Rent-A-Center (RCII) Concludes Review of Strategic; Didn't Receive Acquisition Proposals Meeting Objectives for Sale

Rent-A-Center, Inc. (NASDAQ/NGS: RCII) (“Rent-A-Center” or the “Company”), a leader in the rent-to-own industry, today announced that its Board of Directors (the “Board”) has concluded its review of strategic and financial alternatives to enhance stockholder value.

The Board, in consultation with its financial and legal advisors, conducted a comprehensive review of strategic and financial alternatives, including a possible sale of the Company, and unanimously determined that the continued execution of Rent-A-Center’s previously announced strategic plan is in the best interest of the Company and its stockholders. Through its robust review process, the Board focused on evaluating opportunities to maximize stockholder value. The Board, which includes a representative of Rent-A-Center’s largest stockholder, explored a range of potential transactions before determining that the continued execution of the Company's strategic plan, which the Company has been successfully pursuing since the appointment of Mitchell E. Fadel as its Chief Executive Officer at the beginning of the year, provides the best opportunity to enhance long-term stockholder value. The Board was prepared to pursue a sale of the Company if it concluded that such a transaction would both maximize stockholder value and provide certainty of closing. While the Company actively explored a possible sale, the Board unanimously determined that it did not receive any acquisition proposals meeting either of its objectives for a sale of the Company.

“Our Board conducted a thorough review of alternatives for our business, and unanimously determined that the execution of our strategic plan remains the best opportunity to deliver value to our stockholders compared to the alternatives available to us,” said J.V. Lentell, Chairman of the Rent-A-Center Board of Directors. “As demonstrated by our updated financial outlook and key operating metrics for April and May, the Company’s strategic plan is already delivering substantial results and Rent-A-Center is well-positioned to generate value for all stockholders.”

“While today’s announcement represents the conclusion of our formal strategic and financial alternatives review process, we will continue to regularly review opportunities to drive value on behalf of our stockholders,” said Mitch Fadel, Chief Executive Officer of Rent-A-Center. “Through the execution of our strategic plan, we continue to make significant progress to strengthen our financial profile and improve our results. Our cost reduction initiatives are significantly ahead of schedule and we expect to generate over $100 million in annual run-rate savings and realize approximately $70 million in savings in 2018. This compares to our previous expectations of $65 million to $85 million in annual savings and $43 million to $57 million realized in 2018 announced in February, and $75 million to $95 million in annual savings and $50 to $63 million realized in 2018 which was updated in April. Our new US pricing model is enabling us to increase loyalty amongst a larger customer base, growing our customer retention and helping customers achieve their goal of ownership faster than before. We are confident that we have the right plan in place to drive profitability while maintaining lower capital costs, allowing us to create enhanced value for all Rent-A-Center stockholders.”

In connection with the Board’s determination to continue executing the Company’s strategic plan, the results of which are exceeding management’s expectations, Rent-A-Center today provided the following updated guidance for 2018 and preliminary key operating metrics for its Core U.S. and Acceptance NOW (“ANow”) businesses for April and May 2018.

Q2 Guidance

• Consolidated Revenues of $640 to $660 million
  • Core U.S. Revenues of $450 to $460 million
  • Acceptance NOW Revenues of $170 to $180 million
• Adjusted EBITDA in the range of $40 to $50 million
• Non-GAAP diluted earnings per share in the range of $0.20 to $0.30 cents
• Free Cash Flow of $30 to $40 million

2018 Guidance

• Consolidated Revenues of $2.640 to $2.690 billion
  • Core U.S. Revenues of $1.835 to $1.865 billion
  • Acceptance NOW Revenues of $730 to $750 million
• Adjusted EBITDA in the range of $160 to $180 million
• Non-GAAP diluted earnings per share in the range of $0.65 to $0.90 cents
• Free Cash Flow of $210 to $230 million (compared to at least $130 million announced in February and at least $170 million announced in April)
• Net Debt of $405 to $425 million at year end(1)
• Consolidated leverage ratio of 2.3 to 2.7 at year end(2)

(1) Net debt equals total debt less cash over $25 million(2) Consolidated leverage ratio is net debt divided by adjusted EBITDA

Operational performance continues to exceed the Company’s internal expectations in both the Core and ANow businesses primarily driven by strong portfolio performance. Monthly Core same store sales have continued to improve sequentially during the second quarter. Positive Core customer growth was generated in April and May for the first time in several years and customer retention is significantly higher than historical averages driven by pricing changes, the 180 day same as cash offering, and enhanced marketing efforts. The value proposition changes recently implemented in most of the Company’s ANow locations have resulted in double digit increases in demand, and Rent-A-Center is committed to investing in ANow’s unmanned platform to drive additional growth.

Core U.S.

• April Same Store Sales: 3.3 percent
• May Same Store Sales: 3.6 percent

ANow

• April Same Store Sales: 2.3 percent
• May Same Store Sales: 2.5 percent

Guidance PolicyThe Company provides selected guidance and will only provide updates if there is a material change versus the original guidance.

You May Also Be Interested In

• SAP Q1 results fall short of Wall Street estimates as transformation kicks off
• Tapestry (TPR) Responds to the FTC’s Lawsuit
• Crane Co. (CR) Tops Q1 EPS by 3c ; Offers Guidance