AAN (2019 - Q1)

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. First Quarter 2019 Earnings Conference Call. [Operator Instructions]. Please note this event is being recorded. I will now turn the call over to Mr. Michael Dickerson, Vice President of Investor Relations for Aaron's, Inc. You may begin your conference. Michael

Thank you and good morning, everyone. Welcome to the Aaron's, Inc. first quarter 2019 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 and Steve Michaels, Aaron's, Inc. Chief Financial Officer and President of Strategic Operations. Many of you have already seen a copy of our earnings release issued this morning. For those of you who have not, it is available on the investor relations section of our website at Aaron.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. The 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 end of December 31, 2018 and subsequent filings with the SEC for a description of the risk related to our business that may cause 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 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 compatibility of our performance with other companies. These non GAAP measures are detailed and 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 investors to help facilitate comparisons of operating results with prior periods and to assist them and understanding the company's ongoing operational performance. With that, I will now turn the call over to John Robinson.

Thanks, Mike. And thank you all for joining us today. We are pleased to report a strong start to 2019. On a consolidated basis, we achieved revenues of more than $1 billion in a quarter for the first time ever, an increase of 11% over the same quarter in 2018. This increase is primarily a result of continued strong invoice growth at Progressive, improvements in the Aaron's business same store revenue trends and the acquisition of franchise locations in 2018. Adjusted EBITDA and adjusted non-GAAP EPS for $115 million and $1.8 per share, respectively, both up meaningfully from the prior year first quarter. While we delivered outstanding financial performance in the quarter, we believe that government shutdown and the uncertainty of the timing and value of the 2018 federal tax refunds affected our customer's behavior in the quarter. We believe that this contributed in part to fewer than expected originations across our businesses. As a result, the Aaron's business lease portfolio is somewhat smaller than planned as we enter the second quarter. The Progressive lease portfolio however, is in line with our expectations due primarily to the lower 90 day buyout activity and favorable trends that are large national retailers. Despite the disruptions experienced by our customers in the first quarter, I'm pleased with the strong financial results delivered by our teams and we are off to a good start in 2019. We remain conservatively capitalized and ended the first quarter with available liquidity of over $500 million in a net debt to adjusted EBITDA ratio of less than one term. This provides us flexibility to continue to invest in our business, explore strategic opportunities, and return capital to shareholders. I will now turn the call over to Ryan to discuss Progressive's Q1 results.

Thanks, John. I am very pleased with the results the team delivered in the first quarter. We continue to generate strong financial performance one destined ahead of future growth and pipeline conversion revenues. Revenues rose 19% in the quarter as compared to the first quarter of 2018 to 523 million. Revenue growth was driven by 14.2% increase in invoice volume in the quarter, resulting from a 17.9% increase in invoice per active door. Our first quarter active door count was approximately 19,800, down 3% from the first quarter of 2018. This change was primarily a result of a reduction in active doors within mattress and mobile which was partially offset by additions and other verticals. As evidenced by the accelerating growth and total invoice and invoice per active door, we believe door count is becoming less predictive as a leading indicator of future revenue growth, particularly as our overall mix shifts towards bigger box and online retailers. EBITDA increased by 41.2% as compared to the same period last year, calculated on basis consistent with the 2019 adoption of new lease accounting standard, EBITDA was 12.5% of revenues versus 10.5% and the year ago period, an increase of 200 basis points. EBITDA margin expansion was driven primarily by lower 90 day buyout activity in the quarter compared to the first quarter of 2018 as well as the leveraging of SG&A expenses and strong revenue growth. We believe the lower 90 day bought activity was a result of ongoing shifts and portfolio mix and year over year changes and federal tax refund activity. Calculated on a basis consistent with the 2019 adoption of the new lease accounting standard, write-offs were 7% of revenues in the first quarter of 2019 compared to 6.8% reported in the year ago period. As demonstrated by the consistency of this metric, our lease pools continue to perform well and are in line with our expectations. I remain excited about the momentum we're carrying into the second quarter and the remainder of the year, and I'm pleased with the significant effort the team has made towards providing the best possible experience for our customers. I will now turn the call over to Douglas to discuss the Aaron's business Q1 results.

Thanks, Ryan. We are pleased with the first quarter financial performance in Aaron's business, which was in line with our expectations in terms of revenue, adjusted EBITDA, and same store revenue. Same store revenue in the quarter was positive 0.7% and improvement a 510 basis points from the prior quarter, and the first positive same store revenue quarter since 2013. Same store revenue has been near flat for three quarters in a row. We expect this trend to continue as improvements in our pricing, product mix, and business transformation initiatives gain momentum. We were somewhat disappointed with delivery activity in the quarter which we believe is a result of the government shut down in an unusual tax season in terms of later timing of refunds compared to prior years, and the uncertainty of refund amounts. That said we continue to expect positive same store revenue within the range of our 0% to 2% outlook for the full year. Revenues increased 4.6% as compared to the first quarter of 2018. Lease revenue increased 9.7% as compared to the same quarter last year, primarily driven by the franchise stores acquired throughout 2018. Lease revenue also benefited from the ongoing investment in our Aarons.com platform which continued its strong growth in the quarter. Aarons.com is a key pillar of our omni-channel strategy and is attracting a younger, higher ticket customer who prefers a mobile shopping experience. Adjusted EBITDA increased 7% and was 10.7% of revenues versus 10.5% and the year ago quarter. Adjusted EBITDA growth benefited from an increase in lease margin, which is increased on a year over year basis for nine consecutive quarters. This was partially offset by higher write offs, and ongoing investments related to our business transformation initiatives, including investments in people and in technology. Write offs were 4.8% of revenues versus 3.8% in the same period last year, contributing to the increase of write offs was an increase in the number and type of promotional offerings, higher ticket leases, store closure activity during the quarter, and an increasing mix of e-commerce as a percent of revenue. On our fourth quarter of 2018 earnings call we described for you three key initiatives to drive improvements in customer traffic and conversion in the Aaron's business. These initiatives are rapid customer onboarding, centralized collections, and our next generation store concept. We're pleased with the results of our expanded testing in each of these areas and continue to refine the processes and make investments that will enable us to prudently scale these initiatives across the entire system. I'll now turn the call over to Steve.

Thanks, Douglas. Effective as of the first quarter of 2019, the company adopted ASC-842 a new standard related to accounting for leases. In our press release, we have added some information to the revenue table to provide you a comparison on an equivalent basis. The new accounting pronouncement requires the company to recognize substantially all of our operating leases on balance sheet as a right of use asset and a non-debt operating lease liability. At the end of Q1, we had an operating lease right of use asset of 370 million and a non-debt lease liability of 406 million. On a consolidated basis, revenues for the first quarter of 2019 were $1 billion, an increase of 11.4% over the same period a year ago, when calculated on a basis consistent with the 2019 adoption of ASC-842. As John mentioned, this is the first time we have posted a quarterly revenue amount of more than a $1 billion. Adjusted EBITDA for the company was 115 million for the first quarter of this year, compared to 94 million for the same period last year, an increase of 21 million or 22.4%. Adjusted EBITDA was 11.4% of revenue in the first quarter of 2019, an increase of 100 basis points from the first quarter of 2018 on a consistent accounting basis, resulting from higher consolidated gross margin. Diluted EPS on a non-GAAP basis for the quarter increased 33.3% to $1.8 versus $0.81 in the prior year quarter. As you will have seen from the earnings release, operating expenses decrease approximately 3 million resulting from the change and classification of bad debt expense at Progressive from operating expenses to a component of revenue due to the 2019 adoption of ASC-842. Adjusting operating expenses in the first quarter of 2018 to be consistent with 2019 reporting, operating expenses would have increased 44 million or 12.7% versus the year ago period. About 60% of the increase is due to the addition of acquired franchise locations throughout 2018 approximately 25% of the increase was driven by the year-over-year increase in write-offs in line with expectations and largely driven by the significant growth at Progressive. The balance of the increase is spread across acquisition related intangible amortization, expenses, and investments in marketing and personnel. During the first quarter, the company closed 84 Aaron's store locations, resulting from management's strategic review of the existing store portfolio. The company recorded restructuring charges of 13 million, primarily consisting of impairment charges associated with the closed stores. Tax generated from operating activities was 165 million for the first quarter of 2019 and we ended the quarter with 124 million in cash compared to 15 million at the end of 2018. We remain conservatively capitalized at the end of the first quarter with available liquidity of $513 million and a net debt to adjusted EBITDA ratio of 0.7 turns. After the end of the quarter, in mid-April, we made a scheduled principal payment on our senior unsecured notes of 60 million. The remaining outstanding balance of our senior unsecured notes is 120 million, with no additional scheduled principal payments until April 2020 on these notes. We are pleased that we delivered strong results in the first quarter and while it's still early in the year, we are confident in our ability to deliver on the results indicated in our 2016 outlook. Lastly, we had included full financial statements as opposed to only showing selected items for the balance sheet and cash flow statement in the earnings release. This is a continuation of our initiative to increase transparency and provide timely information. To that end beginning with this quarter, we will accelerate the filing of our 10Q before the market opens on the day we release earnings. With that, I will turn the call over to the operator to assist with taking your questions.

[Operator Instructions]. And our first question comes from John Baugh of Stifel. Please go ahead.

Let's see. We'll start with maybe Ryan on and I appreciate the comment on the doors versus invoice volume. How might that look in the next four quarters and appreciate that we're not supposed to focus on doors but some might you know, particularly with the onboarding of the BestBuy and whatever else you may have in the pipeline.

We do expect to continue to see some pressure in the door account through the remainder of the year just given the timing of those reductions we referenced specifically, we talked about mattress and on the prior quarter and again, close that out by saying we ended up seeing the dynamic we expected in the first quarter and the mobile reduction was primarily concentrated at the beginning of Q1, so we expect to see that for the next several quarters, offset by additions elsewhere, but those were will be compensated for the next three quarters.

Okay. And then the 90 day, which you sort of relate to the mix shift and tax refund delay, I wonder if you could parse those two and then on the tax refund delay was there some kind of increase or rebound in 90 day activity and say March and April or something? Or how does that number look going forward?

Yes, your intuition is spot on there, we did see the tax effect more pronounced as you might imagine, in the earlier part of the quarter, we essentially returned to levels similar with prior year by March towards the end of the quarter. So it kind of played out as you would expect with the delayed refunds and then on the portfolio mix obviously a lot of drivers influencing portfolio mix but in spite of the continued strong growth we have, we're seeing a slightly older average account and as that occurs, you see fewer 90 day by less 90 day buyout revenues, a composition of overall revenue, which will drive that margin expansion. So the two primary factors we saw resulting in a higher gross margin in the quarter.

Douglas, congrats on the same store increase 2013, wow, that's six years by my calculation that's pretty good. Could you talk a little bit about mix in pricing in your business? Obviously those are good guys and solid [ph] volumes still pressure and give us some view to how that changes and then I don't know if you can give any numbers around your ecommerce, it sounds good.

Yes, sure. So first on ticket you know, we've been working on ticket with this merchandising strategy for the last two years and have raised ticket considerably, which you're starting to see in comps is ticket really comping over itself in the portfolio and driving our top store. We can't live on ticket forever we think that'll probably you know, begin to sort of flatten out over the course of the year and really what we're focused on right now is driving customer traffic. We've talked about business transformation initiatives, new merchandising initiatives and in particular, some of these things we're doing in our stores to free our people up to sell and that's really the focus of the business right now is how do we both drive ticket up and maximize ticket and margin but also drive traffic in the business. E-comm, I think was your second question. And that is a big driver of our business. I think I said it was right at 10% of our revenue written into the portfolio, really bullish on the e-comm. It was up 51% year over year. I think the new platform we put in place and all the enhancements and the team we've built around that are poising us for more growth there. With e-comm comes more new customers and we're seeing both more new customers in our stores and online. So we're really excited about that both channels driving more new customer traffic, and that's been reflected in our results.

Okay. And then Douglas you mentioned some of the pressures on that 100 basis point increase in [indiscernible] and yet you're able to grow I don't think was 20 basis points the EBITDA margin of that business. So can you kind of walk through you know, A, how you did that and B, what that picture looks like going forward with a yin and a yang. Thank you.

Sure. Yes, we're happy with the EBITDA margin expansion 20 basis points most of it came on the back of lease margin expansion, which is really directly related to our merchandising strategy. Although I'm really proud of our store based teams we've gotten some great labor efficiencies in our stores and that's also helped and that's helped offset this 100 basis point increase in our write offs and we've also been able to do all that while investing in our business transformation initiatives. So all those combined and having a 20 basis point increase we're really happy about. Now as I think about write offs going forward, we continue this promotional strategy, which is introducing new customers into the portfolio and new customers charge off at a higher rate than our existing customers and we're also driving higher ticket which charges off at a higher net book value and then as e-comm, e-comm is a bigger part of our mix, as I mentioned in my remarks, that naturally has a newer, you know, higher value customer. We look at all of this in terms of risk adjusted margins. So what's our lease margin minus our write offs? And we're really happy with our risk adjusted margin. We measure each of our promotions and each channel that we deliver through and on a fully burden basis and so we're happy with where we are and happy with the margin profile of the business right now.

And lastly, that same question I asked Ryan, was there a delayed tax refund benefit or you know, impact that you saw maybe in March and April, as opposed to January and February. Could you walk us through that?

It's John Robinson, definitely saw the same dynamics Ryan described across all our businesses, which is, and I think it's well publicized that refunds were later than expected for sure, anecdotally, we have a lot of feedback from our system that in many cases, they were lighter than customers expected and whether they were wider or not, they were definitely later and it cost customers we believe, to be more cautious and so that drove, that affected originations and on the progressive side, this 90 day buyout rate and the problem on the specifically Aaron's business side is that it affected deliveries and by the time the trend, trended back to our expectations from a delivery standpoint, you know, we've lost some ground relative to our expectations, and you don't necessarily get that back and so we're working hard. We didn't get it back in the quarter. So we're working hard to get it back over the rest of the year and Douglas and his team have a lot of great strategies to do that. So we're confident about that. But it definitely, from our perspective, and there's a lot of data out there but from our perspective, tax season was unusual and different than we expected. The good news is that we saw collections come in and our delivery trends improved by the end of the quarter.

And just a very high level - what do you see in terms of I don't know the opportunity, the total addressable market, how is that chained in your mind with the discussions you're having with national retailers with Progressive, the things you're doing in the core business with e-comm? What are the big moving parts there? Are you more excited or less excited about what you see? Thank you.

We're very excited. Thank you for asking that question. We're very excited about the potential for all our businesses, to serve this customer. It's a big group of our population that's underserved and we believe we provide the best solutions for those customers to get the goods they need for their really to change their lives in a more positive way. So whether it's through big National Retail opportunities at Progressive or new strategies on the Aaron's business side, we think the markets really large, it's, there's a lot of green space and it's kind of incumbent on us just to get better every day, we kind of have a continuous improvement attitude around here. If we can get better every day, we can continue our growth and I feel like we have the unique set of assets, a unique set of people that position us really well to go capture that and you couple that with our balance sheet or kind of capital position. I feel really confident about the opportunity in front of us and our ability to go execute it and it's really starts with our people. So I couldn't be prouder than and couldn't be more excited about all the opportunity.

And I guess I'll sneak one more in here and [indiscernible] pretty big Q1 and reiterate guidance, any philosophy or thought for us there other than that's early in the year?

Yes, you got it. It's early in the year. So we're three months into the year. We're really pleased with the results, particularly in light of the unusual tax season. So we feel it's a good start. But we still got to execute on our plan for the balance of the year and we reiterated the ranges we provide in our Q4 column we will update you guys after Q2.

Our next question comes from Budd Bugatch of Raymond James. Please go ahead.

I guess I'll start a little bit with the Aaron's congratulations on the 70 basis points positive comp. You've been open now Sundays for this year. Can you quantify Douglas maybe what you think that contribution did to that opening on Sunday did to the comp, if that's meaningful or let us know about?

Sure, Budd. Yes, first of all, I just want to say I really appreciate our team members who made that happen. We had to make a real hard pivot to being open seven days a week and team did a tremendous job there. We're not going to quantify the amount Sunday has contributed to comps but it has certainly helped all our stores, across the chain are now open on Sunday and staffed for Sunday, and I'll just say it's performing in line with our expectations. We're seeing I think this is a good fact. We're seeing a lot more new customers on Sunday, which bodes well for our decision to do it and it also says we're not necessarily cannibalizing business from other days, and I think it puts us in a much better competitive position in the marketplace.

What would comp shipment [ph] been positive without Sunday if you weren't open?

We're not breaking apart the competition of comps on this call.

Okay, I tried. I know that we have a change in accounting we were I thought going to get what Progressive's bad debt expense was in the quarter I know you still have to calculate it and then it reduces our reported revenues but last year I think it was the lowest percentage of bad debt in the year I think it was 9.6% which was lower than any of the other quarters. How did Progressive's bad debts looked this quarter?

We came in at 9.7% on the same accounting basis Budd, similar arrived right in line with last year and the pools are performing well.

Okay, and Ryan, I know you talked a little bit about the doors being down on a on a net basis can we get the kind of puts and the takes of that - I don't want it by channel but maybe how many doors were you down and how many doors did you add to get to the door counts at Delta?

Yes, I don't have the composition that gets to the net in front of me, but it was several hundred from the National Mattress partner and it was several hundred on the mobile accounts that we talked about previously. And then we talked about the net effect of that resulted in a 3% decline. It's worth saying that in spite of those declines, and mattress and mobile, we did see invoice growth in both those verticals and they're strong core for us and excited about the potential there but when you net those out, it's about 600 and that minus 600 doors in the quarter so we had some additions elsewhere, because combined, the mattress and mobile were larger than that.

And is your national player rollout is are those doors all done now or when will they be put on board?

We're not providing that color. We're excited about where we're at, in that rollout, particularly obviously excited about the partnership. You know, the cases with all partners, we're focused on executing the best we possibly can for them and their stores and taking exceptional care of the customer. So I won't provide any further detail other than to say we're really pleased with where we're at and excited about the opportunity that remains

And the new partner funnel, I know John talked about being excited about the overall business and the TAM, but how close are we on some new partner data?

Yes, we continue to be really excited about the pipeline and I guess, as I mentioned in the past, it continues to be comprised of both regional and national opportunities, the team is working hard to convert those leads into pilots and pilots into the rollouts and we certainly have folks in each of those stages in the pipeline today. Like John said, it's a third of the US population. It's largely underserved today and we think we're very well positioned to capture the bulk of that opportunity.

Okay, I wouldn't be me if we didn't ask for the cost of revenue, at least revenue and fees for Progressive and for Aaron's, maybe there I know we're going to get it in the Q but maybe if we have it so we can work on our models.

I mean, the Q's coming out in half hour so you know, it'll be in there but I've got it here just so gross margin for Progressive is 31.2% in the quarter and on a consistent basis from 18 it would have been 29.4 and then the Aaron's business I guess the inverse is appreciation is the way we listed in the Q is 53% from - I'm sorry, that's consolidated, my apologies.

I will wait for the Q, if the Q is coming out in half an hour that's great. And Steve, kudos to you for the disclosure it's just, it's noticeably different and much improved and we really do appreciate that. So, kudos to you and your team for that. And with that question, my last question will be and I know, John, you kind of walked away from this question from John, but we have some seasonal changes particularly with away taxes [ph] what should we look for seasonally at least now in terms of the way the guidance is put together, how should we think about it? Are we going to have a stronger second quarter than we would have had it? How do we think - what's the way to think about it?

But you know, we gave some color on the Q4 call about how you know, we give annual guidance, but we did get some seasonality and we said effectively that the Aaron's business would be front end loaded as the investments layer on in the back half of the year and the Progressive business would be back end loaded and Q4 will be the peak earnings quarter and there's, you know, certainly Q1, we're happy to have delivered such strong results, but those trends still hold and, you know, we provided a range and on the non-GAAP EPS it was $0.20 so there's room within that range for what we delivered.

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

I want to follow-up first, with Ryan on the Progressive side. I'd say the number one question that we get around the story is, how to think about the ramp, you know, had a national partner, you know, like BestBuy right now. You know, obviously our work suggests that if you're live in about 2/3rds of their store here today. I guess can you help us think at a high level about how Progressive performs at a retailer of that size versus, you know, what you have across the rest of your partnership based? I mean, are there any differences on the positive side or negative side we should think about, as we think about the ramifications of a partnership like this?

Yes. We think we talked about a bit about the nature of national rollout and the investment required to get that off the ground, obviously it touches a lot of functional areas across the company to execute to the standard that that we set. You know, it's not just the team in the field supporting the folks in the stores or the teams managing their websites, they adapt, but it's our product teams, our technology teams, our compliance teams, our marketing teams all focused on executing the best we possibly can. So we deploy those resources with each of our new opportunities. Obviously, the scale of that is, is larger and higher and the investment larger, you know, as the door count increases. The good thing is over the 20 year history of Progressive we've launched several thousand plus door partners. So we kind of know what that playbook looks like and we are deploying it here as we have in other places and it just is as we discussed in prior calls, it evolves over time as the retailer and their team become more familiar with the offering and customers come to expect it's availability within their locations on their website, and we're seeing that evolution play out here and we've seen it elsewhere. The great thing is if you look at some of our largest accounts, they're also some of our longest tenured accounts and they're still growing at double digit rate. So we're constantly finding ways to tweak and optimize the model to generate higher levels of productivity expect that will be the case here as it has been with all of our other large accounts.

And then Douglas, just, you know, as we think about, you know, same store sales for the year and, again, congratulations on the positive comp here. As we think forward. I mean, any change in your mind about how you're thinking about the cadence of same store sales, you still believe that that should accelerate, you know, and be even stronger as we move through the year or, you know, with what you see today's this may be a better run rate, think about going forward. Thanks.

Yes, I think, you know, first of all proud of the team for 510 basis point increase over the last year in comps. So that's really good. We're happy that where we are, you know, given the lower portfolio as John mentioned in his comments coming out of tax season, we're expecting comps to really bounce around the flat range, kind of where they've been, where they at this quarter and where they've been. For the next few quarters we do want to reiterate our guidance of a positive comps for the year between 0% and 2%. And I think what we're seeing in this deficit at the end of the quarter, will be made up for in the traction we've got going with a lot of our business transformation initiatives and our merchandising strategy continuing to take hold over the course of the year, along with growth in e-comm and obviously Sunday hours contributing. So all those positive really offset the negative of the portfolio decline and tax season.

Our next question comes from Bill Chappell of SunTrust. Please go ahead.

Keep it simple, in fact to Douglas. So is the thought or can you just help quantify if at all possible tax season had a negative effect on same store sales in first quarter and will have a positive impact on same store sales in the second quarter? Is that the way to look at it?

No I don't think so, Bill. I think tax season was - I mean, here's what we saw in the Aaron's business in tax season was we collected our money, the customer paid as we expected, but our deliveries were soft during the whole season. And, you know, I don't - we may call back some of those deliveries over time but I think the other initiatives we have going on so we ended up the lower portfolio balance, but the other initiatives we have going on in the business will offset that decline to get us back to sort of the flattish, I would say for the quarters throughout the year with a net positive 0% to 2% annually.

Okay. And then Ryan, just understanding the mix shift. Do you expect to mix shift to get better or worse as we move through the year? I understand there's kind of seasonality of some of these businesses that will change that, but I'm just trying to trying to kind of gauge how that plays out as we moved the rest of the year.

Yes. I think I alluded in my response to John's question earlier, it is a function of several variables, I mean, you have the agent we talked about earlier, which is driven by you know, difference in growth rates among existing accounts, introduction, starting new accounts, pricing overall rates of growth. And I will say that once you factor all that in, we do like what we're seeing in our portfolio and satisfied with how the pools are performing obviously tax affects play out in Q1 and that that kind of is what it is in Q1 and then the rest plays out through the remainder of the year. And as it sits as it relates to the rest, I think we felt confident enough to reiterate the annual range for write-offs that we've provided in the past of 6% to 8% of revenues and feel good with what we see today and how the pools are performing.

Okay, and then finally, for me, Steve, just understanding the use of cash for this year share count and tax rate, are they all fairly steady, no real changes or expectations for the rest of the year?

No that's right. I mean, we still think the tax rate will be kind of 23 and a half-ish and as you saw, it came in lower than that in Q1 but that happens seasonally but across the - happens every year in Q1 but across the year, we think still around 23.5 and as far as use of cash and share count we do have a large authorizations still remaining with 330 million remaining on our authorization and will continue to have a capital allocation strategy of reinvesting in the business, looking for opportunistic acquisitions and then returning capital shareholders and do that prudently.

Our next question comes from Kyle Joseph of Jefferies. Please go ahead.

Most of my questions have been answered just kind of two for Ryan, if you don't mind. Just in terms of Progressive if you could give us the update on the competitive environment, any changes since last quarter?

It does remain a very competitive market I apologize a bit because I feel like I repeat myself but it kind of is the same dynamic, it is competitive. I think folks are attracted by the large unserved opportunity that remains out there and that dynamic is more pronounced in the regions where the barriers to entry are lower. I'll say that whether we're competing for a regional or a national opportunity we do well when a retailer cares about things like our scale and our access to capital, the stability and reliability of our decision making, you know, the roster of retailer relationships we have that's really unmatched, our prioritization and focus on compliance, a relentless focus on the customer experience where retailers care about those factors. We have a great win rate and that that has been the case that continues to be the case. I think that supports the optimism we have for converting some of the pipeline is out there.

And then one last one for me also on the Progressive side, just talk about underwriting trends, any changes there, if you're getting more conservative, less conservative, any color you can provide us there. And then, you know, we talked about tax refunds a lot on this call, if you could talk about, you know, if there's any changes to underwriting seasonally throughout the year just given those dynamics,

Not really, answer to the second and the answer to the first, we're always in a sort of test measure expand on iterative enhancements to our decision and activities. We've got a very large team focused on that effort. There's obviously a large portfolio then for them to work with optimize their approach on. It's one of the differentiator for Progressive in the marketplace and one of the reasons why we can tell retailers to expect a very consistent performance from us. We have 10 years of data to work with. So we've got an excellent team focused on delivering incremental improvements to our decision and they've been doing exactly that. There aren't really step functions if you will, it's sophisticated set of algorithms that we've developed over time and that we're constantly tweaking.

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

You already answered a lot of questions. I had a question about Progressive in terms of the very strong sequential improvement in invoice volume for active door growth, you know, you went from 11.6 in the fourth quarter to 79 in the first quarter, you know, against a very relatively difficult compare. I mean your invoice volume active [ph] doors are 20%, the first quarter of 2018 so I was just wondering if there's any commentary you can give just in terms of what drove that significant sequential improvement? Thanks.

Yes, appreciate the question. It actually was a record level in Q1 that we set on productivity per door and it was really driven by just more deals, more transactions, more leases per door, really, roughly flat approval rate year over year, and just execution going extremely well, part of our partners and our teams working with those partners out in the field. We do benefit from kind of an evolution of the portfolio toward more productive doors, and we send the past all doors aren't created equal and we've been fortunate enough to onboard some highly productive partners, and they're doing well for us, which contributes to the overall increase in productivity per door. But I will say it's fairly widespread the increases we're seeing in production per door, and that just goes back to optimize the model for productivity.

Our next question comes from Vincent Caintic of Stephens. Please go ahead.

Just a two follow-up questions from what's been previously asked on Progressive. So appreciate the seasonal EPS kind of trend guidance that's really helpful. Just when I think about the national rollout, how I think about maybe the components of earnings. So you added this national rollout in March, I'm just kind of wondering how you think about maybe the expenses as a ramp up versus went through revenue ramps up to these tend to be fairly evenly matched or do you get expenses versus your kind of thinking about this national rollout?

Yes. Good question Vincent. You're absolutely right. There is a bit of a front loading of expenses and we've discussed that a bit in the past. It just comes, you know, by definition is you're investing in those opportunities prior to launch, you've front loaded expenses, you've u front loaded revenue with expenses, you got to build out the technology, you got to build out the teams to roll out the program if you want to do it right, operations is a critical - what they do is they execute phenomenally well for our retail partners and you build that out prior to launch. The dynamic that you see playing out overall in our business and why we were able to generate margin expansion in SG&A in spite of that fact is that while that's occurring in some places and other places, you're sort of further along that curve. You've now rolled out a partner, you're now expanding into higher level of productivities and generating leverage on more mature relationships. So I think the balancing now of the front loading in some places is what's resulting in the leverage we saw in the period.

Okay, perfect. So there isn't really as you're rolling out, there isn't really going to be a particular hump that you see in expenses just because you have prior relationships that are already reaching their maturity, would that be fair?

That's right. If you think about it, if we're talking about a rollout in Q1 of this year, we've spent a significant amount of resources throughout last year to prepare for that, to the extent that, it's the scale, what would warrant that, and especially if we've been piloting and have some visibility into that we've been working on the right technology solution and building the right team to support that.

Okay, perfect, very helpful. And just one more so I appreciate the comment on the press release about the doors versus invoice maybe that relationship is changing now. Is there a kind of any way to think about that when you think about, say a national accounts you have versus regional counts in terms of metrics on the productivity per door, the leases per door, does a national door generate twice the invoices or any other sort of metrics that can help kind of help us compare between different categories of retailers?

The really the best indicator out there for future revenue growth is invoice. And so we tried to break that down in the past into its component parts, which are the metrics we've used historically doors and invoice per door where the product is total invoice. And the problem is not all doors are created equal and so you get variation in that metric and in some periods, it would seem to suggest that performance isn't strong when it actually is very strong and it's offset by strong increases in productivity elsewhere. So the real focus I guess, should be on that invoice number because it is an excellent predictor of revenue performance. The others just come a trade-off.

Vincent, this is John I mean the national versus regional is more descriptor around the footprint of the retailer and not necessarily the characteristics of their doors. So you can have national retailers with lower productivity per door just due to the nature of their business and you could have we have some regional accounts that are very productive. So that doesn't necessarily indicate national versus regional doesn't necessarily indicate door productivity. We are excited about some of the new doors brought on to the productivity potential but that doesn't necessarily mean there's a difference between national and regional.

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

Thank you. To summarize, we're pleased with a strong start to 2019 and while it's still early in the year, and we've got to continue to execute on our plan, we're confident in our ability to deliver on our 2019 outlook. We're pleased with the ongoing performance at progressive and the progress being made by the Aaron's business and its transformation efforts. In conclusion, I'd like to thank our associates, retail partners and franchisees for their dedication to our mission of providing high quality products to credit challenged and underserved customers. Thank you very much and thank you everyone for joining us today.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.