Jefferies Crossover Consumer Finance Summit December 6, 2018 1
SAFE HARBOR STATEMENT & USE OF NON-GAAP INFORMATION Safe Harbor Statement: Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this presentation regarding Aaron's, Inc.'s business that are not historical facts are "forward-looking statements" that involve risks and uncertainties which could cause actual results to differ materially from those contained in the forward-looking statements. Such forward-looking statements generally can be identified by the use of forward-looking terminology, such as "may," "expect," "forecast," "guidance," "intend," "believe," "could," "project," "estimate," "anticipate," "should" and similar terminology. These risks and uncertainties include factors such as changes in federal and state laws and regulations and related legal and regulatory proceedings; our Progressive Leasing ( Progressive ) business s reliance on third-party retailers and the concentration of Progressive s revenues with certain of those retailers; the execution and results of our strategic plan that we continue to implement; the challenges faced by our Aaron s Business, including increased competition and decreases in same store sales; general economic conditions and the economic challenges faced by a portion of our customer base; our access to data sources used in our decisioning models and the effectiveness of those models; the ability of our franchisees to satisfy their obligations to us and their debt obligations, and operational and other failures by, and dispute with, our franchisees; customer privacy, information security, customer demand and the other risks and uncertainties discussed under "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017, and subsequent filings with the SEC. Statements in this presentation that are "forward-looking" include without limitation those related to: Aaron's projected results for future periods (including the outlook for the Company s and its subsidiaries financial performance for the 2018 fiscal year); the position and strength of the Company s lease-to-own platforms; operating advantages the Company expects to maintain going forward; economic advantages the Company expects to maintain going forward, including the strength of its balance sheet, leverage position and liquidity; the Company s capital allocation strategies, including its ability to return capital to shareholders; the acceleration of the Company s omni-channel platform; the results of the business transformation initiatives ongoing in the Aaron s Business, including improvements to its e-commerce channel; the results of the Aaron s Business acquiring certain of its franchisees; profitable growth for Progressive and the Aaron s Business and the results of strategic investments in those businesses; future growth of existing and new retail partner doors and invoice volume for Progressive; Progressive s pipeline for potential new retail partners; Progressive s profitability and EBITDA margins; visibility into the performance and quality of Progressive s lease portfolio; and the size of the addressable markets for Progressive and the Aaron s Business. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. Except as required by law, the Company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances after the date of this presentation. 2 Use of Non-GAAP Financial Information: This presentation contains financial information in a format not in accordance with generally accepted accounting principles in the United States ("GAAP"). Management believes that presentation of these non-gaap items is useful because it gives investors supplemental information to evaluate and compare the Company's underlying operating performance from period to period. Non-GAAP financial measures, however, should not be used as a substitute for, or be considered superior to, measures of financial performance prepared in accordance with GAAP. Please refer to our prior earnings releases on Forms 8-K dated February 18, 2016, February 17, 2017, February 15, 2018, April 26, 2018, May 14, 2018 and July 26, 2018 provided in the Investor Relations section of our website for further information on our use of non-gaap financial measures and for a reconciliation of GAAP to non-gaap items.
Headquarters: Atlanta, GA. Founded: 1955 Ownership: Public (NYSE: AAN) President and CEO: John W. Robinson III 3
AARON S, INC. IS A LEADING OMNICHANNEL PROVIDER OF LEASE-PURCHASE SOLUTIONS With $3.7 Billion in LTM Revenues and Nearly Two Million Customers, Aaron s, Inc. Serves a Large Addressable Market Through Multiple Channels and Products ELECTRONICS TV BUNDLES MOBILE/OTHER FURNITURE APPLIANCES JEWELRY 4
LARGE ADDRESSABLE MARKET CURRENT U.S. FICO SCORE DISTRIBUTION Total addressable market includes 25-35% of the U.S. population < 700 FICO has consistently accounted for approximately 40%+ of U.S. population* We estimate total U.S. Lease-to- Own market to be $25 to $30 billion *Harris Poll for Career Builder 2017 and FICO Banking Analysis 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 20.7% 19.0% 17.1% 13.2% 10.0% 8.5% 6.8% 4.7% 300-499 400-549 550-599 600-649 650-699 700-749 750-799 800-850 U.S. POPULATION BY FICO SCORE 53.4% 54.0% 54.4% 54.3% 53.4% 53.1% 53.2% 53.5% 53.7% 53.9% 54.7% 55.8% 56.8% 40.0% 39.5% 38.5% 38.5% 39.3% 40.0% 40.5% 40.8% 40.6% 40.7% 40.3% 39.7% 38.5% 6.6% 6.5% 7.1% 7.2% 7.3% 6.9% 6.3% 5.7% 5.6% 5.4% 4.9% 4.6% 4.7% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 300-499 500-699 700-850 5
MULTIPLE CHANNELS SERVING NEARLY TWO MILLION CUSTOMERS With $3.7 Billion in LTM Revenues and Nearly Two Million Customers, Aaron s, Inc. Serves a Large Addressable Market Through Multiple Channels and Products VIRTUAL LEASE-TO-OWN LEASE-TO-OWN STORES E-COMMERCE SECOND-LOOK FINANCING Virtual lease-to-own model serves retail partners in categories including furniture, mattress, jewelry, mobile & electronics Lease-to-own stores serve customers for furniture, electronics, appliances & computers Aarons.com, launched in 2015, serves as part of our omnichannel strategy for leaseto-own programs The HelpCard, acquired in 2015, operates in the secondary financing market 6 Sources: Management Estimates, FICO Banking Analytics, Experian, Wall Street Journal
COMPELLING VALUE FOR OUR CUSTOMERS Attractive ownership rates 90/120 day buyout Maximum flexibility Omnichannel model (stores & e-com) 40%+ of the US population is considered to have a subprime FICO score.* Millennials are Credit Adverse Young Millennials are averse to traditional banking and 44% say they have no interest in using credit cards as a primary method of payment.* 78% of Americans live Paycheck to Paycheck* Studies show that no matter how much you earn, getting by is still a struggle for most people. *Harris Poll for Career Builder 2017 and FICO Banking Analysis 7
COMPELLING VALUE FOR OUR SHAREHOLDERS OPERATING ADVANTAGES Customer analytics and decisioning Customer Life cycle management Last mile logistics and reverse logistics Strong regulatory compliance infrastructure and integrity ECONOMIC ADVANTAGES High revenue/cash flow visibility Strong balance sheet/ Low leverage/ $400 million available revolving LOC Sustainable growth platform Shareholder friendly capital allocation Large installed base of strong retail partners 8
in Millions in Millions STRONG FINANCIAL TRACK RECORD TOTAL REVENUES ADJUSTED EBITDA 1 DILUTED EARNINGS PER SHARE $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 $3,720 $3,384 $3,177 $3,208 $2,725 FY 2014 FY 2015 FY 2016 FY 2017 LTM 9/30/18 $400 $350 $300 $250 $200 $150 $100 $50 $0 $363 $363 $342 $324 $264 FY 2014 FY 2015 FY 2016 FY 2017 LTM 9/30/18 $5.00 $4.00 $3.00 $2.00 $1.00 $- 2 $4.35 $4.06 $2.99 $2.56 $2.15 $2.30 $1.86 $1.91 $1.69 $1.08 FY 2014 FY 2015 FY 2016 FY 2017 LTM 9/30/18 Aaron's Business Progressive Dent-A-Med Aaron's Business Progressive Dent-A-Med GAAP Non-GAAP STRONG BALANCE SHEET Total liquidity of ~$400MM at 9/30/18 Net debt to Adjusted EBITDA of < 1.0x Returned $104.2 million to shareholders via share repurchases and cash dividends for the nine months ended September 30, 2018 Authorization to purchase an additional $400 million in common stock $31.6MM repurchased in Q3 18 9 1 Adjusted EBITDA and Non-GAAP Diluted Earnings Per Share are Non-GAAP financial measures. See Safe Harbor Statement & Use of Non-GAAP Items disclosure. 2 FY 2017 GAAP Diluted Earnings Per Share includes net provisional tax benefits from the Tax and Jobs Act of 2017 of $1.90 per share.
Operational Highlights from the Third Quarter Ended September 30, 2018 TOTAL COMPANY $953.1MM in Revenues +14.0% YoY Growth $82.5MM of Adjusted EBITDA 1 1,797MM Customers Served +9.9% YoY Growth $33.6MM of Capital Returned to Shareholders 12.7% Net Debt to Capitalization vs. 13.0% in Q3 17 PROGRESSIVE BUSINESS SEGMENT $504.4MM in Revenues +26.6% YoY Growth $51.7MM of EBITDA 1 808,000 Customers Served +19.7% YoY Growth 20,258 Active Doors +3.8% YoY Growth $355MM Invoice Volume +26.0% YoY Growth AARON S BUSINESS SEGMENT $439.2MM in Revenues +1.7% YoY Growth Same Store Revenues Flat $32.7MM of Adjusted EBITDA 1 1,267 Company Stores 90 Franchised Stores acquired in July 2018 432 Franchised Stores 10 Note: All data is as of or for the three months ending September 30, 2018. 1 EBITDA and Adjusted EBITDA are Non-GAAP financial measures. See Safe Harbor Statement & Use of Non-GAAP Items disclosure.
A A R O N S I N C. G R O W T H S T R AT E G Y OUR GOAL: Operate a sustainable business model that helps our customers gain access to a wide variety of high-quality products in a transparent, flexible and affordable way. Grow Progressive Leasing: Investing ahead of revenue growth and expected large national retail chain pipeline conversion Emphasis on regulatory compliance Strengthen Aaron s Business Continue with successful business transformation investments to drive customer engagement, experience and traffic Capital Allocation / Investment Leverage unique assets and competencies in adjacent markets (ongoing customer and retailer relationships, analytics and decisioning, customer and partner servicing platforms, last mile delivery and return logistics, furniture manufacturing) Maintain conservative capital structure and return capital to shareholders (in the absence of a significant acquisition) 11
Progressive Business Segment A Leader in Virtual Lease-to-Own Mission: Provide simple and affordable purchase options for credit challenged consumers Vision: Create a better future for all people with imperfect credit by providing the best purchase experience 12
PROGRESSIVE LEASING: A LEADER IN VIRTUAL LEASE TO OWN 13 RETAIL PARTNER CATEGORIES FY 2017 Mobile Phones 10% Wheels/tires 11% Mattresses 15% Jewelry 7% Furniture 55% Other 2% Note: Category % represents Progressive Leasing revenue attributable to different retail partner categories. Source: Aaron s, Inc. 10-K dated February 23, 2018 FINANCIAL STRENGTH & SCALE TO GROW Strong Value Proposition Progressive s speed and ease of use for customers and retail partners is driving exceptional growth TECHNOLOGY is leading the way Solid Visibility into Lease Portfolio Supported by advanced algorithms, additional predictive metrics, and a short average lease life of seven months Significant Opportunity in New and Existing Doors Strong growth in new doors and continued growth in existing doors driven by adoption rate and changes in product mix Robust Pipeline Experiencing balanced growth across national and regional retailers across all of Progressive s product verticals, including the recent addition of Overstock.com as a new retail partner.
EXAMPLES OF DIVERSIFIED PARTNER BASE Several large existing national and online retailers provide important references for conversion of pipeline 14
P R O G R E S S I V E L E A S I N G : GROW REVENUE AND EBITDA Expand retail partners Drive total invoice volume (active doors, invoice per active door) Technology investments to further enhance decisioning Grow EBITDA 15
Aaron s Business Segment Blueprint For Success: Profitably Grow our Stores Accelerate our Omnichannel Platform Promote Communication, Coordination & Integration Champion Compliance 16
AARON S BUSINESS: A LEADER IN OMNI-CHANNEL LEASE TO OWN MERCHANDISE CATEGORIES FY 2017 FINANCIAL STRENGTH & SCALE TO GROW Appliances 24% Computers 5% Furniture 45% Other 2% Business Transformation Initiatives Gaining Traction and Driving Improvement: Next Generation E-Commerce Pricing and Promotion Discipline Broader Product Assortment Procurement Efficiencies Inventory Mix Optimization Rapid Customer Onboarding 17 Electronics 24% Source: Aaron s, Inc. 10-K dated February 23, 2018 We remain committed to increasing the long-term value of the Aaron s Business by: Enhancing Aaron s omni-channel platform to drive revenue and operate more efficiently Investing in customer-facing programs to support growth Remaining opportunistic regarding acquisitions
AARON S, INC 2018 Outlook Current Outlook Previous Outlook (In thousands, except per share amounts) Low High Low High Aaron's Inc. - Total Revenues $ 3,795,000 $ 3,855,000 $ 3,680,000 $ 3,890,000 Aaron's Inc. - Adjusted EBITDA 382,500 395,500 380,000 413,000 Aaron's Inc. - Diluted EPS 2.75 2.90 2.90 3.20 Aaron's Inc. - Diluted Non-GAAP EPS 3.30 3.45 3.20 3.50 Aaron's Inc. - Capital Expenditures 70,000 80,000 70,000 90,000 Aaron's Business - Total Revenues 1,775,000 1,800,000 1,700,000 1,800,000 Aaron's Business - Adjusted EBITDA 170,000 175,000 170,000 185,000 Aaron's Business - Annual Same Store Revenues (2.0)% (1.0)% (4.0)% (1.0)% Progressive - Total Revenues 1,985,000 2,015,000 1,950,000 2,050,000 Progressive - EBITDA 217,500 222,500 215,000 230,000 DAMI - Total Revenues 35,000 40,000 30,000 40,000 DAMI - Adjusted EBITDA (5,000) (2,000) (5,000) (2,000) 18
19 Appendix
NON-GAAP RECONCILIATIONS 20 12 Source: Aaron s, Inc. third quarter earnings release dated October 25, 2018
RECONCILIATION OF 2018 CURRENT & PREVIOUS OUTLOOK FOR ADJUSTED EBITDA (IN THOUSANDS) 21 Source: Aaron s, Inc. third quarter earnings release dated October 25, 2018
RECONCILIATION OF 2018 CURRENT & PREVIOUS OUTLOOK FOR EARNINGS PER SHARE (IN THOUSANDS) 22 Source: Aaron s, Inc. third quarter earnings release dated October 25, 2018