THE WOODLANDS, Texas, Dec. 18, 2023 (GLOBE NEWSWIRE) — Conn’s, Inc. (NASDAQ: CONN) (“Conn’s” or the “Company”), a specialty retailer of home goods, including furniture and mattresses, appliances, and consumer electronics, today announced its financial results for the quarter ended October 31, 2023.

“We remain focused on pursuing strategic priorities aimed at turning around our retail performance and better serving our core credit constrained customers. I am pleased with the progress we made during the third quarter as we experienced strong year-over-year growth in credit applications and eCommerce sales. Despite the progress we are making, our third-quarter performance continued to reflect persistent industry headwinds and challenging economic conditions,” stated Norm Miller, President and Chief Executive Officer.

“Today we also announced the transaction with W.S. Badcock LLC (“Badcock”), a leading home furnishings company in the Southeast U.S. The transaction with Badcock combines two complementary 120+ year old businesses, with similar product categories, payment solutions and customer profiles. In addition, the transaction immediately strengthens Conn’s financial position by creating a leading home goods retailer with approximately $1.85 billion in retail sales across strong urban and rural markets in the southern U.S. The Badcock transaction represents one of the most significant events in Conn’s history, which we believe creates a clear path for Conn’s to deliver strong financial returns over the coming years,” concluded Mr. Miller.

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

Total consolidated revenue declined 12.8% to $280.1 million, due to a 14.1% decline in total net sales, and a 9.6% reduction in finance charges and other revenues;Same store sales decreased 15.0%, which is the fourth quarter of sequential improvement and a 1,200 basis point improvement from last year’s third quarter;eCommerce sales increased 51.0% to $26.3 million compared to $17.4 million in the prior year;Retail gross margin increased to 33.5% from 33.2% in the prior year;Credit applications increased by 40.6% year-over-year to the highest growth rate in the past five years, and;Reported a net loss of $2.11 per diluted share, compared to a net loss of $1.04 per diluted share for the same period last fiscal year.

Third Quarter Results

Net loss for the three months ended October 31, 2023 was $51.3 million, or $2.11 per diluted share, compared to net loss for the three months ended October 31, 2022 of $24.8 million, or $1.04 per diluted share or adjusted net loss of $18.6 million, or $0.78 per diluted share. On a non-GAAP basis, adjusted net loss for the three months ended October 31, 2023 was $49.2 million, or $2.03 per diluted share, which excludes charges and credits from professional fees related to corporate transactions. This compares to adjusted net loss for the three months ended October 31, 2022 of $18.6 million, or $0.78 per diluted shares

Retail Segment Third Quarter Results

Retail revenues were $221.4 million for the three months ended October 31, 2023 compared to $254.6 million for the three months ended October 31, 2022, a decrease of $33.2 million or 13.0%. The decrease in retail revenue was primarily driven by a decrease in same store sales of 15.0%. The decrease in same store sales resulted from lower discretionary spending for home-related products following several periods of excess consumer liquidity resulting in the acceleration of sales. The decrease in same store sales was partially offset by new store growth.

For the three months ended October 31, 2023, retail segment operating loss was $24.8 million compared to retail segment operating loss of $17.7 million for three months ended October 31, 2022. The decrease in retail segment operating income was primarily due to a decrease in revenue as described above, and higher selling, general and administrative costs (“SG&A”). This increase was partially offset by an improvement in retail gross margin.

Retail gross margin for the three months ended October 31, 2023 was 33.5%, an increase of 30.0 basis points from 33.2% for the three months ended October 31, 2022. The increase in retail gross margin was primarily driven by a more profitable product mix and normalizing freight costs. The increase was partially offset by the deleveraging of fixed distribution costs.

SG&A for the retail segment during the three months ended October 31, 2023 was $97.2 million compared to $94.2 million for the three months ended October 31, 2022. The increase was primarily due to an increase in occupancy from new stores, partially offset by a decline in variable costs and a decline in labor costs resulting from cost savings initiatives.

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

 Three Months Ended October 31,      Same Store (dollars in thousands) 2023 % of Total  2022 % of Total Change % Change  % Change Furniture and mattress$74,406 33.7% $79,927 31.4% $(5,521) (6.9)% (9.1)%Home appliance 79,622 36.1   102,884 40.4   (23,262) (22.6) (23.8)Consumer electronics 25,146 11.4   31,911 12.5   (6,765) (21.2) (23.5)Home office 9,539 4.3   8,630 3.4   909  10.5  6.3 Other 13,918 6.3   9,824 4.0   4,094  41.7  64.0 Product sales 202,631 91.8   233,176 91.7   (30,545) (13.1) (14.5)Repair service agreement commissions (1) 15,938 7.2   18,804 7.4   (2,866) (15.2) (15.9)Service revenues 2,288 1.0   2,378 0.9   (90) (3.8)   Total net sales$220,857 100.0% $254,358 100.0% $(33,501) (13.2)% (15.0)%

(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 Third Quarter Results

Credit revenues were $61.5 million for the three months ended October 31, 2023 compared to $66.6 million for the three months ended October 31, 2022, a decrease of $5.1 million or 7.7%. The decrease in credit revenue was primarily due to a 5.0% 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 $39.0 million for the three months ended October 31, 2023 from $34.8 million for the three months ended October 31, 2022, an overall change of $4.2 million. The year-over-year increase was primarily driven by an increase in the allowance for bad debts reserve of $6.1 million offset by a decrease in net charge-offs of $2.1 million during the three months ended October 31, 2023 compared to the three months ended October 31, 2022. The increase was the result of a portfolio mix shift offset by a smaller carrying value.

Credit segment operating loss was $13.4 million for the three months ended October 31, 2023, compared to operating loss of $0.3 million for the three months ended October 31, 2022. 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 October 31, 2023, to be filed with the Securities and Exchange Commission on December 18, 2023 (the “Third Quarter Form 10-Q”).

Store and Facilities Update

The Company opened one new standalone store during the third quarter of fiscal year 2024 bringing the total store count to 176 in 15 states. During fiscal year 2024, the Company has opened eight standalone stores and anticipates opening one more standalone store during the remainder of the fiscal year.

Liquidity and Capital Resources

On August 17, 2023, the Company completed an ABS transaction resulting in the issuance and sale of $273.7 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 $266.2 million, net of debt issuance costs.

As of October 31, 2023, the Company had $144.2 million of immediately available borrowing capacity under its $650.0 million revolving credit facility. In addition, the Company had $50.0 million of borrowing capacity available under the Delayed Draw Term Loan resulting in a total immediately available borrowing capacity of $194.2 million. The Company also had $5.6 million of unrestricted cash available for use.

Conference Call Information

The Company will host a conference call on December 19, 2023, at 10 a.m. CT / 11 a.m. ET, to discuss its three months ended October 31, 2023 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 third quarter fiscal year 2024 conference call presentation will be available at ir.conns.com.

Replay of the telephonic call can be accessed through December 26, 2023 by dialing 844-512-2921 or 412-317-6671 and Conference ID: 13740585.

About Conn’s, Inc.

Conn’s HomePlus (NASDAQ: CONN) is a specialty retailer of home goods, including furniture and mattresses, appliances and consumer electronics. With 176 stores across 15 states and online at Conns.com, our approximately 4,000 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 statements regarding benefits of the proposed transaction, integration plans and expected synergies, anticipated future financial and operating performance and results, including estimates for growth, 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: our ability to integrate the W.S. Badcock business, the possibility that our shareholders may not approve the issuance of non-voting common stock required for conversion of the preferred stock issued in connection with the transaction, the risk that any announcement relating to the transaction could have adverse effects on the market price of Conn’s common stock, the risk that the transaction and its announcement could have an adverse effect on our ability to retain customers and retain and hire key personnel and maintain relationships with suppliers and customers, our ability to achieve synergies, our inability to operate the combined company as effectively and efficiently as expected, the condition of the W.S. Badcock business being materially worse than the condition we expect it to be in and/or including unanticipated liabilities, our inability to achieve the intended benefits of the transaction for any other reason, 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 eCommerce 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 or our Delayed Draw Term Loan; 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, 2023 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)
(amounts in thousands, except per share amounts)
  Three Months Ended
October 31, Nine Months Ended
October 31,  2023   2022   2023   2022 Revenues:       Total net sales$218,452  $254,358  $684,644  $806,133 Finance charges and other revenues 61,678   66,842   186,962   201,519 Total revenues 280,130   321,200   871,606   1,007,652 Costs and expenses:       Cost of goods sold 146,362   169,842   448,280   530,942 Selling, general and administrative expense 131,032   126,243   395,244   389,169 Provision for bad debts 39,123   35,104   101,334   77,059 Charges and credits, net 2,071   8,006   1,264   6,522 Total costs and expenses 318,588   339,195   946,122   1,003,692 Operating (loss) income (38,458)  (17,995)  (74,516)  3,960 Interest expense 22,448   11,478   55,614   23,807 Loss before income taxes (60,906)  (29,473)  (130,130)  (19,847)Benefit for income taxes (9,609)  (4,634)  (9,936)  (3,358)Net loss$(51,297) $(24,839) $(120,194) $(16,489)Net loss per share:       Basic$(2.11) $(1.04) $(4.97) $(0.68)Diluted$(2.11) $(1.04) $(4.97) $(0.68)Weighted average common shares outstanding:       Basic 24,262   23,911   24,196   24,173 Diluted 24,262   23,911   24,196   24,173  CONN’S, INC. AND SUBSIDIARIES
CONDENSED RETAIL SEGMENT FINANCIAL INFORMATION
(unaudited)
(dollars in thousands)  Three Months Ended
October 31, Nine Months Ended
October 31,  2023   2022   2023   2022 Revenues:       Product sales$202,631  $233,176  $631,862  $738,598 Repair service agreement commissions 15,938   18,804   51,600   60,256 Service revenues 2,288   2,378   6,720   7,279 Total net sales 220,857   254,358   690,182   806,133 Finance charges and other 497   270   1,512   815 Total revenues 221,354   254,628   691,694   806,948 Costs and expenses:       Cost of goods sold 146,772   169,842   450,576   530,942 Selling, general and administrative expense 97,212   94,240   294,457   288,306 Provision for bad debts 122   261   321   848 Charges and credits, net 2,071   8,006   1,264   6,522 Total costs and expenses 246,177   272,349   746,618   826,618 Operating loss$(24,823) $(17,721) $(54,924) $(19,670)Retail gross margin 33.5%  33.2%  34.7%  34.1%Selling, general and administrative expense as percent of revenues 43.9%  37.0%  42.6%  35.7%Operating margin(11.2)% (7.0)% (7.9)% (2.4)%Store count:       Beginning of period 175   163   168   158 Opened 1   2   8   7 End of period 176   165   176   165          CONN’S, INC. AND SUBSIDIARIES
CONDENSED CREDIT SEGMENT FINANCIAL INFORMATION
(unaudited)
(amounts in thousands)  Three Months Ended
October 31, Nine Months Ended
October 31,  2023   2022   2023   2022 Revenues:       Finance charges and other revenues$61,528  $66,572  $186,406  $200,704 Costs and expenses:       Cost of goods sold$1,854   —   2,548   — Selling, general and administrative expense 34,070   32,003   101,537   100,863 Provision for bad debts 39,001   34,843   101,013   76,211 Total costs and expenses 74,925   66,846   205,098   177,074 Operating (loss) income (13,397)  (274)  (18,692)  23,630 Interest expense 22,539   11,478   55,598   23,807 Loss before income taxes$(35,936) $(11,752) $(74,290) $(177)Selling, general and administrative expense as percent of revenues 55.4%  48.1%  54.5%  50.3%Selling, general and administrative expense as percent of average outstanding customer accounts receivable balance (annualized) 13.9%  12.4%  13.7%  12.7%Operating margin(21.8)% (0.4)% (10.0)%  11.8% CONN’S, INC. AND SUBSIDIARIES
CUSTOMER ACCOUNTS RECEIVABLE PORTFOLIO STATISTICS
(unaudited)  As of October 31,  2023   2022 Weighted average credit score of outstanding balances (1) 615   613 Average outstanding customer balance$2,661  $2,541 Balances 60+ days past due as a percentage of total customer portfolio carrying value (2)(3) 11.0%  12.2%Re-aged balance as a percentage of total customer portfolio carrying value (2)(3) 18.1%  16.5%Carrying value of account balances re-aged more than six months (in thousands)(3)$34,563  $31,521 Allowance for bad debts and uncollectible interest as a percentage of total customer accounts receivable portfolio balance 17.4%  18.2%Percent of total customer accounts receivable portfolio balance represented by no-interest option receivables 36.2%  33.0%        

(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.

 Three Months Ended
October 31, Nine Months Ended
October 31,  2023   2022   2023   2022 Total applications processed 333,622   231,526   968,571   756,611 Weighted average origination credit score of sales financed (1) 623   621   621   620 Percent of total applications approved and utilized 18.8%  23.8%  20%  22.4%Average income of credit customer at origination$53,600  $50,900  $52,300  $50,600 Percent of retail sales paid for by:       In-house financing, including down payments received 61.1%  54.0%  60.8%  51.9%Third-party financing 14.7%  17.6%  14.7%  18.2%Third-party lease-to-own option 8.6%  7.2%  8.2%  7.1%  84.4%  78.8%  83.7%  77.2% CONN’S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
  October 31, 2023  January 31, 2023Assets(unaudited)  Current Assets:   Cash and cash equivalents$5,562 $19,534Restricted cash 41,430  40,837Customer accounts receivable, net of allowances 424,940  421,683Other accounts receivable 52,020  56,887Inventories 231,814  240,783Income taxes receivable 40,933  38,436Prepaid expenses and other current assets 11,496  12,937Total current assets 808,195  831,097Long-term portion of customer accounts receivable, net of allowances 355,092  389,054Property and equipment, net 214,770  218,956Operating lease right-of-use assets 335,423  262,104Other assets 12,912  15,004Total assets$1,726,392 $1,716,215Liabilities and Stockholders’ Equity   Current liabilities:   Short-term debt and current finance lease obligations$7,934 $937Accounts payable 66,540  71,685Accrued expenses 91,823  82,619Operating lease liability – current 60,303  53,208Other current liabilities 12,668  13,912Total current liabilities 239,268  222,361Operating lease liability – non current 403,531  331,109Long-term debt and finance lease obligations 673,472  636,079Deferred tax liability 1,952  2,041Other long-term liabilities 17,601  22,215Total liabilities 1,335,824  1,213,805Stockholders’ equity 390,568  502,410Total liabilities and stockholders’ equity$1,726,392 $1,716,215

CONN’S, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS
(unaudited)
(amounts 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: retail segment adjusted operating loss, adjusted net loss, adjusted net 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.

RETAIL SEGMENT ADJUSTED OPERATING LOSS
  Three Months Ended
October 31, Nine Months Ended
October 31,  2023   2022   2023   2022 Retail segment operating loss, as reported$(24,823) $(17,721) $(54,924) $(19,670)Adjustments:       Store closure (1) —   —   2,340   — Asset sale (2) —   —   (3,147)  — Lease termination (3) —   —   —   (1,484)Employee severance (4) —   8,006   —   8,006 Professional fees (5) 2,071   —   2,071   — Retail segment operating loss, as adjusted$(22,752) $(9,715) $(53,660) $(13,148) 

(1) Represents store closure costs due to the impairment of assets associated with the decision to end the store-within-a-store test with Belk, Inc.
(2) Represents a gain related to the sale of a single store location, net of asset disposal costs.
(3) Represents a gain on the termination of a lease.
(4) Represents severance costs related to a change in the executive management team.
(5) Represents professional fees costs related to corporate transactions.

ADJUSTED NET LOSS AND ADJUSTED NET LOSS INCOME PER DILUTED SHARE  Three Months Ended
October 31, Nine Months Ended
October 31,  2023   2022   2023   2022 Net loss, as reported$(51,297) $(24,839) $(120,194) $(16,489)Adjustments:       Store closure (1) —   —   2,340   — Asset sale (2) —   —   (3,147)  — Lease termination (3) —   —   —   (1,484)Employee severance (4) —   8,006   —   8,006 Professional fees (5) 2,071   —   2,071   — Tax impact of adjustments(6) —   (1,809)  —   (1,472)Net loss, as adjusted$(49,226) $(18,642) $(118,930) $(11,439)Weighted average common shares outstanding – Diluted 24,262   23,911   24,196   24,173 Net loss per share:       As reported$(2.11) $(1.04) $(4.97) $(0.68)As adjusted$(2.03) $(0.78) $(4.92) $(0.47)                

(1) Represents store closure costs due to the impairment of assets associated with the decision to end the store-within-a-store test with Belk, Inc.
(2) Represents a gain related to the sale of a single store location, net of asset disposal costs.
(3) Represents a gain on the termination of a lease.
(4) Represents severance costs related to a change in the executive management team.
(5) Represents professional fees costs related to corporate transactions.
(6) Represents the tax effect of the adjusted items based on the applicable statutory tax rate including the impact of the valuation allowance.

NET DEBT
  October 31,  2023   2022 Debt, as reported   Current finance lease obligations and other$7,934  $919 Long-term debt and finance lease obligations 673,472   591,673 Total debt 681,406   592,592 Cash, as reported   Cash and cash equivalents$5,562  $8,433 Restricted Cash 41,430   45,503 Total cash 46,992   53,936 Net debt$634,414  $538,656 Ending portfolio balance, as reported$979,149  $1,032,800 Net debt as a percentage of the portfolio balance 64.8%  52.2%

Original: GlobeNewswire – Conference Calls, Webcasts: Conn’s, Inc. Reports Third Quarter Fiscal Year 2024