Thank you. Good morning, everyone, and thank you for joining us. Our earnings release was distributed after market close yesterday, and it outlines our operational and financial results for the first quarter of 2020. All related materials, including a link to the live webcast are available on our website at investor.rentacenter.com. 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 from our expectations. These factors are described in our earnings release issued yesterday as well as in the company's SEC filings. Rent-A-Center undertakes no obligation to publicly update or revise any forward-looking statements. This call will also include references to non-GAAP financial measures. Please refer to our first quarter earnings release which can be found on our website for a reconciliation of non-GAAP financial measures to the most comparable GAAP financial measures. I'd now like to turn the call over to Mitch.

Thank you, Daniel, and good morning, everyone. Thank you for joining us. We will be providing a voiceover to the presentation shown on the webcast. It can also be found at investor.rentacenter.com. So starting on Slide 3, the coronavirus has put significant stress on our economy and on our organization as we all adjust to social distancing and other governmental measures to combat the pandemic. We worked extremely hard to ensure the health and safety of our employees, customers, and suppliers, which is our number one priority, while making sure we're addressing our customers' needs. Many are affected by this crisis. We are sensitive to their condition and focused on reinforcing the attributes that have made Rent-A-Center a trusted partner for over three decades. The response highlighted the strength of our organization. Our people have gone above and beyond in so many ways, from providing masks to keeping everyone safe, to implementing curbside pickup, and keeping the increased volume of e-commerce deliveries moving smoothly. Very hard work and dedication, especially of our frontline co-workers, inspired each of us every day, and I'm incredibly proud of their efforts. The response has also underscored the relative strength of our lease-to-own model versus traditional retail. It was the case in the Great Recession when lease-to-own sales outpaced general retail, and it's proving to be the case in the current economic environment. While this situation continues to play out, our metrics thus far are performing better than we initially expected when this pandemic started. April was a solid month, helped by government stimulus and e-commerce increases. Financial stress is not new to our customers, and the slowdown appears to be having a more substantial impact for retailers outside the lease-to-own channel we serve. Our model is unique in that it features a revenue stream from the lease payments. It also has a low loss rate as customers generally return products if they can no longer make payments, which we then re-rent. As a result, even though revenue has been impacted slightly by a small portion of showroom closures, we continue to generate recurring revenue, and demand for essential products such as appliances and computers has been strong. Turning to Slide 4, digging in a little deeper into revenue performance and what's happening at our stores, the first quarter marked the ninth consecutive quarter of positive same-store sales in our Rent-A-Center business. And our growth is still in the high-single digits at over 7% from a two-year perspective. And since the beginning of the pandemic, almost all of our Rent-A-Center stores have remained open to address needs-based activity from our credit-constrained customers. While most remain fully open, at the peak, 25% of our locations were operating with a closed showroom. That's come down about 90% as state and local governments move to reopen their economies. We have started operating in compliance with applicable local state and CDC guidelines and we're well-prepared to move forward with further showroom openings as areas allow. We're also operating retail partners through our preferred lease segment where we continue to see strong invoice buying versus last year of 17%. While many of those stores were closed during the second half of March, we benefited from the recurring revenue nature of our lease agreements. About 55% of our staff locations are now open and running in retail partners with open stores, and that compares to only about 25% at the end of March. Our virtual channel saw different applications in March and April, but the demand is trending back towards normal levels. Preferred leases in the important strategic business world, but it's not yet a substantial portion of our business. So the impact to our overall operating results has been muted. I'm really pleased by payment activity in the segment. And as those recap stores reopen, we're seeing strong demand for our lease-to-own program. Sales for the quarter increased modestly, driven by same-store sales increase of 1.7% in the Rent-A-Center business, and the addition of the merchant's preferred virtual solution. We're encouraged by trends we're seeing in e-commerce, which experienced growth of over 100% in April versus last year. First quarter adjusted EBITDA remained consistent with the first quarter of 2019 when non-GAAP earnings per share grew by almost 15%. There will be an impact from the pandemic in the second quarter as it compares to last year, but we believe it will not be nearly as severe as traditional retail as we expect our revenue decline to be 10% or less with a potential for a lower impact on EBITDA. Turning to Slide 5, we're committed to investing in strategic priorities that we believe have the potential to steepen our long-term demand curve by improving the customer experience. E-commerce is clearly one of those. We responded to widespread social distancing by accelerating initiatives to enhance customer service and new payment options for bank and non-bank customers and implement additional e-commerce functionality. These initiatives are improving traction of both new and existing customers. In addition, our digital strategy's overall demand is being helped by the government stimulus and our own internal programs. The majority of our customers qualify for the U.S. CARES Act and many of these stimulus funds to make ground payments. In fact, the day the direct deposit government's stimulus payments were sent out, we saw a material increase in demand and revenue. And we expect further benefits from stimulus as the mail checks go out in waves all summer. We're also offering an internal program called Benefits Plus, which includes an unemployment benefit underwritten by Aon that enables eligible customers who become unemployed to keep their merchandise during this difficult time, providing nice additional support. Skip/stolen losses in each of the segments performed in line with expectations for the quarter. Most of our products are necessities that our customers want to keep, and we're working to help them do just that, even providing payment assistance in some cases. In addition to adding digital capabilities to support demand, we're making continued progress to streamline operations, and I want to stress that these initiatives are paying off. We've been able to react faster and work smarter, and it's helped offset some of the near-term headwinds from the response to the virus. Importantly, the focus on optimizing cost will have long-term benefits as well. Here is just one example. We made enhancements to our centralized contact centers as we reduced labor hours in the staffed preferred lease stores. We believe there is a long-term opportunity to become more efficient at collections as we free up store hours to support additional sales. Our financial condition is strong, with substantial liquidity as we move forward on our strategic plans. We ended the quarter with $183 million in cash and no debt maturities until 2024. And we've prioritized our cash for operations. We are expecting sequential improvement in cash flow in the second quarter and are continuing to invest in our strategic priorities. We've also declared a second quarter dividend consistent with historical amounts. Based on our experience during the Great Recession, we expect demand for our products and services to continue to increase as prime and subprime lenders move back up the credit scale. The demand increases which have historically been seen at the top of our funnel typically more than make up for any short-term impact we see during recessions. We've put a lot of time and effort into improving the customer experience, and we're confident in our ability to execute on strategic initiatives to capture wide-spaced opportunities, both digital and virtual. We see numerous opportunities to gain market share in the Rent-A-Center segment. We also believe the stress on traditional retailers is enhancing our growth prospects for preferred lease. Our conversations with potential retail partners show that they're looking for ways to improve their sales as the virus accelerates change. We have a strong balance sheet and a flexible partner model versus competitors that are not as well capitalized, particularly at the regional level, really some great opportunities for us there. And with that I'll turn it over to Maureen to discuss the first quarter financials in more detail.

Thanks, Mitch. As you can see on Slide 6, consolidated earnings were favorable to last year with an increase in the top line and a slight decline in the adjusted EBITDA margin. Consolidated total revenues were approximately $702 million in the first quarter, an increase of 28% versus the same period last year. The gain was driven by the addition of the Merchants Preferred virtual solution and a same-store sales increase of 1.7% in the Rent-A-Center business, partially offset by refranchising and rationalizing our store base. Adjusted EBITDA was $65.5 million in the quarter, and adjusted EBITDA margin was 9.3% versus 9.5% in the same period last year. Non-GAAP diluted EPS was $0.67, up 14.6% over last year. Other benefits to non-GAAP diluted EPS included lower interest expense versus last year and a lower tax rate of 18.4%, down from 22.9% in the first quarter of 2019. Turning to segment results, starting with our largest segment, revenues for the Rent-A-Center business, which includes corporate-owned U.S. stores and rentacenter.com were $455 million in the first quarter and benefited from a 1.7% increase in same-store sales. To provide some context for the coronavirus impact, same-store sales in our Rent-A-Center business increased 2.8% in January, 4.8% in February, and were down 2.5% in March as the initial impact of the pandemic took effect across the U.S. In April, trends improved sequentially, driven by government stimulus payments. Adjusted EBITDA for the Rent-A-Center business was $74.5 million, up 240 basis points as a percentage of segment revenue versus the same quarter last year. The performance was driven by better gross margins and lower operating expenses as we continue to streamline the business. As a percentage of revenues, skip/stolen losses for the Rent-A-Center business were 3.9%, a 20 basis point decline from the fourth quarter of 2019 and up 20 basis points versus the year-ago period. Preferred Lease total revenues increased 10% in the first quarter versus the same quarter last year. The performance reflects a 17% increase in invoice volume driven by the addition of the Merchants Preferred virtual solution. Adjusted EBITDA for Preferred Lease was $18.8 million or 8.7% of revenue. The year-over-year change in EBITDA as a percentage of sales was driven by investments to support future growth, the mix shift to virtual location and the impact from the coronavirus from closed retail partner locations during the second half of March. Skip/stolen losses were 12.2% of sales for the Preferred Lease segment in the first quarter, up versus last year before we increased our mix of virtual locations, but down 200 basis points sequentially. Profitability in the segment is expected to improve as we scale the virtual offering. Finally, in the corporate segment, first quarter expenses increased $5.5 million, driven by the addition of the Merchants Preferred virtual solution, rent expenses resulting from the sale and partial lease back of the corporate headquarters, and timing of our annual stock award grants. Moving on to the balance sheet and cash flow highlights, cash generated from operating activities was $47.4 million for the first quarter. The company ended the first quarter with $182.9 million of cash and cash equivalents, and outstanding indebtedness of $362 million. Now turning to Slide 7, as we outlined in our March update, we are not providing guidance for the year given the fluid nature of the coronavirus and the varied efforts by the state to contain the spread and reopen their economy. That said, we do want to provide additional color on our near-term outlook and the adjustments we're making to address these challenges. There will be an impact overall in the second quarter as it compares to last year, but not as severe as many traditional retailers are experiencing. Based on what we know today, we expect second quarter revenue to be down 10% or less versus last year, driven by lower demand from closed locations and lower collection. As Mitch noted, we have transformed the organization to incorporate a more variable expense structure and we expect that, coupled with our ongoing focus on reducing costs, to result in an EBITDA decline for the second quarter in the same range to slightly better than the impact on revenue. Additionally, given the improved capital structure and lower interest expense versus last year, earnings per share is expected to be essentially flat to last year during the second quarter. We do not expect to see material pressure on skip/stolen losses for the year. As you know, our contracts are leases and unlike a traditional subprime lender, returning the merchandise is always an option for our customers. Additionally, any pressure reduced on skip/stolen losses is reflected as a non-cash write-off of inventory when customers stop paying and do not return the merchandise. Turning to expenses. We've made a number of additional adjustments to reduce operating expenses, including executive pay reduction; temporarily furloughing employees in stores and at our corporate office; reducing store hours in some cases and where possible, renegotiating real estate leases. We plan to bill back in some expenses as we move into the second half of the year, which have the potential to impact our seasonally low third quarter. That said, we believe our actions will further streamline costs and improve efficiency benefiting future years. Regarding cash flow, inventory purchases and capital expenditures have been reduced in order to partially mitigate the impact of the coronavirus. In addition, we were able to take advantage of the net operating loss carryback and deferred payroll taxes available as a result of the CARES Act. We are tracking to a sequential improvement in free cash flow as compared to the first quarter of 2019. Our near-term outlook of down 10% or less in revenue and EBITDA for the second quarter reflects the resiliency of our lease-to-own model and our swift action to reduce costs. Turning to Slide 8. Our financial position is strong with total liquidity of over $230 million and net debt to adjusted EBITDA at 0.7 times at the end of the first quarter compared to 1.4 times in the year-ago quarter. Our liquidity at the end of April is actually up to $280 million, an increase of approximately $50 million since the end of the quarter driven by strong performance in April. Our capital allocation priorities are to continue to invest in the business and return value to shareholders. In the first quarter, we increased our quarterly dividend from $0.25 to $0.29 and repurchased 1.46 million shares for $26.5 million, returning approximately $42 million in capital to shareholders. As Mitch mentioned earlier and given our healthy financial position, we intend to pay our second quarter dividend on June 1. As always, detailed income statements by segment are posted to our Investor Relations website, and we anticipate filing the 10-Q on May 11. Thank you for your time, I'll now turn the call over for questions.

Thank you. Your first question will be from Bobby Griffin with Raymond James.

Good morning, everybody. Thank you for taking my questions. I hope everybody is doing well and staying healthy. I guess the first question I want to ask Mitch or Maureen is around the portfolio nature of the business. Given that trends are starting to improve here in April and more states are opening, will 2Q largely be on the low watermark for revenue? Or does the portfolio side of the business mean that the impact could actually be worse than 3Q from a revenue decline perspective? Just trying to understand how this business will kind of trend going forward if we stay on the same path of more openings and modestly sequentially improving trends by month?

Yeah. Good morning, Bobby. I think at this point it's too hard to say what's going to happen to the portfolio between now and the end of the quarter, which is what will drive the third quarter revenue. So I don't know if it's the low watermark or not, it's really too much - it's too hard to forecast. All we can tell you is demand is really strong right now. As you can see, April was good, demand was strong, but where the portfolio ends, I don't know. We can't predict the third quarter yet to say that the second quarter is the low watermark or not.

Well, let me I guess maybe ask it a different way. If based on the guidance of down 10% for Q2 revenue, are you assuming that contracts written into the portfolio modestly improve in May and June versus what they're doing today in April?

Well, we expect the demand to stay strong for a couple of reasons. As the stimulus is still going, there are paper checks getting mailed out all summer long. So we expect that to continue to help the - yes, tightening credit as we've talked about that we're already seeing in the marketplace as credit tightens up, it pushes more demand in the lease-to-own transactions. So we expect demand to continue to be strong, not just in April, not just an April thing.

Okay. And then I guess lastly from me, you mentioned briefly there in your response, but when you talk to kind of your third-party retail partners, and you look at kind of the pipeline there for preferred leasing, are they starting to mention already that the first tier and second tier offerings that they usually use for credit are changing and you're seeing more people either new customers or current customers having to rely on that rent zone offering? Or is that typically three to six months after we get an economic shock like we're getting now? How quick do credit conditions typically change?

We think it's happening already and it's not just from anecdotal feedback from retail partners. We have a decision engine in the Preferred Lease business, so we see the customer that comes into the engine from a credit standpoint, not necessarily a FICO score standpoint, but our own credit decisioning, both in staff locations and our virtual locations, and we're seeing a higher quality credit customer coming into the decision engine already.

Okay. I appreciate that. Those both very helpful. I'll jump back in the queue. Thank you for answering my questions.

Thanks, Bobby.

And your next question will be from John Baugh with Stifel.

Good morning. And congratulations on a great first quarter in a tough environment. I'll jump right in. Any comment, Mitch, on what's happening with pickups? Obviously, the skips/losses, stolens are in good shape, and I'm curious if you're having to pick up and then re-rent much more frequently today.

No, we haven't seen that bit yet, John. We work with our customers. They want to keep our products like we - the majority of our products are essential products. The customers want to keep them. The customers are not necessarily under any more pressure than they normally are. I mean, I think as you know there are customers under pressure all the time. This obviously is a tough time for a lot of people, but I don't know that it's necessarily more specific to our customer than maybe others. Keep in mind the majority of the essential workforce probably fits in our customer demo. So we're not seeing anything dramatic there. And the people that need help, we're working with them to keep it on rent. We haven't been in the field a whole lot the last six weeks either. Will there be a few more pickups in May and June than normal? We haven't seen it yet. I think there'd probably be a few more, which on one hand is okay because we buy less product that way to re-rent to others because the demand - I'm comfortable saying the demand will outrun any return in the pickups as more and more people get pushed into the lease-to-own transaction as credit tightens, as people are looking for more flexible options, and so forth.

And then you mentioned the Aon benefits. Could you just sort of review for my benefit and others how many customers have that - I've seen that's on the store side, and how that's kind of working, what you're seeing, how many people are utilizing that benefit now and kind of how the pluses and minuses of that are working so far?

Well, it's all positive. About 70% of our customers have the Benefits Plus included in their agreements, which features the unemployment benefit provided by Aon. This benefit helps eligible customers maintain their merchandise if they become unemployed. While we have seen an increase in claims compared to normal circumstances, it’s not overwhelming. I don’t believe our demographic has a higher unemployment rate than those in middle-income or higher brackets. Most of our customer base consists of essential workers, which has been beneficial. We profit from selling this product, and now that it’s needed, Aon is processing the claims. There are certainly more claims than usual, but it’s supportive, contributing about one to two million a month from Aon and helping customers retain the products they are paying for. However, it’s not going to account for 20% of our revenue. We aren’t witnessing those extreme unemployment rates among our customers right now. While I can’t provide an exact figure, there is a common belief that the lowest income groups are the hardest hit, but I’m not convinced that’s the case. Only time will tell. That said, I think the majority of the essential workforce in the country is represented in our customer base, so it’s definitely advantageous and I’m pleased we have it.

And staying on the same topic, you mentioned payment extensions in some cases. Correct me if I'm wrong, but you do that to some degree all the time. So the question is, are you doing it meaningfully more or to the comments you just made, no, it's not that bad, slightly more, what are you seeing there?

Yes, it's more in that direction. I'd say a bit more than just slightly, but it's not a massive increase in that regard. We do this to assist the customer in retaining the product, but it's a decision made on a case-by-case basis by the stores, and for Preferred Lease, our contact center handles it. The number is up, but as you can see from our revenue forecast for the second quarter, which shows less than a 10% decline from last year, it's not a significant figure. If we were intervening on a large scale, it wouldn't contribute to revenue when we extend terms. If it were that substantial, our revenue forecast for the second quarter would be worse than what we are sharing with you.

Correct. Okay. And then you mentioned on the Preferred Lease side that I think that 25% of your customers or your retail partners were closed at the end of March, and 65% reopened now and you are trending toward normal. I guess kind of a two-part question. Most of those retail partners are furniture if I recall correctly. I would assume even if they're open now, their business is still off substantially versus pre-virus being open. So I'm wondering trending back towards normal sounds like you're close to getting it all back. And I just find that a little hard to believe, but what are your expectations on that business revenue tracking? And I assume we'll get most of the stores open within the next 60 days, if not sooner?

Yes. And the numbers we - it's in the prepared comments, John, only 25% - at the end of March, only 25% were open and now it's 65%. So we had 75% - the inverse of that, obviously, 75% closed and only 25% open at the end of March, now 65% are open. So - and I agree with you, I think by the end of the quarter, if not sooner, they'll all be open. I think we've been pleasantly surprised, even in the furniture categories that the demand has been strong. I think furniture retailers will tell you - because I talk to a lot of them, will tell you they've been surprised that initially back in the middle of March, the rush was the essential products like computers and appliances and so forth. And the longer people are in their homes, I think what we're seeing and as I said, in talking to some furniture executives, CEOs of some of the bigger furniture companies, their belief is now based on what they're seeing is that anything for the home is going to do well. Anything, as people are inside more, and staying home more and not only through the pandemic, but even afterwards, there's the belief people will be home more and out to eat less and those kinds of things, as you know. But it seems like anything for the home, the demand is high. And I'm not saying that - furniture executives will tell you that they're doing better than last year. But what they thought they would do when they reopen compared to what they're doing and doing a lot better than they thought that there's a lot of pent-up demand there. And a lot of the stores are opening, and we're getting back to normal levels ourselves. So keep in mind, John, they could be 20% off last year, and we could still be doing more as credit above us tightens up. So I think in a furniture store because of social distancing and so forth, they are still going to be down some, not as bad as people thought when this started. When they reopened, they're not down as much as they thought they were, and we may not be down at all, based on credit being tighter above us.

Okay. Your next question is from the line of Brad Thomas with KeyBanc Capital. Please go ahead.

Hi, good morning, Mitch, good morning, Maureen. And let me add my congratulations on some nice execution here of late. Let's hear, I wanted to just follow up on some of John's questions on the direct side of the business. I apologize if I missed it. I'm having trouble getting the slide deck up. But can you talk a little bit more about what the invoice volume growth rates, what those trends have looked like as you went through March and April, and how it's tracking here in early May?

Well, the 17% increase in the invoice volume of Preferred Lease in the first quarter, and we pretty much lost the last two weeks of March. It was very, very low, those last two weeks of March. 75% of the stores closed. So if you factor in those two weeks, which were about 15% of the quarter, I mean that 17% gets back to where we were like in the fourth quarter in that 30% range if we hadn't lost those last two weeks. So - and as I said, as they reopen, the demand is strong. I don't have a forecast for you on what we think the invoice line will be in this quarter. But as you see, we expect it to be pretty strong based on the kind of revenue that we're forecasting for the quarter.

Got you. Okay. And can you remind us how much Merchants Preferred would have contributed to revenue and invoice volume here for the quarter as being an acquisition?

Yeah, revenue in the quarter for Preferred Lease was $23 million and it generated invoice volume pretty similar to what they contributed last quarter around the same range as the revenue number for the quarter.

Okay, great. And I guess, Mitch, in terms of a bigger picture question here, as you think about the Rent-A-Center side of the business and the Preferred Lease side of the business, how does the new world that we're in, how does it change strategically? How would you like to position these businesses as you think about the strategy and some of the investments you're going to be making over the next couple of years?

I believe that a significant portion of our business is shifting towards online sales. As we mentioned, our e-commerce orders in April have doubled compared to a year ago. While we don't expect this rate to continue indefinitely, we do anticipate it will remain robust. We see this trend of increased online shopping as a lasting change rather than a temporary spike. We're actively investing in this area. A noteworthy statistic is that in April, about two-thirds of the customers placing orders through our website were new to us, many of whom hadn't engaged with us in quite some time. This ratio of new customers is stable as our online numbers have doubled from last year. This indicates not only growth in our e-commerce but also that the rate of new customers has doubled, which I find significant. We will keep investing in this area, which is driven by our value proposition and the current tightening of credit, alongside the appeal of leasing over purchasing. We have introduced more payment options for customers, making it easier for both bank and non-bank customers to complete their transactions. We've also streamlined the auto-pay sign-up process and added texting capabilities for both sales and collections. This reflects our commitment to enhancing the e-commerce experience. Overall, whether discussing Preferred Lease or Rent-A-Center, e-commerce has become the most significant shift, gaining increased importance in our strategy. We are excited about our growth in April and the initial days of May, as well as the fact that our new customer percentage has also doubled. This suggests that customers are not merely opting to shop online due to stay-at-home orders; we are successfully attracting new customers. This is a strong indicator of our brand and our value proposition.

Great, that's very helpful. Thank you, Mitch.

Thanks, Brad.

Thank you. And your next question will come from the line of John Rowan with Janney. Please go ahead with your question.

Hi, can you hear me now?

Yes. Hi, John.

Hi, guys. Good morning. So as you look into 2Q and you've made comments about having a big increase in cash flow. What are your plans? Are you going to maintain a high level of liquidity and a lot of cash? Or would you look to actually reduce that in 2Q?

Yes, so we're evaluating that. We initially drew down an additional $118 million when the pandemic first started because of the uncertainty and just to make sure that we had access to our cash flow and adequate liquidity. Given the increases in cash flow that we're expecting in the second quarter, we'll be evaluating that. We'll know a lot more about the state governments opening up their economies and what impact that's going to have on our business and may feel comfortable at some point within the quarter soon after to reduce that debt.

Okay. And then can you remind me, is there any online-only business in Merchants Preferred? Meaning that you don't actually - that the merchandise you shop for online and then lease on transaction is created fully online? Or is it primarily the virtual lease-to-own and store?

It's a combination. We don't have any retailers that only operate online yet, but generally speaking in Preferred Lease, about 30% of business location starts online with those retailers. So it's roughly 30% of that business, but as I mentioned, we haven't worked with anyone yet that doesn't have physical stores.

Okay. Thank you.

Thank you.

Your next question will come from the line of Kyle Joseph with Jefferies.

Hey. Good morning, guys. Thanks for taking my questions and apologies, I hopped on late, if I do ask something that was stated earlier. I just wanted to get a sense, you guys have given us sort of color on Merchants Preferred - or, sorry, Preferred Lease, but I kind of want to cover retail demand for the virtual rent-to-own products. Have you seen an increase in down calls from retailers looking to add the virtual rent-to-own to their products suite?

It's pretty active there as retail goes through the - such an - I don't know what you want to call it, such a huge change so fast and accelerated change if you will. We think there's going to be great opportunity for us to add accounts, large accounts and small accounts for that matter. So we think there's going to be huge opportunity if they look for ways to replace tightening credit primarily. And so we think it's going to be a better environment coming out of here for the Preferred Lease business than even before.

Got it. And then just if you'll help get a sense for your thoughts on the health of the underlying consumer. Obviously, we've had unemployment claims go up a lot, so we've had stimulus and federal unemployment. You offset that. Obviously, that's scheduled to end at some point, but can you just walk us through where your customer is right now in general and where you see that heading over the next, call it months and quarters?

Well, I think the customer is in pretty good shape right now. With the stimulus, they've got more disposable income; we're seeing demand at really strong levels. As I've said a couple of times this morning, Kyle, our customer is under pressure all the time. So what we've seen in past recessions is more customers get pushed, come in to the top of our funnel as credit tightens. To the extent there's any that we lose out of the other side of the funnel that we can't keep on rent, they struggle too hard. We've seen in the past that more customers get pushed into our transaction and get pushed out of the transaction during a recession. When you think about our e-com business being doubled what it was a year ago and our new customers coming as part of that number also doubling, I'd say there's a lot of customers getting pushed into the transaction and that's under the belief it's going to be like past recessions where we do pretty darn well.

Got it. And then given this environment and the shift to e-commerce, can you give us a sense for how sales - the mix shift has shifted and impacts on margins that your - the margins at the Rent-A-Center business were much better than I had modeled for and I believe dropped year-over-year, so can you give us a sense for your outlook there?

Yes, the margins probably - they are pretty good in the Rent-A-Center business, probably just because of the changes we made to the value proposition, not necessarily because of shift in product mix. Certainly when this started, there was more push on the essential products. Laptops or appliances, refrigerators, and freezers, and the like, even game consoles as people are home more I guess trying to give the kids something to do or maybe it's more adults these days. I don't know; I'm not a gamer, but we rent a lot of game consoles. But as we – six weeks into it now the mix is getting pretty even, the furniture is starting to move again and moving well with good demand and I think right now it's spread out over all of our products as people stay at home more. It's not just the things they had to have real quick like a laptop to work from home or for the kids because they are home-schooling and so forth. It's pretty well spread out through all of our product categories now.

And the mix of e-commerce sales as a percentage of revenue was 16.5% in the quarter, which was up from 14.7% in the fourth quarter of '19. So we continue to see that increase, and then of course, it was some of the closed shared rooms and some of the shifting cutthroat behavior to shop online we saw an even more dramatic increase this past quarter.

Got it, that's really helpful. One last one from me to highlight. Your outlook for the second quarter is very impressive in this environment. Obviously, you have had rents coming down to a certain extent, but in terms of modeling, what line items in terms of expenses should we expect to be the big offset there?

Yes, a lot of the savings on the operating expense side come from temporarily furloughing store employees where there are cases of closed shared rooms or with Preferred Lease, the retail partner is closed; we've temporarily furloughed our employees. There are also decreases that we're seeing in real estate costs. We've renegotiated leases with a pretty significant number of our landlords taking either rent deferrals or even rent reductions. And then we’ve also evaluated any non-essential type of spend to try to counteract some of the negative impacts that we're seeing from the top line. We will see a modest increase in skip/stolen losses in the second quarter. However, we're doing everything we can to try to offset those losses by being smarter about our costs and reducing costs where we can.

But the biggest line to summarize what you just said, Maureen, would be the labor line.

Right.

If you're - the reason that the revenue is down less than 10% and EBITDA is down less than 10% as well - will be down less than 10% as we forecasted today, labor is the biggest line you would be adjusting in a model, right?

Right. There's others that are more variable expenses like, for example, we're doing fewer deliveries and pickups, and so there is a delivery costs that are lower.

Well, gas - and gas prices - my gosh, yes.

Gas prices are down and I think that leaves - so that helps drive it and any other variable type of expenses will be lower in that quarter.

Yes, Kyle, for many years we believed, and we even stated, that we had more of a fixed cost model. However, over the past couple of years, especially after we had to turn around the company, we transformed our labor model into a variable one. We no longer have minimum requirements, such as needing a certain number of people in the store or a specific number of trucks. Now, our labor costs are much more variable. If some showrooms were closed or if demand was low before the stimulus checks were issued, we were able to reduce our labor costs. So, labor is now a variable expense for us compared to how it used to be.

Really appreciate that, very helpful. Mitch, Maureen, thanks so much, and I echo others on congrats on a great quarter despite the rough operating environment.

Thank you, Kyle.

Thank you, Kyle.

Your next question will come from the line of Vincent Caintic with Stephens. Please go ahead.

Thanks. Appreciate the guidance you gave for the second quarter and that it's very strong guidance. Appreciate that. Could you possibly help break it out by segment levels, so how you're thinking about the Rent-A-Center stores versus Preferred Lease for revenues and earnings?

Yes. So we do expect to see a top line impact that's fairly similar between the two segments. But from an operating expense standpoint, as we just walked through, there's a number of more items that we can address on the Rent-A-Center side to help offset some of the impacts versus the Preferred Lease side where we've seen more of the closures and more of that impact without as many opportunities to address the expense side. We have looked at reducing the labor lines within the Preferred Lease segment as well and have done temporary furloughing of employees. We've also shifted some of the collections activities to our centralized call center to improve the efficiency and help improve the margins. So we will see more of a pressure on the skip/stolen losses in the Preferred Lease segment versus the Rent-A-Center business where we're able to pick up the product; we have more of a relationship with the customer and should see very modest impact on skip/stolen losses within the Rent-A-Center business.

That's very helpful detail. And I guess on that, when I think about the skip/stolens and bad debt and also how you think about maybe depreciation of the items, any thoughts or incremental save reserves that you have to take there? And I guess maybe one related question, but does the new CECL accounting methodology affect your accounting at all?

The CECL impact was only felt in our home choice business related to installment sales, amounting to less than $1 million, and it did not impact our Rent-A-Center or Preferred Lease businesses. We reviewed the reserves for the skip/stolen losses discussed in the first quarter and made some adjustments, although these adjustments were not significant in relation to COVID-19. We anticipate making reserve adjustments in the second quarter to account for potential pressures from skip/stolen losses.

We believe that any adjustments we might consider in the second quarter are already reflected in our expectation that EBITDA will remain within 10% of last year, and our total EPS, after accounting for interest savings, will be relatively flat compared to last year. We do not anticipate a significant number due to other offsets. It's important to note that this is still a lease arrangement and not a sale. In challenging times, customers can return the item, allowing us to rent it out again. We collaborate with customers to maintain their lease agreements. Unlike a subprime loan, where lack of funds leads to write-offs, our lease-to-own model offers much greater flexibility. Historical data from 2008 and 2009 shows that we did not experience similar losses during that period.

And if they are write-offs, the inventory write-down, they're not cash-impacting items. And then one other thing to point out, we have seen some pressure on collections, but that's already reflected in our revenue numbers since we don't record the revenue until we collect payments from our customers. So that's already impacting our business and is reflected in our color about the second quarter with revenue and EBITDA being down 10% or less. Those are reflected with the lower collections our estimates for what the skip/stolen losses and reserves will look like. And we still believe that we can perform with pretty decent margins given this environment.

And I think, Vincent, all that reflects on the operations team in both Rent-A-Center and the Preferred Lease, what a great job they're doing, not just management, but even more specifically our frontline store co-workers of what a great job they're doing during these trying times to help the customer get new products as well as help keep people on rent. We got additional ways for customers to pay than we had just six weeks ago, as far as payments online and so forth. So there's been a really great team effort on making it easier for the customer to pay and a great effort by our store employees.

Yes, it definitely shows in your results. Appreciate that. I guess last question, so on the topic of the tightening maybe competitors or I should say lenders who are more in the prime or near-prime space. In the last recession, you took a lot of share and grew a ton of profitable business from people who aren't typically shopping at your stores, but because tightening that came down. I guess what - just curious what you're seeing today in terms of who's coming into the stores physically and virtually through your e-com business? Are they the same type of customers who you'd interact with? Or are you actually seeing different customers, maybe higher-tier customers? And then for those customers that you might not normally be seeing, but are seeing now, are there any specific types of products or buying or any differentiators there?

Yes, that's a good question. What we've observed is that the customers we're currently seeing have a higher quality score compared to before, indicating that both subprime and prime lenders are directing more favorable credit applications our way. This suggests we're receiving better credit profiles in our transactions. Additionally, our new customer traffic on the website has doubled compared to a year ago, highlighting an influx of new customers who also exhibit stronger credit quality. It’s important to note that my reference to higher quality is in the context of credit assessment, not in relation to the individuals themselves. Furthermore, while our initial customer base leaned towards more essential products, we are now observing a more balanced range of products, including furniture, televisions, laptops, and appliances. Initially, the focus was on essential goods, but we now see a wider distribution of product categories that align with our typical offerings.

Thank you for the details. Thanks.

Thanks, Vincent.

And there are no other questions at this time. I'll turn the call back over to Mitch Fadel, CEO, for final closing remarks.

Thank you, operator. As I was just mentioning, I'd like to take one more opportunity to thank our store co-workers who've done such a great job, safely taking care of themselves and our customers all while dealing with an increase in demand for our products and services. And I'd say our frontline store co-workers deserve a tremendous amount of credit, and I want to point that out again, and I want all of you to know how much we appreciate you out there in the stores. Because I was visiting some stores the other day and I just can't be more thankful for the effort we're getting out of our store co-workers. You're doing a great job, and I want to take one more opportunity to say thank you. And thank you to everyone else who joined us on this call and for your continued support. So go on, have a really good day, everyone, and stay safe.

Thank you. Thank you, everyone, again, for joining today's call. This concludes the conference. You may now disconnect.