Executive Summary

Consolidated Q3 2023 revenue declined 11.4% year over year to $525.7M while GAAP diluted EPS was $(0.13); non‑GAAP EPS was $0.01 as lower lease revenues at Aaron’s Business and weaker BrandsMart retail sales outweighed cost efficiencies .
Gross margin improved 150 bps YoY to 51.7% on mix and better margins at both segments, but adjusted EBITDA fell 33.8% YoY to $25.3M; write‑offs at Aaron’s improved 140 bps to 6.1% on decisioning enhancements .
Guidance narrowed and lowered across most headline items: GAAP EPS, non‑GAAP EPS (high end), operating cash flow, adjusted free cash flow, and segment profitability (notably BrandsMart EBIT to a loss) .
Management highlighted improved credit performance (write‑offs, non‑renewals), continued GenNext rollout (245 stores, >30% of segment revenues), and a new BrandsMart store; macro headwinds and trade‑down behaviors remain a drag on demand and BrandsMart comps (‑17%) .

What Went Well and What Went Wrong

What Went Well
- Credit performance: Aaron’s write‑offs improved to 6.1% (‑140 bps YoY) on decisioning enhancements, with 32+ day non‑renewal rate also better YoY .
- Gross margin expansion: Consolidated gross margin rose to 51.7% (+150 bps YoY); Aaron’s Business and BrandsMart both posted higher gross profit margins YoY .
- Strategic execution: 15 GenNext locations opened in Q3 (245 total; >30% of Aaron’s revenues), new BrandsMart Augusta store opened; e‑commerce penetration at Aaron’s rose to 18.5% of lease revenues .
- CEO quote: “The Aaron's Business segment is benefiting from our lease decisioning enhancements, which led to lower write‑offs and a larger than expected lease portfolio size… we remain focused on positioning both businesses for growth.” — Douglas Lindsay, CEO .
What Went Wrong
- Top‑line pressure: Consolidated revenue down 11.4% YoY; Aaron’s Business revenues down 8.9% on smaller lease portfolio/early purchase options, BrandsMart revenues down 16.9% on weaker traffic and trade‑down .
- Profit compression: Adjusted EBITDA down 33.8% YoY; non‑GAAP EPS down to $0.01 vs $0.31 last year, reflecting lower volumes and profit at BrandsMart .
- Guidance cuts: GAAP EPS, non‑GAAP EPS (high end), operating cash flow, adjusted free cash flow, and BrandsMart EBIT revised lower; Aaron’s Business EBIT range trimmed .

Financial Results

Overall P&L vs prior year and prior quarter

Metric	Q3 2022	Q2 2023	Q3 2023
Revenue ($M)	$593.4	$530.4	$525.7
GAAP Diluted EPS ($)	$(0.51)	$0.21	$(0.13)
Gross Profit ($M)	$297.7	$282.3	$271.9
Gross Margin (%)	50.2%	53.2%	51.7%

Non‑GAAP and cash metrics (YoY)

Metric	Q3 2022	Q3 2023
Adjusted EBITDA ($M)	$38.2	$25.3
Non‑GAAP Diluted EPS ($)	$0.31	$0.01
Cash from Operations ($M)	$66.8	$34.7
Adjusted Free Cash Flow ($M)	$50.1	$7.8

Segment breakdown (YoY)

Segment	Q3 2022 Revenue ($M)	Q3 2023 Revenue ($M)	Q3 2022 (Loss)/EBT ($M)	Q3 2023 (Loss)/EBT ($M)
Aaron’s Business	$412.9	$376.2	$23.5	$17.5
BrandsMart	$183.3	$152.4	$3.0	$(2.4)

KPIs (Aaron’s Business; selected)

KPI	Q3 2022	Q2 2023	Q3 2023
Lease Portfolio Size ($M)	$125.8	$119.6	$116.4
Lease Renewal Rate (%)	86.3%	88.2%	86.2%
Write‑offs (% of lease revs)	7.5%	5.4%	6.1%
E‑commerce (% of lease revs)	16.2%	17.9%	18.5%
GenNext stores (count)	195	230	245

BrandsMart comps

Metric	Q3 2023
Comparable Sales YoY	(17.0%)
E‑commerce % of product sales	8.9%

Notes: “(Loss)/EBT” = earnings (loss) before income taxes. Aaron’s metrics exclude BrandsMart Leasing per company definitions .

Guidance Changes

Full‑year 2023 guidance: current vs prior (July 31) and direction

Metric	Previous Guidance (Low–High)	Current Guidance (Low–High)	Change
Consolidated Revenue	$2.12B – $2.22B	$2.12B – $2.17B	High lowered
GAAP Net Earnings	$16.8M – $25.5M	$14.0M – $17.5M	Lowered
Adjusted EBITDA	$140M – $160M	$140M – $150M	High lowered
GAAP Diluted EPS	$0.55 – $0.80	$0.35 – $0.50	Lowered
Non‑GAAP Diluted EPS	$1.00 – $1.40	$1.00 – $1.20	High lowered
Cash from Operations	$164.9M – $180.9M	$156.2M – $168.7M	Lowered
Capex	$85.0M – $100.0M	$87.5M – $95.0M	Narrowed
Adjusted FCF	$85.0M – $95.0M	$75.0M – $80.0M	Lowered
Aaron’s Business Revenue	$1.50B – $1.57B	$1.50B – $1.54B	High lowered
Aaron’s Business EBT	$101.0M – $110.0M	$98.0M – $102.5M	Lowered
Aaron’s Business Adj. EBITDA	$170.0M – $185.0M	$170.0M – $177.5M	High lowered
BrandsMart Revenue	$615.0M – $645.0M	$615.0M – $630.0M	High lowered
BrandsMart EBT	$(0.5)M – $2.5M	$(2.5)M – $(1.0)M	Lowered (to loss)
BrandsMart Adj. EBITDA	$12.5M – $17.5M	$12.5M – $15.0M	High lowered

Earnings Call Themes & Trends

Note: The full Q3 2023 earnings call transcript could not be retrieved from the source system. The themes below reflect the company’s Q3 earnings press release and investor presentation.

Topic	Previous Mentions (Q1 2023)	Previous Mentions (Q2 2023)	Current Period (Q3 2023)	Trend
Credit quality (write‑offs, non‑renewals)	Write‑offs 5.4% on decisioning enhancements	Write‑offs 5.4% with improvement YoY	Write‑offs 6.1% (seasonal uptick) but 140 bps better YoY; 32+ day non‑renewals improved YoY	Improving YoY; seasonal variability
GenNext rollout	222 stores; 26.7% of revs	230 stores; ~29.3% of revs	245 stores; >30% of revs; 15 opened in Q3	Expanding footprint, higher mix
E‑commerce (Aaron’s)	17.9% of lease revs	17.9% of lease revs	18.5% of lease revs	Gradual penetration increase
BrandsMart demand/mix	Seasonally soft Q1; loss before tax $(0.9)M	Comps −20.9%; margin improved; EBT $1.1M	Comps −17.0%; margin +50 bps; EBT $(2.4)M	Weak demand; some margin resilience
Cost optimization	Ongoing programs and restructuring	Ongoing, with restructuring	On track for $35–$40M in 2023	Continuing
Macro headwinds	Inflation, rates, weaker demand	Same; noted in highlights	Weaker traffic, trade‑down impacting BrandsMart	Persistent headwind

Management Commentary

CEO: “The Aaron's Business segment is benefiting from our lease decisioning enhancements, which led to lower write‑offs and a larger than expected lease portfolio size, despite ongoing challenges in customer demand. During the quarter, we opened three Aaron's stores in new markets and our first new BrandsMart store since acquiring the business, and we remain focused on positioning both businesses for growth.” — Douglas Lindsay .
Company highlights: “Cost optimization initiatives on track to achieve $35 to $40 million target for 2023” and “Returned $9.5 million to shareholders in the form of share repurchases and dividends” .

Q&A Highlights

The Q3 2023 earnings call transcript was not accessible from the source system; therefore, specific Q&A themes and management responses could not be validated and are not included. We will update this section upon transcript availability.

Estimates Context

Wall Street consensus estimates (S&P Global) were not available via the tool for AAN at this time due to a data mapping issue; as a result, we could not compare reported results to S&P Global consensus for Q3 2023. We will supplement with S&P Global consensus when accessible.

Key Takeaways for Investors

Credit improvement is durable: write‑offs and non‑renewals continue to trend better YoY on decisioning upgrades; this is supporting gross margins despite weaker top‑line .
BrandsMart demand softness remains the swing factor: comps −17% and a Q3 pre‑tax loss signal ongoing macro and category pressure despite modest margin gains; FY guidance now embeds losses at BrandsMart .
Guidance reset lowers near‑term earnings/FCF trajectory: cuts to GAAP and non‑GAAP EPS (high end), operating cash flow, and adjusted FCF suggest more conservative H2 expectations; focus shifts to execution against narrowed ranges .
GenNext and e‑commerce are structural positives: larger, modernized formats and higher digital penetration are expanding reach and improving unit economics over time (>30% revenue mix) .
Liquidity/capital returns intact: $39.3M cash, $339.6M revolver availability; continued dividends and opportunistic buybacks ($9.5M returned in Q3) offer downside support, though delevering remains prudent in a high‑rate backdrop .
Trading setup: the combination of lowered guidance and improving credit metrics may cap downside if execution holds; however, a clear inflection at BrandsMart (traffic/ASP mix) is likely required for multiple expansion .

Additional documents reviewed for context:

Q3 2023 Form 10‑Q (financial statements, segment detail, KPIs) .
Q2 2023 Form 10‑Q (trend analysis, KPIs) .
Q1 2023 Form 10‑Q (baseline, early decisioning impacts) .
Press release: Dividend declaration (Nov 8, 2023) .

Aaron's Company, Inc. (AAN)·Q3 2023 Earnings Summary