The Aaron’s Company, Inc. (NYSE:AAN) Q3 2023 Earnings Call Transcript
The Aaron's Company, Inc. (NYSE:AAN) Q3 2023 Earnings Call Transcript October 24, 2023
Operator: Welcome to The Aaron's Company Third Quarter 2023 Results Call. Thank you for your patience follow the underway. My name is Allen, and I'll be your moderator for today's call. [Operator Instructions]. But now I would like to pass the conference over to our host, Marc Levee, VP of Finance and Investor Relations, to begin. Marc, please go ahead. whenever you're ready.
Marc Levee: Thank you, and good morning, everyone. Welcome to our third quarter 2023 earnings conference call. Joining me today are Aaron's Chief Executive Officer, Douglas Lindsay; President, Steve Olsen; and Chief Financial Officer, Kelly Wall. After our prepared remarks, we will open the call for questions. Yesterday after the market closed, we posted our earnings release on the Investor Relations section of our website at investor.aarons.com. We also posted a slide presentation that provides additional information about our third quarter results and full-year 2023 outlook. During today’s call, certain statements we make may be forward-looking, including those related to our outlook for this year. For more information, including important cautionary notes about these forward-looking statements, please refer to the Safe Harbor provision that can be found at the end of the earnings release.
The Safe Harbor provision identifies risks that may cause actual results to differ materially from the content of our forward-looking statements. Also, please see our Form 10-K for the year ended December 31, 2022, and other filings with the SEC for a description of the risks related to our business that may cause actual results to differ materially from our forward-looking statements. On today’s call, in the release, and in the supplemental investor presentation, we refer to certain non-GAAP financial measures, including EBITDA and adjusted EBITDA, non-GAAP net earnings, non-GAAP EPS, adjusted free cash flow and net debt, which have been adjusted for certain items which may affect the comparability of our performance with other companies.
These non-GAAP measures are detailed in the reconciliation tables included in our earnings release and the supplemental investor presentation posted on our website. With that, I will now turn the call over to our CEO, Douglas Lindsay.
Douglas Lindsay: Thanks, Marc, and good morning, everyone. Thank you for joining us today and for your interest in The Aaron’s Company. Before we discuss the results of the third quarter, I would like to mention some exciting leadership announcements. On September 13th, we announced the appointment of [ph] Wali Bacdayan and Kris Malkoski to our Board of Directors effective October 1st. Wali and Kris have a wealth of knowledge and experience, and I know they will be great additions to our board. Also, on September 13th, we announced the appointment of Russ Falkenstein to Chief Operating Officer of Lease-to-Own. Russ joined the company in 2016 and has served in a number of senior leadership roles. In his new role, he will oversee all Lease-to-Own operations at Aaron’s and BrandsMart leasing.
I'm also very excited to announce that we held a grand opening celebration for our new BrandsMart store in Augusta, Georgia on October 21st. This is the first new store we've opened since we acquired the company in April of last year. We are delighted to bring the BrandsMart experience to the Augusta community and we look forward to delivering exceptional value and service to our customers in this new market. Now, turning to the results of the third quarter. I'm pleased to report that we delivered consolidated earnings that exceeded our internal expectations. We've benefited from the least decisioning enhancements in Aaron’s business, and continued progress on our cost optimization initiatives at both Aaron’s and BrandsMart. We achieved these results despite ongoing challenges in customer demand for the big ticket and discretionary products we carry.
In the Aaron’s business, we ended the quarter with revenues and earnings above internal expectations, primarily due to a larger than expected lease portfolio size combined with lower write-offs. We also made great progress in our market optimization initiatives, including adding more GenNext stores and expanding our hub and showroom program while continuing to grow our e-commerce channel. As we look to the fourth quarter of this year and into 2024, we expect the challenging demand trends to persist. In this environment, we remain focused on growing our market share through delivering a best-in-class customer experience, including flexible payment options, low prices, and a broad product selection. We are also excited about the next evolution of our lease decisioning model, which we believe will enhance the customer experience and lead to higher approval rates.
Steve will share more details about this initiative in a minute. I'm pleased with the progress we're making on our Aaron's multiyear strategic plan, And I remain encouraged about our ongoing transformation and the investments we're making to drive future growth. Now turning to BrandsMart. We remain confident in BrandsMart's compelling value proposition and our long-term strategic growth opportunities, including expanding into new markets and growing our e-commerce channel. Although demand is challenging, we remain focused on optimizing profitability through enhanced cost controls and strategic procurement and pricing actions. While doing this, we are also continuing to enhance our capabilities in merchandising, marketing, and technology to position the business for long-term growth.
Now I'll turn the call over to Steve to provide more details about both Aaron's And BrandsMart.
Steve Olsen: Thanks, Douglas, and good morning, everyone. The Aaron's business delivered revenues for the third quarter that exceeded our internal expectations despite the ongoing challenges in customer demand. Leased merchandise deliveries were down 4.5% year-over-year. This is an improvement over the last quarter of approximately 580 basis points. The year-over-year change was largely due to fewer lease applications in the quarter, actions we took to tighten lease decisioning in prior quarters, and approximately 3% fewer company-operated stores as compared to the beginning of the prior year quarter. In addition, we continue to see pressure on our average ticket as customers trade down to lower-priced items across all major categories.
Our lease portfolio ended the quarter with a value of $116.4 million. This was 7.5% lower than the prior year quarter, but larger than we expected due to fewer lease agreements churning out of the portfolio. Now, moving to our key lease renewal metrics. The lease renewal rate for the quarter was 86.2% for all company-operated Aaron's stores. This rate was down approximately 10 basis points year-over-year. Our 32 plus day non-renewal rate was 2.6% at the end of the third quarter. This was an improvement of 30 basis points year-over-year. This also reflects a sequential increase of 10 basis points from the prior quarter, primarily due to normal seasonal trends. We are pleased with enhancements to our lease decisioning model, which we believe continue to contribute to improvements in our write-offs.
A close-up view of a furniture piece in the company's showroom.
Write-offs as a percentage of lease revenues was 6.1%, which is an improvement of 140 basis points versus the prior-year quarter. Now turning to our important strategic growth initiatives for the Aaron's business. Our GenNext stores strategy continues to deliver meaningful financial performance through the transformation of our in-store customer experience and operating model. In the quarter, we opened 15 GenNext stores, bringing the year-to-date total to 34 stores and 245 company-operated GenNext stores since launching the program. At the end of the quarter, these stores accounted for over 30% of our lease revenues in retail sales. That compares to just over 22% in the prior-year quarter. In addition, we are pleased with our progress in executing the new hub and showroom program.
We now have 111 showrooms in the chain and are achieving the expected cost savings. As we continue to evolve our GenNext strategy, I'm excited to report that we are now opening Aaron's stores in new markets. This includes three GenNext stores in one showroom open in new markets so far this year. Now turning to Aaron’s e-commerce channel. We continue to focus on improving our digital marketing strategies, enhancing the online shopping experience, and expanding the assortment with over 10,400 products on aarons.com. In the third quarter, revenues generated from leases initiated on aarons.com increased 1.3% year-over-year, and now represent 18.5% of total lease revenues as compared to 16.2% in the prior year quarter. Recurring revenue written into the portfolio from e-commerce decreased 6.8% compared to the prior year quarter.
We believe the decrease resulted from tighter lease decisioning in prior quarters and lower average ticket. We continue to see growth in our new weekly payment option, both in stores and on aarons.com. As a reminder, we rolled out this option in stores in Q3 of last year and on aarons.com last quarter. We are excited to provide enhanced flexibility to our customers through our new weekly payment options, and we believe our compelling lease rates will help us gain market share over time. In addition, we are excited about enhancements to our lease decisioning model rolled out earlier this month. Customers are now able to shop across all of our channels by submitting just one lease application, and we now approve all customers through a consistent lease decisioning model.
We believe these enhancements will streamline the customer experience, lead to higher approval rates, and improve conversion of lease applications. Now turning to BrandsMart. We are very excited about the recent opening of our first new store in Augusta, Georgia. This store showcases our new brand image in a more modern store layout. I want to extend my thanks to all of our team members who work tirelessly to launch this new store. I am proud of what we achieved and I look forward to serving customers in this new market. Turning to our third quarter performance. As Douglas mentioned, we continue to operate in a challenging customer demand environment. As a result, BrandsMart's comparable sales were down 17% year-over-year. This was a result of ongoing weaker customer traffic and customer trade down to lower price products, primarily in major appliances, TVs, and computers.
As we work to attract new BrandsMart customers, we continue to invest in our e-commerce channel and digital marketing strategies. Consistent with overall sales performance, we experienced pressure in our e-commerce channel. E-commerce product sales represented 8.9% of total product sales down from 9.3% in the prior year quarter. We continue to focus on optimizing profitability of the business. For the third quarter, a product gross margin improved by approximately 80 basis points as compared to the prior-year quarter. This was a result of direct procurement savings and strategic pricing actions. As we move into the holiday season and look ahead into 2024, we remain focused on achieving transaction synergies and positioning the business of future growth.
Now I'll turn the call over to Kelly to provide further details on our financial performance.
Kelly Wall : Thanks Steve. We filed our Form 10-Q earnings release and investor presentation yesterday after the market closed, and these documents can be found on our Investor Relations website. Please refer to these documents for additional details regarding our financial performance and outlook for the consolidated company and the two business segments. Also, unless stated otherwise, any comparisons I make the prior periods will be on a year-over-year basis. Consolidated revenues for the third quarter of 2023 were $525.7 million compared with $593.4 million. This year-over-year decrease is primary due to the expected lower lease revenue and fees and retail sales at the Aaron's business and lower retail sales at BrandsMart.
Consolidated adjusted EBITDA was $25.3 million, compared with $38.2 million. This year-over-year decrease is primarily due to the lower revenues at both business segments, partially offset by lower personnel costs at both business segments and lower write-offs at the Aaron's business. As a percentage of total revenues, adjusted EBITDA was 4.8%, compared to 6.4%. On a non-GAAP basis, earnings per share were $0.01, compared to earnings of $0.31. Adjusted free cash flow was $7.8 million, a decrease of $42.3 million. This decrease was driven by lower cash provided by operations and having generated $7.5 million of proceeds from real estate transactions in the prior year quarter. On a year-to-date basis, adjusted free cash flow was $86.4 million, an increase of $18.5 million.
This increase is largely driven by higher cash provided by operations as we have executed on our cost optimization initiatives and managed merchandise inventory levels at both businesses to reflect the soft demand environment. During the quarter, we continued to return capital to shareholders, paying $3.9 million in dividends and repurchasing about $5.7 million of the company's common stock. In addition, we ended the third quarter with $39.3 million of cash and $187.5 million of debt. Our net debt balance at the end of the quarter was $148.1 million and our net debt to adjusted EBITDA leverage ratio ended the quarter at one times. Turning to our updated outlook. In the third quarter earnings release, we provided an update to our full-year 2023 outlook.
This updated outlook reflects our expectation that total revenues for the consolidated company will be between $2.12 billion and $2.17 billion. We have updated revenues to incorporate our consolidated results in the first three quarters of 2023 and to also reflect expected lower product sales at BrandsMart for the year as compared to our prior outlook. We have narrowed the range of our outlook for adjusted EBITDA and non-GAAP EPS for the consolidated company. We expect adjusted EBITDA to be between $140 million and $150 million. We expect non-GAAP EPS to be between $1 and $1.20. The lowered midpoint for both reflects that we no longer expect to close a planned sell leaseback transaction for a group of Aaron's stores by the end of the year. The revised outlook also includes the continued lower demand we are experiencing at BrandsMart.
And finally, we have lowered our adjusted free cash flow outlook, which is also impacted by the timing of the sale-leaseback. And with that, I will now turn the call over to the operator for Q&A.
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Q&A Session
Operator: Thank you. We will now enter our Q&A session. [Operator Instructions]. Our first question today comes from Kyle Joseph from Jeffries. Kyle your line is now open. Please go ahead.
Kyle Joseph: Good morning guys. Thanks for taking my questions. Just start out on the rev headwinds at call it either business. Just want to see if you're seeing any sort of strength in certain verticals, or ongoing weakness in others. Trying to get a sense of if consumer electronics are showing any signs of life, given that they probably have the shortest product cycle?
Douglas Lindsay: Yes. Hey, Kyle, it's Douglas. How you doing? I think we said that the Aaron’s business, our deliveries were down about 4.5% of that, 4.5%, about half was really decisioning related and lower store count, and the other half was demand. So, in the Aaron's business, while we're seeing fewer applicants, we're also seeing a higher conversion rate. And I'm really proud of what the team's done there to convert customers, and we're seeing a bit more strength in the customer. There albeit a down cycle. We're also seeing customers choosing lower price points, across most major categories, especially in television and that's consistent with BrandsMart as well. We're really seeing, customers generally looking for deals in both businesses, and you'll see us be promotional during the holiday periods which we have been, but we're seeing that driving more of our demand in this demand cycle.
I'll let Steve talk specifically about categories to your second part of your question.
Steve Olsen: Yes. Good morning, Kyle. I'll talk first about the Aaron’s business. So there, definitely saw some growth in some categories. So, on the appliance side, growth in laundry and ranges, and on the furniture side upholstery, and have a flat business in mattresses. So definitely some growth areas. On the declining side, up against some pretty surging demand last year in gaming, and then continued pressure in TV, computers, and bedrooms. So, on the BrandsMart side, the best performing category, which is still slight negative is small appliances and home goods, followed by audio and video and security and the categories that are most under pressure, being appliances, TVs, and computers. So, to answer your question on consumer electronics, seeing some improvement, that being slight mid-single digit negatives in audio and video and security, but TV is continue to be under pressure and the only really growth area we've seen in TVs as Douglas referenced is really in that opening price point.
So, seeing some improvement in the opening price points in CE, but just not enough to offset the overall demand.
Kyle Joseph: And tied to that, shifting over to credit, obviously, you saw a good decline year-over-year in write-offs, but just give us an update on the kind of the health of the underlying consumer. I mean, obviously light demand and there's a number of factors driving that, but in terms of credit, it seems like they're relatively sound, but just kind of an update on the health of your underlying consumer?
Marc Levee: Yes, I mean, I think the consumer's been pretty resilient. I mean, we noted that despite having fewer applicants and the fact that we're approving less by several hundred basis points year-over-year. We're really controlling our renewals process. So, 30-day non-renewed was down 30 basis points year-over-year, write-offs were down 140 basis points. And so, we're really encouraged by that. In terms of, what we're seeing with the actual consumer, while we are seeing fewer lease applications, we're starting to see signs of a slightly higher income and better credit quality customer coming into both Aaron's and BrandsMart leasing and so that's encouraging. As we said before, we have the benefit of owning BrandsMart and seeing what is coming in through the full credit waterfall.
As I think we've mentioned, 30% of our BrandsMart sales are financed through our private label credit card, and this quarter, we're beginning to see lower approval rates from the higher tier lenders above us, which should benefit BrandsMart leasing over time. Now on the Aaron's business, we're not necessarily seeing a pickup in application volume, but we are seeing a slight mix shift to higher income, higher credit consumers. And again, we continue to believe if there is a trade down that's coupled with an increase in general demand, whether that be through a replacement cycle or otherwise, that will be a tailwind for the business. And the cost transformation initiatives and the modernization of our competitive positioning will benefit us.
Operator: Our next question comes from Bobby Griffin from Raymond James. Bobby your line is now open. Please go ahead.
Bobby Griffin : Good morning guys. Thanks for taking my questions. I guess first from me, I guess on the Aaron side of the business, just curious kind of what you kind of think for 4Q and what's implied in the lease portfolio? It looks like we are making progress on it. It's declining but declining a little bit less. Do you think we've kind of hit the bottom now in the lease portfolio size where 4Q we're used to kind of think 4Q holiday, you usually see sequential expansion here in the portfolio? Do you think that's still a possibility this year given some of the demand pressures?
Kelly Wall: So, I think what we've said on prior calls is that, with the kind of continued pressure on demand and the corresponding revenue written into the portfolio through the course of this year. We are expecting that year-over-year, we're going to end 2023 with a lower lease portfolio size. As we think about Q4 specifically, which you asked about, you're right. Normally, we would see an increase going from Q3 to Q4, and we do expect that again this year. Again, it's to be seen as we go through November and December just how much of a bounce back we get, but based upon the comps that we saw last year and then what we're seeing here today, we would expect an increase sequentially. One thing I do want to remind you though as we go into 2024, and Steve and Douglas both talked about this, we've talked about this last few quarters, is that kind of the overall in the lease portfolio, what we've seen quarter-to-quarter is lower demand than what we had been anticipating and that trend has continued.
And we've been able to offset that with less churn out of the portfolio. So again, we've talked about improvement in write-offs. That's helped with the portfolio. We've also seen customers paying out their leases earlier or less often, right, than they would, their early payouts are less frequent than what they've been in the past. And so, as a result, again, churn is lower, while demand written in is also lower. And the net benefit has been a slightly better performance in lease portfolio size than what we expected quarter-to-quarter. As we move into to next year, the impact that that has is as we do start to see demand normalize, which we'd expect at some point, or we start to see the benefit of the trade-down that Douglas talked about. The benefiting revenue and earnings from that will lag.
So as demand has continued to be solved, pushing out kind of that growth in the top line and bottom line that we would've been expecting earlier in the year as we go into next year. So hopefully that gives you some color on both Q4 and some insight as to how we're starting to think about next year, which again, we'll provide you a lot more detail on 2024 on our next earnings call.
Bobby Griffin: Okay. Yes. And Kelly, that's helpful. And just to take that maybe one step further to make sure I'm capturing it. It probably sets up for the first half of next year from an EVA perspective, see some type of year-over-year pressure. Is that the correct read-through from your comments?
Kelly Wall: That's correct.
Bobby Griffin: Okay. Yes, that's helpful. Yes, because I don't think, I don't know if the street models necessarily have that captured. I guess, or captured correctly. I guess the next question I had is just on BrandsMart, and it's just more on the implied 4Q revenue performance versus the year-to-date trends. It does imply from a year-over-year decline, the decline lessens a lot. I know we got one new store, so is that just the difference or is there some view on the promotional side of things or just maybe walk me through kind of the assumptions in the 4Q implied revenue guidance for BrandsMart?
Kelly Wall: So, Bobby, you're right. We did open the Augusta store. The grand opening was this past weekend, and so there will be a contribution in Q4 relative to last year. Also, we are, we're kind of comping over a week Q4 last year as well. And so, while our view on the quarter does incorporate kind of the demand trends we've seen year-to-date, I think the two positives are comping over a weaker comp and in the addition of Augusta.
Steve Olsen: Hey Bobby, this is Steve. In addition, we've invested more in the holiday season from a marketing perspective both on the direct response side and digital marketing side with a real focus of really driving that value proposition, that low price position down at BrandsMart. We're excited about our promotional offers that we have coming into the holiday season. And as Kelly mentioned, look, I think we have the right plans to move this business forward.
Bobby Griffin: Okay, appreciate that. And I guess lastly for me, you guys now I think, have owned the business for six full quarters, or at least reported six full quarters. Just any new learnings on how you think about the long-term margin potential? I think the last time we talked a little bit about it was on the 4Q call, but just now, going through the cycle, what do you think about the long-term margin potential of the BrandsMart business?
Kelly Wall: Yes, Bobby, first, I'd say the macroeconomic environment's really challenging right now for retailers who sell appliances, furniture, and electronics. I'm really proud of Steve and Team's performance. We strongly believe in the BrandsMart's compelling value proposition and our right to win over the long-term. We feel like the synergies are compelling. We got a great customer base with great core markets and significant growth potential in terms of units. Our four-wall economics are very compelling over our fixed cost structure. And so that's really exciting for us. As you know, we grand opening of Augusta, and while we're going through a downturn right now, we believe over long-term in the BrandsMart's either profitability. We are not putting out any kind of revised EBITDA or profitability forecast. We should do that as we give outlook for 2024 and beyond.
Operator: Our next question comes from Scot Ciccarelli from Truist Security. Scot your line is now open. Please go ahead.
Joe Chalhoub: Good morning guys. This is Joe on for Scott. I just had a quick question on the sale-leaseback timing you mentioned. Is that due to any changes in the interest or cap rate environment? Or is that something you're pushing off longer term for strategic reasons?
Kelly Wall: Yes, Joe, it's Kelly. I mean, as I think you're probably aware, right? We've over the last several years completed sell leaseback transactions as well as the sale of real estate with stores we have closed. We think that as we think about our overall kind of capital allocation strategy. Our view is that we're not in the business on real estate and that it's we want to monetize those assets and then put that capital to work within the business or return it to shareholders. As we are ending this year, you're correct. I think the environment is not as positive, as we end the year as it has been in prior quarters where we've completed the transactions. And so, as we think about ending the year, the thought was to just be more prudent in terms of our expectations on timing as it relates to completing that transaction, I thought it best not to include it in this year's earnings.
Joe Chalhoub: And then just shifting gears a little bit. Just wanted to ask about the seasonal dynamics at play as we think about the write-offs from 3Q to 4Q. If you could just give any color on those?
Kelly Wall: Yes, absolutely. So typically, what you'd see is Q3 would be the kind of our weakest quarter from a write-off perspective. We did end Q3 of this year at 6.1%. We've mentioned pretty nice improvement in the same quarter over last year. I think as we move into the fourth quarter of this year, we might not see the same seasonal improvement, that we have in prior periods, we might, but it will be kind of close whether it's kind of, just above or just below. One of the dynamics that's impacting that is, we talked, Douglas talked and Steve talked about enhancements that we're making to our lease decisioning. And with that, we are expecting an increase in applications through our e-comm channel. And so, with the growth in e-comm as a percentage of the total portfolio, we've talked in the past how those customers that come to that channel tend to have a higher, kind of write-off profile.
And so, we'd expect to see that kind of materialize as we move through the quarter and into kind of the fourth quarter of next year.
Joe Chalhoub: And then just one last question. Just talking about the trade-down sort of trade-in dynamics. Can you guys talk about the higher credit quality customers coming in, where you think they're coming from, and if it's from above your funnel or customers coming in from other peer LTOs? Thanks.
Kelly Wall: Yes. I think we've said before, we sort of have expected with credit tightening that there's been this trade across going on from peers. As everybody in the space has been tightening, we are seeing, as I said, slightly higher incomes and slightly higher credit scores. The only data we have on that, we don't know where they were before us, but we do have data at BrandsMart and we are seeing tightening within the waterfall at BrandsMart. So that would indicate to me if BrandsMart is a proxy for other retail tightening that that may be occurring.
Operator: [Operator Instructions]. Our next question comes from Jason Haas from Bank of America. Jason your line is now open. Please proceed.
Jason Haas: Hi, good morning, and thanks for taking my questions. So, you mentioned that you've seen, I guess stronger demand for the weekly payment options. Is that a function of the macro environment? Does that signal that the consumer's under pressure and they're looking more for that weekly payment option? And if things were to improve in the macro environment, do you think you would see that reverse and consumers go back to looking for that monthly payment?
Steve Olsen: Hey Jason, it's Steve. Great question. I'll start off by saying we're definitely pleased with one the progress we're making with it and how customers are responding to our new weekly payment options, which now give them weekly, biweekly, and monthly payment frequencies depending on their needs. We're seeing, obviously more weekly customers, more customers taking our weekly payment option both in-store and our e-commerce channel, but still it's a small portion of our overall mix of deliveries. We think weekly really gives us the chance to demonstrate our competitive lease rates on a weekly basis across all of our major categories. So, while we're pleased with it, we're getting good feedback from our customers, tough to really say, what happens in the future. We just see it as another way to give our customers more flexibility to really set up a payment that meets their needs.
Kelly Wall: Jason, our goal is to offer payments at whatever frequency the customer wants to pay, whether it be weekly, biweekly, semi-monthly or monthly. And we do believe that our weekly price points are very compelling relative to what our consumer may get in other places. And so, we're leaning in on our opening price points. We think our weekly opening price points are super compelling. So, we're excited about it and we're excited about growing that part of the business.
Jason Haas: Great. Thank you. And then switching over to BrandsMart, can you just talk about how you're thinking about store openings going forward? Is the plan about one store per year or is it higher? Can you just remind me what expectations were and what when the next one will open?
Kelly Wall: Hey Jason, it's Kelly. So yes, we've stated consistently over the last several quarters that we'd expect to open at a one to two stores a year. Obviously, we opened the one in Augusta this year, and we'd expect to open one to two next year. We've not provided an update on kind of the exact timing of that next store. So, I think it's safe to assume at this point that it's not going to be in Q1. So, that first store, the earliest for next year, the earliest it would come would be kind of Q2, late in Q2, potentially in Q3.
Jason Haas: Okay, got it. Thank you.
Operator: Thank you, Jason. We currently have no further questions registered, so I would like to hand back to Douglas Lindsay for any closing remarks.
Douglas Lindsay: Thank you, Operator. We appreciate everyone who's joined us today. I want to thank our team members and franchisees for their relentless focus on delivering exceptional value and service to our customers each day. We believe that our continued focus on innovation and our ongoing strategic investments will enhance our distinct competitive advantages and grow our market share both Aaron's and BrandsMart. Thank you again for joining us today and we'll touch you soon.
Operator: That concludes The Aaron's conference call. Thank you very much for your participation. You may now disconnect your lines.
