Good morning, and thank you for holding. Welcome to Rent-A-Center’s Second Quarter Earnings Conference Call. As a reminder, this conference is being recorded, Thursday, August 5, 2021. Your speakers for today are Mr. Mitch Fadel, Chief Executive Officer of Rent-A-Center; Maureen Short, Chief Financial Officer; Jason Hogg, Executive Vice President of Acima; Anthony Blasquez, Executive Vice President, Rent-A-Center Business; and Brendan Metrano, Vice President of Investor Relations. I would now like to turn the conference over to Mr. Metrano. Please go ahead, sir.

Thank you, Demaria. Good morning, and thank you all for joining the Rent-A-Center team to discuss our results for the second quarter of 2021. Hopefully you’ve had an opportunity to review our earnings release, which was distributed after the market closed yesterday. The release and all related materials, including a link to the live webcasts 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 and adversely 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, except as required by law. This call will also include references to non-GAAP financial measures. Please refer to our second quarter earnings release, which can be found on our website, for a description of the non-GAAP financial measures and the reconciliations to the most comparable GAAP financial measures. With that, I’ll turn the call over to Mitch.

Thank you, Brendan. For starters, I’d like to introduce Brendan Metrano, who recently joined us as the Head of Investor Relations. Brendan comes to us from Western Union where he also headed investor relations. And prior to that, he was a sell side analyst for over a decade. So he brings a strong understanding of equity markets and the investment community, especially in payments and fintech. So welcome, Brendan. And thank you and good morning, everyone. And thank you again for joining us this morning to discuss our second quarter results. If you’ve hopefully seen in our press release yesterday afternoon, our business continues to deliver outstanding results with over 20% pro forma organic top line growth and over 200 basis points of pro forma margin expansion in the quarter. We had strong momentum heading into the second half of the year and are on a path of major transformation with the Acima acquisition that positions us to significantly benefit from secular changes in the market. So very exciting time for our team, our customers, retail partners and investors. Before jumping into the quarter, let’s take a minute to explore this favorable fundamental backdrop behind our story. Essentially it boils down to our business being well positioned to benefit from some prevailing trends that seem to have a long runway, including shifts in consumer behavior, a need for more demographic inclusivity and technological disruption. As I think we’re all familiar with today many aspects of consumer behavior are evolving quite rapidly, much of it enabled by technology and recently accelerated by the COVID-19 pandemic. One change that pertains to us is the adoption of all types of payment plans. It’s becoming increasingly acceptable, if not preferable, to pay for goods and services with a stream of small payments, rather than running up credit card balances or depleting savings. We’re also benefiting from consumer preferences for seamless, flexible and convenient experiences. Rent-A-Center’s differentiated omni-channel model allows consumers to conveniently shop for, pay for and get access to durable goods through the channel of their choice, digital, physical or hybrid—hassle-free without long-term debt obligations or other long-term commitments. Another trend that benefits us is growing demand for solutions that promote inclusivity rather than lock out underprivileged groups. Many traditional payment services and retailers are effectively closed off for under-banked or cash-constrained consumers and those services that are available are often lower quality experiences that can make people feel like second-class citizens. Our business strives to provide the financially underserved with access to top quality products and first-class experiences. And finally, technology is transforming almost every aspect of business, especially with respect to data and analytics and the Acima acquisition has given us industry-leading capabilities in those areas. When you think about our business today with Acima, roughly half of our business is digital, whether that’s e-commerce or virtual—half of our business is digital—an incredible transformation when you think about that over just the last two years. We think that leasing is still in its infancy as a form of consumer payment and that our omni-channel model and industry-leading technology platform provide us with a strong foundation for growth. Moreover, we are breaking new ground in the payments industry with the recent launch of our proprietary LeasePay Card powered by Mastercard, which revolutionizes the lease-to-own shopping experience for durable goods for financially underserved consumers and dramatically expands the market opportunity for retailers. Jason will expand on this new product and other fintech developments in a few minutes. Given this transformation of our business, you’ll hear us increasingly discussing the payments and fintech context, pivoting to concepts like gross merchandise volume as we did this quarter. So now let’s review the highlights and progress we made during the second quarter. Total revenue was $1.2 billion and increased approximately 75% year-over-year, which was largely driven by significant incremental gross merchandise volume or GMV resulting from the Acima acquisition. And on a pro forma basis, organic total company revenue grew 21.6% led by the 43% organic growth in GMV for our virtual lease-to-own business and, of course, Acima, as well as 10% organic revenue growth for the Rent-A-Center business. We continue to get a lot of macro questions, especially on effects of stimulus payments over the past year. And as we said in the past, we certainly have benefited from some aspects of the recent uncommon macro environment, including stimulus payments. But we believe that primary factors behind our performance include strong underlying fundamentals, technological advancements and execution. The team has done a fantastic job of driving transactions and portfolio growth with a range of initiatives like product offerings and procurement under challenging conditions, implementing e-commerce and marketing strategies and adding new merchants. On top of this, our lease-to-own business is durable and anti-cyclical as it actually benefits from a tighter credit environment. When the economy is booming and credit is loose, our core customers tend to lease more. During more challenging economic periods, when credit tightens, we gain new customers who previously didn’t need or choose to use our solutions. We do not believe the performance we’ve delivered as a result of the pandemic and stimulus is as good as it gets, not at all. In fact, we believe our best results remain ahead of us. We delivered over 400 basis points of EBITDA margin expansion in the second quarter to 15.2%, benefiting from very strong profitability in the Rent-A-Center business and solid margins of Acima. As a company, we remain highly committed to efficiency investments in our customer relationships, and they’re paying off with lower loss rates and improved collections. Adjusted earnings per share was $1.63 in the second quarter compared to pro forma earnings per share of $0.80 in the prior year. Given our strong performance year-to-date and favorable underlying fundamental trends, we increased our 2021 guidance across almost every key metric. In addition, considering the compelling long-term value creation potential of our company, strong financial position and significant cash flow generation, the Board has authorized a new $250 million share repurchase program. I’m pleased to say the integration of Acima is well on track and moreover the additional insights we’ve gained about Acima over the past month makes us even more optimistic about the technological and strategic value of the acquisition and the tremendous long-term growth prospects for our company. With all that, I’ll turn the call over to Jason to update us more specifically on the Acima business.

Thanks, Mitch. To start, I would reemphasize your comments on Acima. After a full quarter of getting deeper into the business, we continue to be impressed with its quality, especially on the technology side; the decision engine, data and analytics and tech talent are all best-in-class. Acima has been a leap forward for our virtual lease-to-own capabilities and has been complementary with initiatives we were already working on. So we are very enthusiastic about our position in the virtual lease-to-own industry and the expansive possibilities we see for this business. As Mitch noted, earlier this week we issued a press release outlining some of the key solutions we’ll continue to roll out and launch over the next few quarters that will make up the Acima Ecosystem, which we believe can double the estimated total addressable market for Acima to something approaching $100 billion. We are excited about the growth opportunities for the Acima Ecosystem and the proprietary patent-pending elements of our solutions. I’ll expand on some of the highlights of this week’s press release in a few minutes, but first I’d like to take an opportunity to step back and provide a big-picture perspective on how we think about the Acima opportunity. The traditional retail shopping payment system, primarily comprised of cash, credit cards and debit cards, essentially excludes a large segment of the population—the financially underserved—from securing the use of durable goods because these consumers have insufficient cash or credit profiles to meet the standards of most payments solution providers. On top of this, most options that are available today offer an undesirable experience that can treat financially underserved customers as second-class citizens. This system is also suboptimal for retailers who would certainly offer durable goods to this large segment of customers, but lack the transaction solutions to do so. Acima addresses challenges for both groups through its mission to create a consumer lease ecosystem that reduces transaction frictions and barriers for consumers and businesses and creates a shopping experience that is more inclusive of all demographics by unlocking opportunities for consumers, regardless of income level or financial history. Interestingly, we’re even seeing some success with Acima for non-retail applications with very strong adoption rates for our Benefits Plus solution among Acima customers. We’ll achieve this mission by adhering to four core principles for all of our solutions: ease, choice, mobility and transparency. The fintech innovations we highlighted in the press release earlier this week are great examples of this in practice. You see, Marketplace is a single destination accessible on both the Acima mobile app and website where consumers can acquire the eligible retail products they need through an LTO transaction with Acima. The Marketplace is a gateway that gives consumers an entry point to the Acima Ecosystem, providing choices beyond the brick-and-mortar retail network to include a growing network of e-commerce retailers. The Acima mobile app puts the power of the Acima Ecosystem at the fingertips of customers by providing them greater mobility and choice when shopping. Customers can apply for a new lease with Acima, find retail locations to shop, directly access the Acima Marketplace, manage their lease accounts and stay up to date with retailer promotions and offers. The Acima browser extension lets consumers extend their lease-to-own shopping experience beyond the Marketplace, directly on select retailers' websites through proprietary technology that does not require retailers to be integrated with Acima’s e-commerce solution. The browser extension allows customers to carry the shopping power provided to them by Acima on their own individual journeys with an untethered lease-to-own shopping experience. No longer will lease-to-own customers be limited to only shopping on sites and locations with pre-negotiated or exclusive e-commerce arrangements. The Acima LeasePay Card is a groundbreaking innovation that can unlock substantial transaction opportunities for financially underserved consumers and retailers. It will begin as a virtual card that enables approved customers to enjoy a flexible payment experience backed by Acima to complete lease-to-own shopping transactions across multiple retailers. After reviewing and executing an LTO agreement with Acima, customers can use the Acima LeasePay Card to complete their shopping experience in the Marketplace or on the retailer's website via the browser extension. By year-end, we plan to begin piloting a physical LeasePay Card also issued through the Marqeta platform, giving customers access to the millions of durable goods retail merchants that accept Mastercard. This is a paradigm shift in the market that opens up shopping opportunities for consumers from what we estimate is 40,000 to 50,000 retail stores today to literally millions of merchant doors. And as a key factor in driving what could roughly amount to a $50 billion increase of incremental TAM. Importantly, the proprietary nature of the LeasePay Card should provide Acima with a favorable competitive position as we pursue these growth opportunities. Moving onto second quarter results and operational progress, my comments reflected pro forma performance as if Acima was included the prior year. The retail partner business came in a bit ahead of our expectations on strong merchandise sales and 43% GMV growth, despite some ongoing macro-related supply chain disruptions and somewhat greater than anticipated retail partner churn resulting from store conversions. Adjusted EBITDA margin was 13.7% in the quarter versus 12.3% in the prior year with skip/stolen losses of 8.7%, down 970 basis points year-over-year. Integration is going as smoothly as we would hope, and we remain on track to realize the estimated $25 million of synergies in 2021. We completed the conversion of all virtual locations to the Acima platform during the second quarter and staff location conversions are progressing on plan. We continue to optimize the organization and are pleased with the results we see from blending the fast and nimble approach of a startup with the structure of a more established operation. We’re getting the right structural framework in place to support our product and business development roadmap as well. For example, we have aligned our multiunit leadership team with our retailer base, allowing for more streamlined communication and execution effectiveness. We expect this change to further maximize our already strong relationship with retail partners. The retail partner pipeline continues to develop, and we are in ongoing discussions with multiple national and large regional accounts. In addition, we are also exploring some alternative channel partners that could prove to be meaningful. Marketing automation from web, app, Marketplace and browser extension continues to evolve and through analytics, personalization, and multivariate tests, we are attracting more customers and lowering our cost per acquisition. We are optimizing customer journey management tools to build utilization of our lease lines and lifetime value of our customers. We developed a number of assets, inclusive of videos, to demonstrate the value of our offerings. Finally, I’d like to thank the entire team, both legacy Rent-A-Center and Acima, for the tremendous effort over the past six months. Integrations are never easy, and I think we have really exceeded expectations. With that, I’ll turn it over to Anthony.

Thanks, Jason. The Rent-A-Center business segment had another strong quarter with revenue growth of 10.2% and same-store sales growth of 16.6%, which marks 14 consecutive quarters of positive same-store growth. Underlying fundamentals remain strong with our lease portfolio up 17% at the end of the second quarter, similar to where it was at the end of the first quarter. As Mitch noted earlier, I’m really pleased with the team’s performance this quarter and with our position heading into the back half of the year, as we’re maintaining that strong year-over-year portfolio increase. One area where we’ve had a lot of success is introducing new categories to our platform that have expanded our addressable market—things such as tools, handbags, e-bikes and tires. Tires are a great example of how we see opportunities that can continue to drive incremental growth. E-commerce continues to be a key growth driver with revenues up 19% in the quarter, even with us comping against 58% growth last year during peak pandemic disruption. Traffic and conversion trends remain strong, running well above pre-pandemic 2019 levels. Importantly, e-commerce is transforming Rent-A-Center. This has made us a more nimble and dynamic company and changed how we interact with our customers, resulting in faster decisioning and enhanced engagement. That helps our customers make better decisions. In combination with our leading retail outlets, we believe we are well positioned to deliver a true seamless omni-channel experience for our customers. Our retail outlets continue to be a key element of our competitive advantage. Rent-A-Center remains committed to our heritage of serving the local communities where our customers live and building lasting relationships. In fact, we just opened the first new store in a few years in Oklahoma, and we plan to launch at least a handful more locations this year. Moving on to profitability, adjusted EBITDA margin was 25.9% in the second quarter, compared to 20% in the prior year with improved decisioning, low loss rates and strong collection activities. I’ll close out with some comments on our outlook for the second half of this year. On top of strong execution, tailwinds have probably been a more beneficial factor than normal for the first half of this year with stable economic activity and ongoing government support. For many of our customers, we think the favorable tailwinds will start to normalize over the second half of the year, which will likely translate into some slight moderation in sales growth with same-store sales in the second half still estimated to be very strong in the low double-digit range. Similarly, we think some of the factors that have benefited margins will also begin to moderate as we expect our EBITDA margins to level out in the low-20s in the second half of the year. With that, I’ll now turn it over to Maureen.

Thanks, Anthony. Second quarter consolidated revenues were $1.2 billion, a 75% increase versus the prior year period, primarily due to the acquisition of Acima, which closed in mid-February. On a pro forma basis, revenues grew 22%. Consolidated adjusted EBITDA of $182 million more than doubled year-over-year and on a pro forma basis grew 41%. Adjusted EBITDA margin was 15.2% in the second quarter compared to the pro forma margin of 13.1% in the prior year, with solid margin expansion for both the Rent-A-Center business and Acima segments led by revenue growth, lower loss rates and operating efficiencies. GAAP EPS was $0.90 in the second quarter compared to $0.70 in the prior year period and included one-time costs related to the Acima transaction and integration. After adjusting for special items that we believe do not reflect the underlying performance of our business, non-GAAP EPS was $1.63 in the second quarter of 2021 compared to $0.80 in the prior year period. We generated $101 million of free cash flow in the second quarter, which as a percentage of net income was in line with historical trends. We ended the quarter with a $145 million cash balance and gross debt of $1.3 billion. During the quarter, we paid down $55 million on our ABL revolving credit facility and have fully paid down the outstanding balance. As a result of our continued strong operational performance and debt reduction, our leverage ratio at the end of Q2 was 1.7 times and we had over $600 million of available liquidity. During the quarter, we paid a cash dividend of $0.31 per share, which was approximately 7% higher year-over-year. Turning to our 2021 guidance, given our better-than-expected portfolio performance and favorable underlying fundamental trends, we have increased 2021 guidance and tightened ranges. Our guidance assumes no additional government stimulus payments or material change in the macroeconomic environment, but some normalization of key profit drivers in the back half of the year from recent levels that may have benefited from the combined effects of the macro environment and policy responses to the pandemic. We now expect consolidated 2021 revenues to be between $4.55 billion and $4.67 billion for 2021, which is an $85 million increase at the midpoint versus our previous guidance from May. This reflects better-than-expected revenues in the first half of the year and continued benefits from our strong second quarter portfolio balance in the Rent-A-Center business segment for the second half of the year. Consolidated adjusted EBITDA is expected to be between $660 million and $700 million, a $55 million increase at the midpoint versus previous guidance and translating to adjusted EBITDA margin of approximately 14.5% to 15%. The new guidance takes into account the strong portfolio performance Anthony referred to, and assumes a more gradual increase in the loss rates in the back half of the year towards historical levels than previously expected, partially offset by continued investments in talent and capabilities to support our technology and growth initiatives. Regarding the cadence of margins over the back half of the year, we expect a modest sequential decrease in the third quarter, reflecting typical seasonality followed by a notable sequential increase in the fourth quarter. Non-GAAP diluted earnings per share is expected to be between $5.90 and $6.40, which is an increase of $0.58 at the midpoint. We now expect to generate free cash flow of $300 million to $350 million for the year. Turning to our segment projections, we expect our Acima segment to generate revenues of $2.34 billion to $2.42 billion for the full year and for Q4 to grow at a higher rate than Q3 given seasonality. Adjusted EBITDA for the Acima segment is expected to be $330 million to $350 million, which translates to adjusted EBITDA margin of approximately 14.1% to 14.5%. Gross margins and adjusted EBITDA margins are expected to increase progressively in the second half of the year, as we realize synergies, which should increase yield and offset the impact of some reversion towards historical levels for key profit drivers, such as skip/stolen losses and customer payment trends. We expect the Rent-A-Center business segment to achieve revenues of $2.02 billion to $2.06 billion with low double-digit same-store sales growth in the back half of the year. Third quarter revenue growth is expected to be in the mid-single-digit range with fourth quarter in the high-single-digit range. Operating expenses should see a step up in the third and fourth quarters, reflecting recent wage increases and more normalized skip/stolen loss rates. We expect these trends will result in 2021 adjusted EBITDA of $480 million to $500 million for the Rent-A-Center business segment, translating to margins of approximately 23.8% to 24.3% for the full year and the low-20s in the back half of the year. Our capital allocation priorities remain focused on driving long-term value creation for shareholders. The top priority is appropriately funding our current business and investing in value-enhancing growth initiatives. Next, we will opportunistically look at M&A transactions that can generate favorable returns. After satisfying investment needs, we return capital to shareholders through a combination of dividends and share repurchases with share repurchases employed opportunistically. Underlying all capital allocation decisions is a commitment to a sound financial structure with appropriate levels of leverage. With $300 million to $350 million of expected free cash flow for 2021 and strong underlying fundamental momentum, we believe the company has more than adequate cash flow to fund investments, make significant progress towards our leverage target of 1.5 times and pay our quarterly dividend. Accordingly, our Board of Directors approved a $250 million share repurchase authorization that replaces our previous authorization and represents approximately 7% of our market cap at current share prices. In closing, as Mitch noted earlier, it’s a very exciting time for all of our stakeholders as our company is in the process of transforming into a more dynamic fintech-oriented business with a highly compelling total return algorithm that includes projected strong top-line growth with targeted revenues of $6 billion in 2023, margin expansion, substantial free cash flow generation, capital returns to shareholders and solid double-digit EPS growth. Detailed income statements by segment are posted to our website and the 10-Q will be filed later today. Thank you for your time. I’ll now turn the call over for your questions.

Your first question will come from Kyle Joseph with Jefferies. Please proceed.

Good morning. Thanks for taking my questions and congratulations on a really, really strong quarter, and appreciate all the commentary you gave across all of the segments. From a high level, as we’re thinking about 2022 here and not asking for guidance specifically, but can you walk us through and maybe—it might be helpful to do it by segment—how you’re thinking about a normalization of revenues, obviously Acima may be different than the Rent-A-Center segment, and then as we think about losses and margins? And then Mitch, I think you did a good job kind of addressing some of the offsetting factors, whether it’s maybe less buyout activity or a normalization of credit demand. If losses do normalize in 2022, just walk us through some of the offsetting impacts as we look out longer term on the business segments.

Sure, Kyle, this is Maureen. I can answer that and then see if Mitch has any additional comments. But our longer-term guidance, as we’ve talked about, hasn’t really changed. The $6 billion target is still our 2023 target. Some of the assumptions that go into that growth projection are that Acima will grow 20% to 25% in GMV as well as revenue over the next three years. We assume low to mid single-digit comps in the Rent-A-Center business. We are seeing some of the benefits of the portfolio carry forward into the second half of 2021. And there could be some upside if that portfolio growth continues to play out throughout the year, but our current projections for 2022 and 2023 still assume those low to mid single-digit comps. We also assume $40 million to $70 million of annualized run-rate synergies with the Acima transaction and integration. And it does not include, as we’ve mentioned in the past, the benefits of any national accounts or any incremental revenue associated with the Mastercard agreement.

Got it. That’s very helpful. And then quick one-off here, obviously the child tax credit payments started going out last month. Did you see any sort of impacts on either segment?

No, really. Good morning, Kyle, this is Mitch. Really nothing to speak of. I think our customers' payments are still strong. Our customers are in pretty good shape still, but it’s not like payouts went up the way they did when bigger stimulus checks hit and things like that. Demand remains strong and collections remain good, but no big pop on payouts or anything that would actually drop the portfolio.

Got it. Thanks, Mitch. And then one last one from me, probably either Maureen or Jason, just on Acima. Obviously, we saw really good EBITDA margin expansion quarter-on-quarter recognizing there’s some moving parts there, and you only have roughly six weeks of contribution from Acima in the first quarter. But can you walk us through the drivers of that? It seems like losses were stable. Was it less buyout activity? Obviously benefit from the full quarter of Acima, but just walk us through the drivers between the big uptick in EBITDA margin there?

Sure, Kyle. Most of the improvement in EBITDA margin was through gross margin. You can see it sequentially increased a couple hundred basis points, or about 150 basis points, which is most of the improvement in EBITDA margin. There were also some benefits of higher revenue and fewer payouts, which translates to higher margins and also converting some of our preferred lease stores to Acima’s technology results in a higher yield. So those are the main drivers. We do expect margins to increase progressively throughout the year, as we mentioned last quarter, mainly due to the synergies really taking hold and increasing throughout the year.

Got it. Very helpful. Thanks a lot for answering all my questions.

Your next question will come from Vincent Caintic from Stephens. Please proceed.

Thanks. Good morning. Thanks for taking my question. I think first question for Jason, so on the GMV volume growth that 43%, that’s really impressive year-over-year. I guess first, if you think that’s a sustainable number, and then second perhaps if you could break it up between what you’re seeing in the organic growth from your existing merchants versus your new account wins. I’m guessing with a 43% number it’s going to be a mixture of both, but I guess it would be impressive if that was all organic or mostly organic from existing merchants. So perhaps if you could kind of separate those two out, that’d be very helpful. Thank you.

Yes. Good morning, Vincent. It’s good to hear your voice. If you look at the GMV trends for the balance of the year, I think what we’re expecting is to grow around 20% and growth decelerates because we’re comping against high growth rates from last year, obviously with the pandemic and everything else that’s happening. One of the other things that we think is going to be a tailwind for GMV includes the online traffic and the activity metrics to customer accounts. We’re actually doing a really good job with regard to opening new doors, and then most importantly, as we’re bringing on some of the new technologies that I mentioned in my comments—the ability to increase the turns per customer and the number of leases—that will have a direct effect. And then, like I also mentioned, we have a number of both e-commerce initiatives, which currently represents about 15% of the segment, and that is going to continue to grow as we’re bringing on more partners and bringing the digital channels online with the assets that we announced this week.

Yes, and I’d add to that, Jason, that the 15% that is e-commerce was in the low single digits a year ago.

That’s right. It’s going to continue to grow as a portion of the business as we continue to turn up the volume on all of these efforts in our omni-channel approach.

Okay, great. Thank you. And then a second question, I think this is for Mitch. So you mentioned M&A in the prepared remarks and I was kind of curious what you might be thinking of. When we look at the competitive landscape, it seems like up and down the point-of-sale financing spectrum and in buy now pay later and lease-to-own, you’ve seen competitors that are trying to be fully in the ecosystem and then other competitors kind of focused or doing more on partnerships with other third-party guys. I’m just wondering when you think about M&A or partnerships across that broad spectrum what are you thinking there? Thank you.

Sure, Vincent. I think we’re open to looking at anything that’s at the right multiple for us to get a good return. So I wouldn’t cut off any category. We’re open to that. Obviously right now, we’re pretty focused on the integration of Acima, but it’s gone smooth as Jason was talking about—it’s been six months into it. Cash is building, you saw the share repurchase because that was part of the capital allocation. Cash flow is better than we anticipated at this point. So we’ll obviously continue to fund new accounts and national accounts will take up some of that cash, but we will be—look, we’ll look at anything from an M&A standpoint. I wouldn’t rule out anything in any of those categories that you mentioned.

Okay, got it. That’s helpful. Thanks very much.

Your next question will come from Brad Thomas with KeyBanc Capital Markets. Please proceed.

Good morning. And let me add my congratulations on a great quarter and all the momentum in the business. I was hoping we could talk a little bit more about the loss rates, the skip/stolen that continue to track at really favorable levels. Can you talk a little bit more about the changes you’re making in the decisioning and how much that is benefiting the loss rates and how sticky you think some of these more favorable trends might be?

Yes, Brad, thanks. This is Jason. Thanks for the question and good morning. I’ll kick off the answer and then hand it over to Anthony as well. One of the things that we have been most impressed about with the acquisition is the decision engine and the advantage that gives us as well as our data sciences group. What we’re finding is that the combination of the dataset that we’re able to use from our legacy business in combination with Acima’s technology is enabling us to underwrite better from two components. The first component is from a fraud perspective and being able to dial in and reduce our fraud losses and skip/stolen resulting from that. And then the second thing is actually we’re able to provide a better underwriting decision with regard to line and customer. So that results in a materially better ticket for us overall. The combination of the two things is giving us an opportunity—

Yes, I would echo those sentiments on the Rent-A-Center business. As more of the portfolio transitions to e-commerce, one of the things that we’re always concerned with is how do we reduce fraud? The centralized decisioning has really given us an opportunity to reduce that substantially as it continues to be a larger part of the portfolio. That’s really the most important thing for us: reduce fraud and convert more customers. Another thing that we’ve introduced recently is approval amounts for our customers. So now not only can we approve more customers, we can go ahead and throttle the potential for loss by making a determination on the approval amount. So it has benefited the Rent-A-Center business. Also, the increase in digital payments has benefited as well with more than half of our payments coming digitally. That’s helping as well.

Just one last thing on the Acima segment: we have the data services capability now bolted into our collections activities. So it enables us to anticipate in advance and make sure that we’re being more targeted with regard to preventative activities on the loss side.

And the other thing I’d add, Brad, you think about the Acima side in a virtual business like that decisioning is always going to be a main component of it and always trying to improve it. Obviously, we think it’s working really well right now. One of the best parts of Acima is the decisioning and it continues to get better every week when the underwriting committee meets and reviews things. So that’s a core element of the Acima business and it’s getting better continuously. On the Rent-A-Center side, it’s relatively new in the last year. We never had much of a loss problem at Rent-A-Center, as you know, Brad. We’ve gone from the mid-3s to the mid-2s, which is a meaningful improvement and you can point to the decision engine for the majority of that. Beyond that, the customer experience in store has improved: a 45-minute transaction for a customer inside our brick-and-mortar store now takes about 10 minutes. The efficiency, the labor savings on our end, and the customer experience improvements are a game changer. With higher entry-level wages, we haven’t seen a big impact because the efficiencies offset the higher pay. The technology and e-commerce advancements overall are the reason for that and a much more efficient business. Then you add on top of that better customer experience for repeat business. It’s much more of a game changer at Rent-A-Center than just the 1% difference in loss margin.

That’s great. Yes, all very, very encouraging. Just to follow up on Mitch’s point on the inflation front. Could you talk a little bit about how an inflationary backdrop in merchandise affects the business? I think many years we were seeing deflation in areas like consumer electronics and even furniture. How does the outlook for the business change with the merchandise cost inflation that we’re seeing?

Actually it’s very interesting, and the impact on a lot of businesses is negative. For our business, inflation can be a positive. When products get more expensive at retail, that’s generally good for lease-to-own. If products are 20% higher at retail, that’s good for Acima because those customers may not qualify for prime lenders for 20% more; if anything, lending standards could tighten. So more customers should start flowing into Acima through the waterfall. It’s also good for the Rent-A-Center segment. When you pass on inflation in cost of goods into small payments—on average $2 a week—it doesn’t have much impact on demand at that level. However, it drives more gross margin dollars overall because we’re more than covering the inflationary cost of the product, leading to higher gross margin dollars, which helps EBITDA margins as it flows through. So while inflation can be bad for the economy broadly, for our lease-to-own business it can be anti-inflationary in effect.

Really helpful perspective. Thanks, Mitch. Thanks everyone.

Your next question will come from Anthony Chukumba with Loop Capital Markets. Please proceed.

Good morning and allow me to offer my congratulations on a really strong quarter as well. So first question: very encouraging to see the share purchase authorization; obviously buying back stock at these levels will be highly accretive to your earnings per share. Now is that share repurchase program going to be a 10b5-1 plan or are you going to buy back stock opportunistically?

Yes. We’re going to think about share repurchases as a flexible way to return capital to shareholders with a preference for executing in a manner that generates value. Meaning when the stock is better valued, we’ll buy a greater amount. And if the stock moves down towards fair value, we’ll buy less. We want to be able to continue to buy even within blackout periods and we’ll likely use a 10b5-1 plan. We’ve used it at times in the past. But we really want to balance more between dividends and share repurchases going forward with this new authorization.

Got it. That’s helpful. And then just one clarification: you mentioned that your increased guidance does not assume any additional government stimulus payments. Are you counting the expanded child tax credit as additional government stimulus payments? It seems to me like that is an additional government payment, just that people are going to be getting it every month as opposed to getting a $1,400 check. I just wanted to clarify that.

Yes. We saw very little impact in July when the first child tax credit payment came out. As we model the rest of the year, it’s not a material factor in our guidance. So I’d say no additional stimulus is assumed. I’m not sure there will be a big impact from the child tax credit. We didn’t put a lot of positive momentum into our model because we saw little impact in July. It’s obviously out there and if anything it will be a positive to the model, but it’s not in our guidance in any material way.

Got it. That’s helpful. Thank you.

Your next question will come from John Rowan with Janney. Please proceed.

Good morning, everyone.

John, this is Jason. Thanks for the question. We are now seeing our national account team get into full swing. As I mentioned in the previous earnings call, we have a robust pipeline. We break it into two areas: big national retailers and e-commerce. We have several hundred large targets in process with regard to the national account side and over 1,000 targets from an e-commerce perspective, which includes large regionals. Specifically, we are in mid- to late-stage discussions with roughly a dozen national partners and probably double that with regard to e-commerce nationals and retailers. So really nice progress. We tracked this now, and the good news is we picked up a significant amount of talent as part of the acquisition of Acima. We’ve consolidated it with our existing national account team and our development office and we’re making really nice progress there.

All right. Thanks, guys.

Your next question will come from Bobby Griffin with Raymond James. Please proceed.

Good morning, everybody. Thanks for taking my questions. I hope everyone’s doing well. I want to touch on the Rent-A-Center segment. You talked a little bit about margins coming back down to maybe the low-20s range, which is still an incredible level when you look at where these EBITDA margins were in 2019. So Mitch, Andy or Maureen, whoever can you maybe unpack some of the drivers there that structurally changed in the business and the confidence you have that these are not temporary stimulus-driven changes and that you can maintain this low-20-ish EBITDA margin going forward?

Good question, Bobby. The primary reason is we have a fixed-cost business. When you’re growing top line, a lot of it flows to the bottom line. Think about gross margins in the 70% range and not much cost below that; as you bring on more customers you get strong flow-through—roughly 50% flow-through on every dollar. So it’s primarily growth-driven. E-commerce helps from an efficiency standpoint, and inflation can give us more gross margin dollars as I mentioned earlier. The lower losses with improved decisioning and other operational efficiencies all work together. But primarily the demand drives the top line. In a portfolio business there’s a long runway on that demand, and we can see quite a ways out. That’s why our projected “slowdown” in the back half of the year is low double-digit same-store sales. All these extra dollars drive significant flow-through, and that’s the biggest part of the margin improvement.

Okay. And then maybe to follow up on Brad’s question and understanding how inflation affects the business: are you starting to see it already in the numbers? When we look at the 16.6% top-line in the Rent-A-Center business, are you already benefiting from merchandise inflation or is that more of a go-forward comment?

I’d say it’s more go-forward. We’re just starting to see some price increases because at our volume of purchases we order quite a ways out. So I think that’s a forward-looking benefit. It’s not heavily modeled yet and not embedded materially in the current numbers.

Yes, we’re just starting to see it now as inventory flows through the system, but it’s early on.

Thank you. I appreciate all the details and best of luck here in the second half.

And at this time there are no further questions. I would now like to turn the call back over to Mitch Fadel for closing remarks at this time.

Thank you, Demaria, and thank you everyone for joining us this morning. Obviously, we’re really excited about how things are going and we believe the best is yet to come. A lot of people out there think this is the peak; we do not. We see ongoing growth on the Rent-A-Center side as we’ve talked about. We didn’t spend much time talking about things like new product categories—Anthony mentioned that in his prepared comments—but new product categories are driving the business. E-commerce was almost 20% growth in the quarter and the Rent-A-Center comp was almost 60% last year during the shutdown. Acima obviously knocked it out of the park with their GMV. We’re so excited about some of the proprietary stuff we announced this week that we really think increases the TAM. Jason’s plan of attack with those products, like the LeasePay Card and so forth, when you add that to Acima, we really think we’ve got one plus one equals three here. The great plan, the great ecosystem plan that Jason had since he started last year is coming to fruition, and when you add that to Acima, one plus one equals three. I could go on all day about how excited we are. Most of you probably already hung up, but I’ll just stop there and say everybody have a great day, and we appreciate your support. Thank you.

This concludes today’s conference call. Thank you for participating. You may now disconnect.