Rent a Center CEO Mark Speese was a featured speaker at the SunTrust Robinson Humphrey 32nd Annual Institutional Investor Conference held recently in Atlanta, GA.

The conference provided the most detailed glimpse yet of Rent a Centers business model, it's recent results, and plans for the future. Mr. Speese' presentation was wide ranging, covering everything from Rent a Center's agreement count by category to the potential for the industry to nearly double in size.

During the Q&A after the presentation, CEO Speese gave some insight into the RentWay acquisition. "RentWay came to us with a list...needless to say that list changed quite a bit." He added, "We weren't interested in buying 1 or 2 stores in a market and leaving 3 or 4 stores in the market...it was all or nothing. Its fair to say that [RentWay] had a monetary amount in mind that they were trying to capture, and how many stores do we have to [sell] to get it there."

A summary of key Rent a Center factoids is below, but we highly recommended that you listen to the audio. We rate it a 10 on the Mudsucker scale. The audio is 36 minutes and requires no special downloads. Audio is available here

Best Quotes...

Mark Speese
Rent a Center CEO
"We believe the industry can add another 6000 plus stores before it is saturated"

(On the closure of 177 of the 295 stores acquired from RentWay)
"Its important to note we stuck them with the lease"

Best Rent a Center and Industry Factoids

Industry Breakdown

• Top 7 companies make up 57%...#7 player has 67 stores
• Rent a Center owns 31% of market share by store count
• ColorTyme has an additional 4%
• Industry Markets to 'Unbanked' or 'Underbanked' consumer
• Rent a Center is 3.5 times the size of #2 player (RentWay)
• Industry consists of approx 8300 stores nationwide

Mark Speese
Rent a Center CEO
"From a fragmentation standpoint you essentially have 3000 plus stores in the hands of mom and pop operators"

• 47 out of 50 states have favorable legislation
• "The environment legislatively is in the best shape it has ever been"
  
  Rent a Center Agreements
• About 25-30% of 'first contracts' go to term
• Average product rented 4.5 to 5 months then returned
• Average product rented 3-5 times over its life
• average 77% margin over the life of product
• Over 90% of products exit system through a rent to own transaction
  7% are cash sold at the end of useful life at 20% margin
  Remaining 3% is losses/chargeoffs
• Average product is in the system for 22 months
• Electronics 42% of revenue
  Furniture 32%
  Major appliances 16%
  Computers 10%
• Product mix is decided by customer demand
• Margins are the same in all categories
• Pricing on a 2x2 formula Costx2 = retail x2 = turn
  
  Rent a Center Customers
• Industry grows regardless of economic climate (6.5% growth last few years)
• 92% of customers have household incomes between 15 and 50K range
• There are 44 million households that fall within that range
• The entire industry served on 3 million of those in 2002
• This is very much a relationship business
  
  Rent a Center Revenue
• Typical industry store does 48k monthly
• Typical RAC store does 70k
  
  Rent a Center Storefronts
• Avg 4200 square feet; 80% showroom
• Company operates with no warehouse or distribution centers
• Rentway stores will generate 95 million this year
• RAC will open 80 to 100 new stores this year
• Avg new store investment is 450k
• Startup inventory 125K; Add another 200k during 1st year
• New stores turn profit in 9th month