Good morning and thank you for holding. Welcome to Rent-A-Center's Third Quarter Earnings Conference Call. As a reminder, this conference is being recorded, Thursday, November 4, 2021. I would now like to turn the conference over to Mr. Metrano. Please go ahead, sir.

Thank you all for joining the Rent-A-Center team this morning to discuss our results for the third quarter of 2021. We issued our earnings release after the market closed yesterday, and hopefully you had a chance to review it. The release and all related materials, including a link to the live webcasts are available on our Web site at investor.rentacenter.com. On the call today from Rent-A-Center, we have Mitch Fadel, our CEO; Jason Hogg, Executive Vice President of Acima; Anthony Blasquez, Executive Vice President of the Rent-A-Center Business Segment; and Maureen Short, CFO. As a reminder, 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 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 also will include references to non-GAAP financial measures. Please refer to our third quarter earnings release, which can be found on our Web site, for a description of the non-GAAP financial measures and reconciliations to the most comparable GAAP financial measures. With that, I'll turn the call over to Mitch.

Thank you, Brendan, and good morning to all of you who have joined us today to discuss our third quarter results. We certainly appreciate your interest, and are pleased to have the opportunity to update you on the developments in our company as we continue to be among the leaders in the advancement of leasing as an alternative solution for consumers in today's rapidly evolving commerce and payments landscape. Over my career, I can't think of another period of such innovation and disruption as we're seeing today, with the range of developments things like digital wallets, and crypto-currency, and super apps, and buy-now-pay-later, and most importantly, new lease-to-own options, which we often refer to as LTO. And with our leadership position in consumer leasing solutions, we are in a great position to benefit from this environment. Take, for example, the current proliferation of buy-now-pay-later. We get asked a lot if it's a threat. But we believe it's actually the opposite. Lease-to-own is very complimentary to buy-now-pay-later because we see little customer segment overlap, and LTO could drive incremental sales in the buy-now-pay-later waterfall. In fact, we're seeing this benefit firsthand in our business today with growing interest in our virtual LTO offering from potential merchant partners who realize they're leaving money on the table with customers that don't qualify for buy-now-pay-later. Similarly, consumers are seeking payment services that work for them, rather than for the benefit of an established system that is perceived to take advantage of and exclude consumers. In contrast, LTO is one of the most inclusive payment options serving even un-banked consumers, and is highly flexible, and getting approved doesn't require a hard credit enquiry that can impact credit scores. Because the LTO solutions include returnable consumer durable products like furniture, appliances, and electronics, transactions typically have…

Thanks, Mitch. Picking up on your comments about the market opportunity, it really is amazing to see how people are changing the way they think about paying for products and services, meeting other financial needs, and even the lifestyles which people aspire. Consumers today increasingly value services that are flexible, personal, and inclusive over traditional services that are rigid, uniform, and exclusionary. This is disrupting the competitive landscape, and benefiting innovative business models like buy-now-pay-later, and other alternative payment solutions, like Acima. As we're witnessing this play out, it validates the Acima acquisition, our strategy, and the tremendous opportunity that we have for the company's future. These same trends drove us to develop our product suite, over a year ago, that we eventually reframed as the Acima Ecosystem, including the Acima App, Acima browser extension, Acima Marketplace, and the Acima LeasePay Card. We discussed the Ecosystem at some length on our second quarter call, in conjunction with an announced soft launch in early August. So, before getting into a discussion of broader performance for the quarter, I'll share some insights from our preliminary findings. Keeping in mind that the primary focus for the launch, at this stage, has been testing and learning, we've seen encouraging early results that reinforce our belief in the transformative potential of the ecosystem. The Acima App, which is essential mission control for the Ecosystem, already has over 220,000 active users at the end of three months. The users are largely comprised of existing customers that were either unconverted or had unused approval amounts. Looking forward, we believe we are on pace to reach the one million user threshold during the second quarter of 2022. To put this in perspective, it took Facebook and Twitter, 12 and 24 months respectively, to hit that milestone. So, if…

Thanks, Jay. Staying with the topic of the changing environment that consumers and our business are experiencing today, it may be surprising to some people just how well the Rent-A-Center Business segment has been performing. But for those of us close to the business, we know just how solid the underlying fundamentals are and how much opportunity there is to generate consistent growth over the long-term. This was illustrated again in the third quarter with revenue growth of 5.6%, including 12.3% same-store sales growth and that was comping against 8.6% revenue growth and 13% same-store sales growth in the prior year period. That makes it 15 consecutive quarters that we have generated positive same-store growth and five consecutive quarters of double-digit same-store growth, which is a testament to the unique value proposition we offer customers; high quality products, flexible lease-to-own solutions to fit everyone and a great experience. Importantly, we continue to evolve with the consumer and are meeting their preferences with a growing omni-channel platform that has played a key role in our performance over the past year and a half. In the third quarter, our e-commerce revenue grew 9% as it left 71% growth in the prior year. E-commerce accounted for 21% of revenue, a substantial increase relative to just 13% in the third quarter of 2019. Importantly, we believe we remain in the early innings of capturing the long-term opportunity in the e-commerce channel. The team's strong execution, including sourcing product, marketing, merchandising and collections translated to 14% year-over-year growth in the portfolio for the third quarter. So, we feel we're in great position heading into the home stretch this year and for a solid start to 2022. Profitability also remains solid in the third quarter with adjusted EBITDA margins of 22.9%, up 60 basis points year-over-year,…

Thanks, Anthony. As Mitch noted earlier, we delivered solid results in the third quarter, despite some anticipated headwinds that we called out on the second quarter call including some typical third quarter seasonality and a reversion to more normal ranges for customer payment activity, loss rates and early payouts. Reported revenues of $1.2 billion increased 66% year-over-year and consolidated adjusted EBITDA of $170 million almost doubled. Much of that growth is attributable to the Acima acquisition that closed in mid-February. On a pro forma basis, consolidated revenues grew 13.3% and adjusted EBITDA grew 4.1%. This translated to a margin of 14.4% in the third quarter, compared to 15.7% for the prior year period. The year-over-year contraction in margins was primarily attributable to normalization and customer payment activity for delinquencies and loss rates from the wind down of government stimulus, as well as a mix shift to the high growth Acima business. Margins for the re Rent-A-Center business segment, Mexico segment and corporate costs were all favorable year-over-year, while the franchise segment margins were down 135 basis points. Below the line net interest expense was $19.7 million reflecting the debt financing from the Acima acquisition. The effective tax rate on a non-GAAP basis was 24% compared to 23.3% in the prior year period and diluted share count was 68.2 million. GAAP EPS was $0.31 in the third quarter compared to $1.15 in the prior year period and included one-time cost related to the Acima transaction and integration. After adjusting for special items that we believe do not reflect the underlying performance of our business, non-GAAP EPS was $1.52 in the third quarter of 2021 compared to $1.04 in the prior year period. We generated $55 million of free cash flow in the third quarter and returned $38 million to shareholders through…

[Operator Instructions] Your first question comes from Bobby Griffin with Raymond James.

Good morning, everybody. Thanks for taking my questions. Hope everybody is doing well.

Morning, Bobby.

First, I just wanted to talk about maybe just the month-by-month basis, know that typically you don't get into that type of color, but just now that things are starting to normalize, it would be helpful, how did kind of payment activity and in skips/stolens trend during the quarter? And then did it kind of level out in October, and that's what you're assuming carries forward in the fourth quarter? Or are you assuming it continues to build back up a little bit in November and December?

Yes, good question, Bobby. It deteriorated as the quarter went on, as we got farther away from stimulus. But the good news is that as we got into October, especially as we ramped up from a staffing standpoint -- got caught up from the staffing standpoint, in the collections center, we've seen really good trends in October. So, that gives us the confidence, going forward, that we've -- it's certainly normalized faster than we thought. But October gives us a good feeling going forward, and confidence going forward that it was a short-term blow.

Okay, that's helpful. And then -- and secondly, is more just longer-term, inside the Acima business, obviously we got an outlook for really good revenue growth. Maybe just help us unpack where you see some margin opportunities after that business within the P&L as -- I know gross margin can move around a lot based on what the customers are, and stuff. So, just maybe, as we think two, three years out, where there could be upside on the margins, and what some of those moving parts are?

Thanks, Bobby. When you look at some of the things that I was talking about earlier, we've got some key differentiators that are out there, and particularly when you look at the Ecosystem. So, having declining customer acquisition costs while simultaneously having increases with regard to the number of leases per customer when the average ticket is holding, enables us to get margin expansion in that regard. And so, having this ongoing relationship is critical. Also, as we continue to bring on more partners, like how I had mentioned P.C. Richard, and we have Whirlpool, and [indiscernible] Electronic, you're getting sort of a coattail effect that's taking place there as well because we not only have the ability to originate through the traditional locations, but now originate on our own customers, and drive them towards optimized retail origination experiences.

Okay, and then --

I'm sorry, Bobby. The other thing I'd add to that, when we think down the road, is in our legacy business, the staff legacy business, we've got about half of those stores converted, and would do the other half early next year. And with the Acima decisioning, and so forth, and what you've seen in the numbers, we'd expect, in the long-term, the losses to be lower in our legacy business as we convert over to Acima. And as well as it's a faster platform, and can it reduce a little bit in those stores that we haven't converted yet. So, as I think we go forward, the staff business has some opportunity, that's part of the long-term synergies we expect anyhow. So, I think we've overall, in the business, you'd see lower losses as well.

Yes, and then we're going to continue optimizing by channel, using, as Mitch was talking about, our machine learning and AI, so that every partnership, every channel, every product continues to get crisper from an underwriting perspective, yes.

Okay, that's very helpful. Mitch, that was actually my follow-up, was just the labor opportunity. So, I'll go ahead and jump back in the queue because you answered it, but I appreciate the time, and best of luck here in the fourth quarter.

Thanks, Bobby.

Your next question comes from John Rowan with Janney.

Good morning. Can you guys remind me what is included and not included out of your current objectives in the guidance for 2023? Just run through, because I believe there was a lot that was basically excluded from that number that you're currently undertaking. Thank you.

Well, the guidance excludes any share repurchases. And so, but really that's the only stipulation when it comes to our guidance.

And we're really talking EBITDA margins when we say $6 billion -- we expect to be at least $6 billion at mid-teens EBITDA margin, from an EPS standpoint it certainly would not include that if you try to back in the EPS numbers. But it's got 20% to 25% GMV growth over those couple years to get there. And it's got us achieving the synergies that we're on track to achieve. It's got the Rent-A-Center business, John, running mid single-digit growth next year, because there's quite a tail coming into the year with that portfolio, as Anthony mentioned, is still up 14% year-over-year. And then in 2023, you'd look at low to mid single-digit growth in that business. So those are the base assumptions that we've talked about.

But what about big retail partner wins and/or additional growth spurred by the omni-channel fintech platform?

Yes, I think that's a really good follow-up question. What we don't know is -- we know, as Jay was pointing out, we know how big the total addressable market is with the Acima Ecosystem and LeasePay Card in the marketplace, and so forth, and we're already seeing some great results, as he mentioned, doing transactions in stores where we're not even integrated in is really exciting, it's transformational. But we don't have that figured in. I mean that's -- it's hard to make those assumptions. And will it be worth $200 million in revenue next year or $500 million or in 2023? At this point, we're trying not to bill that in. I think it's certainly -- that number, the 20% to 25% is going to take continuing to add on good strategic accounts for sure. But as far as the Acima Ecosystem, it's -- there's certainly upside when you think about it that way.

Okay, thank you.

Thanks.

Your next question comes from Vincent Caintic with Stephens.

Good morning. Thanks for taking my questions. So, first, just kind of trying to think about the run rate maybe going into 2022, and I understand you're not giving 2022 guidance yet. But when I think about the fourth quarter guidance, is there any sort of one-timers or anything that might change as we run-rate into next year, because it seems like when I look at fourth quarter guidance, you are having EBITDA margin expand quarter-to-quarter. And then maybe there's credit normalization in the third quarter, maybe the -- I guess the reserving maybe is taken up front. So, I'm just kind of wondering if there's anything when we think about the fourth quarter that we should be thinking about if we're modeling on to next year. Thank you.

Well -- go ahead, Maureen.

I was just going to mention, there are some reserve adjustments that were made, both in the Rent-A-Center business as well as the Acima business, that is meant to predict based on customer payment activity and loss trends, what we think should be reserved for into the future. So, there were some one-time adjustments made for that normalization. As we mentioned in our prepared comments, we expected that normalization to happen over a couple of quarters, maybe even slightly into '22. So, there were some adjustments made this year that should set us up better for '22, since we've taken some of those reserves that we likely would have taken a couple quarters from now.

Okay, that's helpful. And, I guess, was there -- is there anything else in the fourth quarter just kind of when we're thinking about it going to turn to or is the fourth quarter kind of a good proxy for how we should be thinking about the going forward?

Well, I think you're talking about a growing business. And if, as you go into the future still, 19% GMV growth last quarter, and as we think about the year, we're starting to comp over a big account, like Wayfair added last year at this time of year. So, that can decelerate the GMV a little bit, like the 19%. But converting the fast store to the Acima system you got some short-term drop when you think about any time you're doing a conversion, and you take one step back, take two steps forward. But then you got the new accounts coming in, like Jay was mentioning. And that's what continues to drive it, and would you say, Jay, 2,700 no accounts in the last quarter. So, there's a lot of ins and outs comping over a large addition. Obviously, you're not going to comp over it unless you have other large additions. And we feel real good about the large retailer in the Northeast P.C. Richard, that we just signed an exclusive with them, and we're kicking off here in November there. For those who don't know it, they're one of the top 10 appliance retailers in the country. And so, that's when you're growing the way we're growing, even though the third quarter the margins went down, because of all the stuff we talked about, a stimulus winding down normalization faster, caught a little bit light on staffing as that happened. Supply chain obviously, and you can guess on when it gets better. But when you have a growing business, even, it might be lumpy a quarter here or quarter there, like we just went through Vincent, but overall, you got those 20% to 25% growth rates, if we give or take a quarter of some kind of lumpiness, like the stimulus ending but overall, I mean think about the stores, we added, not even talking about the Acima Ecosystem, but 2700 new stores today and so forth.

Yes to your point, I mean it's a step function. But what we're seeing is the lead indicators are the competitive wins, the new products in the marketplace, like Mitch was saying, and then there's a ramp that gets associated with them. So, you start to see an acceleration, once they get to their sort of exit velocity rate when they normalize out.

There's also additional synergies that we're assuming will take place in '22 that we haven't seen yet, we haven't finished the full integration yet. Some of those synergies were masked in the back half of this year because of some of the changes that we've seen with the normalization. But the good news is we're seeing strong growth, and we're seeing those synergies play out. It's just some of that normalization that occur that made it a little choppy. But '22 we should be at a normalized rate.

Yes and nothing that has changed our long-term outlook.

Exactly.

Okay, perfect. That's really helpful. Thank you for that. And then a follow-up question on Acima, so a lot of really exciting data, I saw the Ecosystem video on your Web site that was really interesting, as well as the marketplace. And it's really interesting to see that marketplace with, you've got BestBuy, Home Depot, overstock.com, you got a bunch of merchants in there. And I was wondering if you can maybe talk about kind of your pipeline, how you're seeing that you kind of answered it a little bit. But if you could talk about the pipeline there and even partnerships, such as you kind of touched on these buy now pay later partnerships, and they're taking an interest in [Be Stone] [Ph] and in Acima. So, may be if you could talk about the pipeline, both in terms of the merchant side, as well as partnership sides. And what's the, I guess the timeframe look like for that? Thank you.

Yes, thank you. So, I'll sort of take that in reverse order. When you look at the partnerships, the interesting thing, and what we've been sort of saying for a couple of quarters now is, we see this as a complementary set, as people become more used to buy now pay later as a solution, it addresses a different segment than we address. And so, for us, it's actually having the effective getting people more accustomed to these alternative solutions. And so that's been feeding very nicely into our ecosystem, like you talked about. With regards to the Ecosystem itself, we are a test and learn type environment, we had a reason. So, we rolled out the mobile app, like I talked about with over 220,000 active users. Now that we've started to get all of our metrics, they're in line, and we've tested it out, we're continuing to add to the marketplace. We're seeing fantastic volume going through the some of the merchants that you just mentioned, despite not having the integration. And what you'll start to see is that we're accelerating then our efforts from a consumer standpoint, one very important thing and as Mitch mentioned, that with the 2700 wins in other areas where we're succeeding, it gives our merchants the opportunity to take other bites at the apple because we are embedding our native mobile app whereas before customers walk in, have a very friction free experience in the store. But then they leave and now we have the ability to execute what we're going to be launching is executing on the mobile app and now having a stacking effect of customers so that when they do leave, we can continue to allow our merchants to continue to market to them. And more importantly, transact on their phones now versus having to come back into the store. And so, the effect of that'll have a sort of a forced multiplier effect. So, and then the last thing I would say, which Mitch was talking about, and I mentioned briefly also the lease pay Mastercard, as we build a larger and larger base of consumers on our platform. We have more opportunities to allow them. So, in on our direct-to-consumer plays, we not only have the ability for them to make purchases at the merchants that you just described. But once we moved the physical piece of plastic into that consumer base, their ability to start going to 2.2 million locations makes it a ubiquitous solution that is very similar. And why that's important is when we're having discussions with large national retailers, it helps us with integration. It helps us with not having to have a heavy integration. It also has completely changed the dynamic on how those retail partners view our solution as just another means like a debit card or credit card or any other means for their customers to spend in the retail location.

Your next question comes from Anthony Chukumba with Loop Capital Markets.

Good morning. Thanks for taking my question. Just one quick point of clarification first, you said you keep using the word accounts and then you also said stores. I'm assuming that 2,700 that's 2,700 doors, right? That's just 2,700 stores, not like 2,700 completely disparate retailers, right.

That's correct. It's 2,700 doors.

Okay. So, since given the fact that you've mentioned at 2,700 number, I guess my question is, so what's the total number of doors for Acima at this point? Can you disclose that?

No. I mean we don't talk about that. Other than we've made previous statements as to the size and like I said, in my comments, we say over 30,000 right now. So, -- and so that's growing at a pretty significant rate still.

Okay. No, fair enough. And then, okay, just one last follow-up, so just wanted to get back to the super normalization the collection activity. So, I just want to make sure I understand. So, basically it sounds like the effect from the stimu checks started to wear off and maybe you guys hadn't been as aggressive or didn't feel the need to be as aggressive with collections, because everyone had stimu checks and was making their payments and doing early buyouts. And so it sounds like you hired more people to now the collection, customer payment activities normalizing to go after that, or do you allocate more hours or a combination of those. I'm just trying to understand exactly what that means.

Yes. I'll start out on the Acima side, and then pass it to Anthony for the Rent-A-Center side. So, when Mitch talked about being taught a little bit short, what we're talking about is we were converting over our operations and in doing so that's when we started to see the normalization accelerate. So, what we've seen now is our staffing ratios come back in line with regard to our account loads from a delinquent account load. And so, the key is that our exit velocity for 2022. We'll be back in line with the guidance that we've provided.

And you are talking [multiple speakers] -- call centers.

That's correct. And then the other thing is we've brought other one of the nice benefits is the Acima platform has a number of other streams that are automated, that enable us to enhance not just having to have collectors. And we were able to then bring those online with the general portfolio. So, Anthony?

Hey, Anthony. For the Rent-A-Center business, historically the third quarter is softer from a payment perspective. So, we know that yearly going in the third quarter is going to wind down a bit as people go ahead and get prepared for school and vacations right before the school year begins. So, you're right, the people had stimulus checks in their pocket, but we knew that those were winding down. We knew that enhanced unemployment was ultimately going to end as well. So, we took a proactive measure throughout the quarter to go ahead and get staffed back up, actually headcount year-over-year is up 7%. So, that not only benefited the opportunity when the normalization occurred to go ahead and react, it also sets us up for the fourth quarter from a demand perspective. But that one sort of unique situation that occurs is, you're right, the customers were more flush with cash in their pocket, and it's almost like a wait-and-see, like when is the period that this normalization occurred. It occurs quickly. We in turn go ahead and respond, but there is also that balancing act to make sure that we don't overcorrect because we don't want to go ahead and harm the portfolio as well. So, we went ahead, we normalized and what we're seeing now and our leading indicators, we feel very confident that the historical trends for the fourth quarter will continue and the loss rates, like I said, around 3% going forward, we feel confident about that.

Got it, very helpful. Keep up the good work, guys. Thanks.

Thank you.

Thanks, Anthony.

Your next question comes from Brad Thomas with KeyBanc.

Yes. Thanks. Good morning. Just to follow up on that last line of questioning. So, on the Rent-A-Center side, as we look at the 2022, you think that annual losses can still be in the 3% range and just any level of detail you go into on your competence in that would be great.

Yes. Thanks a lot, Brad. Yes. I do expect that that's going to occur first off the normalization happening. And what we're seeing right now from a customer payment perspective, we do feel confident. And when you think about normalization, the way that I look at it in the Rent-A-Center business is I'm not expecting that we're going to go back to pre-pandemic numbers. And the reason that I can feel confident about that is because now we have centralized decisioning that's available inside of all of our stores, in addition to that as a byproduct of the pandemic customer communication tactics and the initiatives that we employed there and then the ramping up of digital payments. So, when you put those things together, that's what makes me confident in the go-forward of 3% -- around 3% be in the range for RAC.

Yes. Almost 60% of payments are now happening outside the store.

Yes, yes, approaching 60%. So, we feel good about that.

That's really helpful. And maybe a similar question for Jay on the Acima side, I mean, the theme of this call, and I think others in the sector for this quarter has been normalization happening faster than expected. Yet, the Acima side, we're still seeing the losses down partially from having Acima within the mix. Can you just talk a little more Jay, about your line of sight to 2022? And how you make sure you don't get overly confident in the algorithms and this is what perhaps would be a more violent move back to normal trends on consumers…

Yes. When you look at our 20, 22 loss projection, we're looking at somewhere around a normalization rate of 6% to 8% within the virtual book. The key thing is how we don't end up getting kind of overconfident to your point with regard to the underwriting is this ability to break it down by channel, by product, by partner. So, there is not just one monolithic decision engine, but our machine learning and our AI is constantly running optimization and looking for exploiting the good portion of the population while minimizing the riskier portion of the population along that lines. And we're able to track that in real-time and then we meet on it on a regular basis.

Really helpful. And Maureen, I apologize if I missed it, but can you just give us an update on where we stand year-to-date on synergies? How much you think you'll get in the fourth quarter and your current plan for 2022?

We believe by the end of the year, we'll achieve the $25 million that we talked about. There were a number of different initiatives, part of which we've deployed others still extend within 2022, which is why we talked about a longer-term run rate of 40 million to 70 million. Most of what we had anticipated rolling out in 2021 has already occurred, but we are expecting some of those benefits to show through within the fourth quarter. So, like I mentioned earlier, we're on track with achieving those synergies. There's been some offset with the timing of the normalization, but we still feel very confident that integrating the preferred lease business with Acima, bringing those two companies together will make us a better company, will get us to mid-teens EBITDA margins over the next year or two.

I think the other thing, Brad, when you think about the future, a lot of questions, obviously this morning about the future as compared to the lumpiness of where we are today, remember the normalization of payments what comes with that is a tighter credit environment. You're talking to -- Jay is talking about our own decisioning and certainly by vertical and even by retailer and same in Anthony's business by vertical how do we decision. And there's a tightening of going on out there without stimulus. We just -- where it needs to remember that tighter credit environments are beneficial to us in the long run, even if in the short-term they're not, but in the long run Lease-to-Own business benefits from tighter credit out there above us. And we're already seeing some of that in our vintages, in the -- in our, what we call VantageScore. As people come into our portfolio, we're seeing a slight uptick in that customer credit worthiness, I guess you'd call it our VantageScore. You'd call it a lot of different things, but we're seeing a better customer already. And we would expect that to accelerate and everybody just needs to remember a tighter credit environment, even though in the short-term, we get -- it's impacted us in the third quarter and as we go into our fourth quarter and the guidance we gave, but in the long run, this is something that benefits LTO.

Absolutely, thank you all so much.

Thank you.

Thank you.

Thanks.

Your next question comes from Kyle Joseph with Jefferies.

Hi, good morning. Thanks for taking my questions. Not to beat a dead horse, but on the credit side, obviously, it's normalizing. Can you just give us a sense for -- are there any potential offsets in the credit normalizing environment and then kind of remind us how the Rent-A-Center business did in a negative economic scenario, like the GFC and then how you envision the Acima business performing in an environment like that?

Yes, I think, they both outperforming in an environment like that as we go and think about 2022 and 2023 as credit tightens. We've certainly seen that over the years with Rent-A-Center. If you go back to one of the worst recession in the history of the company in 2000 -- and in the country in 2008 and we had good growth rates certainly outperformed just about everybody when it comes to not only revenue, but our losses didn't go up and so forth. And Acima should be very, very similar, Kyle. I mean, it's the same business. It's through retail partners. Of course, the Acima ecosystem stands -- can stand on its own, but it's still the same business, it's still leasing where they can return the product and we can re-rent those products through Rent-A-Center. So the recession resiliency store, I'm sure in 2022 and 2023, not that we're necessarily be in recession as a country, but the impact will be there from a credit tightening standpoint and credit tightening is good in the long run. Rent-A-Center when you look at not having to -- where we reduced the guidance on Acima -- the annual guidance on Acima in that Rent-A-Center, keep in mind, I mean, Rent-A-Center -- a couple thousand Rent-A-Centers out there have collectors in each store on the street. If people aren't paying, they can react much faster to a technological collection of a centralized call center through virtual payments and so forth. So, the impact is going to be much less on Rent-A-Center than Acima when this happened in the third quarter when the normalization was faster. But overall in the long-term, both should benefit from the tighter credit environment.

Yes. That makes sense. And then a quick follow up for me, obviously, you talked about the supply chain impacting Acima, but just walk us through the Rent-A-Center side of the business, any impacts from the supply chain, how your inventory is positioned heading into the holiday season there?

Yes, Kyle. We're in a strong position from all the major categories. Good inventory levels actually ended the quarter with held for rent up 24% versus the prior year. So, the merchants and the vendor partners have done a good job of sourcing inventory. And we've said it before, just remember in the Rent-A-Center business, we're able to go ahead and source for fewer SKUs, but buy deeper in them, so that we have the staple items for the customers that are available. We're still seeing good expansion in categories like tools and tires and handbags and e-bikes, et cetera. And we're looking for opportunities to expand the assortment that's available on the Web site as well strategically though because we want to make sure that whatever we're showcasing to our customers online that from a customer experience perspective, there are things that we can get. So, we'll ramp those up as time goes on as the supply chain loosens up, but overall to meet the demand of the fourth quarter, we feel confident, especially with that held for rent being up 24% year-over-year.

Got it. Thanks very much for answering my questions.

Thanks, Kyle.

Thanks, Kyle.

Thank you.

Your next question comes from Tim Vierengel with Northcoast Research.

Good morning and thank you for taking my question. It seems like most of my -- actually questions were already answered, but I do have one bigger picture question for Anthony and Mitch. It seems like consolidation is happening in most fragmented industries in the U.S. with all the supply chain issues and kind of really limited capital of these smaller operators. I was wondering if we should expect something similar in the legacy brick-and-mortar business and if you guys have seen any kind of easing competitive environment recently. Thanks.

Yes, Tim, this is Mitch. There is -- you emphasized us and the obvious one other public competitor errands, there's -- not near as much competition, in the Rent-A-Center either e-com or brick-and-mortar business as there is -- in the virtual environment. So, it's not like competition has grown, we're growing. We're opening some stores. As you know we will open stores next year. We're about the only ones growing stores. Our competitors shutting down stores and on the regional side we're not seeing any real growth there. So, we're the only ones growing. Look I think -- honestly, I think, there'll be some opportunities for us to do some acquisitions here and there. There'll be small ones, you know, there is one large competitor anyhow, so there'll be small ones, probably not all that material. You can add a few million dollars of EBITDA here or there, but I think certainly they'll probably be some of them, but they'll be pretty small in that side of the business. So, I think when you think about M&A, the -- and using our great balance sheet for M&A or share repurchases and the capital allocation stuff that Maureen was talking about. I think the opportunities are probably more on the Acima side and other business verticals like that in the payments world than it is on the Rent-A-Center. We'll do up on the Rent-A-Center side, but they're going to be pretty small.

Yes, thanks. It's not so much the M&A activity, I just understand. You guys have been outperforming by, I'm going to say, high single digits for almost 24 months now. So, I was just trying to gauge how sustainable that is. Can you maybe remind us -- I have number in my head that 45% of the store doors in the industry you're -- or run by independents. Is that number much smaller now? Am I thinking of a number that's maybe five years old?

You know, I'd say it's -- you're not that far off. It's to between 35 and 45.

Okay. All right, all right. Thank you so much for answering my questions.

Thanks, Tim.

Your next question comes from Carla Casella with JP Morgan.

Hi, just two quick ones here. One on the labor costs front. It sounds like you pre-hired labor in third quarter. But I'm wondering, are you expecting -- are you still hiring in through fourth? Are you fully staffed and how comfortable are you with the labor cost levels?

Yes. Good morning, Carla. I'd say we caught up in the third quarter and into October. There's still hiring going on. There always is because unfortunately we have turnover as well. So, I would say we -- by the end of October, we're in pretty darn good shape and it's kind of normal going forward the number of people we need to hire, but the third -- late third quarter and then into October was more of a catch-up.

Okay, great. And then just, as you mentioned, a few times, we returned to more normal patterns sooner than you expected. As you see that, are you seeing any kind of uptick or change in the way you have to compete for either on the Acima side, retail partners or customers there or on the Rent-A-Center side for your traditional customers? Like are you changing any of the terms or do you see any change in the average length of the contracts or anything unusual as we return to normal.

No, the good news in our business is that as credit tightens, as people get tighter on money, it certainly impacts our payments, as we've been talking about this morning. But then, but from a demand standpoint, it actually pushes, pushes more demand as credit tightens above us, if you will, in the funnel. So, I think overall, from and as Jason mentioned this on the Acima side, the proliferation of the buy now pay later space where that we really don't compete for that same customer. But there's a lot of turndowns in that space with our retail partners, and we were hearing from retail partners say what do we need to talk to you about those, those turndowns we're seeing so as more people add more prime and near prime payment options for their customers, they start to see more and more customers they can't do business with as they add those options. And that just benefits doesn't and actually, I don't want to call it easy, but it makes it easier to get their attention that they need the LTL option in the store absolutely.

Great, thank you.

Thanks, Carla.

I will now turn the conference over to Mitch Fadel for closing remarks.

Well, thank you, operator, and thank you everyone for your interest this morning. Appreciate your time. It's an interesting time. It's been a heck of a year so far, we got to finish strong, and a heck of a year when you start off the year with an acquisition like Acima and we had some lumpiness in the third quarter, things normalized a little faster. We talked about the supply chain. Overall, we need to go back to our guidance at the beginning of the year after we closed Acima, we'd be delighted to be where we are today at that from an EPS standpoint in the midpoint range in the $6. So, that's a lot higher than what we were where we thought we'd be moving out to Acima things, so some lumpiness in quarters but big picture. Keep that in mind and just keep in mind and our outlook for the long-term has not changed. And in fact, a tighter credit environment is a benefit to at least going over the next couple of years. So, we're really excited. And with that, we'll let you get back to your probably have another call coming anyhow and we'll get back to work. Thank you everyone.

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