Archive for the ‘RCII’ category

Rent-a-Center (RCII)

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Rent-a-Center (RCII)
Stock Price: $31.05
Diluted Shares: 55.3MM
Market Cap: $1.7BN
Cash: $53MM
Debt: $833MM ($194MM outstanding on term loan [most of which is due in 2016]; $89MM drawn from revolver [expires July 2016]; $300MM 6.625% senior notes due Nov 2020; $250MM 4.75% senior notes due May 2021)
Other Liabilities, not including Deferred Taxes: $307MM
EV: $2.8BN
2013 EBITDA: $334MM
Multiple: 8.4x

How do you make a million dollars? Sell to rich people.
How do you make a billion dollars? Sell to poor people.

– Somebody somewhere

Rent-a-Center is an industry leading brand in the rent-to-own category with more than double the store count of Aarons (#2 competitor) and 5x the store count of competitors #3-#8 combined (RCII rolled-up the industry from 1993 – 2006). Their core customer is a sub-prime borrower (target 35% of US 310MM population; 50% of MX 110MM population) who rents for 4-5 months on average (only 25% choose to buy) – furniture is 37% of rental revenues, electronics are 30%, appliances 18% and computers 15%. Customers pay in advance either weekly (85% of agreements), semi-monthly or on a monthly basis.

RCII is not a new idea – the US “core” is an established business without many growth opportunities that generates significant FCF. But there are two things happening at RCII that many who don’t follow the story (not covered by any major banks) are missing: RAC Acceptance and Mexico.