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Conn’s, Inc. Reports Third Quarter Fiscal Year 2023 Financial Results

Conn's, Inc.
Conn's, Inc.

THE WOODLANDS, Texas, Dec. 06, 2022 (GLOBE NEWSWIRE) -- Conn’s, Inc. (NASDAQ: CONN) (“Conn’s” or the “Company”), a specialty retailer of home goods, including furniture, appliances, and consumer electronics, with a mission to elevate home life to home love, today announced its financial results for the quarter ended October 31, 2022.

“Retail sales remain challenged by macroeconomic headwinds, which continues to impact discretionary spending, and lower year-over-year lease-to-own sales. As we navigate this environment, we are refocusing our efforts to better serve our core credit constrained customers. Conn’s differentiated credit offerings power a compelling model that we believe is needed now more than ever as consumers across the country are impacted by high inflation and growing economic uncertainty,” stated Norm Miller Interim President and Chief Executive Officer.

“We aim to improve our financial performance by taking a disciplined approach to growth and profitability. This includes prudently controlling costs and capital expenditures, while pursuing investments that contribute to earnings. In addition, I am committed to execute against the Company's existing strategic priorities. These include strengthening our core retail business by expanding our assortment and testing partnerships; leveraging our credit business, including through the launch of an in-house lease-to-own offering; and accelerating eCommerce growth as we become a unified commerce retailer. Conn's continues to have a unique value proposition, solid foundation, and compelling future. With a strong and committed leadership team focused on execution, I am confident we can turn around our financial and operating results,” concluded Mr. Miller.

Third Quarter Financial Highlights as Compared to the Prior Fiscal Year Period (Unless Otherwise Noted):

  • Total consolidated revenue declined 20.8% to $321.2 million, due to a 24.0% decline in total net sales, and a 5.7% reduction in finance charges and other revenues;

  • Same store sales decreased 27.0%;

  • Credit spread was 980 basis points, and fiscal year-to-date the credit spread was 1,030 basis points;

  • Carrying value of account balances re-aged more than six months improved to $31.5 million, from $61.8 million;

  • Reported a net loss of $1.04 per diluted share, compared to net earnings of $0.60 per diluted share for the same period last fiscal year;

  • Reported a non-GAAP, adjusted net loss of $0.78 per diluted share, compared to adjusted net earnings of $0.60 per diluted share for the same period last fiscal year; and

  • Added two new standalone stores bringing the total number of stores at October 31, 2022 to 165 and added 15 store-within-a store locations with Belk bringing the total number of Belk store-within-a-store locations to 19.

Third Quarter Results

Net loss for the three months ended October 31, 2022 was $24.8 million, or $1.04 per diluted share, compared to net income for the three months ended October 31, 2021 of $18.2 million, or $0.60 per diluted share. On a non-GAAP basis, adjusted net loss for the three months ended October 31, 2022 was $18.6 million, or $0.78 per diluted shares, which excludes charges and credits for severance costs due to a change in the executive management team. This compares to adjusted net income for the three months ended October 31, 2021 of $18.2 million, or $0.60 per diluted share.

Retail Segment Third Quarter Results

Retail revenues were $254.6 million for the three months ended October 31, 2022 compared to $334.8 million for the three months ended October 31, 2021, a decrease of $80.2 million or 24.0%. The decrease in retail revenue was primarily driven by a decrease in same store sales of 27.0%. The decrease in same store sales was primarily driven by lower discretionary spending for home-related products, lower lease-to-own sales and comparatively higher same store sales in the prior year due to the impact of stimulus benefits. The decrease in same store sales was partially offset by new store growth.

For the three months ended October 31, 2022, retail segment operating loss was $17.7 million compared to retail segment operating income of $22.5 million for three months ended October 31, 2021. On a non-GAAP basis, adjusted retail segment operating loss for the three months ended October 31, 2022 was $9.7 million after excluding the charge for employee severance. On a non-GAAP basis, the adjusted retail segment operating income for the three months ended October 31, 2021 was $22.5 million. The decrease in retail segment operating income for the three months ended October 31, 2022 was primarily due to a decrease in revenue as described above and a decline in the retail gross margin percentage.

The decrease in retail gross margin was primarily driven by increased product costs as a result of the deleveraging of fixed distribution costs, higher freight, higher fuel costs and higher financing fees. These increases were partially offset by an increase in RSA commissions and a more profitable product mix.

The SG&A decrease in the retail segment was primarily due to a decline in variable costs, labor costs, including bonus expense, and advertising costs as a result of cost savings initiatives. These decreases were partially offset by an increase in occupancy and operational costs due primarily to new store growth.

The following table presents net sales and changes in net sales by category:

 

Three Months Ended October 31,

 

 

 

 

 

Same Store

(dollars in thousands)

 

2022

 

% of Total

 

 

2021

 

% of Total

 

Change

 

% Change

 

% Change

Furniture and mattress

$

79,927

 

31.4

%

 

$

106,756

 

31.9

%

 

$

(26,829

)

 

(25.1)        %

 

(28.3)        %

Home appliance

 

102,884

 

40.4

 

 

 

128,385

 

38.3

 

 

 

(25,501

)

 

(19.9

)

 

(22.5

)

Consumer electronics

 

31,911

 

12.5

 

 

 

46,751

 

14.0

 

 

 

(14,840

)

 

(31.7

)

 

(33.9

)

Home office

 

8,630

 

3.4

 

 

 

17,373

 

5.2

 

 

 

(8,743

)

 

(50.3

)

 

(51.0

)

Other

 

9,824

 

4.0

 

 

 

9,036

 

2.7

 

 

 

788

 

 

8.7

 

 

(14.5

)

Product sales

 

233,176

 

91.7

 

 

 

308,301

 

92.1

 

 

 

(75,125

)

 

(24.4

)

 

(27.6

)

Repair service agreement commissions (1)

 

18,804

 

7.4

 

 

 

23,769

 

7.1

 

 

 

(4,965

)

 

(20.9

)

 

(20.8

)

Service revenues

 

2,378

 

0.9

 

 

 

2,513

 

0.8

 

 

 

(135

)

 

(5.4

)

 

 

Total net sales

$

254,358

 

100.0

%

 

$

334,583

 

100.0

%

 

$

(80,225

)

 

(24.0)        %

 

(27.0)        %


(1)

The total change in sales of repair service agreement commissions includes retrospective commissions, which are not reflected in the change in same store sales.

 

 

Credit Segment Third Quarter Results

Credit revenues were $66.6 million for the three months ended October 31, 2022 compared to $70.6 million for the three months ended October 31, 2021, a decrease of $4.0 million or 5.7%. The decrease in credit revenue was primarily due to a 7.3% decrease in the average outstanding balance of the customer accounts receivable portfolio as well as a decline in insurance commissions. The decrease was partially offset by an increase in late fee revenues.

Provision for bad debts increased to $34.8 million for the three months ended October 31, 2022 from $26.5 million for the three months ended October 31, 2021, an overall change of $8.3 million. The year-over-year increase was primarily driven by an increase in net charge-offs of $13.1 million during the three months ended October 31, 2022 compared to the three months ended October 31, 2021. The increase in net charge-offs was partially offset by a decline in the allowance for bad debts during the three months ended October 31, 2022 compared to an increase during the three months ended October 31, 2021. The decrease in the allowance for bad debts during the three months ended October 31, 2022 was primarily driven by a decrease in the customer account receivable portfolio balance, which was partially offset with an increase in historical loss rates. During the three months ended October 31, 2021, the increase in the allowance for bad debts was primarily driven by an increase in the customer accounts receivable portfolio balance and an increase in loss rates.

Credit segment operating loss was $0.3 million for the three months ended October 31, 2022, compared to operating income of $7.0 million for the three months ended October 31, 2021. The decrease was primarily due to the increase in the provision for bad debts and a decrease in credit revenue.

Additional information on the credit portfolio and its performance may be found in the Customer Accounts Receivable Portfolio Statistics table included within this press release and in the Company’s Form 10-Q for the quarter ended October 31, 2022, to be filed with the Securities and Exchange Commission on December 6, 2022 (the “Third Quarter Form 10-Q”).

Store and Facilities Update

The Company opened two new standalone stores during the third quarter of fiscal year 2023 bringing the total store count to 165 in 15 states and opened 15 store-within-a-store locations with Belk, which brings the total number of store-within-a-store locations to 19. During fiscal year 2023, the Company plans to open a total of 11 standalone locations.

Liquidity and Capital Resources

As of October 31, 2022, the Company had $155.4 million of immediately available borrowing capacity under its $650.0 million revolving credit facility. The Company also had $8.4 million of unrestricted cash available for use.

On November 21, 2022, the Company entered into an Amendment No.1 (the "Amendment") to the Fifth Amended and Restated Loan and Security Agreement. The Amendment, among other things, replaces the interest rate benchmark and provides for a covenant relief period beginning with the third quarter of fiscal year 2023 and continuing until the Company delivers financial statements and compliance certificate for the fiscal quarter ending April 30, 2024, unless earlier terminated pursuant to the terms of the Amendment. Additional detail with respect to the Amendment No.1 to the Fifth Amended and Restated Loan Agreement may be found in the Third Quarter Form 10-Q.

On November 30, 2022, the Company completed the sale of $63.1 million in aggregate principal amount of zero coupon Asset Backed Fixed Rate Notes, Class C, Series 2022-A (the "Class C Notes") which were previously issued and held by the Company. The asset backed notes are secured by the transferred customer accounts receivables and restricted cash held by a consolidated VIE. Net proceeds from the sale were used for general corporate purposes.

Conference Call Information

The Company will host a conference call on December 6, 2022, at 10 a.m. CT / 11 a.m. ET, to discuss its three months ended October 31, 2022 financial results. Participants can join the call by dialing 877-451-6152 or 201-389-0879. The conference call will also be broadcast simultaneously via webcast on a listen-only basis. A link to the earnings release, webcast and third quarter fiscal year 2023 conference call presentation will be available at ir.conns.com.

Replay of the telephonic call can be accessed through December 13, 2022 by dialing 844-512-2921 or 412-317-6671 and Conference ID: 13732583.

About Conn’s, Inc.

Conn's HomePlus (NASDAQ: CONN) is a specialty retailer of home goods, including furniture, appliances and consumer electronics, with a mission to elevate home life to home love. With over 160 stores across 15 states and online at Conns.com, our over 3,500 employees strive to help all customers create a home they love through access to high-quality products, next-day delivery and personalized payment options, including our flexible, in-house credit program. Additional information can be found by visiting our investor relations website at https://ir.conns.com and social channels (@connshomeplus on Twitter, Instagram, Facebook and LinkedIn).

This press release contains forward-looking statements within the meaning of the federal securities laws, including but not limited to, the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Such forward-looking statements include information concerning our future financial performance, business strategy, plans, goals and objectives. Statements containing the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “should,” “predict,” “will,” “potential,” or the negative of such terms or other similar expressions are generally forward-looking in nature and not historical facts. Such forward-looking statements are based on our current expectations. We can give no assurance that such statements will prove to be correct, and actual results may differ materially. A wide variety of potential risks, uncertainties, and other factors could materially affect our ability to achieve the results either expressed or implied by our forward-looking statements, including, but not limited to: general economic conditions impacting our customers or potential customers; our ability to execute periodic securitizations of future originated customer loans on favorable terms; our ability to continue existing customer financing programs or to offer new customer financing programs; changes in the delinquency status of our credit portfolio; unfavorable developments in ongoing litigation; increased regulatory oversight; higher than anticipated net charge-offs in the credit portfolio; the success of our planned opening of new stores; expansion of our e-commerce business; technological and market developments and sales trends for our major product offerings; our ability to manage effectively the selection of our major product offerings; our ability to protect against cyber-attacks or data security breaches and to protect the integrity and security of individually identifiable data of our customers and employees; our ability to fund our operations, capital expenditures, debt repayment and expansion from cash flows from operations, borrowings from our Revolving Credit Facility, and proceeds from accessing debt or equity markets; the effects of epidemics or pandemics, including the COVID-19 pandemic; and other risks detailed in Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the fiscal year ended January 31, 2022 and other reports filed with the Securities and Exchange Commission. If one or more of these or other risks or uncertainties materialize (or the consequences of such a development changes), or should our underlying assumptions prove incorrect, actual outcomes may vary materially from those reflected in our forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. We disclaim any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise, or to provide periodic updates or guidance. All forward-looking statements attributable to us, or to persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements.

CONN-G

S.M. Berger & Company

Andrew Berger (216) 464-6400

CONN’S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(dollars in thousands, except per share amounts)

 

Three Months Ended
October 31,

 

Nine Months Ended
October 31,

 

 

2022

 

 

 

2021

 

 

2022

 

 

 

2021

Revenues:

 

 

 

 

 

 

 

Total net sales

$

254,358

 

 

$

334,583

 

$

806,133

 

 

$

972,664

Finance charges and other revenues

 

66,842

 

 

 

70,875

 

 

201,519

 

 

 

214,879

Total revenues

 

321,200

 

 

 

405,458

 

 

1,007,652

 

 

 

1,187,543

Costs and expenses:

 

 

 

 

 

 

 

Cost of goods sold

 

169,842

 

 

 

211,298

 

 

530,942

 

 

 

612,219

Selling, general and administrative expense

 

126,243

 

 

 

138,081

 

 

389,169

 

 

 

402,000

Provision for bad debts

 

35,104

 

 

 

26,532

 

 

77,059

 

 

 

19,658

Charges and credits

 

8,006

 

 

 

 

 

6,522

 

 

 

Total costs and expenses

 

339,195

 

 

 

375,911

 

 

1,003,692

 

 

 

1,033,877

Operating income (loss)

 

(17,995

)

 

 

29,547

 

 

3,960

 

 

 

153,666

Interest expense

 

11,478

 

 

 

5,206

 

 

23,807

 

 

 

20,498

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

1,218

Income (loss) before income taxes

 

(29,473

)

 

 

24,341

 

 

(19,847

)

 

 

131,950

Provision (benefit) for income taxes

 

(4,634

)

 

 

6,102

 

 

(3,358

)

 

 

31,309

Net income (loss)

$

(24,839

)

 

$

18,239

 

$

(16,489

)

 

$

100,641

Income (loss) per share:

 

 

 

 

 

 

 

Basic

$

(1.04

)

 

$

0.62

 

$

(0.68

)

 

$

3.42

Diluted

$

(1.04

)

 

$

0.60

 

$

(0.68

)

 

$

3.34

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

 

23,911,273

 

 

 

29,488,321

 

 

24,172,679

 

 

 

29,418,047

Diluted

 

23,911,273

 

 

 

30,261,421

 

 

24,172,679

 

 

 

30,127,419

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONN’S, INC. AND SUBSIDIARIES
CONDENSED RETAIL SEGMENT FINANCIAL INFORMATION
(unaudited)
(dollars in thousands)

 

Three Months Ended
October 31,

 

Nine Months Ended
October 31,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

Product sales

$

233,176

 

 

$

308,301

 

 

$

738,598

 

 

$

897,757

 

Repair service agreement commissions

 

18,804

 

 

 

23,769

 

 

 

60,256

 

 

 

66,600

 

Service revenues

 

2,378

 

 

 

2,513

 

 

 

7,279

 

 

 

8,307

 

Total net sales

 

254,358

 

 

 

334,583

 

 

 

806,133

 

 

 

972,664

 

Finance charges and other

 

270

 

 

 

262

 

 

 

815

 

 

 

695

 

Total revenues

 

254,628

 

 

 

334,845

 

 

 

806,948

 

 

 

973,359

 

Costs and expenses:

 

 

 

 

 

 

 

Cost of goods sold

 

169,842

 

 

 

211,298

 

 

 

530,942

 

 

 

612,219

 

Selling, general and administrative expense

 

94,240

 

 

 

100,969

 

 

 

288,306

 

 

 

294,019

 

Provision for bad debts

 

261

 

 

 

36

 

 

 

848

 

 

 

196

 

Charges and credits

 

8,006

 

 

 

 

 

 

6,522

 

 

 

 

Total costs and expenses

 

272,349

 

 

 

312,303

 

 

 

826,618

 

 

 

906,434

 

Operating income (loss)

$

(17,721

)

 

$

22,542

 

 

$

(19,670

)

 

$

66,925

 

Retail gross margin

 

33.2

%

 

 

36.8

%

 

 

34.1

%

 

 

37.1

%

Selling, general and administrative expense as percent of revenues

 

37.0

%

 

 

30.2

%

 

 

35.7

%

 

 

30.2

%

Operating margin

 

(7.0

)%

 

 

6.7

%

 

 

(2.4

)%

 

 

6.9

%

Store count:

 

 

 

 

 

 

 

Beginning of period

 

163

 

 

 

155

 

 

 

158

 

 

 

146

 

Opened

 

2

 

 

 

2

 

 

 

7

 

 

 

11

 

End of period (1)

 

165

 

 

 

157

 

 

 

165

 

 

 

157

 


(1)

Does not include 15 and 19 store-within-a-store locations with Belk opened during the three and nine months ended October 31, 2022, respectively.

 

 

CONN’S, INC. AND SUBSIDIARIES
CONDENSED CREDIT SEGMENT FINANCIAL INFORMATION
(unaudited)
(dollars in thousands)

 

Three Months Ended
October 31,

 

Nine Months Ended
October 31,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

Finance charges and other revenues

$

66,572

 

 

$

70,613

 

 

$

200,704

 

 

$

214,184

 

Costs and expenses:

 

 

 

 

 

 

 

Selling, general and administrative expense

 

32,003

 

 

 

37,112

 

 

 

100,863

 

 

 

107,981

 

Provision for bad debts

 

34,843

 

 

 

26,496

 

 

 

76,211

 

 

 

19,462

 

Total costs and expenses

 

66,846

 

 

 

63,608

 

 

 

177,074

 

 

 

127,443

 

Operating income (loss)

 

(274

)

 

 

7,005

 

 

 

23,630

 

 

 

86,741

 

Interest expense

 

11,478

 

 

 

5,206

 

 

 

23,807

 

 

 

20,498

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

1,218

 

Income (loss) before income taxes

$

(11,752

)

 

$

1,799

 

 

$

(177

)

 

$

65,025

 

Selling, general and administrative expense as percent of revenues

 

48.1

%

 

 

52.6

%

 

 

50.3

%

 

 

50.4

%

Selling, general and administrative expense as percent of average outstanding customer accounts receivable balance (annualized)

 

12.4

%

 

 

13.3

%

 

 

12.7

%

 

 

12.7

%

Operating margin

 

(0.4

)%

 

 

9.9

%

 

 

11.8

%

 

 

40.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONN’S, INC. AND SUBSIDIARIES
CUSTOMER ACCOUNTS RECEIVABLE PORTFOLIO STATISTICS
(unaudited)

 

As of October 31,

 

 

2022

 

 

 

2021

 

Weighted average credit score of outstanding balances (1)

 

613

 

 

 

607

 

Average outstanding customer balance

$

2,541

 

 

$

2,449

 

Balances 60+ days past due as a percentage of total customer portfolio carrying value (2)(3)(4)

 

12.2

%

 

 

8.8

%

Re-aged balance as a percentage of total customer portfolio carrying value (2)(3)(5)

 

16.5

%

 

 

18.3

%

Carrying value of account balances re-aged more than six months (in thousands) (3)

$

31,521

 

 

$

61,807

 

Allowance for bad debts and uncollectible interest as a percentage of total customer accounts receivable portfolio balance

 

18.2

%

 

 

18.5

%

Percent of total customer accounts receivable portfolio balance represented by no-interest option receivables

 

33.0

%

 

 

32.0

%


 

Three Months Ended
October 31,

 

Nine Months Ended
October 31,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Total applications processed

 

231,526

 

 

 

337,112

 

 

 

756,611

 

 

 

971,456

 

Weighted average origination credit score of sales financed (1)

 

621

 

 

 

616

 

 

 

620

 

 

 

615

 

Percent of total applications approved and utilized

 

23.8

%

 

 

21.5

%

 

 

22.4

%

 

 

21.9

%

Average income of credit customer at origination

$

50,900

 

 

$

49,100

 

 

$

50,600

 

 

$

48,400

 

Percent of retail sales paid for by:

 

 

 

 

 

 

 

In-house financing, including down payments received

 

54.0

%

 

 

52.9

%

 

 

51.9

%

 

 

50.9

%

Third-party financing

 

17.6

%

 

 

17.9

%

 

 

18.2

%

 

 

17.5

%

Third-party lease-to-own option

 

7.2

%

 

 

9.2

%

 

 

7.1

%

 

 

11.0

%

 

 

78.8

%

 

 

80.0

%

 

 

77.2

%

 

 

79.4

%


(1)

Credit scores exclude non-scored accounts.

(2)

Accounts that become delinquent after being re-aged are included in both the delinquency and re-aged amounts.

(3)

Carrying value reflects the total customer accounts receivable portfolio balance, net of deferred fees and origination costs, the allowance for no-interest option credit programs and the allowance for uncollectible interest.

(4)

Increase was primarily due to a decrease in cash collections driven by the impact of stimulus benefits in prior year.

(5)

Decrease was primarily due to the change in the unilateral re-age policy that occurred in the second quarter of fiscal year 2021 and the tightening of underwriting standards that occurred in fiscal year 2021 and fiscal year 2022.

 

 

CONN’S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

 

 

October 31, 2022

 

 

January 31, 2022

Assets

(unaudited)

 

 

Current Assets:

 

 

 

Cash and cash equivalents

$

8,433

 

$

7,707

Restricted cash

 

45,503

 

 

31,930

Customer accounts receivable, net of allowances

 

423,827

 

 

455,787

Other accounts receivable

 

59,142

 

 

63,055

Inventories

 

259,285

 

 

246,826

Income taxes receivable

 

13,599

 

 

6,745

Prepaid expenses and other current assets

 

11,381

 

 

8,756

Total current assets

 

821,170

 

 

820,806

Long-term portion of customer accounts receivable, net of allowances

 

391,933

 

 

432,431

Property and equipment, net

 

218,640

 

 

192,763

Operating lease right-of-use assets

 

255,202

 

 

256,267

Other assets

 

50,187

 

 

52,199

Total assets

$

1,737,132

 

$

1,754,466

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Current finance lease obligations

$

919

 

$

889

Accounts payable

 

79,865

 

 

74,705

Accrued compensation and related expenses

 

19,393

 

 

36,677

Accrued expenses

 

76,937

 

 

73,035

Operating lease liability - current

 

56,295

 

 

54,534

Other current liabilities

 

13,508

 

 

18,576

Total current liabilities

 

246,917

 

 

258,416

Operating lease liability - non current

 

323,410

 

 

330,439

Long-term debt and finance lease obligations

 

591,673

 

 

522,149

Deferred tax liability

 

 

 

7,351

Other long-term liabilities

 

32,026

 

 

21,292

Total liabilities

 

1,194,026

 

 

1,139,647

Stockholders’ equity

 

543,106

 

 

614,819

Total liabilities and stockholders’ equity

$

1,737,132

 

$

1,754,466

 

 

 

 

 

 

CONN’S, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS
(unaudited)
(dollars in thousands, except per share amounts)

Basis for presentation of non-GAAP disclosures:

To supplement the Condensed Consolidated Financial Statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the Company also provides the following non-GAAP financial measures: adjusted retail segment operating income (loss), adjusted net income (loss) and adjusted net earnings (loss) per diluted share. These non-GAAP financial measures are not meant to be considered as a substitute for, or superior to, comparable GAAP measures and should be considered in addition to results presented in accordance with GAAP. They are intended to provide additional insight into our operations and the factors and trends affecting the business. Management believes these non-GAAP financial measures are useful to financial statement readers because (1) they allow for greater transparency with respect to key metrics we use in our financial and operational decision making and (2) they are used by some of our institutional investors and the analyst community to help them analyze our operating results.

RETAIL SEGMENT ADJUSTED OPERATING INCOME (LOSS)

 

Three Months Ended
October 31,

 

Nine Months Ended
October 31,

 

 

2022

 

 

 

2021

 

 

2022

 

 

 

2021

Retail segment operating income (loss), as reported

$

(17,721

)

 

$

22,542

 

$

(19,670

)

 

$

66,925

Adjustments:

 

 

 

 

 

 

 

Lease termination (1)

 

 

 

 

 

 

(1,484

)

 

 

Employee severance (2)

 

8,006

 

 

 

 

 

8,006

 

 

 

Retail segment operating income (loss), as adjusted

$

(9,715

)

 

$

22,542

 

$

(13,148

)

 

$

66,925


(1)

Represents a gain on the termination of a lease.

(2)

Represents severance costs related to a change in the executive management team.

 

 

ADJUSTED NET INCOME (LOSS) AND ADJUSTED NET EARNINGS (LOSS) PER DILUTED SHARE

 

Three Months Ended
October 31,

 

Nine Months Ended
October 31,

 

 

2022

 

 

 

2021

 

 

2022

 

 

 

2021

 

Net income (loss), as reported

$

(24,839

)

 

$

18,239

 

$

(16,489

)

 

$

100,641

 

Adjustments:

 

 

 

 

 

 

 

Lease termination (1)

 

 

 

 

 

 

(1,484

)

 

 

 

Loss on extinguishment of debt (2)

 

 

 

 

 

 

 

 

 

1,218

 

Employee severance (3)

 

8,006

 

 

 

 

 

8,006

 

 

 

 

Tax impact of adjustments

 

(1,809

)

 

 

 

 

(1,472

)

 

 

(274

)

Net income (loss), as adjusted

$

(18,642

)

 

$

18,239

 

$

(11,439

)

 

$

101,585

 

Weighted average common shares outstanding - Diluted

 

23,911,273

 

 

 

30,261,421

 

 

24,172,679

 

 

 

30,127,419

 

Earnings (loss) per share:

 

 

 

 

 

 

 

As reported

$

(1.04

)

 

$

0.60

 

$

(0.68

)

 

$

3.34

 

As adjusted

$

(0.78

)

 

$

0.60

 

$

(0.47

)

 

$

3.37

 


(1)

Represents a gain on the termination of a lease.

(2)

Represents a loss of $1.0 million from retirement of $141.2 million aggregate principal amount of our 7.25% senior notes due 2022 and a loss of $0.2 million related to the amendment of our Fifth Amended and Restated Loan and Security Agreement.

(3)

Represents severance costs related to a change in the executive management team.