive Officer.
“During the second quarter, we completed the
first phase of our eCommerce platform migration, launched our
store-within-a-store pilot at Belk, Inc. ("Belk"), and expanded our
best-in-class payment options with the launch of a new layaway
program across our retail footprint. We continue to pursue new go
to market strategies and partnerships aimed at leveraging our
industry-leading next-day white glove delivery capabilities. We
believe we are taking the correct near-term actions to successfully
navigate a difficult retail environment, while continuing to pursue
long-term growth opportunities that we believe will drive value for
our shareholders and our customers,” concluded Ms. Holt.
Second Quarter Financial Highlights as
Compared to the Prior Fiscal Year Period (Unless Otherwise
Noted):
- Total
consolidated revenue declined 17.1% to $346.6 million, due to a
19.4% decline in total net sales, and a 6.3% reduction in finance
charges and other revenues;
- Same store sales
decreased 22.0%;
- eCommerce sales
increased 11.5% to a second quarter record of $19.3 million;
- Credit spread
was 960 basis points, and fiscal year-to-date the credit spread was
1,060 basis points;
- Net earnings
were $0.09 per diluted share, compared to net earnings of $1.22 per
diluted share for the same period last fiscal year;
- Adjusted
earnings were $0.04 per diluted share, compared to adjusted
earnings of $1.22 per diluted share for the same period last fiscal
year;
- Added two new
standalone stores bringing the total number of stores at July 31,
2022 to 163 and added four store-within-a store locations with
Belk; and
- The Company completed an ABS
transaction demonstrating the Company’s ability to access the
capital markets even during turbulent market conditions resulting
in the issuance and sale of $407.7 million aggregate principal
amount of Class A and Class B Notes, and issued and retained Class
C Notes in an aggregate principal amount of $63.1 million.
Strategic Update
In response to challenging macroeconomic
pressures, the Company has updated its near-term strategic
priorities which include:
- Reducing operating costs. The Company is
conducting an extensive review and prioritization of its cost
structure. The Company expects current initiatives, combined with
prior actions, to generate cost savings of approximately $12.0 -
$16.0 million in the back half of this fiscal year.
- Lowering capital
expenditures. The Company is delaying or eliminating
several planned capital investments, including adjusting planned
new store openings and distribution center expansions. As a result,
Conn’s expects to reduce investments in capital expenditures for
fiscal year 2023 by approximately $20.0 million compared to its
prior expectation.
- Maintaining conservative
credit underwriting. The Company is focused on maintaining
conservative credit underwriting and remaining disciplined in its
approach to credit collections. At July 31, 2022, the weighted
average credit score of outstanding balances was 611, 60+ days past
due balances as a percentage of the total customer portfolio
carrying value was 11.0%, and re-aged balances as a percentage of
the total customer portfolio carrying value was
16.1%.
Second Quarter Results
Net income for the three months ended
July 31, 2022 was $2.1 million, or $0.09 per diluted share,
compared to net income for the three months ended July 31,
2021 of $37.0 million, or $1.22 per diluted share. On a non-GAAP
basis, adjusted net income for the three months ended July 31,
2022 was $1.0 million, or $0.04 per diluted share. This compares to
adjusted net income for the three months ended July 31, 2021
of $37.0 million, or $1.22 per diluted share.
Retail Segment Second Quarter
Results
Retail revenues were $279.8 million for the
three months ended July 31, 2022 compared to $347.0 million
for the three months ended July 31, 2021, a decrease of $67.2
million or 19.4%. The decrease in retail revenue was primarily
driven by a decrease in same store sales of 22.0%. The decrease in
same store sales was primarily driven by a tightening of
underwriting standards by our lease-to-own partners, the effect the
benefits stimulus had on sales in the prior year period and lower
consumer demand in the current period. The decrease in same store
sales was partially offset by new store growth.
For the three months ended July 31, 2022,
retail segment operating income was $0.1 million compared to retail
segment operating income of $28.7 million for three months ended
July 31, 2021. On a non-GAAP basis, adjusted retail segment
operating loss for the three months ended July 31, 2022 was $1.4
million after excluding the gain on lease termination. On a
non-GAAP basis, the adjusted retail segment operating income for
the three months ended July 31, 2021 was $28.7 million. The
decrease in retail segment operating income for the three months
ended July 31, 2022 was primarily due to a decrease in revenue as
described above and a decline in the retail gross margin
percentage.
The decrease in retail gross margin was
primarily driven by increased product costs as a result of higher
freight, higher fuel costs and the deleveraging of fixed
distribution costs. These increases were partially offset by an
increase in RSA commissions and a more profitable product mix.
The SG&A decrease in the retail segment was
primarily due to a decline in variable costs and declines in
advertising and labor costs as a result of cost saving initiatives.
These decreases were partially offset by an increase in occupancy
costs due to higher utilities costs and new store growth.
The following table presents net sales and
changes in net sales by category:
|
Three Months Ended July 31, |
|
|
|
|
|
Same Store |
(dollars in thousands) |
|
2022 |
|
% of Total |
|
|
2021 |
|
% of Total |
|
Change |
|
% Change |
|
% Change |
Furniture and mattress |
$ |
86,320 |
|
30.9 |
% |
|
$ |
109,259 |
|
31.5 |
% |
|
$ |
(22,939 |
) |
|
(21.0 |
)% |
|
(24.6 |
)% |
Home appliance |
|
120,748 |
|
43.2 |
|
|
|
135,444 |
|
39.1 |
|
|
|
(14,696 |
) |
|
(10.9 |
) |
|
(13.1 |
) |
Consumer electronics |
|
31,860 |
|
11.4 |
|
|
|
48,413 |
|
14.0 |
|
|
|
(16,553 |
) |
|
(34.2 |
) |
|
(36.2 |
) |
Home office |
|
8,857 |
|
3.2 |
|
|
|
17,986 |
|
5.2 |
|
|
|
(9,129 |
) |
|
(50.8 |
) |
|
(50.1 |
) |
Other |
|
7,664 |
|
2.7 |
|
|
|
9,143 |
|
2.6 |
|
|
|
(1,479 |
) |
|
(16.2 |
) |
|
(16.9 |
) |
Product sales |
|
255,449 |
|
91.4 |
|
|
|
320,245 |
|
92.4 |
|
|
|
(64,796 |
) |
|
(20.2 |
) |
|
(22.7 |
) |
Repair service agreement
commissions (1) |
|
21,615 |
|
7.7 |
|
|
|
23,700 |
|
6.8 |
|
|
|
(2,085 |
) |
|
(8.8 |
) |
|
(15.3 |
) |
Service revenues |
|
2,448 |
|
0.9 |
|
|
|
2,840 |
|
0.8 |
|
|
|
(392 |
) |
|
(13.8 |
) |
|
|
Total net sales |
$ |
279,512 |
|
100.0 |
% |
|
$ |
346,785 |
|
100.0 |
% |
|
$ |
(67,273 |
) |
|
(19.4 |
)% |
|
(22.0 |
)% |
(1) The total change in sales of repair service
agreement commissions includes retrospective commissions, which are
not reflected in the change in same store sales.
Credit Segment Second Quarter
Results
Credit revenues were $66.8 million for the three
months ended July 31, 2022 compared to $71.4 million for the
three months ended July 31, 2021, a decrease of $4.6 million
or 6.4%. The decrease in credit revenue was primarily due to a 4.9%
decrease in the average outstanding balance of the customer
accounts receivable portfolio as well as a decline in insurance
commissions.
Provision for bad debts increased to $26.8
million for the three months ended July 31, 2022 from $10.1
million for the three months ended July 31, 2021, an overall
change of $16.7 million. The year-over-year increase was primarily
driven by a smaller decrease in the allowance for bad debts during
the three months ended July 31, 2022 compared to the three
months ended July 31, 2021 and a year-over-year increase in
net charge-offs of $4.9 million. The decrease in the allowance
for bad debts during the three months ended July 31, 2022 was
primarily driven by a decrease in the customer account receivable
portfolio balance and an improvement in historical loss rates.
During the three months ended July 31, 2021, the decrease was
primarily driven by a decrease in the rate of delinquencies and
re-ages, a decrease in the customer account receivable portfolio
and an improvement in the forecasted unemployment rate that drove a
$5.0 million decrease in the economic adjustment.
Credit segment operating income was $7.9 million
for the three months ended July 31, 2022, compared to
operating income of $25.5 million for the three months ended
July 31, 2021. The decrease was primarily due to the
increase in the provision for bad debts and the decrease in credit
revenue.
Additional information on the credit portfolio
and its performance may be found in the Customer Accounts
Receivable Portfolio Statistics table included within this press
release and in the Company’s Form 10-Q for the quarter ended
July 31, 2022, to be filed with the Securities and Exchange
Commission on August 30, 2022 (the “Second Quarter Form
10-Q”).
Store and Facilities Update
The Company opened two new standalone stores
during the second quarter of fiscal year 2023 bringing the
total store count to 163 in 15 states and opened four
store-within-a-store locations with Belk. During fiscal year 2023,
the Company plans to open a total of 10 to 12 standalone
locations and 15 to 20 store-within-a-store locations.
Liquidity and Capital
Resources
As of July 31, 2022, the Company had $186.8
million of immediately available borrowing capacity under its
$650.0 million revolving credit facility. The Company also had
$24.3 million of unrestricted cash available for use.
On July 21, 2022, the Company completed an ABS
transaction resulting in the issuance and sale of approximately
$407.7 million in aggregate principal amount of Class A and
Class B Notes secured by customer accounts receivables and
restricted cash held by a consolidated VIE, which resulted in
proceeds of approximately $402.8 million, net of debt issuance
costs. The Company retained Class C Notes in an aggregate principal
amount of $63.1 million.
Conference Call Information
The Company will host a conference call on
August 30, 2022, at 10 a.m. CT / 11 a.m. ET, to discuss its
three months ended July 31, 2022 financial results. Participants
can join the call by dialing 877-451-6152 or 201-389-0879. The
conference call will also be broadcast simultaneously via webcast
on a listen-only basis. A link to the earnings release, webcast and
second quarter fiscal year 2023 conference call presentation will
be available at ir.conns.com.
Replay of the telephonic call can be accessed
through September 6, 2022 by dialing 844-512-2921 or 412-317-6671
and Conference ID: 13729951.
About Conn’s, Inc.
Conn's HomePlus (NASDAQ: CONN) is a specialty
retailer of home goods, including furniture, appliances and
consumer electronics, with a mission to elevate home life to home
love. With over 160 stores across 15 states and online at
Conns.com, our over 3,500 employees strive to help all customers
create a home they love through access to high-quality products,
next-day delivery and personalized payment options, including our
flexible, in-house credit program. Additional information can be
found by visiting our investor relations website at
https://ir.conns.com and social channels (@connshomeplus on
Twitter, Instagram, Facebook and LinkedIn).
This press release contains forward-looking
statements within the meaning of the federal securities laws,
including but not limited to, the Private Securities Litigation
Reform Act of 1995, that involve risks and uncertainties. Such
forward-looking statements include information concerning our
future financial performance, business strategy, plans, goals and
objectives. Statements containing the words “anticipate,”
“believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,”
“project,” “should,” “predict,” “will,” “potential,” or the
negative of such terms or other similar expressions are generally
forward-looking in nature and not historical facts. Such
forward-looking statements are based on our current expectations.
We can give no assurance that such statements will prove to be
correct, and actual results may differ materially. A wide variety
of potential risks, uncertainties, and other factors could
materially affect our ability to achieve the results either
expressed or implied by our forward-looking statements, including,
but not limited to: general economic conditions impacting our
customers or potential customers; our ability to execute periodic
securitizations of future originated customer loans on favorable
terms; our ability to continue existing customer financing programs
or to offer new customer financing programs; changes in the
delinquency status of our credit portfolio; unfavorable
developments in ongoing litigation; increased regulatory oversight;
higher than anticipated net charge-offs in the credit portfolio;
the success of our planned opening of new stores; expansion of our
e-commerce business; technological and market developments and
sales trends for our major product offerings; our ability to manage
effectively the selection of our major product offerings; our
ability to protect against cyber-attacks or data security breaches
and to protect the integrity and security of individually
identifiable data of our customers and employees; our ability to
fund our operations, capital expenditures, debt repayment and
expansion from cash flows from operations, borrowings from our
Revolving Credit Facility, and proceeds from accessing debt or
equity markets; the effects of epidemics or pandemics, including
the COVID-19 pandemic; and other risks detailed in Part I, Item 1A,
Risk Factors, in our Annual Report on Form 10-K for the fiscal year
ended January 31, 2022 and other reports filed with the Securities
and Exchange Commission. If one or more of these or other risks or
uncertainties materialize (or the consequences of such a
development changes), or should our underlying assumptions prove
incorrect, actual outcomes may vary materially from those reflected
in our forward-looking statements. You are cautioned not to place
undue reliance on these forward-looking statements, which speak
only as of the date of this press release. We disclaim any
intention or obligation to update publicly or revise such
statements, whether as a result of new information, future events
or otherwise, or to provide periodic updates or guidance. All
forward-looking statements attributable to us, or to persons acting
on our behalf, are expressly qualified in their entirety by these
cautionary statements.
CONN-G
S.M. Berger & Company
Andrew Berger (216) 464-6400
CONN’S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(unaudited)(dollars in thousands, except per
share amounts)
|
Three Months EndedJuly 31, |
|
Six Months EndedJuly 31, |
|
|
2022 |
|
|
|
2021 |
|
|
2022 |
|
|
|
2021 |
|
Revenues: |
|
|
|
|
|
|
|
Total net sales |
$ |
279,512 |
|
|
$ |
346,785 |
|
$ |
551,775 |
|
|
$ |
638,081 |
|
Finance charges and other
revenues |
|
67,120 |
|
|
|
71,598 |
|
|
134,677 |
|
|
|
144,004 |
|
Total revenues |
|
346,632 |
|
|
|
418,383 |
|
|
686,452 |
|
|
|
782,085 |
|
Costs and
expenses: |
|
|
|
|
|
|
|
Cost of goods sold |
|
182,718 |
|
|
|
216,042 |
|
|
361,100 |
|
|
|
400,921 |
|
Selling, general and
administrative expense |
|
130,142 |
|
|
|
137,870 |
|
|
262,925 |
|
|
|
263,919 |
|
Provision (benefit) for bad
debts |
|
27,226 |
|
|
|
10,262 |
|
|
41,956 |
|
|
|
(6,874 |
) |
Charges and credits |
|
(1,484 |
) |
|
|
— |
|
|
(1,484 |
) |
|
|
— |
|
Total costs and expenses |
|
338,602 |
|
|
|
364,174 |
|
|
664,497 |
|
|
|
657,966 |
|
Operating income |
|
8,030 |
|
|
|
54,209 |
|
|
21,955 |
|
|
|
124,119 |
|
Interest expense |
|
6,808 |
|
|
|
6,088 |
|
|
12,329 |
|
|
|
15,292 |
|
Loss on extinguishment of
debt |
|
— |
|
|
|
— |
|
|
— |
|
|
|
1,218 |
|
Income before income taxes |
|
1,222 |
|
|
|
48,121 |
|
|
9,626 |
|
|
|
107,609 |
|
Provision (benefit) for income
taxes |
|
(907 |
) |
|
|
11,117 |
|
|
1,276 |
|
|
|
25,207 |
|
Net income |
$ |
2,129 |
|
|
$ |
37,004 |
|
$ |
8,350 |
|
|
$ |
82,402 |
|
Income per
share: |
|
|
|
|
|
|
|
Basic |
$ |
0.09 |
|
|
$ |
1.26 |
|
$ |
0.34 |
|
|
$ |
2.80 |
|
Diluted |
$ |
0.09 |
|
|
$ |
1.22 |
|
$ |
0.34 |
|
|
$ |
2.74 |
|
Weighted average
common shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
23,833,100 |
|
|
|
29,438,605 |
|
|
24,306,524 |
|
|
|
29,382,162 |
|
Diluted |
|
23,916,269 |
|
|
|
30,212,448 |
|
|
24,461,836 |
|
|
|
30,072,401 |
|
CONN’S, INC. AND SUBSIDIARIES
CONDENSED RETAIL SEGMENT FINANCIAL
INFORMATION(unaudited)(dollars in thousands)
|
Three Months EndedJuly 31, |
|
Six Months EndedJuly 31, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Revenues: |
|
|
|
|
|
|
|
Product sales |
$ |
255,449 |
|
|
$ |
320,245 |
|
|
$ |
505,422 |
|
|
$ |
589,456 |
|
Repair service agreement
commissions |
|
21,615 |
|
|
|
23,700 |
|
|
|
41,452 |
|
|
|
42,831 |
|
Service revenues |
|
2,448 |
|
|
|
2,840 |
|
|
|
4,901 |
|
|
|
5,794 |
|
Total net sales |
|
279,512 |
|
|
|
346,785 |
|
|
|
551,775 |
|
|
|
638,081 |
|
Finance charges and other |
|
273 |
|
|
|
224 |
|
|
|
544 |
|
|
|
433 |
|
Total revenues |
|
279,785 |
|
|
|
347,009 |
|
|
|
552,319 |
|
|
|
638,514 |
|
Costs and
expenses: |
|
|
|
|
|
|
|
Cost of goods sold |
|
182,718 |
|
|
|
216,042 |
|
|
|
361,100 |
|
|
|
400,921 |
|
Selling, general and
administrative expense |
|
98,035 |
|
|
|
102,157 |
|
|
|
194,065 |
|
|
|
193,050 |
|
Provision for bad debts |
|
409 |
|
|
|
142 |
|
|
|
588 |
|
|
|
160 |
|
Charges and credits |
|
(1,484 |
) |
|
|
— |
|
|
|
(1,484 |
) |
|
|
— |
|
Total costs and expenses |
|
279,678 |
|
|
|
318,341 |
|
|
|
554,269 |
|
|
|
594,131 |
|
Operating income (loss) |
$ |
107 |
|
|
$ |
28,668 |
|
|
$ |
(1,950 |
) |
|
$ |
44,383 |
|
Retail gross margin |
|
34.6 |
% |
|
|
37.7 |
% |
|
|
34.6 |
% |
|
|
37.2 |
% |
Selling, general and
administrative expense as percent of revenues |
|
35.0 |
% |
|
|
29.4 |
% |
|
|
35.1 |
% |
|
|
30.2 |
% |
Operating margin |
|
0.0 |
% |
|
|
8.3 |
% |
|
|
(0.4 |
)% |
|
|
7.0 |
% |
Store
count: |
|
|
|
|
|
|
|
Beginning of period |
|
161 |
|
|
|
152 |
|
|
|
158 |
|
|
|
146 |
|
Opened |
|
2 |
|
|
|
3 |
|
|
|
5 |
|
|
|
9 |
|
End of period (1) |
|
163 |
|
|
|
155 |
|
|
|
163 |
|
|
|
155 |
|
|
|
|
|
|
|
|
|
(1) Does not include four
store-within-a-store locations with Belk opened during the three
and six months ended July 31, 2022.
CONN’S, INC. AND SUBSIDIARIES
CONDENSED CREDIT SEGMENT FINANCIAL
INFORMATION(unaudited)(dollars in thousands)
|
Three Months EndedJuly 31, |
|
Six Months EndedJuly 31, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Revenues: |
|
|
|
|
|
|
|
Finance charges and other
revenues |
$ |
66,847 |
|
|
$ |
71,374 |
|
|
$ |
134,133 |
|
|
$ |
143,571 |
|
Costs and
expenses: |
|
|
|
|
|
|
|
Selling, general and
administrative expense |
|
32,107 |
|
|
|
35,713 |
|
|
|
68,860 |
|
|
|
70,869 |
|
Provision for bad debts |
|
26,817 |
|
|
|
10,120 |
|
|
|
41,368 |
|
|
|
(7,034 |
) |
Total costs and expenses |
|
58,924 |
|
|
|
45,833 |
|
|
|
110,228 |
|
|
|
63,835 |
|
Operating income |
|
7,923 |
|
|
|
25,541 |
|
|
|
23,905 |
|
|
|
79,736 |
|
Interest expense |
|
6,808 |
|
|
|
6,088 |
|
|
|
12,329 |
|
|
|
15,292 |
|
Loss on extinguishment of
debt |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,218 |
|
Income before income taxes |
$ |
1,115 |
|
|
$ |
19,453 |
|
|
$ |
11,576 |
|
|
$ |
63,226 |
|
Selling, general and
administrative expense as percent of revenues |
|
48.0 |
% |
|
|
50.0 |
% |
|
|
51.3 |
% |
|
|
49.4 |
% |
Selling, general and
administrative expense as percent of average outstanding customer
accounts receivable balance (annualized) |
|
12.2 |
% |
|
|
12.9 |
% |
|
|
12.8 |
% |
|
|
12.4 |
% |
Operating margin |
|
11.9 |
% |
|
|
35.8 |
% |
|
|
17.8 |
% |
|
|
55.5 |
% |
CONN’S, INC. AND SUBSIDIARIES
CUSTOMER ACCOUNTS RECEIVABLE PORTFOLIO
STATISTICS(unaudited)
|
As of July 31, |
|
|
2022 |
|
|
|
2021 |
|
Weighted average credit score
of outstanding balances (1) |
|
611 |
|
|
|
608 |
|
Average outstanding customer
balance |
$ |
2,508 |
|
|
$ |
2,414 |
|
Balances 60+ days past due as
a percentage of total customer portfolio carrying value
(2)(3)(4) |
|
11.0 |
% |
|
|
7.2 |
% |
Re-aged balance as a
percentage of total customer portfolio carrying value
(2)(3)(5) |
|
16.1 |
% |
|
|
20.4 |
% |
Carrying value of account
balances re-aged more than six months (in thousands) (3) |
$ |
35,808 |
|
|
$ |
70,058 |
|
Allowance for bad debts and
uncollectible interest as a percentage of total customer accounts
receivable portfolio balance |
|
17.2 |
% |
|
|
18.3 |
% |
Percent of total customer
accounts receivable portfolio balance represented by no-interest
option receivables |
|
34.0 |
% |
|
|
29.8 |
% |
|
Three Months EndedJuly 31, |
|
Six Months EndedJuly 31, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Total applications
processed |
|
257,381 |
|
|
|
336,438 |
|
|
|
525,085 |
|
|
|
634,344 |
|
Weighted average origination
credit score of sales financed (1) |
|
620 |
|
|
|
614 |
|
|
|
620 |
|
|
|
615 |
|
Percent of total applications
approved and utilized |
|
23.5 |
% |
|
|
22.5 |
% |
|
|
21.8 |
% |
|
|
22.2 |
% |
Average income of credit
customer at origination |
$ |
50,800 |
|
|
$ |
47,700 |
|
|
$ |
50,500 |
|
|
$ |
48,100 |
|
Percent of retail sales paid
for by: |
|
|
|
|
|
|
|
In-house financing, including down payments received |
|
52.1 |
% |
|
|
50.9 |
% |
|
|
51.0 |
% |
|
|
49.9 |
% |
Third-party financing |
|
18.9 |
% |
|
|
17.5 |
% |
|
|
18.4 |
% |
|
|
17.2 |
% |
Third-party lease-to-own option |
|
6.8 |
% |
|
|
11.5 |
% |
|
|
7.1 |
% |
|
|
11.9 |
% |
|
|
77.8 |
% |
|
|
79.9 |
% |
|
|
76.5 |
% |
|
|
79.0 |
% |
(1) Credit scores exclude
non-scored accounts.
(2) Accounts that become
delinquent after being re-aged are included in both the delinquency
and re-aged amounts.
(3) Carrying value reflects the
total customer accounts receivable portfolio balance, net of
deferred fees and origination costs, the allowance for no-interest
option credit programs and the allowance for uncollectible
interest.
(4) Increase was primarily due
to a decrease in cash collections driven by the impact of stimulus
benefits in prior year.
(5) Decrease was primarily due
to the change in the unilateral re-age policy that occurred in the
second quarter of fiscal year 2021 and the tightening of
underwriting standards that occurred in fiscal year 2021 and fiscal
year 2022.
CONN’S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS(in
thousands)
|
July 31, 2022 |
|
January 31, 2022 |
Assets |
(unaudited) |
|
|
Current
Assets: |
|
|
|
Cash and cash equivalents |
$ |
24,256 |
|
$ |
7,707 |
Restricted cash |
|
47,855 |
|
|
31,930 |
Customer accounts receivable,
net of allowances |
|
434,824 |
|
|
455,787 |
Other accounts receivable |
|
55,565 |
|
|
63,055 |
Inventories |
|
262,952 |
|
|
246,826 |
Income taxes receivable |
|
6,813 |
|
|
6,745 |
Prepaid expenses and other
current assets |
|
10,101 |
|
|
8,756 |
Total current assets |
|
842,366 |
|
|
820,806 |
Long-term portion of customer
accounts receivable, net of allowances |
|
398,127 |
|
|
432,431 |
Property and equipment,
net |
|
210,814 |
|
|
192,763 |
Operating lease right-of-use
assets |
|
252,653 |
|
|
256,267 |
Other assets |
|
50,849 |
|
|
52,199 |
Total assets |
$ |
1,754,809 |
|
$ |
1,754,466 |
Liabilities and Stockholders’ Equity |
|
|
|
Current
liabilities: |
|
|
|
Current finance lease
obligations |
$ |
909 |
|
$ |
889 |
Accounts payable |
|
77,691 |
|
|
74,705 |
Accrued expenses |
|
89,934 |
|
|
109,712 |
Operating lease liability -
current |
|
57,940 |
|
|
54,534 |
Other current liabilities |
|
15,517 |
|
|
18,576 |
Total current liabilities |
|
241,991 |
|
|
258,416 |
Operating lease liability -
non current |
|
321,104 |
|
|
330,439 |
Long-term debt and finance
lease obligations |
|
602,412 |
|
|
522,149 |
Deferred tax liability |
|
— |
|
|
7,351 |
Other long-term
liabilities |
|
29,425 |
|
|
21,292 |
Total liabilities |
|
1,194,932 |
|
|
1,139,647 |
Stockholders’ equity |
|
559,877 |
|
|
614,819 |
Total liabilities and stockholders’ equity |
$ |
1,754,809 |
|
$ |
1,754,466 |
CONN’S, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS(unaudited)(dollars in
thousands, except per share amounts)
Basis for presentation of non-GAAP
disclosures:
To supplement the Condensed Consolidated
Financial Statements, which are prepared and presented in
accordance with accounting principles generally accepted in the
United States of America (“GAAP”), the Company also provides the
following non-GAAP financial measures: adjusted retail segment
operating income, adjusted net income, and adjusted net income per
diluted share and net debt. These non-GAAP financial measures are
not meant to be considered as a substitute for, or superior to,
comparable GAAP measures and should be considered in addition to
results presented in accordance with GAAP. They are intended to
provide additional insight into our operations and the factors and
trends affecting the business. Management believes these non-GAAP
financial measures are useful to financial statement readers
because (1) they allow for greater transparency with respect to key
metrics we use in our financial and operational decision making and
(2) they are used by some of our institutional investors and the
analyst community to help them analyze our operating results.
RETAIL SEGMENT ADJUSTED OPERATING INCOME
(LOSS)
|
Three Months EndedJuly 31, |
|
Six Months EndedJuly 31, |
|
|
2022 |
|
|
|
2021 |
|
|
2022 |
|
|
|
2021 |
Retail segment
operating income (loss), as reported |
$ |
107 |
|
|
$ |
28,668 |
|
$ |
(1,950 |
) |
|
$ |
44,383 |
Adjustments: |
|
|
|
|
|
|
|
Lease termination (1) |
|
(1,484 |
) |
|
|
— |
|
|
(1,484 |
) |
|
|
— |
Retail segment operating income (loss), as
adjusted |
$ |
(1,377 |
) |
|
$ |
28,668 |
|
$ |
(3,434 |
) |
|
$ |
44,383 |
(1) Represents a gain on the
termination of a lease.
ADJUSTED NET INCOME AND ADJUSTED NET
INCOME PER DILUTED SHARE
|
Three Months EndedJuly 31, |
|
Six Months EndedJuly 31, |
|
|
2022 |
|
|
|
2021 |
|
|
2022 |
|
|
|
2021 |
|
Net income, as reported |
$ |
2,129 |
|
|
$ |
37,004 |
|
$ |
8,350 |
|
|
$ |
82,402 |
|
Adjustments: |
|
|
|
|
|
|
|
Lease termination (1) |
|
(1,484 |
) |
|
|
— |
|
|
(1,484 |
) |
|
|
— |
|
Loss on extinguishment of debt (2) |
|
— |
|
|
|
— |
|
|
— |
|
|
|
1,218 |
|
Tax impact of adjustments |
|
337 |
|
|
|
— |
|
|
337 |
|
|
|
(274 |
) |
Net income, as adjusted |
$ |
982 |
|
|
$ |
37,004 |
|
$ |
7,203 |
|
|
$ |
83,346 |
|
Weighted average common shares
outstanding - Diluted |
|
23,916,269 |
|
|
|
30,212,448 |
|
|
24,461,836 |
|
|
|
30,072,401 |
|
Earnings per
share: |
|
|
|
|
|
|
|
As reported |
$ |
0.09 |
|
|
$ |
1.22 |
|
$ |
0.34 |
|
|
$ |
2.74 |
|
As adjusted |
$ |
0.04 |
|
|
$ |
1.22 |
|
$ |
0.29 |
|
|
$ |
2.77 |
|
(1) Represents a gain on the
termination of a lease.
(2) Represents a loss of $1.0
million from retirement of $141.2 million aggregate principal
amount of our 7.25% senior notes due 2022 (“Senior Notes”) and a
loss of $0.2 million related to the amendment of our Fifth
Amended and Restated Loan and Security Agreement.
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