Conn’s, Inc. (NASDAQ: CONN) (“Conn’s” or the “Company”), a specialty retailer of furniture and mattresses, home appliances, consumer electronics and home office products, and provider of consumer credit, today announced its financial results for the quarter ended October 31, 2021.

“Retail sales momentum accelerated during the third quarter as same store sales increased 20.6% over the prior fiscal year period and were up 9.7% on a two-year basis. Strong retail sales reflect our success expanding our addressable market, as we serve customers across the spectrum of payment options, scale our digital platform and maintain in-stock inventory levels throughout our product categories,” stated Chandra Holt, Conn's Chief Executive Officer.

“I am pleased with our strong execution in this fluid business environment, and we are well positioned for the fourth quarter and holiday season. We are on track to deliver significant revenue growth and record earnings this fiscal year. I am excited by the direction we are headed and want to thank our team members for their continued hard work and dedication,” concluded Ms. Holt.

Third Quarter Financial Highlights as Compared to the Prior Fiscal Year Period (Unless Otherwise Noted):

  • Same store sales increased 20.6% for the third quarter of fiscal year 2022 as compared to the third quarter of fiscal year 2021 and increased 9.7% on a two-year basis;
  • Strong same store sales combined with the contribution of new stores drove a 28.8% increase in total retail sales for the third quarter of fiscal year 2022 as compared to the third quarter of fiscal year 2021;
  • eCommerce sales increased 294.8% to a quarterly record of $19.2 million;
  • Net earnings increased 140.0% to $0.60 per diluted share, compared to $0.25 per diluted share for the same period last fiscal year;
  • Inventories increased 21.7% compared to total retail sales growth of 28.8%, with approximately 80% of SKUs available for next day delivery at October 31, 2021;
  • Credit spread was 14.6%, the highest credit spread in over 10 years;
  • At October 31, 2021, the carrying value of customer accounts receivable 60+ days past due declined 32.5% year-over-year, and the carrying value of re-aged accounts declined 42.9% year-over-year;  
  • Net debt as a percent of the portfolio balance at October 31, 2021, was approximately 37.7%, compared to 48.2% at October 31, 2020; and
  • Completed $377.8 million ABS transaction in November 2021 at an all-in cost of funds of approximately 3.91%, representing a 110-basis point reduction from the most recent transaction, and the lowest all-in cost of funds since the Company re-entered the ABS market in September 2015.

Third Quarter Results

Net income for the three months ended October 31, 2021 was $18.2 million, or $0.60 per diluted share, compared to net income for the three months ended October 31, 2020 of $7.4 million, or $0.25 per diluted share.

Retail Segment Third Quarter Results

Retail revenues were $334.8 million for the three months ended October 31, 2021 compared to $259.9 million for the three months ended October 31, 2020, an increase of $74.9 million or 28.8%. The increase in retail revenue was primarily driven by an increase in same store sales of 20.6%, new store growth and an increase in RSA commissions. The increase in same store sales reflects an increase in demand across most of the Company’s home-related product categories. The increase also reflects the impact of prior year proactive underwriting changes, which were the result of the COVID-19 pandemic.

For the three months ended October 31, 2021 and 2020, retail segment operating income was $22.5 million and $15.2 million, respectively. The increase in retail segment operating income for the three months ended October 31, 2021 was primarily due to an increase in revenue.

The following table presents net sales and changes in net sales by category:

  Three Months Ended October 31,           Same Store
(dollars in thousands) 2021   % of Total   2020   % of Total   Change   % Change   % Change
Furniture and mattress $ 106,756     31.9 %   $ 82,793     31.9 %   $ 23,963       28.9   %   18.8   %
Home appliance 128,385     38.3     99,872     38.4     28,513       28.5       21.9    
Consumer electronics 46,751     14.0     35,517     13.7     11,234       31.6       28.2    
Home office 17,373     5.2     16,711     6.4     662       4.0       (3.2 )  
Other 9,036     2.7     4,264     1.6     4,772       111.9       76.7    
Product sales 308,301     92.1     239,157     92.0     69,144       28.9       21.0    
Repair service agreement commissions (1) 23,769     7.1     17,465     6.7     6,304       36.1       16.8    
Service revenues 2,513     0.8     3,150     1.3     (637 )     (20.2 )      
Total net sales $ 334,583     100.0 %   $ 259,772     100.0 %   $ 74,811       28.8   %   20.6   %
(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 Third Quarter Results

Credit revenues were $70.6 million for the three months ended October 31, 2021 compared to $74.2 million for the three months ended October 31, 2020, a decrease of $3.6 million or 4.9%. The decrease in credit revenue was primarily due to a 15.2% decrease in the average outstanding balance of the customer receivable portfolio. These decreases were partially offset by an increase in the yield rate from 21.1% for the three months ended October 31, 2020 to 22.6% for the three months ended October 31, 2021 and an increase in insurance commissions.

Provision for bad debts was $26.5 million for the three months ended October 31, 2021 compared to $27.4 million for the three months ended October 31, 2020, a decrease of $0.9 million. The change was primarily driven by a year-over-year decrease in net charge-offs of $26.1 million, partially offset by an increase in the change in allowance for bad debts. The increase in the change in the allowance for bad debts was primarily driven by an increase in the customer accounts receivable portfolio balance during the third quarter of fiscal year 2022 versus a decrease during the third quarter of fiscal year 2021 and an increase in loss rates due to an increase in delinquency.

Credit segment operating income was $7.0 million for the three months ended October 31, 2021, compared to $8.9 million for the three months ended October 31, 2020.  The decrease was primarily due to a decrease in credit revenue, which was driven by the decline in the customer accounts receivable portfolio.

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 October 31, 2021, to be filed with the Securities and Exchange Commission on December 7, 2021 (the “Third Quarter Form 10-Q”).

Store and Facilities Update

The Company opened two new Conn’s HomePlus® stores during the third quarter of fiscal year 2022, bringing the total store count to 157 in 15 states. During fiscal year 2022, the Company plans to open a total of twelve new store (inclusive of the stores opened during the first three quarters of fiscal year 2022).

Liquidity and Capital Resources

As of October 31, 2021, the Company had $320.5 million of immediately available borrowing capacity under its $650.0 million revolving credit facility. The Company also had $10.6 million of unrestricted cash available for use.

On November 23, 2021, the Company completed an ABS transaction resulting in the issuance and sale of $377.8 million aggregate principal amount of Class A, Class B and Class C Notes secured by customer accounts receivables and restricted cash held by a consolidated VIE, which resulted in net proceeds of $375.2 million, and an all-in cost of funds of 3.91%.

Conference Call Information

The Company will host a conference call on December 7, 2021, at 10 a.m. CT / 11 a.m. ET, to discuss its financial results for the three months ended October 31, 2021. 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 third quarter fiscal year 2022 conference call presentation will be available at ir.conns.com.

Replay of the telephonic call can be accessed through December 14, 2021 by dialing 844-512-2921 or 412-317-6671 and Conference ID: 13722603.

About Conn’s, Inc.

Conn’s is a specialty retailer currently operating 157 retail locations in Alabama, Arizona, Colorado, Florida, Georgia, Louisiana, Mississippi, Nevada, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Virginia. The Company’s primary product categories include:

  • Furniture and mattress, including furniture and related accessories for the living room, dining room and bedroom, as well as both traditional and specialty mattresses;
  • Home appliance, including refrigerators, freezers, washers, dryers, dishwashers and ranges;  
  • Consumer electronics, including LED, OLED, QLED, 4K Ultra HD, and 8K televisions, gaming products, next generation video game consoles and home theater and portable audio equipment; and
  • Home office, including computers, printers and accessories.

Additionally, Conn’s offers a variety of products on a seasonal basis. Unlike many of its competitors, Conn’s provides flexible in-house credit options for its customers in addition to third-party financing programs and third-party lease-to-own payment plans.

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; 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, 2021 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 EndedOctober 31,   Nine Months EndedOctober 31,
  2021   2020   2021   2020
Revenues:              
Total net sales $ 334,583     $ 259,772     $ 972,664     $ 769,838    
Finance charges and other revenues 70,875     74,386     214,879     248,396    
Total revenues 405,458     334,158     1,187,543     1,018,234    
Costs and expenses:              
Cost of goods sold 211,298     160,378     612,219     484,015    
Selling, general and administrative expense 138,081     122,158     402,000     350,443    
Provision for bad debts 26,532     27,493     19,658     176,864    
Charges and credits             3,589    
Total costs and expenses 375,911     310,029     1,033,877     1,014,911    
Operating income 29,547     24,129     153,666     3,323    
Interest expense 5,206     11,563     20,498     39,778    
Loss on extinguishment of debt         1,218        
Income (loss) before income taxes 24,341     12,566     131,950     (36,455 )  
Provision (benefit) for income taxes 6,102     5,147     31,309     (8,192 )  
Net income (loss) $ 18,239     $ 7,419     $ 100,641     $ (28,263 )  
Income (loss) per share:              
Basic $ 0.62     $ 0.25     $ 3.42     $ (0.97 )  
Diluted $ 0.60     $ 0.25     $ 3.34     $ (0.97 )  
Weighted average common shares outstanding:              
Basic 29,488,321     29,142,843     29,418,047     29,013,759    
Diluted 30,261,421     29,483,481     30,127,419     29,013,759    
                         

CONN’S, INC. AND SUBSIDIARIES CONDENSED RETAIL SEGMENT FINANCIAL INFORMATION(unaudited)(dollars in thousands)

  Three Months EndedOctober 31,   Nine Months EndedOctober 31,
  2021   2020   2021   2020
Revenues:              
Product sales $ 308,301     $ 239,157     $ 897,757     $ 702,497  
Repair service agreement commissions 23,769     17,465     66,600     57,730  
Service revenues 2,513     3,150     8,307     9,611  
Total net sales 334,583     259,772     972,664     769,838  
Finance charges and other 262     168     695     599  
Total revenues 334,845     259,940     973,359     770,437  
Costs and expenses:              
Cost of goods sold 211,298     160,378     612,219     484,015  
Selling, general and administrative expense 100,969     84,245     294,019     241,003  
Provision for bad debts 36     72     196     422  
Charges and credits             1,355  
Total costs and expenses 312,303     244,695     906,434     726,795  
Operating income $ 22,542     $ 15,245     $ 66,925     $ 43,642  
Retail gross margin 36.8 %   38.3 %   37.1 %   37.1 %
Selling, general and administrative expense as percent of revenues 30.2 %   32.4 %   30.2 %   31.3 %
Operating margin 6.7 %   5.9 %   6.9 %   5.7 %
Store count:              
Beginning of period 155     141     146     137  
Opened 2     2     11     6  
End of period 157     143     157     143  
                       

CONN’S, INC. AND SUBSIDIARIES CONDENSED CREDIT SEGMENT FINANCIAL INFORMATION(unaudited)(dollars in thousands)

  Three Months EndedOctober 31,   Nine Months EndedOctober 31,
  2021   2020   2021   2020
Revenues:              
Finance charges and other revenues $ 70,613     $ 74,218       $ 214,184     $ 247,797    
Costs and expenses:              
Selling, general and administrative expense 37,112     37,913       107,981     109,440    
Provision for bad debts 26,496     27,421       19,462     176,442    
Charges and credits               2,234    
Total costs and expenses 63,608     65,334       127,443     288,116    
Operating income (loss) 7,005     8,884       86,741     (40,319 )  
Interest expense 5,206     11,563       20,498     39,778    
Loss on extinguishment of debt           1,218        
Income (loss) before income taxes $ 1,799     $ (2,679 )     $ 65,025     $ (80,097 )  
Selling, general and administrative expense as percent of revenues 52.6 %   51.1   %   50.4 %   44.2   %
Selling, general and administrative expense as percent of average outstanding customer accounts receivable balance (annualized) 13.3 %   11.5   %   12.7 %   10.2   %
Operating margin 9.9 %   12.0   %   40.5 %   (16.3 ) %
                           

CONN’S, INC. AND SUBSIDIARIES CUSTOMER ACCOUNTS RECEIVABLE PORTFOLIO STATISTICS(unaudited)

  As of October 31,
  2021   2020
Weighted average credit score of outstanding balances (1) 607     599  
Average outstanding customer balance $ 2,449     $ 2,515  
Balances 60+ days past due as a percentage of total customer portfolio carrying value (2)(3)(4) 8.8 %   11.5 %
Re-aged balance as a percentage of total customer portfolio carrying value (2)(3)(5) 18.3 %   28.2 %
Carrying value of account balances re-aged more than six months (in thousands) (3) $ 61,807     $ 98,307  
Allowance for bad debts and uncollectible interest as a percentage of total customer accounts receivable portfolio balance 18.5 %   24.9 %
Percent of total customer accounts receivable portfolio balance represented by no-interest option receivables 32.0 %   18.0 %
           
  Three Months EndedOctober 31,   Nine Months EndedOctober 31,
  2021   2020   2021   2020
Total applications processed 337,112     285,569     971,456     908,078  
Weighted average origination credit score of sales financed (1) 616     618     615     615  
Percent of total applications approved and utilized 21.5 %   22.7 %   21.9 %   21.6 %
Average income of credit customer at origination $ 49,100     $ 46,900     $ 48,400     $ 46,500  
Percent of retail sales paid for by:              
In-house financing, including down payments received 52.9 %   51.5 %   50.9 %   52.6 %
Third-party financing 17.9 %   20.3 %   17.5 %   20.6 %
Third-party lease-to-own option 9.2 %   7.2 %   11.0 %   8.0 %
  80.0 %   79.0 %   79.4 %   81.2 %
(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) Decrease was primarily due to an increase in cash collections and the tightening of underwriting standards that occurred in fiscal year 2021.
(5) Decrease was primarily due to an increase in cash collections, 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.
   

CONN’S, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS(unaudited)(in thousands)

  October 31, 2021     January 31, 2021  
Assets      
Current Assets:      
Cash and cash equivalents $ 10,597     $ 9,703  
Restricted cash 25,528     50,557  
Customer accounts receivable, net of allowances 460,808     478,734  
Other accounts receivable 74,811     61,716  
Inventories 263,134     196,463  
Income taxes receivable 8,787     38,059  
Prepaid expenses and other current assets 9,745     8,831  
Total current assets 853,410      844,063   
Long-term portion of customer accounts receivable, net of allowances 426,220     430,749  
Property and equipment, net 188,502     190,962  
Operating lease right-of-use assets 265,592     265,798  
Deferred income taxes     9,448  
Other assets 52,855     14,064  
Total assets $ 1,786,579      $ 1,755,084   
Liabilities and Stockholders’ Equity      
Current liabilities:      
Current finance lease obligations $ 942     $ 934  
Accounts payable 91,084     69,367  
Accrued expenses 128,054     82,990  
Operating lease liability - current 50,390     44,011  
Other current liabilities 16,402     14,454  
Total current liabilities 286,872      211,756   
Operating lease liability - non current 345,756     354,598  
Long-term debt and finance lease obligations 459,319     608,635  
Deferred tax liability 8,693      
Other long-term liabilities 22,424     22,940  
Total liabilities 1,123,064      1,197,929   
Stockholders’ equity 663,515     557,155  
Total liabilities and stockholders’ equity $ 1,786,579      $ 1,755,084   
               

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 net income (loss), adjusted net income (loss) per diluted share and net debt as a percentage of the portfolio balance. 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.

ADJUSTED NET INCOME (LOSS) AND ADJUSTED NET INCOME (LOSS) PER DILUTED SHARE

  Three Months EndedOctober 31,   Nine Months EndedOctober 31,
  2021   2020   2021   2020
Net income (loss), as reported $ 18,239     $ 7,419     $ 100,641       $ (28,263 )  
Adjustments:              
Loss on extinguishment of debt (1)         1,218          
Professional fees (2)               3,589    
Tax impact of adjustments         (274 )     (803 )  
Net income (loss), as adjusted $ 18,239     $ 7,419     $ 101,585       $ (25,477 )  
Weighted average common shares outstanding - Diluted 30,261,421     29,483,481     30,127,419       29,013,759    
Earnings (loss) per share:              
As reported $ 0.60     $ 0.25     $ 3.34       $ (0.97 )  
As adjusted $ 0.60     $ 0.25     $ 3.37       $ (0.88 )  
(1) 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.
(2) Represents professional fees associated with non-recurring expenses.
   

NET DEBT

(dollars in thousands)

  October 31,
  2021   2020
Debt, as reported      
Current finance lease obligations $ 942     $ 769  
Long-term debt and finance lease obligations   459,319       800,586  
Total debt $ 460,261     $ 801,355  
Cash, as reported      
Cash and cash equivalents   10,597       107,822  
Restricted Cash   25,528       78,374  
Total cash $ 36,125     $ 186,196  
Net debt $ 424,136     $ 615,159  
Ending portfolio balance, as reported $ 1,124,872     $ 1,276,100  
Net debt as a percentage of the portfolio balance 37.7  %   48.2  %
Conns (NASDAQ:CONN)
Historical Stock Chart
From Apr 2022 to May 2022 Click Here for more Conns Charts.
Conns (NASDAQ:CONN)
Historical Stock Chart
From May 2021 to May 2022 Click Here for more Conns Charts.