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Rent-A-Center, Inc. posted fourth-quarter 2020 results, wherein the bottom line missed the Zacks Consensus Estimate. However, sales and earnings improved on a year-over-year basis. Further, management issued an upbeat view for 2021.
Results were driven by robust in Rent-A-Center business and growth in the retail partner channel in spite of challenges tied to the pandemic. The company has also been making digital investments and is confident of its omni-channel strategy.
On Feb 17, 2021, management concluded the Acima Holdings buyout, which combines Acima's capabilities with the company’s Preferred Dynamix platform. This boosts the company’s LTO solutions across e-commerce, digital and mobile platforms. We note that Rent-A-Center engaged AlixPartners for advising the integration and synergy identification processes. It is on track with the integration process. This acquisition is expected to be accretive to adjusted earnings per share in 2021 and 2022. The buyout also boosts the company’s growth profile. In fact, management believes accomplishing $6 billion in total revenues along with mid-teens EBITDA margins in 2023.
Over the past three months, this rent-to-own operator has seen its shares increase 52.8% versus the industry’s 10.4% gain.
Q4 in Detail
Rent-A-Center posted adjusted earnings of $1.03 a share that missed the Zacks Consensus Estimate by a penny. However, the bottom line rose 77.2% from 58 cents earned in the year-ago quarter.
RentACenter, Inc. Price, Consensus and EPS Surprise
Total revenues of $716.5 million were almost in line with the Zacks Consensus Estimate but grew 7.3% year over year. Growth was mainly driven by same-store sales growth in the Rent-A-Center Business segment and higher Preferred Lease revenues, somewhat offset by a lower store count in the Rent-A-Center Business due to refranchising and store-rationalization efforts.
Meanwhile, adjusted EBITDA came in at $97 million, up more than 52% from the year-ago period. We note that adjusted EBITDA margin expanded 400 basis points to 13.5%.
Segment Performance
Revenues at the Rent-A-Center Business segment rose 5.8% to $464.3 million owing to same-store sales growth of 13.7% stemming from a 53% increase in e-commerce sales. We note that the company had refranchised nearly 100 stores in California, which is not reflected in the segment’s revenues. As of Dec 31, 2020, the segment had 1,845 company-operated locations.
Revenues at Preferred Lease segment grew 4.8% from the prior-year quarter to $201.1 million, mainly buoyed by the virtual retail-partner growth, partly mitigated by headwinds related to the availability of products at most of the retail partners. Moreover, invoice volumes rose about 25%, driven by virtual retail-partner additions along with organic growth across virtual and staffed locations. Management informed that starting the first quarter of 2021, this segment will include the results of the Acima operations effective the date of buyout. This will be referred to as the Acima Segment.
Mexico segment’s revenues totaled $14.3 million, up 11.4% on a constant-currency basis. Also, the segment’s same-store sales rose 4.3%. As of Dec 31, the unit had 121 company-operated locations.
Finally, Franchising revenues jumped 57% to $36.8 million on increased store count from refranchising of the California stores in 2020 and rise in inventory purchases by franchisees. As of Dec 31, the company had 462 franchise-operated locations.
Other Financial Aspects
Rent-A-Center ended the reported quarter with cash and cash equivalents of $159.4 million, net senior debt of $190.5 million and stockholders' equity of about $592.1 million. It had an outstanding indebtedness of $197.5 million at quarter-end. The company ended the quarter with $369 million of liquidity, including $209 million available on its previous revolving credit facility.
Capital expenditures totaled $34.5 million in 2020. This Zacks Rank #3 (Hold) company generated cash of roughly $236.5 million from operations and free cash flow, including acquisitions and divestitures of $215.9 million during 2020.
2021 Outlook
Consolidated revenues are now projected in the bracket of $4.305-$4.455 billion for 2021. Rent-A-Center delivered $2.814 billion in 2020. Further, adjusted EBITDA is now forecast between $570 million and $620 million for 2021, while adjusted earnings per share are envisioned in the band of $5.00-$5.55. The guidance suggests year-over-year growth of 41-57% from $3.53 earned last year. The Zacks Consensus Estimate for 2020 earnings is currently pegged at $3.87, which is likely to witness upward revisions in the coming days. Meanwhile, free cash flow is predicted in the band of $145-$195 million.
For the Rent-A-Center Business segment, management anticipates revenues of $1.830-$1.880 billion and adjusted EBITDA of $375-$395 million.
For the Acima segment, revenues are likely to fall in the band of $2.290-$2.390 billion and adjusted EBITDA in the range of $320-$350 million.
Deckers (DECK - Free Report) has an expected long-term earnings-growth rate of 21.5% and a Zacks Rank #2 (Buy).
BJ's Wholesale Club, (BJ - Free Report) is a Zacks Rank #2 stock, which has an expected long-term earnings-growth rate of 15.8%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
Image: Bigstock
Rent-A-Center (RCII) Q4 Earnings Miss, Revenues Increase Y/Y
Rent-A-Center, Inc. posted fourth-quarter 2020 results, wherein the bottom line missed the Zacks Consensus Estimate. However, sales and earnings improved on a year-over-year basis. Further, management issued an upbeat view for 2021.
Results were driven by robust in Rent-A-Center business and growth in the retail partner channel in spite of challenges tied to the pandemic. The company has also been making digital investments and is confident of its omni-channel strategy.
On Feb 17, 2021, management concluded the Acima Holdings buyout, which combines Acima's capabilities with the company’s Preferred Dynamix platform. This boosts the company’s LTO solutions across e-commerce, digital and mobile platforms. We note that Rent-A-Center engaged AlixPartners for advising the integration and synergy identification processes. It is on track with the integration process. This acquisition is expected to be accretive to adjusted earnings per share in 2021 and 2022. The buyout also boosts the company’s growth profile. In fact, management believes accomplishing $6 billion in total revenues along with mid-teens EBITDA margins in 2023.
Over the past three months, this rent-to-own operator has seen its shares increase 52.8% versus the industry’s 10.4% gain.
Q4 in Detail
Rent-A-Center posted adjusted earnings of $1.03 a share that missed the Zacks Consensus Estimate by a penny. However, the bottom line rose 77.2% from 58 cents earned in the year-ago quarter.
RentACenter, Inc. Price, Consensus and EPS Surprise
RentACenter, Inc. price-consensus-eps-surprise-chart | RentACenter, Inc. Quote
Total revenues of $716.5 million were almost in line with the Zacks Consensus Estimate but grew 7.3% year over year. Growth was mainly driven by same-store sales growth in the Rent-A-Center Business segment and higher Preferred Lease revenues, somewhat offset by a lower store count in the Rent-A-Center Business due to refranchising and store-rationalization efforts.
Meanwhile, adjusted EBITDA came in at $97 million, up more than 52% from the year-ago period. We note that adjusted EBITDA margin expanded 400 basis points to 13.5%.
Segment Performance
Revenues at the Rent-A-Center Business segment rose 5.8% to $464.3 million owing to same-store sales growth of 13.7% stemming from a 53% increase in e-commerce sales. We note that the company had refranchised nearly 100 stores in California, which is not reflected in the segment’s revenues. As of Dec 31, 2020, the segment had 1,845 company-operated locations.
Revenues at Preferred Lease segment grew 4.8% from the prior-year quarter to $201.1 million, mainly buoyed by the virtual retail-partner growth, partly mitigated by headwinds related to the availability of products at most of the retail partners. Moreover, invoice volumes rose about 25%, driven by virtual retail-partner additions along with organic growth across virtual and staffed locations. Management informed that starting the first quarter of 2021, this segment will include the results of the Acima operations effective the date of buyout. This will be referred to as the Acima Segment.
Mexico segment’s revenues totaled $14.3 million, up 11.4% on a constant-currency basis. Also, the segment’s same-store sales rose 4.3%. As of Dec 31, the unit had 121 company-operated locations.
Finally, Franchising revenues jumped 57% to $36.8 million on increased store count from refranchising of the California stores in 2020 and rise in inventory purchases by franchisees. As of Dec 31, the company had 462 franchise-operated locations.
Other Financial Aspects
Rent-A-Center ended the reported quarter with cash and cash equivalents of $159.4 million, net senior debt of $190.5 million and stockholders' equity of about $592.1 million. It had an outstanding indebtedness of $197.5 million at quarter-end. The company ended the quarter with $369 million of liquidity, including $209 million available on its previous revolving credit facility.
Capital expenditures totaled $34.5 million in 2020. This Zacks Rank #3 (Hold) company generated cash of roughly $236.5 million from operations and free cash flow, including acquisitions and divestitures of $215.9 million during 2020.
2021 Outlook
Consolidated revenues are now projected in the bracket of $4.305-$4.455 billion for 2021. Rent-A-Center delivered $2.814 billion in 2020. Further, adjusted EBITDA is now forecast between $570 million and $620 million for 2021, while adjusted earnings per share are envisioned in the band of $5.00-$5.55. The guidance suggests year-over-year growth of 41-57% from $3.53 earned last year. The Zacks Consensus Estimate for 2020 earnings is currently pegged at $3.87, which is likely to witness upward revisions in the coming days. Meanwhile, free cash flow is predicted in the band of $145-$195 million.
For the Rent-A-Center Business segment, management anticipates revenues of $1.830-$1.880 billion and adjusted EBITDA of $375-$395 million.
For the Acima segment, revenues are likely to fall in the band of $2.290-$2.390 billion and adjusted EBITDA in the range of $320-$350 million.
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Deckers (DECK - Free Report) has an expected long-term earnings-growth rate of 21.5% and a Zacks Rank #2 (Buy).
BJ's Wholesale Club, (BJ - Free Report) is a Zacks Rank #2 stock, which has an expected long-term earnings-growth rate of 15.8%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
Click here for the 4 trades >>