Earnings Call: Q2 2021

Aug 5, 2021

Good morning and thank you for holding. Welcome to Rent A Center's Second Quarter Earnings Conference Call. As a reminder, this conference is being recorded Thursday, August 5, 2021. Your speakers for today are Mr. Mitch Fidell, Chief Executive Officer of Rent A Center Maureen Short, Chief Financial Officer Jason Hogue, Executive Vice President of Aseema Anthony Blasquez, Executive Vice President, Rent A Center Business and Brendan Mitrano, Vice President of Investor Relations. I would now like to turn the conference over to Mr. Mitrano. Please go ahead, sir. Thank you, Jomarya. Good morning and thank you all for joining the Rent A Center team to discuss our results for the Q2 of 2021. Some of the statements provided on this call are forward looking statements, which are subject to many factors that could cause actual results to differ materially and adversely from our expectations. These factors are described in our earnings release issued yesterday as well as in the company's SEC filings. Rent A Center undertakes no obligation to publicly update or revise any forward looking statements, except as required by law. This call will also include references to non GAAP financial measures. Please refer to our Q2 earnings release, which can be found on our website for a description of the non GAAP financial measures and the reconciliations to the most comparable GAAP financial measures. With that, I'll turn the call over to Mitch. Thank you, Brendan. For starters, I'd like to introduce Brendan Metrano, who recently joined us to Head Investor Relations. Brendan comes to us from Western Union, where he also Head of Investor Relations. And prior to that, he was a sell side analyst for over a decade. So he Brings a strong understanding of equity markets and the investment community, especially in payments and FinTech. So welcome, Brendan. And thank you and good morning everyone and thank you again for joining us this morning to discuss our Q2 results. As you've hopefully seen In our press release yesterday afternoon, our business continues to deliver outstanding results with over 20% pro form a Organic top line growth and over 200 basis points of pro form a margin expansion in the quarter has strong momentum heading into the second half of the year and Is on the path of major transformation with the Acima acquisition that positions us to significantly benefit from secular changes in the market. So Very exciting time for our team, our customers, retail partners and investors. Before jumping into Let's take a minute to explore this favorable fundamental backdrop behind our story. Essentially, it boils down to our business being well positioned to Benefit from some prevailing trends that seem to have a long runway, including shifts in consumer behavior, a need for more demographic inclusivity And technological disruption. As I think we're all familiar with, today many aspects of consumer behavior are evolving quite Much of it enabled by technology and recently accelerated by the COVID-nineteen pandemic. One change that pertains to us is the adoption of all types of payment plans. It's becoming increasingly acceptable, if not preferable, to pay for goods and services with a stream of small payments rather than running up credit card balances or depleting savings. We're also benefiting from consumer preferences for seamless, Flexible and convenient experiences. Rent A Center's differentiated omni channel model allows consumers to conveniently shop for, Pay for and get access to durable goods through the channel of their choice, digital, physical or hybrid, hassle free, without long term debt obligations or other long term commitments. Another trend that benefits us is Growing demand for solutions that promote inclusivity rather than lock out underprivileged groups. Many traditional payment services and retailers are We closed off for under banked or cash constrained consumers, and those services that are available are often lower quality experiences that can make people feel like second class citizens. Our business strives to provide the financially underserved with access to top quality products and first class experiences. And finally, technology is transforming almost every aspect of business, especially with respect to data and analytics, and the Acene acquisition and has given us industry leading capabilities in those areas. When you think about our business today with Aseemah, roughly half of our business is digital. Whether that's e commerce or virtual, half of our business is digital, an incredible transformation when you think about that over just the last 2 years. We think that leasing is still in its infancy as a form of consumer payment and that our omnichannel model and industry leading technology platform provide us with a Strong foundation for growth. Moreover, we are breaking new ground in the payments industry with the recent launch of our Proprietary Lease Pay Card powered by Mastercard, which revolutionizes the LTO shopping experience for durable goods for financially underserved consumers and dramatically expands the market opportunity for retailers. Jason will expand on this new product and other FinTech developments in a few minutes. Given this transformation of our business, you'll hear us increasingly discussed it in the payments and FinTechs context, Pivoting to concepts like gross merchandise volume as we did this quarter. So now let's review the highlights and progress we made during the Q2. Total revenue was $1,200,000,000 and increased approximately 75% year over year, which was largely driven by Significant incremental gross merchandise volume or GMV resulting from the Aseem acquisition. And on a pro form a basis, Organic total company revenue grew 21.6 percent led by the 43% Organic growth in GMV for our virtual leased owned business, that being of course Sysima as well as 10% organic revenue growth for the Rent A Center business. Now we continue to get a lot of macro questions, especially on effects of Stimulus payments over the past year. And as we've said in the past, we certainly have benefited from some aspects of the recent uncommon macro environment, including stimulus payments. But we believe that primary factors behind our performance include strong underlying fundamentals, technological advancements and execution. The team has just done a fantastic job of driving transactions and portfolio growth with a range of initiatives like product offerings and Procurement under challenging conditions, implementing e commerce and marketing strategies and adding new merchants. On top of this, our lease to own business is durable and anti cyclical as it actually benefits from a tighter credit environment. When the economy is booming and credit is loose, our core customers tend to lease more. During more challenging economic periods when credit tightens, we gain new customers who previously didn't need or choose to use our solutions. We do not believe the performance we've delivered as a result of the pandemic and stimulus are a story that is as good as it gets, not at all. In fact, We believe our best results remain ahead of us. We delivered over 400 basis points of EBITDA margin expansion in the second quarter 15.2%, benefiting from very strong profitability in the Rent A Center business and solid margins of Aseem. As a company, we remain highly committed to efficiency investments in our customer relationships and they're paying off with lower loss rates and improved collections. Adjusted earnings per share was $1.63 in the 2nd quarter compared to pro form a earnings per share of $0.80 in the prior year. Given our strong performance year to date and favorable underlying fundamental trends, we increased our 2021 guidance across pretty much every key metric. In addition, considering the compelling long term value creation potential of our company's strong financial position and significant cash flow generation, The Board has authorized a new $250,000,000 share repurchase program. I'm pleased to say the integration of Aseem is well on track. And moreover, the additional insights we've gained about Acene over the past months makes us even more optimistic about the technological and strategic value of the position in the tremendous long term growth prospects for our company. With all that, I'll turn the call over to Jason to update us more specifically on the Asema business. Thanks, Mitch. To start, I would reemphasize your comments on Aseemah. After a full quarter of getting deeper into the business, we continue to be impressed with its quality, especially on the technology side. The DecisionEngine, Data and Analytics and tech talent are all best in class. Aseema has been a leap forward for our virtual LTO capabilities and has been complementary with initiatives we were already working on. So we are very enthusiastic about our position in the virtual LTO industry and the expansive possibilities we see for this business. As Mitch noted, earlier this week, we issued a press release outlining some of the key solutions we'll continue to roll out and launch over the next few quarters that will make up the Acima ecosystem, which we believe can double the estimated total addressable market for Acima to something approaching $100,000,000,000 We are excited about the growth opportunities for the Aseem ecosystem and the proprietary patent pending elements of our solutions. I'll stand on some of the highlights of this week's press release in a few minutes, but first I'd like to take an opportunity to step back and provide a big picture perspective on The traditional retail shopping payment system primarily comprised of cash, credit cards and debit cards essentially excludes a large segment of the population, the financially underserved, from securing the use of durable goods, because these consumers have insufficient cash or credit profiles to meet the standards of most payment solution providers. This system is also suboptimal for retailers, who would certainly offer durable goods to this large segment of customers, but lack the transaction solutions to do so. Aseema addresses challenges for both groups through its mission to create a consumer lease ecosystem that reduces transaction frictions and barriers for consumers and businesses and creates a shopping experience that is more inclusive of all demographics by unlocking opportunities for consumers regardless of income level or financial history. Interestingly, we're even seeing some success with Aseema for non retail applications with very strong adoption rates for our Benefits Plus solution among Aseemah customers. We'll achieve this mission by adhering to 4 core principles for all of our solutions: Ease, choice, mobility and transparency. The FinTech innovations we highlighted in the media earlier this week and are great examples of this in practice. The Aseema marketplace is a single destination accessible on both the Aseema mobile app and website where consumers can acquire the eligible retail products they need through an LTO transaction with Aseema. The marketplace and is a gateway that gives consumers an entry point to the Aseema ecosystem, providing choices beyond the brick and mortar retail network to include a growing network of e commerce retailers. The Aseema mobile app puts the power of the Aseema ecosystem at the fingertips Customers can apply for a new lease with Aseema, find retail locations to shop, Directly access the Usimab marketplace, manage their lease accounts and stay up to date with retailer promotions and offers. The Seema browser extension lets consumers extend their LTO shopping experience beyond the marketplace directly on select retailers' websites through proprietary technology that does not require retailers to be integrated with Acima's e commerce solution. The browser extension allows customers to carry the shopping power provided to them by Aseema on their own individual journeys with an untethered LTO shopping experience. No longer will LTO customers be limited to only shopping on sites and locations with pre negotiated or exclusive e commerce arrangements. The CEMA lease pay card is a groundbreaking innovation that can unlock substantial transaction opportunities for financially underserved consumers and retailers. It will begin as a virtual card that enables approved customers to enjoy a flexible payment experience backed by Aseema to complete LTO shopping transactions across multiple retailers. After reviewing and executing an LTO agreement with Aseema, customers can use the Aseema lease pay card to complete their shopping experience in the marketplace or on the retailer's website via the browser extension. By year end, we plan to begin piloting physical lease pay card also issued through the Marketa platform, giving customers access to the millions of durable goods retail merchants that accept Mastercard. This is a paradigm shift in the market that opens up shopping opportunities for consumers from what we estimate is 40,000 to 50,000 retail Today, to literally millions of merchant doors and is a key factor in driving what could roughly amount to $50,000,000,000 increase of incremental Tim, importantly, the proprietary nature of the lease pay card should provide Ascema with a favorable competitive position as we pursue these growth opportunities. Moving on to 2nd quarter results and operational progress, my comments reflected pro form a performance as if Aseemah was included in the prior year. The retail partner business came in a bit ahead of our expectations on strong merchandise sales and 43% GMV growth despite some ongoing macro related supply chain disruptions and somewhat greater than anticipated retail partner churn resulting from store conversions. Adjusted EBITDA margin was 13.7% in the quarter versus 12.3% in prior year with Skip's stolen losses of 8.7%, down 9 70 basis points year over year. Integration is going as smoothly as we would hope, and we remain on track to realize the estimated $25,000,000 of synergies in 2021. We completed the conversion of all virtual locations to the Aseema platform during the Q2 and staff location conversions are progressing on plan. We continue to optimize the organization and are pleased with the results we see from blending the fast and nimble approach of a startup with the structure of a more established operation. We are getting the right structural framework in place to support our product and business development roadmap as well. For example, we have aligned our staff multi unit leadership team with our retailer base, allowing for more streamlined communication and execution We expect this change to further maximize our already strong relationship with retail partners. The retail partner pipeline continues to develop and we are in ongoing discussions with multiple national and large regional accounts. In addition, we are also exploring some alternative channel partners that could prove to be meaningful. Marketing automation from web, app, Marketplace and browser extension continue to evolve and through analytics, personalization And multi barrier tests, we are attracting more customers and lowering our cost per acquisition. We are optimizing customer journey management tools to build utilization of our lease lines and lifetime value of our customers. We developed a number of assets inclusive of Vidyo's to demonstrate the value of our offerings. Finally, I'd like to thank the entire team, both Legacy Rent A Center and Aseema for the tremendous effort over the past 6 months. Integrations are never easy and I think we have really exceeded expectations. With that, I'll turn it over to Anthony. Thanks, Jake. The Rent A Center Business segment had another strong quarter with revenue growth of 10.2% on same store sales growth of 16.6%, which marks 14 consecutive quarters of positive same store growth. Underlying fundamentals remain strong with our lease portfolio, up close to 17% at the end of the second quarter, similar to where it was at the end of the Q1. As Mitch noted earlier, I'm really pleased with the team's performance this quarter and with our position heading into the back half of year as we're maintaining that strong year over year portfolio increase. One area where we've had a lot of success is introducing new categories to our platform that have expanded our addressable market. Things such as tools, handbags, e bikes and tires. Tires are a great example of how we see opportunities that can continue to drive incremental growth. E commerce continues to be a key growth driver with revenues up 19% in the quarter even with us comping against 58% growth last year during peak pandemic disruption. Traffic and conversion trends remain strong, running well above pre pandemic 2019 levels. Importantly, E Commerce is transforming Rent A Center. This has made us a more nimble and dynamic company and changed how we interact with our customers, resulting in faster decisioning and enhanced engagement that helps our customers make better decisions. In combination with our leading retail outlets, We believe we are well positioned to deliver a true seamless omni channel experience for our customers. Our retail outlets continue to be a key element of our competitive advantage. Rent A Center remains committed to our heritage of serving the local communities where our customers live and building lasting relationships. In fact, we just opened the 1st new store in a few years in Oklahoma and we plan to launch at least a handful more locations this year. Moving on to profitability, adjusted EBITDA margin was 25.9 in the Q2 compared to 20% in the prior year with improved decisioning, low loss rates and strong collection activities. I'll close out with some comments on our outlook for the second half of this year. On top of strong execution, tailwinds have probably been a more beneficial factor than normal for the first half of this year with stable economic activity and ongoing government support for many of our customers. We think the favorable tailwinds will start to normalize over the second half of the year, which will likely translate into some slight moderation in sales growth with same store sales in the second half still estimated to be very strong in the low double digit range. Similarly, we think some of the factors that have benefited margins will also begin to moderate as we expect our EBITDA margins to level out in the low 20s in the second half of the year. With that, I'll now turn it over to Maureen. Thanks, Anthony. 2nd quarter Consolidated revenues were $1,200,000,000 a 75% increase versus the prior year period, primarily due to the acquisition of Aseema, which closed in mid February. On a pro form a basis, revenues grew 22%. Consolidated adjusted EBITDA of $182,000,000 more than doubled year over year and on a pro form a basis grew 41%. Adjusted EBITDA margin was 15.2% in the 2nd quarter compared to the pro form a margin of 13.1% in the prior year, with solid margin expansion for both the Rent A Center Business and Asema segments led by revenue growth, Lower loss rates and operating efficiencies. GAAP EPS was $0.90 in the 2nd quarter compared to $0.70 in the prior year period and included one time costs related to the Aseema transaction and integration. After adjusting for items that we believe do not reflect the underlying performance of our business. Non GAAP EPS was 1.6 In the Q2, which as a percentage of net income was in line with historical trends. We ended the quarter with a $145,000,000 cash And gross debt of $1,300,000,000 During the quarter, we paid down $55,000,000 on our ABL revolving credit facility and have fully paid down the outstanding balance. As a result of our continued strong operational performance and debt reduction, Our leverage ratio at the end of Q2 was 1.7 times and we had over $600,000,000 of available liquidity. During the quarter, we paid a cash dividend of $0.31 per share, which was approximately 7% higher year over year. Turning to our 2021 guidance. Given our better than expected portfolio performance And favorable underlying fundamental trends, we have increased 2021 guidance and tightened ranges. Our guidance assumes no additional government stimulus payments or material change in the macroeconomic environment, but some normalization of key profit drivers in the back half of the year from recent levels that may have benefited from the combined effects of the macro environment and policy responses to the pandemic. We now expect consolidated 2021 revenues to be between 4 point $5,500,000,000 $4,670,000,000 for 2021, which is an $85,000,000 increase at the midpoint versus our previous guidance from May. This reflects better than expected revenues in the first half of the year and continued benefits from our strong second quarter portfolio balance in the Rent A Center business segment for the second half of the year. Consolidated adjusted EBITDA is expected to be between 660 and $700,000,000 a $55,000,000 increase at the midpoint versus previous guidance and translating to adjusted EBITDA margin of approximately 14.5% to 15%. The new guidance takes into account the strong portfolio performance Anthony referred to and assumes a more gradual increase in the loss rates in the back half of the year towards historical levels than previously expected, partially offset by continued investments in talent and capabilities to support our technology and growth initiatives. Regarding the cadence of margins over the back half of the year, We expect a modest sequential decrease in the 3rd quarter reflecting typical seasonality followed by a notable sequential uptick in the 4th quarter. Non GAAP diluted earnings per share is expected to be between $5.90 $6.40 which is an increase of $0.58 at the midpoint. We now expect to generate free cash flow of $300,000,000 to $350,000,000 for the year. Turning to our segment projections. We expect our Siemens segment to generate revenues of $2,340,000,000 to $2,420,000,000 for the full year and for Q4 to grow at a higher rate than Q3 given seasonality. Adjusted EBITDA for the Asemis segment is expected to be $330,000,000 to $350,000,000 which translates to adjusted EBITDA margin of increase progressively in the second half of the year as we realize synergies, which should increase yield and offset the Impacted some reversion towards historical levels for key profit drivers such as skip stolen losses and customer payment trends. We expect the Rent A Center business segment to achieve revenues of $2,020,000,000 to $2,060,000,000 with low double digit same store sales growth in the back half of the year. 3rd quarter revenue growth is expected to be in the mid single digit range with 4th quarter in the high single digit range. Operating expenses should see a step up in the 3rd and 4th quarters, reflecting recent wage increases and more normalized gift stolen loss rates. We expect these trends will result in 2021 adjusted EBITDA of $480,000,000 to $500,000,000 for the Renna Center Business segment, translating to margins of approximately 23.8% to 24.3% for the full year and the low 20s in the back half of the year. Our capital allocation priorities remain focused on driving long term value creation for shareholders. The top priority is appropriately funding our current business and investing in value enhancing growth initiatives. Next, we will opportunistically look at M and A transactions that can generate favorable returns. After satisfying investment needs, we return capital to shareholders through a combination of dividends and share repurchases, with share repurchases employed opportunistically. Underlying all capital allocation decisions and is a commitment to a sound financial structure with appropriate levels of leverage. With $300,000,000 to $350,000,000 of Cash flow to fund investments, make significant progress towards our leverage target of 1.5 times and pay our quarterly dividend. Accordingly, our Board of Directors approved a $250,000,000 share repurchase authorization that replaces our previous authorization and represents approximately 7% of our market cap at current share prices. In closing, as Mitch noted earlier, It's a very exciting time for all of our stakeholders as our company is in the process of transforming into a more dynamic, FinTech oriented business with a highly compelling total return algorithm that includes projected strong top line growth with targeted revenues of $6,000,000,000 in 2023, margin expansion, substantial free cash flow generation, Capital returns to shareholders and solid double digit EPS growth. Detailed income statements by segment are posted to our website and the 10 Q will be filed later today. Thank you for your time. I'll now turn the call over for your questions. We will now begin our Q and A session. Your first question will come from Kyle Joseph with Jefferies. Please proceed. Hey, good morning. Thanks for taking my questions and Congratulations on a really, really strong quarter and appreciate all the commentary you gave across all of the segments. From a high level, as we're thinking about 2022 here, and not asking for guidance specifically, But can you walk us through and maybe it might be helpful to do it by segment, but how you're thinking about a normalization of revenues? Obviously, Aseemah may be different than the Rent A And then as we think about losses and margins and then Mitch, I think you did a good job kind of addressing some of the offsetting factors, whether it's maybe Less buyout activity or a normalization of credit demand if losses do in fact normalize in 2022. But just walk us through kind of some of the Offsetting impacts as we look out longer term on the business segments? Sure, Kyle. This is Maureen. I can answer that and then If Mitch has any additional comments, but our longer term guidance as we talked about hasn't really changed. The $6,000,000,000 target is still Our 2023 target, some of the assumptions that go into that growth projection are that Aseema will grow 20% to 25% In GMV as well as revenue, over the next 3 years, we assume low to mid single digit comps in the Rent A Center business. We are seeing Some of the benefits of the portfolio carry forward into the second half of twenty twenty one. And there could be some upside as that portfolio growth continues to play out throughout the year. But our current projections for 20 22 and 23 still assume that low to mid single digit comps. We also assume $40,000,000 to 70,000,000 of annualized run rate synergies with the Aseema transaction and integration. And it does not include, as we've mentioned in the past, the benefits of any national accounts, any large national accounts that we had for incremental revenue associated with the Mastercard agreement. Got it. That's very helpful. And then quick one off here. Obviously, child tax credit payments started going out last month. Did you see any sort of impacts on either segment? No, really nothing. Kyle, this is Mitch. Really nothing to speak of. I think our customer the payments are still Strong. I mean, our customers are in pretty good shape still. But it's not like our Payouts went up like when bigger stimulus checks hit and things like that. So demand remains strong, collections remains good, but no big Hop on payouts or anything that would actually drop the portfolio. Got it. Thanks, Mitch. And then one last one for me, probably either Maureen or Jason. On Aseemah, obviously, we saw a really good EBITDA margin expansion quarter on quarter, Recognizing there's some moving parts there and you only had roughly 6 weeks of contribution from Aseema in the Q1. But can you walk us through The drivers of that, it seems like losses were stable. Was it less buyout activity? Obviously, you benefited from the full quarter of Asema, but just walk us So the drivers between the big uptick in EBITDA margin there? Sure, Kyle. Most of the improvement in EBITDA margin Was through gross margin. You can see it sequentially increased a couple of 100 basis points or 150 or so basis points, which is most of the improvement in EBITDA margin. There were also some benefits of Higher revenue, less payouts, as you mentioned, translates to higher margins and also converting some of our Preferred lease stores to Asema to their technology, it results in a higher yield. So those are the main growth drivers. We do expect Margins to increase progressively throughout the year as we mentioned last quarter, mainly due to The synergies really taking hold and increasing throughout the year. Got it. Very helpful. Thanks a lot for answering all my questions. Thanks, Kyle. Thanks, Kyle. Your next question will come from Vincent Caintic with Stephens. Please proceed. Hey, thanks. Good morning. Thanks for taking my question. I think the first question is for Jay. So on the GMV volume growth, The 43%, that's really impressive year over year. I guess, first, if you think that's a sustainable number? And then second, Perhaps if you could break it up between what you're seeing in organic growth from your existing merchants versus your new account wins. I'm guessing with a 43% number, it's going to be a mixture of both, but I guess it would be impressive if that was all organic or mostly organic from existing merchants. So Perhaps if you could kind of separate those 2 out, that would be very helpful. Thank you. Yes. Good morning, Vincent. It's good to hear your voice. If you look at the GMV trends for the balance of the year, I think what we're expecting is to grow around 20% And growth decelerates because we're comping high growth rates from last year, obviously, with the pandemic and Anything else that's happening. One of the other things that we think is going to be a tailwind from a forecast GMV includes the online traffic and the activity metrics, the customer accounts. So we're actually doing a really good job with regard to our Opening new doors and then most importantly, as we're bringing on some of the new technologies I mentioned in my comments, The ability to increase the turns per customer number of leases and that will have a direct effect. And then Like I also mentioned, we have a number of both e commerce, which currently represents about 15% of Segment and is going to continue to grow as we're bringing on more and more both Partners there and also bringing the digital channels online with the assets that we announced earlier this week. Yes. And I'd add to that, Jay, the 15% of TCOM that was in the low single digits a year ago. That's And it's going to continue to grow as a portion of the business as we continue to turn up the volume on all of these efforts And then second question, I think this is for Mitch. So you mentioned M and A in the prepared remarks. I'm just kind of curious what you might be thinking of when we look at the competitive landscape. It seems like Up and down the point of sale financing spectrum and in like buy now pay later and lease to own, you've seen a competitor by a non pay later company to be fully in the ecosystem and then Another competitor is kind of focused or doing more on partnerships with other biennapiculator guys. I'm just wondering when you think about M and A or partnerships Sort of the broad spectrum, what are you thinking there? Thank you. Sure, Vincent. I think we're open to looking at anything that's Good. At the right multiple in AdStar Ecosystem and Like it says, the right multiple for us to get a good return on. So I wouldn't cut off any category. We're open to that. Obviously, right now, we're pretty On the integration of Aseemah, but it's gone smooth as Jay was talking about. We're 6 months into it. So and cash is Building you saw the share repurchase because as part of the capital allocation, this cash flow is better than we anticipated at this point. So We'll obviously continue to fund new accounts and national accounts will take up some of that cash, but we will be We'll look at anything from an M and A standpoint. I wouldn't not look at anything in any of those categories that you mentioned. Okay, got it. That's helpful. Thanks very much. Thanks, Vincent. Your next question will come from Brad Thomas with KeyBanc Capital Markets. Please proceed. Hi, good morning. And let me add my congratulations on a great quarter and all the momentum And the business, I was hoping we could talk a little bit more about the loss rates, the skip stolens that continue to Track at really favorable levels. Can you talk a little bit more about the changes you're making in the decisioning And how much that is benefiting the loss rates and how sticky you think that maybe some of these more favorable trends might be? Yes, Brad, thanks. This is Jay. Thanks for the question and good morning. And I'll kick off the answer and then hand it over to Anthony as well. So one of the things that we have been sort of most impressed about with the Acquisition is the decision engine and the advantage that, that gives us as well as our data sciences group. And so What we're finding is that the combination of the data set that we're able to use from our legacy business in combination with Aseema's Technology is enabling us to underwrite better from 2 components. The first component is from a fraud perspective And being able to dial in and reduce down our fraud losses and skip stoles resulting from that. And then the second thing It's actually where we're able to provide a better underwriting decision with regard to line and Customer and so that results in a materially kind of better ticket for us overall. So the combination of the two things is giving us an Yes, I would echo those sentiments on the Rent A Center business as more of the portfolio transitions ecom, one of the things that we're always concerned with is how do we reduce fraud and the centralized decisioning has really given us an opportunity to reduce that substantially as it continues to be a larger part of the portfolio. And that's really the most important thing for us is reduce the fraud and go ahead and convert more of the And another thing that we've introduced recently as well is approval amounts for our customers. So now not only can we go ahead And approve more customers, we can go ahead and throttle the potential for loss by going ahead and making a determination on the approval amount. So it's benefited the Rent A Center business And also the increase in digital payments has benefited as well with more than half of our payments coming digitally, that's That's helpful as well. Just real quick, one last thing to tack on the Asema segment. The data services capability now It's bolted into our collections activities, so it enables us to anticipate in advance and make sure that we're being more Targeted with regard to doing preventative activities on a loss side. And the only thing I'd add, Brad, you think about the Aseemah side in a virtual business like that, Cision is always going to be a main component of it And you're always trying to improve it and obviously we think it's working really, really well right now and one of the best parts of the And it continues to get better every basically every week when the underwriting committee meets and reviews things. So that's a core Element of the Aseemah business and getting better every week. On the Rent A Center side, it's relatively new in the last year. And we never had much of a loss problem at Rent A Center, as you know, Brad. Okay. So we've gone from the mid-3s to the mid-2s. That's fantastic. That one percent is important and you can point to the decision engine for the majority of that. Like I said, 1% is important, but beyond that, the customer experience in the Renaissance store and the efficiency of using a decision engine versus Manual verification is you could almost call it a game changer, a 45 minute transaction for a customer inside our brick and mortar store It now takes 10 minutes. And the efficiency, the labor savings on our end, the customer experience, You don't hear us talking a whole lot about labor costs because of the efficiencies we found with decisioning and the digital payments, as Anthony mentioned, Even though wages are up, I mean, at the entry level, hourly wages is what, Anthony, in that like 15%, 20% range, you don't hear us talking a lot about it, Because there's a lot of offset with efficiency and using less hours to make up for that higher pace. So And the technology and the e comm advancements, technological advancements overall are the reason for that and Much more efficient business. And then you add on to that, it's a better customer experience for repeat business and all that. And It's much more of a game changer at Rent A Center than just the 1% difference probably in the loss margin. That's great. Yes, all very encouraging. Just to follow-up on that last point you made, Mitch, on the inflation front. Could you talk a little bit about how an inflationary backdrop in merchandise affects the business, I think of many years where we were seeing deflation in areas like consumer electronics and even furniture. And how does that how does the outlook for the business change with the merchandise cost inflation that we're seeing? Actually, it's very odd. The impact on a lot of businesses is pretty negative. On our business inflation Actually can be a positive, has been in the past, and I think we're seeing some of that right now. And it's a positive even when you pay more for product in that, If product gets more expensive at retail, that's good for lease to own, right? I think everybody it's easy to understand that. If it's more expensive at retail, It's good for Asimah, because if products are 20% higher, I think we're seeing furniture prices maybe even at retail 30% higher. But if it's not like they're going to get approved by prime lenders for 30% more just because of inflation, if anything, it's going to get tighter with lenders, right. So, more customers should start flowing into the Asimu through the waterfall. So, It's good there when things get expensive at retail and it's also good for the Rent A Center segment. And when you can pass on the Inflation that we're seeing in the cost of goods in small payments at on average $2 a week, It doesn't have much impact on demand at $2 a week and $2 or $3 a week, dollars 10 a month, however you want to look at it. It doesn't Effect demand there, but yet actually drives more gross margin dollars overall, Because we're more than covering the inflationary cost of the product. It's more gross margin dollars, which actually helps the EBITDA margins, Right, as it flows, if you have more gross margin dollars. So it can be very positive in the lease to own business for All those reasons, as bad as inflation can be for the whole country in general for our business, where it's really an anti inflation play. Really helpful perspective. Thanks, Mitch. Thanks, everyone. Thanks, Brett. Thank you. Your next Question will come from Anthony Chukumba with Loop Capital Markets. Please proceed. Good morning and allow me to To offer my congratulations on a really strong quarter as well. So first question, very encouraging to see the share repurchase So authorization, obviously, buying back stock at these levels will be highly accretive to your earnings per share. Now is that share repurchase Going to be a 10b5-1 or is it going to be are you going to buyback stock opportunistically? Yes. We're going to think about share repurchases as a flexible way to return capital to shareholders with a preference for executing in a manner that generates Value, meaning when the stocks are better value, we'll buy at a greater amount. And if the stock moves down towards fair value, we'll buy less. Now we want to be able to continue to buy even within blackout periods, so we'll likely use a 10b5-1 plan. We've used it at times in the past, but we really want to balance more between Dividends and share repurchases going forward with this new authorization. Got it. Okay. That's helpful. And then just one clarification. So you mentioned that your increased guidance Does not assume any additional government stimulus payments. Are you counting the are you considering the The expanded child tax credit additional government stimulus payments, because it seems to me like that is an additional government stimulus payments, just that People are going to be getting every single month as opposed to getting a $1400 check. So I just wanted to kind of clarify that. Yes. I think we saw such little impact in July with the first check come out as we model out The rest of the year, certainly, it's in there. So I'd say no additional stimulus. Not sure there's going to be a big impact in child tax credit. We haven't seen much out here. I believe if there is an impact, it's positive, but it's not like we put a whole bunch of Positive momentum in our model because of it, because we saw little impact in July. So it's really not in our model. It's obviously out there and if anything it will be a positive to the model, Anthony. Got it. That's helpful. Thank you. Thank you. Your next question will come from John Rowan with Janney. Please proceed. Good morning, everyone. Hey, John. Good morning. Mitch, you talked about National Partners a little bit. Can you just maybe give us an idea? I know you're not going to call us anything specific, but what the pipeline is of people who are Testing or that your sales group is talking to, just give us an idea of how we're moving toward the progress of getting a national partner. Hey, John. This is Jay, Ashley. Thanks for the question. So we are now actually seeing Our national account team get into what I would call full swing. As I mentioned in the previous earnings call, We are in we have a robust pipeline, so we kind of break it into 2 areas, the big national retailers and then ecom. So we have several 100 big fish in process with regards to the national account side And over 1,000 from an e comm target, which includes obviously large regionals. Then specifically, obviously, we're not Comments on the partnerships themselves, but I can tell you that we're in mid to late stage discussions with roughly a dozen of the national partners and probably double that with regard to the e com nationals and retailers. So really nice progress. We track this now. And the good news is we picked up a significant amount of talent as part of the We've consolidated it with our existing national account team in our development office, and we're making really nice progress there. All right. Thanks, guys. Thanks, John. Thanks. Your next question will come from Bobby Griffin with Raymond James. Please proceed. Good morning, everybody. Thanks for taking my questions. I hope everyone is doing well. Good morning, Rob. I want to touch on the Rent A Center segment. And maybe You talked a little bit about margins coming back down to maybe the low 20s range, which is still an incredible level when you look at where these margins, EBITDA margins were in 20 Keene, so Mitch or Andy or Marine, whoever, can you maybe unpack some of the drivers there that structurally changed in the business and the confidence you have that these are not Stimulus changes and there are more structural changes and you can maintain this low 20 ish EBITDA margin going forward. Yes, good question, Bobby. I think the primary reason is it's Pretty close to a fixed cost business. So when you're growing like we're growing and demand is strong, you get EBITDA margin, A lot of it flows to the bottom line. Think about the gross margins in the 70% range and not much cost below that as you bring on more So, Murch, you get pretty good flow through, right, 50% anyhow flow through on every dollar. It's primarily growth. Now the e comm helps from an efficiency standpoint, certainly. Even the inflation I mentioned earlier, given it's more gross margin dollars, but The losses being lower with the decisioning, all those things working together, but I'd say, Anthony, the primary reason Is the demand driving the drives the top line? And of course, in a portfolio business, there's a long runway in that demand. We can see Quite a ways out and that's why our slowdown in the back half of the year is the low double digit same store sales. So And I say that with a little bit of a giggle when you call that a slowdown low double digits. And So all these extra dollars drive quite a bit of flow through and that's going to be the biggest part of it. Okay. And then maybe to follow-up on Brad's question and understanding how inflation if inflation is coming and it is coming, is How it drives the impact there, but are you starting to see it already in the numbers? So when we look at the 16.6% comp in the Rent A Center business, Is that already benefiting from some merchandise inflation or is that more kind of a go forward type comment? I'd say it's more go forward. I think we're just starting to see And price increases because, of course, at our volume of purchases, our orders are we're buying quite a ways out. So, I think that's a forward looking benefit, honestly, that we don't have modeled, But it's really not in the numbers to date. Yes, we're just starting to see it now in ticket as inventory flows through the system. So, but it's early on. Thank you. I appreciate all the details in both the questions and best of luck here in the second half. Thanks, Bobby. Thank you. And at this time, there are no further questions. I would now like to turn the call back over to Mitch Bedell for closing remarks at this time. Thank you, Jameera, and thank you everyone for joining us this morning. Obviously, we're really excited about How things are going and we believe the best is yet to come. A lot of people out there think this is the peak. We do not. We see ongoing growth on the retina center side as we talked about, but we didn't spend much time talking about things like new product Categories, Anthony, I think you mentioned it in your prepared comments, but new product categories driving the business, ecom just flying, Almost 20% growth in e comm on the rental center side comping over almost 60% last year during the shutdown. So fantastic stuff there. Aseemah obviously knocked it out of the park with their GMV, and we're so excited about some of the Proprietary stuff we announced this week that we really think increases the TAM. Jay's plan Of attack, with those products like the lease pay card and so forth, when you add that to asema and we really I think we've got a 1 plus 1 equal and 3 here. The great plan, the great ecosystem plan that Jace had since he started last year It's coming to fruition and you add that to the achievement, like I said, 1 plus 1 equals 3. So I could go on all day about how excited we are. Most of you probably already hung up, But I'll just stop there and say everybody have a great day and we appreciate your support. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.