{"id":394999,"date":"2020-12-08T06:03:26","date_gmt":"2020-12-08T11:03:26","guid":{"rendered":"http:\/\/www.marketnewsdesk.com\/?p=394999"},"modified":"2020-12-08T06:03:26","modified_gmt":"2020-12-08T11:03:26","slug":"conns-inc-reports-third-quarter-fiscal-year-2021-financial-results","status":"publish","type":"post","link":"https:\/\/www.marketnewsdesk.com\/index.php\/conns-inc-reports-third-quarter-fiscal-year-2021-financial-results\/","title":{"rendered":"Conn\u2019s, Inc. Reports Third Quarter Fiscal Year 2021 Financial Results"},"content":{"rendered":"
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THE WOODLANDS, Texas, Dec. 08, 2020 (GLOBE NEWSWIRE) — Conn\u2019s, Inc. (NASDAQ: CONN) (\u201cConn\u2019s\u201d or the \u201cCompany\u201d), a specialty retailer of furniture and mattresses, home appliances, consumer electronics and home office products, and provider of consumer credit, today announced its financial results for the quarter ended October\u00a031, 2020.<\/p>\n

\u201cOur third quarter results highlight the resilience of our unique hybrid retail and credit business model and the ability to de-risk our credit business while still supporting retail demand through our diverse credit offerings. As a result, we experienced another quarter of robust year-over-year growth of cash and third-party retail sales, which increased 32.7% over the prior fiscal year period and reflect strong demand for home-related products.\u00a0 We are also quickly expanding our digital and omnichannel capabilities to meet surging online trends and e-commerce sales increased nearly 61% during the quarter,\u201d stated Norm Miller, Conn\u2019s Chairman and Chief Executive Officer.<\/p>\n

\u201cThe performance of our credit segment throughout the COVID-19 crisis demonstrates the success of the adjustments we made earlier this year to mitigate the potential impacts on our business of high unemployment and economic uncertainty.\u00a0 While retail sales financed by our in-house credit offering declined 27.9% from the prior fiscal year, our credit segment is benefitting from newer, higher quality originations and the highest rate of cash collections in over ten fiscal years.\u00a0 In addition, the reduction in the portfolio balance, driven by strong cash collections and higher cash and third-party sales, has contributed to significant year-to-date and third quarter operating cash flow and strengthened our balance sheet.\u201d\u00a0<\/p>\n

\u201cSame store sales improved sequentially reflecting the progress we are making to capture retail sales opportunities while prudently managing credit risk.\u00a0 I am proud of our response to the unprecedented challenges we have faced throughout the COVID-19 pandemic and our continued commitment to protect the health and safety of our employees, customers, and communities.\u00a0 This is a testament to the experience of our senior leadership team, the dedication of our employees and the value our credit and retail products provide our communities.\u00a0 As we successfully navigate this difficult period, I remain confident in the direction we are headed,\u201d concluded Mr. Miller.<\/p>\n

\n Third Quarter Results<\/strong>\n <\/p>\n

Net income for the three months ended October\u00a031, 2020 was $7.4 million, or $0.25 per diluted share, compared to net income for the three months ended October\u00a031, 2019 of $11.5 million, or $0.39 per diluted share.\u00a0 On a non-GAAP basis, adjusted net income for the three months ended October\u00a031, 2020 was $7.4 million, or $0.25 per diluted share.\u00a0 This compares to adjusted net income for the three months ended October\u00a031, 2019 of $14.4 million, or $0.49 per diluted share, which excludes facility closure costs and write-off of software costs.<\/p>\n

\n Retail Segment Third Quarter Results <\/strong>\n <\/p>\n

Retail revenues were $259.9 million for the three months ended October\u00a031, 2020 compared to $280.3 million for the three months ended October\u00a031, 2019, a decrease of $20.4 million or 7.3%.\u00a0 The decrease in retail revenue was primarily driven by a decrease in same store sales of 10.9% and a decrease in repair service agreement commissions, partially offset by new store growth.\u00a0 The decrease in same store sales reflects proactive underwriting changes, combined with industry wide supply chain disruptions in certain product categories, each of which was the result of the COVID-19 pandemic.<\/p>\n

For the three months ended October\u00a031, 2020 and 2019, retail segment operating income was $15.2 million and $19.6 million, respectively.\u00a0 On a non-GAAP basis, adjusted retail segment operating income for the three months ended October\u00a031, 2020 was $15.2 million.\u00a0 On a non-GAAP basis, adjusted retail segment operating income for the three months ended October\u00a031, 2019 was $22.2 million after excluding impairments from exiting certain leases upon the relocation of three distribution centers into one facility and a gain from the sale of a cross-dock.<\/p>\n

The following table presents net sales and changes in net sales by category:<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n
\u00a0<\/td>\n\n Three Months Ended October 31,<\/strong>\n <\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\n Same Store<\/strong>\n <\/td>\n<\/tr>\n
\n (dollars in thousands)<\/em>\n <\/td>\n\n 2020<\/strong>\n <\/td>\n\u00a0<\/td>\n\n % of Total<\/strong>\n <\/td>\n\u00a0<\/td>\n\n 2019<\/strong>\n <\/td>\n\u00a0<\/td>\n\n % of Total<\/strong>\n <\/td>\n\u00a0<\/td>\n\n Change<\/strong>\n <\/td>\n\u00a0<\/td>\n\n % Change<\/strong>\n <\/td>\n\u00a0<\/td>\n\n % Change<\/strong>\n <\/td>\n<\/tr>\n
Furniture and mattress<\/td>\n$<\/td>\n82,793<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n31.9<\/td>\n%<\/td>\n\u00a0<\/td>\n$<\/td>\n89,070<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n31.8<\/td>\n%<\/td>\n\u00a0<\/td>\n$<\/td>\n(6,277<\/td>\n)<\/td>\n\u00a0<\/td>\n(7.0<\/td>\n)<\/td>\n%<\/td>\n\u00a0<\/td>\n(12.8<\/td>\n)<\/td>\n%<\/td>\n<\/tr>\n
Home appliance<\/td>\n99,872<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n38.4<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n90,343<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n32.3<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n9,529<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n10.5<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n6.1<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n<\/tr>\n
Consumer electronics<\/td>\n35,517<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n13.7<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n48,113<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n17.2<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n(12,596<\/td>\n)<\/td>\n\u00a0<\/td>\n(26.2<\/td>\n)<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n(29.3<\/td>\n)<\/td>\n\u00a0<\/td>\n<\/tr>\n
Home office<\/td>\n16,711<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n6.4<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n18,681<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n6.7<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n(1,970<\/td>\n)<\/td>\n\u00a0<\/td>\n(10.5<\/td>\n)<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n(13.9<\/td>\n)<\/td>\n\u00a0<\/td>\n<\/tr>\n
Other<\/td>\n4,264<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n1.6<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n4,026<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n1.4<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n238<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n5.9<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n19.8<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n<\/tr>\n
Product sales<\/td>\n239,157<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n92.0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n250,233<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n89.4<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n(11,076<\/td>\n)<\/td>\n\u00a0<\/td>\n(4.4<\/td>\n)<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n(8.7<\/td>\n)<\/td>\n\u00a0<\/td>\n<\/tr>\n
Repair service agreement commissions (1)<\/sup><\/td>\n17,465<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n6.7<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n26,478<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n9.5<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n(9,013<\/td>\n)<\/td>\n\u00a0<\/td>\n(34.0<\/td>\n)<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n(27.9<\/td>\n)<\/td>\n\u00a0<\/td>\n<\/tr>\n
Service revenues<\/td>\n3,150<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n1.3<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n3,411<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n1.1<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n(261<\/td>\n)<\/td>\n\u00a0<\/td>\n(7.7<\/td>\n)<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n<\/tr>\n
Total net sales<\/td>\n$<\/td>\n259,772<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n100.0<\/td>\n%<\/td>\n\u00a0<\/td>\n$<\/td>\n280,122<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n100.0<\/td>\n%<\/td>\n\u00a0<\/td>\n$<\/td>\n(20,350<\/td>\n)<\/td>\n\u00a0<\/td>\n(7.3<\/td>\n)<\/td>\n%<\/td>\n\u00a0<\/td>\n(10.9<\/td>\n)<\/td>\n%<\/td>\n<\/tr>\n<\/table>\n

(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.<\/p>\n

\n Credit Segment Third Quarter Results<\/strong>
\n \n <\/p>\n

Credit revenues were $74.2 million for the three months ended October\u00a031, 2020 compared to $95.8 million for the three months ended October\u00a031, 2019, a decrease of $21.6 million or 22.5%.\u00a0 The decrease in credit revenue was primarily due to a decrease of 16.0% in the average balance of the customer receivable portfolio, a decrease in insurance commissions due to a decline in the balance of sale of our in-house credit financing and a decrease in insurance retrospective income.\u00a0 The decrease was also due to a decline in the yield rate to 21.1% during the three months ended October\u00a031, 2020, 60 basis points lower than the three months ended October\u00a031, 2019.\u00a0 The decline in yield rate was primarily due to an increase in delinquencies.<\/p>\n

Provision for bad debts was $27.4 million for the three months ended October\u00a031, 2020 compared to $45.4 million for the three months ended October\u00a031, 2019, a decrease of $18.0 million.\u00a0 The decrease was driven by a greater decrease in the allowance for bad debts during the three months ended October\u00a031, 2020 compared to the three months ended October\u00a031, 2019.\u00a0 The decrease in the allowance for bad debts was primarily driven by the year-over-year decrease in the customer accounts receivable portfolio.<\/p>\n

Credit segment operating income was $8.9 million for the three months ended October\u00a031, 2020, compared to $10.7 million for the three months ended October\u00a031, 2019. \u00a0On a non-GAAP basis, adjusted credit segment operating income for the three months ended October\u00a031, 2020 was $8.9 million.\u00a0 On a non-GAAP basis, adjusted credit segment operating income for the three months ended October\u00a031, 2019 was $11.9 million after excluding impairments of software costs for a loan management system that was abandoned during the third quarter of fiscal year 2020 in connection with the implementation of a new loan management system.<\/p>\n

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\u2019s Form 10-Q for the quarter ended October\u00a031, 2020, to be filed with the Securities and Exchange Commission on December\u00a08, 2020 (the \u201cThird Quarter Form 10-Q\u201d).<\/p>\n

\n Showroom and Facilities Update<\/strong>\n <\/p>\n

The Company opened two new Conn\u2019s HomePlus\u00ae<\/sup> showrooms during the third quarter of fiscal year 2021 and has opened one new Conn\u2019s HomePlus\u00ae<\/sup> showrooms, its first in Florida, during the fourth quarter of fiscal year 2021, bringing the total showroom count to 144 in 15 states.\u00a0 During the remainder of fiscal year 2021, the Company plans to open two new showrooms, bringing the total for fiscal year 2021 to nine new showrooms.<\/p>\n

\n Liquidity and Capital Resources<\/strong>\n <\/p>\n

As of October\u00a031, 2020, the Company had $276.9 million of immediately available borrowing capacity under its $650.0 million revolving credit facility, prior to giving effect to a minimum liquidity requirement of $125.0\u00a0million pursuant to the third amendment to our revolving credit facility.\u00a0 The Company also had $107.8 million of unrestricted cash available for use.<\/p>\n

Operating cash flow increased 316.6% year-over-year to $385.5 million for the nine months ended October 31, 2020 driven by growth of cash and third-party sales, strong cash payment rates on our customer receivables portfolio and a decline in Conn\u2019s in-house credit originations. The increase in operating cash flow contributed to a reduction in net debt.<\/p>\n

On October 16, 2020, the Company completed an ABS transaction resulting in the issuance and sale of $240.1 million aggregate principal amount of Class A and Class B Notes secured by customer accounts receivables and restricted cash held by a consolidated VIE, which resulted in net proceeds of $238.5 million, and an all-in cost of funds of 4.84%.\u00a0 Class C notes in aggregate principal amount of $62.9 million were also issued in the ABS transaction and were retained by the Company.<\/p>\n

\n Conference Call Information<\/strong>\n <\/p>\n

The Company will host a conference call on December\u00a08, 2020, at 10 a.m. CT \/ 11 a.m. ET, to discuss its financial results for the three months ended October 31, 2020.\u00a0 Participants can join the call by dialing 877-451-6152 or 201-389-0879.\u00a0 The conference call will also be broadcast simultaneously via webcast on a listen-only basis.\u00a0 A link to the earnings release, webcast and third quarter fiscal year 2021 conference call presentation will be available at ir.conns.com<\/a>.<\/p>\n

Replay of the telephonic call can be accessed through December 15, 2020 by dialing 844-512-2921 or 412-317-6671 and Conference ID:\u00a0 13712704.<\/p>\n

\n About Conn\u2019s, Inc.<\/strong>\n <\/p>\n

Conn\u2019s is a specialty retailer currently operating 144 retail locations in Alabama, Arizona, Colorado, Florida, Georgia, Louisiana, Mississippi, Nevada, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Virginia.\u00a0 The Company\u2019s primary product categories include:<\/p>\n