- Net Loss with Strategic Adjustments: Reported $22.5M net loss, including $20M non-cash charges and $3.5M one-time expenses.
- Transformative Financing: Closed $300M term loan, enabling $31.4M annualized SG&A savings and optimizing store footprint (-10% reduction).
- Credit Performance Improvements: Delinquencies over 30 days improved 62bps to 3.14%, with 12% growth in higher-quality customer bookings.
- Revenue & Margin Dynamics: Revenue rose 0.8% YoY, while gross margin improved 100bps to 37.5% (adjusted for one-time benefits).
- Capital Structure Flexibility: $251M cash balance and plans for ABS transactions, with recent securitization oversubscribed 8x (Class A) and 16x (Class B).
Operational Highlights
The company's enhanced underwriting platform, LOS V2, continues to deliver better results, with 76.5% of volume coming from higher-ranked customers, a 12% improvement in higher-quality bookings. The Pay Your Way program is driving improved collections efficiency, reducing in-store payment traffic, and increasing overall payment consistency. The company's focus on technology, including AI, is expected to help it stay ahead of the competition.
Capital Structure Transformation
The company closed a transformative $300 million term loan in October, removing capital constraints and providing flexibility to optimize its store footprint and organizational structure. This loan will enable the company to execute a multi-phase plan to optimize its operations, with expected annualized SG&A savings of $31.4 million. The company plans to complete its capital structure transformation with another ABS transaction and a revolving warehouse facility in the second half of the year.
Valuation Analysis
The current valuation metrics indicate a 'P/S Ratio' of 0.21 and an 'EV/EBITDA' of 1.63. The 'P/E Ratio' is -14.93, and the 'P/B Ratio' is 0.39, suggesting that the market may be undervaluing the company's efforts to optimize its operations and improve credit performance. The 'ROIC' is 48.57%, and the 'ROE' is -2.57%, indicating a potential for improvement in return on equity.
Future Outlook
The company expects to rebuild its inventory in Q3, which will set it up for tax time. It plans to execute an ABS transaction, rebuild inventory, and set up for tax time. The company believes it will be set up nicely for the fourth quarter to take advantage of elevated tax refunds. Analysts estimate next year's revenue growth at 1.6%, indicating a potential for stable growth.