Good morning. My name is Andrea, and I will be your conference coordinator. At this time, I would like to welcome everyone to the Aaron's, Inc. Second Quarter 2020 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Mr. Michael Dickerson, Vice President of Corporate Communications and Investor Relations for Aaron's, Inc. You may begin your conference.

Thank you, and good morning, everyone. Welcome to the Aaron's Inc. Second Quarter 2020 Earnings Conference Call. Joining me this morning are John Robinson, Aaron's, Inc. President and Chief Executive Officer; Ryan Woodley, Chief Executive Officer of Progressive Leasing; Douglas Lindsay, President of the Aaron's Business; Steven Michaels, Chief Financial Officer and President of Strategic operations; and Kelly Wall, Aaron's Incoming Interim Chief Financial Officer. Many of you have already seen a copy of our earnings release and our press release announcing the expected separation of Progressive and the Aaron's business into 2 independent publicly traded companies and certain management changes. Both of those press releases were issued this morning and are available on our Investor Relations website at investors.aarons.com. During this call, certain statements we make will be forward-looking. I want to call your attention to our safe harbor provision for forward-looking statements that can be found at the end of our earnings release. Safe harbor provision identifies risks that may cause actual results to differ materially from the content of our forward-looking statements. Also, please see our Form 10-K for the year ended December 31, 2019, and our Form 10-Q for the quarter of March 31, 2020, for a description of the risks related to our business that may cause actual results to differ materially from our forward-looking statements. Listeners are cautioned not to place undue emphasis on forward-looking statements, and we undertake no obligation to update any such statements. On today's call, we will be referring to certain non-GAAP financial measures, including EBITDA and adjusted EBITDA, non-GAAP net earnings and non-GAAP EPS, which have been adjusted for certain items which may affect the comparability of our performance with other companies. These non-GAAP measures are detailed in the reconciliation tables included with our earnings release. The company believes that these non-GAAP financial measures provide meaningful insight into the company's operational performance and cash flows and provides these measures to help investors facilitate comparisons of operating results with prior periods and to assist them in understanding the company's ongoing operational performance. With that, I will now turn the call over to John Robbins.

Thanks, Mike, and thank you all for joining us today. Let me begin by expressing my gratitude to the many outstanding team members throughout Progressive, the Aaron's Business, Woodhaven and Vive, whose commitment, perseverance and dedication has been extraordinary during this difficult period. Despite the continuing havoc caused by the COVID-19 pandemic, our businesses performed well over the past few months, resulting in strong second quarter financial performance. In the quarter, the company generated adjusted EBITDA of $130 million and adjusted earnings per share of $1.18, well ahead of our expectations. The company's performance was largely driven by strong customer payment activity, reduced operating expenses and more conservative decisioning. The business also generated substantial cash in the quarter, ending June with $313 million on the balance sheet. Given the tremendous amount of uncertainty in the market, we will continue to maintain a conservative stance with respect to how we are managing the business. Now I'd like to discuss the decision to separate the business into 2 independent public companies. Separating has been an idea that both management and our Board have spent a significant amount of time and resources analyzing. After thoroughly considering our options, we believe separating the businesses is the best path to increasing long-term shareholder value. While the combination of the 2 businesses made sense in 2014, today, we believe each business can chart a path to greater growth in earnings on its own. Over the past 6 years, while Progressive and the Aaron's Business have been managed separately, the teams have shared important technologies and best practices, making both businesses stronger. For example, Progressive's decisioning technology enabled aarons.com to be the first and only end-to-end transactional lease-to-own e-commerce business at scale. And most recently, facilitated the launch of centralized decisioning across all U.S. company-owned Aaron's stores.…

Thanks, Ryan. First, let me say I'm excited to lead the Aaron's business into the next chapter and acknowledge that this would not be possible without the extraordinary dedication and hard work of the entire Aaron's organization. From our leadership team to our dedicated team members in our stores, our store support centers and at Woodhaven, who have made tremendous sacrifices throughout this pandemic. I could not be more proud of the team's performance. For the second quarter ended June 30, 2020, revenues were $431 million, a decrease of 2.8% from the second quarter of 2019, primarily due to a lower store count, a smaller lease portfolio per store to begin the quarter and lower deliveries due to the temporary closure of our showrooms, partially offset by strong customer payment activity. As of the end of the quarter, we had nearly all of our Aaron showrooms open, having begun our phased reopening in late April. Same-store revenues were up 1.4% in the second quarter. This increase was due primarily to strong customer payment activity, including higher early payout revenue and retail sales, which we believe were partially triggered by the government stimulus package. Total recurring revenue written into the portfolio declined 13.7% in the quarter, due primarily to the impact of showroom closures and more conservative lease decisioning, both in-stores and on aarons.com. Within the quarter, recurring revenue written volumes rebounded from April's low of down 35% year-over-year to low single-digit declines in May and June. During the quarter, e-com recurring revenue written increased 16.9%, despite being negatively impacted by lower inventory availability and more conservative lease decisioning. As mentioned on last quarter's call, in April 2020, we rolled out centralized lease decisioning in all U.S. company-owned stores. The ability to instantly decision all customers regardless of channel is a…

Thanks, Douglas. First, let me begin by joining John in saying thank you to Ryan for his leadership and friendship over the last 6 years. Having just had my 25th anniversary with Aaron's, I cannot think of a more exciting way to start the next chapter with this great company. I'm humbled and honored to be taking over from Ryan as CEO of Progressive. The results over the years speak for themselves. He has assembled a first-class management team and positioned the business for continued growth into the future. Having been involved with the Progressive team from even before the acquisition, I am familiar with its inner workings, have met many of our retail partner teams and I'm committed to continuing its legacy of technology innovation and dedication to its mission of providing simple and affordable purchase options for credit-challenged consumers. Importantly, I leave the corporate office in good hands. Kelly Wall, the company's current Senior Vice President, Finance and Treasurer, has been appointed Interim Chief Financial Officer. Joining Aaron's in 2017, Kelly brought an extensive corporate finance experience and quickly became an invaluable part of the executive team. He has strengthened our treasury function and our bank group and updated and enhanced our credit facilities. As Interim CFO, he will be a great asset for John and the entire team as we work to execute on the strategic separation. On a consolidated basis, revenues for the second quarter of 2020 were $1 billion, an increase of 6.4% over the same period a year ago. Adjusted EBITDA for the company was $129.8 million for the second quarter of this year compared to $107.4 million for the same period last year, an increase of $22.4 million or 20.9%. Adjusted EBITDA was 12.6% of revenue in the second quarter of 2020 compared…

[Operator Instructions] And our first question comes from Kyle Joseph of Jefferies.

I'd like to pass along my congratulations to everyone, Kelly, Ryan, everyone. Ryan, we'll miss you. John, we'll miss you, but congratulations to everyone on all the moving parts. And on the announcement, it's been very, very exciting. First question for Ryan. I appreciate the color you provided on invoice volume trends through the quarter. Can you give us a sense as to how that's trended in July? And then a follow-up to that would be give us a sense for how 90-day buyout activity trended month-by-month in the second quarter? Ryan Woodley;Chief Executive Officer of Progressive Leasing: Happy to. Thank you, Kyle. I appreciate it. So we haven't closed -- quite closed out July yet and aren't providing monthly insight for Q3 right now, but I will say that we're expecting to be able to report a continuation in that trend of improving invoice volume. So we expect to see year-over-year growth in Q3 up from the slight decline we saw in Q2, which is great, and we're excited about that. On the 90-day buyout trends, we have seen higher levels -- higher year-over-year levels of 90-day buyouts. It's starting to taper a bit, as you might expect, as the effects of the stimulus kind of play out a little bit. And what we see there going forward in Q3 will be wholly dependent on what happens with any future government stimulus. We just don't have enough visibility on that yet to sort of talk about how that will play out in Q3. But we definitely did see higher year-over-year levels in Q2. The peak difference isn't that pronounced. It's sort of mid-single digits. If you look at sort of the peak rate of 90-day buyouts last year for a given monthly pool compared to this year, it's just the continuation that we saw this year is supported by the stimulus that's driving the variance you saw that we reported in gross margin.

And then I'll shift to Douglas. Nice job turning around the business this quarter. But as we think about the third quarter and the fourth quarter, it sounds like a lot of that -- the payments were very high in the quarter. So based on where the portfolio ended the quarter, can you give us any sort of sense for directionally how the comp -- how you anticipate the comp trending going forward?

Yes. Sure, Kyle. Yes. So we saw improvement all through the quarter despite the low and revenue written in April, 35%. We saw a rebound in May and June. And as we enter the third quarter, we're seeing increasing strength, I'd say, in the portfolio, really due to higher customer retention and lower write-offs. We see that continuing going into Q3. I mean in early July, our collections are strong. Portfolio continues to improve. We're seeing a lot less attrition, I would say, out of our portfolio. And based on these trends, we're -- and continued trends on retail sales, I'd say, we're looking at positive comps in Q3 as we move forward. So we're very optimistic about the way the Aaron's Business is trending.

Got it. And then just one for me on the spin. I'm trying to get a sense for how much the businesses still relied on each other. Progressive, how much it relied on Aaron's in terms of collections and how much Progressive relied on the consolidated balance sheet -- or sorry, how much Progressive relied on the consolidated balance sheet? But can you just kind of walk us through what's changed since 2014 in terms of how much they relied on each other?

Yes. Kyle, it's John. Good question. I'll tell you, back to 2014, we kind of constantly made a decision to run the businesses separately. Progressive was obviously on a great trajectory at that point. We wanted to continue that and felt like keeping the businesses as separate as possible made a lot of sense from that perspective. It also made a lot of sense from kind of firewalling information between the companies. So we felt like those are important. So we really have run the businesses largely independently since the acquisition. We've had separate management teams, separate headquarters, we've allocated the overhead of the businesses, we believe, very efficiently to each of their P&Ls. We have shared know-how and technology and learnings back and forth, but we really execute those separately and independently between the 2 businesses. And there's certainly been some good examples and real wins for both businesses. But for example, like reverse logistics at Progressive, that was know-how that was ported over from Aaron's, but it's executed largely almost exclusively by Progressive employees today. So there's really very few dis-synergies from splitting the businesses really due to the way we've managed the businesses since the acquisition. And our expectation is there will be limited and temporary, if at all, short-term shared services between the businesses because of that as well. So there's some back-office sharing that's going on, obviously, around being a public company and Boards and things like that. But largely, separately, the whole kind of duration of the acquisition, so that certainly lends itself to being separated going forward.

All right. Congrats on a good quarter and the exciting announcement.

Thank you.

Our next question comes from Brad Thomas of KeyBanc Capital Markets.

Let me add my congratulations as well to the team on many new roles and opportunities ahead here, exciting time. My -- to follow up on some of the previous questions. I guess I'd be curious, is there any degree of noncompete that you would set up for the Aaron's Business? I think if I step back and think about the trend in the industry, obviously, Aaron's acquiring progressive, your main competitor Rent-A-Center doing acquisitions to try to grow its direct business. I guess is there anything to keep the stand-alone Aaron's Business in the future from trying to build out its own direct competitor to Progressive as we think about the next few years?

Thanks for the question, Brad. It's John. I would say this separation is not about drastic change in strategy for either company. And there certainly will be no limitations on their strategies going forward, nor have there been historically. Probably not appropriate for me to speculate on where the market goes, the market moves and it's a big market. There's a lot of opportunity in a lot of different pockets in the market. So probably won't, can't speculate on that. But both businesses have a good competitive position. They have different financial profiles, capital profiles, but both have great opportunities and great strategies going forward. And we think separate they'll unlock more value, but there will be no restrictions as there haven't been in the past, there won't be any going forward on either business.

That's helpful. And if I could move over to fundamentals on the Progressive side. Ryan, could you talk a little bit about the health of the retail partners that you have? Obviously, there have been some bankruptcies in the furniture sector, companies like Art Van. How is your retail portfolio looking today? And then can you give us a little bit more insights into how some of your new or large partners have been performing of late? Ryan Woodley;Chief Executive Officer of Progressive Leasing: Sure thing, Brad. I believe, generally, they're doing very well, especially well all being considered. There was a lot of movement within the portfolio over this period of time, as you can imagine, we saw thousands of doors close in response to COVID sort of late Q1, early Q2, and then thousands of doors subsequently reopened. So it's been a bit of a tumultuous time. But I've very much admired the resiliency of our partners and how they've worked through that and were able to adapt. We talked on last quarter's call about the curbside motions and e-com initiatives they kicked off during COVID, which we did our best to support. And I think that's been a silver lining in all of this is how it helps solidify those relationships and find new ways to grow the partnerships, which is great. I think we certainly saw some closures, both among our small and large partners. But I would say absent the temporary closures due to COVID in spite of any permanent closures, we would have seen year-over-year growth in active locations for the second quarter. So I think we would have reported growth instead of that 3.9% decline, we would have been talking about growth, which I think speaks volumes about the resiliency of our partners and our partnerships, which is good. And then the opportunity ahead of us, I think, for each of those remains very bright. We have -- a lot of those largest newest relationships are still relatively new with significant opportunity to grow, both in-store and online. We talked -- some of them have talked about our sort of shared e-com initiatives, which represent very compelling long-term growth potential for the business that we're working very hard to execute on and together, and I'm very excited about those. So I think there is a lot of potential there, both in-store and online as we go forward.

I guess just one last question here for Douglas. You've mentioned some issues of product availability that may last for the next 6 to 9 months I believe. I don't think I heard this. Could you help to quantify to what degree your inventory or product selection is not quite where you want it to be today?

Sure, Brad. As you know, like most retailers, when we entered the challenges with the COVID crisis and closed our showrooms, we pulled back on a lot of our orders. As we began to rebound, we kind of -- we got our PO process back and running. Suppliers generally have been having a hard time meeting the demand out there in the marketplace. We really feel like we're in good shape in our stores. And my comment was really around the level in our FCs. In our stores, we're able to meet the customer demand. Obviously, we have pre-lease coming in that helps us do that. And our FCs were down and that really impacts our e-com business more than anything because when you're stopping online, you're looking for a specific product that's being shipped from our FCs. As we think about going forward on a per-store basis, we were down probably kind of combined with our FCs and our store inventory, about 20%, but we believe that's improving every day as we're getting orders in, particularly in appliances. The 6- to 9-month time frame is really for all of our products. We're seeing a little slower supply chain on computers and gaming, but furniture and appliances are moving more rapidly. I just want to also mention Woodhaven. I mentioned that in my prepared remarks, that is a real strategic asset for us. The fact that we can get bedding and furniture from our Woodhaven facilities and control the supply chain on that is a huge advantage. And I just want to shout out to that team because they're working really hard to get us where we need to be entering the third quarter. So...

That's very helpful. Congratulations to you as well, Douglas.

Thank you, appreciate it.

Our next question comes from Elizabeth Suzuki of Bank of America.

What do you think has been the net impact of the CARES Act on both sides of the business? And have you noticed more recent changes as those benefits start to wane? And can you quantify any of those changes?

I mean -- this is John. I'll -- yes, quantifying is going to be tough. I'll be honest, because there's clearly been an impact on the businesses and primarily manifests itself in stronger customer payments than we might have seen this time in a normal year. But it's hard because there's a lot of different variables that are mixed. On the Progressive side, you could can see the impact in higher 90 days, which flows through to gross margin, which the team did an awesome job of offsetting through cost control and lower write-offs. But it did net down a lower margin year-over-year at an EBITDA level for Progressive. On the Aaron's side, we've seen a lot of benefit. The portfolio has performed differently. It's probably lengthened out the duration of the portfolio there, which has resulted in, as Doug said earlier, the portfolio staying larger than we might have normally seen because of lower attrition, and it's resulted in strong revenue in the quarter and positive comps. And as Douglas said, the expectation for positive comps next quarter. So it's definitely an impact that when you kind of blend that in a lot of the initiatives that we've taken, we tightened on decisioning across the whole enterprise. In late March, we tightened on expenses. And it's really difficult to know exactly and to quantify, we believe we tried and we think about it. And in our expectations, there will be some sort of stimulus going forward as we talked about in our guidance. But not completely clear on how much of it we can attribute to the CARES Act. The other side of it, obviously, is we closed stores during April. The Aaron's Business, Progressive had a lot of retail partners closing stores. There's just a lot of moving parts to try to quantify that. But that's probably the best we can do in terms of answering that question, but it's probably net-net been a bit of a tailwind, but there are a lot of moving parts.

Got you. And what portion of your quarter do you think was impacted by stores being closed? I mean is there any way to quantify that and think about as we go forward into the next quarter, are all of -- or really all of your stores open at this point and all of your partner stores open?

Yes. I think it's clearly a major issue in April. As you heard from both Ryan and Douglas, that started to improve through -- really started improving in May and really the back half of May and into June. But it's -- I wouldn't say it's normal still. I mean there are definitely pockets around the country for different reasons where stores are opening and closing for different reasons that we would not normally have seen in a normal year. So I would say it's still having an impact. And it's a little unpredictable, just given how the virus is kind of affecting different areas differently. And so we're just kind of having to be agile and the team has done an amazing job at Progressive with everyone basically working from home and running the whole operation remotely and supporting our retail partners. And in the Aaron's Business, the team has done an incredible job of just reacting to local kind of ordinances and spikes in the virus, and we're still dealing with it. So I don't want to come across it. But I think April was a low point, definitely that was the low point, but we're still dealing with it some. But we would definitely come back quite a bit on both sides. But I wouldn't say we're out of the woods by any stretch.

Our next question comes from Anthony Chukumba of Loop Capital Markets.

So I guess my first question, and I know it's tough to have a crystal ball, but you mentioned with the guidance for the third quarter that, that includes some level of continuing government stimulus, and I was just wondering if you could just give us a little more color in terms of what your expectations are. I mean I think right now, there's talk about that there's going to be another round of $1,200 checks and maybe some level of enhanced Federal Unemployment that maybe it's $200, maybe it's 70% of income. I guess I was just trying to get a better sense for what you're specifically taking in at this point?

Yes. This is John, and I'll let Steve fill in here. But what I would say is our expectation is there'll be some level. We don't know what that will be and we probably baked in some conservatism in terms of what we think it might be, but the expectation is there'll be some level of continued unemployment benefit and then probably some stimulus. I mean, obviously, it's moving -- the news is changing daily on this, and there's -- it's a moving target right now. But we do have an expectation there would be some, but maybe a lower level kind of in what we were forecasting. I don't know, Steve, do you have anything to add to that?

No, I mean I think that's right. The -- it seems like both proposals have some level of onetime checks as well as some enhanced unemployment benefit and their -- the dollar amounts are not the same yet, but there'll be negotiations. And so we've been -- we expect something will get passed, and we've baked that into the guidance, but probably not at the same level, as John said.

Got it. And then just one last question. Obviously, you don't have a ton of debt on your balance sheet, but I was just wondering, how do you think about the debt that you do have sort of forcing that off to Aaron's versus Progressive once the businesses are separated?

Yes. It's a good question, Anthony. It's some of the work that will take place over the next few months. As we said in our release that this is a process that will take much of the rest of the year to complete and kind of setting up balance sheets is part of that work that has to be done. We're fortunate to be in a position, as you said, at the end of the quarter, we had a net cash position so that we have more cash than debt. So it gives us a lot of flexibility. And given that we're in a net cash position, we expect that both businesses will be kind of set in their independent directions with really conservatively capitalized balance sheets. But the exact makeup of that at this point or how we exactly apportion up the debt has not been decided, and we'll work on that and update you guys as we know more.

Anthony, this is Steve. One last thing I would add on that, and John is exactly right. But for one of the first questions and the reason for the acquisition back in 2014 was really to give Progressive a visible and public balance sheet to be able to have good visibility to our retail partners that we were courting at the time and project strength and access to liquidity and the ability to support those retail partners in their growth. And so that's another thing that's changed over the last 6 years. Progressive has grown so well and so nicely to the point where it has a scale and the size now that we'll be able to, as a stand-alone business, no matter what the capital structure split ends up being over the next -- on the separation date, it will have -- Progressive will have a great balance sheet that will continue to be an asset for us as we court additional -- well, support our existing retail partners and try to attract new ones.

Our next question comes from Bill Chappell of SunTrust.

Congratulations to everybody. A few quick questions. One, I realize we're early in the stage, but any kind of guesstimate on kind of cost of the split, synergies of post-split and kind of how -- also where I assume both companies will reside in Georgia, but I didn't know if there was something there, too.

Yes. Well, as I talked about earlier on the last point, Progressive has a headquarters and a management team in Utah, so Progressive's headquarters will be Utah. The Aaron's Business will be headquartered in Atlanta. In terms of -- we talked about dis-synergies earlier, we don't think those are significant given that we've done a -- we've run the business very separately, Bill, and then have allocated, we believe, expenses pretty accurately for all these years between them. So there shouldn't be any big changes there. In terms of onetime expenses, there'll be kind of what you would expect from an advisory standpoint to do this going forward. I don't have a number for you today, but nothing abnormal relative to this sort of process in terms of expenses that we expect to incur to get the separation completed.

Yes. Bill, this is Steve. I'll just add. I mean, Bill, this is minor but I would just add, normal kind of public company Board cost for Progressive and we do some allocations as it relates to the audit, but it will be a full cost of the audit. So there'll be enlisting fees and exchange fees and things of that nature, but nothing material as John said.

Okay. So mainly just public company costs?

Some public company costs, yes.

Got it. And then just specific for Progressive, can you talk a little bit about just how the -- I know with Best Buy, you were going online at the start of the year. Obviously, Best Buy talked about how an inordinate amount of their business has gone online. So I just didn't know if your share or your -- the percentage of the business, I mean how that's worked? Maybe some color in terms of as not just with Best Buy, with all customers, have they gone more online? Have you kind of held the percentage share of business that you would get normally off-line? Or has there been any changes or surprises? Ryan Woodley;Chief Executive Officer of Progressive Leasing: Thanks, Bill. The measurement exercise on that is a bit tricky, given the disruption that we've experienced with store closures and reopenings. So balance of shares are tough, sort of apples-to-apples comparison. We feel good about where we're at in-stores. Our volume relative to the overall volume, we're seeing in the stores. And obviously, anything -- all that we get online is incremental to that. Those initiatives are on track, both teams are working extremely hard to sort of bring those to fruition. And it's great to have the strong support of good partners in making that happen. So we're -- I guess I said it before, so I'll just repeat myself. I'm very excited about the potential there and expect that to be a near-term benefit.

Okay. So too early to tell or I guess too confusing to tell is probably the best way to look at it. Ryan Woodley;Chief Executive Officer of Progressive Leasing: No, I would say it's absolutely going to be incremental. We feel good about what's happening in the stores, and we're on track to roll those things out. So we feel good.

Okay. And then, Douglas, one for you. Just any update, I think there was a fair amount of advertising around the pre-approval process now that you centralized decisioning. Any update of how that went? Again, I know it's a choppy environment to see that, but just any thoughts there would be great.

Yes. Bill, I mean I couldn't be more proud of the team and the rollout of our centralized decisioning. We've got a site apply.aarons.com, where you can go get preapproved, either on your phone or in-stores. And obviously, we're advertising that. We're now seeing almost all of our customers either go through e-com or in our stores now going through that channel to get approved and to get their leasing power. And it's just given us the ability to control risk and drive margin and probably most importantly, if you ask people in our stores, it's just creating a really great team member experience and customer experience. It's just so much easier. It takes the labor out of the models and the outcomes have been really strong. So it's all working, and we're really happy with it. And I think that's what's giving us a lot of confidence in the sort of higher customer retention going forward and stronger profitability. So really, really successful program, and we look forward to seeing the results as we move forward.

Next question comes from Bobby Griffin of Raymond James.

I hope everybody is staying safe. And congrats on a good quarter in a challenging environment. Douglas, I wanted to go back to kind of some of your comments about the core business first. But if -- you guys have done a lot of work on the store rationalization efforts, and there's still some more go. If you were to look in the markets that you've already done or completed the large part of that rationalization, what are you kind of seeing from performance metrics of those collective stores to kind of maybe highlight what the opportunity is on a long-term basis?

Yes. That's a great question. We've been closing emerging stores for a while. I mean the beauty of the business that we have is the portfolio-based business. So you can effectively take these 2 books of revenue and put them together within a close proximity and retain -- even if you retain up to half of the customers, it drives a significant increase in profitability from the cost takeout. We've been investing heavily in market strategy in order to understand the further opportunity there. Right now, we're at 1,100 stores, we think we have considerable market opportunity to do the same. And I would say it would be a combination of closed merge activities, getting in slightly bigger boxes and better retail locations and enjoying the economics that we've seen historically from doing that. But with greater retention, just from being in a better spot in the market and really servicing the market through larger boxes and more e-comm, and we've seen that be a successful recipe. We'll also look at repositioning some of our stores and our more recent repositioning work and investing in place in the places that we think are real winners has also yielded benefit as we put our gen-next model in place. So I'd say we're gaining more and more confidence in our real estate strategy, and that's going to be an important pillar of how we drive strong cash flow in the long term and earnings growth. So both have very important pillars for our long-term strategy.

Okay. I appreciate that. And then I guess also on your comments about written revenue into the portfolio, kind of down low single digits in May and June. I assume that does include the impact of the closed stores that you're doing throughout the quarter? And if so, is there a way to kind of strip out the closed store impact and maybe get a sense of what written revenue in the portfolio is doing on a comp store basis, like a same-store count year-over-year?

Yes. So the numbers I gave you were on a comparable store basis, so it doesn't include the impact of that. And so yes, importantly, we've seen positive trends in that. As we look forward, the revenue written number will decrease slightly. And I just want to be clear on that. As we -- and I said this in my statements, but as we use our centralized decisioning tool in the portfolio and it becomes a bigger part of the portfolio, we will be not approving as many customers, which will impact negatively recurring revenue written but positively impact our ongoing revenue and margin. And so that's important as you think about that. In addition, as you know, last year, in the third quarter, we had a large sales initiative, which drove recurring revenue written up by about 13%, but we had negative same-store revenue due to lack of collectibility. We should see the opposite this year in the third quarter with negative revenue written due to centralized collections and comping over last year, but positive same-store revenue.

Okay. That's very helpful. And then lastly for me, Ryan, I understand the early buyouts ticked up, especially with the stimulus and stuff as well as the mix of the business. Is there any way to separate out the 450 basis points, even if it's rough numbers, decline in gross margin, how much do you think that was just kind of core mix of business changing versus early buyouts being at a much higher rate because of stimulus? Ryan Woodley;Chief Executive Officer of Progressive Leasing: Yes. I can give you a decent sense to that. It's a good question. We had talked, I think, in the last 2 quarter's calls about the expected impact on gross margin of those recent national launches and the resulting shift in mix as well as growth, revenue under portfolio earlier in the year. We said that we expect that would have an effect on gross margins. And about 1/3 of that, I would say, roughly, is attributable to what we -- the trend we expected. And the rest, I would say, is primarily driven by government stimulus.

Perfect. That's very helpful. Congrats to the team on all the moving parts, look forward to watching it unfold and best of luck in the third quarter. Ryan Woodley;Chief Executive Officer of Progressive Leasing: Thank you.

Our next question comes from Alex Maroccia of Berenberg.

I hope you're all doing well. Expanding upon the 90-day buyout trends you mentioned earlier, can you provide any clarity into how you're considering the later-than-usual tax refunds that some people received this year? Ryan Woodley;Chief Executive Officer of Progressive Leasing: In the context of expecting a prolonged effect attributable to tax refunds in addition to government stimulus?

Yes, just the stimulus increasing on the 90-day buyout. Are you expecting something similar given the July 15 tax day this year? Ryan Woodley;Chief Executive Officer of Progressive Leasing: We expect to continue to see higher levels of 90-day buyouts, and I expect that will have an effect, although I believe it will be somewhat muted in the context of ongoing government stimulus. So we expect the trend of higher year-over-year 90-day buyouts to continue that. That will be a component. But I think the larger component will continue to be government stimulus, given that we expect some support to be passed here in the future over Q3.

Got it. Okay. And secondly, I know that you were anticipating the online adoption of Progressive from a few of the larger retail partners starting in July. Have there been any changes in timing there? And are you expecting to see any immediate benefits from it? Ryan Woodley;Chief Executive Officer of Progressive Leasing: We do expect to see benefit in Q3 from those initiatives. Everybody has been working really hard. Everyone's had a lot to focus on lately, but the teams have been exceptionally focused on delivering on those initiatives. And I'm super proud of the progress that both teams, our internal teams, those -- our partner teams have made on those initiatives, and I expect them to bear fruit in Q3 and beyond.

Our next question comes from Vincent Caintic of Stephens.

And first question for Ryan. So thanks for all your hard work and sorry to see you go. Actually, the #1 investor question I've been getting this morning to the extent you can answer it is, I guess why you're leaving at this time given the growth and opportunity we've been seeing and so investor feedback has generally been suppressed by you leaving, any comments you can make there? Ryan Woodley;Chief Executive Officer of Progressive Leasing: Thanks, Vince. It was ultimately a personal decision, but a really tough one. I'm just so proud of the team here at Progressive, and I really do believe the business has a very bright future, but there's never a perfect time for these things and as excited I am about the future of the business and confident I am in the team and their ability to work with Steve to create great success for the business, it just felt like the right time. The separation felt like the right time to hand over the reins to a new leader to continue the mission. And I'll enjoy watching their success and I, of course, will continue to be available to the company, to Steve as an adviser as I sort of watch that success play out.

Yes. This is John, Vincent. The thing I'd add, Ryan is obviously an exceptional talent. We've been lucky to have him. He's done an amazing job. One of the things -- and I think maybe the thing he does best is build and really grow in a really outstanding team. We've got a lot of talent. I mean Blake Wakefield is the President of the business. He's been here since 2013. He's completely converse at the business across all the different disciplines, knows the retail partners extremely well, knows the strategy extremely well. And there's just a lot of depth and breadth from a team perspective. And I know Ryan said that earlier, and it's really, really true. So he has definitely positioned the business to continue to perpetuate its trajectory. And that's what we're -- couldn't be more appreciative of that, that kind of development, that infrastructure development that Ryan has put in place that allows the business to continue on. And Steve, obviously, I've worked with very closely for a long time now. And Steve just knows the business extremely well, has outstanding judgment at executive level and a great view on the strategy for the business, a great understanding of it. And it's not a -- the strategy has been the same for a long time at Progressive, really before even my time and Ryan has just enhanced it and Steve will enhance it further with Blake's help and the rest of the team. So as much as Ryan is a great talent as much as he's out front on these calls, he would be the first to tell you that the success of Progressive is a function of an outstanding team that has grown and frankly needs opportunity. And there's a great opportunity for a lot of folks because of this change. So I just want to make those points that are important to understand as an investor.

And John, sorry to not be able to hear you on a quarterly basis too, but glad you're staying on. For Steve and Douglas as the CEO of the -- CEOs of the business, if maybe you could speak to, I guess, what your focuses are going to be going forward as separate companies and any strategy, any particular focus that you see going forward? And that's it from.

Yes. This is Douglas, Vincent. So I mean in the Aaron's Business, not much changes. I mean our strategy is consistent with what we've been doing. We have a large, resilient customer base, and we feel like we've got a little wind at our back from a macro standpoint, so we're really excited about that. We really believe in our compelling value proposition for our customer, which really starts with superior pricing relative to our competition. We now can approve more customers than just about anyone else in the marketplace. And we've got this embedded service advantage with our stores and our supply chain or versus supply chain, which is we believe really compelling. If we can layer on top of that, digital enhancements like centralized decisioning and our e-com platform and all the other advancements that we're doing to sort of simplify and improve the customer experience, it's really compelling. And so we're pursuing a longer-term real estate strategy, which we think adds to that and provides positive cash flow and earnings growth to the overall mix of the business. So when you put all those things together and then look out at the second half of 2020 and our outlay going forward, we couldn't be more optimistic about the business and the benefit for shareholders.

Yes. Vincent, this is Steve. I mean I would just add basically what John said that I'm very excited to be joining this really strong team that is executing at a very high level. And the strategy is sound. We've got this very large -- largely unserved, massive market. We're the leader, and we will continue to invest in technology and innovate our product and for the betterment of our customers, both current and future and retail partners and continue to spread and increase the buy at least own -- at retail both online and in-store. And so we've got a great business model with -- that's cash-generative at high-growth rates and short-duration portfolio with great visibility for us to be able to be nimble and react to the things that we're seeing in the marketplace. So the strategy will evolve over time, just like it has over the last 6 years, but it is working, and we'll be doubling down on it.

This concludes our question-and-answer session. I would like to turn the conference back over to John Robinson for any closing remarks.

Thank you for participating on our call today. I would just like to reiterate how much I appreciate our team members' hard work over the past few months. It's definitely a challenging time and delivering such strong results in Q2 is exceptional. I'd also like to again thank Ryan Woodley for all his contributions to Progressive and wish him the best of luck in the future. And lastly, I'd like to reiterate how excited I am about the announcement today and the opportunities ahead for Progressive and Aaron's. Thank you, again, for your participation on the call, and we look forward to updating you on our progress.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.